Audit finds DPL not enforcing law on operations fund again

Sixto K. Igisomar

An auditing firm’s independent report found that the Department of Public Lands is again not enforcing a public law that requires the creation of a DPL Operations Fund and that without that, DPL is unable to produce reliable and relevant financial information.

In response, DPL Secretary Sixto K. Igisomar said that compliance with Public Law 15-02 will require the collaborative effort of both DPL and the Department of Finance.

Igisomar said DPL plans on taking steps with DOF to rectify all the conditions of this audit finding by the end of fiscal year 2023, so that both DPL and DOF will be complaint with the law.

The Office of the Public Auditor hired Deloitte & Touche LLC to audit DPL’s internal control and compliance for fiscal year that ended on Sept. 30, 2010. The Deloitte report, which OPA released last Nov. 16, said the results of their tests of compliance with certain provisions of laws, regulations, contracts, and grant agreements disclosed instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Deloitte informed Igisomar that they identified certain deficiencies in internal control that they consider to be material weaknesses.

Deloitte reached similar findings in its audit of DPL’s internal control and on compliance for the fiscal year that ended on Sept. 30, 2019.

With respect to the latest audit, Deloitte said an effective system of internal control over financial reporting includes maintenance of a separate general ledger system that records transactions and generates reliable and relevant information.

The auditor said P.L. 15-02 required the establishment of the DPL Operations Fund, which shall be maintained by DOF.

The law required all revenues received by DPL be deposited into the DPL Operations Fund and that all operational expenses by DPL be paid from that DPL Operations Fund.

Despite this law, Deloitte said, monitoring and timely reconciliation of transactions with DOF is not being performed.

The auditor said DPL did not implement available system controls over the financial reporting process and monitoring control procedures are not established to determine the accuracy and completeness of disbursements processed at Finance.

Deloitte found that DPL has not maintained a separate ledger system since fiscal year 2007.

The auditor determined that revenues received by DPL are not deposited into the DPL Operations Fund.

A general ledger for DPL transactions is maintained by DOF, which is not reconciled or monitored by DOF or DPL.

Cash transactions received and disbursed at DPL are summarized in cash receipt and disbursement journals, which are not recorded in the DOF general ledger.

Journal vouchers posted to DOF’s general ledger by DOF personnel are not approved by DPL management.

The auditor said receivables, accounts payable, accruals and unearned revenues are not reconciled in DOF’s general ledger.

The auditor said adjustments to record DPL transactions in DOF’s general ledger were recorded by DPL through proposed audit adjustments.

Expenditures incurred by Parks and Recreation were recorded under DPL which was not in the FY 2020 budget, thus reducing the amount that would ultimately be transferred to the Marianas Public Land Trust.

Deloitte recommends that DPL comply with Public Law 15-02 and monitor and reconcile transactions with DOF in a timely manner.

The auditor also recommends that DPL establish monitoring control procedures over disbursements, perform periodic reconciliations with DOF to verify the accuracy and completeness of disbursements processed, and reconcile account balances maintained in the DOF general ledger.

Deloitte noted that the lack of compliance with P.L. 15-02, the lack of reliable and relevant financial information and the inability to timely detect errors and inaccuracies was reported as finding in the audits of DPL for fiscal years 2010 through 2019.

In response to the audit report, Igisomar said as part of corrective actions, revenues are deposited into bank accounts that are separate from the CNMI General Fund bank accounts.

Igisomar said DPL and DOF are in active discussions to have the P.L. 15-02-compliant accounts in place.

He said according to the Office of the Attorney General, P.L. 15-02 mandates DOF to manage all the accounting functions of DPL, including maintaining its general ledger.

The secretary said DPL and DOF are in the process of devising a transition plan that ensures an orderly transfer of these functions to DOF while simultaneously addressing reconciliation, approval and context adjustment processes.

However, he said, currently personnel and other operations expenditures are monitored and reconciled every time reports are received from DOF.

Igisomar said payroll timesheets are certified by the DPL Finance director, approved by DPL secretary, and the DOF accounting director prior to processing checks by the NMI Treasury.

He said all journal vouchers originate from DPL and are approved and signed by the DPL secretary prior to being submitted to DOF for entry into DOF’S system.

Furthermore, Igisomar said, vendors’ and payroll checks are reconciled against DPL reports to ensure they are accurate and properly accounted for and reimbursed to CNMI general fund biweekly for payroll and 15th and 30th of the month for other operation expenses.

He said adjustments and request for supplemental check are verified by the DPL Finance director and approved by the DPL secretary as well as the CNMI Finance and Accounting director.

He said all fund transferred to the CNMI general funds were approved by the DPL secretary and Bank of Guam issues voucher to notify DOF that reimbursements of expenses are posted to Finance accounts.

Igisomar said the Division of Parks and Recreation were assumed by DPL pursuant to a lateral transfer of personnel to assist DPL with upholding its responsibility of preserving the value of land properties, including the Mariana Resort hotel and golf course in Marpi, Managaha Island, and other DPL properties. He said there is currently no lessee in place at Mariana Resort, while the firm awarded the master concessionaire contract for Managaha withdrew.

With respect to other DPL properties, Igisomar said DPL does not have sufficient staff to perform maintenance itself.

He said DPL also assumed the expenses for having Parks and Recreation personnel, though those expenses did not cause DPL to incur deficit spending.