Govt’s FY04 deficit totals $153M

The CNMI government’s unreserved deficit totaled $153 million as of Sept. 30, 2004—a whooping $34-million increase compared with the prior year’s deficit of $118.4 million, or a $113-million growth over 10 years, according to the Office of the Public Auditor.

The number is based on OPA’s review of the single audit performed by independent auditing firm Deloitte & Touche on the CNMI government for fiscal year ending Sept. 30, 2004.

OPA said the total deficit increased mainly due to the “failure of the general fund to pay employee retirement contributions totaling $111 million, resulting in the assessment of $19 million in penalties and interests due from the general fund to the NMI Retirement Fund.”

OPA said that, although general fund revenues increased by nearly $10 million in FY 2004, it was insufficient to offset an increase in government expenditures totaling $35.6 million, which included increased spending for salaries and wages by $7.7 million.

It said the FY 2004 expenditure exceeded spending levels by $33.7 million.

The following agencies and programs had the largest “over-expenditures:”

– penalty for non-payment of retirement contributions, $19 million;

– bad debts, $8.5 million;

– government utilities, $6.1 million

– Department of Public Health, $818,090;

– Legislative Branch, $161,581;

– Rota Mayor’s Office, $135,581.

MORE VIOLATIONS

OPA said that, during the period, questioned costs relating to federal grants totaled $2.7 million, a significant increase from the previous year’s $293,088.

This is subject to federal review “and may require reimbursement from the general fund to the federal grantor agencies.”

OPA said in its report that known violations of accounting principles and compliance weaknesses in internal controls increased from 27 in FY 2003 to 44 in FY 2004.

Among the findings were:

– bank collections for five major accounts were not performed on a timely basis;

– the Commonwealth Health Center’s large receivable balance of $99.3 million and the backlog of billing files reflect inadequate billing and collection procedures;

– advances to vendors totaling $2.3 million were not properly supported, recorded, or liquidated;

– Of the $2.3 million recorded travel advances, over $860,000 remained unchanged from the prior year. The travel records of six people were not made available;

– $713,000 of questioned costs relating to federal grants was created by a failure to obtain grantor approval to sole-source purchases in excess of $100,000; and

– the CNMI was substantially in violation of the federal cash management requirements for drawdowns and release of funds relating to Medical Assistance Program and capital improvement program.

Further, OPA said that, in addition to federal grants questioned costs, other major “contingent liabilities” were found relating to the Puerto Rico dumpsite closure and the pension liability at the NMI Retirement Fund.

The CNMI government’s liability for future costs associated with the dump closure was “not determinable” but with the Fund, the estimated liability totaled $516.9 million, as cited by an Oct. 1, 2003 actuarial report.

Unfunded liabilities refer to a future claim of current and retired government workers, forecasted shortfall between existing retirement assets, future earnings and contributions against future benefits that must be paid.