OPA finds PSS bank overdraft

The Public School System’s general fund at Bank of Guam had an ending balance of $2,372,912, but issued $3,965,193 in cumulative checks to payees in the fiscal year that ended on Sept. 30, 2019, according to an independent audit, resulting in a negative book balance of $1,631,548.

This was among the findings of the audit report by Burger & Comer P.C. that was released by the Office of the Public Auditor yesterday. OPA hired Burger and Comer to audit PSS’ financial statement, internal control, and compliance for the year that ended Sept. 30, 2019.

The auditor said PSS did not have sufficient cash balances to cover all the checks written and released before Sept. 30, 2019.

The auditor found out that this happened because PSS prepared and issued checks—despite not having adequate funds to cover those checks—because they were assured by the CNMI Department of Finance that funding would be provided shortly after the end of the fiscal year.

Comer & Burger said the effect of PSS’ action caused the financial statement to show a significant bank overdraft. The auditor said PSS ran the risk of issuing checks that would not be honored by its bank.

OPA recommended that PSS should not release checks if there is insufficient cash to cover those checks. The auditor said that PSS’ Finance Department should verify that there is sufficient funds before releasing the checks.

With respect to prior year audit findings, the OPA auditor found that PSS resolved many questioned costs and issues.

On travel advance liquidation, Comer & Burger said a test on PSS’ compliance with travel and commuting policies showed that 62 travel authorizations (about 61%) were not liquidated within the prescribed period. This happened, the auditor said, because of the lack of adherence to policies and procedures regarding the liquidation of travel advances. This had the effect of understating PSS expenses.

Comer & Burger said if the travel is covered by a federal grant, unliquidated travel advances means that PSS has not submitted the expense for reimbursement and therefore has not collected money from the grantor for such travel.

The auditor recommended that PSS should consider including as taxable compensation the travel advances issued to travelers who did not liquidate on time. That way, travelers might be enticed to liquidate their advances on time, the auditor said. Comer & Burger also recommended that PSS comply with its policies and procedures and regulations regarding travel advances.

The auditor said they did not identify any deficiencies in internal controls over compliance that could be considered material weaknesses. However, the auditor said, they did identify certain deficiencies that may be considered “significant deficiencies.” The release of checks and the advance travel were among the five items that Burger & Comer found to be significant deficiencies.

The auditor’s opinion is that PSS complied, in all material respects, with the types of compliance requirements that could have a direct and material effect on each of its major federal programs for the year ended Sept. 30, 2019.

The auditor determined that PSS’ financial statements present fairly, in all material respects, the financial position of governmental activities, each major fund, and the aggregate remaining fund information of PSS, as of Sept. 30, 2019, and the changes in financial position for the year then ended in accordance with accounting principles.