OPA: Legislature overspent $60M bond

The government may need to scale down some uncompleted infrastructure projects and cancel other projects altogether, after the Legislature over-appropriated a $60-million bond floated in 2000, according to the Office of the Public Auditor.

An OPA audit showed that the Legislature appropriated a total of $1.52 million in excess of the funds actually available from the bond.

Public auditor Michael S. Sablan said this occurred because the CNMI Legislature did not have adequate procedures to determine an accurate balance of $60 million bond proceeds and interest income when it passed ten CIP appropriation acts from 2000 to 2004.

“As a result of the over appropriation, [the Commonwealth Development Authority] may not be able to certify available funds for some capital improvement projects. The CNMI government may need to identify and appropriate additional funds to complete the under-funded projects, scale down the scope of some uncompleted projects, or cancel some projects altogether,” Sablan said.

“OPA believes that the over appropriation of the $60-million bond proceeds and interest should be immediately addressed while some of the intended capital improvement projects have not started or if already started, are still in progress and can be scaled down,” he added.

The CNMI government floated the $60-million bond in 2000 to fund various capital improvement projects. Because of several deductions from the bond proceeds, only $49.67 million was left available for appropriation.

From Sept. 28, 1999 through July 31, 2004, the Commonwealth enacted a total of eight appropriation laws that identified the bond proceeds as a source of funding.

OPA found that three of the laws appropriated unavailable funds totaling $880,295. The unfunded or underfunded programs are water system improvement and road projects at Precinct III, road paving projects at Precinct IV, and the San Vicente waterline replacement project.

The audit also revealed that two CIP appropriations exceeded available bond interest income by $640,316.

Citing an analysis conducted by Bank of Guam, OPA stated that the $60-million bond earned an interest income of$4.26 million as of July 31, 2004. However, Public Laws 14-2 and 14-20 appropriated $1 million and $3.9 million respectively, thus resulting in the over appropriation.

Furthermore, OPA identified $127,088 of bond funds used for projects not specifically identified in bond related CIP appropriations. The agency referred to improvements projects at the Susupe Central Fire Station, Department of Public Safety impound yard and the Susupe Sports Complex.

“The analysis determined that there were occasions when CDA approved drawdowns of bond proceeds for projects not specifically identified in CIP appropriation acts, as required. This could potentially lead to insufficient funding for some capital improvement projects,” Sablan said.