OPA: Govt’s 2002 deficit at $80M

The fiscal deficit incurred by the CNMI government and potential claims against its assets—estimated at over $528 million—showed the CNMI’s fiscal health in frail condition, which would impact on its ability to render public services.

The Office of Public Auditor has formed a financial audit unit, which would coordinate and monitor all of the CNMI’s financial audits.

Public Auditor Michael Sablan reported that the CNMI government incurred expenditures exceeding revenue collections from fiscal year 1997 to 2002.

“While it is acknowledged that this six-year period represents the most volatile financial period in recent history, OPA is gravely concerned about the continued increase in the CNMI government’s accumulated deficit and the impact it could have on the government’s continuing ability to maintain the current level of operations, programs and services,” Sablan said, in a letter to Gov. Juan N. Babauta.

An audit of the CNMI’s financial statements for fiscal year 2002 indicated a deficit of $80,921,000 for the Commonwealth government. The audit report stated that unreserved fund balance totaled a negative $104,437,000.

The audit, however, did not cover the unfinished Commonwealth Utilities Corp.’s audit. It also said that the Northern Marianas College could not confirm both its inventory and capital assets due to inadequate records. Sablan said there was also inadequate accounting of receivables from the federal government, taxes and other debtors.

“The combination of the accumulated General Fund deficit and the potential demands of the noted contingent liabilities…creates a somber picture of the financial health of the CNMI government,” the report stated.

Contingent liabilities pertain to potential claims against the assets of the CNMI government. For FY 2002, these included some $488,693,000 representing unfunded pension liability and some $40 million for land acquisition costs.

Sablan also said that some $24 million in medical claims remain unpaid. The General Fund guarantees the payment of this Government Health Insurance Program contingency.

The OPA reported that the Commonwealth Health Center recorded uncollectible accounts amounting to over $99 million during the fiscal year, increasing from over $73 million for the previous fiscal year.

“This one year write-off in excess of $26 million underscores the need for better accountability,” Sablan said. “The DPH [Public Health] department-wide incurred General Fund expenditures in excess of $43 million in FY 2002, representing the largest departmental operational outlay in the CNMI government.”

Sablan proposed separate financial statements for the CHC to improve the facility’s efficiency. He said that, while a separate accounting financial presentation for the CHC would incur costs, the facility stands to benefit by having specific financial information available to management and policymakers.

The audit report also pointed out several weaknesses in internal control measures to safeguard the assets of the government, including inadequate documentation of advances to vendors.

The OPA commended the Department of Finance and other government agencies, though, in reporting financial information to improve fiscal accountability.