CUC gets good audit report, but…
For the year ending Sept. 30, 2021, the Commonwealth Utilities Corp. incurred a loss from operations of about $14.7 million, in contrast to the $426,460 income it posted the previous year, according to an independent audit on CUC released by the Office of the Public Auditor yesterday.
Based on numbers cited in the report prepared by independent auditor Burger Comer & Associates, it said that CUC’s net operating revenues in 2021 was $65.57 million, while its operating expenses were at $83.26 million, which translates to a loss of $14.68 million from operations.
The year before that, in 2020, net operating revenue was at $82.06 million, while the operating expenses were at $81.63 million, which meant $426,460 in earnings.
Burger Comer & Associates gave CUC a good audit report for the year ending Sept. 30, 2021, but found significant deficiency for not complying with federal requirements in one of its major programs.
In its corrective action plan, CUC acting chief financial officer Rodolfo Urbano informed the auditor that a personnel has been assigned to monitor various projects and work with the grants administrator to ensure that reports are prepared and submitted on time.
David Burger of the Burger Comer & Associates submitted to the CUC board their report on CUC’s internal control over financial reporting and on compliance and other matters based on an audit of financial statements.
The auditor audited CUC’s financial statements, which comprise the statement of net position as of Sept. 30, 2021, and the related statements of revenues, expenses and changes in net position, and of cash flows.
Burger said the results of their tests disclosed instance of noncompliance or other matters that are required to be reported under Government Auditing Standards.
In their opinion, Burger said, CUC complied in all material respects, with the types of compliance requirements that could have a direct and material effect on each of its other major federal programs.
Burger did not identify any deficiencies in internal control over compliance that they consider to be material weaknesses. However, he said, they did identify certain deficiencies in internal control that they consider to be a significant deficiency.
In their opinion, Burger said, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the financial statements as a whole.
The auditor found the deficiency pertaining to the U.S. Environmental Protection Agency’s Drinking Water and Wastewater Infrastructure: Consolidated Environmental Programs.
According to the administrative conditions of the grant agreement, CUC must prepare an SF 425 (Federal Financial Report) annually and submit it on or before Dec. 31 of the same year. Burger found that this report was submitted late. The auditor found that the grant administrator did not submit the report on time but requested an extension. Burger said no proof was provided that the extension was filed or approved by the grantor.
Burger said there is a risk that the grantor may not approve future grants due to CUC’s noncompliance with the grant requirements.
The auditor recommends that CUC should properly maintain their accounting, financial, and project records in a manner that will facilitate timely preparation and submission of required reports.
Urbano told Burger that CUC agrees with the auditor’s finding and shared CUC’s corrective action plan.
CUC acknowledged that fiscal year 2021 has been difficult both operationally and financially for CUC as it was coming off Super Typhoon Yutu—needing to clean up, repair, and reestablish systems that were damaged—and then sliding into the COVID-19 pandemic, which severely damaged revenue generation throughout the CNMI due to the loss of Saipan tourism, bringing about a dramatic turn in events.
CUC’s cash flow each month plunged from $9 million or more to $5 million and less, which required commitments from all divisions that there would be no overtime, all cell phones provided by the utility were turned in and shifted to personal responsibility, staffing was prioritized when vacancies occurred, vacations were canceled, and maintenance was pulled back on critical repairs, among other austerity measures.
Audit
