CUC power revenue from commercial customers down from $16.2M to $12M

An independent audit conducted on the Commonwealth Utilities Corp. shows that its power revenue from commercial customers went down by $4 million in 2021—from $16.2 million in 2020 to $12 million a year later.

In his presentation to the CUC board meeting last week, Dave Burger, managing partner of Burger Comer Magliari, said one of the things they considered in the audit his company did on CUC for the 2021 period was that the CNMI probably had six months of regular operations in 2020 and six months of COVID-19 pandemic.

For 2021, there were 12 months of COVID-19, said Burger.

That means they already expected to see a decreased revenue for CUC’s commercial accounts, he said.

At the time, Burger said, hotels were operating up until March 2020 and not much at all in 2021.

He said their firm is doing the numbers for the Hotel Association of the Northern Mariana Islands, which enabled them to determine that hotel occupancy last September was at only 41%.

“Hotels are not making any money at year-to-date,” said Burger, adding that the best month was 53% and only three hotels were getting over 60% occupancy.

He said this was indirectly applicable to CUC because it generates revenue from the power consumption of hotels.

The 2021 audit has three reports: the financial statements themselves, internal controls and compliance with government auditing standards, and internal control and compliance for each major program.

Burger said they have a qualified opinion on the audit report on the financial statements themselves. That is simply because they were not hired on or before Sept. 30, 2021 to do the audit and, as such, could not be there to observe the physical inventory on that date.

He said it’s a routine qualification anytime the auditor is not engaged before the end of the fiscal year being audited.

“I hope that doesn’t create problems with federal agencies. I’m dealing with it on other clients and really it is routine,” Burger said.

On the internal control and compliance report, he said they did have one finding.

On the third report—compliance for each major program—Burger said they did have one finding on federal programs as it relates to reporting.

He said there are periodic reports required to be submitted to the grantor and, in this case, the reports were late.

Burger said the CUC management has provided them with a corrective action plan.

“I don’t think there’s any disagreement with the finding. It did happen,” he pointed out.

In comparing the 2021 figures to the 2020, Burger said there was an increase in total assets and deferred outflows of resources of about $20 million.

Burger said about $14 million of that is an increase in cash, and then there was construction and progress that went up by about $8 million.

“And that kind of explains the increase in assets,” he said.

As for total liabilities, Burger said there wasn’t really any change: from $46.3 million to $46.9 million.

Burger said there was a significant decrease in an obligation under environmental remediation costs at $8 million.

He said net position went up by $20 million, which is pretty much the same as the total assets and deferred outflows.

On the income statement, the net operating revenues went from $82 million in 2020 down to $68 million in 2021.

Over that last 10 years, he said, CUC has had four years of sharp decreases in revenue for different reasons.

Burger said net operating revenues dropped quite a bit, creating an operating loss.

He said, however, the remediation helped out, recovery of bad debts helped out quite a bit, and capital contributions were tremendous, during which construction and progress happened.

“So net position, which is the equity of CUC, actually went up by $20 million in 2021,” he said.

As to why the audit covers only the 2021 period, Burger said one of the three auditing firms operating in Micronesia decided to leave the market last March, so there were some jobs that were left undone or not even started.

“That’s why this audit is coming out at this time. …It’s been a bit overwhelming. We’re just inundated with requests for work,” he added.