‘PSS relying more on fed funds’

The Public School System is alarmed by its growing reliance on federal grants for funding, according to an independent audit.

J. Scott Magliari & Company, which audited PSS’s finances for the fiscal year 2005, found that PSS received $37.2 million from the central government.

This represented 59 percent of PSS’ total funding for 2005, a major decline from FY1997 when the General Fund’s share was 78 percent of the total funding.

Meanwhile, PSS got $32.1 million in federal grants in 2005, an increase of more than $11 million from the FY2004 level funding of $20.8 million. In addition, PSS received $1.2 million in capital improvement projects funding.

“PSS management considers the erosion [of the General Fund’s share] a particularly worrisome situation, in that PSS has become extremely dependent upon a major funding source over which it has very little control or influence,” the audit report stated.

Public Auditor Michael S. Sablan noted that over-reliance on federal grants may put government agencies in a tricky situation. “Federal grants are uncontrollable and involve a lot of compliance issues. Deficiencies that are not dealt with on timely basis could cause serious disruptions to an agency’s operations, like what happened in Guam when the U.S. Department of Education held back funding for the schools,” he said.

The audit also showed that the bulk of PSS’ FY2005 expenditures, 83 percent or $60.9 million, related to instructional expenses such as regular classroom instruction, special education, co-curricular and student services. This is slightly up from 81 percent in the previous year.

Non-instructional support services, including administration, community, other support and depreciation, accounted for the balance of the expenditures during the year. Of the total $12.1 million in support services expenses, $7.8 million related to general and school administration expenses.

PSS’ total assets declined by $1.2 million to $89.3 million and total liabilities increased by $1.3 million to $8.2 million.

The auditors noted that the ratio of current assets to current liabilities declined significantly from 3.2 to 1 in FY2004 to only 1.9 to 1 in FY2005.

“This means that for every $1 in liabilities owed by PSS, due within one year, PSS has only $1.90 in current assets to meet the obligation,” the audit said.

PSS operates 22 schools and 10 Head Start centers. It is also the largest employer in the CNMI government, with over 1,150 workers.

Student enrolment during FY2005 was 11,599, up 5 percent from 11,016 in the previous year. PSS projects the enrollment numbers to reach 15,000 by the year 2010.