Audit detects some slip-ups in CUC regs for HR, travel

In its independent audit on the Commonwealth Utilities Corp.’s financial statements, the Office of the Public Auditor found that CUC is not in compliance with its regulations for the maintenance of human resources files and with its travel policies and procedures.

The independent audit, conducted by Burger Comer Magliari P.C. on CUC’s financial statements on years that ended Sept. 30, 2018, and 2017, determined that the utilities agency did not adhere to policies and procedures for the maintenance of human resources files.

The auditor also found lack of adherence to established policies and procedures regarding the liquidation of travel advances.

CUC chief financial officer Greg Cruz agreed with the auditor’s findings.

On human resources files, Cruz said the HR Department is working diligently to make sure all employee documentations of change be in place to avoid or minimize any errors or future discrepancies.

Cruz said that, although there were missing Notice of Personnel Actions from the employees’ files, the pay rate changes were approved prior to the payroll department making the adjustments.

On travel, Cruz said CUC’s Travel Section will ensure that all interisland and international travels trip reports—travel documentations that are required to be submitted 15 days from return of travel—should be submitted in a timely manner. He said the Travel Section will advise employee by email and courtesy phone call with the submission of travel vouchers and trip reports.

As for missing boarding passes, CUC employees would request airlines for a duplicate copy of boarding passes, Cruz said.

He said a travel checklist will be given to every employee when picking up checks, to be acknowledged by the employee.

With respect to human resources matter, the auditor found that, as a result of CUC’s noncompliance with its regulations, there could be misstatements in payroll expenses.

“Potential fraud could exist and not be detected,” the auditor said in its findings.

The auditor said that based on results of testing of personnel records, for 20 or 22 percent of 90 personnel records selected for testing, the rate used in calculating the payroll was not supported by an approved Notice of Personnel Action for 20 employees.

The auditor said the cause was that the NOPAs for the fiscal year ending Sept. 30, 2018,l were not provided to the auditor by the HR Department.

The auditor noted that a similar condition was reported in the prior year audit.

The auditor’s recommendation is that CUC should ensure that all employees have valid contracts, and that the HR Department maintains and updates the files periodically.

With respect to travel policy, the auditor said for 20 or 25% of 79 travel authorizations selected, the travel voucher was submitted latte; 10 or 13% were not dated; 25 or 32% were missing boarding passes; and 7 or 9% were not liquidated.

The auditor said for 15 or 19% of 79 travel authorizations selected, the trip reports were not submitted together with the travel voucher.

The auditor noted a similar condition was reported in the prior year audit.

The auditor’s recommendation is that CUC should adhere to its travel policy to ensure that all travelers comply with the policy.

The auditor informed CUC board of directors that, in its opinion, such financial statements present fairly the financial position of CUC as of Sept. 30, 2018, and the changes in the net position and cash flows for the year ended in conformity with accounting principles generally accepted in the U.S.

“In our opinion, the schedule of revenues, expenses and changes in net position on a divisional basis and the schedule of expenditures of federal awards are fairly stated in all material respects in relation to the basic financial statements as a whole,” the auditor said.

The auditor also stated that the results of their tests showed instances of noncompliance or other matters that are required to be reported under government auditing standards.

The audit showed that during the year ending Sept. 30, 2018, CUC had earnings from operations of about $7.4 million compared to a loss of about $4.1 million for the year ending Sept. 30, 2017.

The audit also indicated that during the year ending Sept. 30,2018, CUC’s operating revenues increased overall by $14.3 million or 16.8% when compared to revenues for the year ending Sept. 30, 2017.

The audit found that operating expenses also increased by $2.8 million or 3.2%.

As of Sept. 30, 2018, CUC had $107.22 million invested in capital assets, net of depreciation where applicable, including electric plant, water plant, sewer plant, administrative equipment, and construction in progress.

Ferdie De La Torre | Reporter
Ferdie Ponce de la Torre is a veteran journalist who has covered all news beats in the CNMI. Born in Lilo-an, Cebu City in the Philippines, De la Torre graduated from the University of Santo Tomas with a bachelor’s degree in journalism. He is a recipient of many commendations and awards, including the CNMI Judiciary’s prestigious Justice Award for his over 10 years of reporting on the judiciary’s proceedings and decisions. Contact him at ferdie_delatorre@saipantribune.com

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