Fund scrambling to find an independent auditor

Posted on Nov 18 2011
By Moneth Deposa

The NMI Retirement Fund is scrambling to find an independent auditor that will work on its fiscal year financial audit after a couple of request for proposals advertised in newspapers found no takers.

Fund administrator Richard Villagomez has already asked the Office of the Public Auditor what legal and procedural issues may arise in the absence of a financial audit for fiscal year 2011.

According to Villagomez, the Fund twice issued in the past three months a request for proposal for a financial auditor. The first search was advertised in the local papers and closed on Sept. 21. During the open period, two firms expressed interest but only J. Scott Magliari & Associates submitted a proposal by the closing date.

Villagomez said Deloitte and Touche initially expressed interest, but later indicated it would not be submitting a proposal because of the passage of Public Law 17-51, the Beneficiaries’ Derivative Act, which became effective around the RFP open period.

Subsequently, Scott Magliari called the Fund to withdraw his proposal, also because of the passage of the Beneficiaries’ Derivative Act.

The second search closed on Nov. 9 and the Fund only received one inquiry but no responses.

“As a result of Public Law 17-51 the Fund is unable to retain the services of any professional advisors. This extends from investment advisors, to money managers, to litigation counsel and now to external auditors. Accordingly, we are unable to retain a financial auditor to perform the required annual audit to comply with the law,” Villagomez told Public Auditor Michael Pai in a letter on Monday.

The Beneficiaries’ Derivative Act allows retirees to sue the Fund’s independent advisers and money managers in the event the Fund board refuses to do so.

“As it stands, we don’t have an independent firm to audit our books and time is ticking toward the CNMI single audit deadlines. This inability to contract with service providers-though predicted and raised to lawmakers as a negative consequence on several occasions over several months in opposition to P.L. 17-51 when it was still a bill-is unprecedented for the Fund. We would like to begin planning any necessary steps the Fund should start taking now to address any foreseeable legal and procedural issues that may arise in the absence of a financial audit for FY 2011,” Villagomez added in his letter to Pai.

Villagomez emphasized that independently audited financial statements are the foundation for other finance related reports and it is crucial for any organization that deals with money to be audited by an independent accounting firm.

“The board of trustees relies on independent auditors to review the management of the Fund and the actuary relies on the audit report in preparing the actuarial report. Even if the Fund were able to hire another actuary, the actuary may not be able to move forward without [a fiscal year] 2011 audit report. We sincerely hope OPA finds a way for the CNMI to overcome this challenge,” said Villagomez.

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