The Commonwealth Government Employees' Credit Union's Net Assets Plunge $.9M. For calendar year 2004, total liabilities exceed total assets by $946,816. Consequently, total Net Assets are negative. This is according to an independent audit conducted by Deloitte and Touche. Other assets significant to the Credit Union are in its cash and cash equivalents and receivables which constitute a majority of its member loans.

Financial Highlights

• The Credit Union’s Statement of Net Assets (Balance Sheet) reports assets and liabilities at agiven point in time and assesses an agency’s overall financial position. At December 31, 2004, total liabilities exceed total assets by $946,816. Consequently, total Net Assets are negative. Negative assets indicate that the overall financial condition of the Credit Union is weak, and that it is not achieving an adequate standard to be in operation. Another indicator of the health of the credit union can be measured in its current ratio, which is determined to be 0.928 to 1. This ratio suggests that for every one dollar of liabilities the Credit Union has outstanding, it can only pay out $.93 cents. The higher the current ratio, the more liquid a company is in meeting its short-term debt obligation.

Some of the Credit Union’s significant assets are in its cash and cash equivalents and receivables which constitute a majority of its member loans. These assets are stated separately as unrestricted and restricted. Unrestricted cash and cash equivalents and receivables (net of loan losses) are stated as $252,000 and $700,984; restricted cash and cash equivalents and receivables, net are stated as $52,044 and $831,307. Other significant assets listed are plant and equipment at $41,340, accrued interest at $14,081, and other receivables reported at $8,663.

• Possible delinquent accounts is a risk the Credit Union faces; thus, it must be aggressive in its collection efforts to minimize the amounts of such losses. The allowance for loan losses on member loans at December 31, 2004, was calculated to be $256,584, which represents about 14.3% of total member loans. This allowance is an amount based on management’s belief will adequately absorb possible loan losses on existing loans. Eighty percent of the Credit Union’s total assets as measured in its net loans to total assets ratio are invested in the loan portfolio. A maximum ratio should be established by management in order to avoid any liquidity problems.

• The Credit Union’s material liabilities remain in its outstanding loan payable of about $1.8 million. The payable stems from a loan agreement entered into with the Northern Mariana Islands Retirement Fund (the Fund) in August 1996 for a period of thirty years and expiring in March 2026. Other significant liabilities include member’s savings accounts which is reported at $941,520, the current portion of the loan payable at $32,635, accounts payable at $23,944, and deferred income at $32,081. In its Management Discussion and Analysis (MD&A) report, the Credit Union noted that it is doing its best to boost membership, improve services to its members, and provide more loans to increase its income potential.

Audit Findings

• Audit findings are reportable items considered material by the auditors. Findings document situations where established policy, procedures or standards have not been followed. Such deviations may lead to losses for the CNMI or misstatements in its financial reports. Findings, if they remain uncorrected, can ultimately lead to qualifications in the Opinion of the auditors. For Calendar 2004, the Credit Union has seven (7) reported audit findings and zero (0) unresolved findings from prior year audits. Although seven findings are reported, the Credit Union has established corrective action plans for each of these reported findings.

Download/view OPA Executive Summary for the CGECU Audited Financial Statements FY 2004

Download/view CGECU Audited Financial Statements FY 2004