Results of the Single Audit of the CNMI as a whole, for the fiscal year ended September 30, 2006, reflect the government wide efforts to reduce spending. However, because General Fund revenues saw a significant decrease, revenues were again insufficient to cover total expenditures. General Fund revenues decreased 10.3% and expenditures decreased 14.7% over the previous fiscal year. The General Fund unreserved deficit increased by 2%; this is a significantly smaller increase than the 14% increase seen in fiscal year 2005.

General Fund Revenues Decreased 10.3%, Expenditures Decreased 14.7%

CNMI General Fund revenues and expenditures simultaneously decreased in fiscal year 2006. Revenues decreased by $22.2 million to a total of $192.7 million. The significant decrease was primarily the result of a shrinking tax base due to the declining garment industry coupled with a downturn in the tourism industry since the pullout of Japan Airlines in October 2005. Revenue collections for FYE 2006 were the lowest they have been since 1994.

Additionally, through various cost-cutting measures the government successfully decreased General Fund expenditures by $35.9
million to a total of $209 million for the fiscal year. Despite the weighty reduction, General Fund revenues were again insufficient to cover
total expenditures.

The greatest losses in revenue were from a $20.6 million decrease in the collection of taxes, a $2.2 million reduction in interest and
dividends, and a $1.8 million decline in the collection of revenue from licenses and fees. At the same time, General Fund expenditures saw a sharp reduction in payments to the Department of Public Lands (formerly Marianas Public Lands Authority) for land claims by $12.2 million as well as a reduction of $8.2 million for the general government and $5.6 million for public safety and law enforcement.

General Fund Unreserved Deficit Increased to $177.2 in FYE 2006

The CNMI’s cumulative unreserved fund deficit continues to mount with an increase of 2% to a total of $177.2 million for the fiscal year. This is a significantly smaller increase than the 30% and 14% increases that were seen in fiscal years 2004 and 2005, respectively.

Major factors for the deficit increase were 1) payments to the Department of Public Lands toward land claims, despite the nearly 65% reduction in payments from the previous fiscal year, and 2) the inclusion of $11.9 million in employer retirement contributions as expenditures. The contributions were suspended from payment in 2006 by Public Law 15-15, for the period of March 1, 2006 through September 30, 2007; therefore these contributions were not budgeted for in 2006.

Expenditures $5 million less than budgeted

Expenditures by function examined on a budgetary basis came in under budget by a total of $5 million.

Audit Findings Increased from 48 to 52; Questioned Costs Jump to $5 Million

Audit findings, which represent known violations of accounting principles and non-compliance with and/or weaknesses in internal controls, increased to 52; of which, 37 represent uncorrected findings from the previous year. Sixteen findings relate to financial statements, 34 relate to federal awards and questioned costs, and two relate to both financial statements and federal awards. Among the findings were:

• The General Fund’s large taxes receivable balance ($15.1 million) indicates a lack of policies and procedures over the assessment of taxes receivable.
• Of the $1.6 million in outstanding and unliquidated travel advances, $1.2 million represents carryforwards from prior years. Improper and untimely travel liquidations were also noted.
• Advances to vendors totaling $4.1 million were not properly supported, reported, or liquidated.
• Noncompliance with federal property standards and the CNMI Property Management Policies and Procedures.
• Noncompliance with established procurement policies and regulations, incomplete procurement files, and questioned costs of $196,248.
• The Medicaid Program paid out $1.6 million for services that were not reviewed for eligibility or for propriety of rates charged.

The overall effect of the audit findings was the disclosure of $1.5 million in questioned costs relating to Federal grants. This is a 104% increase over the questioned costs identified in the FYE 2005 Single Audit, bringing the cumulative total of unresolved costs to $5 million. The questioned costs are subject to Federal review and may require reimbursements from the General Fund to the Federal grantor agencies.

Download/view the OPA Executive Summary of the CNMI Audited Financial Statements FY 2006

Download/view CNMI Audited Financial Statements FY 2006