This is the report on the audit of financial statements of the Northern Mariana Islands Retirement Fund (NMIRF) as of September 30, 2010 and 2009, and the related Statements of Changes in Plan Net Assets Available for Benefits for the years then ended. Also included is the Report on Internal Controls and on Compliance for the year ended September 30, 2010. The audit was conducted by J. Scott Magliari & Company.

Plan Net Assets Not Enough To Pay Accrued Benefits

Based on the latest actuarial valuation of the Defined Benefit Plan dated October 1, 2009, the present value of accrued benefits amounts to $928,755,628. As of September 30, 2010, plan net assets available for benefits were $355,557,796. The Statement shows that should the plan terminate at September 30, 2010, the Fund’s plan net assets available for benefits is not enough to pay for its accrued benefits. Present value of accrued benefits in excess of the plan net assets available for benefit was $573,197,832.

Financial Highlights

Management's Discussion and Analysis provided the following highlights:

• Net assets held in trust for pension benefits as of September 30, 2010 and 2009 were $337,990,950 and $353,475,412, respectively a decrease of $15,484,462 or 4.4% from fiscal year 2009.
• Total additions, as reflected in the Sstatements of Changes in Plan Net Assets Available for Benefits, were $69,549,430 and $44,339,462 for the years ended September 30, 2010 and 2009, respectively. Total additions increased by $25,209,968 or 56.8% compared to 2009 due primarily to the $24,448,589 net investment income this fiscal year.
• Value of investments at market value declined from $332,308,037 in 2009 to $312,326,477, a decrease of $19,981,560 or 6.0% despite the $24,448,589 net investment income due to drawdowns of $40,855,000 to cover shortfalls in funding payout obligations.
• Total deductions, as reflected in the Statements of Changes in Plan Net Assets Available for Benefits, were $85,033,892 and $94,069,062 for the years ended September 30, 2010 and 2009, respectively. This is a decrease of $9,035,170 or 9.6%, largely due to a lower provision for uncollectible contributions in 2010 offset to a smaller extent by the increase in benefit payouts.
• The funded ratios (the ratio of net assets held in trust for pension benefits vs. total actuarial present value of accrued liability) based on the May 2011 Actuarial Valuation Report were 38.8% at October 1, 2009, and 44.8% at October 1, 2008, respectively. This deterioration in funding level was due to a combination of a) the decline in value of net assets held in trust for pension benefits, and b) the increase in total actuarial present value of accrued liability.
• Actuarial present value of accumulated plan benefits as of October 1, 2009 and 2008 were $911,188,782 and $899,440,600, respectively, and of these liabilities, $59,365,592 and $60,057,174, respectively, are the present value of non-vested benefits.

Financial Statements Findings

The report on internal control and on compliance for the year ended September 30, 2010 disclosed the following financial statement findings:

• The NMIRF Records Section was not able to timely reconcile the member ledgers with the remittance from the CNMI autonomous agencies. Thus, it was not able to update the individual member ledgers in a timely manner.
• The NMIRF was not able to distribute Form 1099 to its recipients before the January 31st deadline. Furthermore, the database for the electronic filing did not include recipients who retired in fiscal year 2010.

The audit noted that the new database software contracted with a third-party systems developer is still not fully utilized. The NMIRF is exploring options on how to recover from the vendor. 

Download the Report on the Audit of Financial Statements and Report on Internal Controls and on Compliance