Review finds $60 million bond proceeds and interest income over-appropriated
(June 24, 2006)
OPA's review of appropriations acts identifying the $60 Million Bond as a source of funding found that the CNMI Legislature over appropriated bond proceeds and interest income, totaling $1,520,611. As a result, the CNMI Government may need to identify and appropriate additional funds to complete the under funded projects, scale down the scope of some uncompleted projects, or cancel some projects altogether.
In a letter dated January 29, 2004 from former Governor Juan N. Babauta, OPA was requested to conduct an audit on the expenditure and management of the interest proceeds from the $60 Million Bond. In his letter, the Governor stated that “the First and Second Senatorial District[s] have raised specific concerns related to the manner in which the Commonwealth Development Authority is expending [the] bond interest proceeds.”
Pursuant to the Capital Improvements Projects Bond Authorization Act of 1999, Public Law (PL) 11-102, CDA on behalf of the Commonwealth, was authorized to issue “up to sixty million dollars ($60,000,000) worth of tax-exempt general obligation bonds of the Commonwealth to fund a variety of public purpose capital improvement projects as specifically set forth in CIP appropriations acts.” Public Law 11-102 also authorized CDA “to secure interim financing to fund the projects contemplated in the bond issue from a financial institution in an amount up to thirty million dollars ($30,000,000). The funds borrowed under the interim financing shall be retired from funds generated by the bond issuance.”
Public Law 11-119, enacted on January 25, 2000, appropriated the funds to be borrowed under the interim financing for various capital improvement projects, including the refinancing of ongoing projects3. The interim financing was obtained by CDA on February 18, 2000 through a $30 Million Bond Anticipation Note from the Bank of Guam (BOG). In total, $8,175,243 was drawn down from the Bond Anticipation Note.
CDA floated the $60 Million General Obligation Bonds, Series 2000A. On November 15, 2000, CDA entered into an Indenture of Trust (Indenture Agreement) with BOG for the management of the bond proceeds. Pursuant to the Indenture Agreement, the bond proceeds were segregated into funds (or in accordance with the intended use). Prior to being obligated, moneys within certain funds were to be invested by the Trustee and the earnings (interest income) were to be additionally appropriated with the bond proceeds.
