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SAIPAN, CNMI (Marianas Variety, Feb 12) – The U.S. Government Accountability Office, the investigative arm of the U.S. Congress, says the Commonwealth of the Northern Mariana Islands continues to have serious internal control and accountability problems that increase its risk of fraud, waste, abuse and mismanagement, adding that strong leadership is needed for the islands to weather its current crisis and establish a sustainable future.

GAO presented these findings to the U.S. Senate Committee on Energy and Natural Resources during a Feb. 8 hearing on the CNMI’s labor, immigration, law enforcement and economic conditions.

Jeanette Franzel, director of GAO’s Financial Management and Assurance, said the CNMI’s longstanding accountability problems include the late submission of financial audit reports, inability to achieve clean opinions in its financial statements by the independent financial auditors, and reports showing serious internal control weaknesses over financial reporting and compliance with laws and regulations governing federal grant awards.

She said many of the auditors’ findings are longstanding, going back in some cases to 1987.

The CNMI received $65.6 million in federal grants in fiscal year 2005, and its audited financial statements are used by federal agencies for overseeing and monitoring the use of federal grants.

Franzel said progress has been made by the CNMI concerning the timely submission of its audit reports.

For FY 2004, the CNMI’s audited financial statements were 22 months late. But it was only one month late for its FY 2005 submission.

"However, given the CNMI’s continued inability to achieve clean opinions on its financial statements and the continuing material internal weaknesses over financial reporting, there is limited accountability over federal grants to this insular area," said Franzel.

Franzel said the CNMI’s fund balance — which generally reflects the amount of resources available for current government operations — went into a deficit balance during FY 2002 and continued to decline to a deficit balance of $84.1 million by the end of FY 2005.

A significant contributing factor to the gap between expenditures and revenues is that the actual expenditures have exceeded budgeted expenditures each fiscal year during the period 2001 through 2005.

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