CNMI Government’s 2011 Deficit Recorded At $369.4 Million

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Pacific Islands Development Program, East-West Center With Support From Center for Pacific Islands Studies, University of Hawai‘i

CNMI Government’s 2011 Deficit Recorded At $369.4 Million Government says recovery from decreasing revenues unlikely

By Haidee V. Eugenio

SAIPAN, CNMI (Saipan Tribune, June 7, 2013) – Despite the work hour cuts and other austerity measures in place at the time, the Commonwealth of the Northern Mariana Islands government's total fund deficit climbed to almost $369.4 million in fiscal year 2011, from $316.7 million in 2010, newly released financial statement findings of independent auditing firm Deloitte & Touche LLC show.

The total fund deficit is triple the amount of the governor's proposed budget of $123.4 million for fiscal year 2014, which begins on Oct. 1.

In 2007, the total fund deficit was still below $200 million, Deloitte data shows.

The Deloitte report is addressed to Gov. Eloy S. Inos.

With tourism arrivals in the upswing of late, future reports may post a healthier financial state.

The governor and Lt. Gov. Jude U. Hofschneider, through Finance Secretary Larrisa Larson, said in a separate report accompanying the Deloitte report that the CNMI general fund posted a "total fund deficit of $351.3 million" in 2011, a 4.3-percent increase from $336.9 million in 2010.

"For budgetary reporting purposes, general fund actual revenues were higher than final estimates by $2.8 million, or 2 percent, while reported actual expenditures exceeded final estimated appropriations by $31.5 million, or 20.5 percent," Finance said in the report which, along with the Deloitte report, was obtained by Saipan Tribune from the Office of the Public Auditor yesterday afternoon.

These amounts do not include transfers to and from other funds, nor does it include the receipt or use of long-term debt proceeds.

Budget deficit is a combination of overspending and revenue shortfall.

Copies of the reports were also provided to Senate and House members, some of whom are now working on the fiscal year 2014 budget bill.

With the steady increase in deficit and no funds set aside to retire it, past and present administrations may have been violating the CNMI Constitution.

Article 10 Section 6 of the CNMI Constitution says the government shall retire the deficit during the second consecutive fiscal year following the year.

Deloitte data

Deloitte data shows that total assets were at $33 million while liabilities, at $378.5 million in 2011.

Total revenues were at $141.6 million, while total expenditures were at $194.9 million.

"The cause of the above condition is that resources are not readily available to alleviate cash flow needs. Further, revenue resources are not adequate to meet increasing expenditures/obligations," Deloitte said in its financial statement findings.

It recommends that the CNMI review its various functions so it could maintain adequate cash flows to meet current obligations.

Inadequate cash flows to meet current obligations were reported as a finding in the single audits of the CNMI for fiscal years 2004 through 2010.

Larson, on behalf of the CNMI government, said in response to the Deloitte audit that various austerity measures, including reduced work hours, hiring freeze, stringent review of non-personnel expenditures and reduced budget allotments have reduced expenditures from $193 million in 2007 to $154 million in 2011.

"Revenues have fallen at a faster rate than expenditures during this period but the cash flow effect was mitigated by $60 million in deferred retirement contributions," Larson said.

In fiscal year 2011, employee work hours were reduced by 20 percent or 16 hours-from the regular 80 hours to 64 hours per pay period, among other austerity measures.

Administration data

The Inos administration data, meanwhile, shows that for the fiscal year ending Sept. 30, 2011, the CNMI's total net deficiency increased by $18.7 million, to a net deficiency position of $238.9 million from $220.2 million.

This represents an increase of some 8.5 percent from the net deficiency position at the beginning of the year.

During the year, the CNMI's expenses for governmental activities were $292.3 million, including expenses recorded for payments made or due autonomous agencies, and were funded in part by program revenues of $158.9 million and further funded with taxes and other general revenues totaling $114.7 million.

The difference between total revenues of $273.6 million and total expenses of $292.3 million is what resulted in the $18.7 million increase in net deficiency.

The administration said economic factors continue to play a large role in developing the tax and other revenue budgets for the general fund of the CNMI.

"The local economy, still slowed by the effects of a drop in tourism and loss of the garment industry, has continued to follow a trend of decreasing revenues. The prospects for fiscal year 2012 appear similar, with not much recovery in sight," the administration said.

It said the financial report is designed to provide citizens, taxpayers, customers and creditors with a general overview of the CNMI's finances and to show the CNMI's accountability for the money it gets.

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