Government Of Guam’s Debt Situation Deepens

admin's picture

Government Of Guam’s Debt Situation Deepens Guam’s debt per capita high compared to other territories

By Mar-Vic Cagurangan

HAGÅTÑA, Guam (Marianas Variety Guam, Jan. 17, 2014) – The government of Guam’s fiscal performance may have scored higher in 2012, but the level of its debts has exploded beyond its assets and repayment ability, with each Guam citizen owing $8,810.

According to a performeter report released by the Office of Public Accountability yesterday, 113.3 percent of GovGuam’s total assets of $1.46 billion were funded with long-term debt.

"This is an unfavorable financial indicator and indicates that for each dollar of assets GovGuam owns, it owes $1.46 of that dollar to others," the OPA said, noting that Guam’s debt per capita is considered high compared to other insular territories.

The analysis showed that as of Sept. 30, 2012, GovGuam’s general fund had a ratio of cash and cash equivalents to current liabilities of 34 cents to a dollar.

"This indicates that GovGuam had 34 cents in cash and short-term investments available to pay every $1 of current liabilities, and is a possible indicator of short-term cash flow difficulties," the OPA report said.

Higher score

Nevertheless, evaluators concluded that GovGuam’s financial health and performance was better in 2012 compared to the previous year, posting an overall score of 2.81 – from a scale of 1 being least favorable, to 10 being most favorable.

In 2011, GovGuam scored 2.73 on the Performeter and Audit Findings, Timeliness, and Exception Resolution analysis conducted by Crawford & Associates P.C. for the U.S. Department of the Interior’s Office of Insular Affairs.

Evaluators attributed the slight increase in the rating to the slight reduction in the overall deficit of the government, and an improvement in the operational deficit of the general fund, which received a boost from bond borrowings that netted $352.7 million in proceeds.

The OPA said the 2012 score is Guam’s highest in eight years but remains the lowest score among the eight insular areas analyzed.

"GovGuam’s unfavorable rating continues primarily due to its cumulative deficit of approximately $194.2 million," the OPA said.

The provision for tax refunds liability amounting to approximately $100 million was included in the calculation for consistency in comparison with previous years’ fiscal performance.

Short-term obligations

Evaluators found that GovGuam’s ability to promptly pay its short-term obligations – including debt owed to vendors and government payroll – has relatively improved, but is likely to remain a problematic situation.

"A current ratio of 2 to 1 indicates good current liquidity and an ability to meet the short-term obligations. This measure is that of only the general fund, the primary operating fund of GovGuam," the OPA said.

As of Sept. 30, 2012, GovGuam’s general fund had a ratio of current assets to current liabilities of 1.10 to 1, indicating that the government has $1.10 of current assets to pay for every $1 of current liabilities.

While showing a significant improvement from prior years, the OPA said the current ratio is still considered an unfavorable indicator of liquidity.

Tax burden

Guam’s financial ratio of taxes per capita indicates a relatively high tax burden when compared to other insular governments, and posted an increase from the ratio of the prior year, the OPA said.

"For the year ended Sept. 30, 2012, total taxes amounted to $610.5 million or $3,831 per capita," the report said.

Evaluators found that GovGuam’s reliance on certain types of revenue sources beyond its direct control exposes it to financial difficulties.

The OPA report said GovGuam had direct control over 38.6 percent of its revenues, including charges for services and some local taxes. The ratio indicates 61.4 percent of GovGuam’s revenue dispersion is dependent on revenue sources such as taxes tied to the Internal Revenue Service codes and grants over which it has no control.

Rate this article: 
No votes yet

Add new comment