Audit Show CNMI Retirement Fund Lacks Oversight Of Investments

Procedures to monitor Defined Contribution Plan investments recommended

By Cherrie Anne E. Villahermosa 

SAIPAN, CNMI (Marianas Variety, Aug. 10, 2017) – Deloitte & Touche LLC, an independent auditing firm, conducted an audit on the Northern Mariana Islands Retirement Fund’s financial statement and found that it lacked procedures to monitor investments of the Defined Contribution Plan or DCP.

The report recommended that the Retirement Fund establish and implement monitoring procedures for the DCP investments, which should include but are not limited to examination of monthly trust reports from the fund manager and reconciliation to the general ledger.

In a letter to the Fund’s acting administrator Larrisa Larson, who is also the Department of Finance secretary, the auditing firm said that an effective system of internal control includes procedures to periodically monitor investments.

DCP was created by Public Law 15-13 to provide an individual-account retirement system for persons employed by the CNMI government and its component units.

The Retirement Fund is responsible for the general administration and operation of the DCP.

The audit report stated that as of Sept. 30, 2016, DCP investments of $25,872,905 were not properly monitored or recorded.

The report added that the effect of this condition is a misstatement of DCP investment accounts.

The report identified a certain deficiency in internal control which is considered to be a material weakness.

“A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency or a combination of deficiencies in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented or detected and corrected on a timely basis. We consider the deficiency…to be a material weakness,” the report stated.

The Retirement Fund management has not responded to the report’s findings, according to Deloitte & Touche LLC.

It said the Fund management has not adopted governmental accounting standards on board statements and accounting and financial reporting for pensions.

Moreover, it said, the Fund management has not recorded pension expense and related revenue for the years ending Sept. 30, 2016 and 2015.

The audit report stated that as of Sept. 30, 2016 and 2015, the Retirement Fund had $176,175 and $1,176,175 respectively in obligations to the Settlement Fund related to the Settlement Agreement.

DCP is a voluntary multi-employer pension plan and is the single retirement program for all new employees whose employment commenced on or after Jan. 1, 2007.

DCP had a total participation of 2,562 and 2,464 as of Sept. 30, 2016 and 2015.

In a statement, the Torres administration said it is “continuing to review the findings of the internal audit report on the Retirement Fund. The recommendations provided are worthy of consideration and in the interest of establishing a stronger system for the beneficiaries, the audit report will be an important document in ongoing discussions.”

The administration added that it is “taking measures to review the efficacy of all aspects of the services we are providing to the general public. Following a call for agency review of regulations, an effort is underway to strengthen the operation of government. The audit report is a timely addition to that effort and the review of its findings will be a productive element in strengthening it.”

Marianas Variety
Copyright © 2017 Marianas Variety. All Rights Reserved

Rate this article: 
Average: 3 (1 vote)

Add new comment