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Local deficit reduced in FY19, but questioned costs double

By Nancy I. Maanao

The $83.4 million deficit Gov. Eddie Calvo left behind was reduced to $47.8 million at the end of the first nine months of Gov. Lou Leon Guerrero's administration, according to the audited financials of Fiscal Year 2019 released last week by the Office of Public Accountability. At the same time, the OPA's Single Audit of federal funds spending in FY2019 shows that questioned costs doubled in the fiscal year when Calvo handed the reins of government to Leon Guerrero.

The credit for the deficit reduction can be shared among Mr. Calvo, Ms. Leon Guerrero, and the 34th Guam Legislature, which was led by then-Speaker Benjamin Cruz. Mr. Cruz now is the Public Auditor.

Part of the reason for the deficit reduction was that actual revenue collections exceeded budgeted revenue projections by $34.8 million. The low budget projections were made in the final year of the Calvo administration and the 34th Guam Legislature and are attributable to those leaders in office at the time.

Another part of the reason for the deficit reduction was that spending was below authorized levels by $32.1 million. Spending occurred in the final quarter of the Calvo administration, and the first three quarters of the Leon Guerrero administration.

The spending cuts, however, came from two of the island's most critical agencies, the Department of Public Health and Social Services, and the Department of Education.

"Among the executive branches, the Department of Health and Social Services and the Department of Education had the biggest savings totaling $6.4M against their budgeted expenditures." - Audited Financials for FY2019

The audited financials credit the increase in the business privilege tax from four percent to five percent as having driven a $45.3 million increase in BPT collections. Those increases were met by decreases in BPT and income taxes due to the Trump tax cuts and BPT tax exemptions for small businesses.

Federal funds questioned costs

The Single Audit of federal funds spending shows the number of findings doubled from four in Fiscal Year 2018 to eight in Fiscal Year 2019. Of the eight findings, three of them were repeats. The audit found four findings of material weaknesses, and four findings of significant deficiencies.

"FY 2019 findings resulted in questioned costs totaling $1.1 million (M), which increased from prior years’ unresolved questioned costs of $549thousand (K) to $1.7M," according to the audit.

The audit revealed $594,000 in questioned costs under the Supplemental Nutrition Assistance Program, and indicated that this is the "[s]econd consecutive year that GovGuam’s payment error rate exceeded 105% of the national performance measure."

The medical referral office comprised the second largest questioned cost finding of $517,000.

"Emergency procurement was used eight times to procure services for the Medical ReferralAssistance Office from the same contractor. Four procurement files did not have sufficient documentation to substantiate existing emergency conditions." - FY2019 Single Audit

"The auditors issued a separate management letter identifying 21 findings for nine GovGuam agencies. The findings significantly increased by 17 from four in the prior year. With the highest number of findings, the Department of Administration(DOA)was recommended to:1) hire experienced personnel to assist in the scrutiny of asset and liability accounts;2) investigate validity of recorded transactions;3) perform timely reconciliations; 4) ensure proper recording of all transactions; and 5) coordinate with responsible agencies on the submission of required reports, collections of accounts, and seeking necessary legislation.Other agencies were advised to perform timely recording of transactions, perform reconciliation of accounts, update documentation, and timely submit financial information to DOA. The Department of Revenue and Taxation needs to perform annual analysis of income tax provision and provide timely tax credit information to DOA." - FY2019 Single Audit
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