Annual Report

Calendar Year 2002

Annual Report

Calendar Year 2002

Distribution:

Governor of Speaker, 26th Guam Legislature Senators, 26th Guam Legislature All Government Agencies Attorney General of Guam U.S. Department of Interior Office of Inspector General-Pacific Field Office

Public Auditor’s Message

Hafa Adai! I am his continued commitment to assist the pleased to present insular areas. Mr. Devaney stated that the our second annual strength of the Public Auditors would make report. During his oversight role easier. 2002 we issued nine audit and At this same meeting, David B. Cohen, investigative Assistant Secretary for Insular Affairs of the reports compared Department of Interior announced that the to three in 2001, “level of economic assistance… will be reviewed and determined in part by the strength and issued 13 financial independence of its public auditors.” audits of autonomous While the Guam Legislature expanded the agencies prepared role of the Office five different times, they by independent CPA firms and issued the continued to reduce our budget general-purpose financial statements and incrementally, finally resulting in an 8% single audit reports of the Government of reduction from FY 2002. The OPA barely Guam. These audits have identified over $6 managed to meet these mandates despite million in waste, fraud and abuse. My staff limited staff. However, further reductions to and I were gratified that both the United our budget will impede the OPA’s ability to States Attorney for Guam and Guam’s operate meaningfully and effectively. Attorney General credited our office for issuing audits that helped them make In May, our office hosted the 13th Annual criminal cases for fraud and abuse of APIPA Conference. With 200 participants, it government funds. was the largest APIPA conference ever. Auditors and accountants in government and Government Auditing Standards require that from the private industry from throughout audit agencies be reviewed every three years Micronesia attended the four-day training to assure compliance with these standards. conference. The APIPA conferences are made In November, a peer review team headed by possible through the Pacific Island Training the Public Auditor of Palau, after a weeklong Initiative funded by the U. S. Department of examination of our work, issued the highest Interior Office of Insular Affairs and the USDA rating possible, an unqualified opinion and Graduate School. found our Office to be in “full compliance” with government auditing standards. I again This Office will continue to be a watchdog wish to acknowledge the hard work and over government spending and promote dedication of my staff for the professionalism accountability and fiscal responsibility in our and commitment they have shown government. throughout the year in all aspects of our work. Special recognition goes to Randall Wiegand, the Audit Manager who oversaw the Senseramente, OPA reports we issued.

U.S. Department of Interior Inspector

General Earl Devaney hosted the second Doris Flores Brooks, CPA, CGFM annual meeting with the Public Auditors of Public Auditor of Guam the Pacific Region. Mr. Devaney expressed Mission Statement OPA Receives “Full Compliance” in Quality Control Review The Office of the Public Auditor seeks to achieve independent and Who audits the Auditor? Every so often, nonpartisan assessments that promote the proverbial question surfaces. accountability and efficient, effective Government Auditing Standards issued management throughout the by the Comptroller General of the Government of Guam. We seek to serve United States require that audit the public interest by providing the organizations undergo a quality control Governor of Guam, the Guam review every three years. In Legislature, and the People of Guam November 2002, the OPA underwent its with dependable and reliable second quality control review or peer information, unbiased analysis, and review as it is often called. The first objective recommendations on how peer review of the OPA was in August best to use government resources in 1999. The 2002 peer review team support of the fiscal well being of our consisted of the Public Auditor of Palau island and our people. To achieve this and one of his supervisory staff along mission, we: with a consultant from the U.S. Department of Agriculture Graduate Endeavor to fulfill the highest School. After a week of examining the standards of our profession and the expectations of the public to the best of our ability. Uphold the highest ethical standards in the performance of our work and encourage such standards throughout the Government of Guam. Commit to quality as the main principle governing our work. Perform our work with diligence, conscientiousness, and due professional care.

Foster a partnership with our staff OPA Employees Celebrate their Full Compliance Peer to enable them to reach their full Review. From left to right: Fred Cantoria, Jackie Vaughn, Doris Flores Brooks, Yuka Cabrera, Pete Tajalle, Chris potential and contribute to their Duenas, Francis Quinto, Randy Wiegand, and Don growth and long-term success. Laureano.

Work collaboratively with the entities that we audit and with the contracted auditors we employ so as OPA’s audit work papers to scrutinize to develop harmoniously improved how well we complied with government financial controls. auditing standards in developing our audits, the hours of preparation and the OPA’s adherence to auditing standards paid off. The OPA received an unqualified opinion, or full

2 compliance report, indicating that its The OPA website also provides a hotline system of internal quality controls was tip submission form, more information suitably designed and that no material on the office, and links to other deficiencies were noted. A copy of the websites related to the mission of the full compliance report is provided in office. By the end of 2002, there were Appendix 1. The OPA’s next scheduled 25 audit and information releases on peer review is in approximately three the website. For the year, over 34,000 years. hits were made to our website, with November having nearly 6,000 hits and January over 5,000 visits. See Appendix OPA Website Launched 7 for a complete listing of releases.

On January 4th 2002, the official The OPA thanks its Webmaster, iCON website of the Office of the Public Corporation, for all the effort it has Auditor was launched. The website devoted to the maintenance of the provides an avenue for the public to website and invites everyone to browse conveniently access audits and other the site at www.guamopa.org. information on Government of Guam entities at the click of a button.

Visit our website www.guamopa.org. You can access audit reports, view old releases, and report a tip or concern.

3 OPA Relocates Office that Guam OPA was host, the first one being in 1996. As host, all OPA In 2001, the OPA received a memo from employees were involved in preparing the Guam International Airport for the conference in one facet or Authority (the landlord for all Tiyan another. The conference, held at the offices) indicating that it would begin Guam Marriott Resort from May 20 to charging rent to the Government of May 24, was a huge success. Over 200 Guam tenants in the Tiyan area. participants from the government and Although the OPA had been private sectors attended the Guam contemplating relocation to a more conference, making it the largest APIPA conducive working environment prior to training conference ever. This the memo, the imminent conference offered three training discontinuance of rent-free occupancy tracks, one for auditors, another for made the decision to move an easy supervisory and management auditors, one. In the final week of March 2002, and a new track for financial after reviewing five proposals to our accountants. Participants were free to published request for proposals, the select sessions in any of the tracks. OPA officially relocated its offices to Among the variety of courses offered the Pacific News Building, more were GASB 34 Requirements, How to commonly known as the PDN Building. Obtain an Unqualified Opinion, The office address is now: Effective Audit Supervision, Management Accountability and Pacific News Building, Suite 401 Controls, How to Analyze Your 238 Archbishop Flores Street Autonomous Government’s Agencies’ Hagåtña, Guam 96910. Financial Health and Ethics in Government. APIPA GUAM 2002 Participants received up to 32 hours of Every year, the Association of Pacific continuing professional education (CPE) Islands Public Auditors (APIPA) holds a credits for the courses they attended. conference in one of the member The instructors for the conference were islands. APIPA, formed in 1989, now funded by the USDA Graduate School at consists of twelve members, the Public no cost to APIPA or the Government of Auditors of American Samoa, Guam. For the past decade the Commonwealth of the Northern Department of Interior Office of Insular Mariana Islands, Guam, Republic of Affairs through the Pacific Island Palau, Republic of the , Training Initiative (PITI) has been the Federated States of Micronesia providing funding to the USDA Graduate (FSM) National Government, the FSM School for training throughout the states of Pohnpei, Yap, Chuuk and insular governments. At the Kosrae, Western Samoa, and, the conference, Senators of the 26th Guam newest member, the Virgin Islands. Legislature presented a resolution to James Johnson, Director of Technical In 2002, it was Guam’s turn in the th Assistance of the Office of Insular rotation to host the 13 annual training Affairs, and to Steve Latimer of the conference. This was the second time USDA Graduate School expressing

4 From left to right front row: Gerald Shea USDA Graduate Program Manager, James Johnson Director of Technical Assistance DOI/IA, Ursula Abalos Pohnpei State PA, Doris Flores Brooks Guam PA, Michael Sablan CNMI PA, Jack Maykoski USDA Graduate School Associate Director, Samuel Paul Audit Supervisor Guam DOI/IG; second row Frank Crawford, Patricia Keehley and Michael Crawford USDA Graduate School Consultants, Madison Tosie Kosrae State PA, Jean Tonyokwe RMI PA, Gertrude Gootinan Yap State PA; third row Francis Sefo American somoa PA, Satrunino Tewid Palau PA and Steven Van Bevehoudt Virgin Islands PA. Not shown Stephen Latimer USDA Program Manager. appreciation for the funding and Audit Activities training they have provided Guam and the other island governments. Performance Audits

Registrants were also treated to an Performance audits are commonly opening reception, picture-taking broken down into the two separate sessions, a closing dinner banquet, and categories of Economy/Efficiency a Hula Performance, not to mention Audits and Program Audits. lunch at the Marriott Café for the duration of the conference. The Economy/Efficiency audits include registration fee ranged from $125 for determining (a) whether the agency is APIPA members to $175 for non-APIPA acquiring, protecting, and using its staff. Registration fees brought in resources (such as personnel, property, over $32,600, which was used to cover and space) economically and all the APIPA expenses including the efficiently, (b) the causes of venue and participants’ lunches. In the inefficiencies or uneconomical end, APIPA Guam made a profit of practices, and (c) whether the entity $7,141. The profits were transferred to has complied with laws and regulations the Office of the Pohnpei State concerning matters of economy and Auditor, the host for the 14th APIPA efficiency. Conference in June 2003.

5 On the other hand, program audits another $7,900 was made to an include (a) determining the extent to employee, his wife and daughter. The which the desired results or benefits audit was referred to the Attorney intended by the legislature or other General for possible prosecution. authorizing body are being achieved, (b) the effectiveness of organizations, Guam Telephone Authority Accounts programs, activities, or functions, and Receivable and Accounts Payable: (c) whether the agency has complied Our review found lax enforcement of with laws and regulations applicable to GTA’s disconnection policy, the program. consequently the allowance for doubtful accounts increased to $7.5 In 2002, OPA issued nine audit reports. million representing 49 cents of every dollar of receivables. Subsidiary ledgers Southern High School Non- were out of balance ranging, from Appropriated Funds: Our audit $54,000 to $1.4 million, including disclosed that the DOE Non- negative balances in receivables of Appropriated Funds policy was not over $500,000. Accounts payable had followed. Disbursements of over long outstanding balances of $360,000. $102,000 did not have supporting documentation, payments to cash and Community Child Development Fund: individuals were not in compliance with Our audit found that the lack of policies, and $3,876 was paid in travel adequate management oversight, costs for the spouse of an advisor, who monitoring, expenditure control, and was not a DOE employee. lack of financial data from the Department of Administration Guam Mass Transit Authority contributed to the suspension of the Procurement: This report was in program in February 2001. response to then-Senator Felix Camacho of the 26th Guam Legislature, Guam Memorial Hospital: Our review now the Governor of Guam. While our found irregularities in the payment of audit did not find any irregularities in two cases for which no formal claim the two purchases referred by the was ever filed. One payment of Senator, we did conclude that GMTA $150,000 went to the family of the was using multiple blanket purchase Associate Administrator for the alleged orders to short-cut the procurement wrongful death of her sister. The other process. case was for payment of $300,000 to a Doctor who alleged her rights were Department of Parks and Recreation violated by the hospital; again, no Revolving Fund: Our report found that claim had been filed. The Associate nearly all controls over the collection Administrator entered into a criminal of revenues were nonexistent; revenues plea agreement with the U. S. Attorney had declined from $220,000 in 1997 to and has also been indicted by the Guam $85,000 in 2001; $67,000 in cash was grand jury, along with a hospital diverted to the DPR Employees employee who was a notary public, in a Association; payments of over $22,000 related case. Efforts are also being were made to certain employees and

6 made to recover the $450,000 for the expenditures. The GIAA Board of hospital. Directors, the Executive Manager and other management failed to discharge Guam Airport Authority Credit Card their duties in the interest of the and Travel: Travel went from $100,000 people of Guam. The case was in 1999 to $700,000 in 2001. In the 24 referred to the Attorney General and, months we reviewed, travel was over because of the involvement of federal $1 million, consisting of 320 travel funds, to the U. S. Attorney for possible authorizations for 120 individuals. The prosecution. Executive Manager traveled 214 days, acting Chief of Police, 100 days, the Department of Land Management: Our chairman of the board, 73 days, report found that the government did another board member, 79 days, the not follow its own procedures during Governor, 136 days, the Governor’s the building permit process for the Parc body guard, 117 days and the First Lady Hotel. The building permit was of Guam, 74 days during the two years. miscalculated resulting in loss of $62,700. A quitclaim deed transferred 125 square meters of government land for $3,124 when the prevailing market price was $21,000 and the government lost lease revenue for the use of government land of over $90,000 annually or $1.5 million from 1985 to 2002. The case was referred to the Attorney General for possible civil recovery of the lost revenue.

The Guam International Airport Authority’s Travel-Related Expenses escalated phenomenally from 1999 to 2001. Department of Corrections Overtime Practices Interim Report: Our report The Executive Manager spent over found extensive abuses in the overtime $28,000 for entertainment and meals at practices at DOC. In two pay periods such places as Club Paradise, a topless we tested at the Adult Correctional men’s club featuring lap dancing in Las Facility and the Hagåtña Detention Vegas, Club Yeobo, a hostess club on Facility there were over 3,671 hours Guam, and Café Mogambo in Makati, and 3,469 that could not be verified or Philippines. On many of his trips, the confirmed to Central Control Blotters Manager would receive miscellaneous at a cost of $50,591 and $47,927. At allowances which, when added to his other divisions we found that at least per diem would equate to over $500 2,155 hours and 2,137 hours could not per each day of travel. The Deputy be verified costing $36,972 and Executive Manager used the GIAA credit $38,679. The dollar value of card for over $11,544 in personal unaccounted hours worked and paid charges. could be as high as $4 million. There

were at least 30 employees whose We found a complete breakdown of overtime pay gave them double and control over travel and credit card triple their base pay. The Public

7 Auditor determined that an interim waste and abuse of Government of report should be issued to alert the Guam Funds. Consolidation of audits Governor, the Legislature, and the has also resulted in savings of $21,500 Attorney General of possible fraud and to government agencies. From credit collusion in the calculation of overtime, card and overtime abuses to non- premium differentials for hazardous appropriated funds, we have issued duty and night work, and holiday hours. audit reports on various agencies and activities. See appendix 3. At year’s end, the OPA had four audits in progress. Financial Audits Prior Year Audits Title 1 GCA § 1908 requires that all Guam Mass Transit Authority Credit Government of Guam departments, Card Abuse: As a result of this audit agencies and instrumentalities be issued in July 2001, the former General annually audited. Financial audits are Manager and Assistant General Manager conducted in order to provide were indicted by the Attorney General reasonable assurance that the financial in early 2003 for misuse of government statements of the government entity funds. present fairly its financial position, results of its operations, and its cash flows in conformity with accounting principles generally accepted in the USA. It is the policy of the OPA that independent CPA firms under OPA oversight will conduct the financial audits of the Government of Guam and the autonomous agencies. The Public Auditor and her staff work closely with the contracted firms to ensure that the audits are informative, comprehensive and in compliance with Government Auditing Standards issued by the The improper use of government credit cards was discovered through our audits of GMTA and GIAA Comptroller General of the United States.

OPA Identifies More Than $6 Million in The OPA’s review of these financial Improper Spending audits is a key element in the review process of government entities. It is Since 2001, the public has been through these reviews and analyses bringing tips and concerns to the OPA’s that the OPA is able to glean more attention through our hotline and other information than is apparent in mediums in hopes that they will be financial statements and convey that looked in to and resolved. To the credit information to the people of Guam. of these “whistleblowers,” the OPA has Additionally, through questionnaires been able to identify over $6 million in and interviews, the OPA is able to

8 scrutinize the various Government of one reason or another, these agency Guam entities to a greater degree than audits have not been completed on in the past. During 2002 there were 13 time. With the continued involvement financial audits issued. See Appendix 2 of the OPA and stressing the for a listing. importance of timely audits, the OPA will continue to work with government All financial audits are procured entities to meet the June 30th deadline. through a Request for Proposal (RFP). However, this will take the full The OPA, pursuant to 1 GCA 1908, has cooperation and assistance of the the authority to oversee this agencies. procurement process as well as select the independent auditor chosen for an Cost of Audits engagement. For fiscal year 2001, CPA firm Deloitte Touche Tohmatsu has 12 In 2002, the OPA conducted a survey of separate engagements, auditing firms the various GovGuam agencies and Burger and Comer, J. Scott Magliari and entities to ascertain the cost of the Co., and Ernst and Young have two financial audits by CPA firms. For fiscal engagements each. The OPA year 2001, the aggregate cost was just encourages all CPA firms willing and under $1,000,000. Of this amount, the capable of conducting governmental OPA paid $298,000 for the audit of the audits to submit proposals to conduct Government of Guam’s general-purpose audits of governmental entities. financial statements, which is the single largest audit engagement The Retirement Fund, Guam Visitors GovGuam enters into. Bureau and the Tourist Attraction Fund are two years behind in their audits. The Government of Guam audit encompasses all the line agencies, as The Department of Education was last well as the Supreme Court, the audited in 1997. The OPA worked with Superior Court and the Guam the Inspector General’s staff of the Legislature. Unlike in prior years, for Department of Interior and the fiscal year 2001 the OPA was able to Department of Education to secure include the Supreme Court and the their agreement in the late reporting of Guam Mass Transit Authority in the federal grants to DOE. Government of Guam audit. In the past, these entities had been audited It is the Public Auditor’s express goal to separately. The change saved our have all audits completed on a current government over $21,500 in audit fees. basis so that the information contained therein is pertinent and useful to the public, policy makers and Opposition towards OPA Authority administrators. By law,1 these financial audits should be issued no later than Since January 2001, the OPA has been nine months after the fiscal year end or encountering some opposition to its by June 30th of the following year. For oversight authority of the procurement and selection of independent auditors. In May 2002, the Retirement Fund 1 1 GCA §1909(a).

9 denied access to its records to the duly the RFP to the OPA for review, selected auditor, Burger and Comer, on the OPA had not yet approved the basis that there was not a signed the RFP prior to its publication. contract. The Public Auditor sued the The OPA made contact with GWA Retirement Fund Director and board on the issue and the RFP was members. Judge Joaquin V. E. suspended until OPA approval Manibusan Jr., in ruling in favor of the was granted. OPA, ordered the Fund to allow its Guam Housing and Urban records to be audited immediately by Renewal Authority (GHURA): the firm selected by the Public Auditor. GHURA initially allowed the OPA The Judge also awarded OPA attorney to review its RFP for audit fees of $8,345 to be paid by the services but later entered into a Retirement Fund. contract without obtaining the Public Auditor’s approval. The OPA also experienced resistance or GHURA then issued their FY 2001 initial noncompliance with the audit report without the benefit following agencies: of OPA review. Should GHURA attempt such a maneuver in the Guam Power Authority (GPA): In future, it will be fought legally June 2002, GPA issued an RFP for by the Public Auditor. audit services without the Guam Visitors Bureau (GVB): review and approval of the OPA. awarded the audit contract for The Public Auditor immediately fiscal years 1999, 2000 and 2001 ordered that the RFP be to Deloitte Touche Tohmatsu suspended until she had without OPA participation or reviewed and approved its form approval. In the interest of and contents. In the interest of getting the audits completed, having the audit completed which were two years behind, timely, the OPA reached a the Public Auditor opted to work compromise with GPA on a with the auditor. As with couple of issues regarding the GHURA, future non-cooperation selection of the auditor. by the GVB will be challenged by Guam Memorial Hospital the Public Auditor. Authority (GMHA): In September 2002, GMHA issued an RFP for audit services without the OPA HOTLINES review and approval of the Public Auditor. The Public The OPA receives a multitude of tips Auditor contacted GMHA on the and concerns from citizens regarding issue. Subsequently, the RFP was the different GovGuam agencies. If cancelled and GMHA has since people want to submit a tip or concern, been cooperating with the OPA. they may do so by calling our office Guam Waterworks Authority hotline, 47AUDIT (472-8348), logging (GWA): In November 2002, GWA onto our website, www.guamopa.org, issued an RFP for audit services. or by speaking to an employee of the Although GWA had forwarded OPA or the Public Auditor by phone or

10 OPA Hotline Topics By GovGuam Agency (2002)

DOE 9%(13) GPA 8% (12) DOC 8%(11)

OTHER 51% DPW (75) 8% (11) GAA GMH 8% (11) 8% (11) in person. These contacts from citizens difficult to address the issues with our are a crucial element in the audit limited resources. A listing of other process as it helps the OPA assess risks activities that the OPA has been within the different areas of the requested or mandated to review or government. In 2002, we received 144 participate follow. such tips and concerns. Of those, we were able to address 87 of them, either The Guam Legislature in Public by forwarding them to independent Law 26-70 required the OPA to auditors, following up with appropriate be an observer in the authorities, initiating an audit, or government’s attempt to sell the determining that the information was Guam Telephone Authority. insufficient to act on. The OPA thanks Representatives from the OPA those citizens who have taken the were present during the opening initiative to contact our office and of the GTA privatization proposal submit their tips and concerns. on Guam. An OPA auditor also traveled to Washington, D.C., in July 2002 to observe the second OPA Involvement in Other bid opening. Governmental Activities In September 2002, the OPA was asked to participate in the In addition to the OPA’s oversight Department of Public Health responsibility of audit activities, the evaluation of request for office has received several requests to proposals on the economic partake in or review other government- impact of Community Health related activities. Although the office Centers’ fee schedule increases. appreciates the trust and confidence of The aftermath of those making the requests, it has been Chata’an and Halong in July 2002

11 necessitated federal assistance to federal grants. The Public amounting to millions of dollars. Auditor is a member of the Work The Guam Legislature outlined Group. the reporting requirements of P.L. 27-01 authorizes the OPA to these emergency funds. The assess transactions of Typhoon legislation opened these records Pongsona-related expenditures to the Public Auditor for incurred by GovGuam. auditing. P.L. 26-144, an act requiring the Staff Hours Guam Waterworks Authority to outsource the maintenance and In 2002, OPA staff allocated operation of the water wells, approximately 14,000 hours to their booster pump stations, meters, work. A breakdown of staff hours is etc., requires the Public Auditor shown below. to be an observer throughout the outsourcing process. Because of the two that P.L. 26-169 established the struck Guam in 2002, the amount of Guam State Clearinghouse under administrative leave taken by OPA staff the Office of the Lieutenant appears particularly high. Much work Governor. The Advance Federal was lost to the typhoons. Funding Work Group was also created to advise the Lieutenant In addition, our office lost one of its Governor in matters pertaining original nine employees in June 2002

OPA Staff Hours Distribution-2002

Holidays 1120 Personal/Sick Leave 1637

Investigative A dm inistrative 5127 Leave 541

Training 881

Performance Adminstrative 4457 3155

Financial 1365

12 and was not able to fill the vacancy exceeded the required amount of until September. We then lost another training. Each staff has received an employee and have not been able to average of 60 to 70 continuing keep the ninth position filled, with professional education credits in 2002 another employee leaving for medical alone. Needless to say, the training reasons. sessions and seminars have been invaluable tools in preparing our staff for the challenges encountered in the Staff Training conduct of our work.

Government Auditing Standards, commonly known as the “Yellow Book,” OPA Budget Slashed More Than 9% require that individuals performing Despite Performance audits of governmental entities obtain no less than 80 hours of continuing For FY 2002, the Guam Legislature professional education (CPE) credits in appropriated $967,000 to the OPA. a two-year period. Such a requirement Although that amount is still a modest ensures that an audit organization’s number, it was the largest amount staff maintains its professional appropriated to the office since its proficiency. Not adhering to this inception in 1994 and was certainly standard may affect an audit good news for the Office. However, in organization’s ability to obtain a clean spite of our performance in 2002, the opinion in a peer review. Legislature decreased the OPA budget to $943,000 for FY 2003. The decrease The OPA recognizes that this is a of $24,000, which equates to a 2.5% standard that cannot be reduction, was still a palatable overemphasized. The professionals in cutback, considering the overall our Office have all maintained or financial condition of the government.

OPA Employees at 13th APIPA training conference-Front (left to right): Francis Quinto, Randy Wiegand, Doris Flores Brooks, Fred Cantoria, Susan Teo. Back(left to right): Chris Duenas, Xuerong Yang, Yuka Cabrera, Don Laureano.

13 However, in the second quarter of Public Auditor’s Office compared to a 2003, the office was unexpectedly minor .2% or one fifth of one percent called in for a budget hearing. At the by the Government of Guam. The CNMI hearing, as we made our presentation, OPA has a secure funding formula for we were given the impression that our its budget, whereas the Guam OPA budget would not be cut further and budget is subject to appropriation by that we should not worry about any the Guam Legislature. adjustments. As politics would have it though, the Legislature ended up voting Frozen Increments Result in Loss of in favor of a reduction. The vote Employees resulted in a further decrease of $55,000 to our budget, which now is at In 2002, the OPA lost two employees $888,000, an overall reduction of more who had both been with the Office for than 9% from prior year. more than a year. Due to the government-wide freeze in increments, Comparison of Guam OPA to CNMI OPA it is difficult for our office to compete with those who offer more attractive By comparison, the CNMI Office of the compensation. This again reflects on Public Auditor, a constitutional office, the budget allocated to the OPA by the has a secure source of funding. The Legislature. CNMI OPA receives a formula budget of 1% of government revenues with a minimum base of $1 million. Other Guam Endures Three Typhoons in comparisons include: Five Months

On July 5, 2002, Guam felt the wrath of CNMII Revenues: $310 million Typhoon Chata’an. It was the first time General Fund Revenues: $215 million in almost five years that Guam OPA Budget: $2.2 million2 experienced a storm of any significant Staff: 32 magnitude. Typhoon Chata’an brought Public Auditor salary $100,000 since 2001 on heavy rainfall and sustained winds in excess of 100 mph, leaving hundreds By comparison the Government of Guam homeless and ruining the summer plans is more than four times as large as the of many. CNMI government. Only five days later, Typhoon Halong Guam Revenues $1.2 billion swept by Guam, exacerbating the General Fund Revenues $440 million already dismal situation Guam was OPA Budget $888,0003 facing in Typhoon Chata’an’s Staff: 9 Public Auditor salary $82,025 since 1994 aftermath. Although not nearly as devastating as Typhoon Chata’an, The CNMI Government invests over 1% Typhoon Halong brought more rainfall of General Fund Revenues for the and hampered recovery efforts that had commenced in the preceding days.

2 Includes general fund audit of $194,000. 3 Includes general fund audit of $298,000

14 Then on December 8, 2002, as many were lost because of the three residents were still recovering from the typhoons, nearly enough time to two July typhoons, complete one audit. Despite these battered the island. The storm, which setbacks, the OPA continues to weather officials originally said would endeavor to accomplish its mission. pass east of Guam, seemingly parked itself over the island for almost 12 UOG Internship Program hours and trashed everything in its path. The surreal image of cracked In 2002, the OPA employed two seniors concrete structures, overturned from the University of Guam through vehicles, typhoon shutters caved in, the College of Business and Public and hundreds of destroyed homes Administration accounting internship validated the typhoon’s strength. To program. It was the first time the OPA make matters worse, a fuel availability utilized interns in its operations and crisis in the ensuing week impeded all the benefits of the extra help was recovery efforts as firefighters battled immediately apparent. The interns a fuel tank blaze and nonessential played a role in various phases of the government employees were given auditing process and were able to assist administrative leave for almost a week OPA employees with some of their in order to conserve gasoline. workload. The interns received credits towards their degree programs and had an opportunity to work and gain experience in government auditing. One of the interns is now an employee of the OPA. Her performance during her internship and her desire to be a full-time employee of the OPA earned her the opportunity.

Because of the symbiotic relationship that the internships have to offer, the OPA intends to continue as a participating employer as long as resources are available. The OPA

Mold grew all over the walls at the OPA after Supertyphoon thanks and congratulates its two Pongsona caused major water damage to the building. interns on their graduation.

Like many other government agencies Federal Counterpart to Relocate and businesses, the OPA experienced damage to its office as a result of these In October 2002, the OPA received typhoons. The productivity of the office word that the its federal counterpart, was temporarily impaired due to lost the U.S. Department of Interior’s Office working days. Over 5004 work hours of the Inspector General (DOI/OIG), would be closing its Guam office in by early 2003. The work of the DOI/OIG 4 See staff hours pie chart on page 12.

15 office has always complemented the Elected Leaders Pledge to Work with work of the OPA and the news was OPA certainly disheartening and untimely. After the general election November Immediately upon learning of the 5th, the Public Auditor met with the closure, the Public Auditor started newly elected officials. Briefing lobbying vociferously with the sessions on areas of accounting and administration, the Legislature, and audit concerns were provided by the other concerned officials to keep the Public Auditor to the new majority office opened. The 26th Guam Senators of the 27th Guam Legislature, Legislature passed Resolution 297 the Consolidated Commission on urging the Secretary of Interior and the Utilities (CCU), the Guam Education Inspector General of the Department of Policy Board, Attorney General-elect Interior to remain on Guam. The U. S. Douglas Moylan, Governor-elect Felix Attorney for Guam joined in the clamor Camacho and Lieutenant Governor- to keep DOI/OIG in Guam. elect Kaleo Moylan. Notwithstanding Unfortunately, the decision had already their different missions and political been made and DOI/OIG employees platforms, they all voiced their desire were reassigned to other locations. to work with the OPA on the difficult issues facing our government. The OPA The OPA would like to thank the looks forward to working with the DOI/OIG for its continued support island’s newly elected leaders in through the years and wishes the best bringing about greater accountability of to its employees as they take on new the people’s monies. tasks in other parts of the country.

From left to right front row: Samuel Paul Guam IG Office, Michael Sablan CNMI Public Auditor, Satrunino Tewid Palau Public Auditor, Jean Tonyoke RMI Auditor General, Madison Tosie Kosrae Public Auditor; back row Michael Colombo IG Regional Audit Manager, Stephen Van Beverhoudt Virgin Islands Public Auditor, Mary Adler Deputy Inspector General, Earl Devaney Inspector General, Doris Flores Brooks Guam Public Auditor, Haser Hainrick FSM Public Auditor & Francis Sefo American Samoa Territorial Auditor.

16 Public Auditor Meets with Department fulfilling its role as a public watchdog? of Interior Inspector General We consider these factors to be relevant in deciding where our In December 2002, the Public Auditor discretionary grants should go.” See and Audit Manager Randall Wiegand Appendix 8 for full text of the News met with Department of Interior Release. Inspector General Earl Devaney. Also present at the meeting were the Public Auditor of other Pacific Islands and the Virgin Islands. This was the second time the Inspector General invited the Public Auditors to meet with him. Over the two-day meetings, the Public Auditors discussed a variety of topics affecting their islands, including training initiatives, resolution of IG audit recommendations, capacity building between the OPA’s and the IG, and funding assistance to the Public Auditors. Mr. Devaney expressed his From Left to right: Randy Wiegand, OPA Audit Manager, continued commitment to the insular David B. Cohen, , Assistant Secretary of the Department areas and his desire to meet annually of Interior for the Office of Insular Affairs, and Doris with the Public Auditors. Flores Brooks, Public Auditor of Guam.

“Strength of Public Auditors Will Be Factor in Awarding Interior Grants” OPA Recognized by Media For Work in 2002 The Inspector General also invited David B. Cohen, Assistant Secretary of As 2003 rolled in, the Pacific Daily the Department of Interior for the News and KUAM put out their top Office of Insular Affairs to meet with stories of the previous year. The OPA the Public Auditors. Mr. Cohen was pleasantly surprised to be among announced that “the level of economic the top stories on both lists, assistance that each U.S. Territory or particularly at number five on PDN’s freely associated state will receive list and number four on KUAM’s list. In from the Office of Insular Affairs will addition, KUAM’s website, be determined in part by the ‘strength www.kuam.com revealed that Internet and independence’ of its public users rated government corruption and auditor’s office.” “We will look at a government audits among the most number of factors,” said Cohen. “For read about topics on the website. All example, is the public auditor’s office these stories can be viewed online at properly funded and staffed with our website, www.guamopa.org. These qualified people? How strong are the stories are in Appendix 5 and Appendix safeguards to its independence? Is it 6. vulnerable to having its funding cut if it offends the government? Is it actively

17 Charitable and Other Activities

Despite our demanding schedules OPA staff found time to contribute and give back to our community. OPA staff participated in the Thanksgiving Food Baskets for needy families of the Guam Housing and Urban Development as well as participated in two island wide cleanups, the first for the Earth Week Cleanup and the second for the Beauty and the Beach Coastal Cleanup.

All OPA Employees are also active members of the Association of Government Accountants, an organization dedicated to “advancing government accountability.” Meetings are held monthly and we encourage others in the accounting field to attend these meetings. Doris Flores Brooks is presently the President of the AGA Guam Chapter and Francis Quinto, also of the OPA, is the chapter treasurer.

Our office is dedicated to enhancing the quality of education that is received by our youth and college students. We participated in the Island Leadership Day activities in 2002, in which students shadowed the management of our office in order to gain insight and an understanding of our office and the work we do.

We intend to continue supporting these endeavors and similar activities. We feel that the purposes that are served are in the best interest of our entire island community.

18 Office of the Public Auditor 2002 Annual Report

APPENDIX 1

Office of the Public Auditor 2002 Annual Report

APPENDIX 1

Office of the Public Auditor 2002 Annual Report

Financial Audits Issued in 2002

AGENCY/ENTITY REPORT Auditing Firm YEAR

Government of Guam Single Audit Reports FY 2000 Deloitte Touche Tohmatsu Government of Guam General Purpose FY 2000 Deloitte Touche Financial Statements Tohmatsu Government of Guam Retirement Fund FY 1998, Burger and Comer FY 1999 Northern and Southern Community Health FY 2000 Deloitte Touche Centers Tohmatsu Guam Educational Telecommunications Corp. FY 2001 Burger and Comer (KGTF) University of Guam FY 2001 Deloitte Touche Tohmatsu Guam Power Authority FY 2001 Ernst and Young Port Authority of Guam FY 2000 Deloitte Touche Tohmatsu A.B. Won Pat Guam International Airport FY 2001 Deloitte Touche Authority Tohmatsu Territorial Highway Fund FY 2000 Deloitte Touche Tohmatsu Guam Memorial Hospital Authority FY 2000 Deloitte Touche Tohmatsu Guam Economic Development Authority FY 2001 Deloitte Touche Tohmatsu Guam Housing Corporation/ Guam Rental FY 2001 J. Scott Magliari Corporation and Company

Note: At year’s end, the FY 2001 audits of the Guam Memorial Hospital Authority, Port Authority of Guam, Guam Community College, Guam Waterworks Authority, Guam Telephone Authority, Guam Visitors Bureau, Tourist Attraction Fund, Territorial Highway Fund, Government of Guam Retirement Fund and the Department of Education had not yet been issued.

APPENDIX 2 Office of the Public Auditor 2002 Annual Report

Waste, Abuse, & Savings Identified by the OPA Since 2001

Agency Waste/Abuse Identified

$1.7 million wasted on an energy project which was University of Guam abandoned $15K Abuse by Assistant General Manager Guam Mass Transit (Recovered) Authority $6K Abuse by General Manager $102K in undocumented expenditures and $4K in Southern High School funds not reimbursed to SHS Close-Up Fund $100K missing from the DPR Revolving Fund plus Department of Park & payments of $22,000 paid to DPA employees and Recreation over $7,900 paid to DPR employee and family Guam Memorial $450K in Undocumented Claims paid Hospital Authority Department of Land $63K Not collected by DPW; Management $1.5 million rent not collected by DPR ($91K/yr) $1.05 million in total travel costs over 24 months; $144K in travel costs by Executive Manager over 24 Guam International months (214 days off-island); Airport Authority $11.5K in personal expenditures by Deputy Executive Manager ($8K recovered); Credit cards cancelled at GIAA Dollar value of unaccounted hours at DOC could be Department of as high as $4 million. Overtime has been reduced Corrections by over 70% since the release of our interim report

Agency Savings Identified

$13,500 saved by rolling audit into GPFS Guam Mass Transit Authority Supreme Court of $8,000 saved by rolling audit into GPFS Guam

APPENDIX 3 Office of the Public Auditor 2002 Annual Report

OPA Organizational Chart – As of 12/31/02

Public Auditor Administrative DFB Officer-AC

Audit Manager RW

Performance Audits and Financial Audits and Investigations Hotline/Citizen Concerns

Auditor III Auditor III FQ PT

Auditor I Auditor I Auditor I Management YC AL JV Analyst I - CD

Vacant Vacant

APPENDIX 4 Office of the Public Auditor 2002 Annual Report

APPENDIX 5 Office of the Public Auditor 2002 Annual Report

APPENDIX 6 Office of the Public Auditor 2002 Annual Report

OPA Website Year in Review

January 18, 2002 Guam OPA releases the Single Audits of the Government of Guam for Fiscal Year 2000. Click here for highlights of the report Click here for full report

February 12, 2002 Guam OPA releases the GOVERNMENT OF GUAM GENERAL PURPOSE FINANCIALS for Fiscal Year 2000. Click here for highlights of the report Click here for full report

March 5, 2002 Guam OPA to Host 13th Annual Association of Pacific Islands Public Auditors (APIPA) Conference. Click here for an introduction and overview of APIPA Click here to register for the conference Click here to see course offerings Click here to see course descriptions

March 27, 2002 Guam OPA releases Government of Guam Retirement Fund Audited Financial Statements. Click here for highlights of the report Click here for full report

April 30, 2002: The Office of the Public Auditor has released an audit report on the Guam Mass Transit Authority Procurement Issues.

Click here to see the report. (162k PDF)

April 25, 2002 The Office of the Public Auditor has released the audit report on the Northern and Southern Community Health Centers for Fiscal Year 2000. Please click on the links below to see the highlights and the audit reports.

Click here for the Highlights Click here for the Financial Statements/Audit Report Click here for the Report on Compliance and Internal Controls

May 15, 2002 The Office of the Public Auditor has released its Annual Report

August 27, 2002 The Office of the Public Auditor has released an audit report on the University of Guam.

Highlights Financial Statements/Audit Report Report on Compliance /Internal Controls

APPENDIX 7 Office of the Public Auditor 2002 Annual Report

June 5, 2002 The Office of the Public Auditor has released an audit report on the Guam Educational Telecommunications Corporation. Click here for the Highlights Click here for the Financial Statements/Audit Report Click here for the Report on Compliance and Internal Controls

June 7, 2002 The Office of the Public Auditor has released an audit report on the Guam Power Authority. Click here for the Highlights Click here for the Financial Statements/Audit Report Click here for the Report on Compliance and Internal Controls

June 12, 2002 The Office of the Public Auditor has released its report on the Department of Parks And Recreation (OPA Report No. 02-03 Audit). Click here for the Highlights Click here for OPA Report No. 02-03

June 14, 2002 The Office of the Public Auditor has released an audit report on the Port Authority Of Guam. Click here for the Highlights Click here for the Financial Statements/Audit Report Click here for the Report on Compliance and Internal Controls

June 18, 2002 The Office of the Public Auditor has released an audit report on the Guam International Airport Authority. Click here for the Highlights Click here for the Financial Statements/Audit Report Click here for the Report on Compliance and Internal Controls

June 19, 2002 Public Auditor Sues to get the Government of Guam Retirement Fund Audited

Click here for the news release Click here to view the scanned court documents (approx. 900 Kb) (this file may take up to 8 minutes to download on a 56K connection) Guam PDN News Story

APPENDIX 7 Office of the Public Auditor 2002 Annual Report

June 26, 2002 Public Auditor wins suit get the Government of Guam Retirement Fund Audited. Click here for the news release

July 2, 2002 The Office of the Public Auditor has released its report on the Guam Telephone Authority (OPA Report No. 02-04 June 2002). Click here for the Executive Summary Click here for OPA Report No. 02-04

July 17, 2002 The Office of the Public Auditor has released an audit report on the Territorial Highway Fund. Highlights Financial Statements/Audit Report Report on Compliance /Internal Controls

July 25, 2002 The Office of the Public Auditor has released an audit report on the Guam Memorial Hospital Authority.

Highlights Financial Statements/Audit Report Report on Compliance /Internal Controls

August 20, 2002 The Office of the Public Auditor has released an audit report on the Guam Economic Development Authority.

Highlights Management Letter Financial Statements/Audit Report Report on Compliance /Internal Controls

August 29, 2002 The Office of the Public Auditor has released an audit report on the Guam Housing Corporation.

Highlights Financial Statements/Audit Report Report on Compliance /Internal Controls

September 16, 2002 The Office of the Public Auditor has released an audit report on the Guam Rental Corporation . Highlights Financial Statements/Audit Report Report on Compliance /Internal Controls

APPENDIX 7 Office of the Public Auditor 2002 Annual Report

November 19, 2002 The Office of the Public Auditor has released an audit report on the Department Of Public Health (OPA Report No. 02-05 November 2002) .

Click here for the Executive Summary Click here for OPA Report No. 02-05

November 22, 2002 The Office of the Public Auditor has released an audit report on the Guam International Airport Authority (OPA Report No. 02-06 November 2002) .

Click here for the Executive Summary Click here for the Full Audit Report Click here for the Report Body Click here for the Report Appendices

November 27, 2002 The Office of the Public Auditor has released an audit report on the Department of Land Management (OPA Report No. 02-07 November 2002) .

Click here for the Executive Summary Click here for the Full Audit Report

November 29, 2002 The Office of the Public Auditor has released an Interim report on the Department of Corrections (OPA Report No. 02-08 November 2002) .

Click here for the Report

December 26, 2002 The Office of the Public Auditor has released an Auditability assessment for the Department of Education.

Click here for the highlights Click here for Auditability Assessment

APPENDIX 7