Quadrennial Report Fiscal Years 2000-2003 Marshall Islands Social Security Administration Table of Contents

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Quadrennial Report Fiscal Years 2000-2003 Marshall Islands Social Security Administration Table of Contents Quadrennial Report Fiscal Years 2000-2003 Marshall Islands Social Security Administration Table of Contents Page Message from the Chairman of the Board ……………………………………… 4 Board of Trustees ………………………………………………………….……. 6 Message from the Administrator ……………………………………………….. 7 Organizational structure ………………………………………………………… 8 Financial highlights Revenues from Retirement Fund contributions …………………………… 10 Revenues from Health Fund contributions ……………………………….. 10 Revenues from investments ………………………………………………. 11 Expenditures related to Retirement Fund benefit payments .……………… 12 Expenditures related to Health Fund benefit payments ………………….. 12 Expenditures related to operations .………………………………………... 12 Budgetary control ………………….………………………………………. 13 Actuarial valuation of System’s accrued liabilities ……………………….. 14 Audit reports and findings………………………………………………… 14 Executive summary General ……………………………………………………………………. 15 Principal provisions ……………………………………………………….. 15 Retirement programs ……………………………………………………… 16 Statistical information on the number of contributors ……………………. 17 Statistical information on the number of beneficiaries and amount of benefits ……………………………………………………………… 19 Statistical information on membership ……………………………………. 19 Prior Service Benefits Trust Fund and its beneficiaries ………………….. 20 Totalization agreement …………………………………………………… 20 Reduction in force program and its beneficiaries ………………………… 21 Issues on tax collection and enforcement .……………………………….. 21 MISSA’s civil cases and delinquencies settled out of court………………… 21 Hiring of new investment advisor and custodian …………………………. 22 Overview of MISSA’s policy on investments …………………………….. 22 MISSA’s membership to the Bank of the Marshall Islands’ Board ………. 23 Transfer of the Health Fund to the Ministry of Health …………..………… 23 Renovation of Majuro and Ebeye offices…………………………………… 24 Development of policies, operating procedures and regulations …………… 24 Ebeye operations…….……………………………………………………… 24 Development and upgrade of computer system……………………………. 25 Interaction with counterparts in the Pacific …………………. ……………. 25 Future outlook on sustainability …………………………………………… 25 Appendix Exhibit A - Auditors’ unqualified opinion (FY 2002) …………………….. A1 Exhibit B - Auditors’ unqualified opinion (FY 2001)……………………… B1 Exhibit C - Auditors’ unqualified opinion (FY 2000)……………………… C1 2 Page Exhibit D - Audited Balance Sheets (FYs 2002, 2001 & 2000) ………….. D1 Exhibit E - Audited Statements of Revenues, Expenditures and Changes in Fund Balances (FYs 2002, 2001 & 2000)…………………………… E1 Exhibit F - Balance Sheet as of September 30, 2003 (unaudited) ………… F1 Exhibit G - Income Statement for FY ended Sep. 30, 2003 (unaudited) …. G1 Exhibit H - Notes to financial Statements, September 30, 2002 …………. H1 Exhibit I - Actuarial Report –Summary and Conclusion …………………. I1 3 MARSHALL ISLANDS SOCIAL SECURITY ADMINISTRATION P.O. Box 175, Majuro, Marshall Islands, MH 96960 Phone: (692) 625-3101, Fax: (692) 625-4570 E-mail: [email protected] February 2, 2004 His Excellency Kessai Note, President Republic of the Marshall Islands Honorable Litokwa Tomeing, Speaker Nitijela of the Marshall Islands Honorable Members Nitijela of the Marshall Islands Dear Sirs and Madam: On behalf of the Board of Directors of the Marshall Islands Social Security Administration, I am pleased to present this Quadrennial Report covering our organization’s activities for the fiscal years of 2000 to 2003. After being constituted by newly elected President Kessai Note and his Cabinet in early 2000, the MISSA board faced the daunting task of correcting the wayward direction of an organization that had been unauditable and unaccountable for more than four years, and that appeared to be hopelessly mired in corruption. The retiree’s trust fund was being raided on a regular basis because revenues were not covering the expenses of the operation. At stake for the people of the Marshall Islands was the future welfare of their elders and their disabled citizens. Our newly appointed Board, the first in the history of the Marshall Islands ever to have a majority of women as sitting members, established three main goals for our mission to put Social Security back on a sound financial footing: *To be fully auditable and accountable. *To increase revenues via the institution of aggressive tax collection policies mandated by the Social Security Act. *To drastically decrease expenses and streamline the operation of the Administration. The Board’s first task toward accomplishing these formidable goals involved the reorganization and replacement of top management. The Board selected Ms. Saane K. 4 Aho, a U.S. educated Marshallese woman, to be the Administrator directed to change the direction of MISSA. Despite immediate demands for corrective action from the Board, Ms. Aho, along with her staff, successfully responded with courage, dedication and professionalism. As this report will show, our previously stated goals have been achieved: *MISSA is now fully auditable and accountable. For the fiscal year of 2002 there were no findings in our audit for the Social Security system. *MISSA revenues have increased each year, from a low of $5.51 million in 1999 to $13.04 million in 2003. *MISSA expenses have decreased from $1.55 million in 1999, or 14.5% of total revenues, to $862,000 in 2003, or only 6.6% of total revenues. MISSA has now earned the respect of an entire nation. As an organization, our mission for the future is simple: To continue to improve for the welfare of the people of the Marshall Islands. In closing, I would like to thank the families of the MISSA Board members, administration and staff for supporting us over the past four years. Without their patience for and understanding of the long hours that we have put in for the people of the Republic, none of our successes would have been achievable. Sincerely, Jack Niedenthal Chairman of the MISSA Board 5 Board of Trustees John M. Niedenthal Board Chairman (2003-2006) Grant Labaun Vice-Chairman (2000-2003) Board Chairman (2000-2003) * Liaison Officer, Bikini Atoll Local Gov’t. * GM, G & L Enterprises & Affiliates * Board Member, Bank of the Marshall Is. * Board Chairman, Bank of the Marshall Is. * Vice-Chairman, Prior Service Tust Fund * Executive Member, General Council of * Treasurer, Majuro Coop. School Board the Assemblies of God Churches E. Tommy Milne Vice-Chairman (2003-2006) Maria K. Fowler Board Member (2000-2003) Board Member (2000-2006) * Administrator, Ebeye Hospital * Board Member, Judicial Commission * Partner, KL & K Corporation Saeko Shoniber M. Biram Stege Board Member (2000-2006) Board Member (2000-2006) * Secretary of Finance, RMI * Secretary of Education, RMI * Board Member, Bank of the Marshal Is. * Board Member, Bank of the Marshall Is. * Board Member, College of the Marsh. Is. * Board Member, Alele, Inc. Cradle Alfred Suzanne Murphy-Chutaro Board Member (2000-2006) Board Member (2003-2006) *Manager/Proprietor, Liepajid Handicrafts • Advertising Manager, Marshall Is. Journal To Our Beneficiaries, Contributing Members, and the People of the Marshall Islands, I am very pleased to present you with the Marshall Islands Social Security Administration’s Quadrennial Report for fiscal years 2000 through 2003 which contains the Administration’s financial statements and analysis for this period, the system’s accrued actuarial liabilities at October 1, 2001, information on our benefit programs, and other significant changes and activities that have taken place since the beginning of my tenure as the Administrator for MISSA in mid 2000. The appointment of MISSA’s Board of Directors by the Cabinet in early 2000 and their hire of a new management team enabled MISSA to ensure the accountability of its financial records, improve its financial condition, and effectively manage its operations and benefit programs. Under the auspices and direction of the Board, the Administration’s primary objective to ensure accountability of its financial records was achieved in early 2001 when MISSA’s audited financial statements for fiscal years 1997, 1998, 1999, and 2000 were finally released. To date, MISSA’s audited financial statements are current and unqualified. In addition, the decline in tax collections in the late 1990s and the uncertainties surrounding the financial condition of the MISSA Funds forced the Administration to strengthen its policies on internal controls and procedures, revamp its collection efforts and restructure its operations. Consequently in FY 2003, MISSA’s annual revenues from tax contributions, penalties, and interest have more than doubled and its operating expenses cut by half the amounts in FY 1999. This allowed the Administration to invest more than $4.43 Million into the Retirement Trust Fund over the past four years. In FY 2004, MISSA anticipates greater interaction with RMI government leaders, social security counterparts in the region, and the general public regarding the development and implementation of sound strategies and legislation aimed to address the widening gap in the Fund’s assets and actuarial liabilities. We are also optimistic of the continued growth in the Fund’s assets as we continue to control and minimize administrative spending, enforce tax collection, and anticipate positive returns on our investments. In line with our goal to better and more effectively serve our members and beneficiaries, we expect the modernized version of our computer operating system to be installed in mid 2005. I want to recognize and thank MISSA’s Board of Directors, managers,
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