Financial Statements, Additional Information and Independent Auditors' Report ______
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REPUBLIC OF THE MARSHALL ISLANDS ___________________________________________ BASIC FINANCIAL STATEMENTS, ADDITIONAL INFORMATION AND INDEPENDENT AUDITORS' REPORT ___________________________________________ YEAR ENDED SEPTEMBER 30, 2013 REPUBLIC OF THE MARSHALL ISLANDS FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2013 TABLE OF CONTENTS Page No. I. Independent Auditors' Report 1 II. Management’s Discussion and Analysis (Unaudited) 4 III. Basic Financial Statements Government-Wide Financial Statements: Statement of Net Position 16 Statement of Activities 17 Governmental Fund Financial Statements: Balance Sheet 18 Statement of Revenues, Expenditures, and Changes in Fund Balances 19 Reconciliation of Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 20 Fiduciary Fund Financial Statements: Statement of Fiduciary Net Position 21 Statement of Changes in Fiduciary Net Position 22 Discretely Presented Component Unit Financial Statements: Combining Statement of Net Position 23 Combining Statement of Revenues, Expenses and Changes in Net Position 24 Notes to the Basic Financial Statements 25 IV. Required Supplementary Information - Other than Management’s Discussion and Analysis 66 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - General Fund 67 Notes to Required Supplementary Information - Budgetary Reporting 68 V. Other Supplementary Information 69 Combining Schedule of Expenditures by Account - Governmental Funds 70 General Fund: 71 Schedule of Revenues, Expenditures by Function, and Changes in Fund Balance (Fund 100100) 72 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Fund 100100) 74 REPUBLIC OF THE MARSHALL ISLANDS FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2013 TABLE OF CONTENTS, CONTINUED Page No. V. Other Supplementary Information, Continued Nonmajor Governmental Funds - Special Revenue Funds: 76 Combining Balance Sheet 79 Combining Schedule of Revenues, Expenditures by Function, and Changes in Fund Balances 81 Combining Schedule of Revenues, Expenditures by Account, and Changes in Fund Balances 83 Fiduciary Funds - Private Purpose Trusts: 85 Combining Schedule of Fiduciary Net Position 86 Combining Schedule of Changes in Fiduciary Net Position 87 Fiduciary Funds - Agency: 88 Statement of Changes in Assets and Liabilities 89 Nonmajor Component Units: 90 Combining Schedule of Net Position 92 Combining Schedule of Revenues, Expenses, and Changes in Net Position 93 Grants Assistance Fund: 94 Combining Balance Sheet 96 Combining Schedule of Revenues, Expenditures by Functions, and Changes in Fund Balances (Deficits) 97 Combining Schedule of Revenues, Expenditures by Account, and Changes in Fund Balances (Deficits) 98 Compact of Free Association Sector Grants: 99 Combining Balance Sheet 101 Combining Schedule of Revenues, Expenditures by Function, and Changes in Fund Balances (Deficits) 102 Combining Schedule of Revenues, Expenditures by Account, and Changes in Fund Balances (Deficits) 103 General Fund: 104 Combining Balance Sheet 106 Combining Schedule of Revenues, Expenditures by Function, and Changes in Fund Balances (Deficits) 107 Combining Schedule of Expenditures by Account 108 Deloitte & Touche LLP 361 South Marine Corps Drive Tamuning, GU 96913-3973 USA Tel: (671)646-3884 Fax: (671)649-4932 www.deloitte.com INDEPENDENT AUDITORS' REPORT His Excellency Christopher J. Loeak President Republic of the Marshall Islands: Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Republic of the Marshall Islands (RepMar) as of and for the year ended September 30, 2013, and the related notes to the financial statements, which collectively comprise RepMar’s basic financial statements as set forth in Section III of the foregoing table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Marshall Islands National Telecommunications Authority, which represent 17 percent, 4 percent, and 7 percent, respectively, of the total assets, net position, and program revenues of the aggregate discretely presented component units. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Marshall Islands National Telecommunications Authority, is based solely on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. - 1 - We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective net position or financial position of the governmental activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Republic of the Marshall Islands as of September 30, 2013, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis-of-Matters Debt Guarantee As discussed in Note 13 to the financial statements, the Marshall Islands National Telecommunications Authority is in default of certain debt to the Rural Utilities Service for which RepMar is the guarantor. Restatement As discussed in Note 15 to the financial statements, beginning net position of the aggregate discretely presented component units has been restated to correct an error. Our opinion is not modified with respect to these matters. Other Matters Required Supplementary Information: Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, as set forth in Section II of the foregoing table of contents, as well as the Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - General Fund, as set forth in Section IV of the foregoing table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise RepMar’s basic financial statements. The Other Supplementary Information, as set forth in Section V of the foregoing table of contents, is presented for purposes of additional analysis and is not a required part of the basic financial statements. - 2 - The Other Supplementary Information