By Moneth G. Deposa
Variety News Staff

THE $2 million cut to the Public School System’s personnel budget in fiscal year 2006 has resulted in a deficit for PSS which may be placed on high-risk status by the federal government if the amount is not returned by the Fitial administration.
The Board of Education on Friday asked Gov. Benigno R. Fitial for the restoration of the $2 million citing the concerns raised by independent auditing firm Scott Magliari & Co.
“The appearance in our annual audit, for the first time ever, of a deficit, will have huge negative connotations. The U.S. Department of Education could put us on high-risk status,” BOE Chairman Roman C. Benavente told the governor in his letter on Jan. 12.
Scott Magliari & Co. has begun the school system’s FY 2006 audit and will complete it by March 31.
Benavente said Phil Maestri of the USDOE reminded PSS during a Dec. 6 meeting that it must be mindful of the “supplanting issue.”
“He explained that as the federal investment in education in the CNMI increases, so should local investment. A $2 million reduction in our FY ’06 funding, the local funding for payroll, at a time when federal funding is increasing, most likely would be highlighted in our annual audit report as a case of supplanting (i.e., federal funds being used to replace local funding,” Benavente said.
Last fiscal year, PSS originally received $37.2 million of which only $35.2 million was allowed for personnel and operations. The administration promised to return the money this fiscal year.
Benavente said the school systems on Guam, American Samoa, the Virgin Islands and Washington D.C. are all on high-risk status.
“In some instances, these jurisdictions are required to spend local funds first and then seek reimbursement, rather than just-in-time (within 48 hours) draws which is how we at PSS manage our federal funding so that the local funding that we do receive is not negatively impacted,” Benavente said.
PSS is the only insular area that is not a high-risk grantee, he added.
On Dec. 13, BOE asked the governor for confirmation that the $2 million late funding reduction will be restored as promised as this resulted in a deficit for PSS that must be retired this fiscal year.
As of Friday, no response from the governor’s office had been received by PSS.
Benavente said PSS federal programs officer and acting director of finance Tim Thornburgh had informed the board about the system’s “major financial problem.”
“We’ve been advised about our situation….it is not as bright as we expected this year in terms of federal and local assistance,” he told Variety.
“We have to get the assurance that we will get our money back or else we will be facing additional problems,” he said, adding that the board will ask the Legislature for a PSS supplemental budget.