In his letter to Public Auditor Michael Pai, Fund Administrator Richard S. Villagomez said the Fund twice issued a request for proposal for auditing services but failed in both instances to get an auditor to take on the task.
Villagomez reported to Pai that the Fund was able to get two responses for its first issued RFP that closed on Sept. 21 with Deloitte and Touche and J. Scott Magliari & Asociates indicating their interest to participate; however, both firms withdrew citing the passage of Public Law 17-51 or the beneficiary derivative lawsuit act.
J. Scott Magliari & Associates informed the Fund on the morning of Oct. 7 of its decision to withdraw its proposal saying that even if indemnification from PL 17-51 were an option, the company could not accept an indemnification from the Fund because it would violate the requirement for independence. It also told the Fund that it had explored obtaining liability insurance but failed to find a policy to cover liabilities brought on by PL 17-51 after an extensive search.
The Fund’s second RFP closed on Nov. 9 and resulted in no responses.
For Villagomez, “As a result of PL 17-51 the Fund is unable to retain the services of any professional advisors. This extends from investment advisors, to money managers, to litigation counsel and now the external auditors.”
Villagomez sounded the alarm that the Fund could not retain a financial auditor to perform the required annual audit to comply with the law.
He told Pai, “We are reporting this to you because your office is the Cognizant Agent of the CNMI with regards to audits. As it stands, we don’t have an independent firm to audit our books and time is ticking towards the CNMI Single Audit deadlines.”
Villagomez described as “unprecedented” the Fund’s inability to contract with service providers as a consequence of the passage of the law which the Fund had opposed on several occasions long before the bill was signed into law.
The Fund administrator told Pai that the pension agency would like to start planning the necessary steps to take on how the Fund should address any foreseeable legal and procedural issues resulting from the lack of financial audit for fiscal year 2011.
In a separate statement, Villagomez said independently audited financial statements are the foundation for other finance related reports.
“It is crucial for any organization that deals with money to be audited by an independent accounting firm,” he said.
He said their board of trustees relies on independent auditors to review the management of the Fund and the actuary relies on the audit report in preparing the actuarial report.
He said, “Even if the Fund were able to hire another actuary, the actuary may not be able to move forward without an FY2011 audit report.”
Villagomez pins their hope on the OPA finding a way to hurdle this challenge for the CNMI.
