THE Commonwealth government “overcommitted” $86 million in American Rescue Plan Act funds, and overspent $37.8 million in local funds, according to the report submitted by the Palacios-Apatang administration’s transition team assigned to the Department of Finance.
“The consequences of the overspending have been delayed but can no longer be avoided,” the report stated as it recommended, among other things, the suspension of the retirees’ 25% benefit.
The team led by former Special Assistant for Management and Budget Vicky Villagomez said its preliminary reconciliation determined that the $481.8 million in ARPA funds that the CNMI government received from the federal government “is overspent…and overcommitted, and stands at a deficit of $86 million.”
In general, the report said, the deficit was caused by unallocated expenditures related to special grants assistance and government operations.
Additionally, the report said, ARPA was used to fund disaster-related expenditures pending reimbursement amounting to $48.7 million. Once these reimbursements are received, the ARPA fund deficit will go down to $37.4 million.
As of Dec. 28, 2022, the report reflected $28.7 million in outstanding debt to vendors for payment of goods and services provided, of which $12.4 million was current, $3.1 million was due in 30 to 60 days; $5.4 million was due in 60 to 90 days; and $7.9 million was due beyond 90 days.
As for the CNMI government’s local revenue, the report said the deficit was largely caused by overtime incurred by the Department of Public Safety, the Department of Fire and Emergency Medical Services, the Department of Corrections and the Department of Finance-Customs Services in responding to the Covid-19 pandemic.
According to the report, the revenue collections for the first quarter of FY2023, which was from October 2022 to December 2022, exceeded the estimates by 11%, “displaying a modest recovery in the local economy.” The increase in collections, the report said, was attributed to the increase of business gross revenues.
These revenues, the report said, “are being used to cover under-allocated personnel costs and prior year obligations to unpaid vendors.
The report noted that the government’s current approved budget accounts for 80% of personnel costs while the remaining 20% is funded by ARPA.
But with the ARPA funds in deficit, “the unbalanced budget forced cost-shared employees to be shouldered by the general fund,” the report said.
It added that the FY2023 budget, or Public Law 22-22, must be amended “to resolve the unbalanced funding and restructure services accordingly to maintain government operations by doing more with less.”
According to the report, “the government’s financial situation is dire.”
“The months and years ahead will not be without hardship,” it added. “The consequences of the overspending have been delayed but can no longer be avoided. The government has neither the funds nor the means to sustain current levels of programs, employment, and services. The full extent of the financial shortfall will take time to ascertain,” the report stated.
The transition team made the following recommendations:
• Conduct full reconciliation of the ARPA and general fund expenditures.
• Initiate revision of the CNMI’s ARPA spending plan with U.S. Treasury.
• Aggressively process federal reimbursements and drawdowns to reduce ARPA and general fund deficit.
• Implement best practices to improve record-keeping and standardize processes for more accurate financial tracking and reporting.
• Enforce fiscal and budgetary controls to prevent deficit spending from the general fund and other funding sources.
• Collaborate with the Office of Management and Budget to revise the FY2023 budget. The budget should consider a reduction in overall costs and restructure services to reflect funding available.
• Complete Munis software implementation for full functionality by shifting resources back to the central government.
• Train and develop Munis super-users to conduct hands-on training and troubleshooting for all departments and agencies.
• Restore budget controls within Munis to prevent uncontrolled spending beyond limitations of appropriations.
• Mandate ethics training within the first 100 days in office at all departments and agencies.
• Reconvene the Fiscal Summit Team to develop a fiscal strategic plan to identify the goals and objectives of the CNMI, create action plans that prioritize and assign agency tasks, and determine where financial and other resources can be directed.
• Reconvene the Governor’s Single Audit Committee to expedite the completion of the single audit for FYs 2021 and 2022.
• Implement cost-cutting measures such as restricting government travel to federally funded programs that are pre-approved and authorized by the grantor agency.
• Discontinue the 25% additional retiree pension payment until the government stabilizes its current financial state.
The other members of the Finance transition team are Ryan Camacho, Emma Perez, Sen. Corina Magofna, Tiara Evangelista, Tony Reyes, Eli Cabrera, Ezra Yumul and Eleanor Alinas.
In a statement on Thursday, Gov. Arnold I. Palacios and Lt. Gov. David M. Apatang said they will provide the public with more information about the CNMI government’s general state of financial affairs when they have completed a “thorough and comprehensive assessment of all financial records, audits, and other relevant documents.”
