The recently released audit of Pohnpei's Economic Development Authority for fiscal year 2007 reported that the Authority's operating revenues were down by 18 and a half percent while operating expenses increased by 122.9% from the prior year.
The auditor said that two months into the fiscal year under review, due to a disagreement resulting from the Authority's agreement with Oceania, Inc. former Governor David issued executive order number 05-2007 which temporarily transferred the control, maintenance, and management of the cold storage facilities at Deketik to the Department of Economic Affairs. In fiscal year 2006 those facilities generated over $90,000 for EDA but in 2007 the Authority received no income from transshipment services at the Pohnpei Port.
EDA entered the year with liabilities of $314,968. Because of debt settlement with other State Government component units and due to collection of some bad debts they ended 2007 in a positive position with assets of $69,316.
The audit said that EDA still has accounts receivables on its books that will not likely ever be collected. Previous audits have recommended that the Authority should review and reconcile its receivable accounts. That issue was still not resolved in the 2007 audit and the auditor said "Most of the Authority's customers refute the balances of their accounts. In addition most of the accounts do not have any more assurance that it can be collected. (sic)" The bad debts amounted to $128,411. Management does not believe that it can collect that money.
After adjustments the Authority had a negative cash flow of over half a million dollars. EDA is currently operating with an Acting Executive Director which they have done since former Director Yosuo Phillip resigned in order to run for office in the state. The current Acting Director is Hernet S. Ringlen. He was not the Acting Director during the period under review in the audit.
Audit exceptions by law are supposed to be resolved within six months of the receipt of an audit. The auditor pointed out that there are unresolved findings that date as far back as 1988 with either little or no work having been done toward their resolution.
One of the audit exceptions was that three of the authority's major vendors charge penalties and/or interest fees for unpaid balances. Last year EDA paid approximately $57,600 in accumulated penalties and interest for prior year obligations. At the end of the year EDA still owed $130,200 in principal to the vendors and is still accumulating penalties. At the end of the fiscal year the Authority owed $57,464 for past due Social Security and $37,604 for outstanding income taxes including accumulated penalties and interest.
Ringlen said that the obligations arose from prior years. "Payroll liabilities are not paid on regular manner due to lack of cash. The Authority will further see to it that no other payable will be incurred other than those associated with payroll. The Authority will seek fund(s) to pay its prior year obligations to avoid penalty and other charges by the vendors. The auditor recommendation is well noted."
The Authority at one time had substantial capital assets valuing over $2 million. They included their office building, fishing vessels, a dock, transportation equipment, furniture and fixtures, office equipment, heavy equipment. After adjustment for depreciation the auditor valued them at a total of $6,943 before adding back into the figure $30,974 for "construction in progress" for a total value of $37,914. The building that is "in progress" was begun several years ago before EDA realized that it didn't have enough money to complete the job and worked stopped.
The Authority's fishing vessels are all completely depreciated and worthless. They are "all broken down in such a state with no possibility of being repaired or reconditioned. In addition the Authority's main office building is dilapidated and worn out."
The auditor said "The Authority has incurred substantial losses from its operation from the prior periods and currently is struggling due to declining and unsuccessful projects. The Authority's ability to operate and function might be affected without a reliable source of operation funds to defray its operation costs. This is raising doubt as to its ability to operate as a going concern."