Guam Telephone Privatization Fund and
Interim Transition Coordinating Committee Fund
Financial Highlights for the nine months ended September 30, 2005
July 5, 2006
The financial audit of the Interim Transition Coordinating Committee (ITCC) and the Guam Telephone Authority (GTA) Privatization Proceeds Fund conducted by Ernst & Young as of September 30, 2005 represents nine months of post-privatization activities and the sale of GTA. The ITCC was created by Public Law (P.L.) 27-109 to administer post-privatization matters for GTA, which was sold to TeleGuam Holdings, LLC (TeleGuam) effective December 31, 2004. P.L. 26-70 created the GTA Privatization Proceeds Fund to receive the privatization sales proceeds from TeleGuam. These proceeds are subject to appropriation by the Guam Legislature.
GTA Privatization Proceeds
Of the $150 million in proceeds from the sale of GTA to TeleGuam, $10 million is in the form of a promissory note that matures on December 31, 2012 and $140 million in cash was deposited into various accounts in accordance with an Escrow Agreement and Public Law 26-70. From the $140 million, the following payments were made:
$140,000,000 |
Cash proceeds from sale |
Less: |
|
$107,750,732 |
Rural Utilities Service, Federal Financing Bank, and Rural Telephone Bank loans: |
|
Ø Principal 101,563,637 |
|
Ø Interest 3,916,821 |
|
Ø Prepayment penalty 2,270,274 |
1,745,031 |
Transferred to the ITCC’s checking account without Legislative appropriation. We were unable to determine the authority of this transfer. |
4,283,448 |
Final settlement with TeleGuam on the Asset Purchase Agreement |
1,611,145 |
Paid to TeleGuam for settlement agreement |
903,000 |
Procurement advisor fees |
356,410 |
Settlement of various litigations |
105,814 |
Payment of various retained liabilities |
22,618 |
Legal fees relating to the TeleGuam indemnity claim of the Tiyan Remote Switching Center. |
$ 116,778,198 |
Subtotal |
$ 23,221,802 |
Balance of cash proceeds |
Of the $23 million cash proceeds, various appropriations were made as follows:
$ 23,221,802 |
Balance of cash proceeds |
Less: |
|
$ 7,601,000 |
To the Retirement Fund for cost of living allowances (P.L. 28-94) |
5,000,000 |
To the Guam Memorial Hospital (P.L. 28-64) |
4,200,000 |
To the Retirement Fund for the unfunded liability of the GTA Defined Benefit Plan (P.L. 28-94) |
2,750,000 |
To the Department of Mental Health and Substance Abuse (P.L. 28-65) |
2,246,947 |
To the Retirement Fund for current retirees’ insurance benefits (P.L. 28-68) |
1,005,685 |
Separation incentive bonuses for employees who accepted employment with TeleGuam (P.L. 27-151) |
370,609 |
To the Retirement Fund for retirees’ supplemental benefits (P.L. 27-106) |
$ 23,174,241 |
Total appropriations |
$ 47,561 |
Balance after various appropriations |
On April 11, 2006 the Rural Telephone Bank stock that remained with the Government of Guam was redeemed for $14,713,068. Of this amount, $7,700,000 was paid to the Retirement Fund for the unfunded liability of GTA’s defined benefit plan in accordance with P.L. 28-94. The remaining balance of $7 million was invested in a time certificate of deposit that will mature on July 19, 2006.
In total, the Retirement Fund was paid $21.7 million from the GTA Privatization Proceeds Fund.
Accordingly, as of April 30, 2006 it is estimated that $7 million of the proceeds from the sale of GTA remains available for appropriation.
ITCC Fund
The assets that remained with the Government of Guam after the date of sale on December 31, 2004, were the Rural Telephone Bank (RTB) stock of $933,800 (which was sold), land valued at $830,517 (which is carried as an asset of the Government of Guam), and $1.8 million that was transferred to ITCC to fund their operations and for the payment of retained liabilities.
For the nine-month period, the ITCC Fund incurred $3 million in total expenditures and uses consisting mainly of the following:
$ |
1,076,697 |
Separation incentive bonus |
|
795,457 |
Professional fees |
|
329,410 |
Case settlements |
|
114,913 |
Salaries and benefits for four employees |
|
604,851 |
Other liabilities |
Other liabilities of $605,000 were not properly reconciled and supported and was cited as the only finding in the compliance report. The ITCC had a cash balance of $2.5 million as of September 30, 2005.
Subsequently, the ITCC also received a return of $50,000 from a previous deposit to a consulting firm and $79,000 from the Rural Telephone Finance Cooperation.
For a detailed commentary of the ITCC & GTA Privatization Funds’ performance see the Management Discussion and Analysis portion of the audit report.