February 14, 2005

The FY 2002 and 2003 financial audits of the Territorial Highway Fund (THF) have been conducted by Deloitte & Touche, LLP. The audit shows that revenues derived from liquid fuel taxes, vehicle registration fees and certain licenses, and the use of money and property has seen a steady decline going from $18.5 million in 2001 to $15.5 million in 2002, and further to $14.8 million in 2003.

Expenditures went from a high of $27 million in FY 2001 to a drop of $16 million in FY 2002, only to increase to $17.3 million in FY 2003.

The expenditures are largely comprised of general and administrative expenditures of $6.5 million and bond payments of $6.0 million ($2 million in interest payments and $4 million for principal payment). Approximately $3.5 million is allotted annually to the Guam Mass Transit (GMTA) for its fiscal year operations. GMTA, dedicated to providing public transportation, derives its primary annual funding from liquid fuel tax monies collected by the THF. Other expenses include payments of $400,000 to the University of Guam (UOG) Capital Improvements Fund 1 and $775,550 to the Village Streets Fund.

Expenditures exceeded revenues by $2.5 million in FY 2003. Further, continuous overexpenditure from the previous years has resulted in an escalating THF Special Revenue fund deficit of $13.5 million.

In 2001, a liability of $9.5 million to Guam Power Authority (GPA) was recorded for electrical services for streetlights. However, there have been no appropriations to pay GPA, and the Attorney General is now reviewing the legitimacy of the liability.

There were three findings in the Independent Auditors’ Report on Compliance and on Internal Control. Reconciliation procedures were not performed which underestimated liquid fuel tax receivables by $5.9 million. Contract retention liabilities with a cumulative total of $247,173 are not updated in a timely manner, and include contracts, which have had no activities as far back as 1991. Additionally, an $81,000 adjustment was cited for lack of proper documentation.

1 17 GCA §16132 requires that $500,000, beginning with FY 2002, is to be appropriated annually from the Territorial (Guam) Highway Fund to the UOG Capital Improvements Fund for the purpose of paying debt service incurred for the design, construction, and collateral equipment of the College of Business and Public Administration of the University, and for the replacement of the Fine Arts College roof.