December 16, 2003

The Guam Economic Development and Commerce Authority's (GEDCA) audited financial statements for fiscal year ending September 30, 2002 , were qualified by the auditing firm, Deloitte Touche Tohmatsu because of the auditors' inability to obtain information supporting travel advances of $38,338 and travel expenses of $102,647. GEDCA claims this information was lost in the wrath of Typhoon Pongsona, one day prior to a scheduled review of the information by auditors. This information included four years of credit card and travel reimbursement documentation now deemed lost and destroyed.

Public Auditor Doris Flores Brooks said she found the coincidence of the typhoon and the loss of the records difficult to accept, given the waste of government funds that have been found in the past three years when travel and credit card expenditures were scrutinized by the OPA and in particular, Hotline comments raised as to travel and credit card expenditures at GEDCA. Flores Brooks also noted her concern that GEDCA continued to use the credit cards throughout most of calendar year 2003 and it was only in November that GEDCA cancelled their four credit cards.

Other highlights of GEDCA's financial statements include:

•  GEDCA suffered a net loss of $76,000 in FY 2002 after reporting net income for the past two fiscal years. Guam 's declining economy prompted GEDCA to increase its provision for doubtful accounts by $74,500 from $91,000 in FY 2001 to $165,500 in FY 2002.

•  GEDCA revenues declined 25%, a consequence of Guam 's deteriorating economic climate. GEDCA's sources of income are rent revenues from leases of GEDCA properties and the Qualifying Certificate Program. GEDCA also receives fees whenever GovGuam issues bonds.

•  Operating expenses were reduced in anticipation of the revenue decline. However, operating expenses were only reduced by $33,000 or 1.2%, a vast difference from the revenue decline of 25%.

•  Travel expenses were $44,000 in FY 2002 compared to $198,000 in FY 2001. On the other hand, Advertising and Promotions increased dramatically by 269%, from $93,500 in FY 2001 to $253,000 in FY 2002. Items charged include $140,500 for captive insurance seminars in Japan and Hawaii , $36,000 for a fisheries study, $13,000 for the Pacific Telecom Conference, and $45,000 for trade missions to China . $59,000 of Advertising and Promotions expense was spent for travel.

•  FY 2002 personnel expenses (including trust funds) of $2,062,510 for 34 employees were $970 less than the previous fiscal year despite a reduction by four employees.

•  Finding 3 of the management letter regarding internal control over financial reporting noted that several lease agreements, which are GEDCA's mainstay, were outdated because of unresolved negotiations and therefore, may not be enforceable.

•  GEDCA management has estimated $770,000 in damages incurred from Supertyphoon Pongsona. FEMA is expected to reimburse 90% of this cost.