November 13, 2003

The Guam International Airport Authority has recently issued its Report on Compliance and Internal Controls for the fiscal year ending September 30, 2002. This report is a required element of all financial statement audits conducted in accordance with Generally Accepted Government Auditing Standards.

The Authority has over $52 million in federal grants for various capital projects of which over $28.5 million is available for future spending activities such as $4.2 million to improve the airport’s utility infrastructure and $3.7 million to rehabilitate certain buildings and install security fencing.

The independent auditors, Deloitte Touche Tohmatsu, cited 17 findings. Several of these findings relate to material weaknesses in the Authority’s internal control system.

There were questioned costs of $3.2 million:

• The Authority expended $2.5 million on projects not directly related to capital or operating costs such as the Birdman Rally, Aviation Park, Governor Statues, and legal expenses (Finding17).
• $322,815 had no procurement documents or rationale for goods or services (Finding 15).
• $368,600 was charged to the Program for fiscal year 2002 without subsequent approval from the grantor agency (Finding 16).

Other significant findings include:

• Expenditures of $2.9 were initially capitalized by the Authority but subsequently written off by the auditors, as there was no future benefit (Finding 5).
• Employees were given non-interest bearing promissory notes up to five years to assist them in purchasing generators after Typhoon Chata’an. Notes receivable totaled $499,047 and range from $487 to $10,722. The independent auditors found no evidence that either the Authority’s Board of Directors nor the FAA approved these transactions (Finding 6).
• Change orders of $7.1 million unrelated to the original terminal contract were issued bypassing the procurement process. Among these were $5.5 million for the VIP lounge and Governors’ statues and $1 million for the Mama Bear project (Finding 7).
• Bank reconciliations for the Authority’s general expense account, payroll account, and revenue account were not performed monthly or for the FY ending September 30, 2002 (Finding 4).
• Several findings relating to travel reports, advances and unsupported expenditures (Findings 1,2, 8).
• There was an apparent disregard for procurement and contract approval rules and regulations in issuing consulting contracts (Finding 9).
• $52,000 was given to the GIAA Employees Association. No expense reports were submitted by the Association to validate expenditures and no competitive procurement was made in the purchase of promotional items (Finding 10).
• Budget overruns occurred in travel of $1million, advertising, promotional and entertainment of $1.7 million, and miscellaneous contractual services of $892,000, without obtaining certification of funds (Finding 14).
• Payments to subcontractors, legal counsel contracts, and evidence of services received from consultations were cited in Findings 11, 12 and 13.

The Authority’s board and management generally concurred with the findings and have implemented and enforced policies and procedures to ensure compliance with existing rules and newly implemented regulations. For a more detailed description of the findings refer to the full compliance report at http://www.guamopa.org/