June 21, 2005

The Guam Visitor’s Bureau (GVB) Fiscal Year 2002 financial audit has been issued two years beyond the June 30 th deadline stipulated in 1 G.C.A. §1909. The audit was conducted by Slater Nakamura and Co. The delays were primarily due to problems with both the new contracted auditor and GVB management. Untimely financial reports present information that may not be as useful in current decision making. GVB is one of the few Government of Guam agencies that continue to lag in issuing timely financial audits. This, in turn, has caused qualified audit opinions on the general purpose financial statements of the Government of Guam over the years.

The auditors made an adjustment to reduce retained earnings by $610,000 in FY 2002 as a result of prior years’ unreconciled differences in liabilities and expenses. GVB had been improperly recording unspent appropriations as expenses and accrued liabilities at the direction of the previous general manager. The Special Tourist Attraction Fund Projects (TAF Projects) retained earnings were also reduced by $67,000. However, as of FY 2003, GVB has discontinued this practice. This condition was also reported as a finding in the report on compliance and internal controls.

The primary source of revenue for GVB is legislative appropriations from the Tourist Attraction Fund (TAF). In FY 2002, GVB received $10.6 million compared to $14.7 million in FY 2001.

Total expenses for GVB operations totaled $12.6 million compared to $14.7 million. Of the $12.6 million, $4.1 million was spent for Guam operations and $8.5 million was spent for Japan operations. Promotional expenses totaled $8.8 million of which $7.3 million were spent in Japan and the remaining $1.5 million went to various other promotional areas with the largest amount of $890,000 targeted for the Korea market. Personnel and benefits cost $1.9 million for GVB’s 39 employees in both Guam and Japan.

Because of the decrease in appropriations, GVB reported excess expenditures over revenues of $1.5 million, or a decline of $2.9 million compared to net income of $1.4 million in FY 2001. The TAF Projects, of which GVB is trustee, also reported an over-expenditure of $240,000 compared to FY 2001 net income of $120,000 or a decline of $360,000.

GVB and the TAF have not reconciled the amounts paid to GVB. The FY 2002 audited TAF financial statements reported payments to GVB of $14 million, whereas GVB only reported $10.6 million. Of the $10.6 million, actual cash received was only $3.7 million, while the other $6.8 million remained in receivables.

Since 1999, a receivable of $2.1 million has been reserved and currently remains due from the Government of Guam for appropriations yet to be disbursed to GVB. Six years has passed and it is highly unlikely that this amount will ever be collected and a possibility of a write-off of this amount is anticipated although the GVB Board still has a strong desire to collect this amount from the Government of Guam. A corresponding payable is not reported in the FY 2002 Government of Guam Tourist Attraction Fund financial statements.

The reports on compliance and internal controls reported six findings in 2002. In addition to the improper recording of expenses and liabilities, the report found that not all expenditures were supported with a purchase order, marketing agency fees were not specified in agreements, and in-kind contributions were not recorded. In addition, the accounting software was inefficient in that the reports that should easily be generated from the system are being prepared manually.

For more information, see Management’s Discussion and Analysis.