Audit report: Slight increase in CPA assets

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THE Commonwealth Ports Authority-Airport Division’s operating revenues slightly increased in fiscal year 2018, according to an independent audit conducted by Deloitte & Touche LLC.

The audit report submitted to the Office of Public Auditor indicates that the total assets and deferred outflows for the airport and seaport operations combined increased by less than 1 percent or by $210,871 from fiscal year 2017 to FY 2018.

From $254,625,618 in FY17, CPA’s total assets went up to $254,836,489 in FY18.

The increase from FY16 and FY17 was 3 percent or $6,732,555. From $247,893,063 in FY16, CPA’s total asset went up to $254,625,618 in FY17.

The report said the operating expenses for the airport and seaport operations combined increased by 13 percent or by $2,224,640. From $17,105,591 in FY17, the operating expenses went up to $19,330,231 in FY18 “mainly due to an increase in utility expenses” for FY18.

The airport division’s aviation revenue went down by $631,462 due to a decrease in scheduled chartered flights arriving at the Francisco C. Ada/Saipan International Airport.

In FY18, the seaport fees decreased by $1,804,463 due to a decrease in revenue tonnage, the report added.

“On October 24, 2018, the islands of Saipan and Tinian were devastated by Typhoon Yutu. Damage sustained by Saipan airport included six jet ways being declared unusable. The jet ways are valued at $2 million each, three of which will be replaced by the Federal Aviation Administration. CPA is unable to determine the extent of other airport property damage,” the report stated.

It added that as of Sept. 30, 2018, CPA had $186,590,817 net investment in capital assets, net of depreciation where applicable, including land, runways, terminal and harbor facilities and equipment, fire and rescue equipment, general transportation, other machinery and equipment, and numerous projects under construction. This represents a net increase of $675,880 or less than 1 percent from prior fiscal year.

Also, as of Sept. 30, 2018, CPA incurred back-billed utility charges of $7,202,831. The charges relate to the Commonwealth Utilities Corp.’s underestimating the water usage from FY13 to FY17.

But an omnibus agreement was entered into between CPA and CUC to waive water charges indefinitely and give CUC permanent easement over water wells. The agreement also waives penalties and interest related to water and sewer charges of $744,684 recorded in FY17.

The audit report stated that CPA, in FY18, FY17, and FY16, was able to generate sufficient airport and seaport revenues to meet its bond indenture requirements. A key factor that contributed to CPA airport’s ability to meet these requirements is the FAA opinion allowing passenger facility charges to be considered as revenues for compliance calculations.

The report said, “Revenues and expenses are being monitored on a monthly basis so that steps can be taken to ensure compliance.”

It is management’s intention to control expenses in a comprehensive manner to ensure there is a proper relationship to operating revenues, the report added.

The report said the airport aviation traffic for FY19 was forecast to decrease due to the damage and limitations to the airport caused by Super Typhoon Yutu and the pullout of airlines providing daily and chartered services to and from the Francisco C. Ada/Saipan International Airport.

But the seaport gross revenue tons for 2019 were expected to remain steady, the report stated.

The audit also reported that CPA complied with the passenger facility charge program in the year that ended Sept. 30, 2018.

The report stated that CPA “complied, in all material respects, with types of compliance requirements….”

Asked for comment, CPA board chairwoman Kimberly King-Hinds said the audit reports have also been sent to the FAA for its review.

Also, she said, CPA is working on an amendment to its passenger facility charge application to correct the audit findings listed in the report.

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