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Chuuk Financial Management Update

Palikir, Pohnpei (FSM Information Services): June 23, 2009 - As part of its oversight responsibilities required under the JEMCO Resolution on Chuuk Financial Management, the FSM Department of Finance fields regular visits to the Chuuk State Department of Administrative Services (DAS). On June 17-18, 2009, Secretary Finley Perman and his key staff held meetings with the Director of DAS, Mr. Jesse Mori, and some of his key staff.

During the meeting, Chuuk DAS provided an update on the FY2008 audits. It is expected that the FY2008 audits will be completed in time for the June 30^th deadline. DAS staff also expressed confidence that they expect an improvement in FY2008 audit over FY2007, which was an improvement over previous years. Improvements in audits reflect wide-ranging improvements in financial management in Chuuk State since the August 2007 JEMCO resolution conditioning the flow of Compact funds on significant improvements in financial management in the State.

The outcome of the income tax reconciliation work between the FSM CTA staff and Chuuk DAS staff was also discussed at the meeting. As a result of the findings from the reconciliation, Chuuk State Government can expect the release of calendar year 2006 and 2008 refund checks for its employees sometime soon, with priority release of CY2008 checks.

The issue of Municipal CIP funds was also taken up at the meeting. The requirements for the funds to be drawn down were clarified and a better understanding reached on the next steps that the State Government needs to take. These requirements and steps will be documented and communicated in a memo from Director Mori.

Director Mori and his staff also provided an update on the budgetary out-turn of the State Government during FY2008, and budgetary outlook for FY2009 and FY2010. After running an operating surplus in FY2007 the State Government ran an operating deficit in FY2008-mainly due to a loss on the investment earnings on the State's Early Retirement Funds. If not for the investment loss on the Early Retirement Funds, the State Government would have ran an operating surplus for the second year in a row. The financial performance to date indicates that an operating surplus for FY2009 is very likely.

Also discussed in the meeting were the following: a proposal by Chuuk State on securing land for public infrastructure projects, implementation of a second round of its RIF program, and status of un-liquidated obligations for FY2008.

During the meeting, Secretary Perman and Director Mori signed eleven checks totaling $94,499, mostly to vendors and some individuals for payment of prior year obligations incurred under various U.S. Federal Programs.