QC audit released after more than a decade - KUAM.com-KUAM News: On Air. Online. On Demand.

QC audit released after more than a decade

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by Ken Quintanilla

Guam - It was in November of last year when the Office of Public Accountability started the process of auditing GEDA's Qualifying Certificate Program. And today after over a decade, its audit was finally released.

Audit supervisor Llewelyn Terlaje says the long awaited audit of the QC Program was quite insightful.

She said, "A lot came out from this report that basically leads us to conclude that there's a lot of improvements that need to be taken by GEDA and DRT in order to improve the QC program."

Some of the major findings included that despite being in effect for nearly 50 years, the OPA could not determine the positive or negative financial impact of the program this as a result of both GEDA and Rev & Tax's unverifiable and incomplete database.

GEDA administrator Henry Taitano doesn't necessarily dispute this claim saying ever since the commerce division was removed from GEDA, the agency lacked a capacity on economic impact assessments and analysis.

"What she refers to is a database that our management and staff took the initiative in trying to develop obviously we didn't have an economist at the time, so it was t he best effort to the management and staff to develop something," he said.

The audit further revealed that QC's awarded to the insurance industry are more generous and awarded regardless of the economic impact to the Government of Guam.

"Just based on the law, the types of benefits the other industries could get up to 75%, but for the insurance industry, you could see by the benefits we listed a lot of them are 100%," said Terlaje.

GEDA management state that the law simply does not provide flexibility as it specifically states a rebate of 100 percent.

For instance, GEDA calculated one QC to provide $6.4 million in taxes over a 20-year period however the forgone tax revenues to GovGuam over the same period amount to a little over $100 million - an economic loss of $95.2 million. The audit shows GEDA management had opposed the amendment to include domestic insurance beneficiaries.

Deputy administrator Mana Silva Taijeron said, "We went to the legislature before it was included in the law and we told them it would be problematic and it was included anyway and on top of that they added a provision that added for an automatic renewal which created further problems."

Governor Eddie Calvo's director of communications Troy Torres says the audit reaffirms what the governor has believed all along.

"The governor came out months ago he agreed that insurance companies should pay their fair share of taxes. You're not going to get a dispute from us," he said.

In fact Torres says, Governor Calvo pushed for legislation introduced earlier this year that would have assessed a fee on premiums for health insurance companies, noting, "And what you see in the audit today is an affirmation of that is the auditor is saying that the QC for insurance companies is generous. And we agree."

The OPA has recommended that GEDA and Rev & Tax collaborate, compile, analyze and post data on the QC program. They also recommend, Governor Calvo, the Legislature and the directors of GEDA and DRT revisit the QC law for the elimination of the application of QC's to the domestic insurance industry.

GEDA management meanwhile say both the findings and recommendations are in line with what the agency has known for some time and have even raised most recently at an oversight with lawmakers back in May.

Taitano said, "These are issues that have been around most of these domestic insurance QCs were done in the late 90s and we've been aware of them and we've been working recently with our oversight chair and other senators in his committee on reforms to the QC law."

Taitano says he believes the QC program is beneficial and is Guam's only investment tool.

"What we want to do is take all the factors into consideration and all the comments that we've been receiving especially the criticism on the program and work with the Legislature to improve the legislation and the program but in addition make the best assessment we can," he said.

And while GEDA has six months to come up with an action plan in response to the audit, management note that oversight chair Senator Dennis Rodriguez Jr. is working on an omnibus bill that would revamp the QC program along with including provisions that would instead allow more flexibility and stop the automatic renewal of the QC. 

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