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The $65M "Paper Deficit"?

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$65.3 million - that's how much the Department of Administration is reporting in a reported "paper deficit" as part of preliminary financial audit for the last fiscal year. What does it all mean?

When the Guam Office of Public Accountability officially releases its financial audit of the government's Fiscal Year 2014 finances, expect a major shortfall. "Every year we do the auditing of all the financial statements for the entire government, so I know, because for the last three years, we had a surplus. This year, with the combined fund statements were all included for this preliminary finding for the public to know that there will be deficit," said Tony Blaz, director of the Department of Administration.

This "paper deficit" is caused by GovGuam paying for bills and incurring debt that were not budgeted for in the last fiscal year. It's called a paper deficit because of the timing of the expenditure recordation. So what exactly was paid?

Blaz broke some of it down, saying, "$26.5 million is the ARRA funding, this happened, we expensed to the tune of $21 million and we had to record the $5 million for DOE. That's the shortfall in the real property tax revaluation, so that's why they have $26 million deficit item here."

So along with the $26 million that went to DOE to address issues with ARRA funding, $12.9 million was paid to law enforcement for retroactive raises, $10 million for solid waste debt service, $8.6 million for capitalized interest for bonds, and $7.8 million for the Guam Memorial Hospital. With the exception of the solid waste debt, these are one-time costs that the government won't see again. And while this paper deficit is being reported for the last fiscal year, things are looking up as DOA is tracking a surplus for the current FY2015.

But the million-dollar question remains: will this latest audit affect the payment of tax refunds?

"No, of course not - are you kidding me?" Blaz reacted. "We are going to pay tax refunds - this is the governor's signature item in his plans, so he wants to make sure he pays for it." Blaz notes GovGuam agencies and branches will still have to be financially responsible and control spending.
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