RMI Government now up-to-date in its payments
posted July 15, 2006
The possibility of an immediate cash flow crisis at MISSA was averted with the bi-weekly remittance of the RMI Government now brought back to current. This also resulted to an increase in Q2 collections by $0.057 million or 1.5% from last year.
During the first quarter, the CFO’s financial report to management reflected an unprecedented drop in collections in recent years.
In the first calendar quarter of 2006, MISSA collected $2.47 million which is lower by $0.52 million or 18% from the same period last year. In effect, it also brought down the fiscal year-to-date collections by $0.66 million or 12% from last year.
The huge drop was the result of the delay in remittance from the RMI government covering the last six (6) bi-weekly payrolls beginning January 9, 2006. It amounted to about $1.3 million, inclusive of health fund taxes.
In her April 20, 2006 letter to Jefferson Barton (pictured), Secretary of Finance, the MISSA Administrator emphasized that although she is aware that the RMI Government is presently implementing a “freeze” on its General Fund, it is imperative that action is taken to ensure that the outstanding taxes to MISSA are paid in full. “Any further delay in resolving the matter will greatly affect MISSA’s cash flow situation and its ability to meet benefit payments on time,” she added.
Consequently, the Finance Secretary, who was just recently installed as a new member of the MISSA board, presented to the Administrator a partial remittance of about $700,000. After a few more days, subsequent payments were made until the RMI Government became current in its tax obligations to MISSA.
In a related development, a newspaper reporter from New Zealand who was evidently made aware of the tight financial situation that the RMI government is facing, called MISSA and inquired about the status of the delayed remittance. As everything has already been settled during the time the inquiry was made, the reporter was advised that the RMI government has already fully met its MISSA obligations and is now current.
Despite the updated remittances from the RMI Government, MISSA is still in the brink of a cash flow crisis in the very near future. Unlike in previous years whereby MISSA was able to generate cash surpluses after benefits and operating expenses were paid, the present cash position has dwindled to its lowest point.
In the past several years, benefit payments have steadily increased by about 7% annually and with more new benefit claims being received, the trend is ever increasing. MISSA’s financial managers know that the increase in benefit payments must be equated with increases in social security contributions. However, current tax collections can no longer sustain current benefit payments and this creates a deficit. If this imbalance is not corrected soon, MISSA will be forced to make draw downs from its investments, something that has not happened since early 2000.
To address this concern, MISSA has resorted to putting tighter control on disability benefits and over its administrative expenses. Likewise, additional revenues have been generated as a result of a very aggressive verification of employer payroll records now being conducted by tax auditors.