CFC not output returned XML

[jrottman]

I am writing a function with in my cfc that I am using to return xml. The test code outisde of my function works perfectly, however when I put the code with in my function the I get this error.

XML Parsing Error: xml declaration not at start of external entity
Location:

http://flex.homesmartagent.com/test.cfm

Line Number 3, Column 1:<?xml version="1.0" encoding="utf-16"?>
^

This is my function code:

<cffunction name="displayDocsListQry" access="remote" returntype="xml" output="false">
<cfargument name="fileNum" required="no" type="string" />
<cfdirectory action="list" recurse="yes" directory="#APPLICATION.storePath##APPLICATION.systemInfo.fld_officeCode#/#arguments.fileNum#" name="ListDir" />
<cfquery name="DirQry" dbtype="query">
select * from ListDir
where Type = 'Dir'
</cfquery>
<cfprocessingdirective suppresswhitespace="Yes">
<cfcontent type="text/xml; charset=utf-16">
<cfxml variable="xmlobject">
<cfoutput>
<fileNum label="L060001">
<cfloop query="DirQry">
<directory label="#DirQry.name#">
<cfquery name="fileQry" dbtype="query">
select * from ListDir
where Type = 'File' and directory = '#APPLICATION.storePath##APPLICATION.systemInfo.fld_officeCode#/#arguments.fileNum#/#DirQry.name#'
</cfquery>
<cfloop query="fileQry">
<document label="#fileQry.name#" />
</cfloop>
</directory>
</cfloop>
</fileNum>
</cfoutput>
</cfxml>
<cfset myvar=toString(xmlobject)>
<cfset mynewvar=replace(myvar, "UTF-8", "utf-16")>
</cfprocessingdirective>
<cfreturn mynewvar />
</cffunction>