Formal, documented policies needed for ASG estimate accounts says audit
Independent auditors have recommended that policies and procedures be “formally documented” by the American Samoa Government when it comes to “management estimate accounts and other significant transactions.”
Lawmakers over the years have questioned ASG estimates for forecasts on tax revenues and accounts receivable during annual budget hearings. In fact, on Day One of the FY 2014 budget hearings, lawmakers once again questioned the revenue forecast and didn’t go further, since the Fono wanted the latest revenue collection information on corporate and excise taxes.
ASG Treasurer Dr. Falema’o ‘Phil’ M. Pili told lawmakers that estimates presented in the revenue forecast were checked and rechecked when the budget was being finalized.
The subject of estimates was also raised by the independent audit firm of Moss Adams LLP in the Single Audit Report, which was released in July and received by lawmakers last month.
The report says that many of the accounts within ASG’s financial statements require management judgement and estimates. Additionally, generally accepted accounting principles require management to analyze and assess the reasonableness of such accounts on a recurring basis. Moreover, the report says, the Territory also engages in “complex, unusual transactions throughout the year.”
The auditors went on to say that government operations are complex and there are many accounts within each fund that require management estimate and judgement. “We believe there should be more structure and rigor governing these estimates,” the auditors say. “There were audit adjustments recorded within each fund to correct errors made in these types of accounts.”
Under the General Fund, the auditors pointed out three areas of concern in their findings.
For tax receivables, the auditors say it should be analyzed each month for activity and collectibility, and properly credited upon receipt, or written off if deemed uncollectible. “An audit adjustment of $2.1 million was proposed to more accurately present this account at year end,” said the auditors.
It also says that the government is a party to various claims and judgements, adding that a key management estimate is an accrual for the estimated liability associated with legal claims. “An audit adjustment of $5.8 million was proposed to increase this balance at year end, it says.
The auditors also note that there is a lack of control process over the Immigration bond accounts. The auditors says it’s their understanding that there is an ongoing project to reconcile these accounts, however, as of Sept. 30, 2012, “no adjustments have been made to correct this account.”
Therefore, “we are unable to assess the reasonableness” of the account’s balance, said auditors. (Reconciling of the immigration bond account was assigned some two years ago to the Internal Audit Office, which was created through executive order by then Gov. Togiola Tulafono as part of the Governor’s Office).
In their audit of ASG’s Financial Statements, the auditors said, “We are unable to satisfy our selves as to the accuracy of the Immigration Bond Liability of $7.8 million”. (Previous audits have also cited problems of them unable to audit this account).
The auditors recommend that policies and procedures governing management estimate accounts and significant transactions be formally documents. It says that there should be a “robust analysis and detailed support for each calculation and transaction” and this function should be performed by senior accountant or appropriate departmental staff person with review and oversight by Treasury accountant or comptroller.
In its response, ASG Treasury concurs with the findings, saying it has taken steps to address concerns dealing with the General Fund. Additionally, ASG has taken steps to pay off legal obligations identified in both Administrative Agreements with the U.S. Department of Labor and various legal claims. (USDOL claim is close to $1 million.)
“Resource enhancement will enable the proactive review, oversee, analyze and reconcile significant transactions for the Immigration Bond Account,” said ASG. Additionally, Treasury has established an Analytic Unit purposed to provide “data mining” of trend analysis of financial information by tracking and monitoring various transactions reported by the ASG financial system.
For the Agency Fund, ASG says there is an ongoing project to reconcile these accounts, however, “we have not yet been able to determine the amount of adjustments necessary to correct this account.”
Samoa News should point out that of the $5 million FY 2013 supplemental budget, $100,000 is to pay the investigative costs arising out of audits of the Immigration Bond Fund and other Immigration Office expenses.
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