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ASG budget overrun for FY 2010 —$13 Million

fili@samoanews.com

The American Samoa Government faced an overrun of a little over $13 million in its budget for fiscal year 2010, which ended on Sept. 30, 2010 and auditors have recommended that the government comply with the budget law, according to the independent auditor's report for FY 2010 conducted by the off-island firm of R.C. Holsinger Associates.

The auditor's report dated July 28 and released thereafter, states that 42 departments and the "special programs" budget category exceeded spending of their approved budgets, causing an overrun for FY 2010.

The largest overrun is $5.94 million for the Territorial Office of Fiscal Reform (TOFR); followed by the Airport division of the Port Administration at $1.72 million and $1.05 million in the "Mis. accounts, non-departmental" budget item.

Some departments with notable overruns include Education with $614,334; Treasury at $348,606; Department of Public Safety at $381,334; and Public Works $322,690.

According to the audit report, budgetary requirements are established by law and are required to be followed, but by the end of FY 2010 the total overrun stood at "$13,000,834.00"

"The cause of the overruns is due to a lack of adherence by management to established budgets," according to the auditor's finding, which also notes that budget overruns "affect future appropriations and expenditures."

"We believe this finding represents a reportable condition and material weakness in internal control. However, we have not identified any specific questioned costs associated with this finding," it says.

The auditor recommends that the government "should comply with budgets and appropriations" passed into law. Additionally, timely and accurate reports should be given to the departments to review to ensure costs allocated to their department are appropriate.

"Management and Departments should be held accountable for overruns," the auditors say.

In its response and corrective action plan, ASG says it agrees with this finding and Treasury will continue to provide monthly Budget-to-Actual reports for all departments.

ASG says reports are provided after the 15th - the closing date - of each month and departmental management is accountable for overruns.

"Treasury continues to withhold payments on any account that is overrun except for certain circumstances, such as utilities and supplemental budgets prepared by the Budget Office and approved by local legislature," said ASG.

BACKGROUND

According to Fono legal counsel Henry Kappel, in a Fono hearing in February 2011 on ASG's proposed revenue measures, it seems the Treasurer is struggling to pay... obligations and debts from the prior fiscal year with current fiscal year revenues, which was prohibited following the court case of Legislature vs. Lutali.

(In this case, the court ruled that the governor cannot use revenue from a current fiscal year to pay certain expenditures from a previous fiscal year.)

Kappel told senators that using 2011 revenues to pay past year's debts places undue pressure on 2011 revenues, adding that current revenues were appropriated to operate ASG in the current budget cycle. He said this practice of using current revenues to pay past debts "needs to stop immediately" as well as spending in excess of the appropriated budget.

As for the 2010 deficit, Kappel said it should be set aside and recommends the re-establishment of the deficit reduction fund that existed from about 1998-2001 and revenues earmarked specifically to fund this amount.

To restart this fund, Kappel suggested using any dividends that ASG received from the American Samoa Hawaii Cable LLC. He also points out that those dividends are not included in the FY2011 budget.

(For complete story on samoanews.com: February 11, 2011 issue, "Fono hears from LFO Mauga, legal counsel Kappel")



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