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State of Territory address: ASG deficit at $44 Million

In his first State of the Territory Address before a joint Fono session, Gov. Lolo Matalasi Moliga provided what he claimed was available to his administration in the last nine-days regarding the financial status of ASG, saying local revenue projection for the current fiscal year is over-forecasted by more than $5 million and outstanding debts, or the deficit, is now more than $44 million.

According the governor, it was difficult for the incoming administration to get a real financial status for ASG because of the lack of full cooperation by the out-going administration, including former directors. (Among the former directors in the audience was Magalei Logovi’i, the previous ASG Treasurer and now a sitting senator.)

“Although our financial situation is far from being healthy... we must adopt a positive attitude and the determination to work harder and smarter to implement solutions that will produce long term benefits and prevent such situations from being repeated,” he said, adding that the financial data and other information provided to the Fono — via his oral address and the official written State of the Territory Address of more than 30 pages — was information his administration was able to collect in the last nine days since taking over the helm of ASG.


Lolo said total projected revenue of $93.44 million for basic ASG operations included an “inflated forecast” from individual income taxes of $5.02 million. He didn’t provide specific details of how the administration identified this amount as inflated.

However, during the FY 2013 budget hearings last August lawmakers raised questions over the estimated tax revenue collection of $52.10 million with many of them wanting to know if ASG would actually collect such tax revenues.

The ASG Tax Office is charged with the collection of corporate taxes, individual income taxes and the military cover over tax — which totals $32.10 million. Customs Division collects the rest of the tax revenue — in general excise taxes and soda tax.

When questioned during budget hearings, Tax Office manager Melvin Joseph said he “was surprised” to see in the budget document the high revenue estimates for FY 2013 in taxes collected by the Tax Office. He also stated that he was not consulted about the revenue estimates in the budget book.

Joseph was also asked several times for his forecast or his projection for FY 2013 tax revenue collections under the Tax Office’s jurisdiction and Joseph gave the same reply, “In my opinion, I think it’s $4 million or $5 million high.”

The biggest concern voiced by lawmakers was the ASG inclusion in individual income tax, the estimated $4 million that was to be collected from the new 2% wage tax, which is earmarked for LBJ Medical Center, to first pay off the $3 million loan from the ASG Workmen’s Compensation Account and thereafter goes to LBJ operations.

 Lawmakers believed this wage tax revenue should not be included in the annual revenue for the ASG because it is also included in LBJ’s FY 2013 budget, and LBJ estimated they would collect only $1.5 million from the wage tax in FY 2013.

In his address yesterday, Lolo said that if ASG maintains the level of spending based on the approved budget appropriation, which now included unbudgeted expenditures, the government will experience a $5.17 million “deficit” at the end of FY 2013.


ASG’s total legal liabilities — which are court judgements — stands at $10.33 million and these liabilities continue to grow, because interest continues to accumulate, he said.

Legal obligations include $7.94 million to Progressive Insurance for the old Laufou fire case; $364,071 for Pacific International Engineer Inc., $835,788 to Marisco Ltd., (a federal court case); and $916,093 to the U.S. Department of Labor to settle overtime payment for ASG employees.

Lolo said the administration has been informed by the USDOL team, who were in the territory last December, that this is just the beginning of overtime settlement payments for the rest of ASG. He said these legal obligations must be paid but no money is budgeted for these expenditures.


Another expenditure, said Lolo is the “mass payout of annual, sick leave and compensatory time” for outgoing directors totaling $734,000. He said the 12 remaining directors with payouts being processed is estimated to cost an additional $280,000 bringing the total payouts to $1.01 million. He also said the highest payout was $57,609. (Later in his address, Lolo notes that the former Chief Election Officer Soliai Tuipine Fuimaono payout was for this amount.)

For the Governor’s Office payouts, the total came to $350,860 and the new administration doesn't know how these payouts were determined, said Lolo, who added that the full impact of the payments will be felt at the end of FY 2013.

It was revealed during budget hearings last year, that payouts of annual and sick leave would include then Gov. Togiola Tulafono and then Lt. Gov. Faoa Aitofele Sunia — if they had any annual and sick leave to be paid out.


All applicable expenditures for FY 2013’s first quarter — Oct. 1 to Dec. 31, 2012 — are still trickling in, making it impossible to provide an accurate total, said Lolo.

For example, the Governor’s Office spent $350,860 on payouts but “supposedly” $186,000 was budgeted. However, with the budget cut of $500,000 for the Governor’s Office in the FY 2013 budget proposal, no budget was earmarked for payments, he said.

“In actuality a deficit of $350,860 materialized. The Governor’s Contingency Fund of $110,000 for the entire year has been overspent by $2,416 in one quarter,” he said.

The Election Office’s budget was also overspent with a payout of $57,609 for the outgoing Chief Election Officer, he said. (The former Chief Election Officer, Soliai Tuipine Fuimaono was also in the audience as one of two senators for Ituau county)

According to the governor, incurred overtime for police officers providing security escort for elections cannot be paid because the Special Appropriations Account for the Election Office is overspent.

So far, he said, the first quarter deficit is $1.29 million but this number “will definitely increase” because expenditures incurred prior to the end of FY 2012 are still coming in.

For example, last December’s Ulu Summit expenses are now being presented for payment and one of the invoices exceeded $10,000 for a dinner held for 100 people, said Lolo.


Lolo said the audited financial statements showed a carried forward deficit fund balance of $7.7 million but he didn’t provide details of this deficit. However, he said ASG so far has an “estimated deficit” of $44.55 million as of yesterday.

He also said that ASG is awaiting results of the financial audit for FY 2012 and the preliminary report is due on Feb. 22.

Samoa News will report on other issues from the governor’s address in future editions.

Click on attachment below to download pdf of Gov. Lolo's address.