Audit report of DPW permit fees shows significant discrepancies
Pago Pago, AMERICAN SAMOA — An unannounced cash audit by the Territorial Audit Office (TAO) of building permit fees collected by the Department of Public Works identified discrepancies such as missing cash collections of more than $3,000, prompting TAO to write directly to Gov. Lemanu Peleti Palepoi Sialega Mauga, who was given the outcome of the audit report.
An exhibit document, which lists the receipts to justify the missing cash collection, provided to the governor covering the period of Jan. 8 2019 thru Dec. 22, 2020 shows the amounts and list of supplies purchased with the alleged missing cash.
TAO conducted the unannounced cash count on Feb. 5, 2021 at the DPW’s Accounting Division but limited the scope of count on collections from July 14, 2020 to Feb. 2021 for building permit fees on new construction of homes and businesses, extensions and repair work.
The audit report summarized the objectives of the cash count as well as procedures taken to achieve the objectives.
When TAO first conducted the cash count, it found out there was $164 in cash and $1,139 in checks, which totaled $1,303 with the Cash custodian. When added up with all the receipts, the total came to $5,654 with a cash shortage of $4,351, according to TAO, noting that at the time of the report, the $1,303 had not been deposited to the ASG Revenue Division. TAO also provided supporting documents to the governor.
TAO said it questioned the Cash custodian on the shortage, and she explained that the cash was used to purchase supplies for the office and other urgently needed items for the department per instructions from the deputy director and “this has been the common practice for some time,” TAO acting director Sualauvi Su’a wrote to the governor in the report dated Mar. 8th.
TAO asked for receipts for the missing $4,351 but the Cash custodian couldn’t come up with any until about two weeks later on Feb. 22nd. The Cash custodian and the deputy director submitted a report to the ASG deputy treasurer with a deposit report of $1,303 and supporting documents for the missing $4,351.
It also included a letter from their director saying that “everything was okay and complete,” said TAO.
However, upon further review of the submitted supporting documents, “TAO found out only $685 were within the time fame of the date receipts but the other $3,665 were still missing and unaccounted for, up to the cash count date [Feb. 5, 2021].”
(One of the documents — or exhibits — submitted to the governor, title, “List of Receipts to Justify Missing Cash Collection of $4,351”, details purchases for DPW office supplies from local vendors.)
Sualauvi informed the governor that this “practice is a direct violation” of American Institute of Certified Public Accountants (AICPA) and US Government Accountability Office (GAO) standards and not allowed by ASG Treasury as per ASG Cash Police Manual, which states, “To avoid unreported revenues, departments are not permitted to make any purchases with cash collected. And if a department needs petty cash fund, a request should be made through proper channels at ASG Treasury.”
“The fact that these inconsistencies have been revealed, evidence has shown a possible cover-up, negligent and fraudulent misrepresentation,” said the TAO acting director. “If further investigation is required and revealed that all or part of the missing fund is due to irregularities, the responsible parties could be subject to prosecution.”
TAO found that DPW Finance Division does not have their own department cash collection policies and procedures. Therefore, existing practices do not comply with ASG Treasury Cash Policy Manual and TAO offered to work with the Finance Division to update these important policies and procedures from Treasury.
TAO also found that unused receipts are kept in an unlocked drawer and cash collections are kept in the supervisor’s purse where cash is taken home overnight for safekeeping due to no lock Safe in the office. Furthermore, a cash register is not being utilized; the cash collections are kept in the Supervisor’s drawer with all cashiers open to the funds during regular hours of operation.
“Physical safeguarding of cash collections and unused receipts require immediate improvement for DPW Finance Division to be locked in a vault,” TAO said.
“Due to so many irregularities we discovered during our cash count,” TAO said it extended the scope of its finding to include all transactions from Jan. 1, 2020 to July 2020. One of the examples of the findings for extending the audit is a missing receipt and there was no copy of it.
“Due to misuse of cash,” TAO alleges that “checks collected were not deposited on time so checks eventually stale.” And this was the situation where on Apr. 15, 2020, the DPW deputy director wrote to the ASG Treasury informing them of the “alteration of information on... four receipts that were paid by checks were to be changed to show that they were being paid by cash.”
“This again, was a clear violation of falsification of records and against auditing and accounting principles enforced by ASG Treasury, AICPA and OIG confirms that this unauthorized practice has been on-going for many months if not years,” the report states, and includes the Apr. 15, 2020 letter, as exhibit, from the deputy director of finance and administration, showing the four receipts totaling $329.
Another finding cited by TAO is, days-delayed deposits between Jan. 1, 2020 to Feb. 05, 2021 were about 238 days — or seven months.
“This is not acceptable at all,” the report states. “It’s why receipts for monies received in July 2020 were only turned into Treasury Revenue Office on Jan. 21, 2021,” said TAO and provided a separate detailed spread-sheet for the governor’s review.
The governor was also informed about “unaccountable Cash” from DPW in Manu’a for the use of heavy equipment. “We discovered a copy of a cash transmittal from Manu’a of the list of payment receipts the cash custodian confirmed cash collection were in fact received; however, those payments were never deposited to the Treasury Revenue Office,” the report says but didn’t provide the total amount of the money from Manu’a.
TAO provided eight specific recommendations including, that daily cash collection deposit to the ASG Revenue Office is highly advised without exceptions; cash collections and reports must be reviewed and checked on a daily basis before turning-in to deposit in ASG Revenue Office; advise DPW accounting staff to strictly comply with ASG Treasury Cash Collection policy; and must have a secured Vault or Safe to store overnight cash and unused receipt books.
TAO also recommends the rotation and separation of cash handling duties among staff, saying that this “must be implemented to monitor risk issues” in cash management. “With proper separation of duties, no single employee has control over the entire cash process,” the report says.
(TAO’s unannounced cash audit of the DPS Records Division cites provisions of the ASG Treasury Cash Policy Manual, which states in part that “cash handling duties should be segregated from recording and reconciling duties.” See Monday’s Samoa News edition for details.)
Also recommended is training of staff especially the Building Inspection Division to generate and utilize MS Office software such as Excel and/or equivalent, to facilitate recording logs for easier tracking and time efficient flow of work.
Furthermore, install Point of Sale (POS) type of computer systems at DPW, finance division in Tafuna to streamline these processes. TAO said that the IT division at Treasury and a subcontractor can assist with the setting up and installation.
Also recommended is that there should be a daily reconciliation report which will aim to compare the building permits log to cash receipts issued.
“For the missing $3,665, I would await your decision but a copy of this same report will be make available to the AG (Attorney General) for appropriate actions for the full recovery of ASG monies,” Sualauvi wrote to the governor.
“Second, immediate implementation of POS systems to safeguard cash and to block the holes, is highly recommended,” Sualauvi said.
TAO held meeting on Mar. 02, 2021 with the ASG Treasurer, along with Treasury Department officials, as well as DPW officials, to present the findings and discuss the report. According to TAO, DPW accepted the findings and were ready to implement daily deposits.
Samoa News notes that no new information was available at press time as to whether a further investigation was conducted by the AG’s Office on the missing money. Nor was there any new information on any actions recommended by the governor.