Pago Pago, AMERICAN SAMOA — As the Fono begins reviewing the American Samoa Government’s proposed fiscal year 2027 budget, lawmakers will be asked to consider a total spending plan of approximately $789.3 million. The budget documents reportedly project $137.9 million in local revenues, although the earlier FY2027 Budget Call Letter established a governor-approved General Fund ceiling of $133 million.

Before the Fono debates how the $133 million or the subsequently proposed $137.9 million should be divided among departments, agencies and special programs, there is a more fundamental question: Do those figures represent gross local revenue before debt service, or net revenue available for government operations after debt service and other pledged revenues have been deducted? The FY2025 audited financial statements show why that distinction matters.

WHAT FY2025 ACTUALLY COLLECTED

The FY2025 audit reports $114,906,431 in General Fund revenue and another $15,552,521 in the Bond Debt Service Fund. Together, those two funds received: $114,906,431+$15,552,521=$130,458,952. That $130.459 million is a reasonable measure of ASG’s combined General Fund and Debt Service Fund revenue for FY2025. It is also useful context for judging the $133 million ceiling — governor-approved.

As a gross revenue forecast, $133 million does not appear unreasonable. It is only about $2.5 million, or 2 percent, above FY2025’s combined actual revenue. The subsequently proposed $137.9 million is more aggressive, approximately $7.4 million, or 5.7 percent, above FY2025, and the Fono should ask for a detailed reconciliation explaining the increase from the original $133 million ceiling.

But neither $130.459 million nor $133 million can automatically be treated as money available for departments. The revenue deposited into the Debt Service Fund is there to pay bondholders, not department payroll, contracts, travel, supplies, equipment or subsidies.

In FY2025, the Debt Service Fund spent $6.234 million on principal and $7.338 million on interest, for total debt service of approximately $13.572 million. Using a more conservative $16 million planning allowance for principal, interest, trustee costs and related requirements, FY2025 locally generated revenue available after debt service would have been approximately: $130.459 million - $16 million = $114.459 million.That is much closer to the General Fund’s actual revenue of $114.906 million than to the $165.907 million operating budget enacted for FY2025.

The point is simple: Debt Service Fund revenue is part of ASG’s overall locally generated resources, but it is not additional operating capacity. Once it is counted in gross revenue, the debt obligation must be deducted before calculating what departments can spend.

FY2027 DEBT SERVICE MAY BE HIGHER

The FY2025 audit’s long-term debt schedule shows that principal and interest payments due during FY2027 on obligations outstanding as of September 30, 2025 total approximately $18.780 million.That schedule does not necessarily include trustee fees, required reserve deposits, changes in payment timing or any debt issued after the audit date. It should therefore be treated as a starting point, not necessarily the final FY2027 requirement.

If the original $133 million ceiling is gross of debt service, the audit schedule would leave approximately: $114.220 million ($133 million - $18.780 million) for operations. If the submitted $137.9 million local revenue projection is gross of debt service, approximately $119.1 million would remain after the same scheduled principal and interest payments. On the other hand, if the $133 million or $137.9 million figures are already net of all required debt service, Treasury should be able to provide a simple schedule demonstrating that calculation.

The audit also reports a $20.834 million ending Debt Service Fund balance, including $17.486 million classified as restricted. Some portion of future debt service may be paid from that reserve rather than entirely from FY2027 collections. But restricted debt reserves remain unavailable for department operations.

The Fono should be told exactly how much FY2027 debt service will be funded from current pledged revenue, how much from existing reserves and how much from any other source.

THE BUDGET LAW HAS NOT SHOWN THIS CLEARLY

The FY2025 budget law projected $165.907 million in total local revenue and authorized the same $165.907 million for Basic Operations. The full amount therefore appeared to be available to departments and special programs.

Separately, the law included a $14 million Debt Service Fund under the Enterprise Funds section. That presentation raises two problems. First, debt service is not an enterprise operation. The audit correctly presents it as a governmental debt service fund. Second, if the $14 million was paid from the same tax and locally generated revenue base supporting the $165.907 million operating budget, ASG effectively presented the same revenue as supporting both department operations and bond payments.

ASG cannot use the same dollar twice — once to pay bondholders and again to fund departments.

The pattern continued in FY2026. Public Law 39-1 projected $141.268 million in local revenue and authorized $140.749 million in Basic Operations, leaving a visible cushion of only $519,000. Yet the law also separately listed another $14 million for the Debt Service Fund. Unless the $141.268 million had already been reduced for debt service, the actual operating gap was closer to $13.481 million than to a $519,000 surplus.

For FY2027, the budget law should correct this presentation. It should show: Gross projected local revenue, less required debt service, less other pledged or restricted revenue, equals net local revenue available for Basic Operations. Only that final net amount should be divided among departments.

FY2025 SHOWS IMPROVED SPENDING DISCIPLINE

There is good news in the FY2025 audit.The General Fund’s annual loss declined dramatically. In FY2024, the General Fund lost $26.806 million. In FY2025, the loss fell to $3.081 million. That improvement was real, but it was principally the result of lower actual spending not a smaller enacted budget.

General Fund expenditures fell from $161.067 million in FY2024 to $142.944 million in FY2025, a reduction of approximately $18.124 million. General Fund revenue increased by approximately $5 million, while transfers from the Grant Fund increased by about $602,000. Together, those changes reduced the annual loss by approximately $23.725 million.

Governor Pulaali’i took office in January 2025, after the fiscal year had begun and after the FY2025 budget had been enacted. His administration therefore inherited both the budget and roughly the first quarter’s financial activity.

The FY2025 audit is his administration’s first audit, but it is not an audit of a budget developed entirely by his administration. The Pula administration nevertheless deserves credit for substantially reducing actual expenditures during the remaining portion of the year.

However, it would be inaccurate to say the enacted FY2025 budget was significantly smaller than the FY2024 budget. The FY2025 law authorized $165.907 million for Basic Operations. The FY2024 budget package, including supplemental funding, was approximately $165.6 million. The principal improvement was therefore in budget execution and spending control, not in the size of the appropriation itself.

THE GENERAL FUND IS NOT AS STRONG AS THE HEADLINE BALANCE SUGGESTS

The audit reports an ending General Fund balance of $34.700 million. At first glance, that may appear to be a substantial reserve. It is not that simple. Within that total, the audit reports a negative unassigned fund balance of $34.276 million. It also reports negative General Fund “cash and investments” of approximately $2.904 million at year-end.

The positive total fund balance exists because the General Fund also reports large amounts classified as restricted, committed and assigned. Those classifications may represent encumbrances, designated projects, legally restricted resources and other amounts that are not freely available to close future operating deficits.

At the government-wide level, ASG’s total net position increased by approximately $38.9 million, and long-term obligations declined by about $20.4 million. Those are positive developments. But unrestricted net position became more negative, declining from negative $117.959 million to negative $126.899 million.

In other words, ASG added capital assets and reduced some long-term liabilities, but its unrestricted financial position did not improve.

THE $5.1 MILLION GRANT FUND DEFICIT NEEDS AN EXPLANATION

The FY2025 Grant Fund result is one of the most concerning parts of the audit.

The fund received $433.031 million in revenue and incurred $413.305 million in expenditures, producing a surplus of $19.726 million before transfers. ASG then transferred $24.956 million out of the Grant Fund: $24.715 million to the General Fund and $241,391 to ASDRO. The transfer exceeded the Grant Fund’s annual surplus by approximately $5.230 million, leaving an ending deficit of $5.074 million.

That does not automatically prove that federal grant money was misused.

The deficit could have resulted from several different conditions: ASG may have transferred more operating-grant proceeds than the Grant Fund had earned. It may have failed to record an eligible federal receivable. It may have failed to release earned amounts from unearned revenue. Some costs may have been local match or otherwise non-reimbursable. There also could have been a modified-accrual timing issue involving revenue that was earned but not considered available within the audit’s 60-day period.

The audit does not tell the reader which explanation applies.

ASG did record a substantial $88.895 million receivable from the federal government, and that amount is not inherently unbelievable given that ASG reported approximately $446 million in federal expenditures during the year. The deficit therefore cannot be explained simply by saying that reimbursements had not yet been collected.

More directly, the audited statements show that ASG transferred approximately $5.23 million more from the Grant Fund than the fund generated after paying its FY2025 expenditures. That should have prompted a note identifying the grants involved, the source and legal authority for each transfer, any receivables or deferred revenue associated with the transfer, and how the deficit was corrected after year-end.

The absence of that explanation is especially concerning because the audit finding says ASG maintains grant receivable and deferred-revenue spreadsheets that do not reconcile to prior-year balances. The general ledger is adjusted to match the spreadsheets at closing, rather than being reconciled throughout the year.

WHERE IS THE INVESTMENT INCOME?

The FY2025 audit also reports approximately $263.144 million in U.S. Treasury obligations held by the primary government. The Grant Fund reported approximately $264.970 million in cash and investments, suggesting that the Treasury portfolio was principally associated with the large advance-funded federal balances, likely including ARPA funds. Yet the audit provides no meaningful investment-income reconciliation.

The General Fund budget-to-actual schedule reports only $4,015 of interest income. The Grant Fund reports $14.395 million of “miscellaneous” revenue, but the audit does not disclose how much of that amount was interest, which fund earned it, whether it was ARPA-related, whether it was transferred to the General Fund, or whether it had been appropriated.

This omission is material to the FY2027 budget discussion.

The FY2026 budget law projected $7.274 million in interest income. If investment earnings are being used to support current operations or the FY2027 local revenue estimate, the Fono needs a complete schedule showing:

The beginning investment balance, purchases and maturities, average invested balance, interest received, accrued interest, realized gains or losses, ending balance, fund ownership, transfers and appropriations.

It is not enough for hundreds of millions of dollars in Treasury securities to appear in one note while the earnings from those securities disappear into an unexplained miscellaneous-revenue line.

A CLEAN OPINION IS NOT A CLEAN BILL OF HEALTH

The auditor issued unmodified, or “clean,” opinions on the FY2025 financial statements and on the three major federal programs tested: ARPA State and Local Fiscal Recovery Funds, the Consolidated Grant to the Outlying Areas and Medicaid.

The audit also reports no current federal award findings. Those are favorable results. However, ASG was again classified as not qualifying as a low-risk auditee, and the auditor identified a material weakness in financial reporting controls.

The audit found that ASG’s general ledger was not properly reconciled or closed during the year. Approximately $8 million in adjustments were proposed or posted to the General Fund and another $45 million to other funds during or after audit fieldwork.

The auditor said similar findings have remained unresolved for years and recommended that ASG re- establish a Comptroller function and perform monthly or, at minimum, quarterly financial closing procedures. The audit also found that ASG’s workers’ compensation liability lacked a reliable actuarial basis.

Most troubling from a basic accountability standpoint, auditors requested records for 76 disbursements, particularly involving special projects, and found that 46 did not have copies of checks or appropriate supporting documentation available for review. ASG said many documents had been removed for other reviews and were not returned or had been misfiled.

A clean financial statement opinion can coexist with a material weakness. The opinion means that, after audit adjustments, the statements are considered fairly presented in all material respects.

It does not mean ASG’s books were properly maintained during the year, that every expenditure was supported, that the budget was balanced, or that the internal controls were effective.

THE QUALITY OF THE PUBLISHED AUDIT

ASG management is responsible for preparing the financial statements. The independent auditor is responsible for testing them, requiring necessary corrections and disclosures, and deciding whether the final statements support the audit opinion.

It would therefore be unfair to attribute every problem in the report solely to the audit firm. Nevertheless, the document released to the public appears insufficiently reviewed and does not provide the level of explanation that the Fono, taxpayers and creditors should expect.

The published report contains several apparent inconsistencies.

The Management’s Discussion and Analysis says business-type program revenue exceeded expenses by approximately $4 million, but the detailed table immediately below reports only $416,262.

The government-wide Statement of Activities appears to assign the entire $419.209 million of operating grants to “General Government,” while reporting no operating-grant revenue for education, health and welfare, public safety or economic development. Yet the federal awards schedule identifies tens of millions of dollars in education, health, Medicaid, agriculture and other program expenditures. That unexplained classification produces highly distorted functional results.

The deposit note reports approximately $365.2 million of un-collateralized cash, while the investment-risk discussion says deposits and investments are insured or collateralized and held in ASG’s name. The audit reports hundreds of millions of dollars in Treasury obligations but does not identify the related investment income. It reports a $5.074 million Grant Fund deficit without explaining the grants, transfers or accounting entries that created it.

Any one of these issues might be explained through audit workpapers or Treasury records. But the public and the Fono do not have the workpapers. They have the published audit.

On its face, the FY2025 report is not useless, but it is poorly edited, insufficiently explanatory and weaker as a public accountability document than it should be.