Pago Pago, AMERICAN SAMOA — “In our view, the Tax Office was not effective in enforcing collection efforts and its records indicated a significant number of businesses have outstanding unpaid taxes and balances were delinquent,” wrote acting Territorial Auditor, Tofa Sualauvi H. Su’a in late October to Gov. Lemanu P. S Mauga on the outcome of the Territorial Audit Office’s Performance Audit Report on the Tax Office for fiscal years 2018 to 2021.

“In addition, the Tax Office did not maintain effective control over collections. Specifically, collections were not adequately reconciled,” said Tofa in the executive summary of the report.

“This is an audit concern as it indicated a lack of enforcement efforts by staff and, subsequent huge revenue losses to ASG,” the executive summary of the report, which was recently made public, pointed out.

“Some weaknesses occurred at the port of entry level.”

The governor was informed that the “most significant to note were deficiencies and inaccuracies in the completeness and timeliness of tax receivables information.”

 And these deficiencies resulted in workload for collection staff in following up and correcting them and resulted in delays in collecting monies owed to ASG.

Tofa explained that while these problems existed in pre-1995 with millions of dollars invested by both ASG and the U.S Interior Department’s Office of Insular Affairs for improvement in financial systems, staffing and equipment, it appears that very little progress have been made.

“In the last five to eight years, external auditors have expressed serious concerns over problems at the Tax Office, which also resulted in their qualified opinions in some of the ASG audited financial reports,” Tofa said in the 45-page report.

Tofa noted that the audit disclosed that a considerable effort is needed by the Department of Treasury and the Tax Office to manage receivables in the areas of collection, aging receivables, and providing allowance when collection efforts fail requiring a swifter write-off.

“We found that improvements are to be implemented to ensure more effective and efficient tax collection procedures are in place,” the report said and cited specific examples:

•           Absence of timely reconciliations; General Ledger versus Subsidiary Ledger

•           Maintaining of accurate tax receivable records

•           Significant negative (credit) balances in tax receivables aging reports

•           Tax Compliance; voluntary compliance and non-compliance interventions

•           Segregation of Duties (SOD)

•           Outdated tax information software and systems failure

•           Management of Bad Debts and Allowance Reserve - key policy actions

“Many of the findings in this report are the results of an outdated and, an overwhelmed system. While we took into consideration the extraordinary circumstances of a global pandemic, the Tax Office should have a reliable tax information system to provide for the needs of the American Samoa Government and its people,” Tofa explained.

The Territorial Audit Office also found that the existing Standard Operating Procedures and Policy Manual (SOPs), which has been instituted to guide the staff “has not been updated.”

Noted in the report was that Tax Office Manager, Tanoa’i Vaaimamao Poufa was off-island in June during the time of the performance audit, and it was the Deputy Tax Manager of Operations who was on hand at the time.

The audit report included many findings and recommendations. And according to Tofa, the contents of the report were discussed in an exit meeting on June 28, 2022 attended by the Treasurer and officials of both Treasury and the Tax Office and the report was submitted with a request for comments.

“There is still one final important issue that the Tax Manager did not address; the tax abatements approved in 2018 for certain taxpayers,” said Tofa, who noted that his office will take this up separately as a special investigation audit in next year’s audit plan.

Additionally, the Tax Office and the Treasury Department “generally concur” with recommendations and is taking corrective actions. However, Tofa informed the governor that, nothing in the Tax Office “responses changed our report.”

TAX OFFICE MANAGER REPLY

A copy of the Tanoa’i response letter, dated Aug. 23, was included in the final audit report, and Tanoai apologized for not been present during the audit as he was on leave for personal matters.

“As the manager of the Tax Office, we take the findings and recommendations outlined in your report very seriously and a wakeup call to create streamlined processes and procedures to ensure efficient and effective services for our taxpayers, and in the same manner warrant the collections of tax revenue for the American Samoa Government,” Tanoa’i wrote to Tofa.

Tanoa’i outlined measures and changes that will be implemented to comply with the findings and recommendations of the audit.

For example a “New Tax System” — A feasibility study is currently underway for a new tax system for the American Samoa Government. This has been a consistent finding in previous audits that the Moana application is outdated and unsupported.

“We have high expectations that the new tax system will fulfill and be the answer to the systematic shortcomings outlined in the findings,” said Tanoa’i.

Another example is “Relocation & Filling of Staff Vacancies of Enforcement Unit (Audit, Collections & Compliance)”. Tanoa’i explained that plans are in the pipeline to relocate the enforcement arm of the Tax Office — referring to collection division.

He noted that every year, during the filing season January 01 to April 15 all collection, compliance and audit actions are put on hold as all staff are assigned to serve taxpayers when the office offers its free filing assistance program.

“In the past two tax years, this has been extremely difficult due to Covid 19 and all the stimulant packages provided by the federal government whereby this was all the staff did yearlong, serve the taxpaying public and provide answers to their inquiries, while trying to fit in their collections, compliance and audit duties,” he explained.

“Relocating of the enforcement unit will ensure that their functions and duties be performed uninterrupted year-round,” he wrote.

On the issue of “Expansion of Taxpayer Services & Processing Units”, Tanoa’i said the Tax Office had tried unsuccessfully with previous administrations to discontinue the free filing assistance program, because it was affecting daily operations and interrupting compliance, collections and audit functions.

His question to the Tax Office was: “O fea o le a o le atunuu e faila ai latou lafoga?” (Meaning: Where will the community go to file their taxes?)

“I was speechless and caught off guard as I felt that we were trying to accomplish one thing while neglecting another important function of this office, serving our people,” Tanoa’i said.

“This part of the plan ties in with the relocation of the enforcement unit, leaving space on the first floor for the expansion of Taxpayer Services, hiring more Taxpayer Services Agents to assist the public yearlong,” he explained.

Further, the expansion of the Processing Unit and hiring of more Processing Technicians for the data input of taxpayer information into the tax system would support this important function as well.

“We have taken into consideration the findings and offer the above solutions as possible remedies to rectify our shortcomings,” he concluded. 

Full details of the Tax Office performance audit found on Territorial Audit Office webpage (https://www.asgaudit.com/projects-3).