American Samoa

The financial condition of the American Samoa government deteriorated rapidly in the latter half of the 1980s. By fiscal year 1991, the government was experiencing severe cash flow problems and was having trouble making payments. The financial situation worsened despite substantial growth in local revenues since 1980. Corporate tax revenues have been hard to predict, and a considerable portion of personal and business income taxes has never been collected. The main reason for this situation is the territorial government's poor financial management practices. Efforts by the Department of the Interior to improve these practices have been unsuccessful. American Samoa has not fully complied with conditions attached to the operating assistance it receives, and Interior's compliance enforcement has been lax. In addition, American Samoa has been slow to respond to recommendations by Interior's Office of the Inspector General.

GAO found that: (1) for all but 2 fiscal years (FY) between 1980 and 1990, American Samoa operated with a General Fund deficit, and the territory's financial condition deteriorated most rapidly between FY 1987 and 1990, when its deficit grew from $500,000 to $17.6 million; (2) American Samoa's revenue from local sources grew from $30.8 million in FY 1981 through 1985 to $36.1 million in FY 1986 through 1990; (3) because of wide fluctuations in corporate income taxes, revenue growth has been erratic and difficult to predict and American Samoa has experienced problems in collecting all income taxes from individuals and businesses; (4) American Samoa had inadequate internal controls for managing program expenditures and it exceeded budget appropriations by $4.5 million in expenditures for 17 government departments and programs; (5) although American Samoa has a law prohibiting expenditures in excess of budget appropriations, it has routinely disregarded this law, and has ignored procurement and contacting procedures and regulations; (6) since Interior actions to improve American Samoa's financial management practices have been ineffective, it has been Interior's policy since 1983 to request no increases in operating assistance for American Samoa, and General Fund expenditures have decreased in proportion from 50 percent in FY 1984 to 35 percent in FY 1990; and (7) American Samoa has only partially complied with conditions attached to the operating assistance it receives, and Interior has been lenient in enforcing compliance and has exercised limited oversight over grant projects, but has taken steps to enhance its oversight role.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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