GAO cites recurring weakness in ASG financial statements

Pago Pago, AMERICAN SAMOA — The U.S Government Accountability Office (GAO) in its US Territories Public Debt Outlook — 2023 Update report, issued last week Thursday found that “American Samoa continues to have some financial management and reporting issues.”

While American Samoa has submitted its yearly audited financial statements on time since at least 2017, GAO said the territory has received a qualified audit opinion for at least the last 5 years.

A GAO footnote explained that an auditor expresses a qualified opinion on a unit’s financial statements, when they either:

•           conclude that misstatements, individually or in the aggregate, are material but not pervasive to the financial statements after obtaining sufficient appropriate audit evidence; or

•           are unable to obtain sufficient appropriate audit evidence on which to base the opinion, but conclude that the possible effects on the financial statements of undetected misstatements, if any, could be material but not pervasive.

In the report, GAO said that in fiscal year 2021, American Samoa received a qualified opinion on its component units because the independent auditor was unable to verify certain component unit revenue and receivable balances.

“Timely and reliable financial data provide important information for investors, policymakers, oversight bodies, and the public on the financial and economic condition of the territory,” GAO said.

Additionally, the “independent auditors have identified a recurring material weakness in internal control over financial reporting related to its financial close and reporting process.”

“This reduced the government’s ability to produce timely and reliable financial reports on a monthly, quarterly, and annual basis,” it says. “Robust internal controls are important to support managers as they make financial decisions or adapt to shifting environments, evolving demands, changing risks, and new priorities as they arise.”

Another GAO footnote, explained that the financial close process involves verifying and adjusting account balances at the end of an accounting cycle — often the end of the quarter or end of year — to produce financial reports representative of an entity’s financial position as of a certain date.

(Samoa News notes that the GAO audit for this report was conducted and drafted prior to the current concerns over the FY 2022 financial audit statement, over the lack of the FY 2022 audited statement for the government-owned Territorial Bank of American Samoa-TBAS.)

Meanwhile, the GAO report states that in May 2021, Moody’s Investors Service revised its credit outlook for the government of American Samoa to stable from negative, reflecting governance improvements, including enhanced transparency and budget management.

A GAO footnote explained that a “stable outlook” indicates a low likelihood of a rating change over the medium term. In March 2022, Moody’s reaffirmed its Ba3 credit rating for American Samoa — meaning that its bonds are subject to substantial credit risk.