TAO audit reveals past ASG practice of using dept operating expense budgets to fund infrastructure projects

Pago Pago, AMERICAN SAMOA — The infrastructural projects by the previous administration were funded using multiple sources, including departmental operating expense budgets and special programs; and that their incurred travel costs were in the millions.

This was revealed in the Territorial Audit Office audit of American Samoa’s Fiscal Year 2025 (FY25) Local Budget at the request of Governor Pulaalii N. Pula. 

The audit report dated July 14, 2025, authored by Mike Edmonds, Territorial Auditor, assessed the Fiscal Year 2025 (FY25) budget. The purpose of the audit was to evaluate whether local revenues and expenditures would meet their projected budget figures.

The Governor initiated the audit following an estimate that first-quarter revenues would fall approximately $55 million short of the budgeted revenues, which totaled $165,907,000.

According to the report, the auditors estimate that General Fund expenditures for FY25 will be approximately $117,026,500, which is around $12.65 million lower than the budgeted amount of $129,677,000. This projected spending represents about 10 percent below the budgeted figure. The largest anticipated savings are in Personnel Services, which are estimated to be $12.78 million under budget. Conversely, they expect Other Expenses to exceed the budget by $2.19 million.

The report indicates that auditors project the General Fund's Personnel Services expenditures for FY25 to be $ 90.657 million. This figure is $12,775,500 less than the budgeted amount of $103,432,500. However, it is $6,013,646 more than the total personnel costs of $84,643,354 for fiscal year 2024.

Notably, ASG’s retirement contribution for all career service employees increased from 12% to 14% in FY25. This change accounts for approximately $1.6 million of the projected increase in personnel costs for FY25 compared to FY24.

For Materials and Supplies expenditures in the General Fund, auditors project a total of $3,131,000 for FY25, which is $1,216,000 below the budgeted amount of $4,347,000. This projection is also lower than the spending totals for FY23 and FY24, which were $3.64 million and $3.43 million, respectively. The largest anticipated reductions in spending are for office supplies, food, and repair and maintenance supplies.

In the General Fund, auditors estimate that Contractual Services expenditures will total $5,780,000, which is approximately $525,000 below the budgeted amount of $6,350,500. This projection is slightly higher than the spending for the previous two fiscal years, during which ASG spent $5,264,854 in FY23 and $5,587,323 in FY24.

The report also noted that travel expenses for FY25 are expected to be $2,077,500, approximately $199,000 lower than the budgeted amount of $2,276,500. This amount is also less than what was spent in the last two fiscal years, when ASG incurred travel costs of approximately $2.34 million in FY24 and $3.13 million in FY23.

For FY25, equipment purchases are anticipated to total approximately $1.258 million, which is $121,000 less than the budgeted amount of $ 1.379 million. In FY24, ASG spent approximately $564,000, primarily on vehicles and other machinery, whereas in FY23, the expenditure was $2.03 million.

Additionally, auditors reported that a contractor was paid $7.6 million from the Other Expenses category in FY23, in addition to $3.7 million from the Special Projects budget. These payments funded various projects, including survey and design work for Manu’a construction, renovations for the Lieutenant Governor’s residence, the access road at Lion’s Park, and repairs to Fonoti Road.

According to the auditors' analysis, ASG utilized multiple funding sources, including departmental operating expense budgets and Special Programs, to finance these projects. It noted that using the General Fund’s operating expenses to fund capital projects is considered a fiscally unsound practice that should be discontinued.

It said that this approach has several drawbacks:

— It circumvents the Legislative authority for approving operating and capital budgets;

— It reduces the available funds for essential government services, potentially leading to service disruptions or cuts; and,

—Capital costs and operating costs should be accounted for separately to ensure accurate financial reporting and transparency regarding the actual costs of providing services and capital projects.

The auditors recommend that the practice of using the operating budget to finance capital construction programs be re-evaluated and subject to stricter budgetary controls. It also recommends that the Governor should issue a directive that clarifies and enforces the appropriate use of operating funds, ensuring that capital construction projects are funded and administered through the annual Special Programs budget approved by the Legislature.

The FY25 Special Programs Budget amounts to $36.3 million.

This budget includes a variety of subsidies, as well as various construction and maintenance projects. The FY25 Special Programs budget also accounts for contributions to non-profits, payments to political appointees, and other earmarked initiatives. Given the nature of these earmarked programs, the Auditors did not attempt to project Special Program spending for the remainder of fiscal year 2025.

But, to provide context for ASG’s projected local spending, the Auditors assume that ASG will spend 86 percent of the Special Programs budget for FY25. This would result in an estimated expenditure of about $31,226,000 out of the $36,305,000 budgeted for Special Programs.

When combined with the projected General Fund spending of $117,026,000, the total local spending would reach approximately $148.3 million.

This figure exceeds ASG revenue projections by about $24.6 million, which are estimated at $123 million. 

The assumed spending level provides perspective on ASG's projected spending, according to the Auditors.

And, if local revenue and expenditure projections hold, ASG faces a significant budget challenge that must be addressed.