Auditing and Financial Management:

The Federal Audit Function in the Territories Should Be Strengthened

AFMD-82-23: Published: Mar 25, 1982. Publicly Released: Mar 25, 1982.

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The principal U.S. territories of American Samoa, Guam, the Northern Mariana Islands, the Virgin Islands, and the Trust Territory of the Pacific Islands have had long-standing problems in their financial management systems. The Department of the Interior's U.S. Government Comptrollers are presently responsible for auditing all significant aspects of governmental operations and federal programs in these territories. Because of the substantial federal assistance provided to the territories and the difficulty they have improving and maintaining adequate financial management systems, the federal audit function is still needed. GAO reviewed the organization and the functions of the offices of the U.S. Government Comptrollers as part of its continuing efforts to improve the federal internal audit capability.

GAO stated that the Comptrollers are located in a line organization that has management responsibility for the activities being audited and do not report to a high enough level in the Interior. Consequently, their independence has been impaired. Also, the establishment of close relationships between auditors and territorial officials may have affected the Comptrollers' ability to work in an impartial manner. GAO also found that a large portion of the Comptrollers' limited audit staff is devoted to preparing an ill-defined annual report of the fiscal condition of the government, and this is reducing their audit coverage of other territorial programs and operations. GAO concluded that a strengthened federal audit presence alone is not enough to improve the economy and efficiency of the territorial governments. The territories need to assume greater responsibility for establishing and maintaining strong financial management systems to ensure proper control and accountability over federal and local funds, but they cannot do the job alone; they need federal technical assistance. Such assistance, coupled with an improved territorial government internal audit capability, would further enhance federal audit effectiveness.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Matters for Congressional Consideration

    Matter: Congress should enact similar legislation to require the Governor of American Samoa to submit to the cognizant federal auditors, the Secretary of the Interior, and Congress a written statement of actions taken on federal audit recommendations within 60 days of the issuance date of the audit report.

    Status: Closed - Implemented

    Comments: Draft legislation, prepared by GAO to implement this recommendation, was incorporated into H.R. 5139 and passed by Congress on October 1, 1982. The bill, P.L. 97-357, was signed by the President on October 19, 1982.

    Matter: Congress should enact similar legislation to require the Governor of American Samoa to prepare, publish, and submit a comprehensive annual financial report in conformance with the standards of the National Council on Governmental Accounting within 120 days of the close of the FY to the Secretary of the Interior and Congress.

    Status: Closed - Implemented

    Comments: Draft legislation, prepared by GAO to implement this recommendation, was incorporated into H.R. 5139 and passed by Congress on October 1, 1982. The bill, P.L. 97-357, was signed by the President on October 19, 1982.

    Matter: Congress should enact similar legislation to require the Governor of American Samoa to arrange for an independent audit of the comprehensive annual financial report in conformance with generally accepted government auditing standards for governmental units.

    Status: Closed - Implemented

    Comments: Draft legislation, prepared by GAO to implement this recommendation, was incorporated into H.R. 5139 and passed by Congress on October 1, 1982. The bill, P.L. 97-357, was signed by the President on October 19, 1982.

    Matter: Congress should amend the organic acts for Guam and the Virgin Islands and the public laws relating to the Northern Mariana Islands and the Trust Territory of the Pacific Islands to require the Governors of Guam, the Northern Mariana Islands, and the Virgin Islands, and the High Commissioner of the Trust Territory of the Pacific Islands to: (1) prepare, publish, and submit a comprehensive annual financial report in conformance with the standards of the National Council on Governmental Accounting within 120 days of the close of the fiscal year (FY) to the Secretary of the Interior and Congress; (2) arrange for an independent audit of the comprehensive annual financial report in conformance with generally accepted government auditing standards for governmental units; and (3) submit to the cognizant federal auditors, the Secretary of the Interior, and Congress a written statement of actions taken on federal audit recommendations within 60 days of the issuance date of the audit report.

    Status: Closed - Implemented

    Comments: Draft legislation, prepared by GAO to implement this recommendation, was incorporated into H.R. 5139 and passed by Congress on October 1, 1982. The bill, P.L. 97-357, was signed by the President on October 19, 1982.

    Matter: Congress should amend the organic acts for Guam and the Virgin Islands and the public laws relating to the Northern Mariana Islands and Trust Territory of the Pacific Islands to eliminate the provisions requiring the U.S. Government Comptrollers to submit an annual report of the fiscal condition of the government to the territorial Governors, High Commissioner, and the Secretary of the Interior.

    Status: Closed - Implemented

    Comments: Draft legislation, prepared by GAO to implement this recommendation, was incorporated into H.R. 5139 and passed by Congress on October 1, 1982. The bill, P.L. 97-357, was signed by the President on October 19, 1982.

    Matter: Congress should enact legislation to transfer the audit authority and staff from the U.S. Government Comptroller for American Samoa to OIG, Department of the Interior, for the purpose of establishing an independent organization which will maintain a satisfactory level of audit oversight of the Government of American Samoa.

    Status: Closed - Implemented

    Comments: Draft legislation, prepared by GAO to implement this recommendation, was incorporated in H.R. 5139 and passed by Congress on October 1, 1982. The bill, P.L. 97-357, was signed by the President on October 19, 1982.

    Matter: Congress should amend the organic acts for Guam and the Virgin Islands and public laws relating to the Northern Mariana Islands and Trust Territory of the Pacific Islands to: (1) transfer the audit authority and staff from the U.S. Government Comptrollers to the Office of the Inspector General (OIG), Department of the Interior, for the purpose of establishing an independent organization which will maintain a satisfactory level of audit oversight of the Governments of Guam, the Virgin Islands, the Northern Mariana Islands, and the Trust Territory of the Pacific Islands; and (2) eliminate the provision requiring the U.S. Government Comptrollers to provide reports at the request of the territorial Governors and High Commissioner.

    Status: Closed - Implemented

    Comments: Draft legislation, prepared by GAO to implement this recommendation, was incorporated into H.R. 5139 and passed by Congress on October 1, 1982. The bill, P.L. 97-357, was signed by the President on October 19, 1982.

    Matter: Congress should, upon termination of the agreement under which the United States administers the Trust Territory of the Pacific Islands, enact legislation to provide federal audit oversight in the Northern Mariana Islands.

    Status: Closed - Implemented

    Comments: Draft legislation, prepared by GAO to implement this recommendation, was incorporated into H.R. 5139 and passed by Congress on October 1, 1982. The bill, P.L. 97-357, was signed by the President on October 19, 1982.

    Recommendations for Executive Action

    Recommendation: The Governor of the Virgin Islands should strengthen his internal audit function by increasing the size of staffs, improving staff capabilities, expanding the scope of audit coverage, and ensuring audit independence.

    Agency Affected: Virgin Islands

    Status: Closed - Not Implemented

    Comments: After 4 years, the Governor has provided no response on what corrective action has been, or will be, taken. Although this recommendation is still valid, no action is anticipated. No future follow-up is required.

    Recommendation: The President's Personal Representative for Micronesian Status Negotiations should, when negotiating the remaining agreements terminating the Trust Territory of the Pacific Islands (TTPI), specifically the subsidiary agreement on auditing, develop a federal audit capability with respect to the new Governments of the Marshall Islands, the Federated States of Micronesia, and Palau with authority and responsibilities comparable to those of the U.S. Government Comptrollers.

    Agency Affected: Department of the Interior: Office of Micronesian Status Negotiations

    Status: Closed - Implemented

    Comments: On January 14, 1986, P.L. 99-239 was enacted, which gives the Comptroller General of the U.S. authority to all grants and assistance provided to the Governments of the the Marshall Islands and the Federated States of Micronesia under the Compact of Free Association and by the U.S. Government.

    Recommendation: The Director, Office of Management and Budget (OMB), should designate OIG, Department of the Interior, as the cognizant federal audit agency in the territories under the single audit concept.

    Agency Affected: Executive Office of the President: Office of Management and Budget

    Status: Closed - Implemented

    Comments: On March 2, 1982, the Director, OMB, assigned Interior the responsibility for administering the single audit provisions of OMB Circular A-102 in the U.S. Territories and TTPI. OIG became the cognizant federal audit agency for these areas under P.L. 97-357, October 19, 1982.

    Recommendation: The Secretary of the Interior should direct the Inspector General to establish formalized audit report follow-up systems in the Interior's territorial audit offices.

    Agency Affected: Department of the Interior

    Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of the Interior should develop and submit to Congress a comprehensive technical assistance plan, including a determination of what resources are needed, to establish effective financial management systems for the Governments of American Samoa, Guam, the Northern Mariana Islands, and the Virgin Islands.

    Agency Affected: Department of the Interior

    Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Governor of the Virgin Islands should establish an audit follow-up system to ensure that recommended corrective actions on all federal and independent audit reports are implemented and followed through to completion.

    Agency Affected: Virgin Islands

    Status: Closed - Not Implemented

    Comments: After 4 years, the Governor has provided no response on what corrective action has been, or will be, taken. Although this recommendation is still valid, no action is anticipated. No future follow-up is required.

    Recommendation: The Governor of the Northern Mariana Islands should strengthen his internal audit function by increasing the size of staffs, improving staff capabilities, expanding the scope of audit coverage, and ensuring audit independence.

    Agency Affected: Commonwealth of the Northern Mariana Islands

    Status: Closed - Not Implemented

    Comments: After 3 years, the Governor has provided no updated response on the action in process. Although this recommendation is still valid, no additional response is anticipated. No future follow-up is required.

    Recommendation: The Governor of the Northern Mariana Islands should establish an audit follow-up system to ensure that recommended corrective actions on all federal and independent audit reports are implemented and followed through to completion.

    Agency Affected: Commonwealth of the Northern Mariana Islands

    Status: Closed - Not Implemented

    Comments: After 3 years, the Governor has provided no updated response on the action in process. Although this recommendation is still valid, no additional response is anticipated. No future follow-up is required.

    Recommendation: The Governor of Guam should strengthen his internal audit function by increasing the size of staffs, improving staff capabilities, expanding the scope of audit coverage, and ensuring audit independence.

    Agency Affected: Guam

    Status: Closed - Not Implemented

    Comments: After 4 years, the Governor has provided no response on what corrective action has been, or will be, taken. Although this recommendation is still valid, no action is anticipated. No future follow-up is required.

    Recommendation: The Governor of Guam should establish an audit follow-up system to ensure that recommended corrective actions on all federal and independent audit reports are implemented and followed through to completion.

    Agency Affected: Guam

    Status: Closed - Not Implemented

    Comments: After 4 years, the Governor has provided no response on what corrective action has been, or will be, taken. Although this recommendation is still valid, no action is anticipated. No future follow-up is required.

    Recommendation: The Governor of American Samoa should establish an audit follow-up system to ensure that recommended corrective actions on all federal and independent audit reports are implemented and followed through to completion.

    Agency Affected: American Samoa

    Status: Closed - Not Implemented

    Comments: After 3 years, the Governor has provided no updated response on the action in process. Although this recommendation is still valid, no additional response is anticipated. No future follow-up is required.

    Recommendation: The Governor of American Samoa should strengthen his internal audit function by increasing the size of staffs, improving staff capabilities, expanding the scope of audit coverage, and ensuring audit independence.

    Agency Affected: American Samoa

    Status: Closed - Not Implemented

    Comments: After 3 years, the Governor has provided no updated response on the action in process. Although this recommendation is still valid, no additional response is anticipated. No future follow-up is required.

    Recommendation: The Secretary of the Interior should report to Congress on the resources needed to assist the new Governments of the Marshall Islands, the Federated States of Micronesia, and Palau in establishing their financial management system requirements.

    Agency Affected: Department of the Interior

    Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

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