ASTCA audit raises doubt about its ability as a ‘going concern

An Independent Auditor’s Report of the American Samoa Telecommunications Authority — Years Ended September 20, 2016 and 2015 —by Aldrich CPAs + Advisors LLP, reported on April 26, 2017, that it prepared the financial statements “assuming ASTCA will continue as a going concern.”

A copy of the report, obtained by Samoa News, points to ASTCA having “incurred substantial losses from operations in both 2016 and 2015, has negative working capital, and negative cash flows from operations, which raise substantial doubt about its ability to continue as a going concern as of April 26, 2017.

“Management’ s plans regarding those matters are described in Note 10,” the report says, adding, “The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

“Our opinion is not modified with respect to this matter,” the auditor’s report concludes. Aldrich is a US accounting, wealth and consulting firm providing tax, audit and employee benefit plans in Portland, San Diego, Salem, Carlsbad and Anchorage. The branch in Salem, Oregon performed the audit.

In Note 10, the auditors lay out their “uncertainty regarding ASTCA’s ability to continue as a going concern.”

It indicates the change in net position of the authority was a “decrease of $4,683,188 for the year ended September 30, 2016 and a decrease of $4,143,512 for the year ended September 30, 2015.“ASTCA’s current liabilities exceed current assets by $4,922,051 at September 30, 2016 ($564,236 at September 30, 2015) and has lease obligations in excess of $4, 000,000 for the 2017 fiscal year.

“Further, cash flows from operations for the year ended September 30, 2016 were ($2, 090,001) and continue to be severely impacted by the ongoing deficit of payments received for services provided,” Note 10 states. 
It then points to the Interfund Account with ASG. “In 2015 ASTCA wrote off $934,446 of uncollectible amounts of receivables from ASG for telecommunication services,” and ASG is disputing their obligation to pay for E-RATE services provided by ASTCA prior to 2016.

It says, “… when all the above factors are considered including non-compliance with RUS loan covenants, there is uncertainty regarding ASTCA’s ability to continue as going concern.”

The auditors do note, “management and the Board of Directors are developing a plan to secure funding to invest in undersea fiber that will provide a connection from ASTCA’s facilities to a landing site in the United States mainland.” It notes this will allow ASTCA to restructure existing transport agreements (broadband capacity), “thereby reducing operating expenses, and further provide for revenues by leasing excess capacity. In addition, the fiber connection will allow ASTCA to provide expanded service offerings to subscribers, including a robust mobile data network and video product.”

The independent audit report note concludes, “ASTCA’s continuation is dependent upon its ability to collect payments for services provided and obtain additional sources of revenues as well as reduce its operating costs.

“In the event of ASTCA’s inability to improve cash flow, it could have a material adverse effect on ASTCA’s ability to continue as a going concern.

“The financial statements do not include any adjustments that might be necessary should ASTCA be unable to continue as a going concern,” the report says.

Samoa News has reported that ASTCA is currently looking at an additional loan of $10million from the American Samoa Government Employees Retirement Fund, which according to the ASGERF board has been granted. This is in addition to a $4.2 million loan it is already paying on from ASGERF.

ASTCA is also applying for a $30 million loan from the federal government, which was made public during a Senate Retirement Committee hearing last week. The Independent Auditor’s Report of the American Samoa Telecommunications Authority — Years Ended September 20, 2016 and 2015 — was not mentioned during the hearing.

Samoa News understands that there is positive feedback concerning the ASTCA $30 million application to the federal government — but was not told why ‘positive’.

BACKGROUND

ASTCA’s single highest Receivable, listed in the Auditor’s Report, is money owed for E-RATE telecommunications services it provides to the American Samoa Department of Education. At Sept. 30, 2016, it is reported as owed $2,530, 897. According to the report, E-RATE is a federally funded universal service Schools and Libraries Program, which ASG terms of contracts obligates ASDOE to provide for 11% of the service costs with the balance (89%) federally funded and administered through the Universal Service Administrative Company (USAC).

Amounts Receivable for E-RATE services at Sept 30, 2015 were $1,748,007.

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