The Legislative Financial Office has recommended the Fono question ASG Treasurer Magalei Logovi’i on the more than $2 million in outstanding lease payments of government property, and question the proper ASG witnesses as to how the government came up with projections in individual income tax collections for the new fiscal year.

These issues were cited by legislative financial officer Talalemotu Mauga in his fiscal year 2013 budget analysis, which was based on a request by Senate Budget and Appropriations Committee chairman Sen. Lemanu Peleti Mauga, who has scheduled for this week three hearings to gather advance information prior to the Fono’s joint budget hearings set to begin Sept. 4.

The Senate budget committee is scheduled to hear today testimony from Tri Marine International, the new cannery in the territory, with the goal to find out the number of new employees scheduled for next year, as well as any updates on the company’s operations, Lemanu announced last week during the Senate session.

Tomorrow the committee is scheduled to hear testimonies from officials of the ASG Shipyard Services Authority and on Thursday there will be testimony from the ASG Tax Office, says Lemanu, who added the Senate would like to hear more information from these witnesses since the major funding source for the new fiscal year is expected to come from their activities.

In his Aug. 24 letter on the budget analysis, Talalemotu Mauga said Gov. Togiola Tulafono’s message to the Fono pointed out “four important elements projected to fuel short term growth in our economy”. (These elements were outlined in the governor’s cover letter to the Fono when the FY 2013 budget was submitted last week)

The four elements, according to the LFO letter, are: local canneries plan to increase their work force next year to meet increased demand; additional revenue of $6.8 million from the tobacco settlement (which is the unpledged interest), increase in tax collections; and dry dock shipyard operations offering employment for local residents.

Samoa News reported last week that ASG forecasts to collect $52.10 million in taxes in FY 2013, with the largest amount of $25.10 million from “individual income tax”. For the shipyard, the government owned entity is projecting to collect $2.17 in revenue and hire an additional 14 people while expenditures are estimated at $1.89 million.

In his review of the budget, Talalemotu Mauga said the Estimated Appropriable Revenues, show that the increase in local revenues is attributed to the individual income tax (which is $7.1 million more than FY 2012) and the tobacco settlement money.

Also cited in the revenue sources is the Indirect Cost “which I believe is under estimated by approximately $1,066,636,” he said. (FY 2013 estimates Indirect Costs at $4.50 million while it was $6.3 million in FY 2012)

He explained that the FY 2013 estimate for federal grants (of $113.05 million) is $8.8 million or 9% higher than FY 2012 ( $104.15 million). He said the formula in calculating Indirect Cost is 15% - 16% of total personnel services, excluding  fringe benefits, under federal grants.

For example, he said, of the total federal grants for FY 2013, a total of $44.55 million is for personnel services, less 16.7% for fringe benefits of $7.44 million. He said indirect costs should be at $5.56 million (15%) or $5.93 million (16%) for the new fiscal year.

He also raised concerns with another funding source and questioned the current data that is available in calculating the individual income taxes.

For the tobacco settlement money, he said the $6.8 million is considered FY 2012 revenues and questioned why it was not submitted to the Fono for appropriation. “And most importantly, does ASG still has the $6.8 million available in the bank for fiscal year 2013?” he added.

He also provided for the committee a report complied by the LFO staff on private businesses with outstanding amounts due to ASG totaling $2.08 million (or $2,083,482.93) and the report shows that the largest amount owed is around $492,000 from the now defunct ASG owned Rainmaker Hotel. “These revenues could be injected into our economy, specifically to fund ASG'a most pressing needs such as the off island referral program and transportation services to the Manu’a Islands to name a few,” he said.

“...I recommend that the Senate/House Budget and Appropriations Committees raise this issue with Mr. Magalei, to go after these businesses to recover these revenues” as soon as possible, he said.

As reported last week, the LBJ Medical Center budget for FY 2013 does not show any funds for the medical referral program. For Manu’a transportation, the budget book proposes $350,000 — an increase of $100,000 from the current fiscal year.

Copies of the budget analysis were also sent to Senate President Gaoteote Tofau Palaie, House Speaker Savali Talavou Ale and House Budget and Appropriations Committee chairman Vailiuama Steve Leasiolagi.

The final schedule for the upcoming Fono budget hearings, with dates and times each department and agency is supposed to appear, is expected out this week.

At yesterday's House session, Rep. Larry Sanitoa requested from the House leadership some of the financial reports for review by House members before hearings get underway. Among the requested reports are the estimated revenues to be collected under the new 2% wage tax and how much has already been collected.

This wage tax is to first repay the $3 million loan for LBJ Medical Center from the ASG Workmen's Compensation Account, and once paid off, future proceeds are for LBJ operations. LBJ has included this wage tax as one of its funding sources in FY 2013.