Pago Pago, AMERICAN SAMOA — “The concept of the Payment Voucher (AP) system requires a review to address issues that derived [sic] during the Covid-19 activities,” the Performance Audit report by the Territorial Audit Office (TAO) of the more than $14 million in federal CARES Act funding awarded to the Health Department (DoH) during the COVID pandemic.

Part two of the Samoa News article on the audit looks at one of the findings, which is use of the “Payment Voucher System” in which the audit identified issues of concern. For example, the use of the “Direct Payment Voucher” (DPV) — commonly referred to as the Quick Purchase Order, which has a threshold limit.

TAO explains that use of the DPV baseline guide issued by ASG Treasury Finance Division in the 2014 manual states that "the method is for smaller purchases and certain activities such as School Lunch Program (SLP) from local farmers."

“While the objective brings convenience,” TAO said, “we view a disadvantage from an audit perspective during the pandemic in that some payments revealed problems with documentation and some expenses were processed and paid despite being outside the recommended threshold amount.”

“We also view that there was a lack of balance as expediency was prioritized over essential payment functions,” the audit states.

Furthermore, the ASG Treasury Finance Division 2014 guidance manual provides the following guideline that “the threshold for Direct Payment Voucher is $500, without prior approval and the use of the Direct Payment Voucher above the threshold must be pre-approved by the Treasurer.”

According to TAO, the “authority for this flexibility was limited and our audit testing did not locate any documentation from the ASG Treasurer on prior-approval allowing purchases and services above the threshold to process and paid [sic] out.” And that documentation shall be maintained and submitted for audit review.

“We also have not seen an executive approval to waive or specify alternative requirements for changes in connection with payments above the threshold limit,” the audit points out and cited examples of payments processed through the DPV.

TAOA said it is “concerned that given the nature of emergency situations, the Department [DoH] must include a risk planning that would identify measures to facilitate the creation of steps and procedures similar to the ones created in response to the Covid-19 pandemic.”

“The risk planning shall include steps and procedures which continue to function during emergency situations to prevent any improper payments before they occur,” the audit says.

In its recommendation, TAO noted that despite the urgency to prioritize expediency — rapid issuance of funds to meet crucial needs — and bypassing of some procurement processes and requirements, the processing of payments above the threshold should have followed the ASG Department of Treasury finance guidance manual.

“The guidance manual is the foundation of governance and policies and procedures were prepare[d] and written for a specific purpose,” it says.

In addition, DoH is to document all procurement actions and maintain appropriate documents and records to support expenses charge against federal awards, TAO said.

In its response, DoH reiterated that its operation is time sensitive and requires quick turnaround time that normal payment voucher processes cannot provide.

“We concur to create an emergency situation and risk plan to share to Procurement [Office] and other parties involved,” said DoH management, adding that the department will also work closely with ASG Treasury on Direct/ Quick Payment Vouchers and the type of pre-approval required for processing purposes for payments over $500.

Additionally, DoH will abide by ASG Accounts Payable Policies & Procedures Manual Section 2.3 on Direct Payments to Vendors.

The second issue, identified in the audit for payment vouchers, is that the Accounts Payable Voucher (APV) Form is often not properly completed.

The review of selected APV shows that not all information required on the forms are properly filled out and completed. It is expected that the form shall be authorized by a responsible person and this is done by endorsing a designated section on the payment voucher.

TAO cited four examples of APV that were not properly completed and explained that this finding is important.

“Although payments were effected, the issue is that an important feature of accounting is the control mechanism. Vouchers are particularly important in that it creates a paper trail which documents all of the people involved with a particular transaction, as well as their tasks associated with that transaction,” the audit explained. “In such a way, it is easier to assess who is responsible for what.”

TAO recommend that APV Forms be properly filled out and signed off by responsible personnel.

Failure to do so casts doubt on the authenticity of the payment. It also tells the approver (who reviews everything) to make sure that the information is accurate and then the payment is approved.

Responding to this issue, DoH management noted that it’s the ASG Treasury’s requirement that all signatures be present before any payment is processed. Complete and final vouchers are stored at Treasury's Disbursement Office. Files presented to the audit team are copies. It is the Treasury's responsibility to hold the originals with all required signatures.

DoH “will make note and practice making copies of the signed and authorized Accounts Payable Voucher to verify and to confirm that the APV is completely filled out for future reference,” according to management’s reply.

And the third issue identified in the audit is that “Not All Payments have Complete Supporting Documentation.”

“A clear trail of key documents to support procurement decisions was sometime [sic] missing.

“The initial vouching of disbursements was performed at the ASG Department of Treasury Disbursement Section as the Department of Health was unable to provide those at the time,” said TAO.

“The audit review reveals that not all payments have adequate supporting documentation.

“Documents such as copies of Purchase Orders and Receiving Reports were missing and could not be found,” it said and cited four examples of AP Vouchers — all large amounts — for which documents were missing.

TAO also said that it was unable to confirm that inspections were carried out for project jobs before partial and final payments were issued to contractors.

Furthermore, there were no inspection reports nor other necessary documentation filed to confirm jobs were performed to the satisfaction of DoH.

“We found the department's filing system as very unorganized,” said TAO and explained why this finding is important. “Retention and Availability is an important condition of grant disbursements, and thus complete records must be retained for the entire retention period as indicated in the Notice of Awards,” said TAO.

The audit recommends that the DoH should ensure that all payments’ supporting documentation be maintained on file after all the required checks have been performed and authorized by designated personnel in accordance with the ASG requirements and best business practices.

“It is very important that the senior management team shall ensure that record keeping requirements are enforced and in-place.

“Timely spot checks shall be performed to ensure that responsible personnel are performing their duties accordingly,” said TAO.

DoH — in its management response to this issue — points out that it is also the ASG Treasury's requirement that all reports be present before any payment is processed.

According to DoH, the completed package for payment is stored and can be found at the Department of Treasury's Disbursement Office, as they are responsible for al payouts. Files presented to the audit team are copies. It is the Treasury's responsibility to hold the originals with all required documentation.

According to DoH, a plan is now being implemented to improve and upgrade its file storing system to a cloud-based system for high-level protection, accessibility, and efficiency of all the supporting documentation such as Purchase Requisition, Purchase Order, Invoice, and Receiving Report for future reference.

In addition, as per recommendation, the DoH Finance Team shall regularly perform a timely spot check to ensure that files are efficiently organized and securely stored.

Samoa News will report in future edition details of other findings in the TAO report. See Samoa News edition Mar. 30, 2023 for the first story on the TAO Performance Audit.