Independent Audit Part 4: Deficiencies in ASG workmen’s comp program
Pago Pago, AMERICAN SAMOA — Independent auditors have identified significant deficiencies in reporting under the government’s workmen’s compensation program, where the calculation is “complex” and ASG has promised to address the problem, based on recommendations by the auditors.
This is one of deficiencies that the Utah-based firm, certified public accountant firm, Larson & Company PC, identified in its audit of ASG’s financial statement for fiscal year 2019.
According to the auditors, generally accepted accounting principles require reasonable estimates to be made in situations when absolutes are not known. Furthermore, estimates should utilize the most reliable data available in order to have reasonable assurance that assets are not overstated and liabilities are not understated.
The auditors explained that ASG’s “calculations regarding the liability for workers compensation is complex, and does not account for situations where the payee continues to receive payments after the age of 75, which is the projected end of life.”
During the review of the calculation, “we also noted several errors in formulas and calculations of net present value, resulting in a significant adjustment to the accrued workers compensation liability,” the auditors said.
They point out that there also appears to be no substantial baseline to substantiate the methodology used to calculate the liability. “The effect of not having an appropriate baseline, or reasonable estimate could be material to the financial statements,” they said.
As to the cause of the problem, the auditors said the errors noted in the calculations appear to be from incorrect formulas being used, or incorrect use of the net present value calculation.
Furthermore, there appear to also be errors related to the incorrect calculation based on a family member receiving benefits, or age calculations.
Auditors recommend that management use the protection features in their spreadsheet to prevent accidental errors to formulas.
They also recommend that ASG acquire the services of a licensed actuary to review their estimates and calculations to determine a proper baseline similar to the requirement of post-employment benefit plans, which determine appropriate life expectancy and which will also account for those receiving benefits beyond the life expectancy period.
In response, ASG agrees with the finding, saying that the American Samoa Workmen's Compensation Commission (WCC) met with the ASG Treasury Department in February 2019 to present and explain before the WCCC the purpose and reasons for an actuary report.
The WCC accepted the proposal and will proceed to collaborate with the ASG Treasury team to acquire an actuary to review estimates and calculations to determine a proper baseline for ASG, the audit report states.