An analysis of ASG’s financial reports by the Legislative Finance Office for the FY 2014 second quarter— Jan. 1-Mar. 31— confirms that based on the trend of collections and spending, the government is forecasting a shortfall at the close of fiscal year 2014 and the LFO recommends immediate cost saving measures.

Legislative Financial Officer, Talalemotu Mauga made the conclusion in a report to Senate President Gaoteote Tofau Palaie and House Speaker Savali Talavou Ale, with copies to the chairmen and members of the Senate and House budget committees.

Mauga’s report includes second quarter budgets of all ASG entities covering the first six months of FY 2014, plus the Treasury Department’s General Fund Revenue Report and Expenditures Report as well as the Office of Budget and Planning’s Report of Budget-vs-Year to Date Expenditures.

Based on a review of the reports from Treasury and Budget Office, Mauga said it's surprising to see that the two top agencies that have access to the same computer system interpreted the financial data differently, and therefore submitted to the Fono two different sets of financial reports

However, he said directors of the two departments “arrived at the same conclusion of ASG ending with a shortfall” — just different shortfall amounts — at the end of FY 2014, which closes on Sept. 30, 2014.

For example, the Budget Office is forecasting a shortfall of $23.16 million; Treasury is projecting a shortfall of $14.02 million, while the LFO’s forecast is a shortfall of $16.95 million.

Additionally, the Budget Office has projected annual revenues at $108.17 million, with actual collections by the end of the second quarter at $43.36 million. However, Treasury has projected annual revenues at $105.13 million with actual revenue collections at $42.14 million, according to the LFO report.

LFO conducted its own revenue of financial records and came up with projected annual revenues of $94.41 million with actual collections at $41.80 million — by the end of the 2nd quarter.

Based on the financial analysis of ASG’s financial reports, Mauga said, “it is very critical” that the Fono address the shortfall problem when lawmakers convene next month “because it could translate into a massive layoff of government employees or a RIF — reduction in the workforce — if the problem is not resolved.”

Mauga recalled last August’s joint Fono budget hearings when lawmakers questioned the Treasurer and the Budget Office director regarding the projected increase of $20.46 million in local revenues to be “excessive” given the trend in the past ten years of government operations and revenue collection.

“The Legislature’s concerns were legitimate and we were right from the start before the beginning of fiscal year 2014, unfortunately, somehow we ‘all’ fell into the ‘TRAP’ of sweet talk, lies, impressive testimonies and the fancy Executive Summary submitted by the Administration,” Mauga wrote in the cover letter of his report.

(During last year’s budget hearings, lawmakers questioned the accuracy of forecasting $17.7 million in corporate tax for FY 2014 compared to FY 2013 at only $6 million and ASG officials had responded that the amount “is a very conservative number.”)

He said the important question that comes to mind is "what can the Legislature do?" to resolve this problem, adding that it’s inevitable that difficult decisions must be made in order to avoid potential economic or social backlash.

To overcome the revenue shortfall, he recommends that government spending “must be realigned to match revenues collected and to rebuild ASG cash flows to the extent that its current commitments are met and the necessary cash reserves are restored.”

He suggested cost containment measures to be implemented “as soon as possible” to resolve the shortfall problem. For example, enforce provisions of the budget law, forcing the Budget Office to withhold the planned expenditures to ensure that the appropriations will not be exhausted before the end of the fiscal year or the Budget Office shall be required to submit a "REVISED BUDGET PLAN" in whole or in part to the Legislature if the receipts will be insufficient to meet the authorized expenditures levels.

Other recommendations:

•         Continue to enforce the Executive Order regarding the freeze in hiring, salary increments, promotions and reclassifications;

•            Freeze unnecessary travel;

•            Cut back on spending for materials & supplies;

•            Shifting of local positions to the federal grants where it is permissible; and

•            Increase the percent contingency plan from 10% - 20%. (The contingency plan calls for the Budget Office to withhold 10% of ASG offices and departments’ budgets and the governor implemented it last year.)

The LFO financial analysis comes just before the Fono is scheduled to convene on July 14 for the 4th Regular Session, and the FY 2015 budget is a priority issue, to be reviewed and approved by lawmakers, who are expected to ask the administration to provide a reasonable forecast for FY 2015 based on 2014 actual budget numbers and historical data.

Samoa News should point out that many lawmakers were skeptical and unconvinced from the beginning when ASG officials testified that the government is doing well financially. Some lawmakers have been vocal about it, constantly asking for updated reports on revenues and expenses so that they can be kept up to date on the ASG money status.

Many lawmakers were very concerned during budget hearings last year because they believed expenditures for FY 2014 were based on excessive local revenue projections from some overly aggressive economic predictions.