America’s wasted millions

By David North

CLOSE to US$25O million dollars have been stolen, wasted or mis spent in the United States island territories, according to the Inspector General of the US Department of Interior.

In Guam, the government may lose US$25 million in tax revenues because it had not completed property appraisals promptly; it cannot locate $4.3 million in equipment; and it lost substantial funds by sloppy (and generous) payroll policies towards its elected officials and the bureaucrats in the school system.

In the Northern Marianas, “the Housing Authority borrowed $lO million to make an advance payment to a contractor who had been awarded a sole source (i.e Non-competitive) construc tion contract. The Housing Authority then borrowed funds from the contractor to pay interest on the $lO million borrowed. As a result $683,000 was paid in interest to finance the $lO million advance, and home buyers will need lessly pay an additional $4 million to $6 million to purchase homes because the construction contract was awarded sole source.”

The Northern Marianas also have experienced major short-falls in their electrical power and water accounts because they failed to collect for services to houses and to commercial establish ments.

In American Samoa the local government has “consistently underesti mated the amount of local revenues

collected and available for government operations in annual budget submissions to the US Congress,” and thus secured larger budget submissions than the Inspector General thought appropriate.

The Inspector General was critical of the Department of Interior’s Office of Terri torial and International Affairs (OTIA) for failing to show “progress...in resolv

ing long-standing problems in the man

agement of each territorial government.”

According to the Inspector General, Samoa’s tax collection system is so casual that it did not even collect income taxes from 21 of the 65 federal employees identified as working in Samoa; this is clearly a visible population from whom collection should be easy.

The Pohnpei State of Federated States of Micronesia purchased $120,700 worth of utility poles and related equip ment; the request for proposal specified that the stuff had to be delivered to Pohnpei. The winning vendor, however, knew that he could ship his material free on a barge heading to Pohnpei from the State of Washington, and was able to underbid his competitors who figured in shipping costs. Had Pohnpei informed all bidders about the free shipping oppor

tunity, the utility equipment could have

been purchased for considerably less money.

In the Marshalls, the Kwajalein

Atoll Development Authority (KADA)

was granted $3.4 million for a construc tion project by the US Government. In accepting the funds, KADA agreed to a 1.5 per cent limitation on administration.

KADA then spent more than $187,000 over the limit of 1.5 per cent ($51,414),

including $144,112 on its board of directors.

In Palau, the auditors had a field day. The General Accounting Office (GAO), the investigating arm of the Congress, found a treasure-trove of conflicts of interest, wasteful procure ment practices, the conning of overseas contractors to build roads that the island could not pay for, and much more. A good example, at the top government structure, was the question of who owned the house occupied by then President Lazarus Salii.

The Republic of Palau, the GAO said, on one hand acted as if the house was owned by an individual landlord ( rent was paid to that person) but on the other the government acted as though it owned the house, making $90,000 worth of improvements to it. To further gall the auditor, they could not determine from Palau’s incomplete property records who had title to the place.

The auditors do not just find theft and waste, they also encounter fiscal policies which favour one segment of the popu lation over the public as a whole. For example, in its description of the tangled finances and often clumsy management of the American Samoa Government, a report by the world-wide consulting firm, Louis Berger International Inc, said: “In brief, subsidies (of consumer services) increase use of the service thereby increasing the government’s losses, encourages waste and misuse of the service, and are finally, only con trolled by rationing. Not until the government charges its actual costs or runs out of funds will the cycle be halted.

“Failing to cover the cost of a service is considered a ... gift to anyone using the service and a tax on anyone who does not or cannot use the service. Subsidies,

however, also act as a tax on general development in that they can take funds away from other priorities. Low cost or free health means less money for education, roads or community ser vices.

“The airport charges the airlines for landing, takeoff and parking. Funds collected are substantial, S 1,266,000 in FY1989, but are insufficient to cover all costs ( annual loss a 5543,000 in FY 1989). Beneficiaries of the subsidies are primarily tourists, government officials who travel, and high-income individ uals. Those taxed are primarily lower income residents. A number of small operations also lose money including the Lava Golf Course (SI 79,000 loss per annum). Beneficiaries of the subsidies are the wealthy and tourists who can afford to play golf and those who are taxed are the less well of.”

What the American Samoa Govern ment did with Lava Golf Course was to lease it for 50 years at an annual rate of USS3O,OOO a year. The Government turned around and paid 50 times 530,000, or 51,500,000 in a lump sum.

The Inspector General calculated that by ignoring the“time value of money” the American Samoa wasted the 51,195,000 paid to the owner of the golf course. □