American Samoa: Accountability for Key Federal Grants Needs Improvement
Published: 2004-12-17T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: American Samoa, a U.S. territory, relies on federal funding to support government operations and deliver critical services. The Secretary of the Interior has administrative responsibility for coordinating federal policy in the territory. Under the Single Audit Act of 1996, American Samoa is required to perform a yearly single audit of federal grants and other awards to ensure accountability. To better understand the role of federal funds in American Samoa, GAO (1) examined the uses of 12 key grants in fiscal years 1999-2003, (2) identified local conditions that affected the grants, and (3) assessed accountability for the grants.
section_title: What GAO Found
paragraphs: In fiscal years 1999-2003, 12 key federal grants supported essential services in American Samoa. These services included support for government operations, infrastructure improvements, nutrition assistance, the school system, special education, airport and highway infrastructure improvements, Medicaid, and early childhood education. A shortage of adequately trained professionals, such as accountants and teachers, as well as inadequate facilities and limited local funds hampered service delivery or slowed project completion for many of the grants. For example, American Samoa's only hospital lacked an adequate number of U.S.-certified medical staff. Further, the hospital had persistent and serious fire-safety code deficiencies that jeopardized its ability to maintain the certification required for Medicaid funding. American Samoa's failure to complete single audits, federal agencies' slow reactions to this failure, and instances of theft and fraud limited accountability for the 12 grants to American Samoa. The American Samoa government did not comply with the Single Audit Act during fiscal years 1998-2003. The 1998-2000 audit reports, completed in 2003, and the 2001 audit report, completed in 2004, cited pervasive governmentwide and program-specific accountability problems. Despite the audits' delinquency, federal agencies were slow, or failed, to communicate concern to the American Samoa government or to take corrective action. In addition, accountability for all of the grants was potentially undermined by instances of theft and fraud. For example, the American Samoa Chief Procurement Officer, whose office handles procurements for most of the grants GAO reviewed, was convicted of illegal procurement practices.

section_title: Letter
paragraphs: American Samoa, a U.S. territory, relies on federal funding to support its  general government operations and deliver critical services; over the last 5  years, federal awards to the territory represented, on average, about 45  percent of the territory’s operating budget. Each fiscal year, the  government of American Samoa is required by the Single Audit Act of 1996  to undergo an audit of its federally funded programs within 9 months of the  year’s end. The Secretary of the Interior has general administrative  responsibility for coordinating this and other federal policies in American  Samoa, and the U.S. Department of the Interior’s Office of Insular Affairs  (DOI) is authorized to take appropriate action regarding the single audit.  The American Samoa government, which has historically operated under  deficits, has struggled to reform its financial management and decrease its  dependence on federal funds by increasing local revenues. However, the  territory has a limited economic base: its largest employer is the American  Samoa government, and the next largest employers are two tuna canneries  that benefit from federal tax incentives due to expire in 2005.
We reviewed 12 key federal grants that provided about $450 million to  American Samoa during fiscal years 1999-2003. In fiscal year 2000, these  grants represented about three-quarters of all federal expenditures by the  American Samoa government. To better understand the role of federal  funds in American Samoa, we (1) examined the uses of these key federal  grants to American Samoa, (2) identified local conditions that affected the  grants, and (3) assessed accountability for the grants.
To examine the use of the grants and the effects of local conditions, we  collected and reviewed grant data from the federal and local agencies  responsible for overseeing the selected programs in fiscal years 1999-2003,  interviewed federal and American Samoa program officials to learn about  program activities and operations, and conducted site visits in American  Samoa to observe programs and projects funded by the 12 grants. To assess  accountability, we reviewed legislation, regulations, and other relevant  documents; monitoring reports and financial audits conducted by federal  agencies; and American Samoa’s single audit reports for fiscal years 1998- 2001, which were completed in 2003 and 2004. We also conducted federal  agency interviews and on-site observations. We performed this work  between September 2003 and October 2004 according to generally  accepted government auditing standards. Appendix I provides further  details of our scope and methodology. Appendixes II through VI describe  each federal department’s use of grant funds and assess the performance  and accountability for each of the 12 grants we reviewed.
subsections: section_title: Background
paragraphs: American Samoa lies 2,600 miles southwest of Hawaii and consists of seven  islands, covering a land area of 76 square miles (see fig. 1). In 2003, it had a  population of 57,844. The main island of Tutuila has very little level land  and is mostly rugged, with four high peaks, the tallest rising over 2,000 feet.  Agricultural production is limited by the scarcity of arable land, and  tourism is impaired by the island’s remote location and lack of tourist-rated  facilities. Two tuna canneries constitute the main sources of private sector  employment. Most of the economic activity and government operations on  Tutuila take place in the Pago Pago Bay area.
As an unorganized, unincorporated U.S. territory, American Samoa is not  subject to the U.S. Constitution in the same manner as the 50 states. For  example, some constitutional rights, such as the rights to vote in national  elections and to full voting representation in the U.S. Congress, do not  apply to American Samoa. Although no congressional act formally  establishes a government structure in American Samoa, the territory has its  own local government and constitution. Those born in American Samoa are  U.S. nationals. Since 1977, a popularly elected governor has headed the  American Samoan executive branch for a 4-year term, and the legislature,  or Fono, has comprised 18 elected senators and 20 elected representatives.  Nearly 40 American Samoan departments, offices, and other entities  provide public safety, public works, education, health, commerce, and  other services to American Samoans.
Providing these services has proved financially challenging for the  American Samoan government. After a period of relative budget growth in  the early 1980s, the territory’s finances rapidly deteriorated in the second  half of the decade when expenditures exceeded income in American  Samoa’s budget. In fiscal year 1991, the government borrowed $5 million  from its employee pension fund to temporarily relieve its cash flow  problems.
Following a GAO report in 1992, Congress directed DOI and the American  Samoa government to form a joint working group to address the  government’s financial management problems. The working group made  recommendations to the American Samoa government, which pledged to  implement a financial recovery plan based on these recommendations.  Beginning in fiscal year 1997, the Senate Appropriations Committee  directed DOI to withhold $2 million of capital improvement funding from  the territory until DOI could certify that the American Samoan government  had adequately implemented the recovery plan. However, the territory’s  financial situation subsequently worsened and, in 1999, Congress  authorized a direct federal loan to American Samoa for $18.6 million to  pay debts and implement reforms. In 2001, the American Samoa  government submitted an initial fiscal reform plan to DOI. DOI and the  American Samoa government signed an MOA in 2002, implementing fiscal  and operational reforms. The MOA was designed to bring the American  Samoa government operating expenses into balance with projected  revenues for fiscal years 2003 and beyond. It also outlined a schedule for  American Samoa to complete all outstanding single audit reports.
Five federal departments have historically provided significant grants to  the American Samoa government, including one large grant from DOI to  support government operations. During fiscal years 1999-2003, DOI, USDA,  ED, DOT, and HHS provided about $450 million in grant funds to American  Samoa through 12 key grants. Of these 12 grants, 4 were structured  specifically for American Samoa, 2 were structured for all U.S. insular  areas, and 6 were structured in the same manner as in the 50 U.S. states.  Table 1 shows the federal awarding departments and agencies, the grants,  the grant structures, and the grant award amounts for fiscal years 1999- 2003.
section_title: Federal Grants Provided Essential Services to American Samoa
paragraphs: In fiscal years 1999-2003, 12 federal grants, funded by five departments,  provided and supported several essential services in American Samoa. DOI  awarded grants that subsidized government operations, supported  infrastructure improvements, and provided technical assistance. USDA  awarded grants that provided nutrition assistance for which about half of  the territory’s population was eligible. ED awarded grant funds that  supported American Samoa’s education programs, including the special  education program. DOT awarded grants for critical infrastructure  improvements to the territory’s airports and roadways. Finally, HHS  awarded grants to support health care and early childhood education in  American Samoa.
subsections: section_title: DOI Supported Government Operations and Infrastructure Improvements
paragraphs: In fiscal years 1999-2003, DOI provided grants that supported government  operations and infrastructure improvements in American Samoa. DOI  provided, on average, about 16 percent of the American Samoa  government’s total budget during the period of our review, through an  annual direct subsidy as well as through grants for capital improvements  and technical assistance. (See app. II for more details and an assessment of  the DOI grants.)
subsections: section_title: Government Operations Grant
paragraphs: DOI provides the government operations grant as an annual direct subsidy  to the American Samoa government to help fund the difference between  the territory’s revenues and the cost of maintaining its current government  programs and services. To promote the American Samoa government’s self- sufficiency, DOI has held the amount of the grant constant, without  adjusting it for inflation or population growth. The grant supports general  government operations, including public works, economic development,  and salaries. Specific operations that the grant supports include American  Samoa’s Department of Education; LBJ Hospital, the territory’s primary  clinic and only hospital; and the High Court of American Samoa. In fiscal  years 1999-2003, the American Samoa government received an average  annual operations grant award of about $23 million. According to DOI  officials and our analysis, the portion of the American Samoa government’s  budget supported by the government  operations grant decreased from about 18 percent in fiscal year 1999 to  about 15 percent in fiscal year 2003.
section_title: Capital Improvement Grants
paragraphs: DOI’s capital improvement grants provide funds to improve the physical  infrastructure of American Samoa and other U.S. insular areas. Capital  improvement projects in American Samoa are prioritized and carried out  according to the American Samoa government’s Capital Improvements  Plan. In fiscal years 1999-2003, DOI provided an average annual award for  capital improvement grants of $10.2 million to the American Samoa  government. During this period, about 28 percent of the funds awarded to  American Samoa were allotted for water and sewer improvements; 25  percent for school improvements, including new and renovated  classrooms; 16 percent for improvements to the LBJ Hospital; and 4  percent for roads. LBJ Hospital was allotted about $1.5 million for each  year during that period.
section_title: Technical Assistance Grants
paragraphs: DOI provided general technical assistance grants to all U.S. insular areas  for short-term noncapital projects, such as obtaining computer hardware  and software and providing training to improve the insular area’s capacity  to conduct government operations. In fiscal years 1999-2003, DOI’s general  technical assistance grants provided American Samoa an average of about  $350,000 annually. Examples of DOI’s technical assistance included, in  April 2001, a $200,000 grant to the American Samoa Port Authority to  purchase and install a container tracking system for cargo entering and  leaving American Samoa’s harbor of Pago Pago and, in April 2002, a  $185,000 grant to the American Samoa government to purchase and install  an upgraded immigrant tracking system. LBJ Hospital also received  technical assistance grants.
section_title: USDA Offered Nutrition Assistance to About Half of the American Samoan Population
paragraphs: Three USDA programs made nutrition assistance available to about half of  the American Samoan population during most of the period of our review.  The School Lunch Program made free breakfast and lunch available to all  school-age children. WIC provided nutrition assistance to pregnant, breast- feeding, and postpartum women and to infants and children up to 5 years of  age. The Food Stamp Program in American Samoa provided nutrition  assistance to the low-income elderly, the blind, and the disabled. (See app.  III for a more detailed description and an assessment of the USDA grants.)
subsections: section_title: School Lunch Program
paragraphs: USDA’s School Lunch Program is funded as a special block grant and  operates under a memorandum of understanding (MOU) established  specifically for American Samoa in 1991 and administered by the American  Samoa Department of Education. Before 1991, the program in American  Samoa followed the same requirements as in the rest of the United States,  providing subsidized breakfast and lunch to children in public and  nonprofit schools, based on the income level of the children’s households.  Since 1991, the American Samoa School Lunch Program has provided free  breakfast and lunch to all school-age children. Officials explained that the  change in grant and program structure gave American Samoa greater  flexibility to serve the needs of its children. In fiscal years 1999-2003, USDA  provided an average annual grant of $9.8 million. In school year 2002-2003,  the American Samoa Department of Education reported public and private  school enrollment of about 19,000 students, all of whom are eligible for the  program. In the same year, the School Lunch Program served about 3.2  million breakfasts and 3.6 million lunches. The program currently serves  meals at 23 elementary schools, 6 high schools, 10 private schools, 55 early  childhood education (Head Start) centers, and 37 day care centers. The  program has no citizenship, residency, or income requirements.
section_title: Special Supplemental Nutrition Program for Women, Infants, and Children
paragraphs: USDA’s WIC Program in American Samoa follows the same requirements as  the program in the 50 states, providing supplemental food and nutrition  education at no cost to eligible pregnant, breast-feeding, and postpartum  women and to infants and children up to 5 years of age. The American  Samoa WIC Program was established in 1996 and is administered by the  American Samoa Department of Human and Social Services. In fiscal years  1999-2003, USDA provided an average annual grant of $5.3 million. During  fiscal years 2000-2003, an average of about 6,000 recipients were receiving  monthly WIC “food instruments,” or checks. Eligibility for benefits is  determined on the basis of nutritional risk, income, and residency.
section_title: Food Stamp Program
paragraphs: USDA’s Food Stamp Program in American Samoa is designed specifically  for the territory and operates under a MOU that allows American Samoa to  provide food vouchers for the low-income elderly and for blind and  disabled persons. Under the MOU, American Samoa is able to set its own  eligibility standards as long as it stays within the capped block grant—in  fiscal year 2003, about $5.4 million. In the 50 states, the Food Stamp  Program is an entitlement program; all qualified applicants receive  benefits, and funding is not capped. In American Samoa, Food Stamp  recipients must meet financial and nonfinancial eligibility criteria, as  specified in the MOU; however, benefits are calculated so as not to  cumulatively exceed the capped grant. The maximum benefit in American  Samoa for fiscal year 2004 was $132 per person per month. In fiscal years  1999-2003, USDA provided an average annual grant of $5.3 million. During  fiscal years 2000-2003, the program served an average of about 2,800  recipients monthly. The program is one of the few remaining U.S. Food  Stamp Programs that still uses paper food coupons; most of the other  programs have implemented an electronic benefits transfer system to  provide food assistance to eligible recipients.
section_title: ED Supported the American Samoa School System and Special Education Students
paragraphs: ED’s Innovative Programs grant provides a large share of funds to the  American Samoa Department of Education to support its education  programs, and ED’s Special Education grant funds the territory’s special  education program. In fiscal year 2003, the two grants provided,  respectively, about $16.8 million and $5.8 million. (See app. IV for a more  detailed description and an assessment of the ED grants.)
subsections: section_title: Innovative Programs Grant
paragraphs: State and local education agencies are eligible for federal grants and funds  to implement numerous federal education programs. In fiscal years 1999- 2003, using a consolidated grant application, American Samoa applied for  and received an Innovative Programs grant to fund many of the territory’s  education programs. The Innovative Programs grant is designed to assist  state and local education agencies in implementing education reform  programs and improving student achievement. Funding under the grant can  be used to implement local Innovative Programs, which may include at  least 27 activities identified in the No Child Left Behind Act of 2001. For  fiscal years 1999-2003, the American Samoa Department of Education  reported that it implemented programs for training instructional staff,  acquiring student materials, implementing technology, meeting the needs  of students with limited English proficiency, and enhancing the learning  ability of students who are low achievers. During the 5-year period, the  annual Innovative Programs grant increased from about $6.8 million in  fiscal year 1999 to about $16.8 million in fiscal year 2003. Beginning in 2002,  the grant award to American Samoa more than doubled as a result of the  No Child Left Behind Act of 2001, which increased appropriations for the  Innovative Programs and other education programs. The grant award that  the American Samoa government received in fiscal year 2003 provided  about 40 percent of the American Samoa Department of Education’s budget  for that year. Other federal funds provided another 30 percent of American  Samoa’s education budget (including funds from the DOI Government  Operations grant), with local funds contributing the remaining portion.
section_title: Special Education Program
paragraphs: In fiscal years 1999-2003, ED provided an average of $5.3 million, under its  Individuals with Disabilities Education Act (IDEA) grants, for American  Samoa’s Special Education Program. The program is required to provide a  free, appropriate public education to eligible children with disabilities,  regardless of nationality or citizenship. The Special Education Program in  American Samoa operates under the same requirements and guidelines as  special education programs in the 50 states and is almost entirely funded by  its annual IDEA grant. The American Samoa Department of Education  reported that, as of January 2004, its Special Education Program was  providing services to slightly more than 1,100 eligible 3- to 21-year-old  students with disabilities.
section_title: DOT Provided Grants for Airport and Highway Infrastructure Improvements
paragraphs: DOT provided funds that allowed for important airport and roadway  infrastructure improvements through the Airport Improvement Program  and the Federal-aid Highway Program grants. (See app. V for more details  and an assessment of the DOT grants.)
subsections: section_title: Airport Improvement Program
paragraphs: In fiscal years 1999-2003, DOT, through the Federal Aviation  Administration’s (FAA) Airport Improvement Program, provided American  Samoa an average annual grant of $7.9 million. The program operates under  the same regulations in American Samoa as in the rest of the United States.  American Samoa has three airports, all of which receive Airport  Improvement Program grants. The main airport, Pago Pago International,  has two runways, one of which can accommodate large commercial jets,  and has eight commercial airline flights departing per week. Since 1998, the  Airport Improvement Program grants have been used for extending  runways and constructing taxiways and for rehabilitation and new overlays  of existing runways, taxiways, and shoulders. Projects funded with Airport  Improvement Program grants also included the construction of a rescue  and firefighting training facility, new aircraft rescue and firefighting  vehicles, and perimeter fencing to improve airport security. Runway safety  areas at Pago Pago International Airport, the territory’s main airport, were  upgraded to meet FAA standards, providing additional margins of safety.  These projects have benefited from the presence of an airport engineer,  hired with funds from the Operations and Maintenance Improvement  Program, a separate DOI grant.
section_title: Federal-Aid Highway Program
paragraphs: DOT’s Federal Highway Administration provided American Samoa an  average annual grant of $6.2 million under the Federal-aid Highway  Program during fiscal years 1999-2003. Although the territory’s highway  subprograms are funded under a separate statute, the Federal Highway  Administration administers them in the same manner as programs in the  other states under the Federal-aid Highway Program, with the territorial  transportation agency functioning as the state highway agency. American  Samoa’s Five-Year Highway Division Master Plan sets forth sequenced  budgets and time frames to improve and maintain Route 1, the island’s  main traffic corridor. The American Samoa Department of Public Works  typically handles the planning and construction supervision of the highway  program. Figure 2 shows a map of American Samoa and selected highway  projects that we reviewed along Route 1 and other village roads.
section_title: HHS Supported Health Care and Early Childhood Education
paragraphs: HHS grants supported (1) health care at LBJ Hospital under the Medicaid  program and (2) early childhood education for American Samoan children  under the Head Start Program. (See app. VI for more details and  assessments of each grant.)
subsections: section_title: Medicaid
paragraphs: HHS’s Medicaid Program in American Samoa operates under a U.S.  statutory waiver, which exempts it from most Medicaid laws and  regulations; instead, it uses a plan of operations approved by HHS. A  territorial statute requires American Samoa to provide free health care to  its population. Virtually all care, both inpatient and outpatient, is provided  by LBJ Hospital, which is managed by the LBJ Medical Center Authority. In  fiscal years 1999-2003, HHS provided the hospital an average annual  reimbursement of $3.4 million; in fiscal year 2003, federal Medicaid funds  represented about 13 percent of the hospital’s revenues. American Samoa  receives a capped amount for its Medicaid Program, like the other U.S.  territories but unlike the states, where Medicaid is treated as an  entitlement program with no cap on total federal funds. In American  Samoa, the federal Medicaid grant is used as one of the hospital’s sources  of revenue to support the territory’s universal health care system, rather  than as support for a separate Medicaid Program with enrolled Medicaid  beneficiaries as in the 50 states. Although there is no separate Medicaid  enrollment in American Samoa, HHS requires the LBJ Medical Center  Authority to submit an annual estimate of the population presumed to be  eligible for Medicaid. This estimate of “presumed eligibility” is based on the  size of the population in American Samoa and the percentage of families  living below the U.S. poverty level, according to the U.S. Census.
As the territory’s Medicaid provider, LBJ Hospital must provide all  Medicaid-required services. If these services are not available on-island,  American Samoa must arrange for them to be provided off-island. Although  the Medicaid grant’s broadly stated goal is the provision of basic medical  services, HHS officials do not require the hospital to supply data on its  provision of such services. As a result, no data were available for us to  determine the quality of the care or whether all required Medicaid services  were provided to the eligible population. HHS officials stated that they  have some assurance that a minimum standard of care is provided, because  LBJ Hospital must meet Medicare certification standards to participate in  Medicare and Medicaid. However, the hospital faces long-standing  challenges in maintaining its Medicare certification (see app. VI).
section_title: Head Start
paragraphs: The Head Start Program in American Samoa, referred to locally as the  Early Childhood Education Program, is part of the American Samoa  Department of Education. The program in American Samoa is subject to  the same performance requirements as Head Start Programs in the rest of  the United States and delivers most required services, according to HHS  officials. In fiscal years 1999-2003, HHS provided the Early Childhood  Education Program an average annual grant of $2.7 million. The grant set  the enrollment level at 1,532 slots for 3- to 5-year-old children. As of March  2004, the program had 54 classrooms and 111 classroom instructors,  according to American Samoa officials. Early Childhood Education  officials stated that although there are more eligible children than available  slots, the program serves virtually all of the children who apply for it.  Program highlights include dental screening and follow-up treatment for  almost all enrolled children and a literacy program emphasizing both  Samoan and English. The curriculum and materials are locally designed  and incorporate native culture, community, and environment, as well as  family traditions. Another key program activity is the construction of  several new facilities dedicated exclusively to early childhood education  classrooms. In fiscal years 1999-2003, HHS provided the program about  $3.8 million in additional “program improvement” grant awards for the  construction of seven new facilities containing 38 classrooms.
section_title: Local Conditions Limited Delivery of Services or Project Completion for Many of the Grants
paragraphs: Conditions in American Samoa limited the delivery of services or project  completion for many of the grants we reviewed. A lack of adequately  trained professionals limited financial oversight for all programs and  service delivery in several programs. In addition, inadequate facilities  affected the delivery of services under Head Start at Early Childhood  Education Program centers and under Medicaid at LBJ Hospital. In  particular, the LBJ Hospital building had persistent fire-safety deficiencies  that jeopardized the hospital’s ability to maintain the certification required  for continued Medicaid funding. Finally, limited local resources to  complement federal grants slowed the completion of critical projects at  LBJ Hospital and Pago Pago International Airport.
subsections: section_title: Lack of Professional Staff Limited Service Delivery
paragraphs: Some of the programs that we reviewed experienced a shortage of staff  with adequate professional training, which limited the financial oversight  of federal funds and delivery of certain services. The relatively low salaries  in American Samoa and the remote location of the territory made it difficult  to attract and retain individuals with specialized training. Staff shortages  included the following:  In the American Samoa government, the position of Territorial Auditor  remained unfilled in fiscal years 1998-2003. An official in the American  Samoa Department of Treasury, the department that processes nearly all  federal grants, reported that the department experiences difficulty in  retaining certified public accountants, because the American Samoa  government is unable to afford competitive salaries for these  professionals.
In the American Samoa Department of Education, most teachers had  obtained only an associate in arts degree from the American Samoa  Community College. Further, according to the Special Education  Division Office, the program had only one physical therapist during the  period of our review and needed speech pathologists, occupational  therapists, audiologists, and psychologists. In addition, the local Head  Start Program was unable to comply with the federal standard to deliver  mental health services to enrolled children and families, because no  mental health professionals were available in the territory to work with  the program.
In the American Samoa Department of Human and Social Services, the  WIC and Food Stamp Programs lacked sufficient staff with technical  skills to adequately maintain the databases on which the programs rely  to record and process recipient transactions, reconcile transactions, and  perform required monitoring and evaluation of issued benefits.
LBJ Hospital officials reported that they did not have an adequate  number of U.S.-certified medical doctors or registered nurses, despite  incentive programs to attract them. The hospital also had unmet needs  for medical technicians, such as radiology and operating room  technicians. The hospital lacks the capacity to provide the full range of  Medicaid-covered services, and consequently those services that are not  available must be provided off-island. For fiscal years 2001-2003, the  hospital reported an average off-island medical care expenditure of  about $2 million annually.
section_title: Inadequate Facilities Also Affected Service Delivery
paragraphs: Limited facilities hampered the ability of the Head Start and Medicaid  Programs to deliver services to their targeted populations. Examples are as  follows:  While the Head Start Program in American Samoa made progress in  constructing several new facilities to provide modern classrooms, the  program continued to depend on villagers who made their homes  available for Early Childhood Education classes. As of March 2004, 19 of  the program’s 54 classes were held in village homes, according to the  local program officials. The officials stated that their first priority for the  use of supplemental federal Head Start grant funds was to continue to  build additional classrooms but that, as a result, no funds were available  to provide adequate playgrounds or perimeter security fencing.
LBJ Hospital’s poor physical infrastructure made it difficult to deliver a  minimum standard of care to the population of American Samoa,  including the Medicaid-eligible population. For more than a decade, the  hospital suffered from persistent, serious fire-safety building code  deficiencies that threatened its ability to maintain the Medicare  certification required for participation in Medicare and Medicaid. In a  Medicare-certification survey of the hospital conducted in November  2003, the survey team cited the hospital for a lack of “basic features of  fire protection, which are fundamental to all health care facilities,” such  as smoke and fire detection and alarm systems, automatic sprinklers,  adequate water pressure, and fire-rated smoke and fire  compartmentation. Earlier Medicare certification surveys cited many of  the same problems, but the hospital has failed to correct them despite  HHS’s threats, since at least 1993, to terminate the hospital’s  certification.
In 2004, in response to the fire-safety deficiencies identified in the 2003  Medicare-certification survey, the hospital reprogrammed $650,000 of  its fiscal year 2003 DOI capital improvement funds to install a  facilitywide sprinkler system. However, hospital officials said that the  project would not be completed until December 2005 and that the  renovation efforts would be constrained by “a fixed barrier of time,  money and space.” Although the hospital depends primarily on DOI  funds to bring its facility up to HHS standards, DOI and HHS did not  collaborate during fiscal years 1999-2003 to identify construction needs  and funding resources to ensure that common goals are met.  Specifically, when awarding capital improvement grants to the America  Samoa government and LBJ Hospital, DOI did not obtain information  from HHS regarding deficiencies that threatened the hospital’s  Medicare certification.
section_title: Limited Local Funds Hampered Service Delivery and Slowed Project Completion
paragraphs: Limited local resources also affected some of the programs in our review.  LBJ Hospital’s ability to upgrade its facility and hire needed staff was  severely hampered by chronic budget deficits and outstanding debt.  Likewise, the lack of local funds to complement Airport Improvement  Program grants slowed the pace of completing critical projects, according  to American Samoa officials. Examples of the effect of limited local  resources on these programs include the following:  LBJ Hospital officials reported that because of persistent operating  budget deficits, they were unable to hire needed staff and respond to the  many infrastructure needs of its aging facility. DOI capital improvement  grants, which average about $1.5 million annually for the hospital,  support only one or two new construction projects per year. According  to hospital officials, the hospital depends entirely on federal grant  funds to support its infrastructure upgrades, including those needed to  correct the fire-safety deficiencies cited by HHS hospital certification  surveys.
Two key sources of revenue for LBJ Hospital, from DOI and the  American Samoa government, did not increase during the period of our  review (see fig. 3). The hospital’s annual subsidy from the government  of American Samoa dropped from about $8.1 million in fiscal year 1998  to about $5.3 million in fiscal year 2003. During the same period, DOI  directly provided LBJ Hospital about $7.8 million of the government  operations grant annually without adjusting this amount for inflation.  Although the Medicaid grant increased over time to cover the cost of  inflation, HHS officials reported that the cap on the Medicaid grant  resulted in a smaller federal contribution than American Samoa would  have received if funded like the 50 states. A hospital official reported  that patient revenues increased during fiscal years 1998-2003 but that  much greater increases would be needed if the hospital could not  identify other sources of revenue. The LBJ Medical Center Authority  has proposed to charge service fees to patients to cover about 20  percent of the cost of their medical care. However, hospital officials  believed that the local legislation needed to change such fees would be  difficult to obtain, because the public views free medical care as an  entitlement. Currently, the hospital charges residents a facility fee of $5  per outpatient visit and $20 per day for inpatient stays. The hospital  charges nonresidents $10 for outpatient visits and $100 per day for  inpatient stays.
American Samoa airport officials reported that they lacked the local  resources to complement FAA’s Airport Improvement Program funds,  which slowed the pace of critical airport infrastructure projects. For  example, the airports had not acquired all of the rescue vehicles they  needed, and upgrades of the main runway at Pago Pago International  had to be phased in over several years. In August 2003, following  damage to a commercial airplane from loose asphalt on the runway, the  airport’s main runway shut down for 2 weeks. The closure left American  Samoa cut off from commercial flights to Honolulu until the pavement  could be repaired. According to FAA and American Samoa airport  officials, a great deal of progress was made in improving Pago Pago  International Airport’s infrastructure and rescue response capability  during the past several years; however, it will probably not reach an  acceptable standard until 2007.
For most U.S. airports, including those in American Samoa, a passenger  facility charge of up to $4.50 per passenger provides a key source of  revenue. However, because only eight flights per week depart from Pago  Pago International, the airport generates relatively little revenue and  operates at a loss annually. Congress raised the cap on passenger facility  charges from $3.00 to $4.50 in fiscal year 2000 in FAA’s reauthorization  legislation but elected not to raise it again in legislation reauthorizing FAA  for fiscal years 2004-2007.
section_title: Grants Had Limited Accountability, and U.S. Agencies Reacted Slowly
paragraphs: A lack of required single audits, U.S. agencies’ slow reactions to lack of  single audits, and incidents of theft and fraud compromised the  accountability of federal grants to American Samoa. The American Samoa  government did not comply with the Single Audit Act during fiscal years  1998-2003. The delinquent single audit reports issued for fiscal years 1998- 2001 cited governmentwide and program-specific accountability problems.  However, most federal agencies responsible for programs in American  Samoa did not formally express concern about the delinquent single audit  reports and were slow, or failed, to set forth a plan of action to complete  single audits. In addition, two grants had instances of theft and fraud, and  the accountability of almost all of the grants was potentially compromised  by fraud in the American Samoa Government’s Office of Procurement.
subsections: section_title: Lack of Single Audits Compromised Accountability, Recent Audits Cited Problems
paragraphs: The American Samoa government did not complete single audits for fiscal  years 1998-2003 in accordance with the time frame specified in the Single  Audit Act. As a result, U.S. agencies had limited knowledge of American  Samoa’s accountability for federal funds received during the period of our  review. Specifically, they were unaware of whether grantees complied with  the Davis-Bacon Act and with requirements for financial reporting and  retention of and access to financial records, among other requirements.
Federal agencies are responsible for ensuring that grant recipients subject  to the Single Audit Act complete single audits no later than 9 months after  the end of each fiscal year. An August 2002 MOA between DOI and the  American Samoa government established a schedule for completing  overdue single audits; however, American Samoa failed to comply with the  schedule. The single audit reports for fiscal years 1998, 1999, and 2000 were  completed by the auditors in August 2003. Relative to the deadlines in the  MOA, the 1998 and 1999 reports were 8 months late, and the 2000 report  was 3 months late. The auditors completed the 2001 single audit report in  June 2004, 12 months late.
The single audit reports for fiscal years 1998-2001 cited pervasive  governmentwide and program-specific accountability problems. For the  1998, 1999, and 2000 single audits, the auditors did not express an opinion  on the financial statements of the American Samoa government because  the scope of their work did not enable them to do so. However, in the  single audit report for fiscal year 2001, the auditor expressed a qualified  opinion regarding American Samoa’s financial statements. According to the  report, the qualified opinion was issued because the limitations on the  scope of the audit resulted in the auditor’s inability to locate or verify  physical inventory records, verify the accuracy of the beginning balance of  the government’s general funds, and verify the physical existence and cost  of recorded fixed assets, among other items. These opinions are similar to  those in American Samoa’s single audits for fiscal years 1996 and 1997,  indicating that federal and American Samoa officials did not resolve issues  identified in prior single audit reports, as required.
The reports for fiscal years 1998-2001 cited an average of 31  governmentwide and program-specific findings for each fiscal year. For  example, each audit found that the American Samoa government and its  entities did not maintain adequate systems of internal controls to ensure  compliance with laws, regulations, contracts, and grants applicable to  federal programs. The auditors reported that the American Samoa  government did not comply with major federal program requirements for,  among other items, financial reporting, grant payment, and retention of and  access to records. The audits stated that these problems could adversely  affect the American Samoan government’s ability to administer federal  grant programs in accordance with applicable requirements.
The single audits for fiscal years 1998-2001 also reported program-specific  findings each year for at least 6 of the 12 programs we reviewed. For  example, the auditors reported that in fiscal year 2000, DOI’s capital  improvement funds for constructing toilet facilities were used to purchase  computers. The 2000 report also stated that ED contract documents for  $39,960 were missing. According to auditors, a number of program files  were incomplete and many programs’ transactions were difficult to assess  because the American Samoa government maintained its records in a  haphazard and open manner. In spite of document retention issues, the  auditors reported about $1.3 million in questioned costs and a total of  about $18 million in budget overruns from their sampling of approximately  $295 million in transactions funded by federal grants in fiscal years 1998- 2001.
In our sample review of 12 selected grant transactions, we found that 7 of  these had inadequate supporting documentation and insufficiently detailed  data to show whether program expenditures were allowable. Of 12  transaction files that we requested from the American Samoa Department  of the Treasury, 3 could not be located; 4 lacked purchase orders, invoices,  receiving reports, or pricing estimates; and 2—from the Food Stamp and  Head Start Programs—were complete. According to an American Samoa  government official, grant transaction files should contain a purchase order  or request; an invoice; a pricing estimate (if applicable); a copy of a  receiving report, indicating that a purchased item was received, or a copy  of the check issued for payment; and an accounts payable voucher. (See  app. VII for a detailed description of federal grant processing in American  Samoa.)
section_title: Despite Delinquent Single Audits, Most Federal Agencies Reacted Slowly
paragraphs: In spite of the lack of single audits in fiscal years 1998-2003, most federal  agencies were slow to act. For example, DOI did not set forth a plan of  action to complete single audits until 2002 and ED did not take remedial  action until 2003. In order for entities, such as federal and American Samoa  agencies, to administer and control the grant programs, officials must have  relevant, reliable, and timely communications relating to internal and  external events.
DOI, the cognizant agency for American Samoa, established a schedule  for completing the delinquent single audit reports, in an MOA with the  American Samoa government in August 2002 following several months of  discussion. The MOA established a new completion schedule for the  delinquent single audits, among other fiscal and operational reforms for the  territory. Figure 4 provides a time line showing the single audits and federal  actions, including OMB’s regulation deadlines for the reports, the MOA’s  extended deadlines, the dates when American Samoa’s reports were  completed, and the number of months that the reports were late.
ED reported that it sent a letter in March 2002 to the then Governor of the  territory expressing concern about the late single audits and advising that  the department is authorized to take various administrative actions,  including interrupting grant funding. ED’s Inspector General subsequently  visited American Samoa and alerted its Deputy Secretary in December 2002  that inspectors had found instances of fraud, waste, and abuse that might  have been detected and prevented if single audit reports had been  completed and submitted on time. The memo from the Inspector General  also indicated a need for ED to develop a coordinated strategy for  obtaining the required Single Audits. USDA officials cited the lack of single  audits in their 2003 on-site review. HHS noted the delinquency of single  audit reports in on-site program reviews in 2000 and 2003; DOT reported  that the last American Samoa single audit it had received was for fiscal year  1996.
According to OMB Circular A-133, which implements the Single Audit Act,  if a grantee has specifically failed to conduct its single audit reports, federal  agencies should impose sanctions such as, but not limited to, (1)  withholding a percentage of federal awards until single audits are  completed satisfactorily, (2) withholding or disallowing overhead costs, (3)  suspending federal awards until the single audit is conducted, or (4)  terminating the federal award. None of the agencies in our review imposed  any of these sanctions on American Samoa.
According to the Grants Management Common Rule, federal awarding  agencies may designate a grantee “high risk” if the grantee has a history of  unsatisfactory performance, is not financially stable, has an inadequate  management system, has not conformed to terms and conditions of  previous awards, or is otherwise irresponsible. Single audits provide key  information about the adequacy of a grantee’s management system. Federal  agencies that designate a grantee high-risk may impose special conditions  including (1) issuing funds on a reimbursement basis; (2) withholding  authority to proceed to the next phase until receipt of evidence of  acceptable performance within a given funding period; (3) requiring  additional, more detailed financial reports; (4) requiring the grantee to  obtain technical or management assistance; or (5) establishing additional  prior approvals. According to DOI and DOT, they have required some  similar conditions for American Samoa for years. For example, both  agencies issue funds to American Samoa on a reimbursement basis.  However, only ED exercised its authority under the common rule, when, in  September 2003, it placed American Samoa on high-risk status as a result  of American Samoa’s noncompliance with the Single Audit Act. ED now  allows American Samoa to draw down only 50 percent of its grant funds  until certain conditions defined by the department are fulfilled. Other  agencies included in our review took none of the corrective actions  available, under the common rule or under the OMB circular, as a result of  the delinquent single audits. Specifically, although American Samoa did not  comply with the agreed-on schedule for completing the outstanding single  audits, the departments included in our review neither placed American  Samoa on high-risk status nor withheld, disallowed, suspended, or  terminated funds under any of their grants.
section_title: Theft or Fraud Weakened Accountability of Most Grants
paragraphs: Recent instances of theft and fraud by American Samoa government  officials call into question accountability for most of the grants that we  reviewed. Examples of theft or fraud are as follows:  In May 2004, the Chief Procurement Officer of the American Samoa  Government was found guilty of illegal procurement practices. Since  this office handles the procurement activity for most of the grants that  we reviewed, the accountability of the grant funds may be  compromised.
In the American Samoa Department of Education, the Director of the  School Lunch Program pled guilty in July 2004 to charges of stealing  approximately $68,000 worth of food and goods from the School Lunch  Program warehouse between October 2001 and September 2003. The  former School Lunch Program Director was also charged with  conspiring with others to commit offenses against the United States.  The current School Lunch Director said that, while most of the  employees involved in the theft had been removed, one warehouse  employee remains.
In August 2004, the U.S Department of Justice filed charges against the  former deputy director of the American Samoa Department of Human  and Social Services (the department that operates the WIC and Food  Stamp Programs) for conspiring to rig bids for contracts totaling more  than $120,000 in exchange for cash kickbacks.
During the September 2003 USDA review of WIC in American Samoa,  USDA officials were alerted to vendor fraud. The review found  widespread evidence of WIC food checks being exchanged for cash,  cigarettes, other nonfood items, and unauthorized foods at WIC- authorized grocery stores instead of for the supplemental foods  prescribed by WIC and paid for with federal funds. USDA officials  informed the American Samoa WIC Program that it must comply with  corrective action or face fiscal sanctions.
As USDA became aware of problems with theft and fraud, it took action to  increase oversight of those programs.
Additional accountability problems have been alleged. For example, the  local press has published numerous accounts of ongoing federal  investigations. The American Samoa Fono has conducted hearings and  investigations of accountability problems in the territory’s government.  Finally, the recently hired American Samoa Comptroller, at work since  March 2004, resigned as of August 2004 citing concerns over fraudulent and  unethical American Samoa government practices.
section_title: Conclusions
paragraphs: In fiscal years 1999-2003, federal grants from multiple agencies provided  critical funds for essential human services and critical infrastructure  improvements in American Samoa. However, the American Samoa  government faced a range of local challenges to delivering services and  completing infrastructure projects funded with federal grants. These  challenges included a shortage of adequately trained professionals, such as  accountants and teachers, as well as inadequate facilities and limited local  funds. In particular, LBJ Hospital, which provides medical care for most of  American Samoa’s population, received multiple federal grants but  struggled to overcome challenges posed by an inadequate facility and  limited resources. Specifically, although it receives DOI construction grants  for facility upgrades, the hospital struggled to meet HHS fire-safety  standards for continued Medicare certification required for Medicaid  funding. Nevertheless, in recent years federal departments, principally DOI  and HHS, have not formally collaborated on the use of DOI construction  grants at the hospital. In overseeing the hospital’s use of capital  improvement grants, DOI could benefit from information that HHS could  provide regarding the hospital’s ongoing efforts to maintain Medicare  certification.
In addition, in fiscal years 1998-2003, the American Samoa government  failed to comply with the Single Audit Act, demonstrating a lack of overall  accountability for federal grants. Federal agencies are responsible for  ensuring that grant recipients subject to the Single Audit Act complete  single audits no later than 9 months after the end of each fiscal year, yet  when American Samoa failed to complete the audits, the agencies either  failed to act or acted slowly to designate the American Samoa government  a high-risk grantee. The agencies had no consistent response. Further,  incidents of theft and fraud should have heightened federal agencies’  concerns about enforcing the requirements of the Single Audit Act and the  Grants Management Common Rule. The lack of federal action indicates a  need for greater monitoring and reporting and a need for improved  coordination among agencies to ensure the accountability of federal grants  awarded to American Samoa.
section_title: Recommendations for Executive Action
paragraphs: We recommend that the Secretary of the Interior take the following four  actions: To ensure resolution of fire-safety deficiencies threatening the continued  certification of the Lyndon Baines Johnson Tropical Medical Center in  American Samoa and, as warranted, to address the hospital’s staffing and  resource constraints, we recommend that the Secretary  coordinate with federal agencies that grant funds to the hospital and the  American Samoa government to address these issues.
To improve fiscal accountability of federal grants to American Samoa, we  recommend that the Secretary coordinate with other federal awarding  agencies to  designate the American Samoa government as a high-risk grantee,  according to the Grants Management Common Rule, at least until it has  completed all overdue single audits;   take steps designed to ensure that the American Samoa government  completes its overdue single audits in compliance with the Single Audit  Act; and  take steps designed to ensure that current and future single audits are  completed in compliance with Single Audit Act requirements.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to the Departments of the Interior,  Agriculture, Education, Transportation, and Health and Human Services as  well as to the government of American Samoa. We received oral comments  from the Departments of Agriculture and Transportation on October 22 and  Education on October 25, 2004. The Departments of Agriculture and  Transportation limited their oral comments to technical corrections. The  Department of Education agreed with our initial recommendations and  provided technical corrections. We received written comments from the  Departments of the Interior and Health and Human Services as well as the  American Samoa government, which are reprinted in appendixes VIII  through X.
The Departments of the Interior, Health and Human Services, and  Education, as well as American Samoa, agreed with our first  recommendation. DOI stated that it would take appropriate action with  other federal agencies to address issues that affect LBJ Hospital’s  certification. HHS agreed to collaborate with DOI and American Samoa on  hospital infrastructure issues. The American Samoa government pointed  out that it is making progress in bringing LBJ Hospital into compliance with  Medicare standards.
The Departments of the Interior and Health and Human Services and  American Samoa disagreed with our second recommendation, and the  Department of Education agreed with us. DOI raised serious concerns  about declaring American Samoa a high-risk grantee but agreed to consult  with the other federal agencies to evaluate whether, or under what  conditions, a joint declaration of high-risk status would be prudent. DOI’s  concerns about imposing high-risk status for American Samoa included the  possible loss of access to federal programs for American Samoa and the  possible impact of such an action on the American Samoan population and  eventually on other insular areas. Losing access to such programs would  further limit the funds available to American Samoa to address their  staffing and resource problems. Furthermore, DOI argued that many of the  measures available with a high-risk declaration are already being taken by  DOI in American Samoa. HHS stated that American Samoa should not be  designated a high-risk grantee with respect to the Medicaid Program. In our  view, the findings of the audits of the LBJ Hospital raise concerns about  accountability at the hospital. The American Samoa government strongly  recommended against its being declared a high-risk grantee unless it fails  to meet the terms of its agreement with DOI, because it believed high-risk  status would imperil future funding. As we report on pages 28-29, the  American Samoa government has already failed to comply fully with the  terms of the agreement with DOI.
We recognize DOI’s concerns about the population of American Samoa and  its dependence upon federal grants for key services. We also recognize the  challenges that DOI faces in balancing its activities in any individual insular  area with sensitivity to the effect of those activities on other insular areas  and on insular area populations. However, a declaration of high-risk status  would more accurately reflect the findings of the completed single audits,  specifically, the auditors’ declining to express an opinion on the financial  statement and citing numerous internal control problems. In addition,  according to the relevant regulations, high-risk status does not require a  suspension of funds. For example, ED declared American Samoa a high- risk grantee while continuing its funding to the territory and significantly  improving its oversight of the funded programs. Under a coordinated high- risk designation, the federal agencies could impose a common set of  improvement milestones for American Samoa to have the high-risk status  removed. Under the current system, several agencies exercise different  levels of heightened oversight, and only ED has declared American Samoa  a high-risk grantee. We continue to believe that a coordinated, consistent  approach to a high-risk grantee across the agencies would be more  productive than the agencies’ current inconsistent approaches.
The Departments of the Interior, Education, and Health and Human  Services agreed to collaborate to ensure completion of outstanding and  future single audits, as per the initial wording of our third and fourth  recommendations. DOI agreed to consult with other agencies to determine  other steps that might be taken to help American Samoa come into  compliance more quickly. However, responding to the initial wording of our  third and fourth recommendations that the agencies coordinate efforts to  ensure compliance with the act, DOI stated that it is unable to ensure that a  grantee will comply with the Single Audit Act. In light of DOI’s response to  our initial recommendations, we are recommending that DOI coordinate  with the other awarding agencies to take steps designed to ensure  American Samoa’s compliance with the act. The American Samoa  government cited its progress in completing the delinquent single audits.
As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  date of this letter. At that time, we will send copies of this report to  interested Congressional Committees and to the Secretaries of the  Departments of the Interior, Agriculture, Education, Transportation, and  Health and Human Services as well as to the Governor of American Samoa.  We also will make copies available to others upon request. In addition, the  report will be available at no charge on the GAO Web site at  http://www.gao.gov.
If you or your staff have any questions regarding this report, please contact  me at 202-512-4128 or gootnickd@gao.gov or Emil Friberg, Assistant  Director, at 202-512-8990 or friberge@gao.gov. Staff acknowledgments are  listed in appendix XI.
section_title: Objectives, Scope, and Methodology
paragraphs: To provide information for the Ranking Minority Member of the House  Resources Committee and the U.S. Delegate from American Samoa, we (1)  examined the uses of key federal grants to American Samoa, (2) identified  local conditions that affected the grants, and (3) assessed accountability  for the grants.
subsections: section_title: Identifying Key Grants to American Samoa
paragraphs: To address these objectives, we first analyzed available information on  total federal expenditures in American Samoa. We reviewed data from the  U.S. Census Consolidated Federal Funds report and the American Samoa  delegate’s Web site, which listed total expenditures to American Samoa in  fiscal years 1995-2001 by federal department. We used these data to identify  the federal departments that provided the largest grants over the 7-year  period. We narrowed our scope to five federal departments—the U.S.  Department of the Interior (DOI), the U.S. Department of Agriculture  (USDA), the U.S. Department of Education (ED), the U.S. Department of  Health and Human Services (HHS), and the U.S. Department of  Transportation (DOT)—whose aggregate grant expenditures totaled more  than 80 percent of the total grants to American Samoa in fiscal years 1995- 2001. To determine that the data were sufficiently reliable for the purpose  of sample selection, we corroborated the ranking from the U.S. Census  Consolidated Funds Report data with data from the American Samoa  delegate’s Web site. We found that despite discrepancies in the dollar  amounts of the five departments’ grants shown by the two sources, the  amounts are the same when aggregated for fiscal years 1995-2001.
To obtain current and original data, we met with and requested grant award  data from the five federal departments for fiscal years 1999 and 2003. Each  department referred us to their agencies with grants or programs to  American Samoa, and these agencies provided data for a total of 61 grants.  From that data, we identified the largest granting agencies across the five  federal departments and selected 12 key federal grants to review that were  among the largest total grant awards when aggregated for fiscal years 1999- 2003. These grants primarily covered areas of government operation,  infrastructure, social programs (such as health and nutrition), and  education. DOI’s grants for capital improvement projects and technical  assistance were selected although they were smaller than some of the other  large federal grants, because DOI was the largest federal grantor to  American Samoa during the period of our review and because these two  grants provided infrastructure assistance that helped meet funding  requirements or served as support to help meet the requirements of other  grants that we selected. We excluded loan grants that are not provided  through local agency or government offices in American Samoa. We also  excluded grants from the Departments of Justice, Commerce, and Labor  and the Environmental Protection Agency because of the grants’ small size.  Finally, we excluded grants from the Federal Emergency Management  Agency because they do not provide ongoing support for government and  related operations.
The scope of our report was limited to the information that we collected  from the five departments and specific agencies that administer the grant  funds; we cannot make statements about grants that we did not review.  However, based on our analysis of data for fiscal years 1999-2003, the  aggregated grant totals from the departments that we did not review were  smaller, in most cases, than the largest single grants we selected. To  corroborate the data for federal funds to American Samoa, we compared  agency data with data in the single audit reports for fiscal years 1998-2001  and found that of the grants that we had selected, only the general  technical assistance grant was not included in the single auditor’s reports.  However, we used the single audit data only to compare grant data from the  federal agencies with total federal grant expenditures in American Samoa.  We estimated that the selected grants represented about 70 percent of all  federal expenditures in American Samoa in fiscal year 2000.
section_title: Examining the Uses of Key Federal Grants
paragraphs: To examine the uses of key federal grants to American Samoa, we collected  and reviewed grant data from the federal and local agencies responsible for  overseeing the selected programs in fiscal years 1999-2003; interviewed  federal and American Samoa program officials to obtain knowledge of  program activity and operations; conducted site visits to observe programs  and projects funded by federal grants; and compared data in single audit  reports for fiscal years 1998-2001 with agency data for selected grants and  background on total federal grants reported by the American Samoa  government. Single audit reports for years after fiscal year 2001 were not  available during the time of our review. To report grant awards to American  Samoa between fiscal years 1999-2003, we relied on grant data provided by  federal agencies. Although we did not audit the grant data from the federal  officials and are not expressing an opinion on them, we discussed the  sources and limitations of the data with the appropriate officials and  addressed discrepancies before reporting grant totals. We determined that  the federal agency data were sufficiently reliable for the purposes of  reporting grant award totals and the general use of grant funds and, to the  extent possible, we corroborated these data with other information  sources, including federal department (headquarters) data, single audit  reports, and U.S. Census data. To describe the activities that grant funds  supported, we relied on information from federal and American Samoa  officials overseeing or administering the grants. We corroborated  information from American Samoa officials with the information we  received from federal officials. For example, we used participation rates in  fiscal years 2000-2003 for the American Samoa Special Supplemental  Nutrition Program for Women, Infants, and Children (WIC) and the Food  Stamp Program and the total number of children enrolled during the 2000- 2003 school years to estimate the percentage of the population for which  nutrition assistance was made available during those years. These  estimates are approximations. Although the participant populations may  occasionally overlap (e.g., a WIC recipient might also have received free  school lunches), the distinct target populations in American Samoa would  not allow enough overlap to greatly affect our estimates.
section_title: Identifying Local Conditions That Affected Grants in American Samoa
paragraphs: To identify local conditions that affected the uses of the selected grants, we  interviewed federal and American Samoa officials, reviewed program  documents, and made observations in American Samoa in March 2004.  Specifically, we looked at the availability of professional staff to administer  grants services or projects, the adequacy of facilities to deliver services,  and the availability of funds to deliver services or complete projects as  specified by program officials or supporting documents for the 12 key  grants that we reviewed.
section_title: Assessing Accountability for Federal Funds
paragraphs: To assess accountability for the grants, we identified requirements in the  legislation, regulations, or other relevant documents; reviewed monitoring  reports and financial audits conducted by federal agencies; reviewed the  single audit reports for fiscal years 1998-2001; conducted federal agency  interviews and on-site observations; discussed accountability issues with  federal and local officials; and reviewed GAO reports on selected grants  and programs for reviews relating to accountability issues.
To further assess accountability, we randomly selected transaction data  from the American Samoa Department of Treasury, the Lyndon Baines  Johnson Tropical Medical Center (LBJ Hospital), and the Territorial Office  of Fiscal Reform—the three American Samoa departments responsible for  accounting for the 12 grants we selected. We based our selection of  transactions on seven “object codes” (e.g., expenditure categories for  personnel, supplies, contractual services, travel, other expenses, office  equipment, and indirect costs) assigned by the Department of Treasury.
To determine the reliability of the single audit data, we interviewed the  external auditors who completed the single audit reports for American  Samoa and confirmed that the auditors had received a peer review. We  consulted with financial accountants in GAO regarding the single audit  reports. We determined that the single audit data were sufficiently reliable  for reporting on American Samoa governmentwide accountability and  citing specific audit findings for the selected grants.
We relied on federal monitoring reports to assess other accountability  issues for our selected programs. We confirmed the opinions or report  findings with federal officials. We determined that these data were  sufficiently reliable for the purpose of assessing the overall and specific  accountability of federal funds.
section_title: Evaluating Grant Performance
paragraphs: To evaluate the performance of the selected grants, we determined whether  the grants had specific program goals or performance standards that  federal and American Samoa officials used for evaluation; collected and  reviewed agency performance and monitoring reports; reviewed GAO  reports; and consulted with GAO experts and methodologists on the  selected grants. On basis of the evaluative criteria provided by federal  officials overseeing the selected programs, we concluded that most  agencies evaluated the grants based on program or service delivery or  whether projects funded by grants were completed. We relied, for the most  part, on federal agency reviews and found them to be sufficiently reliable  for our purposes of describing if and how federal and American Samoa  officials evaluated performance of the 12 key grants. Our findings are  detailed in appendixes II through VI.
We performed our work from September 2003 through October 2004 in  accordance with generally accepted government auditing standards.
section_title: U.S. Department of the Interior Programs in American Samoa
subsections: section_title: Government Operations Grant
subsections: section_title: Purpose and Legislation
paragraphs: Since fiscal year 1952, the U.S. Department of the Interior (DOI) has  provided the government operations grant to American Samoa as directed  assistance, earmarked through the federal budget process and appearing  in federal appropriations tables as a line item. The grant is divided among  the American Samoa government, the Lyndon Baines Johnson Tropical  Medical Center (LBJ Hospital), and the High Court of American Samoa.  According to DOI, the annual grant to the American Samoa government is  the only regular general operating subsidy that DOI provides to an insular  area government in the form of a grant and is intended to supplement, but  not substitute for, local revenues and is also intended to promote self- sufficiency. The portion of the grant allocated to LBJ Hospital is stated in  the grant award documents. The portion of the grant allocated to the High  Court of American Samoa is included in the budget justifications.
section_title: Funding Levels
paragraphs: The government operations grant comprises almost $23 million each year  (see table 2 for details).
Since 1998, DOI has specified that nearly $7.8 million of the grant be  allotted to the budget of LBJ Hospital. Since 1952, a portion of the grant has  been allotted directly to the budget of the High Court. The use of these  funds is not restricted to U.S. nationals or citizens by law or regulations.
section_title: Activities Supported, Target Recipients, and Basic Accomplishments
paragraphs: The government operations grant supports the operations of the American  Samoa government, LBJ Hospital, and the High Court. In each instance, the  money is deposited directly to the recipient’s accounts and becomes part of  the recipient’s funding stream, losing its separate identity. The grant funds  are drawn down from U.S. Treasury accounts in monthly allotments.  During fiscal years 1999-2003, once the funds were drawn down, they were  deposited in the American Samoa government accounts. The grant is  allocated as follows.
Basic government operations. According to the American Samoa  government annual budget for 2003, the funds allocated for basic  government operations were to be spent as follows: $7.4 million to the  American Samoa Department of Education, $2.7 million to the  Department of Public Works, $1.4 million each to the Department of  Public Safety and the American Samoa Community College, $866,500 to  the Department of Legal Affairs, and $750,000 to the Port  Administration. In fiscal year 2003, the grant’s $14.5 million provided 6.5  percent of the American Samoa government total budget.
LBJ Hospital. The portion of the grant designated for LBJ Hospital  enters the hospital’s budget as a revenue source, whereupon its specific  uses cannot be traced. In fiscal year 2003, the $7.7 million represented  about 26 percent of LBJ Hospital’s $29.3 million revenue.
High Court. According to DOI and American Samoa budget documents,  the grant provides all of the High Court’s budget.
section_title: Performance Goals and Accountability Standards
paragraphs: The primary goal of the government operations grant is to provide financial  assistance to help ensure that the American Samoa government is  providing adequate government systems and services. DOI’s secondary  goal for this grant is to promote self-sufficiency for American Samoa.  According to DOI, over the years American Samoa has assumed an  increasing percentage of the total costs of government operations.  According to DOI, since the mid-1990s, the agency’s policy has been to  maintain the grant at a constant level, requiring American Samoa to absorb  costs associated with inflation and population growth and thereby  encouraging the territory’s self-sufficiency. According to DOI officials, the  single audit is a major source of accountability for the portion of the grant  provided to the American Samoa government. LBJ Hospital is to conduct  its own audit annually. Both the American Samoa government and LBJ  Hospital are also supposed to provide financial and cash transaction  reports as they use the DOI grant.
section_title: Performance Evaluation
paragraphs: According to DOI, providing the government operations grant to American  Samoa is consistent with the agency’s goals of serving communities by  providing financial assistance to help ensure that governments provide  adequate systems and services and encouraging self-sufficiency. Budget  data show and DOI confirms that, generally, over the years, American  Samoa has assumed an increasing portion of the total costs of government  operations. However, assessing the American Samoa government’s  progress toward self-sufficiency is difficult because of the lack of verifiable  expenditure data. Because the grant is a direct subsidy to the American  Samoa government, the grant’s performance in encouraging self-sufficiency  must be evaluated in light of accurate revenue and expenditure  information, which single audits should provide. However, because of  American Samoa’s failure to comply with the Single Audit Act, audited  financial statements do not exist for years after fiscal year 2001, and DOI  has no verifiable information on American Samoa’s actual revenues and  expenditures other than the financial and cash transaction reports sent to  DOI by the American Samoa government. Therefore, it is difficult to  determine the extent to which the American Samoa government is moving  toward self-sufficiency.
American Samoa government budget data show that DOI’s contribution to  the government’s budget decreased from about 18 percent in fiscal year  1999 to about 15 percent in fiscal year 2003. According to DOI officials and  American Samoa’s Department of Treasury, local revenues accounted for  about 60 percent of all government revenue for fiscal year 2003, an increase  of about 5 percent since fiscal year 1999.
section_title: Grant Accountability
paragraphs: Because the American Samoa government did not complete single audits  for fiscal years 1998-2003 within the time frame specified in the Single  Audit Act, overall accountability for the government operations grant was  limited. DOI officials asserted that the unique nature of the grant—that is,  as a subsidy to the American Samoa government—implies limited  accountability and that Congress designed the grant as such. Except for  standard grant reporting requirements, the government operations grant is  entirely dependent on the single audits for assurance of accountability. In  the single audits of the American Samoa government for fiscal years 1998- 2001, the auditors stated no opinion about the reliability of the financial  statements or the allowability of claimed costs. They found significant  failure in the internal controls structure. The single audits for fiscal years  2002-2003 remain uncompleted.
Accountability for LBJ Hospital is likewise limited. Independent audits of  the LBJ Medical Center Authority for fiscal years 1998-2001 found  significant problems with the LBJ Hospital accounts. For the relevant  years, LBJ Hospital declined to present the auditor a statement of cash  flows, summarizing its operating, investing, and financing activities as  required by generally accepted accounting principles. Because of this and  other matters, the auditor was unable to express an opinion on the  financial statements printed in the audit. In reviewing compliance with  internal controls, the auditors found instances of noncompliance as well as  several reportable conditions and material weaknesses. Audits of later  years were not available as of November 2004.
section_title: Capital Improvement Grants
subsections: section_title: Purpose and Legislation
paragraphs: Capital improvement grants to American Samoa are among the covenant  grants authorized by the 1976 Covenant to Establish a Commonwealth of  the Northern Mariana Islands. As such, they are mandatory, subject to  annual appropriations. Although a specific amount of covenant grants is  reserved for the Northern Mariana Islands, capital improvement grants are  provided for all other territories, including American Samoa. DOI’s budget  justifications list the intended recipient territory and the projects to be  funded each year.
Before 1996, American Samoa received an annual discretionary grant for  capital improvement needs. These grants averaged approximately $5  million annually and came from the Assistance to the Territories  appropriation. According to DOI officials, during that time period,  American Samoa fell further behind the infrastructure needs of its rapidly  growing population. As a consequence, according to DOI, the people of the  territory faced increasing hardship and risk with regard to basic needs such  as drinking water, medical services, and education. In fiscal year 1996,  Congress enacted legislation directing that some of the mandatory  covenant funds be used to pay for critical infrastructure in American  Samoa. The legislation also required the Secretary of the Interior to  develop a multiyear capital plan with American Samoa and to update it  annually. DOI and the American Samoa government together developed the  Capital Improvements Plan, which established the following priorities for  capital improvement projects:   First-order priorities include health, safety, education, and utilities.
Second-order priorities include ports and roads.
Third-order priorities include industry, shoreline protection, parks and  recreation facilities, and other government facilities.
DOI awards capital improvement grants on the basis of a ranked list of  proposed projects submitted by the American Samoa government based on  the plan. Independent American Samoa authorities also received capital  improvement grants.
section_title: Funding Levels
paragraphs: In fiscal years 1999-2003, American Samoa was awarded $50.8 million for  capital improvements, an average amount of $10.2 million annually.  According to DOI, the use of these funds is not restricted to U.S. nationals  or citizens, and construction projects are not limited to U.S. companies by  law or regulation. Table 3 shows the annual grant award.
In fiscal year 2005, DOI will implement a new competitive allocation  system for the $27.72 million in mandatory covenant grants.
section_title: Activities Supported, Target Recipients, and Basic Accomplishments
paragraphs: Of the $50.8 million in capital improvement projects awarded to American  Samoa in fiscal years 1999-2003, the American Samoa Power Authority  received about $14 million; the American Samoa Department of Education  received about $12.6 million; health care services, including LBJ Hospital,  received about $8.3 million; the Department of Port Administration  received about $4.6 million; and the Department of Public Works received  about $1.8 million for village road construction. An operations and  maintenance fund receives 5 percent of each capital improvement grant,  accruing about $2.7 million in fiscal  years 1999-2003. (See fig. 5 for percentages.) Other recipients of capital  improvement grants include the American Samoa Community College, the  Department of Public Safety, and a fuel storage facility for rehabilitation,  among others.
Although the American Samoa government compiles the list and awards  grants with DOI approval, many American Samoa agencies either manage  their own projects or arrange for another agency to manage them. Both the  American Samoa Power Authority and LBJ Hospital use their own contract  management to control grant funds and obtain desired services. Also, the  American Samoa Departments of Education and Port Administration use  the Territorial Office of Fiscal Reform to oversee and manage their capital  improvement grants. According to agency officials, the American Samoa  agencies have established separate contract management systems because  the regular American Samoa Treasury administrative process for project  design, contracting, construction, and vendor payment is extremely slow.  As a result, several American Samoa agencies have developed parallel  payment systems. (See app. VII for a diagram showing this payment  process.)
The American Samoa Department of Education received about $2.5 million  per year on average—approximately 25 percent of all capital improvement  grants in fiscal years 1999-2003. According to American Samoa officials, the  American Samoa Department of Education used its grants to  construct almost 120 new rooms, including classrooms (see fig. 6),  school offices, and science labs;  purchase 16 new buses for $1 million;  construct new toilet facilities at several schools and hire bathroom  monitors at 21 schools to clean and guard the new toilets;   renovate classrooms and office buildings by improving electrical  systems with lights and fans, as well as installing new window screens,  new doors and locks, and roofs; and   provide new classroom furniture in many of the new and renovated  buildings.
LBJ Hospital, built in 1968, has used its $1.5 million average annual capital  improvement grants to renovate its aging facility and obtain specific  medical devices. Until 1999, few improvements had been made since the  building’s construction. In fiscal years 1999-2003, the total of $7.4 million in  capital improvement grants allowed the hospital to  expand the existing hospital laboratory and renovate of the old  laboratory space (see fig. 7);  construct an ear, nose, and throat clinic and public restrooms;  purchase and install five dialysis machines;  purchase and install a new medical records filing system; and  replace hospital core area air-conditioning chillers.
The Department of Public Works receives $361,000 annually to build village  roads, which are not eligible for funds from the Federal Highway  Administration’s programs. Village roads run from the main connector road  into a population center or to a school.
section_title: Performance Goals and Accountability Standards
paragraphs: DOI reported that capital improvement projects in American Samoa are  consistent with its goal of improving infrastructure in American Samoa.  These grants are the only direct financial assistance for infrastructure in  DOI’s budget. According to DOI officials, project completion is the main  criterion for assessing performance of capital improvement grants. The  agency does not have a staff engineer to conduct technical reviews of  construction projects; instead, it has a standing agreement with the U.S.  Army Corps of Engineers in Hawaii to conduct reviews on an “as needed  basis.” Accountability arises from the inclusion of large projects in the  single audits; on-site monitoring by federal officials, including the resident  DOI representative; and financial reports.
section_title: Performance Evaluation
paragraphs: We selected and reviewed several completed projects constructed with  capital improvement grant funds. According to DOI, the resident DOI  representative visits projects as she determines necessary or when  requested by DOI. About once each year, DOI officials from headquarters  visit American Samoa, review project files, and inspect the projects.
American Samoa Department of Education. We toured several recently  constructed classroom buildings, which featured handicapped-accessible  classrooms for about 30 students, furnished with new desk chairs, electric  lights and ceiling fans, and sinks. We also visited renovated classroom  buildings. Generally, these buildings had no peeling paint, and no plaster or  drywall was falling from the walls. According to a principal at a newly built  facility, a number of postconstruction problems remained unaddressed by  the contractor or the Departments of Education and Public Works. These  problems included failure to clean and restore playground areas to a safe  standard for the returning children, office spaces built without provision  for telephone lines, and improperly welded stair railings.
We also toured several new and renovated toilet facilities on the school  campuses. Generally, these toilets were clean and functional, although we  found instances of blocked drains, tiles missing from walls, and  disconnected power lines into a new building.
LBJ Hospital. We visited the new lab facility, air-conditioned with new  equipment and updated workstations, and the new ear, nose, and throat  clinic, which also had air-conditioned facilities. We were also shown new  wards with private rooms and oxygen piped to bedsides rather than  provided in tanks as in the older wards. We saw many pieces of new  equipment, including equipment for mammography, magnetic resonance  imaging, sonograms, X-ray, and X-ray developing. We visited the new file  room for maintaining medical records. In contrast, the older parts of the  hospital had no air-conditioning and poor ceiling ventilation. The hospital  has had persistent fire-safety problems, including inflammable building  materials and lack of sprinkler systems in older wards. During the period of  our review, the inflammable materials were being replaced as wards were  renovated; however, sprinklers remained inadequate.
section_title: Grant Accountability
paragraphs: Because the American Samoa government did not complete single audits  for fiscal years 1998-2003 within the time frame specified in the Single  Audit Act, overall accountability for the capital improvement grants was  limited. According to DOI officials, the accountability of these grants is no  less than for other federally funded construction grants to the states and  local governments. However, in American Samoa’s single audits for fiscal  years 1998-2001, which include the grants, the auditors disclaim any  opinion about the reliability of the territory’s financial statements, the  allowability of claimed costs, and the effectiveness of internal controls. The  single audits for fiscal years 2002 and 2003 remained uncompleted as of  November 2004.
The audits for LBJ Hospital for fiscal years 1998-2001 found significant  problems with the hospital accounts. For fiscal years 1998-2000, LBJ  Hospital declined to present a statement of cash flows summarizing the  operating, investing, and financing activities as required by generally  accepted accounting principles. As a result, the auditor was unable to  express an opinion regarding the financial statements printed in the audit.  For fiscal year 2001, the auditors found the hospital unable to locate  supporting documents for its accounting records. The auditors expressed  no opinion on the hospital’s financial statements for 2001. The auditors  found several instances of noncompliance as well as several reportable  conditions and material weaknesses in internal controls. Audits for fiscal  years 2002-2003 were not available as of November 2004.
section_title: General Technical Assistance Grants
subsections: section_title: Purpose and Legislation
paragraphs: Each year, Congress appropriates money for technical assistance grants in  the territories. Significant portions of this appropriation have been used for  specific projects, such as the Coral Reef Initiative; Brown Tree Snake  Control, focused on Guam; Maintenance Assistance, also known as the  Operations and Maintenance Improvement Program; and the Insular  Management Control Initiative. The annual appropriation also provides for  general technical assistance to support short-term, noncapital projects.  General technical assistance is not designated for any specific purpose,  unlike the other forms of technical assistance, and is not intended to  supplant local funding of regular operating expenses. DOI allocates these  funds as it deems appropriate through an application process.
section_title: Funding Levels
paragraphs: The number of grants funded annually varies. For example, in fiscal year  2001, general technical assistance funding of $665,600 (see table 4)  comprised 10 separate grants, the largest of which was $200,000 for a  container tracking system for the Port Administration. General technical  assistance grants must be spent in the year that they are obligated;  however, DOI sometimes provides another year of funding to a project with  the understanding that funding for the following year will depend on the  availability of funds.
section_title: Activities Supported, Target Recipients, and Basic Accomplishments
paragraphs: All territories and freely associated states may compete for general  technical assistance grants. DOI staff assess whether the applications  adequately address the problems cited in the applications. According to  DOI officials, DOI helps the insular governments structure their grant  applications to address applicants’ needs and capacity—for example,  whether a requested computer system is sufficient and appropriate for the  designated purpose.
The 23 general technical assistance grants to American Samoa in fiscal  years 1999-2003 totaled $1.75 million, and included $7,790 for Medicare  Coverage Training and $350,000 for computers for the American Samoa  government. Several technical assistance grants, totaling about $390,000,  were to be used to improve operations at LBJ Hospital.
In April 2001, DOI granted the American Samoa Department of Port  Administration $200,000 to purchase and install a container tracking  system for cargo entering and leaving American Samoa’s harbor of Pago  Pago. The system was designed to maintain complete information about  the status of all containers arriving in American Samoa and to improve the  accuracy of the billing procedures for the containers. According to the pier  superintendent, the system allows ships at sea to radio their container  tracking numbers and contents to the port authority, allowing for better  revenue collection and more timely handling of the containers.
In May 2002, DOI granted the American Samoa government $185,000 to  purchase and install an immigrant tracking system upgrade (see fig. 8).  According to DOI documents, the new system maintains a database of  visitors entering the territory and presents a daily list of those whose  visitation has expired or is about to expire. The system also keeps a digital  photograph of visitors’ passports.
In 1999, DOI provided $285,000 and, later in 2001, $300,000 more to the  Pacific Basin Development Council in Honolulu for organizing the  American Samoa Economic Advisory Commission. The commission was  chartered to make recommendations to the President through the  Secretary of the Interior regarding the economic future of American Samoa  and to analyze the history of, and prospects for, economic development in  American Samoa. The commission was also to recommend policies,  actions, and time frames to achieve a secure and self-sustaining economy  for American Samoa. Finally, the commission was to comment on the  related appropriate role of the federal government. In 2002, the commission  issued a four-volume report that targeted four potential growth industries:  fisheries, agriculture, and aquaculture; telecommunications and technology  information; manufacturing; and tourism. The report recommended  creating  a public-private working group in American Samoa to define and set up  a process, structure, and timetable and to manage and oversee the  implementation of the plan explained in the report; and   a federal-territorial task force to coordinate activities and resolve  pressing and potential problems and conflicts by seeking workable  solutions.
An interim report from 2001 by the commission summarized its findings  and cited skepticism within the American Samoan population about the  federal government’s long history of commissioning studies that yielded no  tangible or sustainable results. DOI officials told us that no one in the  American Samoa government had taken responsibility for pursuing the  commission’ s recommendations. The commission included the then  Lieutenant Governor, who became Governor of the territory in March 2003.  According to DOI officials, the American Samoa government responded to  these recommendations by promoting an e-commerce development  corporation for which it had already requested DOI funds.
section_title: Performance Goals and Accountability Standards
paragraphs: No performance goals have been established for this program.
section_title: Performance Evaluation
paragraphs: According to the DOI official responsible for administering the program,  DOI works to structure the general technical assistance grants according to  the American Samoa government’s needs. However, according to DOI, once  the grant is structured, the funds provided, and the training or project  completed, DOI does not follow up to evaluate performance unless  prompted by a complaint from the government or recipient.
section_title: U.S. Department of Agriculture Programs in American Samoa
subsections: section_title: School Lunch Program
subsections: section_title: Purpose and Legislation
paragraphs: The U.S. Department of Agriculture (USDA) provides grant funds for the  American Samoa School Lunch Program. The purpose of the program in  American Samoa is to provide nutrition assistance to residents of American  Samoa, with priority given to school-age children. The current program is  funded by a special block grant that operates according to a memorandum  of understanding (MOU) and provides free breakfast and lunch to all  school age children. From 1962 to 1991, the School Lunch Program in  American Samoa followed the same regulations, policy, and procedures as  the National School Lunch Program in the 50 states. In 1991, USDA  converted the amount paid under the original program to the Child  Nutrition block grant, which has been adjusted for inflation annually since  the transition. According to the MOU, the governor of American Samoa is  charged with administering the program in American Samoa. The American  Samoa Department of Education has been designated as the grant  coordinator. According to federal officials, this transition caused no break  in program services to the children in American Samoa.
Officials explained that the change in grant and program structure was  intended to provide American Samoa with greater flexibility to serve the  needs of its children. In addition, given American Samoa’s remoteness and  unique needs, funding the program with the block grant allowed American  Samoa to better meet those needs than would the national USDA child  nutrition programs (National School Lunch Program, School Breakfast  Program, State Administrative Expense Funds, and Nutrition Education  and Training Program). Another reason cited for the change, according to  federal officials, was that the management and oversight responsibilities  for the traditional child nutrition programs in American Samoa were costly  and severely disproportionate to the overall level of federal assistance  provided to American Samoa; in contrast, the block grant reduced USDA’s  oversight responsibilities and administrative investment.
section_title: Funding Levels
paragraphs: School Lunch Program grants to the American Samoa government are  made on a federal fiscal year basis. Since fiscal year 1991, USDA’s Food and  Nutrition Service (FNS) has provided grant funds on a quarterly basis, with  each year’s grant contingent on the availability of funds and FNS’s approval  of American Samoa’s fiscal year Plan of Operations and completion of the  Drugfree Workplace Certification and Lobbying Certification. On August  15 of each year, American Samoa is required to submit a Plan of Operations  to FNS that describes how funds will be used, the targeted population to be  served, and how often food or other services will be made available to  program recipients. The plan also must include a budget for program  expenditures. Grants are calculated with a fiscal year 1989 grant  calculation methodology that was amended in 1992 and includes a yearly  inflation adjustment. After adjusting for base year funds, FNS adds funding  for the Nutrition Education Training Program, as authorized by Section 19  of the Child Nutrition Act of 1966 (42 U.S.C. §1788). Funds that are  obligated by FNS to American Samoa in a given fiscal year are available for  obligation and expenditure by the School Lunch Program in the following  fiscal year, or 2 years from the date of disbursement. Table 5 shows the  grant award amount for fiscal years 1999-2003.
section_title: Activities Supported, Target Recipients, and Basic Accomplishments
paragraphs: The American Samoa School Lunch Program uses grant funds to provide  free breakfast and lunch to children attending public or private schools and  early education centers (see fig. 9). As of July 2004, the program was  serving meals at 23 public elementary schools, 6 public high schools, 10  private schools, 55 early childhood education centers, and 37 day care  centers.
Although the School Lunch Program in American Samoa is not held to the  same nutritional requirements as in the 50 states, the MOU requires that  meals be nutritious and include a variety of foods. FNS encourages the use  of foods native to the Samoan Islands, as well as other nutritious foods  acceptable to the groups being served. FNS also encourages menu planning  to keep fat, sugar, and salt at moderate levels and to keep the menu  consistent with dietary guidelines published by USDA and the U.S.  Department of Health and Human Services. According to FNS officials, the  American Samoa School Lunch Program develops its own menu, and the  nutritionist works with the schools’ cooks to ensure that the menu is being  followed. FNS provides as much advice as possible on the development  and nutrition quality of the meals.
In addition to funding the delivery of meal services and program  administration, the block grant includes funds earmarked specifically for  nutrition education. The National School Lunch Program is not legislatively  required to provide, and does not receive funding specifically for, nutrition  education. However, training funds are included in the grant portion for  nutrition education. The American Samoa School Lunch Program Director  told us that he is committed to seeking training for his employees and that,  following our fieldwork, several of his staff attended training in the  continental United States. He reported that, in April 2004, he sent four  employees to attend the USDA School Meals Initiative conference held in  Phoenix, Arizona. This conference addressed areas of concern for school  meals initiatives, with particular focus on the advancement of research and  technology to improve services. The Director explained that his staff  acquired updated knowledge of school food services techniques and  methods for improving the American Samoa program. Three other  employees received training in Sacramento, California, and visited the FNS  offices in San Francisco. The Director reported that the staff returned with  fresh enthusiasm about improving menu planning for nutritious student  meals and assisting the field school food coordinators in improving their  job performance.
section_title: Performance Goals and Accountability Standards
paragraphs: The American Samoa School Lunch Program does not have specific  program goals, but language in the MOU states that in developing its Plan  of Operations, the program should give priority consideration to the needs  of its preschool and school-age children; meals should be appealing and  nutritious; and the program should work toward serving meals that meet  the current dietary guidelines for Americans, contain nutrients at  Recommended Dietary Allowances, and conform to the Food Guide  Pyramid.
To assess accountability, the annual Plan of Operations requires the  American Samoa government to identify program activities and  administrative areas that it funds with the grant. The plan should identify  the number of schools where services will be provided and estimate the  number of students who will be served both breakfast and lunch. It should  also provide details of administration expenses and nutrition education  expenses. According to federal officials, there is no requirement that the  American Samoa School Lunch Program “buy America” or that the  American Samoa government hire U.S. citizens.
Program and financial information is provided to federal officials annually  and quarterly in a series of reports. FNS also relies on annual single audit  reports to assess accountability for American Samoa School Lunch  Program funds. In addition, according to USDA headquarters officials, FNS  program and financial management staff are required to conduct program  and financial reviews every 3 years to ensure that American Samoa is  complying with the terms and conditions in the MOU. However, FNS  program staff reported that although they would like to conduct reviews  more frequently, cuts in the travel budget make this difficult. Because the  American Samoa School Lunch Program is funded by a special block grant,  FNS program officials have discretion in the criteria they use to evaluate  and monitor the program. FNS further explained that funds allocated to  American Samoa are much smaller than those allocated to mainland  programs and that the agency focuses its limited resources where attention  is needed most. FNS said that the programs in American Samoa and the  Commonwealth of the Northern Mariana Islands were converted to block  grants to enable the FNS to save on administrative and oversight costs,  among other reasons. FNS conducted program reviews in American  Samoa in September 1998, September 2001, and January 2004, and it  conducted financial management reviews in September 1997 and January  2004.
section_title: Performance Evaluation
paragraphs: The American Samoa School Lunch Program is meeting its purpose of  delivering breakfast and lunch to schoolchildren. Federal program officials  reported that they review meal service based on information that the  American Samoa government submits in the FNS required quarterly  performance reports, which contain the number of meals served in that  period of the grant. Federal officials evaluate the program on the basis of  its effectiveness in delivering services, and they identify areas where  American Samoa can improve management effectiveness and efficiency to  achieve quality management practices.
Following are some of the findings that the officials reported, based on  FNS program reviews in September 2001 and January 2004:  FNS reported that the American Samoa School Lunch Program was  doing a good job of using grant funds to feed children in schools and day  care centers; however, FNS expressed concern about the maintenance  of refrigeration equipment, health and sanitation, and the availability of  fresh fruit and vegetables in the menus.
FNS reported that the American Samoa School Lunch Program staff had  made significant improvements in program operations and  administration under the new School Lunch Program Director. These  improvements followed charges and a guilty plea of the former School  Lunch Program Director owing to the mishandling and theft of  department food supplies and materials.
Regarding program delivery, FNS reported that the warehouse is the  only area where staffing is short and that food collection for distribution  to day care centers consumes considerable staff time.
The American Samoa School Lunch Program includes meal service to  day care centers. FNS reported its concern that supporting the day care  centers may limit the administrative ability of program staff to provide  food to all other schools. Since day care centers already receive $180 per  month per child from the American Samoa Department of Human and  Social Services under a grant from HHS, FNS is recommending that the  American Samoa School Lunch Program (1) consider charging a small  per-pound fee to help cover the administrative costs of delivering food  to the centers and (2) develop a contract with each center to explain  that the program contribution is only a subsidy for the center’s food  needs.
FNS reviewers reported that American Samoa School Lunch Program  nutritionists have conducted workshops with the school cooks to help  develop their skills and to improve nutritional quality of the meals being  served. Nutritionists have been working with the department to expand  the use of fresh fruits and vegetables, particularly those that can be  purchased locally, and have attended training for the School Meals  Initiative for Healthy Children to improve the menus and track  nutritional content.
During our visit to American Samoa, we observed meals being served at  one school, and inspected the kitchens and cafeterias in seven schools. At  one school we visited, pests were evident. When we addressed this with  American Samoan officials, the American Samoa School Lunch Program  Director said that they have had some problems with rodents and termites  and have submitted a request for pest control. In addition, four kitchens  had equipment or maintenance problems, such as broken thermometers on  refrigerators and freezers, holes in window or door screens, and leaking  faucets.
section_title: Local Conditions Affecting Program Delivery or Project Completion
paragraphs: The American Samoa School Lunch Program has faced barriers to program  delivery owing to recent natural disasters and program dependence on  imported food supplies. In January 2004, Cyclone Heta struck the island,  and for 1 week the program’s food service department had to provide food  to a number of emergency shelters throughout the island. Although the  Federal Emergency Management Agency reimbursed the program for the  food costs, both staff and food resources were diverted from the program’s  routine services, and the cyclone damaged at least one school cafeteria.  The American Samoa School Lunch Program Director said that he does not  want the program to be the sole source of disaster relief in any future  emergencies.
The nutrition education specialist said that the program’s reliance on food  imports by boat and the lack of local food production also present barriers  to the program’s delivery of services. Problems with the boat sometimes  cause food shortages. Food shortages also occurred in 2004 because of the  cyclone. Because the nutrition specialist prepares the menu based on what  is available in the warehouse, shortages limit the menu options and the  program’s ability to meet federal nutrition guidelines.
section_title: Grant Accountability
paragraphs: Accountability in the American Samoa School Lunch Program was limited  at both the federal and the program levels, but changes have recently taken  place to improve accountability. The main mechanisms for accountability  in the School Lunch Program are the single audit reports and the financial  management reviews that FNS conducts, in addition to their monitoring  through quarterly and annual reports.
Because the American Samoa government did not complete single audits  for fiscal years 1998-2003 within the time frame specified in the Single  Audit Act, overall accountability for the School Lunch Program was  limited. Further, the single audits for fiscal years 1998-2000, which were  completed in August 2003, have questioned costs because of missing  documentation and unaccounted-for expenses, for which the audit findings  cited lack of internal controls and lack of adherence to the accounting  documentation procedures required by the Office of Management and  Budget. According to the single audits, the questioned costs during fiscal  year 1998-2000 totaled $168,252. As of July 2004, FNS reported that they  had received the single audit report for American Samoa for fiscal year  1999 but not for fiscal years 1998 and 2000.
In addition to being aware of the internal control problems cited in the  single audits, federal officials were alerted to procurement fraud and theft  that occurred in the program throughout fiscal year 2003. The American  Samo School Lunch Program Director and the Chief Procurement Officer  were charged with committing offenses against the United States between  October 2001 and September 2003. These officials pleaded guilty to the  federal charges on July 2004. The School Lunch Program Director pleaded  guilty to charges of taking food and goods valued at $68,000 or more from  the American Samoa School Lunch Program Warehouse and converting  such goods for his and others’ personal use. Although the chief officials  involved in theft and fraud have been replaced, the new Director told us  that not all staff involved in the theft were terminated from program  employment. He said that one person is still working in the warehouse  because of his government status and the department’s inability to place  him elsewhere. The Director said that he is trying to put more controls in  all areas to prevent repetition of past problems.
FNS program officials said that there are still problems with procurement.  For example, the American Samoa School Lunch Program staff asked  recently for an orange juice contract, but the Governor and Attorney  General rewrote the specifications of the contract to allow a contractor to  provide a different and less expensive juice. This change was never  communicated to the School Lunch Program staff. To improve oversight  and monitoring, FNS officials are now requiring that all milk and juice  contracts be sent to the Western Region office for review, with follow-up  documentation and justification, to be approved by FNS in accordance  with USDA’s regulation governing procurement (7 C.F.R. § 3016.36). FNS  officials stated that they would not normally be involved with this level of  oversight. FNS officials also reported that program funds were used to  purchase vehicles for the Director of the Department of Education and the  Director of the American Samoa School Lunch Program. FNS officials  asked the American Samoa officials to return the vehicles to the warehouse  and explained that no government-funded vehicles should be used during  nonwork hours.
FNS financial management officials recently issued their Financial  Management Review of fiscal year 2000. This is the first review that  American Samoa School Lunch Program financial management officials  have conducted since September 1997. FNS officials explained that they  focused on fiscal year 2000 because they had not conducted a financial  management review for a long time and they needed to select a year for  which there would be complete transaction records. An official explained  that they have experienced budget constraints and staff shortages and that  they currently schedule on-site reviews every 5 years.
Their review findings included the following:  According to the Code of Federal Regulations, “effective control and  accountability must be maintained for all grant and subgrant cash, real  and personal property, and other assets. Grantees and subgrantees must  adequately safeguard all such property and assure that is used solely for  authorized purposes.” However, FNS reviewers could not determine  whether the American Samoa government Property Management  Department consistently performed a physical inventory of the  American Samoa School Lunch Program assets.
Four vehicles were not being used exclusively for program purposes.
FNS officials explained that government-funded vehicles should not be  used during nonwork hours and that the American Samoa officials  probably were not aware of this. FNS has requested that American  Samoa officials provide documentation ensuring that the vehicles are  used solely for program purposes.
The financial management review cited internal control problems  regarding inventory of food and fixed assets, misuse of food service  equipment, and draws from the grant’s letter of credit that were not  made on an as-needed basis.
In addition to reviewing reports by the FNS officials, we met with American  Samoa School Lunch Program staff to better understand the program’s  operations and controls. The Program Director provided documentation  and responded to our questions regarding corrective measures to improve  the previous problems in the program. These actions included suspension  and removal of staff involved in incidents of theft, identification of  personnel resources to carry on continued operations, and tighter controls  and monitoring of purchases. The Director has also identified long-range  corrective measures, such as the development and implementation of a  modern computer system to improve food inventory; development of a  network system to improve shipping, receiving, and issuing of inventory;  and a more transparent distribution of resources to ensure that services  and tasks are not duplicated among employees.
While discussing program budgets with American Samoa School Lunch  Program staff, we found that American Samoa had not established a food  cost per child and had estimated food program costs based on an arbitrary  annual increase from the previous year. Until July 2003, the budget report  for the Plan of Operations was completed by staff in the main American  Samoa Department of Education and not by the program staff. The  Director also reported that the program staff did not receive the grant  award letter and that, as a result, the Plan of Operations was not submitted  on time, resulting in a delay of the grant obligation. Although FNS does not  require a food cost per child for budgets in the Plan of Operations, we  found it problematic that program year budget estimates were not based on  analyses of student enrollment and number of meals served for the prior  school year and were not compared with food costs, food used, and other  inventory expenses and allocations. When we communicated our concern  to the American Samoa School Lunch Program and Department of  Education staff, they agreed that estimating food costs per child would be  an important step in improving the budget process, particularly given the  program’s purpose to provide meals to all school-age children.
section_title: Special Supplemental Nutrition Program for Women, Infants, and Children
subsections: section_title: Purpose and Legislation
paragraphs: The Special Supplemental Nutrition Program for Women, Infants, and  Children (WIC) follows the same regulations and requirements in American  Samoa as in the 50 states. The purpose of the WIC Program is to provide  supplemental food and nutrition education at no cost to eligible low- income pregnant, breast-feeding, and postpartum women and to infants  and children up to 5 years of age. According to federal regulations, the  program is intended to serve as an adjunct to good health care during  critical times of growth and development, in order to prevent the  occurrence of health problems, including drug and other harmful  substance abuse, and to improve the health status of these persons.
The WIC Program in American Samoa was established in 1996. The grant to  American Samoa is awarded by USDA’s FNS and is overseen from FNS’s  Western Region. In American Samoa, the state agency is also the local  WIC services provider. Eligibility determinations, nutrition assessments,  and distribution of benefits are all provided in one building, administered  by the American Samoa Department of Human and Social Services, with a  satellite clinic operating on the sparsely populated Manu’a Islands.
section_title: Funding Levels
paragraphs: Funding for the WIC Program in American Samoa increased steadily in  fiscal years 1999-2003 (see table 6). For fiscal year 2004, American Samoa  received a grant award of $6,145,322, with $4,736,905 dedicated to food  benefits and $1,408,417 for nutrition services and administration. The  American Samoa WIC Program also receives a rebate every month from  Mead Johnson for cans of infant formula purchased from WIC vendors.  FNS officials explained that the fiscal year 2003 rebate was between  $62,000 and $62,668 monthly; in fiscal year 2004, the average monthly  rebate increased to $70,034. Rebates are deposited into the WIC food  account and offset charges to the WIC food grant for food costs.
section_title: Activities Supported, Target Recipients, and Basic Accomplishments
paragraphs: Pregnant, breast-feeding, and postpartum women; infants; and children up  to 5 years of age become eligible if they (1) are individually determined by a  competent professional authority to be in need of the special supplemental  foods supplied by the program because of nutritional risk; (2) meet the  WIC income criterion or receive, or have certain family members that  receive, benefits under the Food Stamp, Medicaid, or Temporary  Assistance for Needy Families Program; and (3) reside in the state in which  the benefits are received. FNS program officials explained that nutrition  risk is based on blood work, height, weight, health history, and dietary  assessment and that participants must qualify on at least one of these  factors. The current income requirement is 185 percent of the poverty level.  FNS officials told us that because incomes in American Samoa are so low,  nearly everyone in American Samoa is eligible for WIC benefits if they also  meet the gender, age, and residency requirements. Additionally, FNS  officials explained that, similar to WIC recipients in the 50 states, most  American Samoans who meet the income requirement also meet the  nutritional risk criteria.
The WIC Program in American Samoa has 30 full-time staff, including five  eligibility workers, an eligibility manager, a registered nurse, three licensed  nurses, three community health assistants, and one clerk. As of March  2004, the program had 6,300 WIC recipients, and the WIC offices were  serving about 350 clients per day, with services ranging from nutrition risk  assessments to issuance of WIC “food instruments,” or checks. Eligible  WIC recipients receive (1) a food package, which is a prescription for food  specific to each client; (2) nutrition education; and (3) referrals for health  care. American Samoan officials explained that all WIC applicants are  given a health assessment when they first visit the clinic. Applicants are  asked to present immunization cards for the children; if the immunizations  are not current, children are referred to the Lyndon Baines Johnson  Tropical Medical Center, where shots can be obtained. After applicants are  certified to receive WIC benefits, the public health staff conduct follow-up  assessments for infants every 6 months, from birth to 1 year.
WIC recipients are offered at least two nutrition classes within a 6-month  period. Classes are generally 10 to 15 minutes long and focus on issues  such as breast-feeding tips and other nutrition topics that emphasize the  use of the WIC foods. American Samoa WIC Program staff reported that the  nutrition unit of the WIC Program holds classes regularly. In addition to  nutrition classes, the WIC Program implemented a Reading Readiness  Class in 2002 for children. The class is intended to support education  delivered through the Early Childhood Education Program and is targeted  to children aged 1 to 5 years.
WIC recipients are issued WIC checks that they can use to obtain food at  authorized vendor locations. Currently, there are about 80 authorized WIC  vendors in American Samoa among the three islands. According to FNS  officials, most of the goods on American Samoa are imported and,  consequently, the WIC vendors have high food costs. As a result, the  average cost of WIC food packages is higher in American Samoa than in the  50 states. WIC recipients give vendors WIC checks for specific foods, and  the vendors fill in the dollar amount on the checks and submit them to their  bank. FNS officials reported that the high costs for WIC food packages in  American Samoa also result, in part, from vendor fraud (See Grant  Accountability).
section_title: Performance Goals and Accountability Standards
paragraphs: To gauge the performance of the nutritional services that WIC offers, FNS  has established multiple program output measures. Generally, these  measures are used to assess the types and quantities of services the state  agencies provide and the agencies’ compliance with grant expenditure and  other program requirements. The state agencies develop guidelines  intended (1) to ensure that local agencies effectively deliver WIC benefits  to eligible participants and (2) to monitor local agencies’ compliance with  these guidelines. In addition to using output measures to measure  performance of WIC state agencies, FNS has established breast-feeding  initiation rate as an outcome-based measure for the WIC Program’s breast- feeding promotion and support activities. However, FNS has no outcome  measures for its nutrition education or health referral services.
To monitor the delivery of WIC services in American Samoa, FNS program  officials conduct an on-site management evaluation known as a State  Technical Assistance Review, usually on a 3-year cycle as funds allow.  According to FNS officials, these reviews were conducted in 2000 and 2003.  FNS financial management officials conduct on-site financial management  reviews, and FNS officials told us that they follow a schedule similar to that  of the program staff’s on-site reviews. However, FNS officials later reported  that only one financial management review of American Samoa WIC had  been conducted, in June 2004. FNS Regional financial management reviews  are now performed on a 5-year cycle.
To ensure the accountability of WIC funds in American Samoa, FNS relies  on state technical assistance reviews, financial management reviews, and  A-133 audits (single audit reports). FNS requires American Samoa grantees  to submit monthly financial and participation reports (FNS-798), which  provide information on projected and actual food expenditures, infant  formula rebates, cumulative nutrition services and administration  expenditures and obligations, and revenues from food vendor and  participant collections and from program income. If the WIC Program  receives separate infrastructure grant funds, American Samoa reports  these expenditures annually to FNS on the SF-269A report.
section_title: Performance Evaluation
paragraphs: WIC services and nutrition education were being delivered in American  Samoa, but data to evaluate the performance of the WIC Program, beyond  general program delivery, was limited. Furthermore, incidents of fraud and  theft have jeopardized the integrity and, possibly, the quality of services to  recipients. Under the FNS criteria for the state technical assistance review,  program reviewers assess 11 functional areas of the WIC Program;  however, FNS officials told us that it is difficult to cover all 11 areas during  on-site reviews because they spend only about 4.5 days on island.  Consequently, they identify and focus on the functional areas they see as  critical. During an FNS program review in June 2000, FNS reviewers found  that program services were hampered by inefficient clinic operations and  recipient certifications. FNS officials reported a number of errors in the  determination of nutritional risk and the capture of related participant data  in the automated system. For example, one file recorded a child’s height as  32 inches and, 6 months later, as 31 inches.
FNS recommended that the staff be unified under a single supervisor to  improve communication and clinic operations. FNS also recommended  that staff conducting eligibility assessments be retrained in the certification  requirements. In the 2003 FNS state technical assistance review, officials  reported that, although not all clinic operations recommendations from the  2000 report had been implemented, the designation of a single supervisor  for the certification process had improved communication and the  certification procedures had dramatically improved, including the  documentation, assessing, and processing of WIC recipients. However, the  review cited serious concerns and program violations, including food  vendor overcharging and fraud, and the program is now being monitored  by FNS until American Samoa officials respond to and implement  corrective actions necessary to avoid fiscal sanction.
section_title: Local Conditions Affecting Program Delivery or Project Completion
paragraphs: The American Samoa WIC officials reported technology barriers to  program delivery. Until June 2004, the WIC nutrition education official  lacked an Internet connection that would allow her access to important  nutrition information available on the USDA Web site, despite a request by  the WIC staff in 2003 in response to a recommendation in the FNS on-site  review in September 2003. The WIC Program Director said that the  computer programs were out-of-date and needed to be redesigned. The  Director also reported that the information specialist needed technical  assistance and that the program needed a computer system that connects  all WIC units, including finance, nutrition education, and public health.
FNS officials cited distance to American Samoa and limited travel budgets  as a barrier to effective oversight.
section_title: Grant Accountability
paragraphs: Because the American Samoa government did not complete single audits  for fiscal years 1998-2003 within the time frame specified in the Single  Audit Act, overall accountability for the WIC Program was limited. All  USDA grantees are required to comply with the Single Audit Act  Amendments of 1996 and OMB Circular A-133. In the single audit reports  for fiscal years 1998-2001, auditors found questionable costs in the WIC  Program for all 4 years, totaling $46,799. The reports also identified various  internal control weaknesses, including missing files and support  documentation for purchases, payments, and contracts, and payroll as well  financial records. They further stated that the auditors could not test for  eligibility of participants in all 4 years because sufficient data systems and  documentation were not available. FNS officials told us that as of February  2004, they had not received copies of the 1998-2001 single audit reports that  list the questioned costs. They also said that they had not been made aware  of any findings that required them to follow up on corrective actions for at  least 5 years. In July 2004, Western Region FNS officials reported that they  had received only the fiscal year 1999 single audit report, on May 5, 2004.
In addition, FNS identified various accountability problems in the  American Samoa WIC Program, including incidents of vendor fraud and  abuse and misuse of grant funds. The single audit reports for fiscal years  1998-2001 also identified a lack of internal controls, including missing  documentation for expenditures and case files to test for recipient  eligibility.
During the September 2003 FNS review of the American Samoa WIC  Program, FNS officials were alerted to vendor fraud and abuse occurring in  the program. The review found widespread evidence of WIC checks being  exchanged for cash, cigarettes, other nonfood items, and unauthorized  foods at WIC-authorized grocery stores and redeemed by the stores at local  banks. In addition, the reviewer found frequent instances of vendors  overcharging for WIC foods. The 2003 review requires corrective action to  disqualify eight vendors. FNS reported that American Samoa’s food  package cost was the highest among 88 WIC state agencies and almost  double the national average for food package costs (American Samoa’s  average food package cost per person was $62.15, compared with the  national average of $35.22 and Guam’s average of $52.05). The June 2000  FNS program review stated that the American Samoa vendor manager had  done a “very good job” in establishing a strong WIC presence at all 36  authorized stores through frequent visits and policy clarifications.  However, by September 2003, when FNS conducted another on-site review,  the FNS reviewer found that the number of authorized vendors had  increased from 36 to 83 and that the “authorization process appeared to be  little more than an annual ‘rubber stamp,’ with no evidence of applications  being denied or assessed for competitive pricing against other stores as  required by WIC regulations.” FNS responded by recommending that all  new vendor applications be frozen until further notice, preferably for 2  fiscal years. American Samoa officials told us that no new vendor  applications had been approved since 2003. Although no new vendors have  been authorized, FNS reported that the previous number, 36, was more  than adequate for an island of slightly more than 100 square miles, with an  excellent transportation system connecting all villages. FNS reported that  the Guam WIC Program has only 16 stores for about the same number of  WIC participants and on an island twice the size of Tutuila, the main island  of American Samoa. WIC regulations require the state agency to “authorize  an appropriate number and distribution of vendors of order to ensure  adequate participant access to supplemental foods and to ensure effective  State agency management, oversight, and review of its authorized  vendors.” FNS officials reported that they do not see the justification for  having more than 40 well-distributed WIC-authorized vendors in American  Samoa.
FNS officials said that American Samoa WIC staff are responsible for  authorizing vendors and training them on WIC check transaction and  redemption procedures. FNS officials also reported that the state agencies  administering WIC are required to perform compliance investigations  and/or inventory audits for the WIC Program. The American Samoa  Department of Human and Social Services established a Grants  Management and Evaluation Division to conduct programmatic reviews of  grant-funded programs and monitor programs’ compliance with  regulations. The division found various noncompliance issues, which it  reported along with recommendations for corrective action to the  department director and WIC staff. However, according to division staff,  program officials did not report back to them whether actions were taken  based on their findings and recommendations.
While visiting several authorized WIC stores with American Samoa WIC  officials, we found two violations, based on the guidelines in the American  Samoa WIC Vendor Handbook. In one instance, WIC-authorized food had  no price displayed, and in another instance, a WIC-authorized food item  had expired.
Owing to the seriousness of the problems in the WIC Program, FNS  officials have involved the Governor of American Samoa. The Governor  responded to FNS with a corrective action plan in January 2004; however,  the State agency had delayed implementation of critical actions in the plan,  including mandatory disqualification of the eight stores found to have  committed the most serious WIC violations, cited in the September 2003  FNS review. The FNS Regional Administrator conveyed his concern to the  American Samoa Governor during their July 2004 meeting. During his visit  to American Samoa, the Regional Administrator also found that the  Governor’s concerns about participant access and cheaper prices at the  affected vendors were not warranted.
The Governor reported that actions had been taken against 12 other  vendors who were found to have overcharged for food packages and that 9  of these vendors had reimbursed the program as of June 3, 2004. We  requested documentation from American Samoa’s Treasury department  and found that 8 out of 12 vendors had paid the program for the  overcharges in April 2004. FNS has yet to determine whether the American  Samoa government’s actions met WIC regulatory requirements and is  following up with the state agency regarding the individual cases. As of  August 2004, FNS officials were deciding what actions to take against the  American Samoa WIC Program.
In October 2004 the Governor wrote to FNS stating that the eight  disqualifications, required in the September 2003 FNS review, had been  carried out; FNS is requesting additional documentation to assure this and  other corrective actions had taken place. FNS officials have threatened  fiscal sanctions if the program does not come into compliance.
In addition to failing to take corrective action on the cases of vendor fraud  and abuse, the WIC Program staff did not meet deadlines for submitting  monthly status reports to FNS. Grant data that we requested from FNS  officials revealed that in fiscal years 1998-2003, FNS staff had to  communicate with American Samoa officials because reports were  submitted late, or information was missing. Furthermore, in August 2004,  charges were filed against the Deputy Director of the Department of  Human and Social Services, the grantee of the WIC and Food Stamp  Programs in American Samoa. The Deputy Director was charged with  defrauding the government by conspiring to rig contracts totaling more  than $120,000 in exchange for cash kickbacks.
With regard to internal controls, FNS officials said that the American  Samoa WIC staff were encouraged to adopt an automated system for  financial management and that FNS provided some technical assistance  but that WIC staff turnover had hampered the system’s implementation. In  addition, in a May 2004 review, FNS Financial Management staff found that  the American Samoa Department of Human and Social Services had  overcharged the WIC Program $128,400 for WIC building renovations; FNS  has since demanded a repayment.
section_title: Food Stamp Program
subsections: section_title: Purpose and Legislation
paragraphs: The American Samoa Food Stamp Program is a nutrition assistance  program that provides food coupons to American Samoa’s eligible low- income elderly residents and blind or disabled residents. The program is  administered by the American Samoa Department of Human and Social  Services. The Food Stamp Program in American Samoa was authorized by  the act of December 24, 1980, which allowed USDA to extend programs  administered by the department to American Samoa and other territories.  The program became effective in April 1994, and the first month’s benefits  of the Food Stamp Program were issued in July 1994. The current program  is funded through a capped block grant and operates under an MOU  between the American Samoa government and FNS. The MOU is effective  for a 1-year period and is negotiated annually prior to the beginning of each  fiscal year.
Unlike the Food Stamp Program in the 50 states, the American Samoa Food  Stamp Program is not an entitlement program; further, the MOU under  which it operates allows American Samoa to set its own eligibility  standards as long as they are within the capped block grant. FNS officials  explained that American Samoa decided to target the program to the  elderly and disabled in part because they do not receive Supplemental  Security Income and because offering benefits on the basis of income  would have caused the program to be too broad given the limited resources  of the capped grant. The American Samoa program requirements are  outlined in the MOU and not in the laws and regulations that apply to the  Food Stamp Program in the 50 states. Prior to the negotiation of the MOU,  no Food Stamp Program existed in American Samoa. Over the years,  certain aspects of the MOU have changed, such as the American Samoa  Food Stamp Program’s definition of “disabled”; however, the basic concept  and design of the program have remained the same.
section_title: Funding Levels
paragraphs: The block grant for the American Samoa Food Stamp Program covers the  administration costs of operating the program (e.g., staff salaries, facility  charges) and delivering nutrition assistance benefits to the recipients. The  initial grant amount was $2.7 million; however, in fiscal year 1996, the  annual grant was capped by statute at $5.3 million with adjustments for  annual inflation. When the Food Stamp Program reauthorized in fiscal year  2002, the cap for fiscal year 2004 increased to $5.6 million, as a result of the  Farm Bill, and tied American Samoa funding to Puerto Rico’s grant  amount. American Samoa may not carry over more than 2 percent of its  funding from one fiscal year to the next. Table 7 shows the grant awards for  fiscal years 1999-2003.
section_title: Activities Supported, Target Recipients, and Basic Accomplishments
paragraphs: The American Samoa Food Stamp Program provides nutrition assistance to  low-income elderly, blind, or disabled American Samoa residents.  American Samoa is allowed to set its own eligibility standards to stay  within the capped block grant. Food Stamp recipients in American Samoa  must meet the following financial and nonfinancial eligibility criteria, as  specified in the MOU:   Nonfinancial eligibility criteria (residency, citizenship, and age or  mental or physical disability). To be eligible, a recipient must be either  a U.S. national; a citizen; an alien lawfully admitted to the United States  as an immigrant as defined in Section 101 (a) (15) of the Immigration  and Nationality Act; an alien admitted to the Territory of American  Samoa as a permanent resident pursuant to sections 41.0202 (c)ii,  41.0402 and 41.0403 of the American Samoa Code; an alien legally  married to a U.S. citizen or U.S. national; or an alien who has legally  resided in American Samoa for at least 5 consecutive years.
Resource eligibility standards. A recipient aged 60 and older, disabled,  or blind is subject to the maximum resource standards of $3000.
Gross income eligibility standards. Income is based on the applicant’s  (not household’s) monthly gross income. The current standard is a gross  monthly income of $712 or less.
The fiscal year 2004 MOU defines maximum monthly benefits as $132 per  person. By comparison, the Food Stamp Program in the 50 states provides  maximum monthly benefits of $141 per person. The American Samoa Food  Stamp Program Director told us that potential recipients must attend an  orientation offered weekly explaining the program benefits and  qualification requirements. After attending an orientation, a potential  recipient must apply for certification. The Director of the American Samoa  Food Stamp Program described the program’s efforts to encourage  healthier eating through nutrition classes that recipients can take while  waiting to receive their monthly benefits. Although classes are not  mandatory, the Food Stamp Program staff budget approximately $6,000 for  nutrition education classes per year. At the time of our visit, the American  Samoa Community College was holding nutrition classes at the Food  Stamp clinic to show recipients how to prepare healthier meals at home.  The Director explained that classes are conducted once per month to  coincide with the issuance of the food stamps.
Food Stamp recipients must come to the Food Stamp offices monthly to  receive their food coupons. In fiscal year 2003, the program served an  average of 2,830 persons and issued $292,061 in benefits per month. The  average monthly benefit per person during this period was about $103. The  program is one of the few remaining U.S. Food Stamp Programs that still  uses paper food coupons since the program in the 50 states has  implemented an electronic benefits transfer system to provide food  assistance to eligible recipients.
section_title: Performance Goals and Accountability Standards
paragraphs: The American Samoa Food Stamp Program does not have federally  prescribed program goals or performance standards. FNS officials told us  that they evaluate the American Samoa program according to (1) the  number of people served, (2) whether recipients received the right number  of coupons, (3) whether benefits were awarded correctly, and (4) whether  the coupons were used appropriately. According to FNS officials, the  Department of Human and Social Services, the American Samoa grantee, is  required to monitor and coordinate all program activities and ensure that  the activities conform to the guidelines established in the MOU. The MOU  outlines procedures for operating the program, such as determining  eligibility and processing applications. Program monitoring includes  reviews to evaluate program operations, eligibility certification, and retail  compliance. To monitor the program for accountability, the Department of  Human and Social Services is required to keep necessary records indicating  whether the program is being conducted in compliance with the MOU. To  monitor this, FNS requires Human and Social Services to submit monthly  reports on participation and issuance data and financial information. FNS  has also established procedures for recipients and retailers, penalties and  disqualifications for fraud, and procedures for clients and retailers who do  not adhere to the procedures.
To ensure that the program is in compliance and the services are being  delivered appropriately, FNS conducts on-site reviews. These reviews are  scheduled annually but may occur less often. Program reviews were  conducted in 1995, 2001, and 2004. The last financial management review  was conducted in 2003.
section_title: Performance Evaluation
paragraphs: FNS officials reported that they generally find that the American Samoa  Food Stamp Program delivers assistance to the appropriate recipients. FNS  officials reported that the program operations have improved since the  implementation of an automated system in August 2001. However, during  an on-site review of the Food Stamp Program in April 2004, the FNS  Program Manager found some instances in which file certification  procedures for granting eligibility were not adequately documented. The  FNS reviewer reported that FNS made recommendations to the American  Samoa Food Stamp Program staff to improve documentations and adhere  to the guidelines set forth in the MOU.
The Food Stamp Program Director in American Samoa believes that the  grant is adequate to serve the number of eligible recipients and that  recipients are happy with the program. During our interview with the  American Samoa Department of Human and Social Services Director and  Deputy Director, officials reported that no long-term assessment of the  program’s effectiveness had been conducted but that they are seeing a  change of diet as a result of the nutritional training that the Food Stamp  Program provides. However, the officials could not document dietary  changes. Moreover, they reported that when they recently surveyed  recipients regarding where they would like to use their coupons, recipients  responded that they would like a chain fast-food restaurant to be added as  one of the program’s authorized vendors. FNS officials responded that  under the current MOU, the American Samoa program staff cannot  authorize the fast-food chain to be a program vendor.
section_title: Local Conditions Affecting Program Delivery or Project Completion
paragraphs: Several local conditions affected the delivery of the American Samoa Food  Stamp Program services. Our interviews with federal and program officials  indicated that the program had an inadequate number of professional staff  to maintain and operate the program’s technology infrastructure, including  databases to manage program services and account for the use of funds.  We also found that other technology barriers affected the delivery of  program services. In addition, because the American Samoa Food Stamp  Program staff consider the local postal system unreliable, they require  applicants and recipients to come to the program offices for all  correspondence regarding their benefits. According to the FNS review in  April 2004, the automated system that processes eligibility and administers  benefits automatically closes cases that are not certified within 30 days of  the initial application but does not generate a letter to inform the applicant.  The FNS review also found that although the System Administrator in  American Samoa is very knowledgeable of the automated system, the staff  has limited programming knowledge essential to designing and  programming detailed reports or enhancing the system to meet all of the  Food Stamp Program’s automation needs. FNS officials reported that  American Samoa program officials are in the process of recruiting a  computer programmer.
section_title: Grant Accountability
paragraphs: Because the American Samoa government did not complete single audits  for fiscal years 1998-2003 within the time frame specified in the Single  Audit Act, overall accountability for the Food Stamp Program was limited.  The program is subject to OMB Circulars A-87, A-102, and A-133, which  contains standards required by the Single Audit Act. The recently released  American Samoa single audit reports for fiscal years 1998-2000 showed  questionable costs of $26,033 for the American Samoa Food Stamp  Program. For example, in fiscal years 1998, 1999, and 2000, the questioned  costs resulted from missing reports and missing support documentation  that auditors cited as a lack of adherence to accountability documentation  procedures. Also, in all 3 fiscal years, because of incomplete or missing  participant files auditors were unable to verify that participants were  eligible to receive benefits or that they did not receive benefits prior to  their approval through the certification process.
Although the March 2003 financial management review by FNS officials did  not find significant problems with internal controls in the American Samoa  Food Stamp Program, the findings in the single audit reports point to  accountability weaknesses in financial management. The financial  management review noted that the program was not in compliance with 7  C.F.R. § 3052, which requires submission of an agency’s single audits;  however, FNS reported only that it would follow up on the completion  status of the missing audits. Additionally, FNS officials reported that as of  July 2004, they had received only one of the three single audit reports for  fiscal years 1998-2000, despite the fact that all three were completed in  August 2003. Federal officials explained that since 1997, when the Federal  Audit Clearinghouse was established, a management decision documents  the agreement between FNS and American Samoa on the proposed  corrective action for single audit findings and the date that the actions will  be completed.
The American Samoa Food Stamp MOU states that any firm or local food  producer that has been disqualified by the American Samoa WIC Program  will automatically be disqualified from the American Samoa Food Stamp  Program for the same period of time. FNS officials said it is difficult to  uncover fraud in retail purchases through the type of management  evaluation reviews conducted by federal Food Stamp Program staff.  Federal program reviewers examine American Samoa Food Stamp retailer  authorization and redemption processes, and adherence to retailer  requirements, and retailer training and monitoring. While these reviews  would not reveal food stamp retailer fraud, since the WIC vendors are also  food stamp vendors, and there have been problems with WIC transactions,  FNS is monitoring food stamp retailers closely. FNS officials told us in  February 2004 that the Food Stamp Program in American Samoa has a  compliance program but that compliance reports are not required by FNS.  They are considering amending the fiscal year 2005 MOU to include a  requirement for compliance reports to be submitted to FNS in addition to  the already required reports. In its April 2004 review, FNS found that Food  Stamp Program staff were diligent in ensuring timely authorizations for  vendors participating in the program. FNS also found that program staff in  American Samoa conducted periodic site visits to vendors and ensured that  vendors that redeemed large numbers of food stamps were monitored and  reported violators were investigated. FNS Food Stamp officials discussed  the problems in the American Samoa WIC Program with Food Stamp  Program staff and found that vendor case files contained copies of  disqualification letters; however, these disqualification letters had not been  enforced by the WIC program officials as of August 2004. Staff  acknowledged that they were aware of the MOU requirement to disqualify  the vendors from the Food Stamp Program once decisions have been made  in the WIC Program.
We visited three stores that were authorized vendors for the Food Stamp  Program, WIC, or both. In our Food Stamp review, we found that one  vendor had not posted the Official Food List (see fig. 10 for an example of  the posted list). We did not conduct a full-scale review of all compliance  requirements, but when we asked store staff about the Food Stamp  procedures, one staff member had difficulty understanding Samoan and  English. Other staff members could name only a few of the procedures on  the checklist in the Food Stamp Program retailer guide, which program  staff had provided us before our visit.
The Food Stamp Programs in the 50 states implemented an electronic  benefit transfer (EBT) system, a point-of-sale system that helps ensure  program compliance. FNS had discussions with American Samoa officials  about the territory’s implementing the system. However, FNS cautioned  that many factors should be considered in determining the feasibility of  implementing an EBT system in American Samoa, including the costs of  the system relative to American Samoa’s resources under the capped grant  award; the state of American Samoa’s automation technology and  resources; the financial and technology limitations of vendors; and the  potential impact of such a system on elderly and disabled recipients.
section_title: U.S. Department of Education Programs in American Samoa
subsections: section_title: Innovative Programs Grants
subsections: section_title: Purpose and Legislation
paragraphs: State and local education agencies are eligible for federal grants and funds  to implement numerous federal education programs. In fiscal years 1999- 2003, under a consolidated grant application, American Samoa applied for,  and received, Innovative Programs grants to support its education  programs. The Innovative Programs grant is designed to assist state and  local education agencies in implementing education reform programs and  improving student achievement. Innovative Programs grant funding  provided by a state education agency to local education agencies can be  used to carry out local innovative assistance programs that may include at  least 27 “activities,” which are identified in the No Child Left Behind Act  (NCLBA). The American Samoa Department of Education reported that it  is both a state education agency and a local education agency because it  acts as a state education agency when performing its federal grant  administration functions but as a local education agency when  implementing and assessing local assistance programs.
section_title: Funding Levels
paragraphs: Table 8 identifies the Innovative Programs grant award amounts to  American Samoa for fiscal years 1999-2003. In fiscal year 2003, the  Innovative Programs grant accounted for about 40 percent of the American  Samoa Department of Education’s total budget (about $40 million). Annual  awards to American Samoa and the other insular areas are based on a  statutory formula for set-asides that allocates up to 1 percent of the total  federal education funds available each year to the 50 states for distribution  to the insular areas, according to their respective need. The American  Samoa Department of Education can draw down awarded grant funds  throughout the year and spend any remaining grant funds during the  following fiscal year. The increase in the Innovative Programs grant award  to American Samoa for fiscal years 2002 and 2003 resulted from the  enactment of the NCLBA. The act authorized a $65 million increase in total  federal appropriations for Innovative Programs grants and parental choice  provisions from fiscal year 2001 to 2002 and a $25 million increase from  fiscal year 2002 to 2003. The NCLBA also permitted consolidated grant  applicants such as American Samoa to transfer up to 50 percent of certain  nonadministrative federal funds to the Innovative Programs grant.
section_title: Activities Supported, Target Recipients, and Basic Accomplishments
paragraphs: For fiscal years 1999-2001, the American Samoa Department of Education  reported that it implemented programs for training instructional staff,  acquiring student materials, implementing technology, meeting the needs  of students with limited English proficiency, and enhancing the learning  ability of students who are low achievers. Similar initiatives were proposed  in American Samoa’s fiscal year 2002 and 2003 consolidated grant  applications, in addition to others (see table 9 for a full list). Under the  Innovative Programs grant rules, American Samoa must spend at least 85  percent of the funds on local innovative assistance programs, whereas up  to 15 percent of the funds may be spent on state education agency  programs and the administration of the Innovative Programs grant. Table 9  shows how the American Samoa Department of Education allocated  Innovative Programs grant funds among its various programs in fiscal year  2003.
In fiscal year 2003, the largest dollar share of local education agency funds  supported local activities such as teacher quality improvement programs,  class size reduction efforts, and the purchase of supplemental instructional  materials. According to the American Samoa Department of Education,  every classroom for kindergarten through eighth grade currently has an  average of about 27 students per teacher. However, the department would  like to reduce the average class size to 15 students per teacher for  kindergarten through third grade and to 20 students per teacher for grades  four through eight, by hiring more fully certified teachers. Teachers may  obtain teaching degrees locally from the American Samoa Community  College or from a University of Hawaii cohort program. The American  Samoa Department of Education reported that the community college  enrolled 600 to 900 students per year from 1999-2002 in its teacher  certification program and that 142 teachers graduated from the Hawaii  cohort program in 1999-2002. However, according to department officials,  teachers are difficult to retain owing to the island’s inability to pay salaries  that are commensurate with the cost of living.
For all fiscal years included in our review, American Samoa used the  Innovative Programs grant to budget for local education agency innovative  assistance programs and costs associated with those programs, such as  payroll, supplies, contractual services, travel, equipment, and indirect  costs. According to the American Samoa Department of Education, various  programs receive local education agency program funds on a per child  basis, with equal allocations for each 5- to 12-year-old child. American  Samoa’s fiscal year 2004 consolidated grant application reported that about  17,000 children aged 5 to 17 years were attending 23 elementary, 6  secondary, and 13 private schools.
section_title: Performance Goals and Accountability Standards
paragraphs: The consolidated grant application form developed by the U.S. Department  of Education (ED) identifies five performance goals, with corresponding  indicators, that apply to all proposed education programs. The form  requires applicants to provide certain minimum information, including  performance “targets” to confirm the state or local education agency’s  program compliance with these five goals. The American Samoa  Department of Education is not specifically required to comply with  NCBLA, but it reported in its fiscal year 2003 grant application that “it has  made the commitment to utilize” some of the performance goals as a  framework for improving education in the territory. In addition, local  assistance programs funded under the Innovative Programs grant must be  (1) tied to promoting challenging academic achievement standards, (2)  used to improve academic achievement, and (3) part of an overall  education reform strategy. According to an American Samoa Department of  Education official, implementing certain aspects of the NCLBA could begin  to tie federal dollars to progress and measurable results for students in  American Samoa.
In 2002, ED began requiring the American Samoa Department of Education  (and state education agencies in the 50 states) to submit reports that  describe how programs implemented under the Innovative Programs grant  have affected student achievement and education quality. State and local  education agencies have the authority to develop the content and format of  their own summaries and evaluations, but each agency must meet certain  reporting requirements. According to ED guidance, local education  agencies must submit annual “evaluations” that include, at a minimum,  information and data on the funds used, the types of services furnished,  and the students served by the programs. State education agencies must  submit an annual statewide “summary” based on the evaluation  information received from the local education agencies.
ED reported that it relies primarily on single audit reports, in addition to its  own financial monitoring, to assess the fiscal accountability of American  Samoa’s Innovative Programs grant. ED’s annual performance report  requires grantees to include information about how grant funds were spent.  Since September 2003, ED has designated American Samoa as a high-risk  grantee and has begun requiring the American Samoa Department of  Education to submit quarterly financial reports.
section_title: Performance Evaluation
paragraphs: We found that local program performance was difficult to evaluate, owing  to yearly variations in the types of programs implemented, variations in  funding levels for the programs that did not change, and variations in the  types of data provided in annual performance reports. The Western  Association of Schools and Colleges (an accrediting commission for  schools in the United States) reported that one of American Samoa’s six  high schools continued to be denied accreditation because of long-standing  issues, including poor teacher qualifications, failure to make certain  improvements in student education programs, and failure to procure  education materials and equipment in a timely manner.
In spite of our inability to determine local program performance, ED's  Office of Elementary and Secondary Education indicated that the American  Samoa Department of Education generally submitted the annual reports on  a timely basis for fiscal years 1999-2002 and that the reports provided some  information about American Samoa's education programs. In addition,  ED’s program managers reported that they have frequent communication  with American Samoa Department of Education officials throughout the  application and reporting process but that on-site reviews of the program  are infrequent: the last ED program review in American Samoa was  conducted in 1991. Officials from ED’s Office of Inspector General (OIG)  visited American Samoa in August 2002 to determine whether allegations of  fraud in its programs warranted additional investigation and audit. The  OIG’s report did not include specific findings on the Innovative Programs  grants. ED officials told us that they visited American Samoa in September  2004.
section_title: Local Conditions Affecting Program Delivery or Project Completion
paragraphs: According to the American Samoa Department of Education, American  Samoa’s remoteness presents challenges in all aspects of implementing the  Innovative Programs grant in American Samoa. For example, transporting  personnel, materials, and supplies to and from the territory is costly and  logistically difficult. Attracting and retaining qualified teachers is also a  problem, given that the average teacher salary in American Samoa is about  $13,000 per year while the cost of living is comparable to that in Hawaii.  Although the American Samoa Community College offers an associate  degree in education, the territory has no institutions of higher education.  Most teachers hired in American Samoa have an associate degree from the  community college.
Another factor affecting education in American Samoa is limited English  proficiency. Most students are formally introduced to English in  kindergarten but are raised speaking Samoan, which has fewer letters in its  alphabet and many fewer words than English. According to the American  Samoa Department of Education’s annual grant application for 2003, at  least 70 percent of all students in kindergarten through twelfth grades have  limited English proficiency.
section_title: Grant Accountability
paragraphs: Because the American Samoa government did not complete single audits  for fiscal years 1998-2003 within the time frame specified in the Single  Audit Act, overall accountability for the Innovative Programs was limited  and ED was unable to ensure fiscal accountability for the grant funds. ED  designated the American Samoa government a high-risk grantee in  September 2003, primarily because of its failure to provide timely single  audit reports. Although the American Samoa Department of Education  submitted annual Innovative Programs grant applications and reports in  fiscal years 1999-2003, we determined that the annual reports did not  contain sufficient detail on program expenditures to demonstrate  accountability for the use of all the grant funds. ED officials report that the  agency is now working closely with the American Samoa Department of  Education to submit quarterly financial reports that describe in more detail  how funds are being used.
section_title: Special Education Grants
subsections: section_title: Purpose and Legislation
paragraphs: The Individuals with Disabilities Education Act (IDEA) is the primary  federal law that addresses the unique needs of children with disabilities,  including, among others, children with specific learning disabilities, speech  and language impairments, mental retardation, and serious emotional  disturbance. Under IDEA, Part B, ED provides grants to states and  outlying areas, including American Samoa, to provide eligible children with  disabilities who are aged 3 through 21 years with a free appropriate public  education in the least restrictive environment to the maximum extent  appropriate.
section_title: Funding Levels
paragraphs: American Samoa relies almost entirely on its IDEA grants to fund its  Special Education Program. Special Education grants to American Samoa  and other outlying areas are allotted proportionately among them on the  basis of their respective need, not to exceed 1 percent of the aggregate  amounts available to the states in a fiscal year, as determined by the  Secretary of Education.
IDEA funds have historically been appropriated every July 1 and remain  available for obligation for 15 months. Under the law, if a state education  agency does not obligate all of its grant funds by the end of the fiscal year  for which the funds were appropriated, it may obligate the remaining funds  during a carryover period of one additional fiscal year. The per student  federal amount includes special education services such as regular and  special education classes, resource specialists, and other related services.  Table 10 shows Special Education Program funds awarded to American  Samoa for fiscal years 1999-2003. Amounts do not reflect carryovers from  prior years.
section_title: Activities Supported, Target Recipients, and Basic Accomplishments
paragraphs: As of January 2004, the American Samoa Department of Education  reported that its Special Education Program was using the IDEA grant to  provide services to slightly more than 1,100 eligible 3- to 21-year-old  students with disabilities and that it was providing the requisite services  to eligible children in the territory.
Under IDEA, federal funds may be used for salaries of teachers and other  personnel, education materials, and related services such as special  transportation or occupational therapy. According to the American Samoa  Department of Education, IDEA funds support all but 1 of the Special  Education Program’s approximately 200 positions. According to ED  officials, IDEA does not prohibit the provision of services to non-U.S.  nationals.
section_title: Performance Goals and Accountability Standards
paragraphs: The Special Education Program in American Samoa is required to  demonstrate that it meets all of the conditions that apply to the 50 states  under IDEA. The main objective of IDEA is to identify each child with a  disability, determine his or her eligibility for special education services, and  provide each eligible student an individualized education program designed  to meet his or her needs. To monitor performance of special education  programs nationwide, ED required two biennial reports for the program  covering school years 1998-1999 and 2000-2001. For 2002 and 2003,  American Samoa was required to submit an annual report that included (1)  a comparison of actual accomplishments to the objectives established for  the reporting period, (2) reasons for any failure to meet the established  objectives, and (3) additional pertinent information including a description  of planned future educational activities. In response to ED’s request,  American Samoa submitted a self-assessment in May 2003 based on ED's  special education monitoring process (Continuous Improvement  Monitoring Process), which was being implemented in 2003.
Federal officials said that they rely primarily on the single audit reports to  determine accountability for IDEA program funds. ED also reported that  although the agency is not currently required to perform on-site reviews of  the Special Education Program in American Samoa or any other insular  area or state, members of ED’s Office of Special Education Programs  conducted an on-site review in September 2004.
section_title: Performance Evaluation
paragraphs: The American Samoa Special Education Division Office submitted the  required biennial and annual performance reports between 1999 and 2003.  The Division Office also submitted the required self-assessment report for  2003. In these reports, American Samoa reported to ED that it was difficult  to measure the progress of its Special Education Program because of data  limitations and because its limited review indicated both progress and  “slippage” in several core IDEA areas, such as general supervision of the  program, provision of transition services, parent involvement, and  provision of a free appropriate public education in the least restrictive  environment.
In 1999, a consultant from the Western Regional Resource Center (a  grantee of ED’s Office of Special Education Programs) was contracted by  the American Samoa Department of Education to conduct a compliance  review of IDEA, as part of its general supervisory authority, by reviewing  eight elementary and secondary schools. The consultant reported that all of  the schools had various problems in preparing, updating, and retaining  students’ individualized education programs. Seven of the eight schools did  not provide a free appropriate public education to all eligible disabled  students in accordance with requirements under IDEA. Four schools failed  to place their special education students in the least restrictive  environment; four schools were out of compliance with procedural  safeguards of the act; and four schools had no mechanisms in place for  identifying children and referring them for an evaluation, conducting an  evaluation for those referred to the program, and determining whether  those evaluated were eligible for services.
In May 2003, an American Samoa special education program steering  committee submitted a self-assessment report of the Special Education  Program to ED. The report indicated that certain aspects of the program  needed improvement in areas such as general supervision, public  awareness and child find, early childhood and secondary transition, and  providing a free appropriate public education in the least restrictive  environment. The steering committee also reported that some aspects of  American Samoa’s Special Education Program complied with IDEA  requirements.
After reviewing American Samoa’s self-assessment, ED’s Office of Special  Education Programs identified program areas that were noncompliant or in  danger of failing to comply with IDEA. For example, American Samoa’s  self-assessment indicated that its Special Education Program had a limited  pool of trained personnel and no physical therapists, occupational  therapists, or social psychologists, chiefly because of a reported freeze on  new hires and new positions in the program. ED also identified  inconsistencies in the program’s stated ability to meet the requirement for  special education students to participate in territory-wide assessments. In  addition, ED found that the program failed to comply with IDEA  requirements for parent participation and interagency coordination in  transition planning and provision of services.
During our visit to American Samoa, we selected 17 individualized  education program files from six elementary and secondary schools that  provide special education services in American Samoa, and we reviewed  them for the requisite content. All requested files were provided, and they  generally included the requisite content. We did not evaluate the quality of  the written content in each individualized education program, although  some student files appeared more comprehensive than others.
IDEA also requires each public education agency to identify all children  with possible disabilities residing in its jurisdiction. For each child  identified, the agency must provide a full and individual evaluation to  determine whether the child has a disability and the nature of the child’s  educational needs, so that an individualized education program can be  developed. IDEA requires the public education agency to initiate a  collaborative planning effort between parents and school officials to  develop this education program and calls for implementing the program as  soon as possible. However, parents, teachers and education officials in  American Samoa reported that the Special Education Division Office was  often slow in responding to requests for services and other resources.
For example, we met one student who was completely deaf in both ears but  had been passed from kindergarten to third grade without being identified  and referred to the Special Education Program for an assessment or  evaluation. In third grade, the student was tested by an audiologist and  confirmed to be deaf, and her principal requested the purchase of hearing  aids to enhance the child’s ability to hear. According to the American  Samoa Special Education Division Office, it did not submit a purchase  order for hearing aids until April 2003, 4 months after the request was  made; as of our visit in March 2004, the hearing aids had not arrived.  Officials from the American Samoa Department of Education’s Special  Education Division Office explained that the hearing aids had not yet  arrived because of a miscommunication with the off-island company from  which the devices were ordered. American Samoa Special Education  officials said that the off-island company did not process the hearing aids  order because it required advance payment, but that the company did not  notify the American Samoan Special Education Division Office officials of  this requirement. As a result, payment was not sent to the vendor and the  hearing aids were not ordered.
section_title: Local Conditions Affecting Program Delivery or Project Completion
paragraphs: One barrier to effective implementation of the Special Education Program  in American Samoa is the limited number of licensed or certified  professionals. At the time of our review, American Samoa’s Special  Education Program had about 200 staff, including program administrators,  teachers, social workers, bus drivers, and other personnel. However,  American Samoa Department of Education officials noted that the program  needs more certified professionals. For example, according to the  American Samoa Special Education Division Office, the program has only  one physical therapist (hired in October 2003) and needs speech  pathologists, occupational therapists, audiologists, psychologists, and  other professionals certified or trained in teaching special education. In  addition, the program had no certified psychologist at the time of our  review. American Samoa reported that because its education program is  supported almost entirely by federal funds, its average dollar allocation per  child is more limited than are allocations in states that subsidize their IDEA  grants with state or local contributions.
section_title: Grant Accountability
paragraphs: Because the American Samoa government did not complete single audits  for fiscal years 1998-2003 within the time frame specified in the Single  Audit Act, overall accountability for the American Samoa Special  Education Program was limited. The single audit reports for fiscal years  1999 and 2000, which were completed in August 2003 stated that the  program did not adequately maintain supporting documents for certain  financial transactions and had questioned costs of more than $18,000 in  1999 and more than $170,000 in 2000. In addition, we found that the Special  Education Program Director and staff had limited awareness of the  program’s fiscal position for at least 2 years. Program funds are controlled  almost entirely by the American Samoa Department of Education.
section_title: U.S. Department of Transportation Programs in American Samoa
subsections: section_title: Airport Improvement Program
subsections: section_title: Purpose and Legislation
paragraphs: The Department of Transportation’s (DOT) Airport Improvement Program  provides federal grants for airport planning and infrastructure development  involving safety, security, environmental mitigation, airfield infrastructure,  airport capacity projects, landside access, and terminal buildings. The  Federal Aviation Administration (FAA), which administers the program,  has identified more than 3,000 airports that are significant to the national  air transportation system and thus eligible to receive Airport Improvement  Program grants. Total funding authorization for the Airport Improvement  Program was $3.4 billion in fiscal year 2003. American Samoa has  participated in the Airport Improvement Program since it began in 1982.
section_title: Funding Levels
paragraphs: Table 11 provides a summary of total FAA Airport Improvement grant  awards to American Samoa during the period of our review.
Distribution of Airport Improvement Program grants is based on a  combination of formula grants and discretionary funds. The amounts of  formula grants for primary airports, which include the main airport in  American Samoa, are based on the number of passenger boardings or a  minimum of $1,000,000 per year in grant funds. For nonhub primary  airports like Pago Pago International, these funds are available in the year  they are apportioned and remain available for 3 fiscal years. Larger airports  have only 2 additional fiscal years to use these funds. Airports compete  with other airports in their region for available discretionary funds. The  American Samoa Department of Port Administration, which operates the  airports, is the grant recipient. Before fiscal year 2004, the department was  not required to provide any matching funds for the first $2 million of the  grant award; above $2 million, the local contribution was 10 percent. For  fiscal years 2004-2007, the department is not required to provide matching  funds for the first $4 million; above $4 million, the required local  contribution will be 5 percent. The department fulfills its matching  requirement with credit for in-kind contributions, such as land or staff time,  because it has no funds to contribute to the projects.
section_title: Activities Supported, Target Recipients, and Basic Accomplishments
paragraphs: American Samoa has three airports, all of which receive Airport  Improvement Program grants. The main airport, Pago Pago International, is  classified by FAA as a commercial service–primary airport and has two  runways, one of which can accommodate large commercial jets. Typically,  eight commercial passenger flights depart Pago Pago International per  week. The other two airports, Fitiuta and Ofu, are very small commercial  service–nonprimary airports that cannot accommodate large commercial  carriers.
Since 1998, Airport Improvement Program grants have been used for  constructing taxiways, extending runways, and rehabilitating existing  runways, taxiways, and shoulders. Maintaining the quality of runways,  taxiways, and shoulders is critical to airport safety; according to airport  officials in American Samoa, the jet engines can suck in debris such as  loose asphalt as if they were “huge vacuum cleaners.” Projects also  included the construction of an “aircraft, rescue and firefighting” training  facility, the purchase of new fire and rescue vehicles (see fig. 11), new  shelters for rescue vehicles, and the installation of perimeter fencing to  improve airport security. Runway safety areas at the airport in Pago Pago  were upgraded to meet FAA standards, providing additional margins of  safety. Construction projects are completed through competitive contracts  with engineering and construction firms.
section_title: Performance Goals and Accountability Standards
paragraphs: The same federal regulations apply to Airport Improvement Program grants  in American Samoa as in the 50 states. Airports must have a 3- to 5-year  capital improvement plan, which identifies the airport’s development  priorities and forms the basis for the grants they request and are awarded  by FAA. FAA works with the airports to develop this plan. FAA views  project completion as the primary performance goal and monitors the  performance of projects primarily through weekly construction progress  reports. An FAA engineer also conducts an on-site inspection of every  project, ideally at the project’s completion. However, according to an FAA  official, such inspections are not always possible because of the cost of  travel from the FAA Airport District Office in Honolulu to American Samoa.
According to the FAA official overseeing Airport Improvement Program  grants in American Samoa, contractors’ monthly claims for reimbursement  represent a key means of assuring project accountability. Additionally, FAA  must approve all contract change orders. Grantees must conform to a  broad range of requirements governing the implementation of project  grants, detailed in the FAA Airport Improvement Program Handbook. The  handbook outlines project eligibility requirements, planning process  guidelines, procurement and contract requirements, project  accomplishment requirements, grant closeout procedures, and audit  requirements. The Airport Improvement Program also relies on single audit  reports to assess accountability for its funds to American Samoa.
Procurements made under the Airport Improvement Program must comply  with required federal contract provisions established by various laws and  statutes. For example, the grantee must ensure that contractors comply  with minimum wage requirements under the Davis-Bacon Act. The FAA  official responsible for American Samoa stated that “Buy America”  preferences apply to the purchase of steel and manufactured products but  not to services, such as engineering, consulting, and construction, that  comprise the bulk of grant expenditures. The official also stated that  American construction firms do not bid on runway pavement projects in  American Samoa, most likely because of costs associated with American  Samoa’s remote location and the relatively small size of the projects  involved. In addition, the official stated that the program does not require  contractors to hire workers from the local labor force, according to the  FAA official.
section_title: Performance Evaluation
paragraphs: According to the FAA official responsible for American Samoa, in fiscal  years 1999-2003, the airports successfully completed projects, paid for with  Airport Improvement Program grants, to improve safety and capacity. The  main runway at Pago Pago International is free of areas with the potential  for foreign object debris, and the taxiway’s repavement is almost  completed. The airport now has the ability to respond to a land accident  with its new aircraft rescue and firefighting vehicles, although maritime  rescue capability does not currently exist.
According to an FAA official, the use of separate DOI Operations and  Maintenance Improvement grants to hire an experienced airport engineer  in 2001 to manage the infrastructure projects contributed significantly to  the effective use of the Airport Improvement Program grants in American  Samoa. Prior to the engineer’s arrival, the airports had difficulty  prioritizing and implementing projects funded with FAA’s Airport  Improvement grants. Because of the engineer’s presence, projects were  completed and contractors were paid on time, according to the FAA  official. These DOI funds, which required a 50 percent local match, were  sufficient to cover the engineer’s salary for 3 years. The engineer’s contract  with the American Samoa Department of Port Administration expired at  the end of June 2004.
section_title: Local Conditions Affecting Program Delivery or Project Completion
paragraphs: American Samoa airport officials reported that because the airports  operate at a loss annually, they have been unable to complement Airport  Improvement Program grant funds, which has slowed the completion of  critical projects. For example, as of July 2004, the airports had not  acquired all needed rescue vehicles, and upgrades of the main runway at  Pago International had to be phased in over several years. Despite  significant progress in upgrading the airport’s infrastructure and rescue  response capability, an American Samoa airport official estimated that the  airport would probably not reach an acceptable standard until 2007, based  on the amount of federal funding available.
An incident at Pago Pago International in August 2003 illustrates the impact  of delays in upgrading the airport runway surface. The main runway had to  close for 2 weeks because of the presence of foreign object debris on the  runway. Hawaiian Air, which provides the only service between Pago Pago  and Honolulu, suspended service after one of its jets took in debris after  landing at Pago Pago, sustaining damage to one of its engines. Service did  not resume until after emergency repairs to the runway, stranding travelers  in American Samoa for 2 weeks.
The airports recently acquired two aircraft rescue and firefighting vehicles,  which are now available for use at Pago Pago International. However, two  additional rescue vehicles are still needed, one each for Fitiuta and Ofu  airports, according to an airport official in American Samoa. At Pago Pago  International, crowded commercial jets arrive and depart despite a lack of  maritime rescue capability. The airports have had to delay acquisition of  this essential rescue equipment because of other priorities for the use of  available grant funds. Future grant funds are to be used to purchase  additional aircraft rescue and firefighting vehicles and a maritime rescue  craft.
According to an American Samoa official, the airport generates relatively  little revenue from passenger facility charges of up to $4.50 per boarding  passenger—a key revenue source for airports in the United States. Because  only eight flights per week depart from Pago Pago International, passenger  facility charges at that airport generate about $300,000 per year, which is  insufficient to support any significant infrastructure upgrades or matching  contributions, the official stated. American Samoa officials pointed out that  foreign airports in the Pacific islands charge as much as $25 per departing  passenger. They roughly estimated that if Pago Pago International were to  charge $20 per departing passenger, it would generate more than $1 million  per year. However, the $4.50 cap is statutory; Congress raised the cap from  $3.00 to $4.50 in FAA’s 2000 reauthorization legislation and elected not to  raise it again in FAA’s 2004-2007 legislation.
section_title: Grant Accountability
paragraphs: Because the American Samoa government did not complete single audits  for fiscal years 1998-2003 within the timeframe specified in the Single Audit  Act, overall accountability for the Airport Improvement Program in  American Samoa was limited. The single audits for fiscal years 1998-2000  did not test Airport Improvement Program expenditures. The 2001 single  audit report tested several of the program’s expenditures and found that  the American Samoa government received federal funds in excess of  allowable federal expenditures and did not meet the matching  requirements of FAA grants. In addition, the auditors found that the  American Samoa government is not in compliance with drawdown  requirements of FAA funds, because the funds requested were not  supported by proper documentation. According to prescribed procedures,  these findings were forwarded to the U.S. Department of Transportation  Inspector General, who would determine whether FAA needed to take  remedial measures to improve the American Samoa Department of Port  Administration’s financial accountability.
The FAA official responsible for American Samoa stated that the Airport  Improvement Program grantee had complied with accountability  requirements. The official reported that, throughout projects, he received  on a timely basis contractors’ monthly requests for reimbursement, as well  as weekly construction progress reports from American Samoa airport  officials. We asked airport officials in American Samoa to document that  the contract for the major runway extension project was bid on  competitively and that FAA reviewed and approved the contract award and  contract change orders. The airport officials complied with this request,  and FAA officials confirmed that they reviewed the bid process and all  change orders. FAA officials also stated that there were no unresolved bid  protests for any projects in American Samoa.
section_title: Federal-Aid Highway Program
subsections: section_title: Purpose and Legislation
paragraphs: DOT’s Federal-aid Highway Program provides funding to state  transportation agencies in the planning and development of an integrated,  interconnected highway system important to nationwide commerce and  travel. The primary focus of the program is funding construction and  rehabilitation of the National Highway System (NHS)—including the  Interstate System—and improvements to public roads, with some  exceptions, such as local roads. In 1970, the Federal-Aid Highway Act  established, among other programs, the Territorial Highway subprogram;  since then, the Federal-aid Highway Program has provided for the  improvement of roads in American Samoa. Although Federal-aid Highway  Program projects in American Samoa are funded under a different statute  than projects in the 50 states, the territory’s projects are administered in  the same manner as those in the states, with the territorial transportation  agency functioning as the state agency. The Department of Transportation’s  Federal Highway Administration (FHWA) Hawaii Division Office  administers three main subprograms in American Samoa under the  Federal-aid Highway Program.
Territorial Highway subprogram. The subprogram’s purpose is to  assist American Samoa and other U.S. territories in constructing and  improving its arterial highways and necessary interisland connectors.  Territorial Highway funds can be used for improvements on all routes  designated as part of the Territorial Highway System.
High Priority Projects subprogram. The subprogram provides  designated funding for specific projects described in law and  determined by Congress to be high priority.
Emergency Relief subprogram. Subprogram funds are intended for the  repair and reconstruction of federal-aid highways and roads on federal  lands that have suffered serious damage as a result of natural disasters  or catastrophic failures from an external cause. The funds may be used  for repair work to restore essential travel, minimize the extent of  damage, or protect the remaining facilities.
section_title: Funding Levels
paragraphs: Table 12 shows total annual funding for federal highway planning and  construction in American Samoa for fiscal years 1999-2003. The table also  shows funding for the Territorial Highway, High Priority Projects, and  Emergency Relief subprograms.
Federal funds account for 100 percent of all federal highway construction  projects in American Samoa. The Territorial Highway subprogram provides  a set amount of $36.4 million each fiscal year for the U.S. territories. Of  this amount, American Samoa and the Commonwealth of the Northern  Mariana Islands each receive 10 percent, while Guam and the Virgin Islands  each receive 40 percent, according to a 1993 allocation formula.  Territorial Highway funds are available for expenditure in the fiscal year in  which they are awarded and up to an additional 3 years. High Priority  Projects and Emergency Relief funds are available for an unlimited period  until they are expended and are subject to an annual obligation limit. The  obligation limit for Emergency Relief funding in the territories as a group is  $20 million.
section_title: Activities Supported, Target Recipients, and Basic Accomplishments
paragraphs: The Federal Highway Administration’s (FHWA) Hawaii Division Office is  responsible for administering the Federal-aid Highway Programs in  American Samoa, while the American Samoa Department of Public Works  typically handles the actual work, including planning and construction  supervision. The FHWA-Hawaii Division Office estimated that it approved,  funded, and initiated a total of 43 projects for the Territorial Highway, High  Priority Projects, and Emergency Relief subprograms in American Samoa  in fiscal years 1999–2003. Officials said that about 19 projects showed signs  of being completed or near completion in March 2004. Many of these  projects were to construct and rehabilitate different segments of the  island’s main road—Route 1—and other village roads. One of the  completed projects we viewed restored a segment of Route 1 with new  pavement, curb and gutter, a new concrete revetment on one side, and an  embankment to protect the road from falling rock on the other side.
section_title: Performance Goals and Accountability Standards
paragraphs: FHWA officials characterized the goal of the Federal-aid Highway Program  in terms of project completion more than performance. The main goal for  federal highway projects in American Samoa is to complete funded  projects listed in American Samoa’s Five-Year Highway Division Master  Plan. The master plan serves as a guidebook for highway development  goals in American Samoa and sets forth sequenced budgets and time  frames for the program’s main priority—to rebuild the heavily trafficked  corridor stretching from American Samoa’s main airport to Breakers Point.
According to a U.S. Department of Transportation (DOT) official, American  Samoa, as a Federal-aid Highway Program grantee, is generally subject to  the same construction and program regulations as a state grantee. The  program’s financial accountability is determined in part by the results of  single audit reports. Officials from the Federal Highway Administration’s  Hawaii Division Office said that it relies on the American Association of  State Highway and Transportation Officials’ greenbook, A Policy on  Geometric Design of Highways and Streets, for technical (construction)  accountability standards. The greenbook contains specific nationwide  design controls and criteria for the optimization and improvement of  highways and streets.
According to DOT officials, the Buy America Act applies to the  procurement of materials such as steel, iron, and other manufactured  goods that are used in all Federal-aid Highway Program construction  projects. The act does not apply to procurement of engineering or other  services. The act requires competitive bidding for contracting, equipment,  and other services. The act also requires that federal-aid highway projects  follow other general provisions for awarding contracts, construction,  prevailing wage rates, nondiscrimination in hiring practices, and other  requirements. In addition, the act stipulates that the Federal Highway  Administration’s Hawaii Division Office comply with general project  approval and oversight requirements, but it defines no specific level of  federal oversight for projects in American Samoa.
section_title: Performance Evaluation
paragraphs: According to DOT officials, projects in fiscal years 1999-2003 were  completed in a timely manner, within federal regulations, and in  accordance federal highway greenbook standards. Officials said that the  level of oversight and control of highway funds to American Samoa is  uniquely determined by the FHWA Hawaii Division Office. Officials stated  that they visit American Samoa frequently (at least once per quarter, not  including emergency events) to ensure that projects continue to meet these  goals. FHWA officials said that federal-aid highway programs in American  Samoa have vastly improved significantly in the past several years.  Nonetheless, officials acknowledged that documentation and certain  organizational capability issues in the American Samoa Department Public  Works have been a problem in the past, although they stated that this  problem has improved as well.
section_title: Local Conditions Affecting Program Delivery or Project Completion
paragraphs: The weather and topography in American Samoa present significant  barriers to highway construction and maintenance. Tropical storms cause  major problems, particularly on Route 1, which runs along the shoreline.  Because some roads throughout the island are built into narrow terraces on  hillsides, storms often wash out roadbeds or cause landslides.
section_title: Grant Accountability
paragraphs: Because the American Samoa government did not complete single audits  for fiscal years 1998-2003 within the timeframe specified in the Single Audit  Act, overall accountability for the Federal-aid Highway Program was  limited. Officials from the Federal Highway Administration’s Hawaii  Division Office indicated that they were confident that federal-aid highway  projects initiated in fiscal years 1999-2003 were carried out according to the  program’s requirements and standards. According to the agency, the  American Samoa government submits invoices or other documentation for  each current bill submitted to the Hawaii Division Office for  reimbursement. However, the delinquent 1998-2001 single audit reports  cited noncompliance with the Davis-Bacon Act. The reports also found that  the program lacked formal procedures regarding the retention of road  sampling results in 1998 and that documentation for expenditures in at  least 3 of those years could not be found.
section_title: U.S. Department of Health and Human Services Programs in American Samoa
subsections: section_title: Medicaid
subsections: section_title: Purpose and Legislation
paragraphs: Medicaid was established in 1965 as a joint federal-state program that  finances health care coverage for certain low-income families, children,  pregnant women, and individuals who are aged or disabled. Medicaid  consists of mandatory health care services, which participating states and  territories must offer to certain categories of beneficiaries, and optional  services, which states and territories can elect to offer under a federally  approved state Medicaid plan. In exchange for their providing Medicaid  services, the federal government pays each state and territory a federal  medical assistance percentage of its Medicaid expenditures, which is  determined through a statutory formula based on states’ per capita income.  Under this formula, states and the District of Columbia are generally  eligible to receive reimbursement for 50 to 83 percent of their Medicaid  expenses with no cap on the federal share. However, under federal law,  American Samoa can receive federal funding for only 50 percent of its  Medicaid expenses up to a maximum dollar ceiling, or cap.
In fiscal year 2001, Medicaid had more than 46 million enrollees  nationwide, and federal and state Medicaid expenditures totaled $228  billion. Medicaid is administered by the HHS Centers for Medicare &  Medicaid Services.
section_title: Funding Levels
paragraphs: Table 13 reflects the federal funding received by American Samoa for its  Medicaid Program since fiscal year 1999.
section_title: Activities Supported, Target Recipients, and Basic Accomplishments
paragraphs: American Samoa operates its Medicaid program under a statutory waiver,  which exempts it from most Medicaid laws and regulations but not the  statutory 50 percent federal match or cap. As a result, American Samoa’s  “Plan of Operations” approved by the U.S. Department of Health and  Human Services (HHS) has only three requirements: federal payments may  not exceed the cap, the federal matching rate may not exceed 50 percent,  and American Samoa must provide all mandatory Medicaid services. All in- patient care and virtually all outpatient care are provided by the territory’s  only hospital, the Lyndon Baines Johnson Tropical Medical Center (LBJ  Hospital).
Unlike the 50 states, American Samoa does not enroll individuals in a  separate Medicaid program based on eligibility determinations. Instead,  Medicaid funds in American Samoa are combined with LBJ Hospital’s other  sources or revenue to support a system of free universal health care. In  lieu of federal Medicaid reimbursements for specific services to enrolled  Medicaid beneficiaries, HHS requires that American Samoa submit an  annual estimate of the number of people “presumed eligible” for Medicaid.  According to its Medicaid plan, American Samoa defines its presumed  eligible population as the share of its population living below the U.S.  poverty level, which in American Samoa is 61 percent, according to the  2000 Census. It is not known what the federal Medicaid expenditure for  American Samoa would be if the Medicaid Program were administered  there in the same manner as in the 50 states. However, according to HHS  officials in Region IX, Centers for Medicare & Medicaid Services  headquarters, and Honolulu, the federal Medicaid expenditure in American  Samoa would probably be greater if there were no statutory funding cap.
section_title: Performance Goals and Accountability Standards
paragraphs: According to its approved Medicaid plan, American Samoa is required to  provide standard Medicaid mandatory services, which include physician  services; laboratory and X-ray services; inpatient and outpatient hospital  services; medical screening of minors; family planning; nurse-midwife and  certified nurse-practitioner services; nursing facilities for individuals 21  years or older; and home health care for individuals entitled to nursing  facilities. If these services are not available on-island, American Samoa is  required to make arrangements for them to be provided off-island.
In addition to meeting approved Medicaid plan requirements, American  Samoa must also ensure that LBJ Hospital, American Samoa’s only hospital  facility and a provider of the territory’s Medicaid services, complies with  certain Medicare hospital requirements. Specifically, HHS requires  hospitals receiving payment under Medicaid to meet hospital conditions of  participation established under the Medicare Program. These conditions  are required by the Social Security Act and are intended to protect patient  health and safety and ensure that high-quality care is provided. To assess  LBJ Hospital’s compliance with these conditions, HHS conducts an on-site  survey about every 3 years.
Further, HHS requires the American Samoa Medicaid Program to submit  both an annual budget request and quarterly expenditures reports. In  addition, American Samoa must submit its annual estimate of the  presumed eligible Medicaid population, which HHS must approve before  awarding Medicaid funds. HHS also relies on single audit reports to assess  accountability for the federal Medicaid funds provided to American Samoa.
section_title: Performance Evaluation
paragraphs: No data showing whether all required Medicaid services were being  provided to the eligible population, on- or off-island, or indicating the  quality of care were available for the period of our review. HHS officials  stated that they had some assurance that a minimum standard of care was  provided, because, as a participant in the Medicaid Program, LBJ Hospital  must meet Medicare certification standards to participate in Medicare and  Medicaid. However, federal and American Samoan officials also  acknowledged that the hospital, which was built in the late 1960s, has  struggled to meet the conditions of participation and to provide adequate  health care.
section_title: Local Conditions Affecting Program Delivery or Project Completion
paragraphs: The quality of health care in American Samoa, supported partially by  Medicaid funds, depends largely on the standards of care at LBJ Hospital.  However, the hospital must contend with an inadequate facility, a lack of  qualified medical staff, budget constraints, and American Samoa’s remote  location.
subsections: section_title: Inadequate Facility
paragraphs: LBJ Hospital persistently suffers from serious fire-safety code deficiencies,  which threaten its ability to maintain its Medicare certification. HHS has  conducted on-site Medicare certification surveys of the hospital every few  years, most recently in November 2003. The hospital has failed to correct  its fire-safety problems despite formal threats by HHS, beginning in 1993, to  terminate its certification. The 2003 survey cited many of the same  deficiencies identified in earlier surveys conducted in 1997 and 2000,  including a lack of “basic features of fire protection, which are fundamental  to all health care facilities.” The hospital’s primary fire safety code  violations were due to noncompliant smoke and fire detection and alarm  systems, the failure to install automatic sprinklers, and inadequate water  pressure.
In April 2004, the hospital submitted a “plan of corrections,” as required, in  response to the deficiencies cited in the hospital certification survey. The  plan of corrections, which has been approved by HHS, indicated that the  hospital was dependent on annual U.S. Department of the Interior (DOI)  capital improvement grant funds of about $1.5 million annually to address  infrastructure deficiencies cited in Medicare certification surveys. In fiscal  year 2004, the hospital reprogrammed $650,000 of these funds to install a  facility-wide sprinkler system; however, the hospital reported that this  project will not be completed until December 2005. The hospital also  cautioned, “LBJ will continue to face a fixed barrier of time, money and  space in  efforts to renovate the entire campus facility to fire safety  code requirements.”
Although funds from DOI are essential to LBJ Hospital’s ability to address  critical infrastructure deficiencies cited by HHS, the two federal  departments have not formally collaborated on the hospital’s priorities for  using DOI’s capital improvement grants. According to hospital officials, the  DOI capital improvement grants are sufficient to support only one or two  new construction projects per year. The hospital also reported that it uses  these grants for many other hospital facility upgrades beyond those needed  to address deficiencies cited in Medicare certification surveys. During our  visit to the hospital, we found that although the newly renovated areas had  been fitted with automatic sprinklers, the sprinklers were not yet hooked  up or functional. LBJ Hospital officials attributed this situation to  inadequate water pressure.
section_title: Lack of Qualified Staff
paragraphs: LBJ Hospital’s ability to deliver adequate health care was also hampered by  a lack of qualified staff. According to LBJ officials, the hospital has  difficulty attracting U.S.-certified medical doctors and relies mostly on  medical staff that attended medical school in Fiji. The hospital also  suffers from a shortage of nurses. Recent Medicare certification surveys  found that the hospital did not meet minimum standards for 24-hour  nursing services. With only 22 registered nurses available, the hospital  acknowledged that it does not have a large enough nursing staff to cover  every shift on every unit, 24 hours per day, 7 days per week, as the standard  requires. LBJ Medical Center Authority officials stated that they have  installed incentive programs to try to attract medical doctors and  registered nurses but that the relatively low salaries and the territory’s  remote location make it difficult to attract qualified staff. The hospital also  had unmet needs for medical technicians such as radiology and operating  room technicians.
section_title: Budget Constraints
paragraphs: LBJ Hospital’s ability to upgrade its facility and hire needed staff is severely  hampered by chronic budget deficits and outstanding debt, according to  hospital officials. Key local and federal financial support for the hospital  has either decreased or remained constant. The hospital’s annual subsidy  from the government of American Samoa has dropped from about $8.1  million in fiscal year 1998 to about $5.3 million in fiscal year 2003. Since  1998, the DOI has directly provided LBJ Hospital with about $7.8 million  annually from its government operations grant. This amount has not been  adjusted for inflation. Although its federal Medicaid funding has increased  over time to cover the cost of inflation, HHS and American Samoa Medical  Center Authority officials reported that the cap on the funding probably  results in a smaller federal contribution than American Samoa would  receive if it were funded in the same way as the 50 states.
According to a hospital official, patient revenues increased during fiscal  years 1998-2003; however, much greater increases are needed if the  hospital cannot identify other sources of revenue. The Medical Center  Authority has proposed a plan to charge patients higher fees to cover about  20 percent of the cost of their medical care. However, hospital officials  believe that passing local legislation to authorize the increases would be  difficult, since the public views free medical care as a free service or  entitlement. Currently, the hospital charges a nominal facility fee of $5 per  outpatient visit and $20 per day for inpatient stays. The hospital charges  nonresidents $10 for outpatient visits and $100 per day for inpatient stays.
section_title: Remote Location
paragraphs: American Samoa’s remote location also hampers the delivery of medical  care. Costs of importing supplies are high and, as stated, attracting  qualified medical and other personnel is difficult. Medical care not  available in the territory must be provided off-island at a much higher cost.  For example, patients in need of long-term care must be moved to nursing  homes off the island, usually in Hawaii or California. In fiscal years 2001- 2003, the hospital reported that the average cost of care referred off-island  averaged over $2 million per year—about 8 percent of the hospital’s total  expenses.
section_title: Grant Accountability
paragraphs: Because the American Samoa government did not complete single audits  for fiscal years 1998-2003 within the time frame specified in the Single  Audit Act, overall accountability for Medicaid funding was limited.
Medicaid expenditures were not included in the American Samoa’s single  audits for fiscal years 1998-2001, because they were included in LBJ  Hospital’s financial statements; however, an independent audit of the  hospital’s financial statements for fiscal year 2001 found significant  problems. The hospital had difficulty locating documentation to support its  accounting records and lacked adequate evidential matter to support a  number of recorded transactions. Because of this and other problems, the  auditor was unable to express an opinion on the financial statements  printed in the audit. In addition, in reviewing compliance with internal  controls, the auditors found several instances of noncompliance that they  considered to be reportable conditions and material weaknesses. An  independent audit of LBJ Hospital for fiscal years 1998-2000 found similar  problems, which also resulted in the auditor’s inability to express an  opinion on the financial statements for those years.
section_title: Head Start
subsections: section_title: Purpose and Legislation
paragraphs: The purpose of the Head Start Program is to promote school readiness by  providing comprehensive services designed to foster healthy development  in 3- to 5-year-old children from low-income households. The program,  created in 1965, is administered by the HHS Head Start Bureau,  Administration on Children, Youth and Families, Administration for  Children and Families. Grants are awarded by the HHS regional offices.
Federal appropriations for the Head Start Program nationwide have grown  substantially in recent years, from $1.552 billion in fiscal year 1990 to  $6.668 billion in fiscal year 2003. The expansions have been used to  increase the number of children served and provide “quality improvement”  activities. Funds to grantees are awarded at the discretion of HHS from  state allocations determined by a formula set forth in law after set-aside  provisions have been applied. Payments to the U.S. territories of Guam,  American Samoa, the Commonwealth of the Northern Mariana Islands, and  the Virgin Islands are not to exceed one-half of 1 percent of the total annual  appropriation.
section_title: Funding Levels
paragraphs: Table 14 shows annual grants to the Head Start Program in American  Samoa during the period of our review.
During the annual grant award process, HHS regional offices communicate  to Head Start grantees their level of funded enrollment. For American  Samoa’s Head Start Program, known as Early Childhood Education, HHS  set the enrollment level for fiscal year 2003 at 1,532 funded slots. The  annual grant award includes a base amount to cover basic operating  expenses, plus additional funds such as cost of living adjustments and  quality improvements, which are included in the base amount for the next  fiscal year. A grant award may also include nonrecurring funds for training  and technical assistance and for program improvements such as new  facilities. According to an HHS official, funds may be carried over for 1  year. The Head Start Program in American Samoa typically does not carry  over any funds, with the recent exception of some supplemental grant  funds used for construction of new facilities.
section_title: Activities Supported, Target Recipients, and Basic Accomplishments
paragraphs: Head Start grantees provide a range of individualized services in the areas  of education and early childhood development; medical, dental, and mental  health; nutrition; and parent involvement. The targeted population is 3- to  5-year old children from low-income families. American Samoa has had a  Head Start Program for more than 30 years. Early Childhood Education, the  territory’s only Head Start grantee, is part of the American Samoa  Department of Education. Program officials report that they had 54  classrooms and 111 classroom instructors as of March 2004. (Fig. 12 shows  a Head Start classroom.) According to Early Childhood Education officials,  there are more eligible children in American Samoa than available slots;  however, the program serves virtually all of the children who apply for it.  Not all eligible children apply or remain enrolled throughout the year. Some  children start each year on a waiting list but are eventually able to  participate because of attrition.
section_title: Performance Goals and Accountability Standards
paragraphs: The Head Start Program in American Samoa is subject to the same goals,  standards, and oversight requirements as Head Start Programs in the 50  states, according to HHS officials. Head Start grantees must adhere to a set  of performance standards required in federal regulations. The  performance standards define the services that grantees are to provide to  the children and the families they serve and constitute the Head Start  Program’s expectations and requirements that grantees must meet. The  performance standards cover five service areas including services for  children with disabilities; education (i.e., classroom instruction); building  family and community partnerships; health, including medical, dental, and  mental health screening as well as nutrition and safety; and program  management and operation.
The Head Start Act and accompanying regulations require the HHS Head  Start Bureau to conduct an on-site review every 3 years to ensure that  performance standards are met. The grantee must respond in writing with a  plan for correcting any findings of noncompliance with federal standards.  In addition to undergoing the on-site reviews, grantees are required to  submit an annual “Program Information Report” that tracks program  characteristics and performance data.
Several processes exist to ensure the financial accountability of the  national Head Start Program. First, an HHS fiscal analyst completes an  annual checklist for assessing a grantee’s financial accountability and  makes a recommendation for approving funding to the grantee. Second, the  grantee’s budget figures are included in the annual application, which the  fiscal analyst reviews to make sure that they are allowable. The grantee  must have an approved indirect cost rate and must certify that  administrative costs do not represent more than 15 percent of the total  approved costs of the program. Third, the single audit reports test for  accountability of the program. Fourth, quarterly financial status reports  must be sent by the grantee to the HHS in Region IX. Finally, during HHS’s  triennial, on-site monitoring review, a fiscal analyst reviews the program to  ensure that annual audits are up to date and that financial management  systems, inventory, and procurement processes include required elements.
section_title: Performance Evaluation
paragraphs: Data were not available to assess whether the goal of improving low- income children’s readiness for school has been achieved. However, in its  most recent triennial on-site monitoring review, HHS found that Early  Childhood Education “operates a very high quality Head Start program.”  Additionally, HHS officials in Region IX highlighted progress made by the  grantee in constructing modern, new classroom facilities with the help of  supplemental grant funds.
In May 2003, a team of nine participated in a weeklong review to assess the  degree to which services were implemented according to Head Start  Performance Standards. The review found that the program provided most  required services, and it cited strong community partnerships and a high  level of parent involvement and support for the program. Additionally, the  review highlighted the literacy program, which utilized locally designed  curriculum and materials that incorporated native culture, community, and  environment as well as family traditions. Part of the success of this literacy  program, according to the review, was attributable to the use of a  community lending library and a partnership with a community-based  organization, called “Read to Me Samoa,” to promote child and family  literacy by emphasizing both English and Samoan languages as well as  cultural traditions. The review also found that the Early Childhood  Education Program implements a model oral health program, in  partnership with LBJ Hospital, in which virtually all children receive dental  screenings and follow-up treatment.
HHS officials in Region IX also highlighted the tremendous improvements  in the quality of the classroom facilities owing to the help of supplemental  grant funds. Seven new facilities providing a total of 38 classrooms devoted  exclusively to Head Start either have been completed or are in the process  of being constructed, according to an American Samoa official. Additional  facilities are planned, depending on the future availability of Head Start  grant funds. During our visit to American Samoa, we toured several Early  Childhood Education classrooms, including those in two of the newer  facilities. The classrooms were spacious, well lit, and well ventilated. The  addition of these facilities will enable several classes previously held in  village homes to move into a modern institutional setting. One of the new  facilities has enabled children to be moved from overcrowded classrooms  in eight private homes into a modern institutional setting, according to  Early Childhood Education officials. Currently, the program relies on 19  village homes and 13 elementary schools to provide classrooms.
section_title: Local Conditions Affecting Program Delivery or Project Completion
paragraphs: Although HHS officials viewed the Early Childhood Education Program  favorably, some challenges remain. Early Childhood Education is unable to  meet the performance standards for providing mental health services to  children and their families, and adequate playground space with secure  perimeter fencing is lacking. Additionally, a language barrier poses  additional challenges for assessing children and acquiring curricular  materials. Some of these challenges are as follows:  American Samoa does not have mental health professionals available to  enable the Early Childhood Education Program to fulfill the HHS  performance standard of providing a “comprehensive mental health  program that provides prevention, early identification and intervention.”    Because of this lack of access to mental health professionals, the  program has only requested supplemental training and technical  assistance for a consultant to provide training and awareness to Early  Childhood Education staff and parents on mental health.
Early Childhood Education officials stated that their priority for the use  of supplemental grant funds is to continue to build additional  classrooms, which leaves no funds for adequate playgrounds or  perimeter security fencing.
Head Start has a new requirement for assessing the educational  achievement of children enrolled in the program; however, the  assessment tool is not available in Samoan, the primary language in  Early Childhood Education classes. Additionally, because very few  curricular materials are available in Samoan, the program must devote  additional resources to creating curricular materials locally.
section_title: Grant Accountability
paragraphs: Because the American Samoa government did not complete single audits  for fiscal years 1998-2003 within the time frame specified in the Single  Audit Act, overall accountability for the Head Start Program was limited.  Officials from HHS Region IX stated that the grantee met the region’s  financial reporting requirements, but they cited the program for the lack of  governmentwide single audits. Although the triennial on-site review team  includes a fiscal analyst to review the program’s fiscal management, HHS  officials explained that this review does not rise to the level of a detailed  audit. When the May 2003 on-site review was conducted, the reviewers  pointed out that a single audit for federal grants to American Samoa had  not been conducted since 1997. HHS accepted the grantee’s response that  efforts were under way by the American Samoa government to come into  compliance with the Single Audit Act. After the May 2003 review, the  American Samoa government completed single audits for fiscal years 1998- 2000 but did not test expenditures in the Head Start Program, according to  HHS officials.
section_title: Federal Grants Process in American Samoa
paragraphs: Most federal  grant accounts  are managed  through  American Samoa  government  Department of  Treasury. requests use   of funds. invoices and  receiving   reports to  Treasury.
Samoa Budget  Office and  TOFR verify  balances for  their respective  grant accounts. reconciles  invoices with  grant funds  and issues  payment to  vendors.
Samoa Office  of Procurement  handles  requests for  goods and  services if  competitive  bidding is  necessary.
TOFR grantees  submit invoices  and receiving  reports to TOFR  for payment.
Treasury, TOFR,  and independent  authorities'  financial reports  are merged  together into the  American  Samoan  Government's  Comprehensive  Annual Financial  Report (CAFR).
Annual single  audit reports  include  schedule of  federal  expenditures  for nearly all  federal awards  managed by  Treasury,  TOFR, and  independent  authorities.
Independent  authorities   work through own  procurement  system.
Independent  authorities   use their own  payment systems.
ASG Department of Treasury handles large number of grant accounts.
Fewer grant accounts are established through TOFR and independent authorities.
Independent authorities, such as the Lyndon Baines Johnson Tropical Medical Center, the American  Samoa Power Authority, and the American Samoa Community College, operate semiautonomously  from the American Samoa government.
section_title: Comments from the Department of the Interior
paragraphs: The following are GAO’s comments on the Department of the Interior’s  letter dated October 28, 2004.
subsections: section_title: GAO Comments
paragraphs: 1. We did not refer to any cultural biases in our report. The only use of the  word “cultural” is in the context of Head Start’s teaching cultural  traditions. Neither did we refer to political obstacles. We did note that  hospital officials stated that passing local legislation to increase fees  would be difficult.
2. See page 21. 3. See footnote 13, page 47, appendix II. 4. DOI implies that we assessed it as having “failed to act” in response to  the American Samoa government’s noncompliance with the Single  Audit Act. In fact, we judged that DOI was “slow to act” (see pp. 28-31).  We recognize the department’s long-standing struggle for accountability  in the insular areas; our report refers to most of the measures that DOI  has taken to improve accountability in American Samoa. However, as  we note in the report, DOI did not set forth a schedule for American  Samoa to comply with the Single Audit Act until 2002—almost 3 years  after the due date for the fiscal year 1998 report. 5. DOI asserts that it has taken all available actions short of cutting off  funds in a high-risk status declaration. It further argues that a high-risk  status declaration would imperil funding from other agencies to  American Samoa. However, a high-risk declaration does not mean an  immediate suspension of U.S. funding. Our recommendation is not that  DOI alone declare American Samoa a high-risk grantee, but rather that  the federal agencies coordinate a response to lax accountability in  American Samoa. Improving federal oversight and monitoring will  improve the efficiency and accountability of programs in American  Samoa, to the benefit of most American Samoans.
section_title: Comments from the Department of Health and Human Services
paragraphs: The following is GAO’s comment on the Department of Health and Human  Service’s letter dated November 18, 2004.
subsections: section_title: GAO Comment
paragraphs: 1. The Centers for Medicare & Medicaid Services of the Department of  Health and Human Services states that it works with American Samoa  to ensure that Medicaid budget and expenditure reports are completed  timely and accurately and that it has experienced no significant  problems. However, our discussion in appendix VI of accountability at  LBJ Hospital—the primary provider of medical services in American  Samoa and the primary recipient of Medicaid funds to American  Samoa—raises questions about internal controls at the hospital. The  hospital’s auditor for fiscal years 1998-2000 was unable to express an  opinion, because the hospital declined to present any statements of  cash flow.
section_title: Comments from the American Samoa Government
paragraphs: The following are GAO’s comments on the American Samoa Government’s  letter dated November 5, 2004.
subsections: section_title: GAO Comments
paragraphs: to eliminate duplicate reporting and monitoring. As we note on page 31,  ED has already declared American Samoa a high-risk grantee and has  implemented increased reporting. ED provides almost 18 percent of the  grant dollars we reviewed. ED provides several other grants that were  not included in this review.
section_title: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Eugene Beye, Howard Cott,  Adrienne Spahr, Ann Ulrich, Reid Lowe, Mark Dowling, and Mark Braza  made significant contributions to this report.