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Analysis: GAO Report Finds Lack of Fiscal Accountability in Island Territories


Dec. 23, 2006 — A recent Government Accountability Office (GAO) report tackles the general inability of U.S. island territories to handle government finances adequately.
In its report, entitled "U.S. Insular Areas: Economic, Fiscal, and Financial Accountability," the GAO had two choices: try to effect real reform or simply do its job without causing too much trouble. As usual, the agency chose the latter course.
The resulting report tells a grim story, relating that the four island territories (the Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands) routinely can't handle either their own or federal funds adequately. The audits are routinely late and/or qualified (i.e. the auditors find gaps in the accounting and say so).
This is an important subject, but GAO, the Congressional watchdog agency, as is its wont, manages to hide any interesting stories it uncovers while providing the blandest of recommendations for reform.
Further, the whole report is an excellent (i.e. dreadful) example of writing-by-committee. Any interesting ideas, or examples, or alternatives policies are quickly edited out by an all-too-cautious bureaucracy. (I have been at these governmental sessions where the lawyers and the accountants and the cautious types delete every bit of color from the report that they are scrutinizing.)
Such reports need not be deadly dull. The 9/11 Commission report, for instance, of about a year ago, was both hard-hitting and beautifully written. Specific investigations of specific problems often come up with colorful accounts of wildly expensive dinner parties, or needless trips to exotic locations charged to government agencies. This kind of specificity stirs voters and other decision-makers and often gets things done.
But the GAO will have none of that. In this report, the agency does even not take the baby step connecting inadequate accounting to fraud and waste the best way to avoid wasting government money is to track down how it is spent. Instead the GAO offers such juicy tidbits as listing the "Omission of financial data of the Roy L. Schneider Hospital in the public benefit corporations column," whatever that is.
How much is missing in the hospital's account, and who benefitted, is not discussed in this instance, and, in fact, there are no summary numbers either, totaling the heavy costs of financial sloppiness on the part of the island governments.
The recommendations are similarly unremarkable. For example, they call on the U.S. Department of Interior to: "1) coordinate with other federal grant-making agencies … 2) conduct periodic evaluations of the Department's Office of Insular Affairs conferences and business-opportunity missions… 3) develop a framework for conducting site visits …etc."
The second of these recommendations, I must say, is a good one; the department, under the second Bush Administration, is sure that once the market gets to know the islands, all economic problems will be solved, and thus it puts on a series of expensive conferences to try to get business types to invest in the islands.
GAO is not impressed by these activities and notes that a heavy percentage of those attending these functions are government officials, traveling, often thousands of miles, at the expense of some government agency.
If the GAO was really interested in shaking up these long-standing financial control problems it might have made more robust recommendations. These two, for instance.
A harsh approach
A government agency that does not produce a "clean" (i.e. non-problematic) audit on time loses half of the next year's federal financing the first time it happens. The second time it happens it loses the entire year's funding, with no hopes of ever recovering those lost federal dollars.
This would cause island governors and cabinet members to pay serious attention to financial accounting matters.
A milder approach
If the islands' lack of both skilled labor and financial resources help lead to financial sloppiness, as the GAO indicates in this report, how about using a Peace Corps approach to the problem? One could create a program for experienced governmental financial managers, including about-to-retire GAO auditors, and dispatch them to responsible management positions in island governments for a period of say two or three years with Uncle Sam paying their full salaries. (These borrowed managers would face the loss of their jobs in the sun if they tolerated troublesome financial practices and they would not be protected by island-based family or political ties.)
Maybe not politically correct but probably effective.
If you want an unstimulating, long, dull read just before bedtime, go to the GAO website and then use the search engine to find reports on U.S. Insular Affairs.
Make sure your printer has plenty of paper in it because it is 84, single-spaced pages.
Editor's Note: Author David North, a resident of Arlington, Va., worked for several federal agencies for a number of years.


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