[Audit Report on the Legislature Renovation Project, Legislature of American Samoa, American Samoa Government]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 98-I-653

Title: Audit Report on the Legislature Renovation Project, Legislature
       of American Samoa, American Samoa Government

Date:  August 28,1998




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U.S. Department of the Interior
Office of Inspector General






AUDIT REPORT


LEGISLATURE RENOVATION PROJECT,
LEGISLATURE OF AMERICAN SAMOA,
AMERICAN SAMOA GOVERNMENT


REPORT NO. 98-I-653
AUGUST 1998






MEMORANDUM


             TO:  The Secretary

           FROM:  Richard N. Reback
                  Acting Inspector General

SUBJECT SUMMARY:  Final Audit Report for Your Information - "Legislature
                  Renovation Project, Legislature of American Samoa, American
                  Samoa Government" (No. 98-I-653)


Attached for your information is a copy of the subject final audit report.  The objective of the
audit was to determine whether funds for the renovation work on American Samoa
Legislature buildings were used in an efficient and effective manner and were properly
accounted for and controlled in accordance with applicable laws and regulations.

We concluded that the Legislature did not use funds appropriated for a building renovation
project effectively and efficiently and in accordance with applicable laws and regulations.
Specifically, the Legislature did not procure contractor services and materials competitively
for the initial repair of the roof on the Senate and House Chambers and then significantly
expanded the scope of the renovation project through the issuance of eight change orders.
In addition, the Legislature did not verify the accuracy or reasonableness of labor and
material costs claimed on contractor invoices and did not ensure that the renovation work
was inspected for compliance with the American Samoa Building Code.

These conditions occurred because the Legislature did not have adequate written procedures
for procuring contractor services in accordance with the American Samoa Annotated and for
planning and managing construction projects.  As a result, the Legislature (1) had little
assurance that it received full value for the $1,001,638 paid for contractor services,
construction materials, and equipment; (2) paid at least $20,036 more for roofing materials
than was necessary; (3) overspent project appropriations by at least $211,025; and (4) had
little assurance that the renovated Legislature buildings were in full compliance with building
code requirements.

Based on the Legislature's response to the report's five recommendations made to improve
the Legislature's internal procedures for managing renovation and construction projects for
Legislature buildings, we considered three recommendations resolved and requested
additional information for the remaining two recommendations.

If you have any questions concerning this matter, please contact me at  (202)  208-5745  or
Mr. Robert J. Williams, Assistant Inspector General for Audits, at (202) 208-4252.


Attachment






                                                                      N-IN-AMS-006-97



Honorable Lutu Tenari S. Fuimaono
President of the Senate
Legislature of American Samoa
P.O. Box 855
Pago Pago, American Samoa  96799


Subject:  Audit Report on the Legislature Renovation Project,
          Legislature of American Samoa,
          American Samoa Government (No. 98-I-653)


Dear Senator Fuimaono:

This report presents the results of our review of the Legislature renovation project,
Legislature of American Samoa, American Samoa Government. The objective of the audit
was to determine whether the funds for the renovation work on the Legislature buildings
were used in an efficient and effective manner and were properly accounted for and
controlled in accordance with applicable laws and regulations.

We found that the Legislature did not use funds appropriated for the renovation project
effectively and efficiently and in accordance with applicable laws and regulations.
Specifically, the Legislature did not procure contractor services and materials competitively
for the initial repair of the roof on the Senate and House Chambers, and it significantly
expanded the scope of the renovation project through the issuance of eight change orders
during fiscal years 1995 and 1996.  In addition, the Legislature did not verify the accuracy
or reasonableness of labor and material costs claimed on contractor invoices and did not
ensure that the renovation work was inspected for compliance with the American Samoa
Uniform Building Code.  As a result, the Legislature (1) had little assurance that it received
full value for the $1,001,638 paid for contractor services, construction materials, and
equipment; (2) paid at least $20,036 more for roofing materials than was necessary; (3)
overspent project appropriations by at least $211,025; and (4) had little assurance that the
renovated Legislature buildings were in full compliance with building codes.

To correct these conditions, we recommended that you, as the President of the Senate, and
the Speaker of the House of Representatives (1) develop and implement written procedures
to ensure that all procurements are made in accordance with the American Samoa Code
Annotated; (2) amend the Rules of both the Senate and House to establish a joint committee
for the purpose of periodically identifying the renovation and repair needs of the
Legislature's facilities; (3) request that the Director of the Department of Public Works
review the most recent invoice submitted by the contractor to determine whether it is
reasonable and reflects the costs incurred by the contractor for the renovation of the Senate
and House Chambers; (4) amend the Rules of both the Senate and House to require all
Legislature renovation and construction work to be managed and inspected by the
Department of Public Works; and (5) request that the Director of Public Works inspect the
renovated Legislature facilities to determine whether the construction work is in compliance
with the American Samoa Uniform Building Code.

In the July 10, 1998, response (Appendix 4) to our draft report from the Speaker of the House
of Representatives, the Legislature concurred with three recommendations (Nos. A.1, B.1,
and B.2) and nonconcurred with two recommendations (Nos. B.3 and B.4).  Based on the
response, we consider Recommendations A.1, B.1, and B.2 resolved but not implemented.
Accordingly, these three recommendations will be referred to the Assistant Secretary for
Policy, Management and Budget  for tracking of implementation.  Although the Legislature
nonconcurred with Recommendations B.3 and B.4, the Legislature sufficiently addressed the
intent of the recommendations.  However, additional information is needed for these
recommendations (see Appendix 5).

The Inspector General Act, Public Law 95-452, Section 5(a)(3), as amended, requires
semiannual reporting to the U.S. Congress on all audit reports issued, the monetary impact
of audit findings (Appendix 1), actions taken to implement audit recommendations, and
identification of each significant recommendation on which corrective action has not been
taken.

In view of the above, please provide a response, as required by Public Law 97-357, to this
report by September 30, 1998.  The response should be addressed to our Pacific Office, 415
Chalan San Antonio, Baltej Pavilion, Suite 306, Tamuning, Guam 96911.  The response
should provide the information requested in Appendix 5.

We appreciate the assistance of officials of the American Samoa Legislature in the conduct
of our audit.

                                                              Sincerely,



                                                              Richard N. Reback
                                                              Acting Inspector General






                                                                        N-IN-AMS-006-97



Honorable Mailo Sao T. Nua
Speaker, House of Representatives
Legislature of American Samoa
P.O. Box 485
Pago Pago, American Samoa  96799


Subject:  Audit Report on the Legislature Renovation Project,
          Legislature of American Samoa,
          American Samoa Government (No. 98-I-653)

Dear Speaker Nua:

This report presents the results of our review of the Legislature renovation project,
Legislature of American Samoa, American Samoa Government. The objective of the audit
was to determine whether the funds for the renovation work on the Legislature buildings
were used in an efficient and effective manner and were properly accounted for and
controlled in accordance with applicable laws and regulations.

We found that the Legislature did not use funds appropriated for the renovation project
effectively and efficiently and in accordance with applicable laws and regulations.
Specifically, the Legislature did not procure contractor services and materials competitively
for the initial repair of the roof on the Senate and House Chambers, and it  significantly
expanded the scope of the renovation project through the issuance of eight change orders
during fiscal years 1995 and 1996.  In addition, the Legislature did not verify the accuracy
or reasonableness of labor and material costs claimed on contractor invoices and did not
ensure that the renovation work was inspected for compliance with the American Samoa
Uniform Building Code.  As a result, the Legislature (1) had little assurance that it received
full value for the $1,001,638 paid for contractor services, construction materials, and
equipment; (2) paid at least $20,036 more for roofing materials than was necessary; (3)
overspent project appropriations by at least $211,025; and (4) had little assurance that the
renovated Legislature buildings were in full compliance with building codes.

To correct these conditions, we recommended that you, as the Speaker of the House of
Representatives, and the President of the Senate (1) develop and implement written
procedures to ensure that all procurements are made in accordance with the American Samoa
Code Annotated; (2) amend the Rules of both the Senate and House to establish a joint
committee for the purpose of periodically identifying the renovation and repair needs of the
Legislature's facilities; (3) request that the Director of the Department of Public Works
review the most recent invoice submitted by the contractor to determine whether it is
reasonable and reflects the costs incurred by the contractor for the renovation of the Senate
and House Chambers; (4) amend the Rules of both the Senate and House to require all
Legislature renovation and construction work to be managed and inspected by the
Department of Public Works; and (5) request that the Director of Public Works inspect the
renovated Legislature facilities to determine whether the construction work is in compliance
with the American Samoa Uniform Building Code.

In the July 10, 1998, response (Appendix 4) to our draft report from you, as the Speaker of
the House of Representatives, the Legislature concurred with three recommendations (Nos.
A.1, B.1, and B.2) and nonconcurred with two recommendations (Nos. B.3 and B.4).  Based
on the response, we consider Recommendations A.1, B.1, and B.2 resolved but not
implemented.  Accordingly, these three recommendations will be referred to the Assistant
Secretary for Policy, Management and Budget  for tracking of implementation.  Although the
Legislature nonconcurred with Recommendations B.3 and B.4, the Legislature sufficiently
addressed the intent of the recommendations.  However, additional information is needed for
these recommendations (see Appendix 5).

The Inspector General Act, Public Law 95-452, Section 5(a)(3), as amended, requires
semiannual reporting to the U.S. Congress on all audit reports issued, the monetary impact
of audit findings (Appendix 1), actions taken to implement audit recommendations, and
identification of each significant recommendation on which corrective action has not been
taken.

In view of the above, please provide a response, as required by Public Law 97-357, to this
report by September 30, 1998.  The response should be addressed to our Pacific Office, 415
Chalan San Antonio, Baltej Pavilion, Suite 306, Tamuning, Guam 96911.  The response
should provide the information requested in Appendix 5.

We appreciate the assistance of officials of the American Samoa Legislature in the conduct
of our audit.

                                                              Sincerely,



                                                              Richard N. Reback
                                                              Acting Inspector General






                                      CONTENTS


                                                                      Page

             INTRODUCTION . . . . . . . . . . . . . . . . . . . . . .  1

                  BACKGROUND. . . . . . . . . . . . . . . . . . . . .  1
                  OBJECTIVE AND SCOPE . . . . . . . . . . . . . . . .  2
                  PRIOR AUDIT COVERAGE. . . . . . . . . . . . . . . .  2

             FINDINGS AND RECOMMENDATIONS . . . . . . . . . . . . . .  3

                  A. PROCUREMENT. . . . . . . . . . . . . . . . . . .  3
                  B. PROJECT PLANNING AND MANAGEMENT. . . . . . . . .  7

             APPENDICES

                  1. CLASSIFICATION OF MONETARY AMOUNTS . . . . . . . 14
                  2. STATUS OF FUNDS FOR THE LEGISLATURE RENOVATION
                     PROJECT - OCTOBER 31, 1994, TO OCTOBER 31, 1997. 15
                  3. SCOPE AND COST OF WORK FOR THE LEGISLATURE
                     RENOVATION PROJECT - OCTOBER 31, 1994, TO
                     OCTOBER 31, 1997 . . . . . . . . . . . . . . . . 16
                  4.   LEGISLATURE OF AMERICAN SAMOA RESPONSE . . . . 17
                  5. STATUS OF AUDIT REPORT RECOMMENDATIONS . . . . . 26


INTRODUCTION

BACKGROUND

The Legislature of American Samoa was established by the Constitution of American Samoa
as the third branch of the American Samoa Government.  The Legislature has an 18-member
Senate and a 21-member House of Representatives. Under Section 10.0603 of the American
Samoa Code Annotated, the Legislature has full authority and control over the request,
approval, and disbursement of funds in its budget.  However, Section 12.0208 of the
American Samoa Code Annotated requires that the Legislature procure all supplies,
equipment, and construction services through the Executive Branch's Procurement Office,
which is the central procurement agency for the American Samoa Government.  Both the
Senate and the House of Representatives have their own Rules, which govern their internal
operations. Under the respective Rules, the President controls the operations of the Senate
and the Speaker controls the operations of the House of  Representatives.  The overall fiscal
operations of the Legislature are managed by the Legislative Financial Officer, whose
position was established by Section 2.0601 of the American Samoa Code Annotated.

The Legislature is housed in three buildings that were constructed in 1972: the Senate and
House Chambers, which includes the administrative offices; the Senate Office Building,
which has individual offices for each of the Senators; and the House Office Building, which
has individual offices for each of the Representatives.   In addition, there are two auxiliary
buildings that are used for meetings and social functions of the Legislature: one referred to
as the Guest Fale and the other referred to as the House Coffee Fale.  All of the buildings
except the Guest Fale are connected by a series of covered walkways.

Since 1991, the roofs of all of the buildings in the Legislative complex have needed to be
repaired as a result of damage sustained from two hurricanes.  Accordingly, the Legislature's
fiscal year 1995 budget provided a $300,000 appropriation to repair the roof of the Senate
and House Chambers.  In October 1994, the former President of the Senate and the former
Speaker of the House requested that the Chief Procurement Officer for the American Samoa
Government waive the bidding requirements and allow the award of a sole source contract
to replace the shingles on the roof of the Senate and House Chambers.  The justification for
the waiver stated that the roof needed to be repaired before the first session of the
24th Legislature was convened on January 9, 1995.

Pursuant to a declaration of emergency issued by the Governor, the sole source selection of
a contractor was approved, with an initial contract of  $78,000.  The roofing contractor was
to provide the labor and equipment, and the building materials were to be purchased through
the Procurement Office.  Although contractor payments had to be processed through the
Procurement Office, the Legislature performed the construction management functions of
directing the contractor's work, approving invoices, and initiating contract change orders.
After the roof repairs were started, the Legislature changed the scope of work because the
contractor had determined that the beams supporting the roof needed to be replaced and the
Legislature added other unplanned work on the other buildings in the complex.  As of
October 31, 1997, funding for the project had been increased from $300,000 to $1,415,000
and expenditures totaled $1,626,025, for a cost overrun of $211,025 (see Appendix 2).

OBJECTIVE AND SCOPE

The objective of the audit was to determine whether funds for the renovation work on the
Legislature buildings were used in an efficient and effective manner and were properly
accounted for and controlled in accordance with applicable laws and regulations. To
accomplish our objective, we interviewed officials and reviewed applicable renovation
project financial and administrative records at the American Samoa Legislature, Procurement
Office, Office of the Treasurer, Department of Public Works, and Archive Office. We also
interviewed contractor personnel concerning the renovation project.  Our review covered the
period of October 1994 through October 1997.  However, because the Legislature's
accounting records were incomplete, we were unable to specifically match expenditures for
materials purchased through the Procurement Office to specific work performed during the
renovation project.

The audit was made, as applicable, in accordance with the "Government Auditing
Standards," issued by the Comptroller General of the United States.  Accordingly, we
included such tests of records and other auditing procedures that were considered necessary
under the circumstances.

As part of the audit, we evaluated accounting and management controls over appropriations,
expenditures, and construction management.  We found major internal control weaknesses
in all three areas.  The internal control weaknesses are discussed in the Findings and
Recommendations section of this report.  Our recommendations, if implemented, should
improve the internal controls in these areas.

PRIOR AUDIT COVERAGE

During the past 5 years, the General Accounting Office did not issue any audit reports
pertaining to the American Samoa Legislature. However, in March 1996, the Office of
Inspector General issued the audit report "American Samoa Legislature, American Samoa
Government" (No. 96-I-533), which stated that the Legislature had not procured goods and
services competitively.  During our current review, we found that the Legislature had
developed written procurement procedures but that the draft procedures were not sufficiently
detailed to ensure that the Legislature complied with the procurement requirements set forth
in the American Samoa Code Annotated.

FINDINGS AND RECOMMENDATIONS

A.  PROCUREMENT

The Legislature did not procure contractor services and materials for the renovation project
competitively.  Specifically, the Legislature improperly procured the services of a roofing
contractor by using emergency procurement provisions of the American Samoa Code
Annotated and bypassed the Procurement Office by procuring roofing materials directly from
a vendor on a sole source basis.  These conditions occurred  because the Legislature did not
have adequate written procedures to ensure that contractor services and materials were
procured in accordance with the American Samoa Code Annotated.  As a result, the
Legislature had little assurance that it received full value for the $244,275 paid for contractor
services related to the roof repair contract (see Appendix 3).  Additionally, the Legislature
paid $20,036 more than was necessary for roofing materials.

Contractor Services

Based on our review of the Legislature's  renovation  project records, we determined that the
Legislature had been aware, since 1991, that the roofing shingles and the supporting beams
of the Senate and House Chambers needed to be replaced.  However, funding for the repairs
was not appropriated until fiscal year 1995, when the Legislature's budget included a
$300,000 appropriation for roof repairs.  The appropriation act stated that the funds were
needed to repair the roof of the Senate and House Chambers to prevent further damage to the
structure.  In an October 19, 1994, letter to the Chief Procurement Officer, the former
President of the Senate and the former Speaker of the House for the 24th Legislature
requested a waiver of the American Samoa Procurement Rule's competitive bidding
requirements for hiring contractors and stated that the scope of the required work would be
limited to replacing the roofing shingles. The former President and the former Speaker stated
in their letter that the "building desperately needed a reroofing job since 1991."  The letter
also stated that the repairs needed to be completed by the end of December 1994 and that the
work should begin immediately to prevent any further damage to the building's roof and
interior.  The Legislative Financial Officer told us that the Legislature informally polled
contractors and had identified a contractor who would replace the shingles for $78,000.

As a result of the former President's and former Speaker's request for a waiver, the Governor
of American Samoa intervened and directed the Chief Procurement Officer, on November 4,
1994, to treat this procurement as an emergency procurement as authorized by Section
12.0213 ("Emergency Procurement") of the American Samoa Code Annotated.  The
Governor's intervention allowed the Chief Procurement Officer to issue a sole source
contract to the contractor selected by the Legislature for labor and equipment needed to make
the repairs.  The Governor also directed the Procurement Office to procure all materials
needed for making the roof  repairs.  On October 31, 1994, a sole source contract for $78,000
was issued to the roofing contractor to replace the shingles, with a completion date of
March 31, 1995.  However, because of technical flaws found (for example, the contract was
not signed by the Chief Procurement Officer, and Public Works was incorrectly shown as the
"Architect/Engineer") in the original contract, a new contract was executed on December 5,
1994.  On November 14, 1994, the contractor began making the roof repairs.  Once the
contractor removed the old shingles and exposed the rotted supporting beams, the contractor
advised the former President that the beams would have to be repaired or replaced before the
new shingles could be installed.  As a result, Contract Change Order 001 was issued on
July 20, 1995, for $166,275 to cover the additional work, and the project completion date
was extended to August 31, 1995.

In our opinion, the use of sole source emergency procurement procedures for the roof  repair
contract was not proper.  Section 12.0213 of the American Samoa Code Annotated states,
"[T]he Governor may make or authorize a governmental agency to make emergency
procurements when there exists a threat to public health, welfare, or safety under emergency
conditions . . . .  [but that] [a]n emergency procurement must be competitive as practicable
under the circumstances."  However, the roof of the Senate and House Chambers had been
leaking water since 1991, and its deteriorated condition was not the result of a sudden or
emergency situation but the result of the roof not being repaired in 1991, when the problem
was first detected.   In addition, the Legislative Financial Officer told us that each year since
1991, the Legislature had to replace portions of the interior ceilings of the Senate and House
Chambers because water leaking through the roof collected on top of the ceiling and then
caused parts of the ceiling to fall down.  Further, based on a listing of licensed contractors
maintained by the Department of Public Works, we determined that at least four other local
contractors were capable of repairing the roof of the Senate and House Chambers.  Therefore,
we believe that the procurement of contractor services should have been made competitively.

Roofing Materials

At the beginning of the renovation project, the Procurement Office had requested price
quotations from vendors for materials that were needed to repair the roof of the Senate and
House Chambers.  On November 10, 1994, the Procurement Office issued a purchase order
to the lowest bidder in the amount of $66,680.  However, the Legislature had ordered
identical roofing materials on October 26, 1994, directly from the highest bidder at a cost of
$86,716, thus bypassing the Procurement Office.

In accordance with Section 12.0208 of the American Samoa Code Annotated, the Chief
Procurement Officer is the central procurement official for the American Samoa Government
and is responsible for procuring all construction goods and services for the Government.
Therefore, the Legislature had no authority to purchase materials directly from vendors.
When the Chief Procurement Officer learned that the Legislature had  purchased the roofing
materials, he wrote a letter, dated January 12, 1995, to both the former President of the
Senate and the former Speaker of the House in which he stated, "May I remind you that this
office [Procurement Office] has done its part in procuring these materials in accordance with
the law and any material delivered by any supplier is an illegal procurement and ASG
[American Samoa Government] is not obligated to pay."  However, because of the
subsequent expansion of the renovation project, the roofing materials ordered by the
Legislature were also needed.  Thus, the Procurement Office, at the direction of the
Governor, paid the second invoice for roofing materials in the amount of $86,716, which was
$20,036 higher than the cost of the identical roofing materials purchased by the Procurement
Office using competitive procurement procedures.

During the audit, we determined that the Legislature had prepared draft procurement
procedures in response to our March 1996 audit report "American Samoa Legislature,
American Samoa Government" (No. 96-I-533).  However, we determined that the draft
procedures provided only general instructions and did not include sufficient details to ensure
that all procurement actions would be processed in accordance with the American Samoa
Code Annotated.  The draft procedures did not specify the forms to be used, the internal
document flow, and the required approvals and did not include a requirement that all
procurement actions should be processed by the Procurement Office. To resolve this
deficiency, we believe that the Legislature should develop detailed written procedures to
ensure that all procurements are conducted in accordance with the requirements set forth in
the American Samoa Code Annotated.

Recommendation

We recommend that the Legislature of American Samoa develop and implement detailed
written procedures to ensure that all procurements are made in accordance with the American
Samoa Code Annotated.  The procedures should specify the forms to be used, the internal
document flow, and the required approvals and include a requirement that all procurement
actions should be processed by the Procurement Office.

Legislature of American Samoa Response and Office of Inspector General Reply


In the July 9, 1998, response (Appendix 4) to the draft report from the Speaker of the House
of Representatives, the Legislature concurred with the recommendation and provided
additional comments to support its actions during the renovation.  Based on the response, we
consider the recommendation resolved but not implemented (see Appendix 5).

     Legislature of American Samoa Response.   The Legislature stated:

          On the contrary [to the audit report], the Legislature fully enjoys its newly
     renovated buildings.  It has provided a safe and better working environment
     for everyone.  The project also adds another 5 to 10 years of useful life to
     these old deteriorated buildings.  It further removes an emotional and physical
     hardship experienced by Legislature leaders because of damages sustained
     from these leaky buildings, which are over 20 years old.

The Legislature also stated that once the contractor had removed the "rotten shingles" to the
Senate and House Chambers building and the "rotted beams" were exposed, the Legislature
was "forced" to issue a series of change orders and appropriate more funds to cover the
additional work. Further, the Legislature stated that the former President of the Senate's
decision to renovate the existing Legislature buildings as opposed to building new facilities
justified the Governor's use of the Emergency Procurement provisions of the American
Samoa Code.   The Legislature also  stated that the purchase of shingles by the former
Speaker was the result of a "verbal mis-communication" between the former Speaker and the
Governor but  that the additional shingles "turned out in favor of the Legislature" because
the scope of the work was subsequently expanded to include the roofs of other Legislature
buildings and the additional shingles were used for that purpose.

     Office of Inspector General Reply.  Contrary to the inference that the audit ignored
the need for repairs to the Legislature's buildings, our report takes issue not with the need
for the repairs but with the manner in which the repairs were planned and the project was
expanded to cover other facility repairs.  If the project had been properly planned from its
beginning, with consideration for all necessary repairs instead of just the roof repairs to one
building, the construction services could have been procured using competitive procurement
procedures that we believe would ultimately have saved American Samoa Government
funds.

We found that the presence of rotten beams was identified as a problem by key Public Works
personnel and the roofing contractor before any of the old shingles were removed.  For
example, a Department of Public Works architect stated that during an inspection of the
Senate and House Legislative Chambers in 1992, he was able to "poke holes" in the beams
and that it was clear that the beams would have to be repaired.  Also, the roofing contractor
stated in a April 5, 1995, letter to the President of the Senate, "It was evident at the start of
the project that satisfaction of contract conditions would be impossible without repairing the
beams."  Even though the exact scope of beam replacement that would be required was not
known, we believe that the Legislature should have anticipated that the repair of the roof
would require more extensive work than just the replacement of the shingles.  As such, a
request for bids covering both the replacement of the shingles and the beams could have been
processed through the Procurement Office as one complete job.

Regarding the "emergency procurement," the Legislature's October 19, 1994, letter to the
Chief Procurement Officer requesting an exception to the bidding process stated that the
Senate and House Chambers building "desperately needed a roofing job since 1991," but it
did not reference a need to renovate all of the Legislature buildings.  In addition, the
Governor's letter to the Chief Procurement Officer invoking the emergency procurement
provisions makes reference only to the need to re-shingle the Senate and House Chambers
building, with no reference, directly or indirectly, to a scope of work that included roofing
or renovation work for other Legislature buildings.

Lastly, we disagree with the Legislature's conclusion that the duplicate order of shingles was
favorable to the Legislature.  Although the contractor was able to use the duplicate materials,
we do not believe that the purchase of roofing materials at a cost of $20,026 more than the
price obtained through the Procurement Office can be interpreted as being favorable to the
Legislature.  In addition, an order for roofing materials for the entire project could have been
placed with the lowest bidder.

B.  PROJECT PLANNING AND MANAGEMENT

The Legislature did not effectively plan for and manage the expansion of the renovation
project.  Specifically, the Legislature (1) undertook a major renovation of the Legislature's
buildings without identifying the required scope of  work, estimating project costs, and
determining funding needs; (2) did not verify the accuracy of  contractor billings; and (3) did
not ensure that the contractor's work was inspected.  These conditions occurred because the
Legislature did not have written policies and procedures to ensure that renovation projects
were adequately planned and managed.  As a result, the Legislature noncompetitively
procured contractor services costing $757,363; overspent appropriated funds by at least
$211,025; and had little assurance that contractor billings totaling $1,474,734 for labor,
equipment, and materials were correct and that the construction work was performed in
accordance with building codes.

Project Planning

The Legislature did not adequately plan for the renovation of the Legislature buildings.
Specifically, the Legislature expanded the scope of work after the initial noncompetitive
roofing contract was issued through a series of contract change orders and appropriated funds
to cover the additional work.  This occurred because the Legislature (1) did not have written
procedures for identifying the maintenance and renovation needs of its facilities, estimating
the associated costs, and determining funding needs and (2) did not obtain technical
assistance from the Procurement Office and Department of Public Works, which had the
technical expertise needed to adequately plan for the renovation project.  As a result,  the
Legislature expended $757,363 for contractor services (see Appendix 3) with little assurance
that it received full value for the funds expended and overspent project appropriations by at
least $211,025 (see Appendix 2).

The American Samoa Procurement Act of 1983 (Title 12, Chapter 2, of the American Samoa
Code Annotated) and the Procurement Rules require the Chief Procurement Officer to
procure all construction services for the American Samoa Government.  However, after the
Governor authorized the use of emergency procurement procedures for the initial sole source
contract to repair the roof of the Senate and House Chambers and instructed the Procurement
Office to procure all construction materials needed for the project as requested by the
Legislature Financial Officer, the Procurement Office's role in the renovation project was
limited primarily to determining whether the Legislature had encumbered sufficient funds
before approving payment of contractor invoices.

During the period of September 25, 1995, through August 22, 1996, the former President and
the former Speaker expanded the scope of the noncompetitive roofing contract (as amended
by Contract Change Order 001, dated July 20, 1995) through the issuance of seven additional
contract change orders, totaling $742,888 (see Appendix 3).  The change orders included
work for replacing shingles on the roofs of the Senate Office Building, the Guest Fale, the
House Coffee Fale, and covered walkways between the Legislature buildings and for
replacing the exterior and interior walls of the Guest Fale and the Senate and House
Chambers and portions of the Senate Office Building.  However, according to the contractor,
none of this additional work was discussed with him when he was asked to submit the initial
proposal to replace the shingles on the Senate and House Chambers.   In addition to the seven
contract change orders, the current Speaker noncompetitively procured the services of
another contractor to renovate the interior of the House Coffee Fale and the restrooms in the
House Office Building at a cost of $22,750.  Therefore, the total amount of noncompetitive
procurements for renovation work beyond the original scope of the project to repair the roof
of the Senate and House Chambers was $757,363.  The contract change orders are discussed
in the paragraphs that follow.

     Change Orders 002 and 003.  While the contractor was repairing the roof of the
Senate and House Chambers (see Finding A), the former President directed the contractor
to start repairing the roofs of both the Guest Fale and the Senate Office Building.  This
resulted in the issuance, on September 25, 1995, of Contract Change Order 002, in the
amount of $53,000.  Subsequently, the roof repairs to the Guest Fale and the Senate Office
Building developed into a complete renovation of the Guest Fale and portions of the Senate
Office Building.  As a result, on December 6, 1995, the Legislature issued Contract Change
Order 003, in the amount of $67,000, for the renovation of the interior and exterior of the
Guest Fale and the Senate Office Building.  The Legislative Financial Officer told us that,
although the roofs of both the Guest Fale and the Senate Office Buildings leaked, he "had no
idea" that the former President and former Speaker wanted to perform a renovation of this
magnitude.

     Change Order 004.  The former President and the former Speaker further expanded
the renovation of the Legislature buildings through the issuance, on January 31, 1996, of
Contract Change Order 004.  Specifically, this change order authorized, at a total cost of
$19,888, the replacement of the roof of the walkways between the Legislature buildings and
the renovation of the restrooms and the coffee room in the Senate Office Building.

     Change Orders 005 Through 008.  In January 1996, the former President and the
former Speaker requested that the Department of Public Works prepare an estimate of the
cost to renovate the interior and exterior (excluding the roof) of the Senate and House
Chambers.  Although Public Works submitted a cost estimate in March 1996 for $529,700,
the Legislature paid the contractor a total of $603,000 for the renovation work.  As the
contractor submitted invoices for the renovation work, the Legislature encumbered funds to
pay the invoices through the issuance of Contract Change Orders 005, 006, 007, and 008, for
a total of $603,000.  In addition, on December 11, 1996, the contractor submitted another
invoice for $495,846 for further work that was performed on the interior and exterior of the
Senate and House Chambers, thus bringing the total cost of this phase of the renovation
project to $1,098,846.  However, the Legislature did not issue a contract change order for this
final invoice, and, as of March 17, 1998, the Procurement Office had not paid the contractor
$395,846 of the $495,846 shown on the invoice.

     Cost Overrun.  As a result of the unplanned escalation of work through the
Legislature's verbal authorization of additional work and subsequent issuance of contract
change orders, the appropriations for the renovation project were overexpended by $211,025.
Section 10.0601 of the American Samoa Code Annotated prohibits the overexpenditure of
appropriations and provides that such overexpenditures could result in disciplinary action or
possible legal prosecution against the offenders.  Our March 1996 audit report "American
Samoa Legislature, American Samoa Government" (No. 96-I-533) identified the
overexpenditure of appropriations as a continuing problem and reported that Legislature
officials stated that the overexpenditures occurred because the Government's accounting
system did not provide timely expenditure information.  Although deficiencies in the
accounting system may have contributed to the overexpenditure of appropriations for the
renovation project, we believe that the primary cause of the overexpenditures was that the
Legislature did not adequately plan for and control the project by (1) identifying and
prioritizing the full scope of repair and renovation work needed, (2) preparing  realistic cost
estimates, (3) appropriating funds based on the planned work, and (4) monitoring and
controlling the project through the contract.

As a result of not adequately planning for the renovation project, the Legislature did not have
cost estimates that could be used to determine the amount of funding that would be needed
for the project.  Consequently, as of the end of fiscal years 1995, 1996, and 1997 and as of
October 31, 1997, the renovation project had cost overruns of $52,187, $320,974, $132,241,
and $211,025, respectively (see Appendix 2).  In addition, if the contractor is paid the
$395,846 balance due ($495,846 minus the $100,000 advance payment) on the December 11,
1996, invoice, the renovation project will have a total cost overrun of $606,871.

Project Management

The Legislature did not verify the accuracy of charges shown on invoices submitted by the
contractor and did not ensure that the contractor's work was inspected by the Department of
Public Works to determine whether the construction work was in compliance with the
American Samoa Uniform Building Code.  These conditions occurred because the
Legislature did not have adequate written procedures for verifying the costs shown on vendor
invoices and ensuring that construction work was inspected by the Department of Public
Works.  As a result, the Legislature had little assurance that contractor billings totaling
$1,474,734 for materials, equipment, and labor were proper; that the  buildings were safe for
occupancy; and that the construction work was in compliance with building codes.

Under the terms of the initial contract, the contractor was to provide only labor and
equipment, and the Procurement Office was responsible for procuring the construction
materials.  However, because of delays in procuring materials for later phases of the
renovation project through the Procurement Office, on March 7, 1996, the Governor
authorized the contractor to purchase construction materials directly from vendors and bill
the Legislature.  However, based on our review of the contractor's invoices, we found that
(1) the contractor typically showed on the invoices only a total dollar amount, with no
detailed information regarding the labor, equipment, and materials used on the renovation
project, and (2) the Legislature typically approved contractor invoices for payment without
question and without verification of the amounts billed by the contractor.

During the period of December 5, 1994, through December 11, 1996, the Legislature
received from the contractor 21 invoices, totaling $1,474,734.  We examined all 21 invoices
to determine whether the amounts claimed by the contractor for labor, equipment, and
materials were adequately supported.  We found that none of the invoices provided sufficient
information to permit the Legislature to determine whether the charges shown on the
invoices were proper.  Specifically, the descriptions of charges on 20 of the 21 invoices were
shown in general terms such as "labor" (4 invoices, totaling $68,000); "labor and equipment"
(5 invoices, totaling $122,000); "labor, equipment, and materials" (5 invoices, totaling
$185,888); and "labor and materials" (6 invoices, totaling $603,000).  Although the
description of charges shown on the December 11, 1996, invoice for $495,846 provided
more information than the other 20 invoices, the description, in our opinion, did not provide
sufficient information to allow the Legislature to determine whether the charges were
reasonable.  In addition, there was no evidence in the files to show that the Legislature
questioned or attempted to verify the accuracy of the invoices before payment was approved.
For example:

     -  The contractor submitted to the Legislature an invoice dated February 21, 1996,
for $60,000 for "labor and materials."  Although the construction materials included in this
invoice were purchased by the contractor before the Governor authorized the contractor to
purchase materials for the  renovation project, the Legislature approved the invoice without
determining why the contractor purchased the materials, what materials had been purchased,
and whether the labor charges were reasonable.

     -  The contractor submitted an invoice dated May 6, 1996, for $80,000 for "labor
and materials." However, the Legislature did not require the contractor to provide
documentation to support the amount of labor and material charges shown on the invoice.

Because the Legislature did not have project management expertise, the contractor was
allowed to perform renovation work, including structural repairs, plumbing, and electrical
work, without any assurance that the work was in compliance with the American Samoa
Uniform Building Code.  Title 26, Section 1004, of the American Samoa Code Annotated
states that the Department of Public Works is responsible for monitoring all public and
private sector construction, including building renovations, to ensure compliance with the
Uniform Building Code.  However, we found that the Legislature did not have any written
procedures to ensure that construction work was inspected by the Department of Public
Works.

In our opinion, the problems identified with the renovation project could have been avoided
if the Legislature had developed adequate written procedures for identifying the complete
scope of  renovation work needed, planning the work, estimating project costs, and
determining funding needs.  In addition, we believe that the Legislature should form a
committee responsible for determining the future renovation and repair work needed by all
of the Legislature's facilities and for preparing periodic reports which describe the work that
should be performed, including tentative schedules and estimated costs.  The committee
should also be required to obtain assistance from the Department of Public Works in
determining renovation and repair needs, assisting in the preparation of the reports, and
conducting project inspections during construction work.

Recommendations

We recommend that the Legislature of American Samoa:

         1.  Request the Director of the Department of Public Works and the Chief
Procurement Officer to review the December 11, 1996, invoice for $495,846 submitted by
the contractor to determine whether it is reasonable and reflects the costs incurred by the
contractor for the renovation of the Senate and House Chambers.  If information on the
invoice is not adequate, additional information should be requested from the contractor to
make such a determination.

         2.   Request the Director of the Department of Public Works to perform an
inspection of the renovated Legislature facilities and determine whether the construction
work was in compliance with the American Samoa Uniform Building Code.  If the
Department of Public Works determines that the construction work was not in compliance
with the Code, the contractor should be required to correct the noted deficiencies.

         3.  Amend the Rules of both the Senate and the House of Representatives to
establish a joint standing committee for the purpose of periodically identifying the
Legislature's renovation and repair needs, developing annual cost estimates for the planned
work, and determining funding needs and sources.

         4.  Amend the Rules of both the Senate and the House of Representatives to
require that all future Legislature renovation and construction work be managed and
inspected by the Department of Public Works and that the Legislature obtain technical
assistance from the Procurement Office during the design and contracting phases of
construction projects.   Legislature of American Samoa Response and Office of Inspector General
Reply

In the July 9, 1998, response (Appendix 4) to the draft report from the Speaker of the House
of Representatives, the Legislature concurred with Recommendations 1 and 2 and
nonconcurred with Recommendations 3 and 4.  The Legislature also expressed disagreement
with some of the statements contained in the finding.  Based on the response, we consider
Recommendations 1 and 2 resolved but not implemented and request that the Legislature
provide additional information for Recommendations 3 and 4 (see Appendix 5).

Recommendation 3.  Nonconcurrence.

         Legislature of American Samoa Response.  The Legislature did not concur
with our recommendation to establish a joint standing committee of the Senate and the House
to periodically review and report on the maintenance and renovation needs of the
Legislature's facilities.  Instead, the Legislature stated that this oversight function could be
more effectively administered by the Legislative Financial Officer.

         Office of Inspector General Reply.  We consider the Legislature's suggestion
of having the Legislative Financial Officer, rather than a standing committee of the Senate
and the House, maintain oversight of the renovation and repair needs of the Legislature to
be an acceptable alternative corrective action.  Therefore, the Legislature should provide the
additional information requested in Appendix 5.

Recommendation 4.  Nonconcurrence.

         Legislature of American Samoa Response.  The Legislature did not concur
with our recommendation to amend the Rules of both the Senate and the House to require
the Department of Public Works to manage and inspect all renovation and construction work
on Legislature's buildings.  The Legislature stated that since managing and inspecting all
renovation and construction work on the buildings was already required by existing law, it
would be more appropriate to include these duties as part of the procedures to be developed
in response to Recommendation A.1.

          Office of Inspector General Reply.    We consider the Legislature's
suggestion of including the requirement that the Department of Public Works should provide
supervision and inspection of renovation and construction work on Legislature buildings in
the procedures to be developed in response to Recommendation A.1, rather than in the Rules
of the Senate and the House, to be an acceptable alternative corrective action.  Therefore, the
Legislature should provide the additional information requested in Appendix 5.

General Comments on Finding

In its response to the draft report, the Legislature stated that it is "somewhat misleading" to
criticize the Legislature for expanding the renovation project.  The Legislature also stated
that the $1.6 million cost was justified because the Legislature buildings were restored to
their "original building features."  In addition, the Legislature stated that the project was
implemented with little advance planning but that  a "desperate effort" was needed to save
the Legislature buildings.  Lastly, the Legislature included in its response a schedule showing
that appropriations for the renovation project were overexpended by only $90,759.

We do not agree that obtaining the services of a contractor under the emergency procurement
provisions of the American Samoa Code to re-shingle the roof of the Senate and House
Chambers justifies the expansion of  the project to include major renovation work on other
Legislature buildings. Further, because the Legislature stated that the Legislature facilities
received extensive damage from two hurricanes in the "early 90s" and the Legislature's
October 19, 1994, letter to the Chief Procurement Officer stated that the "building
desperately needed a reroofing job since 1991," we believe that sufficient time existed, prior
to October 1994, for the Legislature to properly plan for the overall project and procure the
needed contractual services using competitive procedures.  Additionally, once the full extent
of the necessary repair work was determined, even after the October 1994 letter, the
Legislature could have taken action to procure contractual services for the entire expanded
scope of the project on a competitive basis rather than expanding the project on a piecemeal
basis through contract change orders.

With regard to the Legislature's schedule that it said shows "total alleged, supposed
overexpenditures" of $90,759 for the renovation project, the Legislature's computations are
incorrect in that the schedule (1) uses the original contract change order amounts, which
totaled $8,275 more than the amounts actually paid to the contractor, and (2) does not include
the $524,387 cost of construction materials purchased by the Procurement Office on behalf
of the Legislature.  A year-by-year summary of the appropriations and actual expenditures
related to the renovation project are presented in Appendix 2.  As of the date of completion
of our audit, the project had cost $211,025 more than the funds made available by the
Legislature for the project.  If we were to include the $395,846 still owed the contractor (as
the Legislature did in its schedule), the total cost overrun would have been $606,871.

                                                  APPENDIX 1

              CLASSIFICATION OF MONETARY AMOUNTS

                           Finding Areas
                                              Funds To Be Put
                                               To Better Use*

     A. Procurement

          Contractor Services
          Roofing Materials

     B. Project Planning and Management

          Project Planning
             Contract Change Orders
             Cost Overrun

          Total

                                                  $244,275
                                                    20,036

                                                   757,363
                                                   211,025

                                                $1,232,699

*Amounts represent local funds.
                                              APPENDIX 2

                   STATUS OF FUNDS FOR THE
               LEGISLATURE RENOVATION PROJECT -
            OCTOBER 31, 1994, TO OCTOBER 31, 1997

                                    Col. 1

                                    Fiscal
                                     Year
                                    Col. 2

                                  Beginning
                                   Balance
                                    Col. 3

                                Appropriations
r Renovation
                                    Col. 4

                                  Transfers
                                  within the
                                 Legislature
                                    Col. 5
                                (Cols. 2+3+4)

                                 Total Funds
                                  Available
                                   Col. 6*

                                    Total
                                 Expenditures
                                   Col. 7**

                                   Advances
                                      to
                                  Contractor
                                   Col. 8*
                                  (Col. 6+7)
                                    Total
                                 Expenditures
                                 and Advances
                                    Col. 9
                                 (Col. 5 - 8)

                                    Ending
                                   Balance

                                    1995

                                    1996

                                    1997

                                    1998

                                   TOTAL

0

($52,187)

(320,974)

(132,241)


$300,000

550,000

450,000

0

$1,300,000

$115,000

0

0

0

$115,000
$415,000

497,813

129,026

 (132,241)


$467,187

818,787

211,267

28,784

$1,526,025

0

0

$50,000

 50,000

$100,000

$467,187

818,787

261,267

78,784

$1,626,025

 ($52,187)

(320,974)

(132,241)

(211,025)

*The amounts shown in Columns 6 and 8 include $524,387 of construction materials
purchased by the Procurement Office.  However, because the $395,846 balance
($495,846 minus $100,000 advance payment) due on the December 11, 1996,
invoice has not been paid, the $395,846 is not included as an expenditure.

**The two $50,000 payments were advances to the roofing contractor against the $495,846
invoice submitted on December 11, 1996.

APPENDIX 3

SCOPE AND COST OF WORK FOR THE
LEGISLATURE RENOVATION PROJECT -
OCTOBER 31, 1994, TO OCTOBER 31, 1997

Contract Change
Order No.

Date
Issued

Contract Change
Order Amount

Amount
Paid

Description

Initial Contract

001-95

002-95

003-95

004-96

005-96

006-96

007-96

008-96

10/31/94

07/20/95

09/25/95

12/06/95

01/31/96

04/08/96

05/17/96

07/09/96

08/22/96

$78,000

    166,275

   $244,275

53,000

67,000

19,888

185,000

80,000

158,000

    180,000

$742,888

      22,750

   $765,638

$1,009,913

$78,000

    166,275

   $244,275

44,725

67,000

19,888

185,000

80,000

158,000

    180,000

$734,613

       22,750

   $757,363

$1,001,638

To replace the shingles on the Senate and House Chambers.

To repair the roof on the Senate and House Chambers (the roof apex,
beams, and decking).

Subtotals (initial roofing contract and related Change Order 001)

To repair the roofs on the Guest Fale and Senate Office Building.

To renovate the interior and exterior of the Guest Fale and the exterior and
portions of the interior of the Senate Office Building.

To renovate the coffee room and restrooms of the Senate Office Building
and to repair the roofs of the covered walkways and House Coffee Fale.

To cover the cost of labor and materials to replace the outside wall and
ongoing interior renovation of the Senate and House Chambers (per
contractor Invoices 411, 412, and 419).

To cover the cost of labor and materials to replace the outside wall and
ongoing interior renovation of the Senate and House Chambers (per
contractor Invoice 654).

To cover the cost of labor and materials to replace the outside wall and
ongoing interior renovation of the Senate and House Chambers (per
contractor Invoice 154).

To cover the cost of labor and materials to replace the outside wall and
ongoing interior renovation of the Senate and House Chambers (per
contractor Invoice 655).

Subtotals (additional work based on Change Orders 002-008)

House Coffee Fale (direct payments to contractor based on invoices)


Subtotals (expansion of renovation project)

Grand Totals (entire renovation project)


                                                     APPENDIX 4
                                                    Page 1 of 9


              LEGISLATURE OF AMERICAN SAMOA RESPONSE

                      (Insert Response Here)

                                                     APPENDIX 5
                                                    Page 1 of 2

              STATUS OF AUDIT REPORT RECOMMENDATIONS

Finding/Recommendation
             Reference

  A.1

  B.1

  B.2

  B.3

        Status

Resolved; not
implemented.

Resolved; not
implemented.

Resolved; not
implemented.

Management
concurs;
additional
information
needed.

Action Required

The recommendation will be referred
to the Assistant Secretary for Policy,
Management and Budget for tracking
of implementation.  However, when
completed, a copy of the written
procedures should be provided to our
office.

The recommendation will be referred
to the Assistant Secretary for Policy,
Management and Budget for tracking
of implementation.  However, when
completed, a copy of the Department
of Public Works cost analysis of the
final invoice should be provided to
our office.

The recommendation will be referred
to the Assistant Secretary for Policy,
Management and Budget for tracking
of implementation.  However, when
completed, a copy of the  Department
of Public Works inspection report
should be provided to our office.

Provide the target date and the title of
the official responsible for submitting
legislation to amend the law
establishing the Legislative Financial
Officer to make that official
responsible for the oversight of the
building renovation and repair needs
of the Legislature.

                                                     APPENDIX 5
                                                    Page 2 of 2

Finding/Recommendation
           Reference

B.4

       Status

Management
concurs;
additional
information
needed.

                  Action Required

Provide the target date and the title of
the official responsible for developing
and implementing new procedures to
ensure that the Department of Public
Works is involved in the supervision
and inspection of renovation and
construction work for Legislature
buildings.






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