STATEMENT
“Accountability: Progress, Challenges, and a Call to Protect the Public Auditor’s Offices”
Keynote Speech of David B. Cohen,
Deputy Assistant Secretary of the Interior
at the
Joint Meeting
of the
Association of Pacific Islands
Public Auditors
and the
Island Government Finance Officers’ Association
Honolulu, Hawaii
December 6, 2007
[Acknowledgements.]
Good morning. When I spoke before the Island Government Finance Officers’ Association
on Tuesday, I noted that Priority 1 for the Department of the Interior’s
Office of Insular Affairs is promoting private sector economic development
in the islands, and Priority 1-A is ensuring accountability for public funds—particularly
the Federal financial assistance provided to the islands by my office and others. On
Tuesday, I spoke about Priority 1. Today, I will speak about Priority
1-A.
We say over and over again that accountability is one of OIA’s two top
priorities, and we have backed up our words with deeds. For example:
- We worked with our colleagues in the Marshall Islands and the Federated
States of Micronesia to negotiate a detailed, comprehensive accountability
program for funds provided under the Compacts of Free Association.
- As part of our effort to implement the Compacts, we have established an
office here in Honolulu dedicated to ensuring that there is accountability
for Compact funds. We have also added personnel in the freely associated
states for that purpose.
- We have revamped the way that we allocate Capital Improvement Project funds,
instituting a competitive process that rewards good fiscal management.
- We have established the position of Accountability Policy Specialist at
our headquarters in Washington, D.C.
- We have a longstanding contract with the USDA Graduate School to provide
training for island officials, with an emphasis on financial management and
improving compliance with the Single Audit Act.
- We have sponsored numerous conferences, workshops and training programs
involving officials from the islands and our colleagues at other Federal
agencies.
- We fund training for public auditors, including programs that enable personnel
from the islands to work and train at various Interior Inspector General
offices.
- We have revised our criteria for granting technical assistance to focus
primarily on our top two priorities, including promoting accountability.
- We have greatly increased coordination with other Federal agencies to focus
on improving the administration of Federal grant programs in the territories
and freely associated states.
- We completely revamped OIA’s Financial Assistance Manual for the
first time in a decade.
Our efforts, together with the hard work of our colleagues from the islands
and our Federal colleagues, have yielded positive results. When I took
office in 2002, not a single one of the 11 nations, states and territories
that we serve was submitting timely or clean Single Audits. Today, the
record on timeliness is almost exactly the opposite: only one of our
11 jurisdictions is not current with its Single Audits. In addition,
Palau’s Single Audits have been timely and clean for the past three years,
Pohnpei’s have been timely and clean for the past two years, and Kosrae
became the newest member of the “Timely and Clean Club” this past
year. Pohnpei is in a club of its own, having completed Single Audits
for the past two years that were timely, clean and with no questioned costs. Pohnpei
will soon be the rule and not the exception, and just as we all worked together
to turn the situation around with regard to timeliness of audits, we will do
the same with regard to cleanliness.
Although we very much value our positive relationships with our colleagues
in the islands, we have taken tough action when tough action was called for. We
have been forced to withhold grant assistance on a number of occasions. We
hate to do that, because our grants fund important programs in health, education
and other crucial areas. We recognize, however, that it is better to
withhold funds and preserve them for future use than to release funds into
an insecure environment, risking that they will never be properly used to address
the needs of the people.
We have excellent working relationships with the governments of almost all
of our island communities. This enables us to work through some very
difficult issues. A while back, we made the very difficult decision to
put American Samoa on high risk status. We imposed a very high bar to
have that status lifted: Two consecutive timely and clean Single Audits,
two consecutive balanced budgets, and sufficient progress on American Samoa’s
fiscal reform plan. The plan was adopted pursuant to a Memorandum of
Agreement for fiscal reform that I signed with the late Governor Tauese Sunia. Governor
Togiola Tulafono has embraced these conditions as a challenge and an opportunity
for his government to greatly improve its ability to serve the people of American
Samoa. He wants American Samoa to meet those conditions and in so doing
become a model for fiscal management in the islands. For our part, we
have responded with substantial technical assistance to help American Samoa
develop the tools and skills necessary to effectively manage its government
finances.
In Kosrae, we have supported a process, involving the new government of Kosrae,
the new government of the Federated States of Micronesia and the USDA Graduate
School, to address an urgent fiscal crisis. With financial assistance
from our office and the FSM National Government, Governor Robert Weilbacher,
his team and the Kosrae legislature have taken painful and courageous steps
to restore that state to fiscal health.
We are working with FSM President Manny Mori and Governor Wesley Simina to
support a similar fiscal recovery plan that is being developed for Chuuk. We
had previously worked with the Chuuk State Government and the FSM National
Government to establish the Chuuk Financial Control Commission to review and
certify all transactions involving Compact funds. OIA has placed a full
time accountant in Chuuk to ensure compliance.
All of us working together have made significant progress to improve accountability
and fiscal management in the islands. We have a tremendous way to go,
however, before the overall performance of the islands in fiscal management
could be called acceptable.
I am proud of the progress that we have made together to improve accountability
because we have done so in the face of daunting challenges. Each of our
insular areas has small populations and educational systems that range from
significantly below to very far below mainland standards. The best and
brightest often have to leave the islands to find decent job opportunities.
As a result of all of these factors, each of the insular areas has a severe
shortage of the type of educated talent that is necessary to ensure good fiscal
management. As you can tell by looking around this room, there are many
educated and talented people in the islands. There just are not yet enough
of them.
In the islands, talent pool shortages cannot be solved by attracting people
over from the next town or the next county. The islands have to shore
up deficiencies in critical skill areas by enticing people to travel thousands
of miles from home. The islands typically do not have the resources to
provide a sufficient financial incentive to entice talented people to do this.
Almost all of the insular areas are made up of multiple islands, in some cases
in the hundreds or thousands. This creates the additional challenge of
providing essential government services to people on several islands, some
of them remote. It requires duplication and makes it harder to achieve
economies of scale. All of this further drains resources that are needed
to attract good talent.
I do not offer these observations as excuses. However, we cannot do
our jobs effectively if we do not have a proper understanding of the challenges
that we face.
Are some of the islands’ fiscal management problems caused by corruption? Of
course, but there is corruption all over the world, including on the U.S. mainland. The
corruption that exists in the islands only makes it harder for the islands
to address the challenges that I have just described.
For all of these reasons, it has taken a great deal of work by all of us to
achieve the accountability gains that we have achieved in recent years, and
it will take a tremendous amount of additional work to raise ourselves up collectively
to an acceptable level. We are committed to doing that work.
One thing is clear: Our efforts cannot succeed unless each of our island
communities has a strong, active, independent, conscientious, properly staffed
and properly funded public auditor’s office. The management of
public funds is a complicated business, and regular, impartial review of our
work is essential to ensure that good value is received for the people’s
money.
OIA has taken steps to encourage each of the island governments to strengthen
their public auditor’s offices. For example, we rate each of your
public auditor’s offices and use that in our determination of the amount
of grant funding that various jurisdictions will receive.
To be frank, however, I am not satisfied. None of us should be satisfied. We
still have jurisdictions that have not had a qualified public auditor in place
for an unacceptably long period of time. We still have public auditor’s
offices that do not have the staff or budget to do an effective job. We
still have public auditor’s offices that are too vulnerable to political
retaliation.
Protecting the auditors is always a challenge. The problem is that auditors
routinely have to be critical of those who have control over their budgets,
personnel decisions and other important matters. And, speaking for the
finance officers’ side of the room, there is not one of us, myself included,
that has not been ticked off from time to time by the work of an auditor. The
problem is that each of us has a tendency to believe that we are perfect, and
that anyone with the gall to suggest otherwise obviously does not know what
they are talking about. Or perhaps they are criticizing us out of irrational
hatred or jealousy. Why would they be jealous of us? Because, as
noted earlier, we are perfect. Most of us, however, are able to take
a deep breath and get beyond those sentiments. Once we do so, it becomes
easier to appreciate the way in which the auditors keep us on our toes and
help us to do a better job of serving the people. And just as we are
not really perfect, auditors are not perfect either. However, their imperfect
attempts to do their job are essential to our ability to improve in
our imperfect attempts to do our job.
Earlier, we notified each of your governments that the failure to have a public
auditor’s office meeting minimal standards would eventually result in
a loss of eligibility for OIA technical assistance funds. Today, I would
like to start a process where we all work together to flesh out that concept. I
would like all of us—finance offices, public auditor’s offices,
the USDA Graduate School, Interior’s Inspector General’s Office,
OIA—to work together to craft clear, objective and reasonable standards
that must be met in order to ensure continued eligibility for technical assistance
funds. The objective will be to ensure that public auditor’s offices
are protected in their independence and are properly funded and properly staffed
with qualified people, starting from the very top. We will work together
to establish reasonable time frames and reasonable procedures. We have
no desire to cut off technical assistance funds simply because a public auditor’s
office is not perfect, or does not meet the “gold standard” in
terms of budget and staffing. We simply want to ensure that public auditor’s
offices are not allowed to fall so far as to become irrelevant, unable to perform
their role in any significant fashion. Sadly, that has occurred in at
least some of our jurisdictions, and that is the problem that we must work
together to address.
We are about to spend an entire day together, and hopefully I have given us
something to talk about. To the extent that our agenda is too crowded
to make significant progress on this topic today, let us resolve to carry on
this conversation by email and other means as we work toward our objective.
The process that I have proposed today will be an important step in our effort
to improve accountability for public funds in the islands. We should
be proud of the progress that we have made to date, and continue to be committed
to making progress in the future. We will definitely continue to make
progress as long as we remember why we are here: To make life better
for the people of the islands.
Thank you.
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