Summary: Although the audit functions presently performed by the Comptrollers of American Samoa, the Virgin Islands, and Guam, including the Trust Territory of the Pacific Islands should continue, they need to be strengthened. Major deficiencies still exist in territorial financial management systems. However, a strengthened Federal audit presence alone is not enough to improve the economy and efficiency of the territorial governments. They need to assume greater responsibility for establishing and maintaining strong financial management systems, establishing audit followup systems, and strengthening their own internal audit capabilities. The Comptrollers are responsible for auditing all significant aspects of governmental operations and Federal programs in the territories. Until recently, the Comptrollers have also provided technical assistance to improve territorial financial management systems. Transferring the Comptrollers' statutory audit function to the Department of the Interior's Office of the Inspector General would make the audit function more independent and also more effective. The audit function could be further strengthened if the preparation of the legislatively mandated annual report of the fiscal condition of the government and the audit of that report were made the responsibility of the territorial governments rather than the Comptrollers. More attention could be given Federal grant audits if the Office of Management and Budget designated Interior's Inspector General as the cognizant Federal audit agency under the single audit concept. There is a need to establish formalized report followup systems to monitor the corrective actions taken by the territorial governments on the Federal auditors' findings and recommendations. More Federal technical assistance and assumption of greater responsibility by the territories would enhance audit effectiveness.
