Finding No.: 2022-005 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D22AF00029-00 Area: Subrecipient Monitoring Questioned Costs: $1,030,566 Criteria: In accordance with applicable subrecipient requirements (CFR §200.332), a pass-through entity (PTE) must: a. Ensure that the subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the PTE must provide the best information available to describe the Federal award and subaward. Required information includes: 1. Federal award identification: (i) Subrecipient’s name, (ii) Subrecipient’s unique entity identifier, (iii) Federal Award Identification Number (FAIN), (iv) Federal Award Date, (v) Subaward Period of Performance Start and End Date, (vi) Subaward Budget Period Start and End Date, (vii) Amount of Federal Funds Obligated by this action by the PTE to the subrecipient, (viii) Total Amount of Federal Funds Obligated to the subrecipient by the PTE including the current financial obligation, (ix) Total Amount of the Federal Award committed to the subrecipient by the PTE, (ix) Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA), (x) Name of Federal awarding agency, PTE, and contact information for awarding official of the PTE, and (xi) Assistance Listings Number and Title; the PTE must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement. 2. All requirements imposed by the PTE on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the Federal award. b. Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved, c. Verify that every subrecipient is audited as required by CFR Subpart F when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in CFR § 200.501, d. Consider whether the results of the subrecipient's audits, on-site reviews, or other monitoring indicate conditions that necessitate adjustments to the PTE's own records, and e. Consider taking enforcement action against noncompliant subrecipients as described in CFR §200.339. Condition: An amount of $1,030,566 (Doc #626) was passed through to Belau Submarine Cable Corporation (BSCC), a component unit of the Republic, for the submarine fiber optic cable project for the year ended September 30, 2022; however, there was lack of evidence to indicate that the above criteria was met. Cause: The Republic lacks internal control policies and procedures to identify subrecipient relationships and monitor subrecipients to ensure compliance with applicable subrecipient requirements. Effect: The Republic is in noncompliance with applicable subrecipient requirements and therefore $1,030,566 is questioned. Recommendation: The Republic should develop and implement internal control policy and procedures to identify subrecipient relationship and monitor activities of subrecipients to ensure compliance with applicable subrecipient requirements. Views of Responsible Officials: The Republic’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.
Finding No.: 2022-007 Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34839-20-55-A-70 Area: Reporting Questioned Costs: $0 Criteria: In accordance with the 2 CFR section 200.303 Internal Controls, the recipient of Federal award must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, in accordance with the 2022 OMB Compliance Supplement, Part 3, Section L: Reporting Compliance Requirements, for financial reporting, the reported amounts should be supported by the underlying accounting records that support the audited financial statements and the Schedule of Expenditures of Federal Awards. Condition: Internal controls over the reporting requirements are not implemented. The Republic’s internal controls are unlikely to operate effectively, as we are unable to ascertain proper review of the required reports, including the accuracy of reported amounts. For 4 (or 33%) of 12 ETA 9130, Financial Status Report tested, cumulative expenditures reported are not accurately supported by the underlying accounting records as follows: No. Report Period Document Number Program Category Cumulative Expenditures per ETA 9130 Cumulative Expenditures per accounting records Absolute Amount of Variance 1 Quarterly Report - Q1 10/01/2020-12/31/2020 UI34839CA0 FPUC Administration – FY21 $122,647 $64,533 $58,114 2 Quarterly Report - Q1 10/01/2020-12/31/2020 UI34839C80 PUA Administration – FY21 188,221 166,157 22,064 Total for Q1: 310,868 230,690 80,178 3 Quarterly Report - Q2 01/01/2021-3/31/2021 UI34839CA0 FPUC Administration – FY21 122,647 64,533 58,114 4 Quarterly Report - Q2 01/01/2021-3/31/2021 UI34839C80 PUA Administration – FY21 188,221 209,597 21,376 Total for Q2: 310,868 274,130 79,490 Grand Total: $621,736 $504,820 $159,668 Cause: The Republic did not maintain effective internal controls over the review process of the ETA 9130 Financial Status Reports. Effect: The Republic is in noncompliance with applicable internal control requirements. This represents a significant deficiency, and the compliance report is modified accordingly. No question cost is presented as there is no effect on the amount expended or received from the Federal award. Identification as a Repeat Finding: Finding 2021-005 Recommendation: The Republic should strengthen monitoring controls over applicable reporting requirements. Responsible personnel should reconcile reported amounts to the underlying accounting records. Views of Responsible Officials: The Republic’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.
Finding No.: 2022-009 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.224 Health Center Program Federal Award No.: 1 H8DCS36516-01-00, 4 H8DCS36516‐01‐01, 6 H80CS02467-35-03, 1 H8FCS41190-01-00, 6 H80CS02467-36-08, 3 H80CS02467‐36‐01, 5 H80CS02467‐37‐00 Area: Procurement, Suspension and Debarment Questioned Costs: $187,764 Criteria: In accordance with 2 CFR 200.320(a)(1)(i) and (ii), to the maximum extent practicable, non-Federal entities should distribute micro-purchases equitably among qualified suppliers. Additionally, micro-purchases may be awarded without soliciting competitive price or rate quotations if the non-Federal entity considers the price to be reasonable based on research, experience, purchase history, or other relevant information and maintains documents to support its conclusion in the procurement files accordingly. Condition: The Republic’s procurement policy, 40 Palau National Code Annotated (PNCA) §625(c)(2), states that small purchases under two thousand five hundred dollars ($2,500) may be made after receiving one (1) written price quotation. However, the Republic’s procurement policy on small purchases does not meet the federal procurement requirement on micro-purchases as stated in the above criteria. As a result, for 260 (or 39%) of the 660 procurement transactions tested, no documentation was maintained to substantiate that the small purchases were distributed equitably among qualified suppliers as follows:For 260 (or 39%) of the 660 procurement transactions, no documentation is maintained to substantiate equitably distributing $187,764 of micro-purchase procurements among qualified suppliers as follows: No. No. of transactions GL Account Name Amount 1 109 General Supplies $101,254 2 18 Boat Rentals 30,700 3 58 Vehicle Cycle Repair 18,102 4 34 Medical Drugs 13,055 5 4 Conference 6,502 6 5 Medical Supplies 6,257 7 7 Building Rentals 3,650 8 1 Computer Software 1,999 9 4 All Other Rentals 1,985 10 9 Dues & Fees 1,500 Cause: The Republic did not effectively monitor compliance with applicable procurement requirements. Condition, continued: No. No. of transactions GL Account Name Amount 11 4 Machinery & Equip Repair 1,030 12 1 Training 700 13 1 Building/Space Rentals 575 14 4 Advertising 255 15 1 Vehicle Cycle Etc Rentl 200 Total: 260 $187,764 Cause: The Republic did not include documentation in the procurement file to evidence that the program made effort to distribute small purchases equitably among qualified vendors. In addition, the Republic’s procurement policy does not address micro-purchases distribution to meet the federal requirements. Effect: The Republic is in noncompliance with applicable procurement requirements. The reportable questioned cost is $187,764. Recommendation: We recommend that the Republic update its procurement policies and procedures to include specific guidance on equitably distributing micro-purchase procurements among qualified suppliers. Additionally, management should ensure that documentation supporting the basis for supplier selection is consistently maintained in the procurement files. Views of Responsible Officials: The Republic’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.
Finding No.: 2022-010 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.224 Health Center Program Federal Award No.: 1 H8DCS36516-01-00, 4 H8DCS36516‐01‐01, 6 H80CS02467-35-03, 1 H8FCS41190-01-00, 6 H80CS02467-36-08, 3 H80CS02467‐36‐01, 5 H80CS02467‐37‐00 Area: Special Tests and Provisions – Sliding Fee Discounts Questioned Costs: $1,357 Criteria: In accordance with the 2022 OMB Compliance Supplement, Part 4, Agency Program for ALN 93.224, Section III-N: Special Tests and Provisions – Sliding Fee Discounts, health centers must prepare and apply a sliding fee discount schedule (SFDS) so that the amounts owed for health center services by eligible patients are adjusted (discounted) based on the patient’s ability to pay as follows: a. Sliding fee discounts are applied to fees for health center services provided to all individuals and families with annual incomes at or below 200 percent of the Federal Poverty Guidelines (FPG). b. A full discount is applied to fees for health center services provided to individuals and families with annual incomes at or below 100 percent of the FPG, or the health center applies only a nominal charge. c. Fees for health center services are discounted based on gradations in family size and income for individuals and families with incomes above 100 and at or below 200 percent of the FPG. d. No sliding fee discount is applied to fees for health center services provided to individuals and families with annual incomes above 200 percent of the FPG. Condition: a. The sliding fee discount schedule used by the Republic is the Ministry of Health’s Sliding Fee Scale, which is not in accordance with Federal requirements, and has not been updated since January 2006 as shown below. The discounts were applied and determined based on whether the patient is a resident or a nonresident, tourist or non-tourist, with insurance or none, senior citizen, and behavioral health patient. Family Size Ministry of Health Sliding Fee Schedule 2022 Federal Poverty Guidelines Percentage of Maximum Charge based on Family Income & Size 20% 30% 40% 50% 60% 70% 100% 200% 1 0-5,700 5,701-10,050 10,051-12,600 12,601-14,100 14,101-17,500 >17,500 $13,590 $27,180 2 0-6,600 6,601-13,500 13,501-16,300 16,301-19,000 19,001-21,800 >21,800 18,310 36,620 3 0-7,400 7,401-17,000 17,001-20,500 20,501-23,900 23,901-27,500 >27,500 23,030 46,060 4 0-8,500 8,501-20,600 20,601-24,800 24,801-28,900 28,901-32,500 >32,500 27,750 55,500 5 0-9,700 9,701-24,200 24,201-29,000 29,001-33,800 33,801-38,700 >38,700 32,470 64,940 6 0-10,700 10,701-27,700 27,701-33,200 33,201-37,500 37,501-43,000 >43,000 37,190 74,380 7 0-11,500 11,501-31,200 31,201-37,400 37,401-43,700 43,701-46,000 >46,000 41,910 83,820 8 0-12,600 12,601-34,700 34,701-41,600 41,601-48,600 48,601-55,600 >55,600 46,630 93,260 9 0-14,800 14,801-38,300 38,301-45,900 45,901-53,600 53,601-65,000 >65,000 51,350 102,700 10 0-16,600 16,601-41,800 41,801-50,200 50,201-58,500 58,501-70,000 >70,000 56,070 112,140 11 0-18,900 18,901-45,300 45,301-54,400 54,401-63,400 63,401-75,000 >75,000 60,790 121,580 12 0-23,500 23,501-48,800 48,801-58,600 58,601-68,400 68,401-85,000 >85,000 65,510 131,020 b. For 51 (or 85%) of the 60 invoices tested, $1,960 out of $1,037,361 in total billed amounts, patients were not properly billed in accordance with the FPG. A full discount was not applied to fees for health center services provided to individuals and families with annual incomes at or below 100% of the FPG, or a nominal charge. No. Encounter No. Invoice Number Payor Family Size Payor Income Bill Charge Audit Calculation Overbilled / (Underbilled) 1 754877 733395 4 $7,488 $11 $– $11 2 781518 759290 3 – 6 5 1 3 776395 754269 1 5,093 3 – 3 4 722461 707096 1 – 45 43 2 5 715155 700604 2 11,338 13 – 13 6 749290 728071 1 8,566 52 – 52 7 736712 717063 1 – 23 10 13 8 723144 707747 3 – 19 10 9 9 726603 711146 5 12,195 58 – 58 10 731023 715830 1 – 34 25 9 11 722752 707357 5 19,231 18 5 13 12 774214 752121 2 1,200 38 29 9 13 769428 747435 1 4,344 98 39 59 14 723611 708224 3 – 6 – 6 15 766923 745041 4 – 35 5 30 16 779565 757371 1 – 20 12 8 17 727345 711861 1 3,702 51 18 33 18 769371 747360 1 10,927 27 10 17 19 767654 745740 1 – 13 10 3 20 731034 715563 1 – 50 29 21 21 740365 719508 2 8,122 13 – 13 22 714110 699086 3 17,478 118 34 84 23 712029 697030 1 7,306 18 5 13 24 776827 754683 1 – 12 10 2 25 738228 717403 1 – 39 5 34 26 754313 732878 1 – 73 30 43 27 749494 728248 1 – 60 17 43 28 714372 699352 1 – 82 6 76 29 770602 748538 1 204 13 10 3 30 768935 746954 2 – 17 15 2 31 712849 697933 4 – 7 5 2 32 749370 728205 3 $– $3 $– $3 33 786662 764376 3 – 96 94 2 34 728123 712628 4 – 43 – 43 35 786837 764570 1 9,996 48 – 48 36 755679 734248 1 11,947 25 – 25 37 724867 709483 1 – 109 – 109 38 754765 733308 1 – 12 11 1 39 782259 760033 1 12,308 48 5 43 40 774749 752638 3 11,050 22 – 22 41 747768 726722 2 – 1 – 1 42 785311 763047 2 3,775 52 12 40 43 714852 699863 1 – 54 10 44 44 763221 741361 4 12,571 18 5 13 45 760077 738373 4 14,123 23 10 13 46 748797 727743 1 – 201 201 47 746736 725464 2 6,000 8 5 3 48 751147 729789 1 – 20 20 49 745654 724406 2 15,825 42 25 17 50 769401 750456 3 – 52 39 13 51 724470 709093 2 560 11 – 11 Subtotal: $1,960 $603 $1,357 c. For 1 (or 1%) of 60 invoices tested, $117 of $1,037,361 in total billed amount, patients were not properly billed based on the FPG. The fees for health center services were not properly discounted based on gradations in family size and income for this individual with income above 100 and at or below 200% of the FPG. No. Encounter No. Invoice Number Payor Family Size Payor Income Bill Charge Audit Calculation Overbilled / (Underbilled) 1 716428 701344 1 $25,532 $117 $104 $13 d. For 1 (or 1%) of 60 invoices tested, $84 of $1,037,361 in total billed amount, patients were not properly billed based on the FPG. The sliding fee discount was applied to fees for health center services provided to this with annual income above 200% of the FPG. No. Encounter No. Invoice Number Payor Family Size Payor Income Bill Charge Audit Calculation Overbilled / (Underbilled) 1 732587 716990 1 $50,000 $84 $97 ($13) Grand Total: $2,161 $804 $1,357 Cause: Republic of Palau Public Law (RPPL) 7-13 Section 19, which amends RPPL 5-7, requires Palauan citizens and their spouses to be charged hospital fees at a subsidized rate compared to non-Palauans. Accordingly, the Ministry of Health implemented its sliding fee schedule policy in 2006 in accordance with RPPL 7-13. The community health centers program adopted its fee schedule policy based on income and family size. However, this policy cannot be implemented without the support of the Olbiil era Kelulau (National Congress). Effect: The Republic is in noncompliance with applicable special tests and provisions requirements for sliding fee discounts. The reportable questioned cost is $1,357. Identification as a Repeat Finding: Finding 2021-007 Recommendation: We recommend that the Republic implement policies related to the sliding fee discount based on family income and size, in accordance with the aforementioned criteria. Views of Responsible Officials: The Republic’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.