Audit 370983

Pass-Through Entity: Federated States of Micronesia National Government Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Various Compact Sector Grants Area: Procurement, Suspension and Debarment Questioned Costs: $406,330 Criteria: In accordance with 2 CFR section 180.300, entities that enter into covered transactions must verify that the person with whom they intend to do business, is not excluded or disqualified by: (a.) Checking SAM.gov Exclusions; or (b.) Collecting a certification from that person; or (c.) Adding a clause or condition to the covered transaction with that person. Further, in accordance with applicable procurement requirements, procurement transactions shall provide full and open competition. Condition: Of 25 nonpayroll expenditures tested, aggregating $1,138,754 of a total population of $7,242,884, the following was noted: 1. For 8 (or 32%), the State did not perform verification whether the individual or contractor was suspended or debarred prior to entering into a covered transaction. 2. For 15 transactions tested, we observed that 5 transactions (or 33%), documents were not provided to demonstrate that competitive procurement was used. Cause: The State of Chuuk lacks policies and procedures for verification of persons or contractors prior to entering into a covered transaction. Furthermore, the State did not provide documentation to the audit team by the requested cut-off date. Effect: The Chuuk State is in noncompliance with applicable procurement and suspension and debarment requirements and questioned costs of $406,330 is reported. Recommendation: The Chuuk State should implement formal procedures to document written evidence that, prior to entering into a covered transaction, a search had been performed to ensure the potential individual or contractor is not suspended or debarred. In addition, Chuuk State should improve its file maintenance system to help ensure documents over compliance requirements can be easily retrieved. Views of Responsible Officials: The State Corrective Action Plan provides explanation for disagreement with Condition 1. The State agrees with Condition 2. Auditor Response: The State concludes that vendors they transacted with are not debarred or suspended based on a search of SAM.gov that was performed subsequent to the transaction date. However, the search should have been performed prior to entering into the transactions.

Pass-Through Entity: Federated States of Micronesia National Government Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Various Compact Sector Grants Area: Period of Performance Questioned Costs: $2,400 Criteria: In accordance with the FSM-US Fiscal Procedures Agreement under Article VI Post-Award Requirements 1(c), the Government of the Federated States of Micronesia shall liquidate all Obligations incurred under a Grant not later than 90 days after the end of the funding period. Condition: For 1 (or 4 %), out of 25 transactions tested, purchase orders were not provided. Accordingly, the State was not able to substantiate that the cost was incurred/obligated within the period of performance. Cause: The State lacks internal controls over maintaining adequate records documenting the period of performance procedures performed. Effect: The State may be in noncompliance with the applicable period of performance requirements. Total question costs identified are $2,400. Recommendation: Responsible personnel should maintain records that document the period of performance procedures performed. Views of Responsible Officials: The State agrees with the finding and Corrective Action is described in the Corrective Action Plan.