Finding No.: 2023-011 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact of Free Association, As Amended Questioned Costs: $100,327 Area: Allowable Costs/Cost Principles Criteria: Federal program expenditures should be necessary and reasonable for the performance of the Federal award, in accordance with allowable costs/cost principles requirements, and be directly related to, and in accordance with, program intent and objectives. Furthermore, 2 CFR 200.303(a) states that a recipient of a 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. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition 1: Of 43 non-payroll transactions tested, aggregating $5,876,660 of $31,535,023 in total non-payroll program expenditures, we noted the following: 1. For 1 (or 2%), cost was not adequately documented due to lack of supporting vendor invoice: Item # Fund # Encumbrance/ Voucher/JV # Account Total 1 10402 22/00003564 BRV Contractual Services $ 100,000 2. For 7 (or 16%), the underlying grant award nos. D23AF00042-00 and D23AF00074-00 terms and conditions state that assistance under the awards may not be sub-granted or transferred. However, $1,847,500 of the grant assistance was disbursed directly to the Enewetak/Ujelang Local Government (EULGOV) and a subgrant agreement with EULGOV was not available. This item is also reported as a matter of noncompliance within Finding 2023-019, including associated questioned costs. Therefore, no questioned cost is presented at this finding. Condition 2: Of 25 payroll transactions tested, aggregating $20,005 of $18,441,905 in total payroll program expenditures, we noted the following: 1. For 3 (or 12%), leave hours were not supported by an approved leave form: Item # Employee # PPE Hours Amount 1 206603 11/19/2022 8 $ 50 3 090465 12/03/2022 24 196 2 04093566 03/11/2023 8 81 $ 327 2. For 1 (or 4%), direct payment to EULGOV was in breach of the underlying grant award nos. D23AF00042-00 and D23AF00074-00 terms and conditions, as noted under Condition 1 item 2 above. No questioned cost for these awards is presented at this finding. Cause: RepMar did not effectively maintain documentation to support expenditures charged to federal programs and did not effectively monitor the validity and allowability of expenditures. Furthermore, RepMar lacks adequate internal control policies and procedures to facilitate adherence with grant terms and conditions. Effect: RepMar is in noncompliance with allowable costs/cost principles requirements. The reportable questioned cost is $100,327. Identification as a Repeat Finding: Finding Nos. 2022-001 and 2022-002 Recommendation: Documents supporting expenditures should be maintained. Further, RepMar management should strengthen monitoring controls so that expenditures are verified for validity and allowability. Finally, RepMar should adopt adequate internal control policies and procedures to facilitate adherence with grant terms and conditions. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.
Finding No.: 2023-015 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact of Free Association, As Amended Questioned Costs: $22,743 Area: Period of Performance Criteria: Grant agreements stipulate the period of performance during which time only costs resulting from obligations of the funding period may be charged. Furthermore, 2 CFR 200.303(a) states that a recipient of a 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. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition 1: For 1 (or 8%) of 13 transactions tested aggregating $30,782 of $733,055 non-payroll expenditures, the vendor invoice was not provided to verify that the cost was not incurred prior to the funding period stipulated in the grant award. Item # Fund # Voucher # Encumbrance # Total 1 10408 22/00001585 JOURNAL F0178101 $ 1,655 Condition 2: For 4 (or 9%) of 44 transactions tested aggregating $312,418 of $7,510,168 in non-payroll expenditures, the vendor invoice was not provided to verify that the cost was not incurred subsequent to the funding period stipulated in the grant award. Item # Fund # Voucher # Encumbrance # Total 1 10401 22/00003877 INVOICE 22/00002357 PORDER $ 355 2 10401 22/00003876 INVOICE 22/00002214 PORDER 111 3 10409 22/00003970 INVOICE 22/00001885 PORDER 320 4 10406 22/00010031 PV 22/00002158 BRV 20,302 $ 21,088 Condition 3: Expenditures totaling $2,050,741 were charged to grant award nos. D23AF00042-00 and D23AF00074-00 utilizing a single project code (SPG # 70110100). The two grant awards have different periods of performance. Compliance with period of performance requirements related to award no. D23AF00074-00 for costs totaling $688,542 could not be ascertained. Questioned costs, if any, that may result from this condition are not determinable. Condition 4: For the Four Atolls Health Care program, the applicable grant agreement covering the period from 10/01/2022 to 01/31/2023 was not made available. Therefore, compliance with period of performance requirements could not be ascertained. Questioned costs, if any, that may result from this condition are not determinable. Cause: RepMar did not effectively maintain documentation and did not establish a unique project code for each grant award to verify compliance with period of performance requirements. Effect: RepMar is in noncompliance with applicable period of performance requirements. Accordingly, questioned costs of $22,743 result from conditions 1 and 2 because the projected questioned cost exceeds the $25,000 threshold. Identification as a Repeat Finding: Finding No. 2022-005 Recommendation: RepMar should implement adequate internal control policies and procedures requiring retention of documentation to support all transactions and establish a unique project code for each grant award. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.
Finding No.: 2023-016 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact of Free Association, As Amended Questioned Costs: $314,943 Area: Procurement and Suspension and Debarment Criteria: Section 200.317 of 2 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards states that, when procuring property and services under a Federal award, a state must follow the same policies and procedures it uses for procurements from its non-Federal funds. RepMar’s Procurement Code states the following: (a) Section 124 - unless otherwise authorized by law, all Government contracts shall be awarded by competitive sealed bidding. (b) Section 127 - procurement of goods and services not exceeding $25,000 may be made in accordance with small purchase procedures promulgated by RepMar’s Policy Office. Small purchase procedures are those relatively simple and informal methods for securing services, supplies, or other property that do not cost more than $25,000. RepMar’s Ministry of Finance, Banking and Postal Services has previously declared that if small purchase procedures are used, price or rate quotations shall be obtained from three qualified sources. (c) Section 128 - a contract may be awarded for a supply, service, or construction item without competition when it is determined in writing that there is only one source for the required supply, service, or construction item. The RMI Procurement Regulations Pursuant to the Procurement Code Act 1988 (RMI Procurement Regulations) Sections 5 and 6 stipulate procedures pertaining to suspension or debarment of persons who shall not be considered for award of contracts. 2 CFR 200.214 states that recipients and subrecipients are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, as well as 2 CFR part 180. The regulations in 2 CFR part 180 restrict making Federal awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from receiving or participating in Federal awards. 2 CFR 180.300 states that when an entity enters into a covered transaction with another person at the next lower tier, the entity must verify that the person with whom the entity intends to do business is not excluded or disqualified by doing the following: (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. Furthermore, 2 CFR 200.303(a) states that a recipient of a 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. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition 1: For 8 (or 12%) of 65 procurement transactions tested, aggregating $6,463,583 of $16,926,745 in total transactions subject to procurement requirements, there was no procurement file provided to substantiate compliance with applicable procurement requirements as follows: Item # Fund # Voucher # Amount 1 10410 22/00001589 JOURNAL $ 11,581 2 10409 22/00001587 JOURNAL 167,852 3 10401 22/00003286 PINVOICE 21,178 4 10406 22/00003856 PINVOICE 9,950 5 10406 22/00005332 PINVOICE 10,275 6 10401 22/00000717 PINVOICE 23,247 7 10406 22/00005350 PINVOICE 24,995 8 10406 22/00001939 PINVOICE 10,437 $ 279,515 Condition 2: For 3 (or 5%) of 65 procurement transactions tested, aggregating $6,463,583 of $16,926,745 in total transactions, the procurement documentation is insufficient to support the rationale for vendor selection in accordance with 2 CFR section 200.323 and 48 CFR section 15.404-3. Item # Fund # Voucher # Amount 1 10402 22/00003565 PINVOICE $ 4,784 2 10402 22/00004883 PINVOICE 5,000 3 10406 22/00002441 PV 660 $ 10,444 For 9 (or 14%) of 65 procurement transactions tested, aggregating $6,463,583 of $16,926,745 in total transactions, supporting procurement documentation was not sufficient to substantiate compliance with applicable procurement requirements as follows: Item # Fund # Voucher # Amount 1 10402 22/00004885 PINVOICE $ 5,000 2 10402 22/00005513 PINVOICE 1,430 3 10406 22/00003035 PV 508 4 10406 22/00011377 PV 4,870 5 10406 22/00000549 PV 336 6 10403 22/00011927 PV 2,319 7 10401 22/00001875 PINVOICE 2,195 8 10402 22/00003839 PV 2,565 9 10402 22/00000269 PV 5,761 $ 24,984 No quotations/ cost comparison were provided for the items. The procurement documentation is insufficient to demonstrate compliance with applicable procurement requirements. Condition 4: Documented evidence of compliance with RMI Procurement Regulations and 2 CFR 200.214 and 2 CFR 180.300 regarding debarred, suspended, or otherwise excluded persons or entities was not made available. Cause: RepMar did not enforce internal control policies and procedures over documentation of the procurement process to satisfy compliance with applicable procurement requirements. Effect: RepMar is in noncompliance with applicable procurement requirements. The reportable questioned cost is $314,943. Identification as a Repeat Finding: Finding No. 2022-006 Recommendation: Responsible personnel should require that documentation be adequate to comply with applicable procurement requirements. Specifically, documentation should indicate the history of procurement, including the rationale for contractor or vendor selection. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.
Finding No.: 2023-019 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact of Free Association, As Amended Questioned Costs: $5,166,243 Area: Subrecipient Monitoring Criteria: 1) Article VI, Section 1(a)(1) of the Fiscal Procedures Agreement (FPA) states that fiscal control and accounting procedures of RepMar, as well as its Sub-Grantees, shall be sufficient to: (i) permit the preparation of reports required by the FPA and the Compact, as amended; and (ii) permit the tracing of funds to a level of expenditures adequate to establish that such funds have been used in compliance with the provisions of the Compact, as amended, and applicable agreements. Furthermore, Article VI, Section 1(k)(1) of the FPA states that RepMar shall ensure that: (i) every Sub-Grant includes any clauses required by the Compact, as amended, the sector Grant awards, and the FPA; (ii) Sub-Grantees are aware of the requirements imposed upon them by the Compact, as amended, the sector Grants and the FPA; and (iii) Sub-Grantees can meet the financial management standards of the FPA. 2) In accordance with applicable subrecipient monitoring requirements, the pass-through entity (PTE) must follow-up and ensure that the subrecipient takes timely and appropriate action on all deficiencies detected through audits, on-site reviews, and other means, pertaining to the Federal awards provided by the PTE to the subrecipient. Furthermore, 2 CFR 200.303(a) states that a recipient of a 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. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the COSO. Condition 1: For 12 (or 100%) subawards tested, no documented evidence was made available to demonstrate that the Ministry of Finance, Banking and Postal Services (MOFBPS) effectively monitored subrecipient activities. Consequently, we were unable to ascertain whether MOFBPS monitored subrecipient compliance with subaward agreements, Compact Agreement, grant award, and the FPA. Item # Subrecipient Fund # Sub-Grant 1 College of the Marshall Islands 10401 $ 987,000 2 College of the Marshall Islands 10402 388,325 3 College of the Marshall Islands 10406 125,000 4 College of the Marshall Islands 10409 500,000 5 Ebeye Christian School 10406 3,984 6 Ebeye Seventh Day Adventist 10406 54,530 7 Father Hacker High School 10406 6,695 8 Kwajalein Atoll Joint Utilities Resources (FY23 allocation) 10412 275,000 9 Kwajalein Atoll Joint Utilities Resources 10412 663,930 10 Kwajalein Atoll Joint Utilities Resources (FY22 allocation) 10412 275,000 11 Marshall Islands Scholarship Board 10401 592,202 12 Marshall Islands Scholarship Board 10406 200,000 13 Queen of Peace 10406 39,279 $ 4,110,945 Other discrepancies were also noted as follows: For item #s 1 through 4, the 4th quarter financial reports were not supported by subrecipient expenditure reports, as required by MOFBPS. Further, the subrecipient’s fiscal year 2023 Uniform Guidance audit has not been issued. Accordingly, questioned cost of $2,000,325 result. For item #s 5 through 7 and 13, the subrecipients are not subject to audit; however, questioned cost of $104,488 result, due to lack of documented evidence of subrecipient monitoring. For item #s 8 and 9, funds were disbursed in one installment payment which conflicts with Section 4 of the underlying Memorandum of Agreement which stipulates quarterly disbursement of funds. Further, the subrecipient’s fiscal year 2023 Uniform Guidance audit has not been completed. Accordingly, questioned cost of $938,930 result. Item # 10 represents a subaward to the subrecipient under award no. D22AF00007-00 for which the period of performance was from 10/01/2021 to 9/30/2023. The subaward represents FY22 allocation that was accrued in fiscal year 2023 and paid in December 2023. Funds were disbursed in a manner inconsistent with the underlying Memorandum of Agreement. Finally, the subrecipient’s fiscal year 2022 Uniform Guidance audit has not been completed. Accordingly, questioned cost of $275,000 result. For item #s 11 and 12, while there is no documented evidence of subrecipient monitoring, no finding is reported in the subrecipient’s fiscal year 2023 Uniform Guidance audit related to the subaward. For item # 12, funds were disbursed semi-annually which conflicts with Section 4 of the underlying Memorandum of Agreement which stipulates quarterly disbursement of funds, and the financial reports required by MOFBPS were not made available. No questioned cost results since the subrecipient was separately audited. Condition 2: Subrecipient monitoring schedule provided by MOFBPS was incomplete. Grant assistance under award nos. D23AF00042-00 and D23AF00074-00 aggregating $1,847,500 was sub-granted to a subrecipient that was not included in the monitoring schedule. Further, the sub-grant was prohibited by the grant award terms and conditions. Accordingly, questioned costs of $1,847,500 result. Condition 3: There was no documented evidence that RepMar monitored subrecipient cash draws to ensure that the time elapsing between the transfer of Federal funds to the subrecipient and disbursement of funds for program purposes was minimized. Questioned costs, if any, that may result from this condition are not determinable. Cause: RepMar lacks effective internal control policies and procedures governing subrecipient monitoring, including compliance with underlying grant awards and memoranda of agreement and Compact provisions. Effect: RepMar is in noncompliance with applicable subrecipient monitoring requirements. As a result, questioned cost of $5,166,243 is reported. Identification as a Repeat Finding: Finding No. 2022-010 Recommendation: RepMar should comply with the applicable provisions of the FPA and subrecipient monitoring requirements and should develop and implement effective subrecipient monitoring procedures. Furthermore, MOFBPS should enforce compliance with subaward agreements, including timely Single Audits of subrecipients, as applicable. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.
Finding No.: 2023-021 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact of Free Association, As Amended Questioned Costs: $ Undeterminable Area: Special Test and Provisions – Annual Performance Reviews Criteria: Education Sector NGA Section 4c. states that in furtherance of the progress made under JEMFAC Resolution 2015-MT-2 all personnel funded from Education Sector, Supplemental Education Grant (SEG) and Ebeye Special Needs (ESN) grants are required to undergo an annual performance evaluation and such evaluation shall be maintained as part of the personnel files and made available when requested for purposes of grant oversight or audits. Furthermore, 2 CFR 200.303(a) states that a recipient of a 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. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the COSO. Condition: We were not provided with a complete listing of personnel funded by the Education Sector, SEG and ESN grants and evidence that the annual performance evaluation was conducted for such personnel. Thus, we were unable to ascertain compliance with this grant special terms and conditions. Cause: RepMar lacks adequate internal control policies and procedures to facilitate monitoring of and compliance with grant special terms and conditions. Effect: RepMar is potentially in noncompliance with applicable special tests and provision. We were unable to execute sufficient appropriate audit procedures. Accordingly, questioned cost is undeterminable. Recommendation: RepMar should establish adequate internal control policies and procedures to facilitate monitoring of and compliance with grant special terms and conditions. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.
Finding No.: 2023-012 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Award No.: NU50CK000558 Questioned Costs: $558,990 Area: Allowable Costs/Cost Principles Criteria: Federal program expenditures should be necessary and reasonable for the performance of the Federal award, in accordance with allowable costs/cost principles requirements, and be directly related to, and in accordance with, program intent and objectives. Furthermore, 2 CFR 200.303(a) states that a recipient of a 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. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition 1: For 16 (or 33%) of 49 non-payroll transactions tested, aggregating $1,851,210 of $2,079,854 in total non-payroll program expenditures, the following deficiencies were noted: Item # Encumbrance/ Voucher # SPG # COVID Non-COVID Total 1 22/00001585 Journal 10290101 $ 5,601 $ - $ 5,601 2 22/00003730 BRV 10320101 44,463 - 44,463 3 22/00001975 BRV 10134501 - 37,900 37,900 4 22/00005845 BRV 10134501 - 1,784 1,784 5 22/00001980 BRV 10580201 20,000 - 20,000 6 22/00001585 JOURNAL 10610101 - 10,000 10,000 7 22/00002210 PORDER 10134501 - 2,520 2,520 8 22/00001931 PORDER 10290101 9,240 - 9,240 9 C1491501 10320101 6,947 - 6,947 10 C14081 10290101 264,000 - 264,000 11 22/00001633 PORDER 10520101 6,322 - 6,322 12 22/00003591 BRV 10320101 2,073 - 2,073 13 22/00001491 PORDER 10580101 - 2,780 2,780 14 22/00002713 PORDER 10136401 1,350 - 1,350 15 22/00002656 PORDER 10136401 4,514 - 4,514 16 22/0001587 JOURNAL 10610101 138,900 - 138,900 $ 503,410 $ 54,984 $ 558,394 Item #s 1 and 2 pertain to security services for which there was inadequate documentation to support cost allocation to the program. Item #s 3 through 5 pertain to RepMar’s Ministry of Health and Human Services (MOHHS) utility expenditures for which there was inadequate documentation to support cost allocation to the program. Item #s 6 through 7 pertain to MOHHS communication expenditures for which there was inadequate documentation to support cost allocation to the program. Item # 8 pertains to MOHHS fuel expenditures for which there was inadequate documentation to support cost allocation to the program. Item # 9 pertains to the construction of MOHHS’s Laura Health Centre Extension, for which the grant Notice of Award (NOA) strictly prohibits construction to be charged to the program. Item # 10 pertains to the purchase of MOHHS’s Marshall Health Information System (MHIS) for which there was inadequate documentation to support cost allocation to the program. Item #s 11-15 pertain to the purchase of equipment (i.e laptops, copier machines, and duplicators), however we noted no budget for equipment per NOA. Item # 16 pertains to a transfer to the Marshall Island Police Department, we were not provided supporting documentation for us to ascertain the allowability of the activity. Condition 2: For 3 (or 27%) of 11 payroll transactions tested, aggregating $11,610 of $471,786 in total payroll program expenditures, the following deficiencies were noted: Item # Employee # PPE Hours Amount 1 04236064 10/08/2022 Unknown $ 103 2 04219081 6/3/2023 74.5 468 3 04231376 7/15/2023 4 25 $ 596 For item # 1, employee was paid an additional $103 which could not be verified due to lack of supporting calculation. Furthermore, the additional payment was not supported by documented approval. For item # 2, the employee's position is Purchasing Specialist II. Documentation of why this is a necessary and reasonable program cost was not available for examination. For item # 3, four leave hours paid were not supported by an approved leave form. The above are expenditures under COVID SPG codes and resulted in reportable questioned costs of $596 because the projected questioned cost exceeds the $25,000 threshold. Cause: RepMar lacks adequate internal control over compliance with applicable allowed and unallowed activity requirements, as well as obtaining and retaining sufficient documentation to support all transactions. Effect: RepMar is in noncompliance with allowable costs/cost principles requirements. The reportable questioned cost is $504,006 (COVID) and $54,984 (non-COVID). Identification as a Repeat Finding: Finding No. 2022-003 Recommendation: RepMar management should strengthen monitoring controls so that expenditures are verified for validity and allowability. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.
Finding No.: 2023-013 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact of Free Association, As Amended Questioned Costs: $ Undeterminable Federal Agency: U.S. Department of Health and Human Services AL Program: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Award No.: NU50CK000558 Questioned Costs: $27,059 Area: Cash Management Criteria: Compact payments shall be made in accordance with Article IV of Fiscal Procedure Agreement (FPA). Further, Article VI stipulates that to the extent that the Government of the Republic of the Marshall Islands awards Sub-Grants to local governments or other entities, it shall establish reasonable procedures to ensure the timely receipt of the reports on cash balances and cash disbursements to enable the preparation of complete and accurate transactions reports. 2 CFR section 200.305(b) states that for recipients other than States, payment methods must minimize the time elapsing between the transfer of funds from the Federal agency and the disbursement of funds by the recipient. Furthermore, 2 CFR 200.303(a) states that a recipient of a 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. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition 1: RepMar does not have established cash management monitoring, which is essential for ensuring compliance with Article IV of the Fiscal Procedure Agreement. Furthermore, there is no detailed listing of expenditures supporting the drawdowns made during the year on file to ascertain whether these expenditures were incurred prior to the date of the reimbursement request, thereby hindering the preparation of complete and accurate transaction reports. Questioned costs, if any, that may result from inadequate records are not determinable. Condition 2: RepMar utilizes a cumulative deductive reimbursement method for payment, therefore, it is unable to provide or correlate when an invoice or drawdown is made. Condition 3: Internal control deficiency resulted in overdraws during the year: • $27,059 for ALN 93.323, which is not material to the program but exceeds the $25,000 threshold and thus questioned costs result. • $2,639,269 for ALN 15.875 in Fund 10309, SPG 70120100. With grantor approval, this overdraw was partially offset against grantor receivables, and the remaining $2,342,351 balance as of September 30, 2023 was reclassed to liabilities. Therefore, no questioned cost results. Cause: RepMar lacks adequate internal controls over compliance related to cash management, including the retention of documentation supporting cash drawdowns. Effect: RepMar is in noncompliance with applicable cash management requirements. Questioned cost of $27,059 results from Condition 3 ALN 93.323. Recommendation: RepMar should strengthen controls to ensure that complete and accurate transaction reports are retained to evidence compliance with applicable cash management requirements. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.
Finding No.: 2023-014 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact of Free Association, As Amended Questioned Costs: $ Undeterminable Federal Agency: U.S. Department of Health and Human Services AL Program: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Award No.: NU50CK000558 Questioned Costs: $ Undeterminable Area: Equipment and Real Property Management Criteria: Section 200.313(d) of the Uniform Guidance and Article VI, Section 1(f)(4) of the Fiscal Procedures Agreement states that procedures for managing equipment, whether acquired in whole or in part with grant funds, will follow state laws and procedures. The following requirements are applicable: a. Property records must be maintained that include a description of the property, a serial number or another identification number, the source of funding for the property (including the FAIN), the title holder, the acquisition date and cost of the property, the percentage of Federal agency contribution towards the original purchase, the location, use and condition of the property, and any disposition data including the date of disposal and sale price of the property; b. A physical inventory of the property must be conducted and the results must be reconciled with the property records at least once every two years; c. A control system must be in place to ensure safeguards for preventing property loss, damage, or theft. Any loss, damage, or theft of equipment must be investigated. The recipient or subrecipient must notify the Federal Agency or pass-through entity of any loss, damage, or theft of equipment that will have an impact on the program; d. Regular maintenance procedures must be in place to ensure the property is in proper working condition; and e. If the recipient or subrecipient is authorized or required to sell the property, proper sales procedures must be in place to ensure the highest possible return. Additionally, the carrying amount of long-lived assets and the estimated useful lives of assets should be periodically re-assessed and adjusted, as appropriate, based on actual experience and relevant factors and circumstances. Furthermore, 2 CFR 200.303(a) states that a recipient of a 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. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: Capital asset records do not meet the criteria above and are not effectively maintained since updates to the records occur only once a year. Specifically, we noted the following deficiencies: • An inventory of capital assets has not been performed in the recent past in accordance with the above criteria; therefore, a reconciliation of capital asset records and physical inventory has not occurred at least once in the past two years. • Capital asset records are not effectively maintained. It does not appear that RepMar has implemented an effective control system to adequately safeguard capital assets from loss, damage or theft, or to reasonably investigate such occurrences. • RepMar has not established policies and procedures governing property maintenance and has not effectively implemented an entity-wide maintenance plan. • RepMar has not established policies and procedures to routinely assess whether impairment indicators are present and to test long-lived capital assets with impairment indicators for impairment. Cause: RepMar lacks adequate internal control policies and procedures to satisfy compliance with federal property rules and regulations and lacks effective procedures governing property maintenance, as well as periodic assessment of asset impairment conditions and useful lives. Moreover, internal control policies and procedures requiring periodic and timely performance and independent review of capital asset reconciliations and related general ledger accounts are not effectively implemented. Effect: RepMar is in noncompliance with applicable equipment and real property management requirements, and possible misstatement of capital assets and related accounts exists. Questioned costs, if any, which may result from inadequate property records, maintenance procedures, and the absence of timely reconciliations are not determinable. Identification as a Repeat Finding: Finding No. 2022-004 Recommendation: The Ministry of Finance, Banking and Postal Services (MOFBPS) should perform an inventory of RepMar’s capital assets as a basis for recording all assets in the financial statements, should complete such inventory in accordance with applicable property rules and regulations, and should develop adequate maintenance procedures in order to keep property in good condition. Furthermore, RepMar should implement internal control policies and procedures requiring periodic and timely performance and independent review of capital asset reconciliations and related general ledger accounts. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.
Finding No.: 2023-017 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Award No.: NU50CK000558 Questioned Costs: $6,500 Area: Procurement and Suspension and Debarment Criteria: Section 200.317 of 2 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards states that, when procuring property and services under a Federal award, a state must follow the same policies and procedures it uses for procurements from its non-Federal funds. RepMar’s Procurement Code states the following: (a) Section 124 - unless otherwise authorized by law, all Government contracts shall be awarded by competitive sealed bidding. (b) Section 125 – (1) contracts shall be awarded by competitive sealed bidding. (2) An invitation for bids shall be issued and shall include a purchase description and all contractual terms and conditions applicable to the procurement. (3) adequate public notice of the invitation for bids shall be given a reasonable time. (4) Bids shall be opened publicly in the presence of one or more witnesses at the time and place designated in the invitation for bid. (5) Bids shall be unconditionally accepted without alteration or correction. (c) Section 127 - procurement of goods and services not exceeding $25,000 may be made in accordance with small purchase procedures promulgated by RepMar’s Policy Office. Small purchase procedures are those relatively simple and informal methods for securing services, supplies, or other property that do not cost more than $25,000. RepMar’s Ministry of Finance, Banking and Postal Services has previously declared that if small purchase procedures are used, price or rate quotations shall be obtained from three qualified sources. (d) Section 128 - a contract may be awarded for a supply, service, or construction item without competition when it is determined in writing that there is only one source for the required supply, service, or construction item. The RMI Procurement Regulations Pursuant to the Procurement Code Act 1988 (RMI Procurement Regulations) Sections 5 and 6 stipulate procedures pertaining to suspension or debarment of persons who shall not be considered for award of contracts. 2 CFR 200.214 states that recipients and subrecipients are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, as well as 2 CFR part 180. The regulations in 2 CFR part 180 restrict making Federal awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from receiving or participating in Federal awards. 2 CFR 180.300 states that when an entity enters into a covered transaction with another person at the next lower tier, the entity must verify that the person with whom the entity intends to do business is not excluded or disqualified by doing the following: (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. Furthermore, 2 CFR 200.303(a) states that a recipient of a 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. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition 1: For 1 (or 6%) of 17 procurement transactions tested, aggregating $89,724 of $1,985,592 in total transactions subject to procurement requirements, no procurement file was provided to substantiate vendor selection. Item # Reference # Expenditure Amount Questioned Cost 1 22/00001586 $ 4,000 $ 4,000 Condition 2: For 1 (or 6%) of 17 procurement transactions tested, aggregating $89,724 of $1,985,592 in total transactions, supporting procurement documentation was not sufficient to substantiate compliance with applicable procurement requirements as follows: Item # Reference # Expenditure Amount Questioned Cost 1 22/00002281 $ 2,500 $ 2,500 Condition 3: Documented evidence of compliance with RMI Procurement Regulations and 2 CFR 200.214 and 2 CFR 180.300 regarding debarred, suspended, or otherwise excluded persons or entities was not made available. Cause: RepMar did not enforce adequate internal control policies and procedures over documentation of the procurement process to satisfy compliance with applicable procurement requirements. Further, RepMar lacks policies and procedures requiring verification of the status of an entity with which RepMar intends to enter into a covered transaction. Effect: RepMar is in noncompliance with applicable procurement requirements. Accordingly, questioned costs of $6,500 result because the projected questioned cost amount exceeds the $25,000 threshold. Identification as a Repeat Finding: Finding No. 2022-008 Recommendation: Responsible personnel should require that documentation be adequate to comply with applicable procurement requirements and regulations. Specifically, documentation should indicate the history of procurement, including the rationale for contractor or vendor selection, and verification of whether an entity or person with whom RepMar intends to do business is not excluded or disqualified. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.
Finding No.: 2023-018 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact of Free Association, As Amended Questioned Costs: $0 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Award No.: NU50CK000558 Questioned Costs: $0 Area: Reporting Criteria: Grant agreements stipulate the type and frequency of reports to be submitted. Furthermore, timely, accurate and complete reporting should be facilitated by an internal control structure conducive to the monitoring, preparation and independent review of required reports. Lastly, financial reports should reconcile with underlying accounting records. Furthermore, 2 CFR 200.303(a) states that a recipient of a 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. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition 1: There are no policies and procedures requiring monitoring of reports to be submitted or listing of reports already submitted. It does not appear that RepMar has developed means to monitor compliance with reporting requirements. Condition 2 (ALN 15.875): Of 46 financial reports due in fiscal year 2023, we noted the following: a) For 20 (or 43%), the reports were not available for examination: Item # Fund # SPG Code Award # Quarter End Due Date Date Submitted 1 10406 70150200 D22AF00005-00 12/31/2022 01/30/2023 unknown 2 10406 70210100 D23AF00077-00 12/31/2022 01/30/2023 unknown 3 10406 70210200 D23AF00077-00 12/31/2022 01/30/2023 unknown 4 10406 70210400 D23AF00077-00 12/31/2022 01/30/2023 unknown 5 10409 70041000 D23AF00011-00 12/31/2022 01/30/2023 unknown 6 10409 70190100 D23AF00050-00 12/31/2022 01/30/2023 unknown 7 20103 70060100 D23AF00024-00 12/31/2022 01/31/2023 unknown 8 20103 70060101 D23AF00041-00 03/31/2023 04/30/2023 unknown 9 10406 70340103 D22AF00004-00 03/31/2023 04/30/2023 unknown 10 10408 70090100 D23AF00009-00 03/31/2023 04/30/2023 unknown 11 10409 70040600 D23AF00011-00 03/31/2023 04/30/2023 unknown 12 10409 70040700 D23AF00011-00 03/31/2023 04/30/2023 unknown 13 10409 70040900 D23AF00011-00 03/31/2023 04/30/2023 unknown 14 10409 70041000 D23AF00011-00 03/31/2023 04/30/2023 unknown 15 10409 70120100 D23AF00037-00 03/31/2023 04/30/2023 unknown 16 10409 70290100 D22AF00006-00 03/31/2023 04/30/2023 unknown 17 10409 71480000 D24AF00024 03/31/2023 04/30/2023 unknown 18 10412 70080300 D23AF00027 03/31/2023 04/30/2023 unknown 19 10412 70140100 D22AF00007-00 03/31/2023 04/30/2023 unknown Item # Fund # SPG Code Award # Quarter End Due Date Date Submitted 20 10412 70140200 D22AF00007-00 03/31/2023 04/30/2023 unknown b) For 3 (or 7%), SF-425 reports do not align with the underlying FMIS expenditure report: Item # Fund # SPG Code Award # Quarter End SF-425 Amount 240P Amount Difference 1 410100 all cost centers D22AF00003-00 FY22 annual $713,140 $819,340 ($ 106,200) 2 10409 70290100 D22AF00006-00 06/30/2023 5,743,454 6,063,193 (319,739) 3 20103 70060101 D23AF00041-00 7/30/2023 20,137,770 20,328,571 (190,801) ($ 616,740) Condition 3 (ALN 15.875) For the Four Atolls Health Care program, we were unable to ascertain compliance with reporting requirements due to lack of grant agreement as reported in Finding No. 2023-015. Further, a second grant agreement (D23AP00058-01) covering the period from 02/02/2023 through 09/30/2027 was available for examination, however, the grant terms and conditions attachment was not included. Condition 4 (ALN 93.323): RepMar uses the ELC Cooperative Agreement Management Platform (CAMP) portal to report financial progress to the Federal grantor. RepMar was unable to provide evidence that such reporting occurred during the audit period. Furthermore, no evidence was provided indicating that the financial information reported thereon agreed to RepMar's underlying accounting records. Cause: RepMar lacks adequate internal control policies and procedures governing monitoring, preparation and independent review of required reports. Moreover, RepMar lacks adequate internal control policies and procedures over retention of all grant agreements, copies of reports submitted to grantors, and the underlying accounting records. Effect: Sufficient appropriate audit evidence supporting compliance with applicable reporting requirements were not obtained which results in report modification. No questioned cost is reported as the condition relates to inadequacy of internal control policies and procedures governing monitoring, preparation, independent review and retention of required reports and underlying accounting records. Identification as a Repeat Finding: Finding Nos. 2022-009. Recommendation: RepMar should establish adequate internal control policies and procedures governing monitoring, preparation and independent review of required reports. Moreover, RepMar should establish internal control policies and procedures requiring retention of all grant agreements and copies of reports submitted to grantors. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.
Finding No.: 2023-020 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.243 Substance Abuse and Mental Health Services – Projects of Regional and National Significance Federal Award No.: 5U79SP020711-04 Questioned Costs: $134,802 Area: Subrecipient Monitoring/Overpayment on Return of Federal Funds Criteria: In accordance with applicable subrecipient monitoring requirements per 2 CFR 200.332, a pass- through entity (PTE) must: 1) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, is used in accordance with the terms and conditions of the subaward, and achieves performance goals. 2) Follow-up and ensure that the subrecipient takes timely and appropriate action on all deficiencies detected through audits, on-site reviews, and other means, pertaining to the subaward. 3) Issue a management decision as required by 2 CFR 200.521 for audit findings pertaining to the Federal award provided to the subrecipient from the PTE . Condition: RepMar did not perform the required monitoring activities for a subrecipient and did not issue a management decision with respect to the subrecipient’s FY2018 Single Audit report dated February 22, 2023. The Single Audit reported questioned costs of $43,335 for noncompliance with allowable costs/cost principles requirements and questioned costs of $91,467 for noncompliance with procurement and suspension and debarment requirements. Furthermore, in the grantor’s March 2023 management decision communication, RepMar was required to refund the grantor for Federal funds reported for noncompliance in the same subrecipient’s FY2016 and FY2017 Single Audit reports. RepMar has since determined that the July 2024 refund included a $267,244 overpayment due to calculation error. Cause: RepMar lacks effective internal control policies and procedures governing subrecipient monitoring. Effect: RepMar is in noncompliance with applicable subrecipient monitoring requirements and overpayment of Federal funds returned. Questioned cost of $134,802 results. Recommendation: RepMar should more closely monitor subrecipients in accordance with subrecipient monitoring requirements. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.