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.: D22AF00329, D23AF00094, D23AF00270, D24AF00047, D24AF00210 Area: Cash Management Questioned Costs: $2,386,924 Criteria: Article IV, Section 5(b)(ii) of the Fiscal Procedures Agreement (FPA) Sector Grants states that infrastructure projects shall be paid on the basis of Accrued Expenditures, provided the Government of the Federated States of Micronesia maintains procedures to minimize the time elapsing between the disbursement of funds to the Government of the Federated States of Micronesia and its payment of the Accrued Expenditure. In accordance with 31 CFR part 205.12(b)(4), a Federal Program Agency transfers the actual amount of Federal funds to a State that will be paid out by the State, in a lump sum, not more than three business days prior to the day the State issues checks. Condition: 1. CSG did not maintain written procedures to minimize the time elapsing between the transfer of infrastructure project funds and the disbursement of such funds. 2. Nine (or 36%) out of twenty-five drawdowns made during the year, were disbursed in excess of the three business days as required by 31 CFR part 205.12(b)(4). Cause: CSG does not have established policies and procedures to minimize the time elapsing between the transfer of infrastructure project funds received from the FSM National Government and CSG’s disbursement of such funds to vendors. Effect or Potential Effect: CSG is in noncompliance with the applicable cash management requirements and questioned costs totaling $2,386,924 results. The amount of questioned costs is based on the total amount of drawdowns made during the year. Identification as a Repeat Finding: This is not a repeat finding. Recommendation: CSG should establish written policies and implement procedures to minimize the time elapsing between the transfer of infrastructure project funds and the disbursement of such funds for program purposes. Although not a State as defined in 2 CFR 200.1, management should consider the threebusiness day rule on cash advance funding stated in 31 CFR part 205.12(b)(4). Views of Responsible Officials: The State agrees with the finding. Corrective Action is described in the Corrective Action Plan.
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.: D23AF00013, D24AF00341 Area: Equipment and Real Property Management Questioned Costs: $32,214 Criteria: In accordance with 2 CFR 200.303(a), a subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Article VI Section I (f)(iv)(c) of the Fiscal Procedures Agreement (FPA) states that a control system shall be developed to ensure adequate safeguards against property loss, damage, or theft. Any loss, damage, or theft shall be investigated. Additionally, according to article VI Section I (f)(iv)(d) of the FPA states that adequate maintenance procedures shall be developed to keep the property in good condition. Condition: For six (or 14%) out of forty-two equipment selected for testing with an aggregate net book value totaling $589,938 and a total net book value population of $3,703,666, CSG did not properly safeguard and maintain the federal capital assets to ensure that the property exists and is in proper working condition. Based on the physical inspection, the following capital assets were either not located or found to be in a broken state, with no evidence indicating that they are currently under repair. Cause: CSG does not have established policies or procedures to ensure sufficient safeguards against loss, damage, or theft of the property, as well as adequate maintenance procedures to keep property in good condition. Effect or Potential Effect: CSG is in noncompliance with applicable equipment and real property management requirements and a total questioned costs $32,214 result. The amount of questioned cost is based on the net book value of the asset. Identification as a Repeat Finding: This is not a repeat finding. Recommendation: 1. CSG should establish a written policy along with comprehensive procedures to ensure effective safeguards against loss, damage, or theft of property, as well as establish robust maintenance protocols to preserve the property in good condition. 2. CSG should strictly enforce their actual safeguarding and maintenance procedures to ensure that federal capital expenditures are kept safe and in good working condition. Views of Responsible Officials The State agrees with the finding. Corrective Action is described in the Corrective Action Plan.
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.: D24AF00334 Area: Period of Performance Questioned Costs: $0 Criteria: In accordance with 2 CFR 200.303(a), the recipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: For two (8%) of the twenty‑five transactions tested, aggregating $45,413 out of a total population of $12,334,264, CSG voided expenditures recorded in their SEFA. No questioned cost identified because it was subsequently corrected and it is only an internal control finding. Cause: CSG did not timely reverse voided expenditure during the correct fiscal year. Effect or Potential Effect: CSG’s current control and procedure for monitoring and correcting voided transactions is not efficiently designed. Identification as a Repeat Finding: Finding No. 2023-004. Recommendation: CSG should strengthen controls to ensure that only valid, incurred, and paid costs are recorded and reported within the correct period of performance and that unsupported expenditures are identified and corrected timely. Views of Responsible Officials: The State agrees with the finding. Corrective Action is described in the Corrective Action Plan
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.: D24AF00340, D24AF0034, D24AF00020, D24AF00334, D24AF00022, D23AF00263, D24AF00023 D24AF00089 D22AF00329 D23AF00166 Area: Procurement and Suspension and Debarment Questioned Costs: $4,275,792 Criteria: Article VI, Section 1(h) of the Fiscal Procedures Agreement (FPA) states that the Government of the Federated States of Micronesia shall not award funds received pursuant to the 2023 Amended Compact to any party which is debarred, suspended, or otherwise excluded from and ineligible for participation in United States assistance programs. Additionally, according to 2 CFR 180.220(b)(1), a procurement transaction is considered a cover transaction if the contract amount is expected or to equal or exceed $25,000. Condition: CSG does not perform suspension and debarment monitoring for covered transactions with a total population of $4,275,792 that is in accordance with Article VI, Section 1(h) of the FPA. Cause: CSG does not have an established policy and procedure for verification of the suspension and debarment status of persons or contractors prior to entering into a covered transaction that is in accordance with Article VI, Section 1(h) of the FPA. Effect or Potential Effect: CSG is in noncompliance with applicable suspension and debarment requirements and questioned costs of $4,275,792 result. Identification as a Repeat Finding: Finding No. 2023-003. Recommendation: 1. CSG should establish a policy and implement formal procedures to document written evidence that, prior to entering into a covered transaction, an assessment has been carried out that is in accordance with Article VI, Section 1(h) of the FPA. 2. CSG could consider designing their policies and procedures for monitoring suspension and debarment status of persons or contractors under a covered transaction in accordance with the provisions of 2 CFR 180.300. Views of Responsible Officials: The State agrees with the finding. Corrective Action is currently ongoing and described in the Corrective Action Plan.