Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D20AF00054, D21AF00024, D23AF00047, D23AF00061 Area: Cash Management Questioned Costs: $1,643,137 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. FSMNG did not maintain written procedures to minimize the time elapsing between the transfer of infrastructure project funds and the disbursement of such funds. 2. Six (or 50%) out of twelve drawdowns tested, FSMNG disbursed the funds for more than three business days. Cause: FSMNG does not have established policies and procedures to minimize the time elapsing between the transfer of infrastructure project funds received from the federal agency and FSMNG’s disbursement of such funds to vendors. Effect or potential effect: FSMNG is in noncompliance with the applicable cash management requirements and a questioned cost of $1,643,137 result. The questioned costs is based on the amounts of drawdowns made. Identification of a Repeat Finding: This is not a repeat finding. Recommendation: FSMNG 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. Management should consider the three-business day rule on cash advance funding stated in 31 CFR part 205.12(b)(4). Views of Responsible Officials: Management agrees with the finding as to the absence of a separate written procedure specifically addressing the time elapsing between the receipt of infrastructure project funds and their disbursement, but disagrees with the application of the three-business-day standard and with the questioned costs. A dedicated cash management procedure will be developed to ensure clarity, setting out the disbursement process and target timeframes consistent with Article IV, Section 5(b)(ii) of the Fiscal Procedures Agreement (FPA). Management's view is that this condition constitutes an internal control deficiency and does not warrant questioned costs. The FPA — the governing award term for these sector grants — requires only that the FSM National Government maintain procedures to minimize the time elapsing between the receipt of funds and payment of the accrued expenditure; it prescribes no specific day-count standard. All disbursements tested were made through the FSM National Government's internal wire-out approval process, which requires authorized signatories, and all were completed within the month of receipt. The deficiency identified is therefore the absence of a documented procedure — a matter of internal control design — and not a failure in the eligibility or propriety of the payments themselves. With respect to the questioned costs of $1,643,137, management notes that the amounts represent actual payments to vendors for eligible infrastructure accrued expenditures. The costs do not meet the definition of questioned costs under 2 CFR 200.1: they did not result from a violation of the terms and conditions of the Federal award, as the FPA contains no three-business-day requirement; they are fully supported by adequate documentation — management reaffirms that all transactions were vouched as completed during fieldwork, with all samples provided and cleared and no missing items; and they are not unreasonable, reflecting the actions of a prudent administration operating its required payment approval controls. Further, under paragraph (3)(i) of the questioned cost definition in 2 CFR 200.1, questioned costs are not an improper payment until reviewed and confirmed as such — and no such determination applies here, as the funds were disbursed in full for their intended grant purposes. Management accordingly requests that the finding be reported as an internal control deficiency with questioned costs of $0. Summary Schedule — Remarks (2024-010): Finding agreed as to the absence of a separate written procedure on time elapsing — dedicated cash management procedure to be developed per FPA Article IV, Section 5(b)(ii); disagreed on the three-business-day standard and the questioned costs. The FPA prescribes no day-count standard, all disbursements were within the month through the required wire approval process, and all transactions were vouched as completed during fieldwork with no missing items — per the 2 CFR 200.1 questioned cost definition, including paragraph (3)(i), questioned costs of $0 are warranted.
Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Unknown Area: Equipment and Real Property Management Questioned Costs: $0 Criteria: In accordance with 2 CFR 200.303(a), recipients 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 statues, regulations, and the terms and conditions of the Federal award. Article VI Section 1(f)(vi)(a) of the Fiscal Procedures Agreement (FPA) states that Property records shall be maintained which include: (1) a description of the property, (2) a serial number or identification number; (3) the source of property; (4) who holds title; (5) the acquisition date and cost of the property; (6) the percentage of Grants used in the purchase; (7) the location, use, and condition of the property; and (8) any ultimate disposition data including the date of disposal and sale price. Further, Article VI Section(f)(vi)(c) 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. Lastly, Article VI Section(f)(vi)(d) states that adequate maintenance procedures shall be developed to keep the property in good condition. Condition: 1. FSMNG’s capital asset listing does not contain all required information identified in Article VI Section 1(f)(vi)(a) of the Fiscal Procedures Agreement. The current listing does not include the source of property, the percentage of Grants used in the purchase, the use and condition of the property. 2. For twenty-seven (or 93%) of twenty-nine equipment selected for physical inspection testing, FSMNG 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: 1. FSMNG’s current policy and procedure for capital asset listing management and maintenance is not in accordance with the requirements of Article VI Section 1(f)(vi)(a) of the Fiscal Procedures Agreement (FPA). 2. FSMNG does not have established maintenance and security procedures to ensure that all federal capital assets are properly maintained and secured in the assigned premises. 3. There was a lack of proper transitioning of responsibilities to the newly assigned personnel designated to manage, maintain and safeguard the federal capital assets. Effect or potential effect: FSMNG is in noncompliance with applicable equipment and real property management requirements and a total questioned costs is $0 which is based on the total net book value of the assets. Identification as a Repeat Finding: Finding No. 2023-007 Recommendation: 1. FSMNG should update the structure and contents of their current capital asset listing to include all the information required by Article VI Section 1(f)(vi)(a) of the FPA. Additionally, the FSMNG should improve their policies and procedures on management and maintenance of their capital asset listing. 2. FSMNG should establish safeguarding and maintenance procedures that ensure performance of periodic inspections, timely repairs, and adequate security in each location of all capital assets of the program. 3. FSMNG could consider training additional personnel for equipment management, safeguarding and maintenance, to ensure that during the period of transitioning of responsibilities, capable individuals can still perform the procedures on behalf of the main responsible individual. Views of Responsible Officials: Management agrees with the finding. As set out in the response to Finding 2024-006, management recognizes that the current Fixed Asset Register (FAR) needs to be rebuilt, with proper recording aligned to the Fiscal Management Regulations and to the property record requirements of Article VI, Section 1(f)(vi)(a) of the Fiscal Procedures Agreement (FPA). The rebuilt register will capture the required data elements — including the description, serial or identification number, source of the property, title holder, acquisition date and cost, the percentage of grant funds used in the purchase, and the location, use, and condition of each asset — so that capital assets procured with federal funding under the program can be clearly identified, and a schedule of disposals, including disposal dates and sale prices, can be maintained and produced for audit. The rebuild must be completed well ahead of the FY2025 audit, as the FAR will then be migrated into the new integrated FMIS (FreeBalance), which maintains a fixed asset register module of its own within the system. Establishing a clean, accurate register prior to migration — with the funding source of each asset identified — will ensure the system-based FAR carries correct and complete records from the outset and can readily support sample selection and audit procedures in future periods. Proper advice and guidance have now been provided to the Supply Team on the recording, tracking, and reconciliation of capital assets, including the FPA property record requirements. Once the rebuild of the FAR is completed, the Supply Team will conduct physical checks and counts of assets so that adjustments — including deletions and other corrections — can be made for FY2025, ensuring the right schedule is carried and used moving forward. Summary Schedule — Remarks (2024-011): Repeat 2023-007. Finding agreed. Addressed together with 2024-006 — FAR to be rebuilt aligned to the regulations and FPA Article VI, Section 1(f)(vi)(a) property record elements, identifying assets procured with federal funding and maintaining a disposals schedule. Rebuild ahead of the FY2025 audit and migration into the new FMIS (FreeBalance) FAR module. Guidance provided to the Supply Team; physical checks and counts to follow the rebuild.
Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D23AF00017, D23AF00019 Area: Reporting Questioned Costs: $0 Criteria: In accordance with 2 CFR 200.303(a), the recipient and subrecipient 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 the Federal statutes, regulations, and the terms and conditions of the Federal award. Based on the grant award agreements, FSMNG is required to submit quarterly Federal Financial Reports (SF-425) that are accurately presented, comparable and reconcilable. Condition: For two (or 25%) of eight SF-425 reports tested, FSMNG did not provide the copy of SF-425 and the attached accounting records extracted from Fundware reports. Cause: FSMNG did not prepare and failed to submit the required quarterly SF-425 reports to OIA for the identified periods. Effect or potential effect: FSMNG is in noncompliance with applicable reporting requirements. No questioned cost is identified as the nature of noncompliance is nonmonetary. Identification as a Repeated Finding: 2023-011 Recommendation: FSMNG should establish controls to ensure that responsible personnel timely monitor the preparation and submission of the required reports to OIA. Views of Responsible Officials: Management agrees with the finding. For the quarter ended September 30, 2023, the quarterly report could not be submitted by the due date due to delays in the submission of reports from a few of the FSM State Governments. As the SF-425 for these awards is compiled incorporating the reports of the participating states, the report for that quarter was incomplete and could not be submitted until the outstanding state reports were received. The final report, following the liquidation period, was subsequently completed and submitted to DOI, and was accepted. Management notes that no questioned costs arise, as the nature of the noncompliance is nonmonetary. Moving forward, DOFA will continue to follow up with the FSM State Governments on the timely submission of their quarterly reports so that the consolidated SF-425 reports can be prepared, reconciled to the accounting records, and submitted to OIA by the applicable due dates. Summary Schedule — Remarks (2024-012): Repeat 2023-011. Finding agreed. For the quarter ended 9/30/2023, delays in a few states' reports left the consolidated SF-425 incomplete and unable to be submitted by the due date; the final report following the liquidation period was submitted to DOI and accepted. No questioned costs — nonmonetary. Follow-up with the states on timely quarterly submissions to continue.
Federal Agency: U.S. Department of Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D23AF00263, D24AF003334, D24AF00335, D24AF00336, D24AF00340, D24AF00341, D24AF00344, D24AF00350, D24AF00378 Area: Subrecipient Monitoring Questioned Costs: $94,422,154 Criteria: Article VI, Section 1(n) of the Fiscal Procedures Agreement (FPA) states that the Government of the Federated States of Micronesia will follow its laws and procedures when awarding and administering Sub-Grants. The Governments shall ensure that: (i) Every Sub-Grant includes any clauses required by the 2023 Amended Compact, the Grant terms and conditions, and this Agreement; (ii) Sub-Grantees are aware of requirements imposed upon them by the 2023 Amended Compact, the Grant terms and conditions, and this agreement; and (iii) The Sub-Grantee can meet the financial management standards of this Agreement. Article VI, Section 2(a)(i) also states that the Government of the Federated States of Micronesia shall be responsible for the management and monitoring of the day-today operations of all Sector Grants and their activities, to assure compliance with all applicable Sector Grant terms and conditions. Additionally, Article VI, Section 1(h) requires 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. The Government of the Federated States of Micronesia shall ensure that Grants shall not go to those parties identified in the SAM Exclusions List. Furthermore, Article IV, Section 5(b)(ii) says 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. Condition: 1. The FSM National Government does not have subrecipient monitoring procedures as required by the FPA. Thus, the FSM National Government did not perform the minimum subrecipient monitoring requirements over the $94,422,154 amounts passed to subrecipients. a. Ensure that every sub-grant includes any clauses required by the 2023 Amended Compact, the Grant terms and conditions, and the FPA. b. Ensure Sub Grantees are aware of requirements imposed upon them by the Compact, as amended, the sector Grant awards and the FPA. c. The Sub-Grantee can meet the financial management standards of the FPA. d. Suspension and debarment verification procedures prior to approving of the subaward. 2. FSMNG did not properly monitor payments to subrecipients, with a total population of $23,177,976, to ensure that the subrecipients timely disbursed the funds upon receipt from FSMNG. No questioned costs are presented as amounts are already questioned at Condition 1. Cause: 1. FSMNG does not have policies and procedures that comply with Article VI, Section 1 of the Fiscal Procedures Agreement. 2. FSMNG does not have established policies and procedures to minimize time elapsing between the transfer of federal funds to the subrecipient and the disbursement of such funds by the subrecipient. Effect or potential effect: 1. FSM National Government is in noncompliance with applicable subrecipient monitoring requirements and questioned costs of $94,422,154, which is the total subrecipient disbursements made during the year, result. 2. The FSM National Government is in noncompliance with the applicable subrecipient cash management monitoring requirements. Identification as a Repeat Finding: 2023-009 Recommendation: 1. FSMNG should update their established policies and procedures to be in accordance with Article VI, Section 1(n) and Section 2(a)(i) of the Fiscal Procedures Agreement to comply with the requirements for pass-through-entities. FSMNG should consider adopting the provisions identified in 2 CFR 200.322 when designing the policies in procedures, which provide details regarding the requirements for Pass-Through Entities for subrecipient monitoring. 2. FSMNG should establish a policy and implement formal monitoring procedures to ensure that the subrecipient complies with the requirement to minimize the time elapsing between the transfer of federal funds to the subrecipient and the disbursement of such funds for program purposes. Management should consider the three-business day rule on cash advance funding stated in 31 CFR part 205.12(b)(4). Views of Responsible Officials: Management disagrees with condition 1. The FSM National Government does have a subrecipient agreement in place. All Compact sector grants are properly allocated through JEMCO for all sub-grantees, and a subrecipient agreement is transmitted to the FSM State Governments for their concurrence each year, under which the states are obliged to the grant terms and conditions. This agreement is signed by both parties — the President and the Governors, as the allottees of the funds — and the process is facilitated by the Office of Compact Management. The matters listed at conditions 1(a) through 1(d) — the inclusion of clauses required by the 2023 Amended Compact, the sub-grantees' awareness of the requirements imposed upon them, their ability to meet the financial management standards of the FPA, and verification prior to approval of the subaward — are all part of this signed subrecipient agreement. Management further notes that condition 1's statement that subrecipient monitoring procedures are 'required by the FPA' is not accurate: nowhere in the FPA is such a requirement prescribed. Throughout the FPA, the obligations rest with the 'Government of the Federated States of Micronesia,' which the FPA itself defines as the Government established and organized by the Constitution of the Federated States of Micronesia, including all the political subdivisions and entities comprising that Government. Under the FSM's longstanding interpretation of that definition, each FSM State Government is itself a grantee within the Government of the FSM and is entitled to its own management and monitoring of the day-to-day operations of its sector grants, consistent with Article VI, Section 2(a)(i). Under the recent interpretation advanced by DOI, however, these responsibilities rest with the FSM National Government, which is now to be classed as a pass-through entity in respect of the states' shares of Compact funds. This classification is a new proposed treatment arising from the ongoing Compact discussions with DOI, consistent with the matters described in the responses to Findings 2024-008 and 2024-009. The FSM National Government is now working on establishing the subrecipient agreement framework and the associated policies and procedures to align with DOI's requirements, taking into account the Uniform Guidance provisions on pass-through entity requirements referred to in the recommendation. Management also disagrees with condition 2. The Compact sector grants concerned are paid on an advance basis: under Article IV, Section 5(b)(i) of the FPA, periodic payments for operational grants are made as soon as practicable after the first business day of each fiscal quarter to fund the financial requirements of that quarter. The time-elapsing provision relied upon in the criteria — Article IV, Section 5(b)(ii) — applies only to sector grants for infrastructure projects, which are paid on the basis of accrued expenditures. The requirement to minimize the time elapsing therefore does not apply to these disbursements to the states, unless they relate to infrastructure. In any event, as demonstrated by the samples tested, funds are disbursed to the states within the month of receipt, through the FSM National Government's required wire-out approval process as described in the response to Finding 2024-010. With respect to the questioned costs of $94,422,154 — the total of subrecipient disbursements made during the year — management's position is that the matters identified constitute, at most, internal control deficiencies relating to the formal documentation of subrecipient monitoring policies and procedures. That framework is now being established, and in accordance with the agreement with DOI, it is to be implemented by 1 October 2026. The conditions do not warrant questioned costs. All samples requested were provided to the auditors, vouched, and cleared, meaning the underlying disbursements are fully supported by adequate documentation. The costs did not result from a violation of the terms and conditions of the Federal award, given that the FPA prescribes no subrecipient monitoring procedures and the pass-through classification is a newly proposed treatment still being settled with DOI; and the costs are not unreasonable, representing the allocation of Compact sector grant funds to the FSM State Governments as approved through JEMCO. Under the definition of questioned costs in 2 CFR 200.1, including paragraph (3)(i), questioning the entire population of subrecipient disbursements on account of an internal control deficiency is not warranted. Management accordingly requests that the finding be reported as an internal control deficiency with questioned costs of $0. Summary Schedule — Remarks (2024-013): Repeat 2023-009. Condition 1 disagreed — a subrecipient agreement exists, signed annually by the President and Governors as allottees, facilitated by the Office of Compact Management, covering conditions 1(a)–(d), with allocations approved through JEMCO; the FPA prescribes no subrecipient monitoring procedures, and the pass-through classification for National is a new treatment per DOI discussions. Condition 2 disagreed — Compact sector grants are paid on an advance basis under FPA Article IV, Section 5(b)(i); the time-elapsing proviso in Section 5(b)(ii) applies only to infrastructure, and in any event disbursements to states are made within the month of receipt. At most internal control deficiencies — the monitoring framework is being established and, per the DOI agreement, is to be implemented by 1 October 2026. Questioned costs contested — all samples provided, vouched, and cleared; per 2 CFR 200.1, including paragraph (3)(i), questioned costs of $0 are warranted. Auditor Response: Condition 1 – Based on February 11, 2026 communication provided by the Department of Interior, the interpretation that the FPA aligns with the provisions of 2 CFR 200.332 is correct and consistent with expectation that FSMNG should conduct subrecipient monitoring procedures over funds passed down to the different FSM states. Condition 2 – The amount of questioned cost identified pertains to fund 19 infrastructure projects passed-through to each state, therefore subject to be monitored for timeliness of disbursement as required by the FPA.
Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D22AF00326 and D23AF000263 Area: Special Tests and Provisions – Annual Performance Reviews Questioned Costs: -$0 Criteria: In accordance with grant award terms and conditions, all personnel funded under Education Sector and Supplemental Education Grant (SEG) are required to undergo an annual performance evaluation which should be maintained as part of the personnel files and made available when requested for purposes of grant oversight or audits. Condition: For nine (or 100%) out of nine employees, FSMNG did not perform the annual performance evaluation for fiscal year 2024. Cause: FSMNG does not have any established policy and monitoring procedure to ensure that the annual evaluation of Education Sector and SEG funded employees are performed. Effect or potential effect: FSMNG is in noncompliance with the requirement. No questioned cost is identified as the nature of noncompliance is nonmonetary. Identification as a Repeat Finding: Finding No. 2023-010 Recommendation: FSMNG should establish monitoring procedures to ensure that the funded personnels under the Education Sector and the SEG are evaluated on an annual basis. FSMNG could consider assigning a dedicated employee that would monitor compliance and perform the required procedures. Views of Responsible Officials: Management agrees with the finding. The department concerned was not aware of the requirement for annual performance evaluations of personnel funded under the Education Sector and Supplemental Education Grant (SEG) during the fiscal year under audit. The requirement has been implemented from FY2025 onwards, with the annual performance evaluations having commenced in 2025. It should be noted that this is a legacy audit, and matters identified in this fiscal year audits are being addressed in the current year moving forward. The department is now well aware of the requirement and will ensure compliance, with annual performance evaluations performed for all Education Sector and SEG-funded personnel and maintained as part of the personnel files, available for grant oversight and audit purposes. In line with the auditors' recommendation, monitoring procedures will be established to ensure the funded personnel are evaluated on an annual basis, and consideration will be given to assigning a dedicated employee to monitor compliance and perform the required procedures. No questioned costs arise, as the nature of the noncompliance is nonmonetary. Summary Schedule — Remarks (2024-014): Repeat 2023-010. Finding agreed. The department was not aware of the annual performance evaluation requirement for SEG/Education Sector funded personnel; the requirement has been implemented from FY2025 onwards, with evaluations commenced in 2025. As a legacy audit, matters identified are addressed in the current year moving forward — the department is now well aware and will ensure compliance, with evaluations maintained in personnel files, monitoring procedures to be established, and consideration of a dedicated compliance employee per the recommendation. No questioned costs — nonmonetary.
Federal Agency: U.S. Department of Health and Human Services AL Program: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Award No.: NU50CK000513 Area: Equipment and Real Property Management Questioned Costs: $19,824 Criteria: In accordance with 2 CFR 200.303(a), recipients 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. Additionally, in accordance with 2 CFR 200.313(d)(1), 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 Federal award identification number), the title holder, the acquisition date, the cost of the property, the percentage of the 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. Further, according to 2 CFR Section 200.313(d)(3), 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. Lastly, according to 2 CFR Section 200.313(d)(4), regular maintenance procedures must be in place to ensure the property is in proper working condition. Condition: 1. FSMNG’s capital asset listing does not contain all required information identified in 2 CFR 200.313. The current listing does not clearly determine which program each asset belongs to. No questioned cost identified as the finding is non-monetary. 2. For four (or 21%) of 19 equipment selected for physical inspection testing, FSMNG did not properly safeguard and maintain the federal capital assets to ensure that the property is existing 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: 1. FSMNG’s current policy and procedure for capital asset listing management and maintenance is not in accordance with 2 CFR 200.313(d)(1). 2. FSMNG does not have established maintenance and security procedures to ensure that all federal capital assets are properly maintained and secured in the assigned premises. Effect or Potential Effect: FSMNG is in noncompliance with applicable equipment and real property management requirements and a total questioned costs $19,824 result. The amount of the questioned cost is based on the net book value of the asset. Identification as a Repeat Finding: Finding No. 2023-017. Recommendation: 1. FSMNG should update the structure and contents of their current capital asset listing to include all the information required by 2 CFR 200.313(d)(1). Additionally, FSMNG should improve their policies and procedures on management and maintenance of their capital asset listing. 2. FSMNG should establish safeguarding and maintenance procedures that ensure performance of periodic inspections, timely repairs, and adequate security in each location of all federal capital assets. Views of Responsible Officials: Management agrees with the finding. As set out in the responses to Findings 2024-006 and 2024-011, management recognizes that the current Fixed Asset Register (FAR) needs to be rebuilt, with proper recording aligned to the Fiscal Management Regulations and to the property record requirements of 2 CFR Section 200.313(d)(1). The rebuilt register will capture the required data elements — including the description, serial or identification number, the source of funding for the property including the Federal award identification number, the title holder, acquisition date and cost, the percentage of Federal contribution, and the location, use, and condition of each asset — so that capital assets procured with federal funding under the program can be clearly identified, together with any disposition data. The rebuild must be completed well ahead of the FY2025 audit, as the FAR will then be migrated into the new integrated FMIS (FreeBalance), which maintains a fixed asset register module of its own within the system. Establishing a clean, accurate register prior to migration — with the funding source of each asset identified — will ensure the system-based FAR carries correct and complete records from the outset. Proper advice and guidance has now been provided to the Supply Team on the recording, tracking, reconciliation, safeguarding, and maintenance of capital assets. Once the rebuild of the FAR is completed, the Supply Team will conduct physical checks and counts of assets — which will include locating and confirming the status and condition of the assets identified in this finding — so that adjustments, including deletions and other corrections, can be made for FY2025 and the appropriate action taken on assets found to be missing, broken, or requiring repair or disposition, in line with the safeguarding and maintenance requirements of 2 CFR Sections 200.313(d)(3) and (d)(4). In line with the auditors' recommendation, a written policy with comprehensive procedures will be established covering effective safeguards against loss, damage, or theft of property, together with maintenance protocols to preserve the property in good condition, and these procedures will be enforced to ensure federal capital assets are kept safe and in good working condition. Summary Schedule — Remarks (2024-015): Repeat 2023-017. Finding agreed. Addressed together with 2024-006 and 2024-011 — FAR to be rebuilt aligned to the regulations and 2 CFR 200.313(d)(1) property record elements, identifying assets procured with federal funding including the award identification number. Rebuild ahead of the FY2025 audit and migration into the new FMIS (FreeBalance) FAR module. Physical checks and counts to follow the rebuild, including confirmation of the status of the assets identified. Per the recommendation, a written safeguarding and maintenance policy with comprehensive procedures to be established and enforced per 2 CFR 200.313(d)(3) and (d)(4).
Federal Agency: U.S. Department of Health and Human Services AL Program: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Award No.: NU50CK000513 Area: Procurement, Suspension and Debarment Questioned Costs: $509,463 Criteria: In accordance with 2 CFR 200.303(a), the recipient and subrecipient 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 the Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, 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. Lastly, 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: For nine (or 100%) of eight purchase orders or contracts selected for testing, with a total population of $509,463, FSMNG did not perform verification whether the individual or contractor was suspended or debarred prior to entering into a covered transaction. Cause: FSMNG 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 2 CFR 180.300. Effect or potential effect: FSMNG is in noncompliance with the applicable procurement and suspension and debarment requirements, questioned costs of $509,463 result. Identification of a Repeat Finding: 2023-018 Recommendation: FSMNG should establish policies and procedures that monitor the suspension and debarment status of vendors prior to entering into a covered transaction that is designed based on any of the suggested methods in 2 CFR 180.300. Views of Responsible Officials: Management agrees with the finding as it relates to the absence of an established written policy and procedure for verifying the suspension and debarment status of persons or contractors prior to entering into a covered transaction, but disagrees with the questioned costs. Management's position is that this constitutes an internal control deficiency and does not warrant questioned costs. With respect to the questioned costs of $509,463, management notes that the entire population from which the questioned costs derive comprises allowable transactions, and verification against the SAM.gov exclusions list confirmed that no vendor or contractor in the population was suspended, debarred, or otherwise excluded. The purpose of the verification requirement in 2 CFR 180.300 — to ensure that covered transactions are not entered into with excluded or disqualified parties — was therefore met in substance: no federal funds went to any excluded party. The costs did not result from a violation of the terms and conditions of the Federal award in substance, are fully supported by adequate documentation, and are not unreasonable. Under the definition of questioned costs in 2 CFR 200.1, including paragraph (3)(i), there should not be a questioned cost for this type of finding, and management accordingly requests that the finding be reported as an internal control deficiency with questioned costs of $0. As corrective action, the compliance team and all departments have now been guided on and made aware of this requirement, and suspension and debarment verification checks are being performed on an ongoing basis as part of the standard checklist of checks prior to entering into covered transactions. In line with the auditors' recommendation, this practice will be formalized into established policies and procedures for monitoring the suspension and debarment status of vendors, designed on the verification methods provided in 2 CFR 180.300. Summary Schedule — Remarks (2024-016): Repeat 2023-018. Finding agreed as an internal control deficiency — absence of a written S&D verification policy; questioned costs disagreed: the full population comprises allowable transactions and no vendor was on the SAM.gov exclusions list, so the substantive purpose of 2 CFR 180.300 was met — per 2 CFR 200.1, including paragraph (3)(i), questioned costs of $0 are warranted. Compliance team and all departments guided and aware; S&D checks performed on an ongoing basis as part of the standard checklist, to be formalized into policies and procedures per the recommendation.