Finding 1159821 (2022-005)

Finding No.: 2022-005 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D22AF00029-00 Area: Subrecipient Monitoring Questioned Costs: $1,030,566 Criteria: In accordance with applicable subrecipient requirements (CFR §200.332), a pass-through entity (PTE) must: a. Ensure that the subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the PTE must provide the best information available to describe the Federal award and subaward. Required information includes: 1. Federal award identification: (i) Subrecipient’s name, (ii) Subrecipient’s unique entity identifier, (iii) Federal Award Identification Number (FAIN), (iv) Federal Award Date, (v) Subaward Period of Performance Start and End Date, (vi) Subaward Budget Period Start and End Date, (vii) Amount of Federal Funds Obligated by this action by the PTE to the subrecipient, (viii) Total Amount of Federal Funds Obligated to the subrecipient by the PTE including the current financial obligation, (ix) Total Amount of the Federal Award committed to the subrecipient by the PTE, (ix) Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA), (x) Name of Federal awarding agency, PTE, and contact information for awarding official of the PTE, and (xi) Assistance Listings Number and Title; the PTE must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement. 2. All requirements imposed by the PTE on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the Federal award. b. Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved, c. Verify that every subrecipient is audited as required by CFR Subpart F when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in CFR § 200.501, d. Consider whether the results of the subrecipient's audits, on-site reviews, or other monitoring indicate conditions that necessitate adjustments to the PTE's own records, and e. Consider taking enforcement action against noncompliant subrecipients as described in CFR §200.339. Condition: An amount of $1,030,566 (Doc #626) was passed through to Belau Submarine Cable Corporation (BSCC), a component unit of the Republic, for the submarine fiber optic cable project for the year ended September 30, 2022; however, there was lack of evidence to indicate that the above criteria was met. Cause: The Republic lacks internal control policies and procedures to identify subrecipient relationships and monitor subrecipients to ensure compliance with applicable subrecipient requirements. Effect: The Republic is in noncompliance with applicable subrecipient requirements and therefore $1,030,566 is questioned. Recommendation: The Republic should develop and implement internal control policy and procedures to identify subrecipient relationship and monitor activities of subrecipients to ensure compliance with applicable subrecipient requirements. Views of Responsible Officials: The Republic’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.