Finding Text
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.