Finding Text
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.