Finding Text
Finding No.: 2024-011 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 Area: Cash Management Questioned Costs: $ Undeterminable Criteria: Compact payments shall be made in accordance with Article VI of Fiscal Procedure Agreement (FPA). Further, Article VIII 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 effective cash management monitoring procedures to facilitate compliance with Article VI of the Fiscal Procedure Agreement. Furthermore, there is no expenditures report on file to support drawdowns made during the year, to ascertain whether expenditures were incurred prior to the date of reimbursement request and whether the time elapsing between transfer of funds was minimized. Lack of such report hinders the preparation of complete and accurate transactions 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, management is unable to provide or correlate when an invoice or drawdown is made. Cause: RepMar lacks adequate internal controls over compliance related to cash management, including retention of documentation supporting cash drawdowns. Effect or Potential Effect: RepMar is in noncompliance with applicable cash management requirements. Identification as a Repeat Finding: 2023-013 Recommendation: RepMar should strengthen controls to ensure that complete and accurate transactions reports are retained to evidence compliance with applicable cash management requirements. Views of Responsible Officials: Effective FY2025, the Accounting Division is now required to prepare drawdown request forms using the detailed expenditure report (journal listing). Each request is submitted to the Finance Secretary only after approval by Accounting Management.