Finding Text
Finding No.: 2024-017 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: Special Tests and Provisions – Annual Performance Evaluation Area: Special Tests and Provisions – Infrastructure Maintenance Fund Contribution Questioned Costs: $0 Criteria: Education Sector, Supplemental Education Grant, and Ebeye Special Needs grants special terms and conditions state that in furtherance of the progress made under JEMFAC Resolution 2015-MT-2, all personnel funded from the grants are required to undergo an annual performance evaluation and such evaluation shall be maintained as part of the personnel files and made available when requested for purposes of grant oversight or audits. Article IX Terms and Conditions of Infrastructure Assistance, Section 9(a) of the 2023 Fiscal Procedures Agreement states that the Government of the Republic of the Marshall Islands shall make annual contributions to the Infrastructure Maintenance Fund, which starts with 5 percent of $50 million in Fiscal Year 2024 and increases thereafter. Such contributions should be made from local funds. The annual contribution is 5 percent of the annual Section 261(a) grants, as set forth in Section 266 of the 2023 Amended Compact. 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: Documentation was not available to substantiate that Public School System performed and documented annual evaluations for all personnel funded from the Education Sector, Supplemental Education Grant, and Ebeye Special Needs as required by grant terms and conditions. Condition 2: RepMar did not budget and transfer the required Infrastructure Maintenance Fund contribution during FY2024. Audit procedures confirmed that to date such contribution has yet to be made. Cause: RepMar lacks comprehensive internal control policies and procedures governing oversight and monitoring of grant terms and conditions to facilitate compliance. Effect or Potential Effect: RepMar is in noncompliance with applicable special tests and provisions requirements. For Condition 1 above, we were unable to execute appropriate audit procedures. For Condition 2 above, the condition relates to unpaid local contribution. Accordingly, questioned cost is undeterminable. Identification as a Repeat Finding: 2023-021 Recommendation: RepMar should establish adequate internal control policies and procedures to facilitate oversight, monitoring, and compliance with grant special terms and conditions. Views of Responsible Officials: Condition 1 Public School System management concurs with the finding. While annual performance evaluations were completed for many grant-funded employees, PSS did not consistently maintain sufficient documentation to demonstrate that all required evaluations had been completed in accordance with the grant requirements. Beginning in FY2027, PSS has implemented the Orange HR Management System, which provides an electronic process for completing, approving, and storing employee performance evaluations. This system creates a centralized electronic record and audit trail, making it easier to monitor compliance and retrieve documentation for audit purposes. In addition, the Finance and Audit Compliance Specialist will conduct periodic compliance reviews to verify that all required evaluations are completed and properly documented before the close of each fiscal year. Condition 2 FY2024 Appropriation was a continuation of FY2023 and did not reflect the new Compact yet since negotiations were still ongoing at the time. The $2.5million matching was clarified with the US DOI team in March 2026, to be appropriated in FY2027. The MOF has not drawn down against this grant.