Finding Text
Finding 2024-008 Pass-Through Entity: Federated States of Micronesia National Government Federal Agency: U.S. Department of the Interior Assistance Listing: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AF00079 Area: Cash management Questioned Costs: $0 Criteria: Article IV, sections 1(b) and 1(c) of the FSM-U.S. Fiscal Procedures Agreement require the State to maintain accounting records that identify the source and application of grant funds and to establish effective controls over grant cash to ensure that such funds are used solely for authorized purposes. Condition: The State recorded a $3.5 million transfer from the Sector Cash account to the General Fund cash account as reimbursement for sector expenditures initially financed by the General Fund. However, the supporting voucher did not include a reconciliation or detailed listing, prepared at the time of the transfer, identifying the expenditures comprising the reimbursement. Reports generated after the transfer also did not demonstrate how management originally calculated the $3.5 million amount. Nevertheless, the available accounting records established that total unreimbursed eligible sector expenditures before the transfer exceeded $3.5 million. Cause: The State did not maintain an ongoing reconciliation of eligible sector expenditures temporarily financed by the General Fund, including amounts subsequently reimbursed and any remaining unreimbursed balances. Effect: The State did not maintain adequate support for amounts due between the General Fund cash account and the Sector Fund cash account. As a result, the State had to rely on other available documentation during the audit to substantiate the related due to and due from balances. Recommendation: The State should maintain a current interfund receivable and payable reconciliation that identifies each eligible grant expenditure advanced by the General Fund, amounts subsequently reimbursed, remaining unreimbursed balances, and evidence of management’s review and approval of each transfer. The reconciliation and supporting expenditure detail should be completed and retained when each reimbursement is calculated and approved Identification as a Repeat Finding: Not applicable View of Responsible Officials: The State’s response and corrective action plan addressing this finding is included in the accompanying corrective action plan.