In FY 2008, auditors identified six “findings” (problems) — the lowest number ever that continued a several year reduction by the Ministry of Finance in problem areas in its accounting for spending of United States and locally generated revenue.
But the FY 2009 audit reported that the number of findings jumped up to 11, with five of these described as “material weaknesses” — serious problems.
For eight of the findings, the audit said that the Ministry of Finance “did not comply with requirements” related to cash management, procurement, sub-recipient monitoring, and equipment and property management relating to a series of U.S. federally funded programs. “Compliance with such requirements is necessary, in our opinion, for (the Marshall Islands) to comply with the requirements applicable to those programs,” the audit said.
The audit of U.S. federal government awards was “qualified” — meaning not complete audit said.
Among the 11 findings in the audit:
• $208,243 in spending under Compact of Free Association sector grants was questioned as not being directly related to or in accordance with the program objectives. More than $90,000 was spent for fuel and was not supported by check voucher files or invoices. The Ministry of Finance said a corrective action plan will involve the chief of accounting and the accounts payable supervisor to ensure all checks are supported by documentation in the future.
• Auditors could not determine the level of non-compliance with U.S. Department of Agriculture funding, saying it was “underterminable.” “We were unable to perform required cash management tests as the detailed federal draw downs and supporting reimbursements were not made available for examination,” the audit said. This review involved more than $800,000 in federal spending but “due to the lack of available information provided by the grantee, the amount of questioned costs, if any, applicable to this funding are undeterminable.” The Ministry acknowledged the problem and said it would be fixed this year.
• About $480,000 in federal grants was spent over the past five years by the Ministry of Education Special Education program on equipment, but no list or record of fixed assets was provided, which violates accountability requirements that “property records must be maintained,” the audit said. A physical inventory is required every two years and the results must be reconciled against previous records. The audit noted that the lack of a “complete fixed assets (equipment) list” by the Marshall Islands government has been pointed out as a problem by auditors for 20 years — every year since 1988. The Ministry of Finance responded that it did conduct a government-wide physical inventory of Marshall Islands assets valued over $5,000, but “unfortunately the listing prepared did not meet the auditors’ expectation.”
• More than $130,000 spent largely on food purchases was questioned by auditors because these seven purchases did not have legally required documentation to confirm the procurement process used for the spending.
Among problems identified by the auditors: Two purchases for the identical amount of $15,438 were questioned because “it appears that the purchases were split into separate purchase orders to avoid the competitive sealed bidding requirement (as) the purchase involved the procurement of 1,479 bags of rice at a total cost of $30,875.
The purchase orders were made on the same date but were purchased from two different vendors in order to reduce the apparent purchase amount below $25,000.” This spending violated Marshall Islands procurement standards, the audit said.
Auditors gave the Ministry of Finance a series of specific recommendations for improvement. The Ministry responded that “the Procurement and Supply Unit will take stringent measures by ensuring that the process of procuring and supplying, including observation of the relevant procedures as disclosed in the Procurement Code, are strictly followed.”
