Deloitte’s “Independent Auditor’s Reports on Internal Control and on Compliance” for FY2 010 describes serious financial management problems in the government’s procurement system, questions spending of $2.2 million in United States grant funding, and says dozens of checks were issued by the government for services and goods that were reported as never received.
The audit report was provided to the Nitijela, or parliament, before it recessed for the year on Friday. It raises numerous questions about $2,588,600 in Marshall Islands spending last year.
The Deloitte audit “will not have an impact on U.S. federal grant funding,” U.S. Ambassador Martha Campbell said. But “what is critical is vigorous follow-up by the offices of the Auditor General and the Attorney General, along with clear political will to address the findings appropriately,” she said.
The parliament’s Public Accounts Committee earlier in the week issued its report on three weeks of public hearings in July and August, criticizing the government for being lax in fixing problems identified by auditors. “The Ministry of Finance has 14 (audit) findings from the previous years, and as of today only two findings have been resolved (with) unresolved questioned costs worth about $2.2 million,” said the report issued by Public Accounts Chairman Sen. Frederick Muller.
At the parliament Thursday, Finance Minister Jack Ading praised staff at the Ministry of Finance for working hard to improve accountability and internal controls in the government during 2011.
While criminal cases now pending in the Marshall Islands High Court involve charges alleging about $500,000 stolen from the government over a four-year period from 2007-2010, the latest Deloitte audit is suggesting five times this amount of money may have been stolen, misused or improperly paid out in one year alone.
In one snapshot included in the FY2010 audit, Deloitte auditors checked the accounts payable vouchers for seven vendors that involved $1,938,706 in government payments — and raised questions about more than $1.6 million, or 84 percent of this spending.
For this $1,621,565, Deloitte auditors found “potentially altered purchase requisitions, potentially altered price quotations, missing grant files/disbursement files, payments for goods that have been represented as not being received, and payments for services that have been represented as not being performed.”
The audit report confirms the findings of an ongoing Marshall Islands government investigation into Ministry of Finance spending that has resulted in the criminal prosecutions of more than 10 people for theft of US federal health funds through the Ministry of Health.
But this audit also shows that the fraud has not been limited to U.S. grant funding and Compact of Free Association health sector money. The audit said $8,032 of European Union grants and $361,670 of Taiwan grants showed altered documents, missing files, and payments for goods or services that the government said were never received.
The Marshall Islands investigation that has produced many criminal prosecutions has shown that people involved in the theft destroyed or removed many records from the Ministry of Finance to cover up the theft, and some of those involved in the theft have admitted to creating fake documents as well as forging documents and signatures of key government officials.
The Deloitte audit for FY2010 raises questions about possible theft of funding from U.S. Compact sector grants, USDA food, Special Education, and many U.S. federal health grants, including the Ministry of Health’s immunization program.
