The Marshall Islands government had the most spending questioned since 2010 by auditors in the FY2014 audit issued to Nitijela last month. Auditors also listed 13 problem areas, 11 of which were reported in previous year audits and not fixed.
In 2012, Finance had reduced questioned spending to a record low of $35,857. It doubled to $71,294 in FY2013. But for FY2014, the figure ballooned to $340,608 — the highest since auditors questioned $1.5 million in spending by the government in FY2010.
So-called “questioned costs” is spending that auditors say did not comply with grant requirements or laws.
The audit questioned spending:
• $4,506 in Compact and Special Education grant payments for employees who were overpaid according to time sheets.
• $305,553 for various RMI purchases that lacked supporting documents to show the procurement process was followed. This included spending ranging from $29 to $150,000. For one purchase, the vendor that was selected by Finance charged 50 percent more than another vendor and “there was no documentation on file to justify the procurement decision,” the audit said. RMI officials requested the sole-source $150,000 purchase be identified as an “emergency procurement,” but auditors said “the request was made nine months after the vendor had commenced providing services.” Finance replied that this sole source purchase was a continuation of another contract carried out by the same vendor the previous year.
Similar problems with procurement were identified 31 times in audits since 2003 without being fixed.
In addition to questioned costs, among the 13 problem areas identified by auditors included:
• The Cabinet during FY2014 approved an exemption “for certain small purchases” from following the RMI Procurement law. The auditor said all government spending had to comply with the law and urged the Cabinet to talk to the Attorney General’s office. Violation of the RMI Procurement Code was reported as a problem in the 2013 audit. Finance said it agreed with the auditor’s recommendation, and pointed out that the Cabinet paper that led to approval of this exemption from the law did not follow the standard practice of having different offices (including the AG’s office) comment on the proposal before a decision was taken by Cabinet. A Cabinet paper to void this earlier Cabinet decision is now in progress, said Finance.
• 11 accounts, which handle tens of millions of dollars annually — ROC, “Foreign Operating,” MEC/ADB, ADB loans payable, Compact and federal grants among them — “were not reconciled during the entire fiscal year,” said the audit. “Reconciliations were eventually completed and audit adjustments were proposed to correct reconciliation errors identified through audit procedures.” Auditors said policies need to be adopted requiring timely account reviews and reconciliations and correction of errors. This was a finding in every audit since 2010.
In response to these problems with lack of control over a total of 31 accounts, Finance said it agreed with the auditors, and has enforced a new standard operating procedure requiring monthly reconciliations and review of these by supervisors and the Secretary of Finance. To help with accounting work at Finance, the ministry has hired two senior level accountants and a third is being provided by the Asian Development Bank to assist Finance’s accounting department with the reconciliation process in hopes of resolving these ongoing problems.
Read more about this in the April 8, 2016 edition of the Marshall Islands Journal.