9 July 2008
F.S. Micronesia Spending by the Federated States of Micronesia government that was questioned by auditors jumped 150 percent in fiscal year 2007 compared to the previous year’s audit, the newly issued government-wide audit by Deloitte and Touche shows.
Auditors questioned spending of $4.1 million in FY2007, an amount that almost equals the outstanding five-year (2002-2006) total questioned costs of $4.6 million. Questioned costs were in the hundreds of thousands of dollars in the early 2000s, but jumped to $1.9 million in FY2005, $1.6 million in FY2006, and in FY2007 to their highest level yet under Compact II.
Overall the FY2007 audit is similar to FY2006. There were 27 findings (problems) identified by auditors in FY2007, compared to 28 in FY2006. The questioned costs and the other findings in both years relate largely to lack of documentation showing compliance with procurement and bidding regulations, and to deficiencies in reconciling U.S. federal funds and funds transmitted from the national to state governments.
A separate management letter listed 15 issues needing improvement, compared to FY2006’s management letter that listed 18 problem areas.
Of the 27 findings in FY2007, 14 were listed as “material weaknesses†— audit language for a serious internal control problem — according to the audit.
The FSM government audit was “qualified†— incomplete — in part because so-called “component units†of the national government were not audited, including the National Fisheries Corporation, and Micronesia Longline Fishing Company, Yap Fishing Corporation, Yap Fresh Tuna, Inc., Chuuk Fresh Tuna, Inc. and Kosrae Sea Venture, Inc.
Auditors explained another reason for the qualification: “Because of inadequacies in the accounting records, we were unable to form an opinion regarding the amount at which receivables, advances, amounts due to the FSM State Governments and deferred revenue are recorded for the governmental activities; the amount at which receivables, advances and amounts due to the FSM State Government are recorded for the General Fund; the amount at which receivables and amounts due to the FSM State Governments are recorded for the U.S. Federal Grants Fund; and the amount at which deferred revenue is recorded for the aggregate remaining fund information.â€
The audit shows that the FSM national government had revenue of $59.6 million in FY2007 and expenses of $57.1, leaving it a net balance of $2.5 million. Major revenue sources included $25.6 million (43 percent of the total) from the Compact and U.S. federal grants, $15 million from fishing rights, and $10.3 million from locally generated taxes.
The audit shows that the FSM national government owes $48.5 million to the Asian Development Bank and $23.7 million to the U.S. Rural Utility Service for a loan for communications infrastructure that was originally $39.6 million. The National Fisheries Corporation is delinquent on repaying a $3.6 million loan from the national government, the audit said.
