Audit shows unauthorized and inappropriate expenditures of Infrastructure Maintenance Funds

By Bill Jaynes

The Kaselehlie Press

July 4, 2018

Pohnpei—Pohnpei’s Office of the Public Auditor (OPA) recently released an audit on Infrastructure Maintenance Funds for fiscal years 2012 through 2016 that pointed out a number of examples of non-compliance with law and negligent accounting practices.

The Infrastructure Maintenance Fund (IMF) is established under the Compact of Free Association with the United States.  Each year the US and the FSM allocate 5 percent of the annual public infrastructure grants to the IMF.  During the years that OPA audited, the US and Pohnpei each contributed $1,571,646 to the fund for a total of $3,143,292.  The IMF is for the upkeep and maintenance of the Pohnpei Government’s capital infrastructure facilities and related assets in accordance with the government Infrastructure Maintenance Plan.  The Pohnpei State Legislature must appropriate the money for specific projects before they can be used.

OPA says that between 2012 and 2016, $1,311,942.80 of IMF monies was used for 29 projects that were not submitted to the legislature for specific approval.

In his response, Jack Yakana, Administrator of the Office of Transportation and Infrastructure wrote that the office notified “all concerned” including the Pohnpei Legislature that IMF project funds for 2015, 2016, and 2017 had not been appropriated during the course of their implementation of the IMF projects that had earlier been approved by the Office of Insular Affairs for those fiscal years.  He says that those project funds were eventually appropriated under the Comprehensive Budget Act for Fiscal Year 2017.

OPA did not audit 2017.  There were 17 projects funded in 2015 and 2016.

“Without the required due process, the corresponding infrastructure maintenance funds of more than $1.3 million were expended improperly.

Pohnpei Department of Treasury and Administration did not respond to the audit.

The audit said that the Pohnpei IMF savings account was not properly managed.  It said that the account was not properly managed, reconciled and monitored to ensure that only authorized and appropriate transactions are processed through the account.  It provided a chart of transactions totaling $450,000 that it said could be misconstrued as having been spent for purposes that were not in line with the purpose for which the account was created.

The audit report said that additionally, the total amount of the IMF account at September 30, 2012 reflected in the State Finance schedule did not match the bank balance by more than $180,000.

The report found that the $32,350 of State contributions to the IMF that was used to pay for the costs of a change order for the completion of a new gymnasium funded under a different grant was an unauthorized use of IMF funds.

The audit said that there was a lack of proper supervisory review and monitoring.  It said that if found that certain adjusting entries made to two contracts affect the total contract price.  I also noted that $3,342 of the IMF account was used to pay laborers renovating the State Hospital.  The payment was approved by the Office of Insular Affairs to be reimbursed on a later date by OIA.  That amount has yet to be reimbursed by OIA.

The auditors also found poor maintenance and safeguarding of pertinent records and documents.