January 09, 2009

The Kaselehlie Press

Palikir, Pohnpei - An audit published December 5, 2008 by the FSM's Office of the National Public Auditor has called into question the handling of funds appropriated by Congress for public projects during the 13th session of Congress. The audit covered fi scal years 2005-2007.

Congress overrode the President's veto of the appropriation bill 13-36. The public law appropriated $2.8 million from local revenues to provide funding for social development and economic development projects. The funds were allocated based on the number of Senators in each state at $200,000 per Senator. Pohnpei State has three election districts and an at large representative and received a total of $800,000 for public projects.

In his summary letter to President Mori, National Public Auditor Haser Hainrick quoted the audit saying that the objectives of the audit were to determine whether a) appropriate reviews and selection of public projects were performed prior to funding; and b) implementation of CFSM public projects was in accordance with laws and regulations.

He said that the selections of which projects to be funded "were based on preferences and individual choices of each Congress member in their own election district, fostering an appearance that favoritism and political influences may unduly influence where and how public funds are spent."

In October of 2006, Matthew L. Olmsted who was an FSM Assistant Attorney General at the time issued a legal opinion at the request of ONPA Audit Supervisor Donald Yamada. Yamada had asked for an opinion on the legal sufficiency of the Appropriations law 13-36. The law said that its purpose was to fund "social development and economic development" projects but it did not define those terms or provide guidance on which social or economic development projects were appropriated uses of the funds. The legal opinion from the Department of Justice said that the law was "defective" because it failed to provide sufficient guidance on how to determine what kind of projects qualified for the funds.

The audit recommended that Congress provide clarity of purpose for what "social development" and "economic development" projects are intended to achieve when legislating new CFSM appropriation laws in order to determine the kinds projects suitable for funding.

The auditor said that certain projects selected by individual Congress members gave the appearance that funds were used for other than public purposes or public use and gave as an example $100,000 to assist in the construction of additional classrooms for a private school. They listed other expenditures that benefited municipal governments and the Election District offices themselves.

There was no documentation of requests for public projects funds. Senators said that they knew the kinds of projects needed in their communities through their interaction with municipal officials and constituents, but those interactions were not documented.

Pohnpei State senators spent $265,000 for repair or construction of secondary roads and farm roads without coordination with State officials. At the same time there were not sufficient maintenance funds to repair potholes or improve safety along stretches of primary roads heavily used by cars, people, and school children. The auditor said that coordination of project funding between the State and National governments could have prioritized road projects for the safety and benefit of more people.

The audit also pointed out that Congress members were inappropriately involved in administering the funds they had appropriated by directing Election District office staff in the use of operating funds, some of which was spent for activities outside the office's oversight function and can be considered questionable use of funds. The FSM Constitution requires separation of powers. Congress members cannot act to appropriate money and then participate in the process of implementing and administering the fund.

Election District staff hires were selected by the Congress members using Special Service Contracts without having to go through the normal hiring process of advertising a position, requiring applicants to have job related qualifications, or following the Personnel Service System for pay scale. Election District 2 (ED 2) had five employees to hand project administration duties for a total biweekly salary level of $1650. Election District 1 (ED 1) had only two employees with a total biweekly salary level of $1077. Election District 3 (ED 3) had only one employee to handle what the five employees at ED 2 were hired to handle. That employee was hired at a biweekly rate of $611. Funds in the election districts were used for purposes other than for oversight. $10,999 was spent for travel. ED 2 purchased three vehicles for a total of $14,000 that were ultimately given to municipal government officials. Construction materials were purchased for $3000 and booked under the office supply account. ED 3 bought six cell phones for a total of $1740. One was given to a bus driver, two to an elementary school and three of the phones disappeared.

The auditor also questioned whether or not the road construction projects were done at a reasonable cost. 15 road projects were performed for a total of $265,000. Because the cost of many of the projects fell under the $20,000 threshold required for a competitive bid process, contracts were awarded to a single contractor without price comparisons. As a result, the funded amount for a project became the target price for a contractor's construction plans and estimated costs.

For phase II of the Nandon improvement project the allottee of the funds, Pohnpei Transportation Authority was also the contractor performing the work.

Of the 15 road projects three came in under the amount appropriated for the project, one cost more than appropriated. Eleven of the fifteen projects cost exactly the amount written into the appropriation law.

The auditors compared the unit cost per square feet of road constructed as an aid to determining the reasonableness of the cost of roads similarly constructed and found wide variances in the price that was paid for the road work. The cost among seven similarly constructed coral capped roads varied between 16 cents per square foot to as high as $1.20 per square foot. Three asphalt paved roads had a per square foot cost ranging from $2.80 to $5.23. The auditor said that the lack of road construction standards made it nearly impossible to compare the costs.

Project Control Documents (PCDs) were provided to the Department of Finance and Administration that contained only a very broad description of how the funds were to be used. The auditor provided an example, "to support the operation of the ED3 projects and administration." The PCD provided no further descriptions of duties, function or responsibilities nor were there documents supporting the planned use of funds.

The auditors said that the lack of clarity and completeness of PCD's limited its usefulness as a guide for controlling and managing projects costs.

The auditors provided examples of two PCDs. A PCD for Mwoakilloa public facilities improvement for $20,000 was stated to be for "repairs and maintenance (of) any public facilities…as well as transportation expenses. From the money received the municipal government spent $3900 on a Toyota pickup truck, $6015 for provisioning fuel to conduct a field trip, $4130 of gasoline and kerosene, $1920 for a Yamaha outboard motor, and $1920 for charter flights.

A PCD for vocational training was stated to be for the purpose of providing "hands on work experience" in a hotel and resort in Guam under a vocational training project for non-paid student interns. At least some of the money was used for other purposes. $2533 was used for round trip travel to Honolulu for one person, and $2019 was used for round trip travel to Saipan for another individual. ED 2 charged $4,442 of its 2005 salaries to the project. The auditors said that they could not determine how the expenditures related to the project purpose.

A letter written as a result of the audit by Assistant Secretary for the Department of Finance and Administration and dated November 26, 2008 says that changes have been mandated. She said that no certifications and disbursements of funds in the future will be made without proper PCD's that are clear and fully defined.

The complete audit from which this article heavily quotes can be found at www.fsmopa.fm