August 18, 2011 Palikir, Pohnpei-In a six page response to an audit performed by the FSM Office of the National Public Auditor (OPA), Department of Justice (DOJ) Secretary Maketo Robert said that it is not the legal responsibility of FSM department heads to ensure that their departments stay on budget. He claimed that responsibility falls on the shoulders of the Department of Finance and Administration (DFA).
Since the Department of Justice would be the Department that would pursue prosecution of those who break national laws, his legal opinion pretty much ended the discussion about whether anyone might one day be prosecuted for violations of the FSM's Financial Management Act (FMA).
The Department of Justice was the only FSM department found by the auditor to have potentially obligated funds in advance of their availability and to have overspent budget appropriations passed by Congress.
In October 2010 Speaker Isaac Figir wrote to OPA and asked them to perform an audit of fiscal year 2010 expenditures and related appropriations regarding salaries and benefits for four Executive Branch entities. The letter specifically asked auditors to look into the expenditures of the Department of Education, the Department of Justice, specifically the Divisions of Immigration and Labor and the National Police, and the Coconut Development Authority. Speaker Figir also established a Special Committee to investigate the matter with then Vice Speaker Frederico Primo as the chair.
The Special Committee did not consist of auditors and the committee was forced to rely on information provided by OPA along with hearings held with department heads. OPA says that it only provided information about audit progress and no details. Strictly speaking that is true. However, an expatriate auditor was fired by OPA for sharing preliminary results with the Special Committee which is against the ethical rules for auditors. The preliminary conclusions that audit supervisor shared with the Special Committee were incorrect and were substantially different from the audit that OPA released on July 25 of this year.
The audit has been a very long time in coming. "The media became involved and a Congressional special committee was formed, tasked with conducting an investigation on the reasons why there were cost overruns and possible violations of the Financial Management Act of 1979 (FMA)," the audit report said in its introduction.
"The conditions described above (which included the request by Speaker Figir to look into possible violations) made it difficult for the Auditors to obtain good information on a timely basis since employees of the Executive Branch were concerned about their jobs and potential prosecution," it continues.
Auditors reviewed documents provided by the Coconut Development Authority and found that CDA had not exceeded its budget. Auditors published seven findings, four of which had to do with the Department of Justice and none of which had to do with CDA.
One of the audit findings had to do with the National Department of Education (NDOE) which permanently lost a nearly half million dollar Supplemental Education Grant for Fiscal Year 2010.
"NDOE lost control of the process," the audit said. "Deliberations between SBOC and Congress caused delay in finalizing the budget and submission to the Office of Insular Affairs (OIA) The loss of control was exacerbated when OIA requested additional changes. Agreement on the changes was achieved in late May 2009, and the grant manager stipulated a revised budget acceptable to OIA was required to be submitted by July 1. Through a series of lapses, this deadline was not met and, accordingly, the SEG 09 was not awarded.
"Notwithstanding the loss of SEG 09 funding, in its search for alternate funding, NDOE discovered there were unexpended SEG funds for 2006 and 2008, which it then utilized for Fiscal 2010 expenditures. This averted a major budget crisis for NDOE," the audit said.
The sixth finding in the audit was directed at the Office of SBOC (Statistics, Budget, and Overseas Coordination). The audit essentially said that because internal policies and procedures have not been updated, budget analysts did not have the benefit of clear guidance and budget information. For example, budget allotments were not always accurate or current.
In finding seven the auditor recommended that the President's office should:
1. Emphasize and require all Department/Agency/ Office Heads to provide budget (using quarterly apportionment) compared to expenditures to the President's office on quarterly basis;
2. Make very clear the overall responsibility of the Department/Agency/Office Heads to ensure their obligations and expenditures do not exceed their allotments throughout the year on a quarterly basis.
The first four findings of the audit were for the Department of Justice. Auditors said that payroll expenditures in FY 2010 for the Division of Immigration and Labor (I & L) exceed the original appropriation by $130,187. Because of the unpredictability of the arrival of ships, Immigration officers whose responsibility it is to control FSM borders are often called upon to perform work on weekends, holidays and after business hours. It's the nature of the job but when DOJ asked for and received authorization for an increase in salaries for I & L officers the Department did not factor in the cost of overtime.
Furthermore, no analysis has been done regarding whether it would be less expensive to hire more officers and avoid overtime or to continue under the present system.
Secretary Robert said that the maximum number of employees for his Department is set by Congress and that he cannot simply increase the number of employees on his own. He did not say in his response whether he had ever looked into the possibility of hiring more officers to serve after hours in order to save money. Neither did he say whether he had ever tried to build a case to do so as his Department did when it requested salary increases.
Auditors did not have in their objectives a mandate to determine whether or not some offi cers of the Division of I & L might intentionally keep ship bound arrivals waiting for hours seemingly in order to incur overtime hours as many "yachties" have suggested. But since those inbound arrivals often claim that they are then charged an additional fee for after hours processing of immigration, that matter is not likely to have cost the division any more money for overtime than for regular time since the overtime cost is supposedly recouped by fees, however, that practice would certainly increase the booked overtime cost whether the cost is offset by fees or not.
Auditors did say in finding three that employees may have been compensated for time not worked because time cards are not used and employees are not required to sign their attendance records.
Finding two said that in the Divisions of I & L and the National Police, overtime costs totaling $227,450 for June through September 2010 were not charged to Fiscal Year 2010 but were charged in the following year. Officers were not being paid benefits and overtime for hours they claimed to have worked and were not actually paid until the next fiscal year.
FY 2010 costs were understated by $227,450 and FY 2011 is so far overstated by $227,450.
According to the audit the Assistant Secretary of Finance responsible for Payroll said that DOJ did not provide overtime hours to the Department of Finance and Administration until the Supplemental Appropriations were passed by Congress "partially in October, 2010 but largely in January 2011."
DOJ claimed that time reports are not withheld but are provided to the Payroll Section of DFA each pay period regardless of available funds.
The auditor made no determination of which statement on the matter was accurate and did not mention any useless referral to the Compliance Investigation Division; useless only because CID reports are forwarded on to DOJ for prosecutorial consideration.
Finding four of the audit was also directed to the Department of Justice and its divisions saying that overtime is uncontrolled.
"The audit team found that approval by the Division Chief is given after the overtime is incurred. There was no evidence of overtime being authorized prior to incurring the overtime. The audit team was told that approval is given verbally and sometimes by email and that the emails were subsequently deleted or otherwise not available.
"Consequently, it is difficult for a manager to convince an external party that the overtime approved represented the most economical approach in the circumstances," the audit said.
In the Executive Summary, Public Auditor Haser Hainrick wrote, "DOJ has provided its legal analysis to support its position that it is not its (DOJ's) responsibility to ensure that expenditures do no surpass the approved budget for the department but says that this is a responsibility that is legally vested in the DFA. If this is correct, then we suggest that the President and Congress should revisit this policy matter because we believe that, as evidenced by the findings of this audit, it would lead to significant budgetary and accountability issues especially when the Department/Office Heads concerned are not legally responsible for their approved budgets. The Department/Office Heads should have ownership of their budgets, at least in as far as budget tracking and monitoring are concerned, while the responsibility of disbursing and accounting for expenditures remain with DFA, for the efficient and effective accountability and management of budgets.
"The appropriation laws designated the allottees of the funds and also assigned to them the responsibility to implement their budgets in accordance with the applicable laws including the Financial Management Act, which prohibits over expenditure. In as far as the Executive Branch is concerned, the allottee's responsibility which is given to the President would be inherently delegated to the Department/Office Heads who-considering the structure of the Executive Branch-keep their hands on the day-to-day implementation of their own budgets. DOJ has spoken on this issue but this is a suggestion from the perspective of what, we believe, would accord an effective budgetary management in the FSM," Hainrick concluded.
A full reading of the audit which is only 34 pages long is extremely informative and even a tiny bit astounding. It can be found at www.fsmopa.fm.