February 23, 2011 Pohnpei, FSM-FSM Office of the National Public Auditor has determined that of 25 National Government employees who received Professional or Market Place premiums as part of their pay packet, 19 of them did not provide credential documents to support the assertions made on their applications or résumés.
Except in one case auditors stopped short of saying that the 19 employees were not qualified to receive a premium as part of their pay packet. Auditors said only that the documentation provided by those employees was insufficient to show their eligibility and that the FSM Division of Personnel did not do background checks to ensure that they were before they authorized the premiums.
Auditors did question the validity of one diploma submitted by an employee who is receiving a professional premium based on that higher degree and have referred that matter to the Compliance Investigation Division for further review. Depending on the results of that review the matter may then be referred to the FSM Department of Justice for possible legal action.
An FSM employee who has achieved advanced professional status in the field of law, engineering, accounting, or who has earned a doctorate degree in any field is qualified to receive a Professional Premium. Qualified employees receive a premium of 90% above the base salary for the position.
A Market Place Premium can be granted to an employee who is recruited in a location outside of the FSM, who is a non citizen of the FSM, and at the time of original hire, a nonresident. The qualified person may be paid a premium based on labor market conditions in the place of recruitment and on the level of the base salary for the position.
The audit of Professional and Market Place premiums released in late January was the first of its kind in the FSM. Auditors say that not only is OPA mandated by law to conduct such audits, "informal communication was received by the Public Auditor that the selection and awarding of these premiums should be audited." They did not say whether or not the tip came from the OPA's fraud hotline. Regardless of the source the tip appeared to be accurate.
During fiscal year 2010 alone when the FSM's entire Gross Domestic Product was just over $300 million the 25 employees who received the two types of premiums were paid a total of nearly a million dollars. Of that, $457,000 was awarded to 24 employees as a Professional premium. $5,366 was awarded to one employee as a Market Place premium.
80% of the awardees had not provided credential documents to substantiate their backgrounds and the FSM Division of Personnel did not conduct background checks of credentials before making the awards.
The audit said that the Division of Personnel had previously been operating under the assumption that background checks were the responsibility of the hiring department. Auditors say that is contrary to the law.
The Division of Personnel told auditors that the market place premium was awarded to the current recipient because the prior employee in that position had received the premium.
The Acting Personnel Officer told the auditors during the exit conference on the audit that she was glad that OPA conducted the audit because it showed that the Division of Personnel may have relied on incorrect information especially in regards to whose responsibility it is to conduct background checks of potential FSM National Government employees.
She told the auditors that the Office of the President is in the process of hiring a new Personnel Officer who will then be responsible for implementing the recommendations of the audit.
"This (the audit) may be a sign of the less than satisfactory situation that now exists at the Division of Personnel which prompted the President to make the decision to transfer the function out of the Department of Finance and Administration, to his office on a temporary basis," wrote FSM's Chief of Staff Kasio E. Mida in his letter in response to the audit. "He considers the status quo there as unacceptable and one way to make improvement was to place the operation in his own office until its credibility and effectiveness could be restored at which time it will become a separate and independent unit."
Mida estimated that it could take a year or so to "change the culture at the Division of Personnel and make it an effective servicing arm of the government."
OPA made five recommendations:
1) Conduct background checking of credentials prior to awarding the premiums to ensure eligibility;
2) Perform background checking of all current employees presently receiving the premiums to verify if the employee was eligible when the premium was awarded;
3) Consider action to recover/collect past premiums paid to current employees that were not eligible for the premiums;
4) Consider legal action against employees who intentionally asserted the attainment of degrees not earned;
5) Develop and implement any other necessary control activities. i.e. policies and procedures, to ensure that the professional and market place premiums are awarded only to individuals who are truly eligible.