Republic of the Marshall IslandsState Government

Finding No.: 2023-011 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact of Free Association, As Amended Questioned Costs: $100,327 Area: Allowable Costs/Cost Principles Criteria: Federal program expenditures should be necessary and reasonable for the performance of the Federal award, in accordance with allowable costs/cost principles requirements, and be directly related to, and in accordance with, program intent and objectives. Furthermore, 2 CFR 200.303(a) states that a recipient of a Federal award must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition 1: Of 43 non-payroll transactions tested, aggregating $5,876,660 of $31,535,023 in total non-payroll program expenditures, we noted the following: 1. For 1 (or 2%), cost was not adequately documented due to lack of supporting vendor invoice: Item # Fund # Encumbrance/ Voucher/JV # Account Total 1 10402 22/00003564 BRV Contractual Services $ 100,000 2. For 7 (or 16%), the underlying grant award nos. D23AF00042-00 and D23AF00074-00 terms and conditions state that assistance under the awards may not be sub-granted or transferred. However, $1,847,500 of the grant assistance was disbursed directly to the Enewetak/Ujelang Local Government (EULGOV) and a subgrant agreement with EULGOV was not available. This item is also reported as a matter of noncompliance within Finding 2023-019, including associated questioned costs. Therefore, no questioned cost is presented at this finding. Condition 2: Of 25 payroll transactions tested, aggregating $20,005 of $18,441,905 in total payroll program expenditures, we noted the following: 1. For 3 (or 12%), leave hours were not supported by an approved leave form: Item # Employee # PPE Hours Amount 1 206603 11/19/2022 8 $ 50 3 090465 12/03/2022 24 196 2 04093566 03/11/2023 8 81 $ 327 2. For 1 (or 4%), direct payment to EULGOV was in breach of the underlying grant award nos. D23AF00042-00 and D23AF00074-00 terms and conditions, as noted under Condition 1 item 2 above. No questioned cost for these awards is presented at this finding. Cause: RepMar did not effectively maintain documentation to support expenditures charged to federal programs and did not effectively monitor the validity and allowability of expenditures. Furthermore, RepMar lacks adequate internal control policies and procedures to facilitate adherence with grant terms and conditions. Effect: RepMar is in noncompliance with allowable costs/cost principles requirements. The reportable questioned cost is $100,327. Identification as a Repeat Finding: Finding Nos. 2022-001 and 2022-002 Recommendation: Documents supporting expenditures should be maintained. Further, RepMar management should strengthen monitoring controls so that expenditures are verified for validity and allowability. Finally, RepMar should adopt adequate internal control policies and procedures to facilitate adherence with grant terms and conditions. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.

Finding No.: 2023-012 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Award No.: NU50CK000558 Questioned Costs: $558,990 Area: Allowable Costs/Cost Principles Criteria: Federal program expenditures should be necessary and reasonable for the performance of the Federal award, in accordance with allowable costs/cost principles requirements, and be directly related to, and in accordance with, program intent and objectives. Furthermore, 2 CFR 200.303(a) states that a recipient of a Federal award must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition 1: For 16 (or 33%) of 49 non-payroll transactions tested, aggregating $1,851,210 of $2,079,854 in total non-payroll program expenditures, the following deficiencies were noted: Item # Encumbrance/ Voucher # SPG # COVID Non-COVID Total 1 22/00001585 Journal 10290101 $ 5,601 $ - $ 5,601 2 22/00003730 BRV 10320101 44,463 - 44,463 3 22/00001975 BRV 10134501 - 37,900 37,900 4 22/00005845 BRV 10134501 - 1,784 1,784 5 22/00001980 BRV 10580201 20,000 - 20,000 6 22/00001585 JOURNAL 10610101 - 10,000 10,000 7 22/00002210 PORDER 10134501 - 2,520 2,520 8 22/00001931 PORDER 10290101 9,240 - 9,240 9 C1491501 10320101 6,947 - 6,947 10 C14081 10290101 264,000 - 264,000 11 22/00001633 PORDER 10520101 6,322 - 6,322 12 22/00003591 BRV 10320101 2,073 - 2,073 13 22/00001491 PORDER 10580101 - 2,780 2,780 14 22/00002713 PORDER 10136401 1,350 - 1,350 15 22/00002656 PORDER 10136401 4,514 - 4,514 16 22/0001587 JOURNAL 10610101 138,900 - 138,900 $ 503,410 $ 54,984 $ 558,394 Item #s 1 and 2 pertain to security services for which there was inadequate documentation to support cost allocation to the program. Item #s 3 through 5 pertain to RepMar’s Ministry of Health and Human Services (MOHHS) utility expenditures for which there was inadequate documentation to support cost allocation to the program. Item #s 6 through 7 pertain to MOHHS communication expenditures for which there was inadequate documentation to support cost allocation to the program. Item # 8 pertains to MOHHS fuel expenditures for which there was inadequate documentation to support cost allocation to the program. Item # 9 pertains to the construction of MOHHS’s Laura Health Centre Extension, for which the grant Notice of Award (NOA) strictly prohibits construction to be charged to the program. Item # 10 pertains to the purchase of MOHHS’s Marshall Health Information System (MHIS) for which there was inadequate documentation to support cost allocation to the program. Item #s 11-15 pertain to the purchase of equipment (i.e laptops, copier machines, and duplicators), however we noted no budget for equipment per NOA. Item # 16 pertains to a transfer to the Marshall Island Police Department, we were not provided supporting documentation for us to ascertain the allowability of the activity. Condition 2: For 3 (or 27%) of 11 payroll transactions tested, aggregating $11,610 of $471,786 in total payroll program expenditures, the following deficiencies were noted: Item # Employee # PPE Hours Amount 1 04236064 10/08/2022 Unknown $ 103 2 04219081 6/3/2023 74.5 468 3 04231376 7/15/2023 4 25 $ 596 For item # 1, employee was paid an additional $103 which could not be verified due to lack of supporting calculation. Furthermore, the additional payment was not supported by documented approval. For item # 2, the employee's position is Purchasing Specialist II. Documentation of why this is a necessary and reasonable program cost was not available for examination. For item # 3, four leave hours paid were not supported by an approved leave form. The above are expenditures under COVID SPG codes and resulted in reportable questioned costs of $596 because the projected questioned cost exceeds the $25,000 threshold. Cause: RepMar lacks adequate internal control over compliance with applicable allowed and unallowed activity requirements, as well as obtaining and retaining sufficient documentation to support all transactions. Effect: RepMar is in noncompliance with allowable costs/cost principles requirements. The reportable questioned cost is $504,006 (COVID) and $54,984 (non-COVID). Identification as a Repeat Finding: Finding No. 2022-003 Recommendation: RepMar management should strengthen monitoring controls so that expenditures are verified for validity and allowability. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.

Finding No.: 2023-013 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact of Free Association, As Amended Questioned Costs: $ Undeterminable Federal Agency: U.S. Department of Health and Human Services AL Program: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Award No.: NU50CK000558 Questioned Costs: $27,059 Area: Cash Management Criteria: Compact payments shall be made in accordance with Article IV of Fiscal Procedure Agreement (FPA). Further, Article VI stipulates that to the extent that the Government of the Republic of the Marshall Islands awards Sub-Grants to local governments or other entities, it shall establish reasonable procedures to ensure the timely receipt of the reports on cash balances and cash disbursements to enable the preparation of complete and accurate transactions reports. 2 CFR section 200.305(b) states that for recipients other than States, payment methods must minimize the time elapsing between the transfer of funds from the Federal agency and the disbursement of funds by the recipient. Furthermore, 2 CFR 200.303(a) states that a recipient of a Federal award must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition 1: RepMar does not have established cash management monitoring, which is essential for ensuring compliance with Article IV of the Fiscal Procedure Agreement. Furthermore, there is no detailed listing of expenditures supporting the drawdowns made during the year on file to ascertain whether these expenditures were incurred prior to the date of the reimbursement request, thereby hindering the preparation of complete and accurate transaction reports. Questioned costs, if any, that may result from inadequate records are not determinable. Condition 2: RepMar utilizes a cumulative deductive reimbursement method for payment, therefore, it is unable to provide or correlate when an invoice or drawdown is made. Condition 3: Internal control deficiency resulted in overdraws during the year: • $27,059 for ALN 93.323, which is not material to the program but exceeds the $25,000 threshold and thus questioned costs result. • $2,639,269 for ALN 15.875 in Fund 10309, SPG 70120100. With grantor approval, this overdraw was partially offset against grantor receivables, and the remaining $2,342,351 balance as of September 30, 2023 was reclassed to liabilities. Therefore, no questioned cost results. Cause: RepMar lacks adequate internal controls over compliance related to cash management, including the retention of documentation supporting cash drawdowns. Effect: RepMar is in noncompliance with applicable cash management requirements. Questioned cost of $27,059 results from Condition 3 ALN 93.323. Recommendation: RepMar should strengthen controls to ensure that complete and accurate transaction reports are retained to evidence compliance with applicable cash management requirements. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.

Finding No.: 2023-014 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact of Free Association, As Amended Questioned Costs: $ Undeterminable Federal Agency: U.S. Department of Health and Human Services AL Program: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Award No.: NU50CK000558 Questioned Costs: $ Undeterminable Area: Equipment and Real Property Management Criteria: Section 200.313(d) of the Uniform Guidance and Article VI, Section 1(f)(4) of the Fiscal Procedures Agreement states that procedures for managing equipment, whether acquired in whole or in part with grant funds, will follow state laws and procedures. The following requirements are applicable: a. Property records must be maintained that include a description of the property, a serial number or another identification number, the source of funding for the property (including the FAIN), the title holder, the acquisition date and cost of the property, the percentage of Federal agency contribution towards the original purchase, the location, use and condition of the property, and any disposition data including the date of disposal and sale price of the property; b. A physical inventory of the property must be conducted and the results must be reconciled with the property records at least once every two years; c. A control system must be in place to ensure safeguards for preventing property loss, damage, or theft. Any loss, damage, or theft of equipment must be investigated. The recipient or subrecipient must notify the Federal Agency or pass-through entity of any loss, damage, or theft of equipment that will have an impact on the program; d. Regular maintenance procedures must be in place to ensure the property is in proper working condition; and e. If the recipient or subrecipient is authorized or required to sell the property, proper sales procedures must be in place to ensure the highest possible return. Additionally, the carrying amount of long-lived assets and the estimated useful lives of assets should be periodically re-assessed and adjusted, as appropriate, based on actual experience and relevant factors and circumstances. Furthermore, 2 CFR 200.303(a) states that a recipient of a Federal award must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: Capital asset records do not meet the criteria above and are not effectively maintained since updates to the records occur only once a year. Specifically, we noted the following deficiencies: • An inventory of capital assets has not been performed in the recent past in accordance with the above criteria; therefore, a reconciliation of capital asset records and physical inventory has not occurred at least once in the past two years. • Capital asset records are not effectively maintained. It does not appear that RepMar has implemented an effective control system to adequately safeguard capital assets from loss, damage or theft, or to reasonably investigate such occurrences. • RepMar has not established policies and procedures governing property maintenance and has not effectively implemented an entity-wide maintenance plan. • RepMar has not established policies and procedures to routinely assess whether impairment indicators are present and to test long-lived capital assets with impairment indicators for impairment. Cause: RepMar lacks adequate internal control policies and procedures to satisfy compliance with federal property rules and regulations and lacks effective procedures governing property maintenance, as well as periodic assessment of asset impairment conditions and useful lives. Moreover, internal control policies and procedures requiring periodic and timely performance and independent review of capital asset reconciliations and related general ledger accounts are not effectively implemented. Effect: RepMar is in noncompliance with applicable equipment and real property management requirements, and possible misstatement of capital assets and related accounts exists. Questioned costs, if any, which may result from inadequate property records, maintenance procedures, and the absence of timely reconciliations are not determinable. Identification as a Repeat Finding: Finding No. 2022-004 Recommendation: The Ministry of Finance, Banking and Postal Services (MOFBPS) should perform an inventory of RepMar’s capital assets as a basis for recording all assets in the financial statements, should complete such inventory in accordance with applicable property rules and regulations, and should develop adequate maintenance procedures in order to keep property in good condition. Furthermore, RepMar should implement internal control policies and procedures requiring periodic and timely performance and independent review of capital asset reconciliations and related general ledger accounts. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.

Finding No.: 2023-015 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact of Free Association, As Amended Questioned Costs: $22,743 Area: Period of Performance Criteria: Grant agreements stipulate the period of performance during which time only costs resulting from obligations of the funding period may be charged. Furthermore, 2 CFR 200.303(a) states that a recipient of a Federal award must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition 1: For 1 (or 8%) of 13 transactions tested aggregating $30,782 of $733,055 non-payroll expenditures, the vendor invoice was not provided to verify that the cost was not incurred prior to the funding period stipulated in the grant award. Item # Fund # Voucher # Encumbrance # Total 1 10408 22/00001585 JOURNAL F0178101 $ 1,655 Condition 2: For 4 (or 9%) of 44 transactions tested aggregating $312,418 of $7,510,168 in non-payroll expenditures, the vendor invoice was not provided to verify that the cost was not incurred subsequent to the funding period stipulated in the grant award. Item # Fund # Voucher # Encumbrance # Total 1 10401 22/00003877 INVOICE 22/00002357 PORDER $ 355 2 10401 22/00003876 INVOICE 22/00002214 PORDER 111 3 10409 22/00003970 INVOICE 22/00001885 PORDER 320 4 10406 22/00010031 PV 22/00002158 BRV 20,302 $ 21,088 Condition 3: Expenditures totaling $2,050,741 were charged to grant award nos. D23AF00042-00 and D23AF00074-00 utilizing a single project code (SPG # 70110100). The two grant awards have different periods of performance. Compliance with period of performance requirements related to award no. D23AF00074-00 for costs totaling $688,542 could not be ascertained. Questioned costs, if any, that may result from this condition are not determinable. Condition 4: For the Four Atolls Health Care program, the applicable grant agreement covering the period from 10/01/2022 to 01/31/2023 was not made available. Therefore, compliance with period of performance requirements could not be ascertained. Questioned costs, if any, that may result from this condition are not determinable. Cause: RepMar did not effectively maintain documentation and did not establish a unique project code for each grant award to verify compliance with period of performance requirements. Effect: RepMar is in noncompliance with applicable period of performance requirements. Accordingly, questioned costs of $22,743 result from conditions 1 and 2 because the projected questioned cost exceeds the $25,000 threshold. Identification as a Repeat Finding: Finding No. 2022-005 Recommendation: RepMar should implement adequate internal control policies and procedures requiring retention of documentation to support all transactions and establish a unique project code for each grant award. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.

Finding No.: 2023-016 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact of Free Association, As Amended Questioned Costs: $314,943 Area: Procurement and Suspension and Debarment Criteria: Section 200.317 of 2 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards states that, when procuring property and services under a Federal award, a state must follow the same policies and procedures it uses for procurements from its non-Federal funds. RepMar’s Procurement Code states the following: (a) Section 124 - unless otherwise authorized by law, all Government contracts shall be awarded by competitive sealed bidding. (b) Section 127 - procurement of goods and services not exceeding $25,000 may be made in accordance with small purchase procedures promulgated by RepMar’s Policy Office. Small purchase procedures are those relatively simple and informal methods for securing services, supplies, or other property that do not cost more than $25,000. RepMar’s Ministry of Finance, Banking and Postal Services has previously declared that if small purchase procedures are used, price or rate quotations shall be obtained from three qualified sources. (c) Section 128 - a contract may be awarded for a supply, service, or construction item without competition when it is determined in writing that there is only one source for the required supply, service, or construction item. The RMI Procurement Regulations Pursuant to the Procurement Code Act 1988 (RMI Procurement Regulations) Sections 5 and 6 stipulate procedures pertaining to suspension or debarment of persons who shall not be considered for award of contracts. 2 CFR 200.214 states that recipients and subrecipients are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, as well as 2 CFR part 180. The regulations in 2 CFR part 180 restrict making Federal awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from receiving or participating in Federal awards. 2 CFR 180.300 states that when an entity enters into a covered transaction with another person at the next lower tier, the entity must verify that the person with whom the entity intends to do business is not excluded or disqualified by doing the following: (a) Checking SAM.gov Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person. Furthermore, 2 CFR 200.303(a) states that a recipient of a Federal award must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition 1: For 8 (or 12%) of 65 procurement transactions tested, aggregating $6,463,583 of $16,926,745 in total transactions subject to procurement requirements, there was no procurement file provided to substantiate compliance with applicable procurement requirements as follows: Item # Fund # Voucher # Amount 1 10410 22/00001589 JOURNAL $ 11,581 2 10409 22/00001587 JOURNAL 167,852 3 10401 22/00003286 PINVOICE 21,178 4 10406 22/00003856 PINVOICE 9,950 5 10406 22/00005332 PINVOICE 10,275 6 10401 22/00000717 PINVOICE 23,247 7 10406 22/00005350 PINVOICE 24,995 8 10406 22/00001939 PINVOICE 10,437 $ 279,515 Condition 2: For 3 (or 5%) of 65 procurement transactions tested, aggregating $6,463,583 of $16,926,745 in total transactions, the procurement documentation is insufficient to support the rationale for vendor selection in accordance with 2 CFR section 200.323 and 48 CFR section 15.404-3. Item # Fund # Voucher # Amount 1 10402 22/00003565 PINVOICE $ 4,784 2 10402 22/00004883 PINVOICE 5,000 3 10406 22/00002441 PV 660 $ 10,444 For 9 (or 14%) of 65 procurement transactions tested, aggregating $6,463,583 of $16,926,745 in total transactions, supporting procurement documentation was not sufficient to substantiate compliance with applicable procurement requirements as follows: Item # Fund # Voucher # Amount 1 10402 22/00004885 PINVOICE $ 5,000 2 10402 22/00005513 PINVOICE 1,430 3 10406 22/00003035 PV 508 4 10406 22/00011377 PV 4,870 5 10406 22/00000549 PV 336 6 10403 22/00011927 PV 2,319 7 10401 22/00001875 PINVOICE 2,195 8 10402 22/00003839 PV 2,565 9 10402 22/00000269 PV 5,761 $ 24,984 No quotations/ cost comparison were provided for the items. The procurement documentation is insufficient to demonstrate compliance with applicable procurement requirements. Condition 4: Documented evidence of compliance with RMI Procurement Regulations and 2 CFR 200.214 and 2 CFR 180.300 regarding debarred, suspended, or otherwise excluded persons or entities was not made available. Cause: RepMar did not enforce internal control policies and procedures over documentation of the procurement process to satisfy compliance with applicable procurement requirements. Effect: RepMar is in noncompliance with applicable procurement requirements. The reportable questioned cost is $314,943. Identification as a Repeat Finding: Finding No. 2022-006 Recommendation: Responsible personnel should require that documentation be adequate to comply with applicable procurement requirements. Specifically, documentation should indicate the history of procurement, including the rationale for contractor or vendor selection. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.

Finding No.: 2023-017 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Award No.: NU50CK000558 Questioned Costs: $6,500 Area: Procurement and Suspension and Debarment Criteria: Section 200.317 of 2 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards states that, when procuring property and services under a Federal award, a state must follow the same policies and procedures it uses for procurements from its non-Federal funds. RepMar’s Procurement Code states the following: (a) Section 124 - unless otherwise authorized by law, all Government contracts shall be awarded by competitive sealed bidding. (b) Section 125 – (1) contracts shall be awarded by competitive sealed bidding. (2) An invitation for bids shall be issued and shall include a purchase description and all contractual terms and conditions applicable to the procurement. (3) adequate public notice of the invitation for bids shall be given a reasonable time. (4) Bids shall be opened publicly in the presence of one or more witnesses at the time and place designated in the invitation for bid. (5) Bids shall be unconditionally accepted without alteration or correction. (c) Section 127 - procurement of goods and services not exceeding $25,000 may be made in accordance with small purchase procedures promulgated by RepMar’s Policy Office. Small purchase procedures are those relatively simple and informal methods for securing services, supplies, or other property that do not cost more than $25,000. RepMar’s Ministry of Finance, Banking and Postal Services has previously declared that if small purchase procedures are used, price or rate quotations shall be obtained from three qualified sources. (d) Section 128 - a contract may be awarded for a supply, service, or construction item without competition when it is determined in writing that there is only one source for the required supply, service, or construction item. The RMI Procurement Regulations Pursuant to the Procurement Code Act 1988 (RMI Procurement Regulations) Sections 5 and 6 stipulate procedures pertaining to suspension or debarment of persons who shall not be considered for award of contracts. 2 CFR 200.214 states that recipients and subrecipients are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, as well as 2 CFR part 180. The regulations in 2 CFR part 180 restrict making Federal awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from receiving or participating in Federal awards. 2 CFR 180.300 states that when an entity enters into a covered transaction with another person at the next lower tier, the entity must verify that the person with whom the entity intends to do business is not excluded or disqualified by doing the following: (a) Checking SAM.gov Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person. Furthermore, 2 CFR 200.303(a) states that a recipient of a Federal award must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition 1: For 1 (or 6%) of 17 procurement transactions tested, aggregating $89,724 of $1,985,592 in total transactions subject to procurement requirements, no procurement file was provided to substantiate vendor selection. Item # Reference # Expenditure Amount Questioned Cost 1 22/00001586 $ 4,000 $ 4,000 Condition 2: For 1 (or 6%) of 17 procurement transactions tested, aggregating $89,724 of $1,985,592 in total transactions, supporting procurement documentation was not sufficient to substantiate compliance with applicable procurement requirements as follows: Item # Reference # Expenditure Amount Questioned Cost 1 22/00002281 $ 2,500 $ 2,500 Condition 3: Documented evidence of compliance with RMI Procurement Regulations and 2 CFR 200.214 and 2 CFR 180.300 regarding debarred, suspended, or otherwise excluded persons or entities was not made available. Cause: RepMar did not enforce adequate internal control policies and procedures over documentation of the procurement process to satisfy compliance with applicable procurement requirements. Further, RepMar lacks policies and procedures requiring verification of the status of an entity with which RepMar intends to enter into a covered transaction. Effect: RepMar is in noncompliance with applicable procurement requirements. Accordingly, questioned costs of $6,500 result because the projected questioned cost amount exceeds the $25,000 threshold. Identification as a Repeat Finding: Finding No. 2022-008 Recommendation: Responsible personnel should require that documentation be adequate to comply with applicable procurement requirements and regulations. Specifically, documentation should indicate the history of procurement, including the rationale for contractor or vendor selection, and verification of whether an entity or person with whom RepMar intends to do business is not excluded or disqualified. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.

Finding No.: 2023-018 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact of Free Association, As Amended Questioned Costs: $0 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Award No.: NU50CK000558 Questioned Costs: $0 Area: Reporting Criteria: Grant agreements stipulate the type and frequency of reports to be submitted. Furthermore, timely, accurate and complete reporting should be facilitated by an internal control structure conducive to the monitoring, preparation and independent review of required reports. Lastly, financial reports should reconcile with underlying accounting records. Furthermore, 2 CFR 200.303(a) states that a recipient of a Federal award must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition 1: There are no policies and procedures requiring monitoring of reports to be submitted or listing of reports already submitted. It does not appear that RepMar has developed means to monitor compliance with reporting requirements. Condition 2 (ALN 15.875): Of 46 financial reports due in fiscal year 2023, we noted the following: a) For 20 (or 43%), the reports were not available for examination: Item # Fund # SPG Code Award # Quarter End Due Date Date Submitted 1 10406 70150200 D22AF00005-00 12/31/2022 01/30/2023 unknown 2 10406 70210100 D23AF00077-00 12/31/2022 01/30/2023 unknown 3 10406 70210200 D23AF00077-00 12/31/2022 01/30/2023 unknown 4 10406 70210400 D23AF00077-00 12/31/2022 01/30/2023 unknown 5 10409 70041000 D23AF00011-00 12/31/2022 01/30/2023 unknown 6 10409 70190100 D23AF00050-00 12/31/2022 01/30/2023 unknown 7 20103 70060100 D23AF00024-00 12/31/2022 01/31/2023 unknown 8 20103 70060101 D23AF00041-00 03/31/2023 04/30/2023 unknown 9 10406 70340103 D22AF00004-00 03/31/2023 04/30/2023 unknown 10 10408 70090100 D23AF00009-00 03/31/2023 04/30/2023 unknown 11 10409 70040600 D23AF00011-00 03/31/2023 04/30/2023 unknown 12 10409 70040700 D23AF00011-00 03/31/2023 04/30/2023 unknown 13 10409 70040900 D23AF00011-00 03/31/2023 04/30/2023 unknown 14 10409 70041000 D23AF00011-00 03/31/2023 04/30/2023 unknown 15 10409 70120100 D23AF00037-00 03/31/2023 04/30/2023 unknown 16 10409 70290100 D22AF00006-00 03/31/2023 04/30/2023 unknown 17 10409 71480000 D24AF00024 03/31/2023 04/30/2023 unknown 18 10412 70080300 D23AF00027 03/31/2023 04/30/2023 unknown 19 10412 70140100 D22AF00007-00 03/31/2023 04/30/2023 unknown Item # Fund # SPG Code Award # Quarter End Due Date Date Submitted 20 10412 70140200 D22AF00007-00 03/31/2023 04/30/2023 unknown b) For 3 (or 7%), SF-425 reports do not align with the underlying FMIS expenditure report: Item # Fund # SPG Code Award # Quarter End SF-425 Amount 240P Amount Difference 1 410100 all cost centers D22AF00003-00 FY22 annual $713,140 $819,340 ($ 106,200) 2 10409 70290100 D22AF00006-00 06/30/2023 5,743,454 6,063,193 (319,739) 3 20103 70060101 D23AF00041-00 7/30/2023 20,137,770 20,328,571 (190,801) ($ 616,740) Condition 3 (ALN 15.875) For the Four Atolls Health Care program, we were unable to ascertain compliance with reporting requirements due to lack of grant agreement as reported in Finding No. 2023-015. Further, a second grant agreement (D23AP00058-01) covering the period from 02/02/2023 through 09/30/2027 was available for examination, however, the grant terms and conditions attachment was not included. Condition 4 (ALN 93.323): RepMar uses the ELC Cooperative Agreement Management Platform (CAMP) portal to report financial progress to the Federal grantor. RepMar was unable to provide evidence that such reporting occurred during the audit period. Furthermore, no evidence was provided indicating that the financial information reported thereon agreed to RepMar's underlying accounting records. Cause: RepMar lacks adequate internal control policies and procedures governing monitoring, preparation and independent review of required reports. Moreover, RepMar lacks adequate internal control policies and procedures over retention of all grant agreements, copies of reports submitted to grantors, and the underlying accounting records. Effect: Sufficient appropriate audit evidence supporting compliance with applicable reporting requirements were not obtained which results in report modification. No questioned cost is reported as the condition relates to inadequacy of internal control policies and procedures governing monitoring, preparation, independent review and retention of required reports and underlying accounting records. Identification as a Repeat Finding: Finding Nos. 2022-009. Recommendation: RepMar should establish adequate internal control policies and procedures governing monitoring, preparation and independent review of required reports. Moreover, RepMar should establish internal control policies and procedures requiring retention of all grant agreements and copies of reports submitted to grantors. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.

Finding No.: 2023-019 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact of Free Association, As Amended Questioned Costs: $5,166,243 Area: Subrecipient Monitoring Criteria: 1) Article VI, Section 1(a)(1) of the Fiscal Procedures Agreement (FPA) states that fiscal control and accounting procedures of RepMar, as well as its Sub-Grantees, shall be sufficient to: (i) permit the preparation of reports required by the FPA and the Compact, as amended; and (ii) permit the tracing of funds to a level of expenditures adequate to establish that such funds have been used in compliance with the provisions of the Compact, as amended, and applicable agreements. Furthermore, Article VI, Section 1(k)(1) of the FPA states that RepMar shall ensure that: (i) every Sub-Grant includes any clauses required by the Compact, as amended, the sector Grant awards, and the FPA; (ii) Sub-Grantees are aware of the requirements imposed upon them by the Compact, as amended, the sector Grants and the FPA; and (iii) Sub-Grantees can meet the financial management standards of the FPA. 2) In accordance with applicable subrecipient monitoring requirements, the pass-through entity (PTE) must follow-up and ensure that the subrecipient takes timely and appropriate action on all deficiencies detected through audits, on-site reviews, and other means, pertaining to the Federal awards provided by the PTE to the subrecipient. Furthermore, 2 CFR 200.303(a) states that a recipient of a Federal award must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the COSO. Condition 1: For 12 (or 100%) subawards tested, no documented evidence was made available to demonstrate that the Ministry of Finance, Banking and Postal Services (MOFBPS) effectively monitored subrecipient activities. Consequently, we were unable to ascertain whether MOFBPS monitored subrecipient compliance with subaward agreements, Compact Agreement, grant award, and the FPA. Item # Subrecipient Fund # Sub-Grant 1 College of the Marshall Islands 10401 $ 987,000 2 College of the Marshall Islands 10402 388,325 3 College of the Marshall Islands 10406 125,000 4 College of the Marshall Islands 10409 500,000 5 Ebeye Christian School 10406 3,984 6 Ebeye Seventh Day Adventist 10406 54,530 7 Father Hacker High School 10406 6,695 8 Kwajalein Atoll Joint Utilities Resources (FY23 allocation) 10412 275,000 9 Kwajalein Atoll Joint Utilities Resources 10412 663,930 10 Kwajalein Atoll Joint Utilities Resources (FY22 allocation) 10412 275,000 11 Marshall Islands Scholarship Board 10401 592,202 12 Marshall Islands Scholarship Board 10406 200,000 13 Queen of Peace 10406 39,279 $ 4,110,945 Other discrepancies were also noted as follows: For item #s 1 through 4, the 4th quarter financial reports were not supported by subrecipient expenditure reports, as required by MOFBPS. Further, the subrecipient’s fiscal year 2023 Uniform Guidance audit has not been issued. Accordingly, questioned cost of $2,000,325 result. For item #s 5 through 7 and 13, the subrecipients are not subject to audit; however, questioned cost of $104,488 result, due to lack of documented evidence of subrecipient monitoring. For item #s 8 and 9, funds were disbursed in one installment payment which conflicts with Section 4 of the underlying Memorandum of Agreement which stipulates quarterly disbursement of funds. Further, the subrecipient’s fiscal year 2023 Uniform Guidance audit has not been completed. Accordingly, questioned cost of $938,930 result. Item # 10 represents a subaward to the subrecipient under award no. D22AF00007-00 for which the period of performance was from 10/01/2021 to 9/30/2023. The subaward represents FY22 allocation that was accrued in fiscal year 2023 and paid in December 2023. Funds were disbursed in a manner inconsistent with the underlying Memorandum of Agreement. Finally, the subrecipient’s fiscal year 2022 Uniform Guidance audit has not been completed. Accordingly, questioned cost of $275,000 result. For item #s 11 and 12, while there is no documented evidence of subrecipient monitoring, no finding is reported in the subrecipient’s fiscal year 2023 Uniform Guidance audit related to the subaward. For item # 12, funds were disbursed semi-annually which conflicts with Section 4 of the underlying Memorandum of Agreement which stipulates quarterly disbursement of funds, and the financial reports required by MOFBPS were not made available. No questioned cost results since the subrecipient was separately audited. Condition 2: Subrecipient monitoring schedule provided by MOFBPS was incomplete. Grant assistance under award nos. D23AF00042-00 and D23AF00074-00 aggregating $1,847,500 was sub-granted to a subrecipient that was not included in the monitoring schedule. Further, the sub-grant was prohibited by the grant award terms and conditions. Accordingly, questioned costs of $1,847,500 result. Condition 3: There was no documented evidence that RepMar monitored subrecipient cash draws to ensure that the time elapsing between the transfer of Federal funds to the subrecipient and disbursement of funds for program purposes was minimized. Questioned costs, if any, that may result from this condition are not determinable. Cause: RepMar lacks effective internal control policies and procedures governing subrecipient monitoring, including compliance with underlying grant awards and memoranda of agreement and Compact provisions. Effect: RepMar is in noncompliance with applicable subrecipient monitoring requirements. As a result, questioned cost of $5,166,243 is reported. Identification as a Repeat Finding: Finding No. 2022-010 Recommendation: RepMar should comply with the applicable provisions of the FPA and subrecipient monitoring requirements and should develop and implement effective subrecipient monitoring procedures. Furthermore, MOFBPS should enforce compliance with subaward agreements, including timely Single Audits of subrecipients, as applicable. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.

Finding No.: 2023-020 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.243 Substance Abuse and Mental Health Services – Projects of Regional and National Significance Federal Award No.: 5U79SP020711-04 Questioned Costs: $134,802 Area: Subrecipient Monitoring/Overpayment on Return of Federal Funds Criteria: In accordance with applicable subrecipient monitoring requirements per 2 CFR 200.332, a pass- through entity (PTE) must: 1) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, is used in accordance with the terms and conditions of the subaward, and achieves performance goals. 2) Follow-up and ensure that the subrecipient takes timely and appropriate action on all deficiencies detected through audits, on-site reviews, and other means, pertaining to the subaward. 3) Issue a management decision as required by 2 CFR 200.521 for audit findings pertaining to the Federal award provided to the subrecipient from the PTE . Condition: RepMar did not perform the required monitoring activities for a subrecipient and did not issue a management decision with respect to the subrecipient’s FY2018 Single Audit report dated February 22, 2023. The Single Audit reported questioned costs of $43,335 for noncompliance with allowable costs/cost principles requirements and questioned costs of $91,467 for noncompliance with procurement and suspension and debarment requirements. Furthermore, in the grantor’s March 2023 management decision communication, RepMar was required to refund the grantor for Federal funds reported for noncompliance in the same subrecipient’s FY2016 and FY2017 Single Audit reports. RepMar has since determined that the July 2024 refund included a $267,244 overpayment due to calculation error. Cause: RepMar lacks effective internal control policies and procedures governing subrecipient monitoring. Effect: RepMar is in noncompliance with applicable subrecipient monitoring requirements and overpayment of Federal funds returned. Questioned cost of $134,802 results. Recommendation: RepMar should more closely monitor subrecipients in accordance with subrecipient monitoring requirements. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.

Finding No.: 2023-021 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact of Free Association, As Amended Questioned Costs: $ Undeterminable Area: Special Test and Provisions – Annual Performance Reviews Criteria: Education Sector NGA Section 4c. states that in furtherance of the progress made under JEMFAC Resolution 2015-MT-2 all personnel funded from Education Sector, Supplemental Education Grant (SEG) and Ebeye Special Needs (ESN) grants are required to undergo an annual performance evaluation and such evaluation shall be maintained as part of the personnel files and made available when requested for purposes of grant oversight or audits. Furthermore, 2 CFR 200.303(a) states that a recipient of a Federal award must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the COSO. Condition: We were not provided with a complete listing of personnel funded by the Education Sector, SEG and ESN grants and evidence that the annual performance evaluation was conducted for such personnel. Thus, we were unable to ascertain compliance with this grant special terms and conditions. Cause: RepMar lacks adequate internal control policies and procedures to facilitate monitoring of and compliance with grant special terms and conditions. Effect: RepMar is potentially in noncompliance with applicable special tests and provision. We were unable to execute sufficient appropriate audit procedures. Accordingly, questioned cost is undeterminable. Recommendation: RepMar should establish adequate internal control policies and procedures to facilitate monitoring of and compliance with grant special terms and conditions. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.

Finding No.: 2022-001 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact Sector Grants Questioned Costs: $27,380 Area: Allowable Costs/Cost Principles Criteria: Federal program expenditures should be necessary and reasonable for the performance of the Federal award, in accordance with allowable costs/cost principles requirements, and be directly related to, and in accordance with, program intent and objectives. Condition 1: For 3 (or 10%) of 29 non-payroll transactions tested aggregating $3,375,773 of $14,205,851 in total non-payroll program expenditures, supporting documentation were not provided for the following: Item # Fund # Encumbrance/ Voucher/JV # Account Total 1 410150 T83102001 Training and Staff Development $ 1,750 2 410100 G22-279W Food Stuff 18,275 3 410102 G22-283C Other Supplies and Materials 5,621 $ 25,646 Condition 2: For 8 (or 21%) of 39 payroll transactions tested aggregating $66,558 of $17,286,417 in total payroll program expenditures, the following deficiencies were noted: Leave hours were not supported by an approved leave form for the following: # Employee # PPE Hours Amount 1 93573 03/12/2022 16 114 2 88856 04/23/2022 8 92 $ 206 Condition 2, continued: Overpayment of or unsupported salaries and wages were noted for the following: # Employee # PPE Amount 1 94419 10/09/2021 $ 170 2 203158 10/23/2021 692 3 62883 11/20/2021 34 4 93669 12/18/2021 185 5 244918 8/13/2022 293 6 205561 9/10/2022 154 $ 1,528 Item # 1 resulted from 126 unsupported additional night differential hours paid. Item # 2 resulted from incorrect payment of 80 differential hours (paid at 20%) as regular hours. Item #s 3 and 4 each resulted from overpayment of 8 hours. Item # 5 resulted from incorrect retroactive pay calculation resulting in overpayment of 102.8 hours. Item # 6 resulted from incorrect standby differential rate used (30%) rather than the Public Service Commission Personnel Manual rate (20%). The above resulted in reportable questioned costs of $1,734 because the projected questioned cost amount exceeds the $25,000 threshold. Cause: Inadequate file maintenance to support expenditures charged to federal programs. RepMar did not effectively monitor the validity and allowability of expenditures. Effect: RepMar is in noncompliance with allowable costs/cost principles requirements. The reportable questioned cost is $27,380. Recommendation: Documents supporting expenditures should be maintained. Further, RepMar management should strengthen monitoring controls so that expenditures are verified for validity and allowability. Views of Responsible Officials: We partially agree with the finding and provide details in our Corrective Action Plan.

Finding No.: 2022-002 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Enewetak/Ujelang Local Government (EULG) Food and Agriculture Support Program Questioned Costs: $1,763,366 Area: Allowable Costs/Cost Principles Criteria: Federal program expenditures should be necessary and reasonable for the performance of the Federal award, in accordance with allowable costs/cost principles requirements, and be directly related to, and in accordance with, program intent and objectives. Condition: Of 39 non-payroll transactions tested, aggregating $1,587,482 of $2,199,010 in total non-payroll program expenditures, the following deficiencies were noted: The grant terms and conditions state that assistance under the award may not be sub-granted or transferred; however, $1,737,620 of the funding was disbursed directly to a subrecipient, of which $685,289 represented reimbursement for payroll costs which were not supported by underlying timesheets, personnel action forms, and registers. Furthermore, no executed subgrant agreement with the subrecipient was made available. The grant terms and conditions state that assistance may not be used for payment of professional legal or administrative fees, however, $24,000 in legal fees were charged to the program (APV #s 770018, 777397, 783370, and 789894). For 1 (or 3%) voucher (#769225) amounting to $1,746, the underlying lease agreement does not support the disbursement duty station is on Enewetak while the leased housing is located on Majuro. Cause: Inadequate file maintenance to support expenditures charged to federal programs. RepMar did not effectively monitor the validity and allowability of expenditures. Furthermore, RepMar lacks adequate internal control policies and procedures to facilitate adherence with grant terms and conditions. Effect: RepMar is in noncompliance with allowable costs/cost principles requirements. The reportable questioned cost is $1,763,366. Recommendation: Documents supporting expenditures should be maintained. Further, RepMar management should strengthen monitoring controls and adopt adequate internal control policies and procedures to facilitate adherence with grant terms and conditions. Views of Responsible Officials: We partially agree with the finding and provide details in our Corrective Action Plan.

Finding No.: 2022-003 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Award No.: NU50CK000558 Questioned Costs: $550,115 Area: Allowable Costs/Cost Principles Criteria: Federal program expenditures should be necessary and reasonable for the performance of the Federal award, in accordance with allowable costs/cost principles requirements, and be directly related to, and in accordance with, program intent and objectives. Condition 1: For 13 (or 48%) of 27 non-payroll transactions tested, aggregating $1,844,265 of $2,468,210 in total non-payroll program expenditures, the following deficiencies were noted: Item # Encumbrance/ Voucher # Cost Center # COVID Non-COVID Total 1 A25947 FK7608 $ 508 $ - $ 508 2 C15643 FL7615 65,304 - 65,304 3 C14915 FL7615 60,136 - 60,136 4 C16301 FL7615 21,852 - 21,852 5 C14911 FL7615 28,228 - 28,228 6 F00421 FL7615 2,561 - 2,561 7 C15761 FL7615 140,000 - 140,000 8 783849 FL7616 118,476 - 118,476 9 772535 FL7616 17,302 - 17,302 10 015030 FN7603 - 32,215 32,215 11 012629 FN7614 20,000 - 20,000 12 012612 FN7605 - 2,581 2,581 13 012613 FN7610 - 39,008 39,008 $ 474,367 $ 73,804 $ 548,171 Item # 1 pertains to airfare cost for a technician to install IT equipment at Ebeye hospital. Cost allocation to the program was not supported. Item # 2 pertains to IT equipment for which there was inadequate documentation to support cost allocation to the program. Item #s 3 through 5 pertain to construction-related costs which are specifically prohibited by the grant. Condition 1, continued: Item # 6 pertains to a laptop purchased for use by a Procurement and Supply Division employee. There was inadequate documentation to support charging the program for this purchase. Item # 7 pertains to security services for which there was inadequate documentation to support cost allocation to the program. Item # 8 pertains to Ministry of Health and Human Services (MOHHS) communication expenditures for which there was inadequate documentation to support cost allocation to the program. Item #s 9 through 13 pertain to MOHHS utility expenditures for which there was inadequate documentation to support cost allocation to the program. Condition 2: For 3 (or 33%) of 9 payroll transactions tested, aggregating $12,595 of $412,500 in total payroll program expenditures, the following deficiencies were noted: Employee # 247926 was paid $50 (or 8 hours) for leave for pay period ended 7/30/2022; such cost was not supported by an approved leave form. Hazardous pay of $700 (check # 229052) was not supported by documented approval authorizing cost allocation to the program for general fund. Employee # 97944 was paid $1,194 for overtime for pay-period ended 10/23/2021; documented approval for such cost allocation to the program was not provided. The above are expenditures under COVID cost centers and resulted in reportable questioned costs of $1,944 because the projected questioned cost exceeds the $25,000 threshold. Cause: RepMar did not effectively monitor the validity and allowability of expenditures. Effect: RepMar is in noncompliance with allowable costs/cost principles requirements. The reportable questioned cost is $476,311 (COVID) and $73,804 (non-COVID). Recommendation: RepMar management should strengthen monitoring controls so that expenditures are verified for validity and allowability. Views of Responsible Officials: We agree with the finding and provide details in our Corrective Action Plan.

Finding No.: 2022-004 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact Sector Grants Questioned Costs: $ Undeterminable Area: Equipment and Real Property Management Criteria: Section 200.313(d) of the Uniform Guidance and Article VI, Section 1(f)(4) of the Fiscal Procedures Agreement states that procedures for managing equipment, whether acquired in whole or in part with grant funds, will follow state laws and procedures. The following requirements are applicable: a. Property records must be maintained that include a description of the property, a serial number or another identification number, the source of funding for the property (including the FAIN), the title holder, the acquisition date and cost of the property, the percentage of Federal agency contribution towards the original purchase, the location, use and condition of the property, and any disposition data including the date of disposal and sale price of the property; b. A physical inventory of the property must be conducted and the results must be reconciled with the property records at least once every two years; c. A control system must be in place to ensure safeguards for preventing property loss, damage, or theft. Any loss, damage, or theft of equipment must be investigated. The recipient or subrecipient must notify the Federal Agency or pass-through entity of any loss, damage, or theft of equipment that will have an impact on the program; d. Regular maintenance procedures must be in place to ensure the property is in proper working condition; and e. If the recipient or subrecipient is authorized or required to sell the property, proper sales procedures must be in place to ensure the highest possible return. Additionally, the carrying amount of long-lived assets and the estimated useful lives of assets should be periodically re-assessed and adjusted, as appropriate, based on actual experience and relevant factors and circumstances. Condition: Capital assets records do not meet the criteria above and are not effectively maintained since updates to the records occur only once a year. Specifically, we noted the following deficiencies: An inventory of capital assets has not been performed in the recent past in accordance with the above criteria; therefore, a reconciliation of capital asset records and physical inventory has not occurred at least once in the past two years. Capital assets records are not effectively maintained. It does not appear that RepMar has implemented an effective control system to adequately safeguard capital assets from loss, damage or theft, or to reasonably investigate such occurrences. RepMar has not established policies and procedures governing property maintenance and has not effectively implemented an entity-wide maintenance plan. Long-lived assets are not routinely evaluated for possible impairment. Capital outlays within the Compact Sector Grants Fund for fiscal years 2022, 2021 and 2020 were as follows: Fiscal Year 2022 $ 4,592,264 Fiscal Year 2021 $ 5,909,859 Fiscal Year 2020 $ 3,358,375 Cause: RepMar lacks adequate internal control policies and procedures to satisfy compliance with federal property rules and regulations and lacks effective procedures governing property maintenance, as well as periodic assessment of asset impairment conditions and useful lives. Moreover, internal control policies and procedures requiring periodic and timely performance and independent review of capital assets reconciliations and related general ledger accounts are not effectively implemented. Effect: RepMar is in noncompliance with applicable equipment and real property management requirements, and possible misstatement of capital assets and related accounts exists. Questioned costs, if any, which may result from inadequate property records, maintenance procedures, and the absence of timely reconciliations are not determinable. Identification as a Repeat Finding: Finding No. 2021-003 Recommendation: The Ministry of Finance, Banking and Postal Services (MOFBPS) should perform an inventory of such inventory in accordance with applicable property rules and regulations, and should develop adequate maintenance procedures in order to keep property in good condition. Furthermore, RepMar should implement internal control policies and procedures requiring periodic and timely performance and independent review of capital assets reconciliation and related general ledger accounts. Views of Responsible Officials: We agree with the finding and provide details in our Corrective Action Plan.

Finding No.: 2022-005 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact Sector Grants Questioned Costs: $ Undeterminable Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Enewetak/Ujelang Local Government (EULG) Food and Agriculture Support Program Questioned Costs: $ Undeterminable Federal Agency: U.S. Department of Health and Human Services AL Program: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Award No.: NU50CK000558 Questioned Costs: $ Undeterminable Area: Period of Performance Criteria: Grant agreements stipulate the period of performance during which time only costs resulting from obligations of the funding period may be charged. Condition 1: For $573,068 of $31,492,268 in total ALN 15.875 (Compact Sector Grants) expenditures, compliance with period of performance requirements for nine cost centers (CC #s CJ8386, CK6028, CK8113, CK8171, CL6030, CL6031, CL8126, CL8171 and CL8401) could not be ascertained due to lack of underlying grant agreements. Condition 2: For $2,126,731 of $2,199,010 in total expenditures for ALN 15.875 (EULG Food and Agriculture Support Program), such were charged to a single cost center (CM6226) that relates to two grant agreements with different periods of performance. Compliance with period of performance requirements regarding costs totaling $826,606 related to award no. D22AF00084-00 could not be ascertained. Condition 3: For $1,628,416 of $2,880,710 in total expenditures for ALN 93.323 (Epidemiology and Laboratory Capacity for Infectious Diseases), compliance with period of performance requirements for five cost centers (CC #s FK7609, FL7615, FL7616, FN7610 and FN7618) could not be ascertained due to lack of underlying grant agreements. Cause: RepMar lacks adequate internal control policies and procedures requiring retention of all grant agreements and creation of a unique cost center for each grant award. Effect: RepMar is potentially in noncompliance with applicable period of performance requirements. Questioned costs, if any, that may result from the above conditions, are not determinable. Identification as a Repeat Finding: Finding No. 2021-004 (ALN 15.875 Compact Sector Grant) Recommendation: RepMar should implement adequate internal control policies and procedures requiring retention of all grant agreements and creation of a unique cost center for each grant award. Views of Responsible Officials: We agree with the finding and provide details in our Corrective Action Plan.

Finding No.: 2022-006 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact Sector Grants Questioned Costs: $44,942 Area: Procurement and Suspension and Debarment Criteria: Article VI, Section 1(j)(1) of the Fiscal Procedures Agreement (FPA) states that RepMar may use its own procedures for procurement, whether done by the government or its Sub-Grantees, provided that they meet the standards identified in the FPA. (a) Section 124 - unless otherwise authorized by law, all Government contracts shall be awarded by competitive sealed bidding. (b) Section 127 - procurement of goods and services not exceeding $25,000 may be made in purchase procedures are those relatively simple and informal methods for securing services, Banking and Postal Services has previously declared that if small purchase procedures are used, price or rate quotations shall be obtained from three qualified sources. (c) Section 128 - a contract may be awarded for a supply, service, or construction item without competition when it is determined in writing that there is only one source for the required supply, service, or construction item. Condition: For 4 (or 7%) of 60 procurement transactions tested, aggregating $2,006,444 of $10,668,605 in total transactions subject to procurement requirements, no procurement file was provided. Fund # Encumbrance # Ref # Amount 410100 A26328 795172 $ 3,826 410102 P86331 764579 8,614 510110 P87912 764652 23,301 510110 P87510 764653 9,201 $ 44,942 Cause: RepMar did not enforce internal control policies and procedures over documentation of the procurement process to satisfy compliance with applicable procurement requirements. Effect: RepMar is in noncompliance with applicable procurement requirements. The reportable questioned cost is $44,942. Identification as a Repeat Finding: Finding No. 2021-005 Recommendation: Responsible personnel should require that documentation be adequate to comply with applicable procurement requirements. Specifically, documentation should indicate the history of procurement, including the rationale for contractor or vendor selection. Views of Responsible Officials: We agree with the finding and provide details in our Corrective Action Plan.

Finding No.: 2022-007 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Enewetak/Ujelang Local Government (EULG) Food and Agriculture Support Program Questioned Costs: $61,961 Area: Procurement and Suspension and Debarment Criteria: Article VI, Section 1(j)(1) of the Fiscal Procedures Agreement (FPA) states that RepMar may use its own procedures for procurement, whether done by the government or its Sub-Grantees, provided that they meet the standards identified in the FPA. (a) Section 124 - unless otherwise authorized by law, all Government contracts shall be awarded by competitive sealed bidding. (b) Section 127 - procurement of goods and services not exceeding $25,000 may be made in purchase procedures are those relatively simple and informal methods for securing services, Banking and Postal Services has previously declared that if small purchase procedures are used, price or rate quotations shall be obtained from three qualified sources. (c) Section 128 - a contract may be awarded for a supply, service, or construction item without competition when it is determined in writing that there is only one source for the required supply, service, or construction item. Condition: For 13 (or 52%) of 25 procurement transactions tested, aggregating $1,226,655 of $1,514,067 in total transactions subject to procurement requirements, no procurement file was provided. Item # Encumbrance or EULG check # Ref # Amount QC reported at this Finding 1 unavailable 768401 $ 5,529 $ 5,529 2 unavailable 770642 247,872 - 3 P8937001 772373 33,500 33,500 4 P8937301 774899 22,932 22,932 5 check 38047 787948 13,058 - Condition, continued: Item # Encumbrance or EULG check # Ref # Amount QC reported at this Finding 6 check 63794 789220 10,842 - 7 check 63798 789220 432 - 8 check 38258 789220 52,153 - 9 check 63714 790134 19,476 - 10 check 63559 790134 370 - 11 check 63872 798961 4,200 - 12 check 63941 798961 6,565 - 13 check 38350 798961 38,000 - $ 454,929 $ 61,961 Item #s 2 and 5 through 13 are also reported as matters of noncompliance within Finding 2022-002, including associated questioned costs. Cause: RepMar did not enforce internal control policies and procedures over documentation of the procurement process to satisfy compliance with applicable procurement requirements. Effect: RepMar is in noncompliance with applicable procurement requirements. The reportable questioned cost is $61,961. Recommendation: Responsible personnel should require that documentation be adequate to comply with applicable procurement requirements. Specifically, documentation should indicate the history of procurement, including the rationale for contractor or vendor selection. Views of Responsible Officials: We agree with the finding and provide details in our Corrective Action Plan.

Finding No.: 2022-008 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Award No.: NU50CK000558 Questioned Costs: $660,990 Area: Procurement and Suspension and Debarment Criteria: Section 200.317 of 2 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards states that, when procuring property and services under a Federal award, a state must follow the same policies and procedures it uses for procurements from its non-Federal funds. Procurement Code states the following: (a) Section 124 - unless otherwise authorized by law, all Government contracts shall be awarded by competitive sealed bidding. (b) Section 127 - procurement of goods and services not exceeding $25,000 may be made in purchase procedures are those relatively simple and informal methods for securing services, Banking and Postal Services has previously declared that if small purchase procedures are used, price or rate quotations shall be obtained from three qualified sources. (c) Section 128 - a contract may be awarded for a supply, service, or construction item without competition when it is determined in writing that there is only one source for the required supply, service, or construction item. Condition: For 4 (or 33%) of 12 procurement transactions tested, aggregating $1,041,946 of $1,858,109 in total transactions subject to procurement requirements, no procurement file was provided. Item # Encumbrance # Ref # Amount QC reported at this Finding 1 C15761 767993 $ 135,186 $ - 2 C15945 785944 600,370 600,370 3 C16477 009097 50,620 50,620 4 F01223 793869 10,000 10,000 $ 796,176 $ 660,990 Cause: RepMar did not enforce adequate internal control policies and procedures over documentation of the procurement process to satisfy compliance with applicable procurement requirements. Effect: RepMar is in noncompliance with applicable procurement requirements. The reportable questioned cost is $650,990 (COVID) and $10,000 (non-COVID). Recommendation: Responsible personnel should require that documentation be adequate to comply with applicable procurement requirements. Specifically, documentation should indicate the history of procurement, including the rationale for contractor or vendor selection. Views of Responsible Officials: We partially agree with the finding and provide details in our Corrective Action Plan.

Finding No.: 2022-009 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact Sector Grants Questioned Costs: $0 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Enewetak/Ujelang Local Government (EULG) Food and Agriculture Support Program Questioned Costs: $0 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Award No.: NU50CK000558 Questioned Costs: $0 Area: Reporting Criteria: Grant agreements stipulate the type and frequency of reports to be submitted. Furthermore, timely, accurate and complete reporting should be facilitated by an internal control structure conducive to the monitoring, preparation and independent review of required reports. Lastly, financial reports should reconcile with underlying accounting records. Condition 1 (ALN 15.875 and 93.323): There is no monitoring of required reports to be submitted or listing of reports already submitted. It does not appear that RepMar has developed means to monitor compliance with reporting requirements. Condition 2 (ALN 15.875 Compact Sector Grants): Due to lack of certain grant agreements as reported in Finding No. 2022-005, we were unable to ascertain compliance with reporting requirements. SF- - underlying accounting 240P report. Furthermore, no SF-425 report ended 9/30/2022 was provided for examination. Condition 3 (ALN 15.875 EULG Food and Agriculture Support Program ): Required reports were not available for examination. Condition 4 (ALN 93.323): Due to lack of certain grant agreements as reported in Finding No. 2022-005, we were unable to ascertain compliance with reporting requirements. Required reports were not available for examination. Cause: RepMar lacks adequate internal control policies and procedures governing monitoring, preparation and independent review of required reports. Moreover, RepMar lacks adequate internal control policies and procedures over retention of all grant agreements, copies of reports submitted to grantors, and the underlying accounting records. Effect: Sufficient appropriate audit evidence supporting compliance with applicable reporting requirements were not obtained which results in report modification. No questioned cost is reported as the condition relates to inadequacy of internal control policies and procedures governing monitoring, preparation, independent review and retention of required reports and underlying accounting records. Identification as a Repeat Finding: Finding Nos. 2021-010 and 2021-012. Recommendation: RepMar should establish adequate internal control policies and procedures governing monitoring, preparation and independent review of required reports. Moreover, RepMar should establish internal control policies and procedures requiring retention of all grant agreements and copies of reports submitted to grantors. Views of Responsible Officials: We partially agree with the finding and provide details in our Corrective Action Plan.

Finding No.: 2022-010 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact Sector Grants Questioned Costs: $74,794 Area: Subrecipient Monitoring Criteria: 1) Article VI, Section 1(a)(1) of the Fiscal Procedures Agreement (FPA) states that fiscal control and accounting procedures of RepMar, as well as its Sub-Grantees, shall be sufficient to: (i) permit the preparation of reports required by the FPA and the Compact, as amended; and (ii) permit the tracing of funds to a level of expenditures adequate to establish that such funds have been used in compliance with the provisions of the Compact, as amended, and applicable agreements. Furthermore, Article VI, Section 1(k)(1) of the FPA states that RepMar shall ensure that: (i) every Sub-Grant includes any clauses required by the Compact, as amended, the sector Grant awards, and the FPA; (ii) Sub-Grantees are aware of the requirements imposed upon them by the Compact, as amended, the sector Grants and the FPA; and (iii) Sub-Grantees can meet the financial management standards of the FPA. 2) In accordance with applicable subrecipient monitoring requirements, the pass-through entity (PTE) must follow-up and ensure that the subrecipient takes timely and appropriate action on all deficiencies detected through audits, on-site reviews, and other means, pertaining to the Federal awards provided by the PTE to the subrecipient. Condition 1: RepMar has not implemented effective policies and procedures over subrecipient monitoring, including compliance with related Compact provisions. For 4 (or 100%) subrecipients tested, deficiencies were noted as follows: Item # Subrecipient Fund # Sub-Grant 1 College of the Marshall Islands 410100 $1,900,328 2 Ebeye Seventh Day Adventist 410150 73,463 3 Queen of Peace 410150 35,005 4 Kwajalein Atoll Joint Utilities Resources 410160 663,930 $2,672,726 Condition 1, continued: Document (MOFBPS) monitoring of subrecipient activities was not made available for examination. Consequently, we were unable to ascertain whether MOFBPS monitored subrecipient compliance with subaward agreements, Compact Agreement, grant award, and the FPA. No questioned costs are reported for item #s 1 and 4 since the subrecipients are separately audited. For item #s 2 and 3, the subrecipients submitted the required financial reports. Condition 2: Subrecipient monitoring schedule provided by MOFBPS was incomplete and inaccurate. Condition 1, item # 4, was not included in the schedule. Condition 3: RepMar did not perform the required monitoring activities for one subrecipient. The 2021 Single Audit Report for the College of the Marshall Islands (CMI) dated September 26, 2024 was accepted by the Federal Audit Clearinghouse on October 10, 2024. Such report included findings and questioned costs amounting to $74,794 for noncompliance, as follows: Finding No. Compliance Requirement QC Amount 2021-006 Allowable Costs/Cost Principles $ 4,597 2021-007 Equipment and Real Property Management - 2021-008 Period of Performance 2,107 2021-009 Procurement and Suspension and Debarment 68,090 2021-010 Reporting - $ 74,794 RepMar did not issue a management decision Cause: RepMar lacks effective internal control policies and procedures governing subrecipient monitoring. Effect: RepMar is in noncompliance with applicable subrecipient monitoring requirements. The reportable questioned cost is $74,794. Identification as a Repeat Finding: Finding No. 2021-008 Recommendation: RepMar should comply with the applicable provisions of the FPA and subrecipient monitoring requirements and should develop and implement effective subrecipient monitoring procedures. Furthermore, MOFBPS should enforce compliance with subaward agreements, including timely Single Audits of subrecipients, as applicable. Views of Responsible Officials: We agree with the finding and provide details in our Corrective Action Plan.

Finding No.: 2022-011 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Enewetak/Ujelang Local Government (EULG) Food and Agriculture Support Program Questioned Costs: $0 Area: Subrecipient Monitoring Criteria: The Notice of Grant Award states that funding is not to be sub-granted. Condition: Grant funds were passed through to a subrecipient, in violation of grant terms and without a subaward agreement. Refer to Finding No. 2022-002. Cause: RepMar lacks adequate internal control policies and procedures requiring monitoring and adherence with grant terms and conditions. Effect: RepMar is potentially in noncompliance with applicable subrecipient monitoring requirements. Recommendation: RepMar should implement adequate internal control policies and procedures requiring adherence with grant terms. Views of Responsible Officials: We agree with the finding and provide details in our Corrective Action Plan.

Finding No.: 2021-001 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact Sector Grants Questioned Costs: $162,992 Area: Allowable Costs/Cost Principles Criteria: Federal program expenditures should be necessary and reasonable for the performance of the Federal award, in accordance with allowable costs/cost principles requirements, and directly related to, and in accordance with, program intent and objectives. Condition: Of $20,767,579 in non-payroll expenditures for the Compact Sector Grants, sixty (60) items totaling $4,879,382 were tested, with the following deficiencies noted: Item # Fund # Compact Sector Encumbrance/ Voucher/JV # Total 1 410110 Health 756478 $ 1,048 2 410110 Health 756484 1,149 3 410110 Health P82838 35,695 4 410160 Landowners Special Needs G21-154H 125,100 $ 162,992 Item #s 1 and 2 pertain to Ministry of Health and Human Services (MOHHS) utility expenditures for the months of April and July 2021 amounting to $87,047 and $32,692, respectively, of which $1,048 and $1,149, respectively, appear to relate to personal utility charges for certain MOHHS staff members. Item # 3 pertains to the acquisition of a pickup truck for Outer Island dispensaries. Such purchase is not provided for in the underlying grant budget, and evidence of grantor pre-approval was not available for examination. Item # 4 pertains to a Journal Voucher entry that was not supported by adequate documentation to ascertain whether such expenditures were allowable costs of the underlying grants. Cause: RepMar did not effectively monitor the validity and allowability of expenditures. Effect: RepMar is in noncompliance with allowable costs/cost principles requirements. Accordingly, questioned costs of $162,992 for ALN 15.875 result. Recommendation: RepMar management should strengthen monitoring controls so that expenditures are verified for validity and allowability. Views of Responsible Officials: RepMar agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-002 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Award No.: NU50CK000558 Questioned Costs: $1,115,563 Area: Allowable Costs/Cost Principles Criteria: Federal program expenditures should be necessary and reasonable for the performance of the Federal award, in accordance with allowable costs/cost principles requirements, and directly related to, and in accordance with, program intent and objectives. Condition: Of $2,635,956 in non-payroll expenditures for the Epidemiology and Laboratory Capacity for Infectious Diseases Program, forty-six items totaling $1,570,692 were tested, with the following deficiencies noted: Item # Encumbrance/ Voucher/JV # Cost Center # COVID Non-COVID Total 1 C14722 FK7608 $ 228,904 $ - $ 228,904 2 C14721 FK7608 198,844 - 198,844 3 C14915 FL7615 84,822 - 84,822 4 C14911 FL7615 67,252 - 67,252 5 714431 FK7608 53,457 - 53,457 6 738264 FL7616 78,001 - 78,001 7 P83157 FK7608 9,693 - 9,693 8 C14077 FK7608 4,000 - 4,000 9 P84813 FK7608 8,516 - 8,516 10 P85473 FL7615 14,830 - 14,830 11 P85475 FL7615 14,440 - 14,440 12 718222 FL7610 - 10,000 10,000 13 740351 FL7615 93,973 - 93,973 14 C14036 FK7602 - 168,022 168,022 15 P86843 FL7615 29,000 - 29,000 16 P86844 FK7608 24,495 - 24,495 17 G21-165H FL7615 9,425 - 9,425 18 G21-165H FL7615 7,278 - 7,278 19 G21-165H FK7608 10,611 - 10,611 $ 937,541 $ 178,022 $ 1,115,563 Item #s 1 through 4 pertain to construction-related costs which are specifically prohibited by the grant. Item #s 5 and 6 pertain to MOHHS utility expenditures for the months of October 2020 and January 2021 for which there was inadequate documentation justifying why such were allocable to the grant. Item #s 7 through 11 pertain to various costs which are not identified in the grant?s approved budget. Specifically, item #s 7, 10 and 11 pertain to POL (fuel) purchases; and item #s 8 and 9 pertain to advertisement costs. Item #s 12 and 13 pertain to MOHHS communication expenditures for which there was inadequate documentation justifying why such were allocable to the grant. Item # 14 pertains to medical supplies purchased for Kwajalein Atoll hospital. Receipt of the supplies could not be verified as the underlying receiving report was not available for examination. Item #s 15 and 16 pertain to the acquisition of two vehicles. Such purchase is not provided for in the underlying grant budget, and evidence of grantor pre-approval was not available for examination. Item #s 17 through 19 pertain to Journal Voucher entries that were not supported by adequate documentation to ascertain whether such expenditures were allowable costs of the underlying grant. Cause: RepMar did not effectively monitor the validity and allowability of expenditures. Effect: RepMar is in noncompliance with allowable costs/cost principles requirements. Accordingly, questioned costs of $937,541 (COVID) and $178,022 (non-COVID) for ALN 93.323 result. Recommendation: RepMar management should strengthen monitoring controls so that expenditures are verified for validity and allowability. Views of Responsible Officials: RepMar agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-003 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact Sector Grants Questioned Costs: $ Undeterminable Federal Agency: U.S. Department of Health and Human Services AL Program: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Award No.: NU50CK000558 Questioned Costs: $ Undeterminable Area: Equipment and Real Property Management Criteria: Section 200.313(d) of the Uniform Guidance and Article VI, Section 1(f)(4) of the Fiscal Procedures Agreement state that procedures for managing equipment, whether acquired in whole or in part with grant funds, will follow state laws and procedures. The following requirements are applicable: a. Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date and cost of the property, the percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property; b. A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years; c. A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated; d. Adequate maintenance procedures must be developed to keep the property in good condition; and e. If the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return. Additionally, the carrying amount of long-lived assets and the estimated useful lives of assets should be periodically re-assessed and adjusted, as appropriate, based on actual experience and relevant factors and circumstances. Condition: Capital assets records do not meet the criteria above and are not effectively maintained since updates to the records occur only once a year. Specifically, we noted the following deficiencies: ? An inventory of capital assets has not been performed in the recent past in accordance with the above criteria; therefore, a reconciliation of capital asset records and a physical inventory has not occurred at least once in the last two years. ? As capital assets records are not effectively maintained, it does not appear that RepMar has effectively developed means to adequately safeguard capital assets from loss, damage, or theft, or to reasonably investigate such occurrences. ? RepMar has not established policies and procedures governing property maintenance and has not effectively implemented an entity-wide maintenance plan. ? Long-lived assets are not routinely evaluated for possible impairment. Capital outlays within the Compact Sector Grants Fund for fiscal years 2021, 2020 and 2019 were as follows: Fiscal Year 2021 $ 5,909,859 Fiscal Year 2020 $ 3,358,375 Fiscal Year 2019 $ 3,163,936 Capital outlays within the Epidemiology and Laboratory Capacity for Infectious Diseases program are not quantifiable. Cause: RepMar lacks adequate internal control policies and procedures to satisfy compliance with federal property rules and regulations and lacks effective procedures governing property maintenance, as well as periodic assessment of asset impairment conditions and useful lives. Moreover, internal control policies and procedures requiring periodic and timely performance and independent review of capital assets reconciliations and related general ledger accounts are not effectively implemented. Effect: RepMar is in noncompliance with applicable equipment and real property management requirements, and possible misstatement of capital assets and related accounts exists. Questioned costs, if any, that may result from inadequate property records, maintenance procedures, and the absence of timely reconciliations are not determinable. Identification as a Repeat Finding: Finding 2020-001 Recommendation: The Ministry of Finance, Banking and Postal Services should perform an inventory of RepMar?s capital assets as a basis for recording all assets in the financial statements, should complete such inventory in accordance with applicable property rules and regulations, and should develop adequate maintenance procedures in order to keep property in good condition. Furthermore, RepMar should implement internal control policies and procedures requiring periodic and timely performance and independent review of capital assets reconciliations and related general ledger accounts. Views of Responsible Officials: RepMar agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-004 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact Sector Grants Questioned Costs: $0 Area: Period of Performance Criteria: The Compact Sector Grants stipulate the period of performance during which time only costs resulting from obligations of the funding period may be charged. Condition: Of $20,767,579 in Compact Sector Grants non-payroll expenditures, sixty items totaling $4,879,382 were tested. Compliance with period of performance requirements could not be ascertained for Journal Voucher G21-154H amounting to $125,100 for Fund 410160 Landowners Special Needs, due to inadequate documentation. This item is also reported as a matter of noncompliance within Finding No. 2021-001, including associated questioned costs. Therefore, no questioned costs are presented at this finding. Cause: RepMar lacks adequate internal control policies and procedures requiring retention of sufficient documentation for all transactions. Effect: RepMar is potentially in noncompliance with applicable period of performance requirements. Recommendation: RepMar should implement adequate internal control policies and procedures requiring retention of sufficient documentation for all transactions. Views of Responsible Officials: RepMar agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-005 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact Sector Grants Questioned Costs: $375,028 Area: Procurement and Suspension and Debarment Criteria: Article VI, Section 1(j)(1) of the Fiscal Procedures Agreement (FPA) states that RepMar may use its own procedures for procurement, whether done by the government or its Sub-Grantees, provided that they meet the standards identified in the FPA. RepMar?s Procurement Code states the following: (a) Section 124 - unless otherwise authorized by law, all Government contracts shall be awarded by competitive sealed bidding. (b) Section 127 - procurement of goods and services not exceeding $25,000 may be made in accordance with small purchase procedures promulgated by RepMar?s Policy Office. Small purchase procedures are those relatively simple and informal methods for securing services, supplies, or other property that do not cost more than $25,000. RepMar?s Ministry of Finance, Banking and Postal Services has previously declared that if small purchase procedures are used, price or rate quotations shall be obtained from three qualified sources. (c) Section 128 - a contract may be awarded for a supply, service, or construction item without competition when it is determined in writing that there is only one source for the required supply, service, or construction item. Condition: Of $20,767,579 in Compact Sector Grants non-payroll expenditures, sixty items totaling $2,120,694 were tested, with the following deficiencies noted: (1) For 3 items (or 5%), procurement was not supported by competitive sealed bid or another appropriate procurement methodology; thus, the following purchases appear to have been sole sourced without written justification: Item # Fund # Compact Sector Encumbrance/ Voucher/JV # Total 1 410100 Education C12349 $ 88,220 2 410150 Ebeye Special Needs Q25030 115,585 3 410160 Landowners Special Needs C14740 102,000 $ 305,805 Item # 1 pertains to a contract addendum extending the period of the contract for online literacy instruction, without any written rationale as to why other vendors were not allowed an opportunity to participate in this federally funded service. Item # 2 pertains to the purchase of two pickup trucks and a bus, for which only one vendor submitted a price quotation. The method of procurement utilized was small purchase rather than competitive sealed bidding as required by Section 124 of RepMar?s Procurement code. Item # 3 pertains to the purchase of equipment which was not supported by documentation evidencing compliance with Section 124 of RepMar?s Procurement code. (2) For 7 items (or 12%), supporting procurement documentation was not sufficient to substantiate compliance with small purchase procedures: Item # Fund # Compact Sector Encumbrance/ Voucher/JV # Description Total 1 410100 Education 725842 Insurance $ 6,460 2 410102 SEG T22503 Boat charter 865 3 410102 SEG P84991 Computer equipment 16,487 4 410102 SEG P85880 Computer equipment 6,875 5 410110 Health C14331 Contractual services 24,427 6 410110 Health P84681 Water 7,800 7 410150 Ebeye Special Needs Q25560 Office supplies 6,309 $ 69,223 Cause: RepMar did not enforce internal control policies and procedures over documentation of the procurement process to satisfy compliance with applicable procurement requirements. Effect: RepMar is in noncompliance with applicable procurement requirements and questioned costs of $375,028 for ALN 15.875 result. Identification as a Repeat Finding: Finding 2020-002 Recommendation: Responsible personnel should require that documentation be adequate to comply with applicable procurement requirements. Specifically, documentation should indicate the history of procurement, including the rationale for contractor or vendor selection. Views of Responsible Officials: RepMar agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-006 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.268 Immunization Cooperative Agreements Federal Award No.: NH23IP922588-02-00 Questioned Costs: $72,441 Area: Allowable Costs/Cost Principles Criteria: Federal program expenditures should be necessary and reasonable for the performance of the Federal award, be in accordance with allowable costs/cost principles requirements, and be directly related to, and in accordance with, program intent and objectives. Furthermore, capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency. Condition: During the year ended September 30, 2021, the Ministry of Health and Human Services (MOHHS) incurred vehicle rental costs for two vehicles (License Plate #s 6846 and 7109) amounting to $54,446 under rental agreement CL# 14542 and $17,995 under rental agreement CL# 15157. A summary of vehicle rental costs by Cost Center # follows: Rental Agreement # Cost Center # COVID Non-COVID Total CL# 14542 FL7543 $ - $ 14,144 $ 14,144 CL# 14542 FL7543 - 14,144 14,144 CL# 14542 FL7543 - 12,053 12,053 CL# 14542 FL7544 14,105 - 14,105 CL# 15157 FL7544 17,995 - 17,995 $ 32,100 $ 40,341 $ 72,441 The initial rental agreement was for the period July 1, 2020 through June 30, 2021, which was extended by MOHHS for an additional year under a lease-to-own arrangement for the period July 1, 2021 through June 30, 2022. The initial amount of $17,995 was paid upon signing of rental agreement CL15157 with a remaining amount of $17,995 to be paid upon transfer of ownership to MOHHS. Total anticipated rental costs associated with these two vehicles is $90,436 or $45,218 per vehicle. Evidence of grantor pre-approval was not available for examination, and the per-vehicle-cost does not appear to be reasonable for the performance of the Federal award. Cause: RepMar did not effectively monitor the validity and allowability of expenditures. Effect: RepMar is in noncompliance with allowable costs/cost principles requirements. Accordingly, questioned costs of $72,441 for ALN 93.268 result. Recommendation: RepMar management should strengthen monitoring controls so that expenditures are verified for validity and allowability. Views of Responsible Officials: RepMar agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-007 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Award No.: NU50CK000558 Questioned Costs: $33,129 Area: Procurement and Suspension and Debarment Criteria: Section 200.317 of 2 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards states that, when procuring property and services under a Federal award, a state must follow the same policies and procedures it uses for procurements from its non-Federal funds. RepMar?s Procurement Code states the following: (a) Section 124 - unless otherwise authorized by law, all Government contracts shall be awarded by competitive sealed bidding. (b) Section 127 - procurement of goods and services not exceeding $25,000 may be made in accordance with small purchase procedures promulgated by RepMar?s Policy Office. Small purchase procedures are those relatively simple and informal methods for securing services, supplies, or other property that do not cost more than $25,000. RepMar?s Ministry of Finance, Banking and Postal Services has previously declared that if small purchase procedures are used, price or rate quotations shall be obtained from three qualified sources. (c) Section 128 - a contract may be awarded for a supply, service, or construction item without competition when it is determined in writing that there is only one source for the required supply, service, or construction item. Condition: Of $2,635,956 in non-payroll expenditures for the Epidemiology and Laboratory Capacity for Infectious Diseases Program, forty-six items totaling $1,570,692 were tested, with the following deficiencies noted: ? For two items, procurement was not supported by competitive sealed bids or another appropriate procurement methodology for purchase of computers and electronic tablets (PO #s P82416 and P83240). Expenditures liquidated against the two purchase orders totaled $24,303 (COVID) and $8,826 (Non-COVID). ? For one item, the method of procurement used for a contractual service (C14077) was sole source as allowed by Section 128 of RepMar?s Procurement Code; however, no documentation was provided to justify use of this procurement method. Expenditures liquidated against this contract totaled $4,000 (COVID). Cause: RepMar did not enforce adequate internal control policies and procedures over documentation of the procurement process to satisfy compliance with applicable procurement requirements. Effect: RepMar is in noncompliance with applicable procurement requirements. Accordingly, questioned costs of $28,303 (COVID) and $8,826 (Non-COVID) for ALN 93.323 result. Questioned costs of $33,129 are reported at this finding whilst questioned costs of $4,000 are not presented as they are questioned costs at Finding 2021-002. Recommendation: Responsible personnel should require that documentation be adequate to comply with applicable procurement requirements. Specifically, documentation should indicate the history of procurement, including the rationale for contractor or vendor selection. Views of Responsible Officials: RepMar agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-008 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact Sector Grants Questioned Costs: $164,688 Area: Subrecipient Monitoring Criteria: 1) Article VI, Section 1(a)(1) of the Fiscal Procedures Agreement (FPA) states that fiscal control and accounting procedures of RepMar, as well as its Sub-Grantees, shall be sufficient to: (i) permit the preparation of reports required by the FPA and the Compact, as amended; and (ii) permit the tracing of funds to a level of expenditures adequate to establish that such funds have been used in compliance with the provisions of the Compact, as amended, and applicable agreements. Furthermore Article VI, Section 1(k)(1) of the FPA states that RepMar shall ensure that: (i) every Sub-Grant includes any clauses required by the Compact, as amended, the sector Grant awards, and the FPA; (ii) Sub-Grantees are aware of the requirements imposed upon them by the Compact, as amended, the sector Grants and the FPA; and (iii) Sub-Grantees can meet the financial management standards of the FPA. 2) In accordance with applicable subrecipient monitoring requirements, the pass-through entity (PTE) must follow-up and ensure that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal awards provided to the subrecipient from the PTE detected through audits, on-site reviews, and other means. Condition: 1) RepMar has not established formal policies and procedures over subrecipient monitoring, including compliance with related Compact provisions. For all four (or 100%) subrecipients tested, deficiencies were noted with the following: Item # Subrecipient Fund # Compact Sector Sub-Grant 1 Canvasback Missions, Inc. 410110 Health $ 100,000 2 Ebeye Calvary School 410150 Ebeye Special Needs 29,675 3 Ebeye SDA School 410150 Ebeye Special Needs 74,909 4 Queen of Peace 410150 Ebeye Special Needs 37,583 $ 242,167 Although the subrecipients submitted financial reports, as required by the underlying Memoranda of Agreement (MOAs), there is no documented evidence of review and verification by the Ministry of Finance, Banking and Postal Services to ascertain compliance with the MOAs, Compact Agreement, grant award, and FPA. Furthermore, the following discrepancies were noted: ? SG-1 forms were not signed by the overseeing ministry, as required; ? Certain subrecipient financial reports covered periods inconsistent with the underlying grant; and, ? Frequency of payments were inconsistent with MOA terms. 2) RepMar did not perform the required monitoring activities for one subrecipient. The 2020 Single Audit Report for Kwajalein Atoll Joint Utilities Resources, Inc., dated April 5, 2022, reported questioned costs of $164,688 for noncompliance with procurement and suspension and debarment requirements. RepMar did not issue a management decision with respect to the subrecipient report. Cause: RepMar lacks adequate internal control policies and procedures governing subrecipient monitoring, specifically with respect to: 1) execution of subgrant agreements with sub-grantee, 2) compliance with cash management requirements and FPA special tests and provisions, and 3) resolution and corrective action of subrecipient audit reports. Effect: RepMar is in noncompliance with specific provisions of the FPA over subgrant agreements and applicable subrecipient monitoring requirements. No questioned costs are reported for Condition # 1) since the subrecipients submitted the financial reports required by RepMar. For Condition # 2), questioned costs of $164,688 for ALN 15.875 result. Identification as a Repeat Finding: Finding 2020-004 Recommendation: RepMar should comply with the specific provisions of the FPA, execute subgrant agreements with all sub-grantees, and comply with subrecipient monitoring requirements. Responsible personnel should enforce compliance with the FPA and sub-grant agreements, and adequate subrecipient monitoring procedures should be developed and adopted. Furthermore, upon receipt of a subrecipient?s Single Audit Report, the responsible personnel should identify whether deficiencies pertaining to the PTE?s Federal award were detected. For all identified deficiencies, the responsible personnel should issue a management decision within six months and follow up on corrective action. Views of Responsible Officials: RepMar agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-009 Recommendation: RepMar should periodically monitor compliance with eligibility requirements. Responsible personnel should determine overpayments and enforce recovery. Views of Responsible Officials: RepMar agrees with the finding and provides details in its Corrective Action Plan. Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: COVID-19 Pandemic Unemployment Assistance (PUA) Federal Award No.: COVID-19 Federal Pandemic Unemployment Compensation (FPUC) Questioned Costs: $26,991 Area: Eligibility Criteria: In accordance with applicable eligibility requirements, claimants are eligible to receive pandemic unemployment assistance and Federal pandemic unemployment compensation if they file an initial application and weekly certifications. Condition: Of 60 case files tested, aggregating $1,054,201 of $5,493,003 in total program benefits, we noted the following: ? For 5 (or 8%), the claimant received paid leave or other paid benefits yet received full PUA and/or FPUC benefits. Claimant # Questioned Cost 1 514833 $ 262 2 514256 720 3 514672 1,048 4 511395 7,972 5 504801 4,243 $ 14,245 ? For 9 (or 15%), the claimant appears to have received benefits in excess of the maximum 79 weeks. Claimant # # of Weeks Questioned Cost 1 504784 85 $ 1,406 2 514735 80 243 3 255046 91 2,634 4 505226 85 1,406 5 514760 86 1,770 6 504801 90 2,034 7 514704 85 1,369 8 202052 86 1,642 9 506690 80 242 $ 12,746 Cause: RepMar did not effectively monitor compliance with applicable eligibility requirements. Effect: RepMar is in noncompliance with applicable eligibility requirements and questioned costs of $26,991 result.

Finding No.: 2021-010 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact Sector Grants Questioned Costs: $0 Area: Reporting Criteria: Article VI, Section 1(b)(1) of the Fiscal Procedures Agreement requires the submission of quarterly financial reports which should reconcile with underlying accounting records. Condition: The SF-425 reports for the quarters ended March 31, 2021 and September 30, 2021 were not available for examination. Cause: RepMar lacks adequate internal control policies and procedures requiring retention of copies of reports submitted to grantors. Effect: RepMar is potentially in noncompliance with applicable reporting requirements. No questioned cost is reported as the condition relates to unavailable reports. Recommendation: RepMar should implement adequate internal control policies and procedures requiring retention of copies of reports submitted to grantors. Views of Responsible Officials: RepMar agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-011 Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: COVID-19 Pandemic Unemployment Assistance (PUA) Federal Award No.: COVID-19 Federal Pandemic Unemployment Compensation (FPUC) Questioned Costs: $0 Area: Reporting Criteria: In accordance with applicable reporting requirements, ETA 9130, Financial Status Report, UI Programs should be prepared and submitted quarterly. Financial data is required to be reported cumulatively from grant inception through the end of each reporting period. Condition: ETA 9130 reports were not prepared and submitted. Cause: RepMar lacks adequate internal control policies and procedures over reporting requirements. Effect: RepMar is in noncompliance with applicable ETA 9130 reporting requirements. Recommendation: RepMar should implement adequate internal control policies and procedures over reporting requirements. Responsible personnel should be aware of and monitor the status of required reports and take steps to effect accurate and complete submissions in a timely manner. Views of Responsible Officials: RepMar agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-012 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Award No.: NU50CK000558 Questioned Costs: $0 Area: Reporting Criteria: In accordance with applicable reporting requirements, financial reports should be prepared and submitted quarterly. Condition: SF-425 reports were not available for examination. Cause: RepMar lacks adequate internal control policies and procedures requiring retention of copies of reports submitted to grantors. Effect: RepMar is potentially in noncompliance with applicable reporting requirements. No questioned cost is reported as condition relates to unavailable reports rather than unsupported expenditures. Recommendation: RepMar should implement adequate internal control policies and procedures requiring retention of copies of reports submitted to grantors. Views of Responsible Officials: RepMar agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2021-013 Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: COVID-19 Pandemic Unemployment Assistance (PUA) Federal Award No.: COVID-19 Federal Pandemic Unemployment Compensation (FPUC) Questioned Costs: $0 Area: Special Tests and Provisions ? UI Program Integrity - Overpayments Criteria: In accordance with applicable special tests and provisions requirements for overpayments, states should recover PUA and FPUC overpayments. Condition: A record of overpayments was not available. Therefore, test of compliance with respect to applicable special tests and provisions requirements for overpayments could not be performed. Cause: RepMar did not effectively monitor compliance with applicable special tests and provisions requirements for overpayments. Effect: RepMar is potentially in noncompliance with applicable special tests and provisions requirements for overpayments. No questioned costs are reported as we are unable to quantify the impact of noncompliance. Recommendation: RepMar should implement adequate internal control policies and procedures over special tests and provisions requirements. Responsible personnel should be aware of and monitor compliance with applicable special tests and provisions requirements. Views of Responsible Officials: RepMar agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2020-001 Federal Agency: U.S. Department of the Interior CFDA Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact Sector Grants Questioned Costs: $ Undeterminable Area: Equipment and Real Property Management Criteria: Section 200.313(d) of the Uniform Guidance and Article VI, Section 1(f)(4) of the Fiscal Procedures Agreement state that procedures for managing equipment, whether acquired in whole or in part with grant funds, will follow state laws and procedures. The following requirements are applicable: a. Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date and cost of the property, the percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property; b. A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years; c. A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated; d. Adequate maintenance procedures must be developed to keep the property in good condition; and e. If the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return. Additionally, the carrying amount of long-lived assets and the estimated useful lives of assets should be periodically re-assessed and adjusted, as appropriate, based on actual experience and relevant factors and circumstances. Condition: Capital assets records do not meet the criteria above and are not effectively maintained since updates to the records occur only once a year. Specifically, we noted the following deficiencies: ? An inventory of capital assets has not been performed in the recent past in accordance with the above criteria; therefore, a reconciliation of capital asset records and a physical inventory has not occurred at least once in the last two years. ? As capital assets records are not effectively maintained, it does not appear that RepMar has effectively developed means to adequately safeguard capital assets from loss, damage, or theft, or to reasonably investigate such occurrences. ? RepMar has not established policies and procedures governing property maintenance and has not effectively implemented an entity-wide maintenance plan. ? Long-lived assets are not routinely evaluated for possible impairment. Capital outlays within the Compact Sector Grants Fund for fiscal years 2020, 2019 and 2018 were as follows: Fiscal Year 2020 $ 3,358,375 Fiscal Year 2019 $ 3,163,936 Fiscal Year 2018 $ 6,242,082 Cause: RepMar lacks adequate internal control policies and procedures to satisfy compliance with federal property rules and regulations and lacks procedures governing property maintenance. Moreover, internal control policies and procedures requiring periodic and timely performance and independent review of capital assets reconciliations and related general ledger accounts, as well as periodic assessment of asset impairment conditions and useful lives, are lacking. Effect: RepMar is in noncompliance with applicable equipment and real property management requirements, and possible misstatement of capital assets and related accounts exists. Questioned costs, if any, that may result from inadequate property records, maintenance procedures, and the absence of timely reconciliations are not determinable. Identification as a Repeat Finding: Finding 2019-002 Recommendation: The Ministry of Finance, Banking and Postal Services should perform an inventory of RepMar?s capital assets as a basis for recording all assets in the financial statements, should complete such inventory in accordance with applicable property rules and regulations, and should develop adequate maintenance procedures in order to keep property in good condition. Furthermore, RepMar should develop adequate internal control policies and procedures requiring periodic and timely performance and independent review of capital assets reconciliations and related general ledger accounts. Views of Responsible Officials: RepMar agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2020-002 Federal Agency: U.S. Department of the Interior CFDA Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact Sector Grants Questioned Costs: $309,528 Area: Procurement and Suspension and Debarment Criteria: Article VI, Section 1(j)(1) of the Fiscal Procedures Agreement (FPA) states that RepMar may use its own procedures for procurement, whether done by the government or its Sub-Grantees, provided that they meet the standards identified in the FPA. RepMar?s Procurement Code states the following: (a) Section 124 - unless otherwise authorized by law, all Government contracts shall be awarded by competitive sealed bidding. (b) Section 127 - procurement of goods and services not exceeding $25,000 may be made in accordance with small purchase procedures promulgated by RepMar?s Policy Office. Small purchase procedures are those relatively simple and informal methods for securing services, supplies, or other property that do not cost more than $25,000. RepMar?s Ministry of Finance, Banking and Postal Services has previously declared that if small purchase procedures are used, price or rate quotations shall be obtained from three qualified sources. (c) Section 128 - a contract may be awarded for a supply, service, or construction item without competition when it is determined in writing that there is only one source for the required supply, service, or construction item. Condition: Of $26,029,015 in non-payroll Compact Sector Grant expenditures, 60 items totaling $2,912,333 were tested, resulting in the following deficiencies: (1) For 5 (or 8%), procurement was not supported by competitive sealed bid or another appropriate procurement methodology; thus, the following purchases appear to have been sole sourced without written justification: See Schedule of Findings and Questioned Costs for chart/table. Item # 1 is a contract addendum covering the period from October 1, 2019 to June 20, 2020. The original contract was not provided for examination. Two other addenda (C13366 and C13367), aggregating $74,500, and covering the period from December 1, 2018 to September 30, 2019, were also previously executed. Item # 2 is an addendum, effective October 1, 2019 to September 30, 2020, to an original $20,000 contract (C13155), effective December 1, 2018 to February 28, 2019, which was solicited through a Request for Proposal stating the contract would be for two years. A previous contract addendum (C13335) for $44,260 was more than double the original contract price and, with a period of February 1, 2019 to June 30, 2019, overlapped the original contract period. Such addendum was reported in Finding 2019-003 in RepMar?s fiscal year 2019 Single Audit. Another contract addendum (C13342) for $27,905 covering the period from July 1, 2019 to September 30, 2019 was also executed. C13569 was effective from October 1, 2019 to September 30, 2020. (2) For 4 (or 7%), supporting procurement documentation was not sufficient to substantiate compliance with small purchase procedures: See Schedule of Findings and Questioned Costs for chart/table.For item # 1, supporting documentation for the travel authorization was not provided to substantiate that the most economical fare was procured. For item #s 2 through 5, evidence of informal price quotations was not provided. Cause: RepMar lacks adequate internal control policies and procedures over the documentation of procurement procedures to satisfy compliance with applicable procurement requirements. Effect: RepMar is in noncompliance with applicable procurement requirements, and questioned costs of $309,528 result. Identification as a Repeat Finding: Finding 2019-003 Recommendation: RepMar should require that documentation be adequate to comply with applicable procurement requirements. Specifically, documentation should indicate the history of procurement, including the rationale for contractor or vendor selection. Views of Responsible Officials: RepMar agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2020-003 Federal Agency: U.S. Department of the Interior CFDA Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: COVID-19 TAP-RMI-2020-1 D20AP00051 Questioned Costs: $3,008,010 Area: Procurement and Suspension and Debarment Criteria: Article VI, Section 1(j)(1) of the Fiscal Procedures Agreement states that RepMar may use its own procedures for procurement, whether done by the government or its Sub-Grantees, provided that they meet the standards identified in the FPA. RepMar?s Procurement Code states the following: (a) Section 124 - unless otherwise authorized by law, all Government contracts shall be awarded by competitive sealed bidding. (b) Section 127 - procurement of goods and services not exceeding $25,000 may be made in accordance with small purchase procedures promulgated by RepMar?s Policy Office. Small purchase procedures are those relatively simple and informal methods for securing services, supplies, or other property that do not cost more than $25,000. RepMar?s Ministry of Finance, Banking and Postal Services has previously declared that if small purchase procedures are used, price or rate quotations shall be obtained from three qualified sources. (c) Section 128 - a contract may be awarded for a supply, service, or construction item without competition when it is determined in writing that there is only one source for the required supply, service, or construction item. Condition: The Program?s total expenditures of $3,008,010 relate to prepayment to a vendor for medical supplies and equipment. Procurement was not supported by competitive sealed bidding or any other appropriate methodology and appears to have been sole sourced. Documentary evidence of the justification and rationale for the sole source procurement method applied was not provided. Cause: RepMar lacks adequate internal control policies and procedures over the documentation of procurement procedures to satisfy compliance with applicable procurement requirements. Effect: RepMar is in noncompliance with applicable procurement requirements and questioned costs of $3,008,010 result. Recommendation: RepMar should require that documentation be adequate to comply with applicable procurement requirements. Specifically, documentation should indicate the history of procurement, including the rationale for contractor or vendor selection. Views of Responsible Officials: RepMar agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2020-004 Federal Agency: U.S. Department of the Interior CFDA Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact Sector Grants Questioned Costs: $1,200,864 Area: Subrecipient Monitoring Criteria: 1) Article VI, Section 1(a)(1) of the Fiscal Procedures Agreement (FPA) states that fiscal control and accounting procedures of RepMar, as well as its Sub-Grantees, shall be sufficient to: (i) permit the preparation of reports required by the FPA and the Compact, as amended; and (ii) permit the tracing of funds to a level of expenditures adequate to establish that such funds have been used in compliance with the provisions of the Compact, as amended, and applicable agreements. Furthermore Article VI, Section 1(k)(1) of the FPA states that RepMar shall ensure that: (i) every Sub-Grant includes any clauses required by the Compact, as amended, the sector Grant awards, and the FPA; (ii) Sub-Grantees are aware of the requirements imposed upon them by the Compact, as amended, the sector Grants and the FPA; and (iii) Sub-Grantees can meet the financial management standards of the FPA. 2) In accordance with applicable subrecipient monitoring requirements, the pass-through entity (PTE) must follow-up and ensure that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal awards provided to the subrecipient from the PTE detected through audits, on-site reviews, and other means. Condition: 1) RepMar has not established formal policies and procedures over subrecipient monitoring, including compliance with related Compact provisions. For 5 (or 62%) of 8 subrecipients tested, deficiencies were noted with the following: See Schedule of Findings and Questioned Costs for chart/table. Although the subrecipients submitted financial reports, as required by the underlying Memoranda of Agreement (MOAs), there is no documented evidence of review and verification by the Ministry of Finance, Banking and Postal Services to ascertain compliance with the MOAs, Compact Agreement, grant award, and FPA. Furthermore, the following discrepancies were also noted: ? SG-1 forms were not signed by the overseeing ministry, as required; ? Certain subrecipient financial reports covered periods inconsistent with the underlying grant; and, ? Frequency of payments were inconsistent with MOA terms. 2) RepMar did not perform the required monitoring activities for two subrecipients, as follows: The 2019 Single Audit Reports for Kwajalein Atoll Joint Utilities Resources, Inc. and Majuro Atoll Waste Company dated September 11 and July 20, 2020, respectively, reported questioned costs of $297,312 for noncompliance with procurement and suspension and debarment requirements, and questioned costs of $903,552 for allowable costs/cost principles requirements, respectively. RepMar did not issue a management decision with respect to the subrecipient reports. Cause: RepMar lacks adequate internal control policies and procedures governing subrecipient monitoring, specifically with respect to: 1) execution of subgrant agreements with sub-grantee, 2) compliance with cash management requirements and FPA special tests and provisions, and 3) resolution and corrective action of subrecipient audit reports. Effect: RepMar is in noncompliance with specific provisions of the FPA over subgrant agreements and applicable subrecipient monitoring requirements. No questioned costs are reported for Condition # 1) since the subrecipients submitted the financial reports required by RepMar. For Condition # 2), questioned costs of $1,200,864 result. Identification as a Repeat Finding: Finding 2019-004 Recommendation: RepMar should comply with the specific provisions of the FPA, execute subgrant agreements with all sub-grantees, and comply with subrecipient monitoring requirements. Responsible personnel should enforce compliance with the FPA and sub-grant agreements, and subrecipient monitoring procedures should be developed and adopted. Furthermore, upon receipt of a subrecipient?s Single Audit Report, the responsible personnel should identify whether deficiencies pertaining to the PTE?s Federal award were detected. For all identified deficiencies, the responsible personnel should issue a management decision within six months and follow up on corrective action. Views of Responsible Officials: RepMar agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2019-001 Federal Agency: U.S. Department of the Interior CFDA Program: 15.875 Economic, Social and Political Development of the Territories Federal Award No.: Compact Sector Grants Questioned Costs: $89,733 Area: Allowable Costs/Cost Principles Criteria: Federal program expenditures should be in accordance with allowable costs/cost principles requirements and should be directly related to, and in accordance with, program intent and objectives. Condition #1: Of $17,007,928 in payroll expenditures for the Compact Sector Grants, sixty items totaling $50,704 were tested, with the following deficiency noted: ? An approved timesheet was not available to support 120 hours paid to employee # 213584 for the pay period ended 12/22/2018 with a gross pay of $982. Condition #2: Of $28,044,734 in non-payroll expenditures for the Compact Sector Grants, sixty items totaling $11,416,065 were tested, with the following deficiencies noted: ? A $3,500 flight charter (Check # 176657) was not approved in the grant budget; thus, such does not appear to be an allowable program cost. Condition # 3: Of $1,594,169 in Compact Section 211(e)(1) Disaster Assistance Fund operating transfers out, two (2) items totaling $258,447 were tested. The following deficiencies were noted: ? Item # 1 ? Check # 136130 for purchase of reverse osmosis equipment included a $38,480 shipping cost, which was not supported by a cargo invoice. Furthermore, no receiving report or evidence of monitoring and safeguarding of the equipment was provided for our examination. ? Item # 2 ? Check # 136344 for a $46,771 private dock repair project was not adequately supported by a contract and does not appear to be an allowable expenditure under the Compact Disaster Assistance Sector Grant. Due to inadequate documentation, we were unable to ascertain whether other costs related to this project were also charged to the grant. Cause: RepMar did not effectively monitor the validity and allowability of expenditures. Effect: RepMar is in noncompliance with allowable costs/cost principles requirements. Accordingly, questioned costs of $89,733 result. Identification as a Repeat Finding: Finding 2018-001 Recommendation: RepMar management should strengthen monitoring controls so that expenditures are verified for validity and allowability. Views of Responsible Officials: RepMar agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2019-002 Federal Agency: U.S. Department of the Interior CFDA Program: 15.875 Economic, Social and Political Development of the Territories Federal Award No.: Compact Sector Grants Questioned Costs: Undeterminable Federal Agency: U.S. Department of Education CFDA Program: 84.027 Special Education ? Grants to States Federal Award No.: H027A180011 Questioned Costs: Undeterminable Area: Equipment and Real Property Management Criteria: Section 200.313(d) of the Uniform Guidance and Article VI, Section 1(f)(4) of the Fiscal Procedures Agreement state that procedures for managing equipment, whether acquired in whole or in part with grant funds, will follow state laws and procedures. The following requirements are applicable: a. Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date and cost of the property, the percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property; b. A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years; c. A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated; d. Adequate maintenance procedures must be developed to keep the property in good condition; and e. If the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return. Additionally, the carrying amount of long-lived assets and the estimated useful lives of assets should be periodically re-assessed and adjusted, as appropriate, based on actual experience and relevant factors and circumstances. Condition: Capital assets records do not meet the criteria above and are not effectively maintained since updates to the records occur only once a year. Specifically, we noted the following deficiencies: ? An inventory of capital assets has not been performed in the recent past in accordance with the above criteria; therefore, a reconciliation of the capital asset records and a physical inventory has not occurred at least once in the last two years. ? As the capital assets records are not effectively maintained, it does not appear that RepMar has effectively developed means to adequately safeguard capital assets from loss, damage, theft, or to reasonably investigate such occurrences. ? RepMar has not established policies and procedures governing property maintenance and has not effectively implemented an entity-wide maintenance plan. ? Long-lived assets are not routinely evaluated for possible impairment. Capital outlays within the Compact Sector Grants Fund for fiscal years 2019, 2018 and 2017 were as follows: Fiscal Year 2019 $ 3,163,937 Fiscal Year 2018 $ 6,242,085 Fiscal Year 2017 $ 7,998,839 Cause: RepMar lacks adequate internal control policies and procedures to satisfy compliance with federal property rules and regulations and lacks procedures governing property maintenance. Moreover, internal control policies and procedures requiring periodic and timely performance and independent review of capital assets reconciliations and related general ledger accounts as well as periodic assessment of asset impairment conditions and useful lives are lacking. Effect: RepMar is in noncompliance with applicable equipment management requirements and possible misstatement of capital assets and related accounts exists. Questioned costs, if any, that may result from inadequate property records, maintenance procedures, and the absence of timely reconciliations are not determinable. Identification as a Repeat Finding: Finding 2018-004 Recommendation: The Ministry of Finance, Banking and Postal Services should perform an inventory of RepMar?s capital assets as a basis for recording all assets in the financial statements, complete such inventory in accordance with applicable property rules and regulations, and develop adequate maintenance procedures in order to keep property in good condition. Furthermore, we recommend that RepMar develop adequate internal control policies and procedures requiring periodic and timely performance and independent review of capital assets reconciliations and related general ledger accounts. Views of Responsible Officials: RepMar agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2019-003 Federal Agency: U.S. Department of the Interior CFDA Program: 15.875 Economic, Social and Political Development of the Territories Federal Award No.: Compact Sector Grants Questioned Costs: $283,502 Area: Procurement and Suspension and Debarment Criteria: Article VI, Section 1(j)(1) of the Fiscal Procedures Agreement states that RepMar may use its own procedures for procurement, whether done by the government or its Sub-Grantees, provided that they meet the standards identified in the FPA. RepMar?s Procurement Code states the following: (a) Section 124 ? unless otherwise authorized by law, all Government contracts shall be awarded by competitive sealed bidding. (b) Section 127 ? procurement of goods and services not exceeding $25,000 may be made in accordance with small purchase procedures promulgated by RepMar?s Policy Office. Small purchase procedures are those relatively simple and informal methods for securing services, supplies, or other property that do not cost more than $25,000. RepMar?s Ministry of Finance, Banking and Postal Services has previously declared that if small purchase procedures are used, price or rate quotations shall be obtained from three qualified sources. (c) Section 128 ? a contract may be awarded for a supply, service, or construction item without competition when it is determined in writing that there is only one source for the required supply, service, or construction item. Condition: Of $27,930,139 in non-payroll expenditures for the Compact Sector Grants, sixty items totaling $2,861,840 were tested. (1) Procurement was not supported by competitive sealed bid or another appropriate procurement methodology; thus, the following purchases appear to have been sole sourced without written justification: See Schedule of Findings and Questioned Costs Item # 4 is an addendum to an original $20,000 contract (C13155), effective December 1, 2018 to February 28, 2019, which was solicited through a Request for Proposal stating the contract would be for two years. The $44,260 contract addendum (C13335) is more than double the original contract price and, with a period of February 1, 2019 to June 30, 2019, overlaps the original contract period. (2) Supporting procurement documentation was inadequate to evidence compliance with small purchase procedures: See Schedule of Findings and Questioned Costs For item # 1, no rationale for vendor selection was evident even though all vendors quoted $5.10 per gallon for gasoline and $5.55 per gallon for diesel. Actual prices charged by the selected vendor ranged from $5.35 to $5.65 per gallon for gasoline and from $5.65 to $5.75 per gallon for diesel. Therefore, questioned costs for the difference in price result. For item # 2, supporting documentation for the travel authorization was not provided to substantiate that the most economical fare was procured. For item #s 3, 5, and 7, evidence of informal price quotations was not available. For item # 4, the vendor quoted the lowest prices of $5.30 per gallon for gasoline and $5.75 per gallon for diesel yet charged $5.45 per gallon and $5.90 per gallon, respectively, which exceeded other vendor quotations. Therefore, questioned costs for the difference in price result. For item #s 6 and 8, the request for quotation was not adequate. For item # 6, justification for vendor selection was not specified as a requirement in the request for quotation; thus, it appears that the basis for vendor selection was invalid. For item # 8, the request for quotation was not sufficiently specific to ascertain whether the most responsive vendor was selected. Cause: RepMar lacks adequate internal control policies and procedures over the documentation of procurement procedures to satisfy compliance with applicable procurement requirements. Effect: RepMar is in noncompliance with applicable procurement requirements, and questioned costs of $283,502 result. Identification as a Repeat Finding: Finding 2018-005 Recommendation: RepMar should require that documentation be adequate to comply with applicable procurement requirements. Specifically, documentation should indicate the history of procurement, including the rationale for contractor or vendor selection. Views of Responsible Officials: RepMar agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2019-004 Federal Agency: U.S. Department of the Interior CFDA Program: 15.875 Economic, Social and Political Development of the Territories Federal Award No.: Compact Sector Grants Questioned Costs: $0 Area: Subrecipient Monitoring Criteria: Article VI, Section 1(a)(1) of the Fiscal Procedures Agreement (FPA) states that fiscal control and accounting procedures of RepMar, as well as its Sub-Grantees, shall be sufficient to: (i) permit the preparation of reports required by the FPA and the Compact, as amended; and (ii) permit the tracing of funds to a level of expenditures adequate to establish that such funds have been used in compliance with the provisions of the Compact, as amended, and applicable agreements. Furthermore Article VI, Section 1(k)(1) of the FPA states that RepMar shall ensure that: (i) every Sub-Grant includes any clauses required by the Compact, as amended, the sector Grant awards, and the FPA; (ii) Sub-Grantees are aware of the requirements imposed upon them by the Compact, as amended, the sector Grants and the FPA; and (iii) Sub-Grantees can meet the financial management standards of the FPA. Condition: RepMar has not established formal policies and procedures over subrecipient monitoring, including compliance with related Compact provisions. During the year ended September 30, 2019, RepMar sub-granted Compact funding to various subrecipients, eight of which were tested and noted deficiencies with the following: See Schedule of Findings and Questioned Costs Additionally, $500,000 of pass-through funding for a housing loan program (Check # 180492) was advanced rather than paid based on approved loans. Further, RepMar has not implemented monitoring procedures to ascertain that loan repayments are made by borrowers in accordance with loan terms. Although subrecipients submitted financial reports, as required by the underlying Memoranda of Agreements (MOAs), there is no documented evidence of review and verification by the Ministry of Finance, Banking and Postal Services to ascertain compliance with the MOAs, Compact Agreement, grant award, and FPA. Furthermore, the following discrepancies were also noted: ? SG-1 forms were not signed by the overseeing ministry as required; ? Certain subrecipient financial reports covered periods inconsistent with the underlying grant; ? Frequency of payments were inconsistent with MOA terms; and Cause: RepMar lacks adequate internal control policies and procedures governing subrecipient monitoring, specifically with respect to: 1) execution of Sub-Grant agreements with Sub-Grantees, 2) compliance with cash management requirements and FPA special tests and provisions, and 3) resolution and corrective action of subrecipient audit reports. Effect: RepMar is in noncompliance with specific provisions of the FPA over subgrant agreements and subrecipient monitoring. Identification as a Repeat Finding: Finding 2018-008 Recommendation: RepMar should comply with the specific provisions of the FPA, execute Sub-Grant agreements with all Sub-Grantees, and comply with subrecipient monitoring requirements. Responsible personnel should enforce compliance with the FPA and Sub-Grant agreements, and subrecipient monitoring procedures should be developed and adopted. Views of Responsible Officials: RepMar agrees with the finding and provides details in its Corrective Action Plan.

Finding No.: 2019-005 Federal Agency: U.S. Department of Health and Human Services CFDA Program: 93.243 Substance Abuse and Mental Health Services - Projects of Regional and National Significance Questioned Costs: $1,026,136 Area: Subrecipient Monitoring Criteria: In accordance with applicable subrecipient monitoring requirements, the pass through entity (PTE) must follow-up and ensure that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal awards provided to the subrecipient from the PTE detected through audits, on-site reviews, and other means. Condition: RepMar did not perform the required monitoring activities for the following subrecipients. The FY 2016 and 2017 Single Audit Reports for Kumit Bobrae Coalition dated February 11, and 21, 2020, respectively, reported questioned costs of $688,694 for noncompliance with allowable costs/cost principles requirements and questioned costs of $337,442 for noncompliance with procurement and suspension and debarment requirements. RepMar did not issue a management decision with respect to the subrecipient reports. Cause: RepMar did not effectively monitor compliance with applicable subrecipient monitoring requirements. Effect: RepMar is in noncompliance with applicable subrecipient monitoring requirements. The total questioned cost is $1,026,136. Recommendation: Upon receipt of a subrecipient?s Single Audit Report, the responsible personnel should identify whether deficiencies pertaining to the PTE?s Federal award were detected. For all identified deficiencies, the responsible personnel should issue a management decision within six months and follow up on corrective action. Views of Responsible Officials: RepMar agrees with the finding and provides details in its Corrective Action Plan.

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