Micronesia Conservation TrustNon-Profit

Finding No.: 2023-002 Federal Agency: U.S. Department of Commerce AL Program: 11.482 Coral Reef Preservation Program Federal Award Nos.: NA20NOS4820198 Area: Cash Management Questioned Costs: $248,189 Criteria: 2 CFR 200.305(b) requires payment methods must minimize the time elapsing between the transfer of funds from the Federal agency or the pass-through entity and the disbursement of funds by the recipient or subrecipient. Advance payments to a recipient or subrecipient must be limited to the minimum amounts needed and be timed with actual, immediate cash requirements of the recipient or subrecipient in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the recipient or subrecipient for direct program or project costs and the proportionate share of any allowable indirect costs. The recipient or subrecipient must make timely payments to contractors in accordance with the contract provisions. 2 CFR 200.305(b)(1) requires that the recipient or subrecipient must maintain or demonstrates the willingness to maintain both written procedures that minimize the time elapsing between the transfer of funds and disbursement by the recipient or subrecipient. Condition: Of thirteen (13) cash drawdowns totaling $759,083, eight (8) cash drawdowns totaling $592,568 were tested. For one (1) sample or (or 13% of drawdowns tested), the Trust did not demonstrate implementation of procedures to minimize the time elapsing between the transfer of funds from the federal agencies and disbursement of funds for program purposes Cause: The Trust does not maintain written procedures to ensure that time elapsing between the transfer of funds from the U.S. federal agency or pass-through entity and the disbursements of funds is minimized. Effect: The Trust is in noncompliance with applicable cash management requirements which resulted in questioned costs of $248,189. Identification as a Repeat Finding: This is not a repeat finding. Recommendation: The Trust should establish written procedures to minimize the number of days elapsing between transfer of funds from U.S. federal agency or pass-through entity and disbursements of funds. Views of Responsible Officials: Management agrees with the finding. See separate Corrective Action Plan

Finding No.: 2023-003 Federal Agency: U.S. Department of Commerce AL Program: 11.482 Coral Reef Preservation Program Federal Award Nos.: NA20NOS4820198, NA20NOS4820046 Area: Procurement and Suspension and Debarment Questioned Costs: $57,750 Criteria: In accordance with 2 CFR 200.214, non-Federal entities are subject to the non-procurement debarment and suspension regulations implementing 2 CFR 180. Such regulation restricts awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities. Under 2 CFR 180.300, when entering into a covered transaction with another person at the next lower tier, verification must be made that the person with whom an intent to do business with is not excluded or disqualified. Such verification can be made by (a) checking SAM Exclusions, (b) collecting a certification from that person; or (c) adding a clause or condition to the covered transaction with that person. Condition: For all three (3) transactions (or 100%) tested amounting in total to $57,750, the Trust could not provide written evidence that prior to entering a covered transaction, the vendor or contractor has not been debarred, suspended, or otherwise excluded from participating in the contract. Cause: The Trust has no procedures to verify whether individuals or contractors are suspended or debarred prior to entering into a covered transaction. Likewise, the Trust does not have written documentation proving prior to entering into a contract, that the vendor was deemed not to be debarred or suspended. Effect: The Trust is in noncompliance with applicable suspension and debarment requirements. Questioned costs of $57,750 is reported. Identified as a Repeat Finding: Finding No. 2022-001 Recommendation: The Trust should revisit and implement formal procedures to document written evidence that, prior to entering into a covered transaction, a search had been performed to ensure the potential individual or contractor is not suspended, debarred, or otherwise excluded. Procedures performed should be adequately maintained in the procurement files. Views of Responsible Officials: Management agrees with the finding. See separate Corrective Action Plan.

Finding No.: 2023-004 Federal Agency: U.S. Department of Commerce AL Program: 11.482 Coral Reef Preservation Program Federal Award Nos.: NA20NOS4820198, NA20NOS4820046 Area: Reporting Questioned Costs: $0 Criteria: In accordance with 2 CFR 170.000, recipients of a federal grant are required to file a Federal Funding Accountability and Transparency Act (FFATA) subaward report if the recipient grants any subaward equal to or greater than $30,000 in federal funds. Under reporting requirements, the recipient must report each subaward of this award term to the FFATA Subaward Reporting System (FSRS) at http://www.fsrs.gov. The key data elements to be reported include subawardee name, subawardee Data Universal Numbering System (DUNS) number, amount of subaward, subaward obligation/action date, date of report submission, subaward number, subaward project description, subawardee names and compensation of highly compensated officers. The subaward report should be submitted no later than the end of the month following the month in which the subaward was issued. Condition: The Trust is required to file twelve (12) reports to the federal grantor for fiscal year 2023. These comprise of five (5) financial reports, five (5) progress narrative reports, and two (2) special reports related to FFATA Subaward Reporting System (FSRS). However, the Trust did not file two (2) of these reports. The Trust has two (2) subaward agreements that exceed the $30,000 federal funds criteria set by FFATA. Cause: The Trust does not have procedures and internal controls in place to determine the special reporting requirements under the FFATA. Effect: The Trust is in noncompliance with applicable reporting requirements related to FFATA. Identified as a Repeat Finding: Finding No. 2022-002 Recommendation: The Trust should establish internal controls requiring periodic review of the applicable reporting requirements involving subawards Views of Responsible Officials: Management agrees with the finding. See separate Corrective Action Plan.

Finding No.: 2023-005 Federal Agency: Agency for International Development AL Program: 98.001 Foreign Assistance for Programs Overseas Federal Award No.: 72049220C00004 Area: Level of Effort Questioned Costs: $0 Criteria: Based on the grant agreement, the not-for-profit entity must comply with the minimum level of effort requirements as explicitly stated in the grant award terms and conditions. This includes, but is not limited to, the minimum number of hours, activities, or resources dedicated to the grant-funded project as specified in the agreement. The entity is required to maintain adequate documentation and records demonstrating that the minimum level of effort has been met. This includes timesheets, activity logs, progress reports, and any other relevant evidence supporting compliance with the level of effort requirements. Condition: Seven (7) employees’ salaries were tested, amounting in total to $76,666. For four (4) samples (or 57%) amounting in total to $5,882, the Trust did not meet the minimum level of effort requirement specific to meeting minimum direct labor labor/salary budgets to be charged to the program as stated in the grant agreement. Cause: The Trust has lacks monitoring controls to comply with the terms and conditions of the grant award. Effect: The Trust has instances of noncompliance on employees’ salaries that did not comply to the minimum level of effort specified in the grant agreement. Recommendation: The Trust should revisit and implement formal procedures to document written evidence to comply with minimum level of effort requirements. Identification as a Repeat Finding: This is not a repeat finding. Views of Responsible Officials: Management agrees with the finding. See separate Corrective Action Plan

Finding No. : 2023-006 Federal Agency: Agency for International Development AL Program: 98.001 Foreign Assistance for Programs Overseas Federal Award Nos.: 72049220C00004 Area: Reporting Questioned Costs: $0 Criteria: In accordance with 2 CFR 170.000, recipients of a federal grant are required to file a Federal Funding Accountability and Transparency Act (FFATA) subaward report if the recipient grants any subaward equal to or greater than $30,000 in federal funds. Under reporting requirements, the recipient must report each subaward of this award term to the FFATA Subaward Reporting System (FSRS) at http://www.fsrs.gov. The key data elements to be reported include subawardee name, subawardee Data Universal Numbering System (DUNS) number, amount of subaward, subaward obligation/action date, date of report submission, subaward number, subaward project description, subawardee names and compensation of highly compensated officers. The subaward report should be submitted no later than the end of the month following the month in which the subaward was issued. Condition: The Trust is required to file eight (8) reports to the federal grantor for fiscal year 2023. These comprise of three (3) financial reports, three (3) progress narrative reports, and two (2) special reports related to FFATA Subaward Reporting System (FSRS). However, the Trust did not file two (2) of these reports. The Trust has two (2) subaward agreements that exceed the $30,000 federal funds criteria set by FFATA. Cause: The Trust does not have procedures and internal controls in place to determine the special reporting requirements under the FFATA. Effect: The Trust is in noncompliance with applicable reporting requirements related to FFATA. Identification as a Repeat Finding: This is not a repeat finding. Recommendation: The Trust should establish internal controls requiring periodic review of the applicable reporting requirements involving subawards. Views of Responsible Officials: Management agrees with the finding. See separate Corrective Action Plan

Finding No. 2022-001 Federal Agency: U.S. Department of Commerce ALN and Title: 11.482 Coral Reef Conservation Program Compliance Requirement: Suspension and Debarment Questioned Cost: $0 Criteria In accordance with 2 CFR 200.214, non-Federal entities are subject to the non-procurement debarment and suspension regulations implementing 2 CFR 180. Such regulation restricts awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities. Under 2 CFR 180.300, when entering into a covered transaction with another person at the next lower tier, verification must be made that the person with whom an intent to do business with is not excluded or disqualified. Such verification can be made by (a) checking SAM Exclusions, (b) collecting a certification from that person; or (c) adding a clause or condition to the covered transaction with that person. Condition The Trust could not provide written evidence showing that, prior to entering into a contract with a vendor, that the Trust concluded the vendor has not been debarred, suspended, or otherwise excluded from participating in the contract. Cause: The Trust does not have a written document proving prior to entering into a contract, that the vendor was deemed not to be debarred or suspended. Effect or potential effect: The Trust is in noncompliance with the applicable requirement. Recommendation: The Trust should revisit and implement procedures to ensure that vendors that are debarred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities are restricted from Federal awards, subawards and contracts. Procedures performed should be adequately maintained in the procurement files. Views of Responsible Officials: Management agrees with the finding. See separate Corrective Action Plan.

Finding No.: 2022-002 Federal Agency: U.S. Department of Commerce AL Program: 11.482 Federal Award Nos.: NA22NOS4820155, NA20NOS4820198, NA20NOS4820046 Area: Reporting Questioned Costs: $0 Criteria In accordance with 2 CFR 170.000, recipients of a federal grant are required to file a Federal Funding Accountability and Transparency Act (FFATA) subaward report if the recipient grants any subaward equal to or greater than $30,000 in federal funds. Under reporting requirements, the recipient must report each subaward of this award term to the FFATA Subaward Reporting System (FSRS) at http://www.fsrs.gov. The key data elements to be reported include subawardee name, subawardee Data Universal Numbering System (DUNS) number, amount of subaward, subaward obligation/action date, date of report submission, subaward number, subaward project description, subawardee names and compensation of highly compensated officers. The subaward report should be submitted no later than the end of the month following the month in which the subaward was issued. Condition The Trust is required to file ten (10) reports to the federal grantor for fiscal year 2022. These comprise of four (4) financial reports, four (4) progress narrative reports, and two (2) special reports related to FFATA Subaward Reporting System (FSRS). However, the Trust did not file two (2) of these reports. The Trust has two (2) subaward agreements that exceed the $30,000 federal funds criteria set by FFATA. Cause: The Trust does not have procedures and internal controls in place to determine the special reporting requirements under the FFATA. Recommendation: The Trust should establish internal controls requiring periodic review of the applicable reporting requirements involving subawards. Views of Responsible Officials: Management agrees with the finding. See Corrective Action Plan.