POHNPEI, Federated States of Micronesia (STPNS) -- Despite the findings of financial improprieties, inconsistencies, missing documentation and bad business practices, the audit summary of the FSM Embassy in Washington DC released on October 20 was worded in generous terms.  

Former Ambassador Jesse B. Marehalau has returned to Yap having been asked at the behest of FSM Congress and President Joseph Urusemal to resign his post as FSM Ambassador to the US.  Ongoing investigations will look into whether or not Marehalau was unwittingly duped by an employee to whom he had given too much power or whether he was complicit in the conspiracy charges currently leveled at Rico Calderon.  The former driver for the Embassy has been reported to have ?rolled over? on Marehalau implicating him in the sale of FSM passports.  Those passports allow the holder to freely enter and work in the U.S.



Apparently Calderon had many more responsibilities than just those of a driver.  For reasons known only to the former Ambassador, bookkeeping responsibilities were removed from Administrative Assistant Connie Marike and given instead to Calderon, who collected over $19,000 for website maintenance in addition to his salary for services as accountant/driver.

The auditors from the FSM Office of the National Public Auditor (ONPA) were in Washington D.C. to do a complete audit covering three fiscal years along the first three quarter of the 2006 fiscal year which ended on September 31.  The last audit covered three years through 1997.  

The auditors found that of the 2103 checks written over the audited period worth almost $3,333,000 only 622 had enough information that could be reasonably used to determine matters of propriety and legality.  The auditor reported that 81 percent of expenditures lacked sufficient documentation and that some had no documentation at all, lacking even the name of the payee.  Sources say that the check register had not been reconciled in five years.  Despite the large number of transactions that had no supporting documentation the auditors were able to determine that besides the lack of documentation something has been going wrong at 1725 N Street NW in Washington D.C.

The audit summary said, ?We believe there are two main reasons for lack of compliance:  lack of knowledge regarding procedures or an intent to cover up inappropriate expenditures.?  

?Inappropriate expenditures? do not include expenditures like that of a computer carrying case purchased by the Embassy for $630, or floor mats for the Ambassador?s car which cost $450.  Those expenditures and others like them were said to ?not follow prudent business practices.?  The term ?inappropriate expenditures? refers instead to expenses like the 16 expenditures of the 622 available for review that reimbursed the Ambassador for personal household expense which is not allowed under FSM law.  The term also applies to the $1340 the Embassy paid for parking tickets which should have been the responsibility of the driver who acquired them.  If money had gone into inappropriate pockets, that would also have been ?inappropriate?.  The lack of documentation for expenditures makes it tedious to ascertain appropriateness, but it is not impossible.

Under the heading ?Prudent Business Practices? the audit questioned the prudence of a cleaning contract that costs $1800 per month when there are only four employees in the building.  They also felt it was excessive for an office of that size to have and pay for 15 phone lines.  Six of the lines are dedicated to the security alarm, DSL line, fax line?leaving 10 lines for four employees to use.

The Embassy did not submit to the Department of Finance and Administration (DOF&A) the Monthly Operating Fund Reports and supporting documentation.  It did not submit a Monthly Imprested Fund Report or Replenishment Requests.  The DOF&A continued to replenish the Embassy?s funds despite the fact that the required documents were not submitted.

The Embassy opened an overdraft line of credit about which DOF&A was not aware.  The funds were commingled in the General Operating Fund of the Embassy.  The principle balance of the loan reached a high point of $200,000 though it is now paid off.  ?We cannot determine what the loan funds were used for because the Embassy commingled funds from FSM advances, FSM payroll, imprested account, and loans? ONPA has requested an opinion from the Attorney General regarding the legality of the loan.?

The Embassy is required under law to maintain a cash journal to record all incoming cash regardless of the source of funding.  There was no cash journal available for review when the Auditors arrived.

The law requires that construction or renovation work over $20,000 must enter a transparent bid process with contractors submitting bids.  The Embassy entered into a contract which they did not send to the Department of Transportation, Communications, and Infrastructure, nor the Justice Department to review as they were required to do.  The contract was with a construction company of Philippine nationals who were charged under the contract to do renovation work on the 100 year old building.  Marehalau told the auditors that the job which was to have been completed no later than September 2005 is still not quite done.  There is some more work to do on the roof.  This is despite payments on the contract totaling $14,799 over the $200,000 budget.  Documentation irregularities regarding the contract and payment for work under it abound.

Regarding the security of passports, the auditors ?found that the Embassy could not track the receipt and distribution of the passports they handled for distribution.?  The records for 441 days of the audit period reviewed were missing.  The remaining logbooks showed that 22 passports had been recorded in incoming logbooks but only 12 passports were recorded in the logbook.  Embassy personnel could not explain the lack of entries in the logbooks.

Deputy Head of Mission James Naich is currently acting as FSM Ambassador until new staff and appointees can be identified and approved.  The only other employee working at the Embassy is a recently hired receptionist.

ONPA has said that a follow up audit will be conducted in 6 to 9 months.

The complete audit can be found at http://www.fsmpublicauditor.fm.