- - -

OF 

INSPECTOR GENERAL 

U.S.DEPARTMENT OF THE INTERIOR 

MANAGEMENT ADVISORY

Coronavirus Aid, Relief, and 

Economic Security Act Funds 

Awarded to the 

Federated States of Micronesia

Report No.: 2020-WR-041-C October 2020
 

OFFICE OF 

INSPECTOR GENERAL 

U.S.DEPARTMENT Of THE INTERIOR 

Mr. Haser Hainrick 

FSM National Public Auditor 

Office of the National Public Auditor 

Federated States of Micronesia 

P.O. Box PS-05 

Palikir, Pohnpei, FM 96941 

Subject: Management Advisory – Coronavirus Aid, Relief, and Economic Security Act 

Funds Awarded to the Federated States of Micronesia 

Report No. 2020-WR-041-C 

Dear Mr. Hainrick: 

Over the past few months, as a part of our oversight responsibilities, we have focused 

particularly on the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) 

appropriations to the U.S. Department of the Interior (DOI). We have provided a variety of 

resources and reports to the DOI addressing potential risks associated with the expenditure of 

these funds and have looked to our own past work to identify potential lessons learned that may 

be applicable now. We have likewise reviewed the Office of Insular Affairs’ (OIA’s) initial 

oversight steps for the CARES Act grant funds to the Insular Area governments. As part of those 

efforts, we also reviewed the Federated States of Micronesia’s (FSM’s) grant documentation and 

pandemic plans and wanted to take this opportunity to share with you some of the lessons we 

have learned from auditing grant awards issued during emergency situations. In addition to these 

general lessons learned, we have attempted to contextualize this discussion by acknowledging 

some of the challenges unique to the FSM. We hope that our experiences may be helpful to your 

own future auditing efforts and would welcome the opportunity to continue working with you 

and your staff, whether through training programs or otherwise. 

Background 

The CARES Act provided the DOI with $756 million to support the needs of its 

programs, bureaus, Indian Country, and the Insular Areas. The OIA was allocated $55 million to 

be distributed to the seven Insular Area governments through its Technical Assistance Program 

(TAP) Office in April of this year, to help prepare for, prevent, and respond to the COVID-19 

pandemic. 

The FSM received $7.74 million of the CARES Act funds, to be expended by 

September 30, 2021. These amounts are in addition to the annual TAP distributions, which are 

usually smaller amounts, even considering that they cover 12 months rather than 18 months. For 

example, in fiscal year (FY) 2019, the FSM received $831,000 through TAP (see Figure 1).

1 

1 In FY 2019, the OIA distributed an additional $8.2 million in TAP funding among the seven Insular Areas. 

Office of Inspector General | Washington, DC 
$7.74 

million 

I 

Figure 1: Funding the FSM Received Through TAP 

Pre- and Post-CARES Act 

TAP Funds FY 2019 

CARES Act Funds Available 

Through FY 2021 

$831,000 

As part of the award, the FSM must meet the grant terms and conditions, which include a 

requirement to document how it used the funds to prevent and respond to the pandemic and how 

the funds supported its pandemic plan. We summarize the grant terms and conditions in our 

attached CARES Act flash report (The Office of Insular Affairs Took Appropriate Action With 

CARES Act Funds) on the OIA’s initial actions related to CARES Act grant funds.2 

Monitoring Grants 

Our past work demonstrates that awards issued during emergency situations create risks 

because they are awarded quickly to respond to public need, often without competition and 

adequate cost and pricing determinations, and have a higher purchase threshold than other 

acquisitions. We believe that these previously identified risks are equally applicable to the 

CARES Act grant funds, and we accordingly encourage you to consider including these grants in 

your future audit planning efforts. Our previously mentioned flash report summarizes the steps 

that the OIA has taken to appropriately administer CARES Act funds, including providing 

specific guidance to the Insular Area governments. The report also includes a list of lessons and 

risks that we have identified and reported on from past audit work: 

• Ensuring sufficient workforce capacity

• Ensuring use of the appropriate award vehicle

• Maximizing competition in the source selection process

• Ensuring background research and risk assessments of potential recipients

2 OIG Report No. 2020-WR-041, https://www.doioig.gov/sites/doioig.gov/files/DOIOIG_OIACARESAct_062520.pdf 

2 
 

 

 

• Monitoring documentation and use of funds by recipients 

• Reviewing recipients’ performance and financial reports

We have also attached another recently issued CARES Act flash report (Lessons Learned 

for CARES Act Awards) that describes these lessons in more detail, and we hope that you will 

find this information helpful as you consider your future audit planning efforts.3 

Challenges Unique to the FSM 

We have summarized above some of the challenges we have identified that are associated 

generally with receipt of large amounts of funds in an emergency setting. We are well aware, 

however, that—even aside from the challenges created by the COVID-19 pandemic—the Insular 

Areas as a group face challenges that may heighten financial risks or otherwise strain their 

governments’ resources and ability to provide support in crisis situations. These concerns include 

economic dependence on a few key industries, scarce natural resources, shortages of skilled 

labor, and a reliance on Federal grants to fund basic services. In addition to these shared 

concerns applicable to the Insular Areas overall, we also know that the FSM faces its own unique 

set of challenges. For example, due to the pandemic, the FSM is projecting a substantial decline 

in its economy, the most significant since 2004. The tourism sector alone is projected to fall by 

46 percent in the current fiscal year. The transportation sector, which includes shipping, port 

services, aviation, and airport ground handling, is projected to fall by 27 percent in the current 

fiscal year. Both sectors are projected to continue falling in the next fiscal year. Taken together, 

these concerns can simultaneously increase the need for careful oversight but make it more 

difficult to provide. 

Conclusion 

Your office has a unique perspective on the particular challenges facing both the Insular 

Areas and the FSM. The additional risks associated with CARES Act grant funds can exacerbate 

those challenges and lead to a heightened need for oversight of these funds. I want to reiterate 

that we would be pleased to serve as an audit planning resource for your office. In the past, we 

have provided audit and investigative training and assistance to Insular Area public auditors, 

including audit and investigative assistance on requested projects to enhance professional 

proficiency. In addition, we have provided tailored training opportunities to audit and 

investigative staff in the Insular Areas to improve technical skills, and we presented information 

at the recent Association of Pacific Islands Public Auditors conference regarding fraud 

awareness and the importance of oversight. Given these experiences, which we believe were 

very positive for everyone, we want to express our commitment to help you identify high-risk 

areas associated with the CARES Act money your government received and to assist you in 

planning for CARES Act assignments. 

3 OIG Report No. 2020-FIN-037, 

https://www.doioig.gov/sites/doioig.gov/files/DOIOIG_CARESActLessonsLearned_052020.pdf 

3 
If you have any questions or would like to discuss any of these issues, please contact me 

at 202-208-5745. 

Sincerely, 

Mark Lee Greenblatt 

Inspector General 

Attachments (2) 

cc: Stoney Taulung, Kosrae State Public Auditor, FSM 

Ihlen K. Joseph, Pohnpei State Public Auditor, FSM 

Achilles Defngin, Yap State Public Auditor, FSM 

Manny San Jose Jr., Chuuk State Public Auditor, FSM 

4 
Report Fraud, Waste,

and Mismanagement

Fraud, waste, and mismanagement in

Government concern everyone: Office 

of Inspector General staff, departmental 

employees, and the general public. We 

actively solicit allegations of any 

inefficient and wasteful practices, fraud, 

and mismanagement related to 

departmental or Insular Area programs 

and operations. You can report 

allegations to us in several ways.

 By Internet: www.doioig.gov

 By Phone: 24-Hour Toll Free: 800-424-5081

Washington Metro Area: 202-208-5300

 By Fax: 703-487-5402

 By Mail: U.S. Department of the Interior 

Office of Inspector General

Mail Stop 4428 MIB 

1849 C Street, NW. 

Washington, DC 20240