Title 10. FINANCE
Chapter 1.
Provisions of General Applicability
Section 10.101. Definitions. In this title:
(1)
"Department" is the Department of Administration and Finance.
(2) "Director" is the Director of the Department.
Background
Amended by State Law 7-1.
Chapter 2. Fiscal Management
Section 10.201. Accounting; records.
(1) Government accounting provides for the full disclosure
of the results of financial operations and the dissemination of all financial
information needed for the management of operations and the formulation and
execution of the Government budget and ensures effective control over
Government income, expenditures, funds, property, and other assets, whether
tangible or intangible.
(2) An office record is open for public inspection in
accordance with regulation.
Section 10.202. Director's powers and duties. The Director has the power and duty to:
(1) prepare and review plans for the management and
enhancement of Government revenues and reimbursements and for the support of
public credit;
(2) supervise the collection of revenues and reimbursements;
(3) prescribe the form of keeping and rendering of public
accounts, and issue pursuant to law a warrant for money from the Treasury
pursuant to appropriation;
(4) prepare and issue reports and fiscal information as may
be required by law or resolution of the Legislature;
(5) as the general accountant of the Treasury and its Funds
record and audit every receipt and disbursement of money paid to, by, or
through the Treasury and exercise full supervision of the Funds;
(6) withhold his approval when necessary to prevent misuse
of State funds, including the disbursement of funds in excess of appropriation;
(7) keep a complete set of double entry books in which
appear accounts which show the current status of each appropriation, and record
daily therein all business transactions pertaining to appropriations in detail;
(8) keep ledgers in which appear in a systematic manner
accounts which show all current Government funds, assets, liabilities, income
and expenditures;
(9) maintain other books, records and documents as are
necessary for the proper administration of the Office;
(10) in consultation with the Director of [the] Department
of Administration and Finance continuously review Government accounting and
financial reporting practices and make required improvements;
(11) maintain accounting systems and produce financial
reports regarding Government operations, including central facilities which
gather and disseminate information concerning Government financial operations
and their results;
(12) give full consideration to the Government's needs and
responsibilities in establishing accounting and reporting systems and other
fiscal requirements; and
(13) emphasize systematic and orderly improvement in
Government financial management in order to formulate, adopt and maintain
simplified and more effective accounting systems, financial reporting
procedures, budget processes, auditing requirements and procedures, and to
eliminate duplication and processes which do not serve a purpose commensurate
with the cost involved.
Background
Amended by State Law 7-1.
Section 10.203. Treasurer. The Director is the Treasurer and has full responsibility
and authority for the Treasury, for the collection, administration, and
safekeeping of all public funds deposited in the Treasury as general
realizations of the Government and for disbursements from the Treasury pursuant
to law.
Section 10.204. Funds of the Treasury. Within the Treasury there are:
(1) the Revenue Fund;
(2) the United States Grant Fund; and
(3) the Foreign Assistance Fund.
Section 10.205. The Revenue Fund.
(1) The Revenue Fund contains all monies received by the
Government pursuant to a law imposing a tax, duty or tariff, and all other
revenues and reimbursements from a fine, fee, license, interest, rent, or
Government service, and other Government collection or collections by a
government for the Government's benefit. A person who receives monies pursuant
to this section transmits the monies within seven days of receipt to the
Division of Finance and Budget for deposit in the Revenue Fund except that:
(a) the Department of Agriculture, Land and Fisheries may
retain monies received in the sale of supplies and equipment for gardening,
livestock and poultry production, and in the marketing of all agricultural
produce;
(b) the Sports Council may retain funds collected pursuant
to Section 7.902(3), funds obtained through contributions and donations, and
any interest thereon for funding operations, acquisition of equipment and the
purchase of prizes;
(c) The Division of Finance and Budget retains in a
Recycling Fund all monies collected pursuant to Title 9, Chapter 22, and
promulgates regulations for the disbursement of Recycling Fund monies for the
refund of beverage container deposits, and the maintenance of a recycling
program;
(d) The Department of Commerce and Industry may retain
monies received from the sale of books, postcards, handicrafts, and other
tourist material for the purpose of acquiring additional inventory of such
classes of items; and
(e) The Division of
Finance and Budget retains in a Publication Fund the proceeds received from the
sale of copies of the Kosrae State Code and the Selected Laws of the State of
Kosrae, which proceeds are available for use by the Code Revision and
Publication Commission to defray the costs of preparation and publication of
the Selected Laws of the State of Kosrae;
(f) The Division of
Finance and Budget retains in a Health Care Fund all monies collected from or
on behalf of patients or clients or the Kosrae Department of the Health
Services, including, but not limited to, reimbursements from any program of
medical insurance and payments received by the State in connection with
off-island referrals. Monies in the
Health Care Fund are continually appropriated for expenditures by the
Department of Health Services solely for the purchase of medical supplies,
inclusive of pharmaceutical supplies, for use by the Department of Health
Services, its clinics, dispensaries, programs and patients.
(g) The Division of
Finance and Budget retains in a State Scholarship Grant and Loan Fund, all
monies received from student loan repayments including any accrued
interest. Monies in the Scholarship
Fund are available solely to the State Scholarship Board to be used for
scholarship purposes only.
(h) The Department
of Education retains in a Yearbook Revolving Fund all monies contributed,
received and collected from yearbook sales by depositing that revenue into the
fund using it strictly for the Kosrae high School yearbook project.
Each department, office, and agency retaining monies
pursuant to subsections (a) through (h) provides a written monthly report to
the Governor and the Speaker on the status of the monies, including amounts
received and expended; upon determining that a department, office, or agency
has money in excess of the amount necessary for the purpose for which it is
allowed to retain the funds, the Governor directs that said excess be turned
over to the State Treasury.
(i) The Court may
retain monies received as payment for published decisions, opinions, rules, or
other documents issued by the Court.
(2) By regulation the Director of the Department of
Agriculture, Land and Fisheries provides for the sale of materials pursuant to
subsection (1)(a) so that:
(a) sale is at cost plus a reasonable charge for
administrative costs; and
(b) there is a reasonable balance between the interests of
assisting the public and fostering private retail sales.
(3) Funds and materials deriving
from State Law 1-25 are available in implementing the use stated in subsection
(l)(a).
Background
Subsection
(1)(a) was amended by State Law 5-36 and further amended by State Law 7-1; subsection (1)(b) was amended by State Law
5-37 and further amended by State Law 5-116; subsection (1)(c) was added by
State Law 4-146 and amended by State Laws 5-59 and 5-198 and further amended by
State Law 7-1; subsection (1)(d) was added by State Law 5-15; subsection (1)
was amended in its entirety by State Law 5-108, which added subsection (1)(e)
and the concluding language of the subsection, Subsection (1)(a) thru (1)(e)
were amended by State Laws 5-201 and 6-9; Subsection (1) (f) added by State Law
6-9; Subsection (1)(g) added by State Law 6-87; Subsection (1)(h) [Court fine]
added by State Law 6-108; Subsection 1(h) [Scholarship Fund] was added by State
Law 7-21; Subsection (1)(c) amended by State Laws 6-121 and 6-146. Former Subsection (1)(c) [airport trust
fund] was repealed by State Law 7-91.
Subsection 2 was amended by State Law 7-1. Subsection (1)(h) (Yearbook Revolving Fund) was added by State
Law 7-134.
Section 10.206. The United States Grant Fund. The United States Grant Fund contains all monies
appropriated or designated by the United States Government for the Government
except United States federal agency program monies which are maintained and
accounted for in a manner to be provided by regulation. Monies in the United
States Grant Fund are accounted for separately and in accordance with reporting
requirements of the United States Government.
Section 10.207. The Foreign Assistance Fund. The Foreign Assistance Fund contains all monies not
belonging to the Revenue Fund and received by the Government for its use from
governments, governmental agencies or other external sources other than the
United States Government.
(a) Foreign
Assistance Fund monies, other than U.S. Federal Education Grant and Congress of
the Federated States of Micronesia appropriations for educational purposes,
shall be deposited into a certificate of deposit held in the name of the State
as an Educational Trust Fund to be held and used for educational purposes as
set forth herein
(1)
The principal amount received shall be retained in the certificate of deposit
until such time as it is authorized to be used.
(2)
The interest shall be made available to the Director of Education, as the
allottee of said interest, to use as merit/achievement awards for students at
school activities such as the annual Education Week. The Director of Education shall report to the Governor on all
expenditures and to the Legislature upon request.
(b) Foreign
Assistance Fund monies received for the Kosrae State Court shall be deposited
into a checking account held in the name of the Kosrae State Court Foreign
Assistance Fund to be held, used and distributed for the purposes designated in
the grant award documents as set forth herein.
(1)
The Chief Justice shall be authorized as allottee and shall provide the sole
authorization necessary for payment of funds from the checking account.
(2)
The funds in the checking account shall be available for use by the allottee,
to use for the purposes specified in the grant award documents. The Chief Justice shall report to the
Governor and to the Legislature on all expenditures upon request.
Subsection (a) added by State Law
6-164. Subsection (b) added by State
Law 6-181.
Section 10.207.1. Legislative Operations Fund. "Legislative operations monies" are monies that
are appropriated or authorized for legislative operations. A Legislative
Operations Fund, administered by the Department of Administration and Finance,
is created to hold legislative operations monies. At the direction of the
allottee of legislative operations monies, or other person designated pursuant
to legislative rule, the Department of Administration and Finance transfers
legislative operations monies from the Funds of the Treasury to the Legislative
Operations Fund.
Background
Added by State Law 5-41. Amended by State Law 7-1.
Section 10.207.2. Disbursement. Monies in the Legislative Operations Fund are available
for withdrawal at the allottee's or designated person's discretion, upon request
made to the Department of Administration and Finance. The request identifies in
writing the appropriation or authorization under which the disbursement is
sought. The Department of Administration and Finance does not withhold monies
requested for disbursement pursuant to this section.
Background
Added by State Law 5-41. Amended by State Law 7-1.
Section 10.207.3. Accounting. The allottee or person designated by legislative rule
renders a quarterly statement of accounting for all public money withdrawn or
expended from the Legislative Operations Fund.
Background
Added by State Law 5-41.
Section 10.208. Allotment.
(1) The Director of the Department of Administration and
Finance has the power and duty to:
(a) make allotments
(b) make allotments of appropriated sums not later than ten
days before the beginning of the fiscal year for which the appropriation is
available or not more than thirty days after the effective date of an
appropriation, whichever is later;
(c) make allotments at monthly, quarterly or other
intervals, if sound financial management practices permit and require; and
(d) immediately notify an allottee in writing of an
allotment and of the periodic nature of the allotment.
(2) Unless otherwise provided by law, the allottees of State
funds are:
(a) The Governor, for the operations of the Executive;
(b) The Speaker, for operations of the Legislature; and
(c) The Chief Justice, for operations of the Judiciary.
(3) The Governor is the allottee of funds appropriated for a
Government operation not stated in subsection 2 when an allottee is not
provided by law.
Background
Subsection (1) was amended by
State Law 7-1.
Section 10.209. Documentation.
(1) Public funds are not recorded as a Government obligation
unless it is supported by documentary evidence of:
(a) a binding agreement for a purpose authorized by law,
executed before the expiration of the period of availability of the funds for
obligation;
(b) a valid loan agreement, showing the amount of the loan
to be made and the terms and schedule of payment;
(c) a purchase order required by law, regulation,
administrative directive or established administrative practice;
(d) an order issued pursuant to law authorizing purchases
without advertising when necessitated by public exigency or for perishable
subsistence supplies or within specific monetary limitations;
(e) a grant or subsidy payable:
(1) from an appropriation made for payment of, or
contribution toward, sums required to be paid in specific amounts fixed by law,
or in accordance with a formula prescribed by law; and
(2) pursuant to an agreement authorized by law, or plans
approved in accordance with and authorized by law.
(f) a valid Government liability resulting from litigation
or settlement;
(g) employment or services or expenses of travel made in
accordance with law, or services performed by public utilities; or
(h) a valid Government liability payable by funds
appropriated or otherwise lawfully available for that purpose.
Section 10.210. Lapse. Funds limited for obligation to a definite period of time
are not available for expenditure after the expiration of the period except for
the liquidation of an amount obligated in accordance with Section
[10.212]. Funds are not available for
expenditure beyond the period provided by law.
Section 10.211. Disbursement. Unless otherwise provided by law, the following procedures
control the administration and management of funds:
(1) Funds remain in the custody and control of the Director
until they are disbursed by him in accordance with law.
(2) Funds are obligated
as of the date the allottee executes the document required by Section 10.209.
(3) The Director disburses funds to liquidate valid
obligation within thirty days of its becoming payable, as indicated by valid
documentary evidence of the obligation and a valid claim for payment, if
required by the document evidencing the obligation.
(4) Only the Director signs a check in disbursement of funds
unless he designates in writing no more than two persons, any one of whom may
sign a check on his behalf. The Director transmits a copy of a designation to
the Legislature.
Section 10.212. Unexpended funds.
(1) Unless otherwise provided by law, an appropriation which
requires expenditure within a stated period becomes void to the extent that the
appropriated sum is not obligated by the end of the period. A sum is available
for expenditure for the purpose of the appropriation only if a valid obligation
for payment of the sum occurs before the expiration of the period and the
Director receives a copy of a valid document evidencing the obligation,
certified by the allottee.
(2) The Director may cancel an obligation not liquidated
within one year following the date it became payable, as evidenced by a valid
document, if the sole reason for the obligation's not being liquidated was the
failure of the party to whom the obligation was due to submit a valid claim for
payment as required by the terms of the document evidencing the obligation.
Section 10.213. Reporting. The Department of Administration and Finance gives to the
Legislature its monthly or other periodic computer statement of the status of
an appropriated sum, and upon request gives the Legislature other data regarding
Government finances or an appropriated sum.
Background
Amended by State Law 7-1.
Section 10.214. Closing. When an unexpended balance remains to the credit of an
appropriation after the purposes of the appropriation have been accomplished,
after the period within which those purposes may be accomplished has ended, or
after the reasons for the appropriation no longer exist, the Director, upon the
receipt of a written statement from the allottee or person charged with the
duty of expending the appropriation that all obligations have been fully paid
and satisfied, may close out the appropriation account and transfer the
unexpended balance to the appropriate fund of the Treasury.
Chapter 3. Annual Budget and Other Appropriations
Section 10.301. Timing of
annual budget.
(1) By February 1st of each year the Speaker, the Chief Justice, a department director, and an agencies' governing body or administrator submits to the Governor a written proposal of expenditures for the coming fiscal year in a manner determined by the Governor. With the exception of Directors' proposals the Governor includes the proposals in the budget without revision.
(2) The Governor submits the annual budget for the coming fiscal year to the Legislature no later than June 1st of each year.
Background
Amended by State Law 6-108 and
6-196.
Section 10.302. Content of annual budget.
(1) The annual budget includes:
(a) a budget message;
(b) recommendations which the public interest may require;
(c) summary data and text;
(d) supporting detail;
(e) proposed appropriations and expenditures for the
Government operations for the coming fiscal year, showing the source of the
funds proposed;
(f) anticipated revenues and other funds available to the
Government from all sources in the coming fiscal year, including taxes, fees,
fines, interest income, revenue or profits from agreements, United States grant
funds, reimbursements for Government services, repayment of a loan, an
unexpended balance from a previous year and an uncollected reimbursement or
debt owed to the Government;
(g) recommendations as to how a deficit is to be met, either
through additional revenues or reimbursements, or reduced appropriations and
expenditures if the total of the proposed appropriations and expenditures
exceeds the total of the funds estimated to be available for appropriation
during the coming fiscal year;
(h) a statement of the balances of the Funds of the Treasury
for the fiscal year last concluded, including the actual revenue by source, all
appropriations, and the obligations and expenditures pursuant to each
appropriation;
(i) a statement of the projected balance of the Funds of the
Treasury for the fiscal year in progress, including all appropriations,
estimated revenues by source, and anticipated obligations, and recommendations
as to how the deficit is to be met, if the projected balance for Fund indicates
a deficit;
(j) details of all budget requests to be submitted to the
United States Government for the fiscal year which next follows the coming
fiscal year;
(k) details of all economic development projects and
construction projects to be funded or undertaken by the Government in the
coming fiscal year, relating such projects to goals and objectives set forth in
the Overall Economic Development Plan;
(l) proposed personnel levels for the Executives' principal departments and the agencies in
comparison to personnel levels for the fiscal year in progress;
(m) a listing of all United States federal agency programs
in which the Government will participate, or be entitled to participate, in the
coming fiscal year, showing each program's total funding, number of personnel
and planned activities, and the principal departments of the Executive, or the
agency or other branch of Government which will administer the program grant;
and
(n) other financial information and data necessary or
desirable for showing in reasonable and practicable detail the Government's
financial condition.
(2) The annual budget treats each position, principal
department, division, bureau, unit, and other organizational entities of the
Executive and agencies, whether or not the budget recommends funding. If
funding is not recommended, the Governor provides a detailed justification in
the budget.
(3) Proposed expenditures for a Government construction
project for the coming fiscal year appears in the proposed budget for the
principal Executive department or for the agency which will have primary use or
control of the facility once constructed.
Section 10.303. Annual budget appropriation.
(1) The Governor submits with the annual budget a bill to
enact the budget. The bill is consistent with the budget.
(2) An enactment of the budget may provide personnel levels
and reprogramming authority.
(3) An appropriation is subject to amendment.
(4) An appropriation of funds from a non-State Government
source adheres to a lawful restriction placed on use of the funds by the
grantor of the funds, including reprogramming limits.
(5) An appropriation may limit the expenditure of funds to a
specific purpose or in accordance with other stated conditions.
Section 10.304. Request for
supplementary appropriation.
(1) The Governor may request the Legislature to enact an
appropriation in addition to the annual budget, as may be required by laws
enacted after enactment of the annual budget or for other reasons in the public
interest. A request includes the grounds therefore, including the reason for
its omission from the annual budget. If a request would create a deficit in a
Fund of the Treasury the Governor recommends ways to meet the deficit.
(2) The Governor may request the Legislature to rescind
existing budgetary authority by law.
Section 10.305. Grant request. Thirty days before the transmission deadline for a grant
request by the Government to any source the requesting party submits to the
Legislature a copy of the request. Within twenty days of receipt the
Legislature submits to the requesting party its written recommendations
concerning the request, if any. The requesting party gives full consideration
to the recommendations and may alter the request accordingly.
Section 10.306. Balanced budget resolution. From all available information the Legislature adopts a
resolution, subject to amendment by subsequent resolutions, stating the total
funds estimated to be available for appropriation from the Funds of the
Treasury during the coming fiscal year. The resolution may also state the
personnel levels to be funded from the total funds estimated to be available
and may provide other spending limits or conditions. Total appropriations and
personnel levels for a fiscal year do not exceed the amount specified in the
resolution.
Section 10.307. United States federal agency program.
(1) Upon the Code's taking effect an obligation of United
States federal agency program monies does not occur without appropriation or
authorization by law, except that the obligation of monies of a program
appearing on the Federal Program Roster at that time may occur until December
31, 1985.
(2) Upon the Compact
of Free Association's taking effect the Government's choice of a United States
federal agency program requires Legislature approval by resolution.
Chapter 4. Required Audits – Office of the Public
Auditor
Section 10.401. Annual/Biennial
Audit. There is an audit of all
expenditures of public funds at the end of each fiscal year. If the Legislature is satisfied that the
objectives of the annual audit can be met by a biennial audit, then it may, by
resolution, waive the requirement of an annual audit. The Legislature cannot waive the annual audit except every other
year.
Background
Amended by State Law 6-108 and
State Law 7-50.
Section 10.402. Contracting
for Annual/Biennial audit. With the
approval of the Legislature, the Speaker designates and authorizes in writing a
Senator who has not had direct responsibility for the disbursement of public
funds to negotiate and contract with an auditor for the annual/biennial
audit. For this annual/biennial audit,
the Senator has full and final authority to obligate the Government by contract
with an auditor, who must be a certified public accountant. An annual/biennial audit contract may not be
executed until after the Legislature has appropriated funds for payment of the
auditor. The Senator designated
pursuant to this section secures by written contract the services of an auditor
who in the member’s best judgment can perform the required audit in a
competent, timely and impartial manner with the least use of public funds.
Former Section
10.402 was repealed by State Law 7-50.
State Law 7-50 amended former Sections 10.405 and 10.406 and combined
those amended sections into a new Section 10.402.
Section 10.403. Auditor access and reporting for the
annual/biennial audit. An auditor
has full access to all documents of the Government and of allottees of public
funds which, in the auditor’s judgment, are relevant to an audit pursuant to
Section 10.401. All Government
officials and employees and all allottees of funds cooperate fully with the
annual/biennial auditor upon his request.
An audit pursuant to Section 10.401, results in a full and detailed
written report by the auditor to the Speaker who promptly transmits a copy to
the Governor, the Attorney General, and the Clerk of the Courts for inspection
by the public and the Broadcast Authority.
Former Section 10.403 was
repealed by State Law 7-50. State Law
7-50 amended former Sections 10.408 and 10.409 and combined those sections into
a new Section 10-403.
Section 10.404. Definition of public funds. “Public funds” as used in this Chapter,
means all the resources, revenues, and grants, subsidies, contributions, or
entitlements owned by, owed to, or held by the State, or held by any
department, agency, or any other person for or on behalf of the Government, as
well as all funds appropriated by the State in connection with State contracts,
State obligations, or any State appropriation funding.
Former Section 10.404 was
repealed by State Law 7-50 which added a new Section 10.404.
Section 10.405. Office
of State Public Auditor. There is
an Office of State Public Auditor for the State of Kosrae which is subject to
the following:
(1) The Office of
State Public Auditor is to be headed by a State Public Auditor, who may be a
certified public accountant. If the
State Public Auditor is not a certified public accountant, then at least one
certified public accountant, who has been certified in the United States, must
be employed by the State Public Auditor.
The Office of State Public Auditor shall otherwise be staffed within the
discretion of the State Public Auditor subject to an approved budgetary
appropriation.
(2) The State Public
Auditor shall be appointed by the Governor, with the advice and consent of the
Legislature. The Public Auditor shall
serve for a term of 4 years and until a successor is confirmed. An individual may be reappointed for an
additional term or terms with the advice and consent of the Legislature.
(3) The Legislature
may remove the State Public Auditor from office for cause by a two-thirds
vote. In the event of such removal, the
governor shall appoint an Acting Public Auditor until a successor is appointed
and confirmed.
Background
Former Section 10.405 was amended by State Law 7-50 and combined with former Section 10.406 and renbumbered as Section 10.402. State Law 7-50 added a new Section 7-405.
Section 10.406. Powers
and Duties. The State Public
Auditor shall:
(a) Inspect and
audit personally, or by his duly authorized assistants, all accounts, books,
and other financial records of the State Government, to include but not be
limited to, every branch, department, office, political subdivision, board,
commission, agency, other public legal entity (owned, or partially owned, by
the State), whether they receive public funds or not, and nonprofit
organizations that receive public funds from the State Government;
(b) Inspect and
audit personally, or by his duly authorized assistants, the fiscal books,
records, and accounts of all allottees and other custodians of public funds,
making independent verification of all assets, liabilities, revenues,
expenditures, and obligations of the State Government, entities owned in whole
or part by the State Government, and agencies of the State Government.
(c) Inspect and
audit personally, or by his duly authorized assistants, the fiscal books,
records, accounts, and other financial records associated with any project,
program, and activity receiving funding in whole or in part from public funds
of the State Government, including the records of any contractor performing
public work on a cost-reimbursement-type contract in order to verify the cost
charged to the public contractor;
(d) Inspect and
audit personally or by his duly authorized assistants, the books, records,
accounts, and other financial records associated with business sales that may
be used for sales assessment for tax collection purposes;
(e) Prepare and file
written audit reports of all inspections and audits completed;
(f) Have the
exclusive audit jurisdiction over public funds of the State Government, except
as set forth in Section 10.403, and except as he shall contract for independent
auditing services to be performed under his supervision in instances where
specialized expertise is required, or where auditing requirements are beyond
the capacity of the State Public Auditor’s staff and where funding is
available;
(g) Keep a complete
and accurate record or file of all audit reports, inspections, investigations,
releases, audit work papers, and other materials pertaining to the work of the
Office of the State Public Auditor;
(h) Cooperate with
State agencies by offering such advice and assistance as may be requested of
the State Public Auditor for the establishment or improvement of the accounting
system(s) used by the various State agencies and departments;
(i) Require the aid
and assistance of all State officials and employees and any custodian of public
funds at all times in the inspection, examination, and audit of any and all
books, accounts, and records of the State Government; and
(j) Have access
during regular business hours to all of the books and accounts, reports,
vouchers, or other records of information in any branch, department, office,
political subdivision, board, commission, agency and other public legal entity
(owned, or partially owned, by the State).
Nothing in this section shall be construed as authorizing or permitting
the publication of information prohibited by law.
Background
Former Section 10.406 was amended by State Law 7-50 and combined with former Section 10.405 and renumbered as Section 10.402. State Law 7-50 added a new section 10.406.
Section
10.407. Special audits. The Legislature, by resolution, or the
Governor, by written request, may require an audit of a particular agency or entity,
or may require an audit of the expenditure of public funds, or a portion
thereof, at any other time. A special
audit request may establish reasonable requirements for the timing of the
special audit and the special audit reports.
In addition, the State Public Auditor has the discretion, as well as the
duty and power, to initiate an audit whenever and wherever the State Public
Auditor determines that such an audit would be beneficial to the State. A special audit conforms to the requirements
of this chapter.
Background
Former Section 10-407 was repealed and replaced by State Law 7-50.
Section 10.408. Audit
Reports. All audit reports shall be
in writing, and shall comply with the following:
(1) A copy of all
audit reports of the State Public Auditor shall be provided to the Governor,
the Speaker of the Legislature, the Attorney General, and shall be made
available to the public by delivering a copy to the Broadcast Authority and the
Clerk of the Kosrae State Court. If a
State agency or publicly-owned corporation is the subject of an audit report,
it shall also be provided a copy of the report.
(2) The State Public
Auditor may file a report at such time as may be specifically required by
statute or request or as he may determine if no time is specified in a request.
(3) Each audit
report shall contain recommendations made in regard to the subject matter of
the special audit. The branch, agency,
or publicly- owned entity shall respond to the auditor’s recommendations and
make any necessary corrections.
(4) Recommendations
in all audit reports shall be confined to matters within the jurisdiction of
the State Public Auditor, including compliance or noncompliance with laws
governing the expenditure of public funds, and the need for amendments or new laws
to secure the efficient expenditure of public funds.
Background
Former Section 10.408 was amended by State Law 7-50 and combined with Section 10.409 and renumbered as Section 10.403. State Law 7-50 added a new Section 7-408.
Section 10.409. Verification
of deposits. In verifying any
audit, the State Public Auditor shall have the right to ascertain the amount of
bank deposits belonging to the entity or agency required to be audited, and
shall have the right to audit said account on the books of such bank. No bank shall be liable for making available
to the State Public Auditor any of the information required under the
provisions of this section.
Background
Former Section 10.409 was amended by State Law 7-50 and combined with Section 10.408 and renumbered as Section 10.403. State Law 7-50 added a new Section 7-409.
Section 10.410. Payment
of salaries and expenses.
(1) The salaries of
the State Public Auditor, his staff, and employees shall be paid in the same
manner and through the same procedure used for the payment of salaries of other
State Government employees.
(2) The salary of
the State Public Auditor shall be $15,750.00, which salary shall not be reduced
during his term in office.
(3) The State Public
Auditor position shall be exempt from the Public Service System; however,
members of his staff who would otherwise qualify for employment in the Public
Service System may be included therein.
(4) The State Public
Auditor shall submit a proposed budget to the Governor to be included in the
annual budget for presentation to the Legislature at the times required by the
Code.
Background
Added by State Law 7-50.
Section 10.411. Contracting
for special services. The State
Public Auditor may contract with other persons or organizations of established
competence for special services required by the State Public Auditor to carry
out his powers and duties. Any such
contracts however, shall be within the established budget of the Office or have
specific separate funding. Any
contracts for the services of a certified public accountant shall be awarded
only to the person or organization who, in the best judgment of the State
Public Auditor, can perform the required audit, or other duties and
responsibilities in a competent, timely and impartial manner with the least use
of public funds.
Background
Added by State Law 7-50.
Section 10.412. Issuance
of subpoenas.
(a) The State Public
Auditor may, by subpoena, summon persons to appear at a reasonable time before
him. He may administer oaths to such
persons, and question them regarding receipts and expenditures of money and any
other relevant matters necessary for the due execution of the duties vested in
the State Public Auditor by this Chapter.
(b) The State Public
Auditor may issue subpoenas duces tecum requiring the production, within a
reasonable time, of books, records, documents, or other relevant financial
papers or objects necessary for the performance of his duties.
(c) Any subpoena
issued under the authority of the State Public Auditor shall be issued in the
name of the State of Kosrae and shall be addressed to the person summoned, or
to the person who is the custodian of the records requested. The subpoena shall be signed by the State
Public Auditor and shall set forth, with reasonable certainty, the books,
documents, or other papers required, the object of the inspection and audit,
the time and place of the hearing and the consequences of failure to obey the
subpoena or summons. The subpoena, or
summons, shall be served by a police officer who is directed to serve the
subpoena forthwith to the person to whom it was addressed.
(d) A person
subpoenaed shall have only those privileges against producing books, documents,
or other papers under subpoena duces tecum which are authorized by the Rules of
Evidence of the State Court.
Background
Added by State Law 7-50.
Section
10.413. Types of audits and audit
standards. The types of audits and
applicable audit standards shall be as follows:
(1) Three types of
audits may be performed:
(a) Financial and
compliance. This type of audit
determines whether the financial statements of an audited entity present fairly
the financial position and results of financial operations in accordance with
generally accepted accounting principles and whether the entity has complied
with laws and regulations that may have a material effect upon the financial
statements.
(b) Economy and
efficiency. This type of audit
determines whether an entity is managing and utilizing its resources
economically and efficiently, the causes of inefficiencies or uneconomical
practices, and whether the entity has complied with law and regulations
concerning economy and efficiency.
(c) Program
results. This type of audit determines
whether the desired results or benefits established by the Legislature or other
authorizing body are being achieved and whether the program administrators have
considered alternatives that might yield desired results at a lower cost.
(2) Any given audit
or review may include one or more of the objectives in Subsection (1) of this
section in the reasonable exercise of the State Public Auditor’s discretion.
(3) The State Public
Auditor shall perform audits in conformity with generally accepted audit
standards as established by the American Institute of Certified Public
Accountants.
Background
Added by State Law 7-50.
Chapter 5. Authorization
Section 10.501. National government grant. There is authorization for the disbursement of State funds
in advance of receipt of monies granted by the national government for
Government use. State funds are not available for advancement if monies granted
by the national government are not for Government use.
Chapter 6. Compact of Free Association
Section 10.601. Authorization
to debit Compact Financial Assistance Fund account fees. The Governor is authorized to approve, without further
authorization or appropriation, the debiting of the Compact Financial Assistance Fund account of the State of Kosrae,
as established by the Agreement on Internal Budget and Finance Procedures under the Compact of Free
Association between the National
Government of the Federated States of Micronesia, for custodian and investment management fees associated with
that account.
Background
Added by State Law 4-101.
Chapter 7. Compact Fund Financing
Section 10.701. Definitions. Unless the context clearly indicates otherwise, the
following definitions apply to terms used in this chapter:
(1) "Bond": any bond, note or other evidence of
indebtedness issued under the National Compact Fund Financing Act, including
any evidence of indebtedness for money borrowed from commercial banks or
similar financial institutions and any reimbursement obligation to a provider
of Credit Enhancement.
(2) "Bond Repayment Fund": the fund created in
section 624 of Title 55 of the FSM Code to provide for the deposit and
disbursement of funds pledged by a state government and/or the National
Government which participating in a borrowing.
(3) ["Committee"]: the committee referred to in
section 524 of Title 58 of the FSM Code.
(4) "Compact": the Compact of Free Association
between the FSM and the United States of America and its attendant agreements.
(5) "Credit Enhancement": bond insurance, letters
of credit, or similar credit enhancement instruments.
(6) "Financing Program": the Medium-Term Note
Program and any other program for borrowing established or permitted by the
National Compact Funds Financing Act and this chapter including, without
limitation, programs involving public offering or private placement of bonds or
direct borrowing from commercial banks or similar financial institutions.
(7) "FSM": the Federated States of Micronesia.
(8) "Indenture": any indenture, agreement or other
instrument pursuant to which the Bonds shall be issued, as approved by a
resolution of the Committee.
(9) "National Compact Funds Financing Act" or
"National Acts": section 511 et seq. of Title 58 of the FSM Code, as
amended, and including any amendments that may be adopted hereafter.
(10) "Pledged Compact Funds": the amounts payable
under the Compact which the President is authorized to pledge to the payment of
the bonds following legislative action by the FSM and the State.
(11) "Pledged Funds": the Pledged Compact Funds
and/or other pledged moneys, and investment earnings thereon.
(12) "President": the President of the FSM or his
lawfully and properly appointed designee.
(13) "Resolution": the resolution or resolutions
of the Committee authorizing the issuance and sale of Bonds on the terms and
conditions, and substantially in the form, approved therein or pursuant to
procedures provided therein.
(14) "Secretary": the FSM Secretary of Finance.
(15) "State": the State of Kosrae.
(16) "Trustee": the FSM
fiscal agent appointed as such in the indenture pursuant to the National Act,
and any successors or assigns, who will act as such for the benefit of the
holders of the Bonds.
Background
Added by State
Law 5-11.
Section 10.702. Authority to borrow. The State may participate in the Medium-Term Note Program
and any other program for borrowing established or permitted by the National
Compact Funds Financing Act including, without limitation, programs involving
public offering or private placement of bonds or direct borrowing from
commercial banks or similar financial institutions. The specific amount that
may be pledged and used to cover the costs of the borrowing is authorized by
law.
Background
Added by State Law 5-11.
Section 10.703. Authority of State officials. When the specific amount that may be pledged and used to
cover the costs of borrowing is authorized by law:
(1) The Governor, the Director of Department of
Administration and Finance, the Governor's delegate, if any, to the Committee,
and the Attorney General are authorized to perform the functions and duties
described in the National Act. In the case of the Attorney General, he is
specifically authorized to provide the legal opinion described in the National
Act.
(2) Without limiting the foregoing, the Governor may
authorize the pledge of security necessary to secure the borrowing, to satisfy
any financial obligations attributable to the State related to or resulting
from such borrowing, and to pledge such additional security as may be necessary
to protect the FSM Government and any non-participating state against any loss
arising in connection with the State's participation in a financing program;
provided, however, that the Governor may take such actions only with respect to
specific amounts allowed by State law.
(3) The Governor is also
authorized to enter into an agreement or agreements with the Secretary and any
lending institution regarding the disbursement of proceeds of Bonds and
earnings thereon or the proceeds of borrowing from commercial banks or similar
financial institutions and regarding the payment of all financial obligations
attributable to the State related to
or resulting from the borrowing.
Background
Added by State
Law 5-11. Subsection (1) was amended by
State Law 7-1.
Section 10.704. Delegation of authority to the President. When the specific amount to be pledged and used to cover
the costs of borrowing is authorized by law, the Governor may issue a written
certification to the President that specifies the amount and source of funds or
other security to be used to secure a borrowing and to cover the costs of
borrowing. When the anticipated project costs including the anticipated costs
of borrowing are less than the amount State law allows to be borrowed, then the
amount certified by the Governor may be the lesser amount. Upon receiving the
Governor's certification, the President is authorized to irrevocably pledge the
amounts of Compact Funds specified in the Governor's certificate, including any
investment earnings therefrom that would otherwise be payable to the State, or
irrevocably pledge such other security as may be specified in the Governor's
certificate. The President shall not make any such pledge except to secure a
borrowing of funds on behalf of the State. The pledge shall secures
payment of the bonds or funds borrowed, costs and expenses and all other
financial obligations resulting from or relating to the Financing Program that
are not otherwise paid. The President shall also be authorized to make the
necessary payments from the pledged amounts for the purpose of and to the
extent required to satisfy all financial obligations attributable to the State
related to or resulting from the Financing Program. The President shall certify
to the Governor in writing the amount actually so pledged and the amount
authorized but not actually pledged.
Any funds that are authorized to be pledged by law but that are not actually
pledged or used to satisfy such financial obligations shall remain as funds of
the State.
Background
Added by State Law 5-11.
Section 10.705. Compact Funds. When the specific amount to be pledged and to be used to
cover the cost of borrowing is authorized by law, and the Governor has issued a
written certification to the President as provided in section 10.704 of this
chapter, and the proceeds of the Financing Program have been actually or
constructively received by the State, then the State consents to and authorizes
a reduction in the amount of Compact Funds received or to be received on behalf
of the State through the Compact Financial Assistance Fund, with such reduction
being commensurate with the amount of Pledged Compact Fund pledged by the
State, and irrevocably waives all rights to the receipt of such Pledged Compact
Funds.
Background
Added by State Law 5-11.
Section 10.706. Indemnification.
(1) Recognizing the complexity of any Financing Program
pursued under this chapter and the National Act, the State indemnifies and
holds harmless all officers, employees or other agents acting for or on behalf
of the State from any and all claims, causes of action, demands, losses, costs,
or damages including all court costs and attorney's fees, regardless whether
suit is actually brought, (hereinafter called "claims") arising from
or relating to any act or omission directly or indirectly related to the
matters contained in this chapter or the National Act, or related to the
establishment or implementation of any Financial Program, or to the repayment
of any borrowing under any Financial Program. The State accepts tender of defense
upon demand and immediately reimburses any payment of claims by the officer,
employee or other agent of the State.
(2) This indemnification and hold harmless covers claims
that are foreseeable and unforeseeable, whether the act or omission is deemed
to be within or outside the scope of employment or responsibility, and whether
caused by negligence or recklessness of any degree, or otherwise. [Moreover],
without limitation, this indemnification and hold harmless specifically applies
to the Attorney General with respect to any opinions or advice which may be
required or rendered. This indemnification and hold harmless does not apply to
any criminal acts.
Background
Added by State Law 5-11.
Section 10.707. Taxes. In accordance with the National Act, neither the State nor
any political subdivision thereof imposes any tax, assessment or levy on or
related to a borrowing under any Financial Program.
Background
Added by State Law 5-11.
Section 10.708. Waiver of
sovereign immunity.
(1) Notwithstanding any other law to the contrary, the State
hereby waives its sovereign immunity but only to the extent necessary to permit
the national government or any other state of the FSM to bring an action within
the FSM and execute a judgment as to any assets of the State based on any loss
arising in connection with the State's participation in a Financing Program.
(2) The State specifically asserts and establishes its
sovereign immunity from any other suit, judgment or execution with respect to
any matter or action taken pursuant to this act or the National Act. Except as
expressly authorized by subsection (1) of this section or as expressly
authorized by other State law, the State does not waive its sovereign immunity
regarding the aforementioned matters or actions.
Background
Added by State Law 5-11.
Section 10.709. Alteration of rights. After the issuance of any Bonds, the State does not limit
or alter, or seek [to] limit or
alter the rights thereby vested and vested pursuant to the indenture including,
without limitation, the irrevocable pledge by the President of Pledged Compact
Funds, until the Bonds, together with interest and premium, if any, thereon,
are fully paid and discharged; provided, however, that nothing herein contained
shall preclude such limitation or alteration if and when adequate provision is
made in accordance with the terms of
the indenture for protection of the holders of the Bonds. The FSM is authorized
to make this undertaking for the State in the Bonds and the indenture.
Background
Added by State Law 5-11.
Section 10.710. Authorization to debit certain expenses. Without further authorization or appropriation,
the State approves the debiting of the Compact Financial Assistance Fund
account of the State of Kosrae, as established by the Agreement on Internal
Budget and Finance Procedures under the Compact of Free Association between the
National Government and the State Governments of the Federated States of
Micronesia, for reasonable expenses, including trustee fees, associated with a
borrowing by the State under the National Compact Funds Financing Act.
Background
Added by State Law 5-11.