FINANCIAL MANAGEMENT REGULATIONS FEBRUARY 2019

FINANCIAL MANAGEMENT

REGULATIONS

FEBRUARY 2019

IMPORTANT NOTE: The threshold for procurement, asset capitalization and open bidding is currently before Congress

and may be subject to change depending on the final decision taken. These Regulations include the original

thresholds that may be subject to change.

This version of the Regulations also includes comments raised by the Department of Justice as received on

01/18/18and 08/01/18 and other internal comments during the official consultation period. Where the Secretary has

agreed with the comments the draft Regulations have been updated to reflect the recommendations.

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FINANCIAL REGULATIONS

1.

GENERAL ....................................................................................................................................................... 5

1.1.

AUTHORITY ........................................................................................................................................... 5

1.2.

PURPOSE ............................................................................................................................................... 5

1.3.

APPLICABILITY ....................................................................................................................................... 5

1.4.

DEFINITIONS.......................................................................................................................................... 5

1.5.

GUIDELINES ........................................................................................................................................... 9

2.

FINANCIAL DELEGATIONS ........................................................................................................................... 13

3.

GENERAL PLANNING AND BUDGETING ...................................................................................................... 15

4.

5.

3.1.

GENERAL BUDGETING REQUIREMENTS.............................................................................................. 15

3.2.

RESPONSIBILITIES FOR BUDGET FORECASTS ...................................................................................... 16

3.3.

BUDGET TIMETABLE............................................................................................................................ 16

3.4.

ESTIMATES & APPROPRIATION BILL ................................................................................................... 20

3.5.

CHANGES TO APPROPRIATIONS.......................................................................................................... 20

3.6.

ADMINISTRATION OF THE BUDGET .................................................................................................... 21

REVENUE COLLECTION AND RECEIPT.......................................................................................................... 22

4.1.

REVENUE - GENERAL ........................................................................................................................... 22

4.2.

RECEIPT OF REVENUE.......................................................................................................................... 23

4.3.

ISSUE AND COLLECTION OF INVOICES ................................................................................................ 24

4.4.

SAFE CUSTODY OF CASH & CASH EQUIVALENTS ................................................................................ 25

4.5.

BANKING OF REVENUE........................................................................................................................ 25

4.6.

REPORTING THE LOSS OF PUBLIC MONEY .......................................................................................... 27

4.7.

BANK RECONCILIATIONS..................................................................................................................... 28

PROCUREMENT AND PAYMENTS................................................................................................................ 29

5.1.

PROCUREMENT ¨CGENERAL ................................................................................................................. 29

5.2.

PURCHASING OF GOODS & SERVICES ................................................................................................. 33

5.3.

PROCESSING OF PAYMENTS................................................................................................................ 37

5.4.

MAKING PAYMENTS TO SUPPLIERS .................................................................................................... 38

5.5.

NON-COMPLIANCE WITH PROCUREMENT REQUIREMENTS .............................................................. 42

5.6.

TRAVEL EXPENSES ............................................................................................................................... 42

5.7.

PAYROLL .............................................................................................................................................. 51

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6.

5.8.

SENSITIVE EXPENDITURE..................................................................................................................... 55

5.9.

DECLARED STATE OF EMERGENCY...................................................................................................... 60

PROCUREMENT AND OPEN BIDDING.......................................................................................................... 60

6.1.

PROCUREMENT & OPEN BIDDING - GENERAL .................................................................................... 60

6.2.

PROCUREMENT BY SEALED BIDS (OPEN BIDDING) ............................................................................. 61

6.3.

PROCUREMENT BY COMPETITIVE PROPOSALS................................................................................... 67

6.4.

CHANGE ORDERS FROM INITIAL CONTRACT ...................................................................................... 68

6.5.

CONFLICTS OF INTEREST ..................................................................................................................... 69

6.6.

CONFIDENTIALITY AND COMMERCIAL SENSITIVITY ........................................................................... 69

7.

PROPERTY, PLANT & EQUIPMENT .............................................................................................................. 70

8.

IMPREST FUNDS .......................................................................................................................................... 73

9.

8.1.

IMPREST FUNDS - GENERAL................................................................................................................ 73

8.2.

FOREIGN MISSIONS............................................................................................................................. 73

8.3.

FINANCE FIELD OFFICES ...................................................................................................................... 75

8.4.

MARITIME OPERATIONS REVOLVING FUND ....................................................................................... 76

8.5.

SUPPLY STOCK REVOLVING FUND....................................................................................................... 77

JOURNAL VOUCHERS .................................................................................................................................. 77

10. ADMINISTRATION OF PUBLIC PROJECT APPROPRIATIONS......................................................................... 78

10.1.

APPLICABILITY ................................................................................................................................. 78

10.2.

PROJECT CONTROL DOCUMENT ..................................................................................................... 79

11. REPORTING ................................................................................................................................................. 80

11.1.

REQUIRED REPORTS FROM ALLOTTEES .......................................................................................... 80

11.2.

REQUIRED REPORTS FROM SECRETARY OF FINANCE ..................................................................... 81

11.3.

REQUIRED REPORTS FROM DEPARTMENTS AND AGENCIES OF NATIONAL GOVERNMENT .......... 81

11.4.

ECONOMIC & FISCAL UPDATE REPORTING..................................................................................... 81

12. NON-COMPLIANCE WITH REGULATIONS.................................................................................................... 81

12.1.

COMPLIANCE UNIT.......................................................................................................................... 81

12.2.

STATE OF EMERGENCY.................................................................................................................... 81

12.3.

OFFENCES AND PENALTIES ............................................................................................................. 82

12.4.

REPEALER ........................................................................................................................................ 82

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Revised FMR Detail

1.

GENERAL

1.1. AUTHORITY

These regulations are promulgated by the Secretary of Finance and Administration with the approval of the

President of the Federated States of Micronesia (FSM), pursuant to the authority granted to the Secretary by Title

55 of the Code, 227 and 606, and by the President of the FSM pursuant to the authority granted by Title 55 of the

Code, Sections 418, 616, and 621. These regulations and any amendments hereto, shall have the force effect of law.

1.2. PURPOSE

The purpose of these regulations is to implement the provisions, as amended, of the Financial Management Act of

1979, and other laws of the FSM relating to government financial management through the establishment of

National government-wide standards and procedures necessary to provide an adequate degree of fiscal control and

accountability over funds appropriated by the Congress of FSM, allotted to the FSM National Government or

entrusted to the management of the FSM National Government.

1.3. APPLICABILITY

1) Except as otherwise provided by law, these regulations shall apply to:

a) All allottee of FSM appropriation laws;

b) The expenditure of any funds appropriated by the Congress of the FSM; and

c)

U.S Federal grants, or foreign aid channeled through the FSM Government with the President as the

Allottee.

2) Reference made herein to the head of a department or an Allottee of the FSM National Government shall

include his designee, if applicable.

3) Reference made herein to a ¡°subpart¡± shall mean part of these Financial Management Regulations.

1.4. DEFINITIONS

For the purposes of these regulations, unless it is otherwise required or the context requires a different

construction, application, or meaning:

1.4.1. Acquisition cost

Means the cost of the asset including the cost to ready the asset for its intended use. Acquisition cost for

equipment, for example, means the net invoice price of the equipment, including the cost of any modifications,

attachments, accessories or auxiliary apparatus necessary to make it useable for the purpose for which it is

acquired.

Acquisition costs for software includes those development costs capitalized in accordance with generally

accepted accounting practice (GAAP).

Ancillary charges, such as taxes, duty, protective in transit insurance, freight and installation will be included as

part of the acquisition cost of the asset.

1.4.2. Allotment

Defined under Section 215 of the Financial Management Act 1979. ¡°Allotment¡± means the delegation of

authority to a person to create legally enforceable financial obligations in accordance with applicable law on

behalf of FSM within specified limits set forth in an appropriation act of the Congress of the FSM or as may be

required by the terms of funding available from other sources.

1.4.3. Allottee

Shall mean the person designated as such by an appropriation law or the Financial Management Act of 1979, as

amended, or the sub-allottee as designated in the Advice of Allotment form issued by the Office of Budget.

a)

A National Allotteeis an Allottee which is an FSM Government Agency, or an employee, or official of an

FSM Government Agency; and

b)

A non-national allottee is any other allottee.

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