FINANCIAL MANAGEMENT REGULATIONS FEBRUARY 2019

1 FINANCIAL MANAGEMENTREGULATIONSFEBRUARY 2019 IMPORTANT NOTE: The threshold for procurement, asset capitalization and open bidding is currently before Congressand may besubject to change depending on the final decision REGULATIONS include the originalthresholds that may be subject to version of the REGULATIONS also includes comments raised by the Department of Justice as received on01/18/18and08/01/18and other internal comments during the official consultation period. Where the Secretary hasagreed with the comments the draft REGULATIONS have been updated to reflect the recommendations. 2/7/ 2019 Department of Finance &AdministrationPage2 2/7/ 2019 Department of Finance &AdministrationPage3 FINANCIAL PLANNING AND BUDGETING FOR BUDGET & APPROPRIATION TO OF THE COLLECTION AND OF AND COLLECTION OF CUSTODY OF CASH & CASH OF THE LOSS OF PUBLIC AND OF GOODS & OF PAYMENTS TO WITH PROCUREMENT 2/7/ 2019 Department of Finance & STATE OF AND OPEN & OPEN BY SEALED BIDS (OPEN BIDDING).

2 BY COMPETITIVE ORDERS FROM INITIAL OF AND COMMERCIAL , PLANT & FIELD OPERATIONS REVOLVING STOCK REVOLVING OF PUBLIC PROJECT CONTROL FROM REPORTS FROM SECRETARY OF REPORTS FROM DEPARTMENTS AND AGENCIES OF NATIONAL & FISCAL UPDATE WITH OF AND 2/7/ 2019 Department of Finance &AdministrationPage5 Revised FMR REGULATIONS are promulgated by the Secretary of Finance and Administration with theapproval of thePresident of the Federated States of Micronesia (FSM), pursuant to the authority granted to the Secretary by Title55 of the Code, 227 and 606, and by the President of the FSM pursuant to the authority granted by Title 55 of theCode, Sections 418, 616, and 621.

3 These REGULATIONS and any amendments hereto, shall have the force effect of purpose of these REGULATIONS is to implement the provisions, as amended, of the FINANCIAL MANAGEMENT Act of1979, and other laws of the FSMrelating to government FINANCIAL MANAGEMENT through the establishment ofNational government-wide standards and procedures necessary to provide an adequate degree of fiscal control andaccountability over funds appropriated by the Congress of FSM, allotted to the FSM National Government orentrusted to the MANAGEMENT of the FSM National )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; andc) Federal grants, or foreign aid channeled through the FSM Government with the President as )Reference made herein to the head of a department or an Allottee of the FSM National Government shallinclude his designee, if )Reference made herein to a subpart shall mean part of these FINANCIAL MANAGEMENT the purposes of these REGULATIONS , unless it is otherwise required or thecontext requires a differentconstruction, application, or costMeans the cost of the asset including the cost to ready the asset for its intended use.

4 Acquisition cost forequipment, 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 costs for software includes those development costs capitalized in accordance with generallyaccepted accounting practice (GAAP).Ancillary charges, such as taxes, duty, protective in transit insurance, freight and installation will be included aspart of the acquisition cost of the under Section 215 of the FINANCIAL MANAGEMENT Act 1979. Allotment means the delegation ofauthority to a person to create legally enforceable FINANCIAL obligations in accordance with applicable law onbehalf of FSM within specified limits set forth in an appropriation act of the Congress of the FSM or as may berequired by the terms of funding available from other mean the person designated as such by an appropriation law or the FINANCIAL MANAGEMENT Act of 1979, asamended, or the sub-allottee as designated inthe Advice of Allotment form issued by the Office of )ANationalAllotteeisan Allottee which is an FSM Government Agency, or an employee, or official of anFSM Government Agency; andb)Anon-national allotteeis any other allottee.

5 2/7/ 2019 Department of Finance &AdministrationPage6 Revised FMR Depository AccountShall mean an account with a FINANCIAL institution:a)which is approved by the Secretary;b)which reflects the address of record to be that of the Secretary; andc)fromwhich the withdrawal of funds is authorized upon the signature of the Secretary or thresholdThecapitalization thresholdis the dollar amount that determines the proper FINANCIAL reporting of the acquisition costsbelow thecapitalization thresholdwill be expensed as capitalizationthreshold is currentlyset at $3, expendituresMeans expenditures to acquire fixed assets or capital & cash equivalentsCash and short-term,highly liquid investments are included.

6 Bank overdrafts are excluded. Restricted cash isnot included in cash and cash equivalents. Instead, changes in restricted cash should generally be presented asinvesting BidderShall mean any business:a)in which at least fifty-one percent (51%) of interest therein is owned by an FSM citizen or citizens;b)Which has been a resident of the FSM for at least one year immediately prior to the submission of its bid;c)which has paid FSM Gross Revenue Tax for the one-year period immediately prior to the submission of itsbid; andd)which, with respect to construction projects, shall commit its bid that at least:(i) twenty five percent (25%) of all workers employed at all times at the job site shall be FSM citizen.

7 And(ii) twenty-five percent (25%) of all materials and supplies to be used shall be purchased from within a legal instrument by which the National Government purchases property or services needed to carryout public services under an OfficerorCOShall mean the official in charge of letting a contract for an FSM Government an entity or individual that receives a contract as defined SubsistenceAllowanceShall meanan allowance provided to a government officer to defray likely travel expenses likemeals, and otherminorincidental travel expenses. A Daily Subsistence Allowance (DSA) formspart of the per diem (refer to definition below) of the or act of spending tangible personal property (including information technology systems) having a useful life of more thanone year and a per-unit acquisition cost which equals or exceeds the capitalization levelof $1, expenditurerefers to the purchase of goods and services, which include public consumption andpublic investment, and transfer payments consisting of income transfers (pensions, social benefits)

8 And yearRefersto each one year period beginning October 1 and ending on the next following September Year shall be designated by the number of the calendar year in which such Fiscal Year assets or Capital assetsMeans tangible or intangible assets used in operations having a useful life of more than one year which are 2/7/ 2019 Department of Finance &AdministrationPage7 Revised FMR Detailcapitalized in accordance with GAAP. Fixed assets include:a)Land, buildings (facilities), equipment, and intellectualproperty (including software) whether acquired bypurchase, construction, manufacture, lease-purchase, exchange, or through capital leases; andb)Additions, improvements, modifications, replacements, rearrangements, reinstallations, renovations, oralterations to capital assets that materially increase their value or useful life (not ordinary repairs andmaintenance)

9 OfficeShall mean the official overseas offices of the FSM Government, including the Guam Consulate, the HonoluluConsulate, the embassy , the japan embassy , the Fiji embassy , the Mission, and any other officialoverseas offices which may be established, provided said offices are authorized by law or these REGULATIONS tomaintain Imprest Revolving Funds or Operating Government AgencyShall mean any branch, department, office, division, board, bureau, commission, committee, institution, orauthority of the FSM National LawShall mean laws of the FSM and United States laws applicable to FSMfinancial MANAGEMENT Accepted Accounting Principles (GAAP)Has the meaning specified in accounting standards issued by the Government Accounting Standards Board(GASB) and the FINANCIAL Accounting Standards Board (FASB).

10 Government Auditing Standards (GAGAS)Means generally accepted government auditing standards issued by the Comptroller General of the UnitedStates, which are applicable to FINANCIAL fixed assetsNon-monetary assets withoutphysical substance, such as trademarks, copyrights, patents and patentapplications and property, such as loans, notes and other debt instruments of property ownership (whether theproperty is tangible or intangible). controlsMeans a process,implemented by the National Government, designed to provide reasonable assuranceregarding the achievement of objectives in the following categories:a)Effectiveness and efficiency of operations;b)Reliability of reporting for internal and external use; andc)Compliance with applicable laws and Order FormShall mean a form prescribed by Secretary that provides, at minimum, the following information or items:a)The name of the FSM Government Agency making the requests for services;b)The date of therequest;c)The description of the services needed.