Overview:
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Palau’s Ministry of Finance is asking lawmakers to revive funding for the Government’s FY2023 Single Audit — but a series of timing mishaps, a shift in Compact funding rules, and a missing four-word phrase may have left the bill stuck in legislative limbo.
By: L.N. Reklai
Koror, Republic of Palau — The Ministry of Finance has formally requested that the Olbiil Era Kelulau make nonlapsing the funding appropriated for the Government’s FY2023 Single Audit, citing a series of circumstances that prevented the funds from being utilized before the appropriation period expired.
In a Miscellaneous Communication filed with the Senate, the Ministry explained that the funding lapse was the result of compounding timing issues and a shift in the structure of audit assistance under the Compact Review Agreement (CRA) 2023 — not a change in need or purpose.
A Chain of Circumstances
According to the Ministry, the problems began with a longstanding assumption that the FY2023 audit would be funded through grant assistance from the U.S. Department of the Interior, as had been done historically. Because of that assumption, no separate local appropriation was sought at the outset.
The situation was further complicated when delays in completing prior-year audits pushed the FY2023 Single Audit past the signing of the CRA 2023, under which audit funding was folded into a broader grant assistance framework rather than provided as a standalone DOI audit grant. The shift in funding structure was not immediately recognized as requiring a local appropriation.
By the time the Government understood that local funds were necessary, the window for requesting them through the Annual Implementation Process had closed, as had the regular local budget appropriation timeline. No funding was available when audit work finally commenced.
To remedy the situation, the Ministry sought funding through an amendment to the FY2025 Budget Act under RPPL 11-37, later amended by RPPL 12-03. However, because the appropriation did not include nonlapsing language, the funding period expired before the money could be put to use — leaving the audit without its intended funding source.
Temporary Funds Used to Keep Audit Moving
Documents accompanying the request reveal that the Government tapped available Taiwan Administrative Cost funds on a temporary basis to keep the audit from stalling. Director Rengiil, whose statement was relayed through the email exchange included in the filing, noted that halting the audit while awaiting an appropriation was not a viable option, as Palau was already significantly behind schedule and further delays would have jeopardized federal compliance requirements, financial reporting, and eligibility for federal funding.
The requested appropriation, the Director stated, is needed to reimburse that temporary funding source and properly align audit expenditures with their originally intended purpose.
Senate Budget Bill Does Not Include Nonlapsing Language
Despite the Ministry’s appeal, the supplemental budget bill that passed the Senate on its third reading did not include approval of the nonlapsing language appropriation sought by the Ministry. The omission leaves the funding question unresolved and may require further legislative action before the audit costs can be properly covered.
Senator Rukebai Kikuo Inabo, in an email exchange included in the filing, questioned why continued appropriations were necessary if the FY2023 audit had already been completed and invoices paid. The response from Kaleb Udui clarified that the core issue is one of reimbursement — ensuring the temporary funds used are replaced with the appropriately designated funding — and noted that sufficient reserves exist in the general fund balance to absorb the expenditure.
What Comes Next
The Ministry is urging lawmakers to reauthorize the FY2023 audit funding with nonlapsing language so that the appropriation remains available until fully expended. Without legislative action, the Government risks leaving a temporary funding draw unreconciled and potentially out of compliance with federal reporting obligations.
The matter has been referred to the Senate Committee on Resource, Commerce, Trade and Development for deliberation.
