REPUBLIC OF THE MARSHALL ISLANDS ___________________________________________ BASIC FINANCIAL STATEMENTS, ADDITIONAL INFORMATION AND INDEPENDENT AUDITOR’S REPORT ___________________________________________ YEAR ENDED SEPTEMBER 30, 2021 REPUBLIC OF THE MARSHALL ISLANDS FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2021 TABLE OF CONTENTS Page No. I. Independent Auditor’s Report 1 II. Management’s Discussion and Analysis 4 III. Basic Financial Statements Government-Wide Financial Statements: Statement of Net Position 18 Statement of Activities 19 Governmental Fund Financial Statements: Balance Sheet 20 Statement of Revenues, Expenditures, and Changes in Fund Balances 21 Reconciliation of Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 22 Fiduciary Fund Financial Statements: Statement of Fiduciary Net Position 23 Statement of Changes in Fiduciary Net Position 24 Discretely Presented Component Unit Financial Statements: Combining Statement of Net Position 25 Combining Statement of Revenues, Expenses and Changes in Net Position 26 Notes to the Basic Financial Statements 27 IV. Required Supplementary Information - Other than Management’s Discussion and Analysis 67 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - General Fund 68 Notes to Required Supplementary Information - Budgetary Reporting 69 V. Other Supplementary Information 70 Combining Schedule of Expenditures by Account - Governmental Funds 71 General Fund: 72 Statement of Revenues, Expenditures by Function, and Changes in Fund Balance (Fund 100100) 73 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Fund 100100) 75 REPUBLIC OF THE MARSHALL ISLANDS FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2021 TABLE OF CONTENTS, CONTINUED Page No. V. Other Supplementary Information, Continued Nonmajor Governmental Funds - Special Revenue Funds: 78 Combining Balance Sheet 81 Combining Statement of Revenues, Expenditures by Function, and Changes in Fund Balances (Deficits) 83 Combining Statement of Revenues, Expenditures by Account, and Changes in Fund Balances (Deficits) 85 Fiduciary Funds - Private Purpose Trust Funds: 87 Combining Statement of Fiduciary Net Position 88 Combining Statement of Changes in Fiduciary Net Position 89 Fiduciary Funds - Agency: 90 Combining Statement of Fiduciary Net Position 91 Combining Statement of Changes in Fiduciary Net Position 92 Nonmajor Component Units: 93 Combining Statement of Net Position 95 Combining Statement of Revenues, Expenses, and Changes in Net Position 96 Grants Assistance Fund: 97 Combining Balance Sheet 99 Combining Statement of Revenues, Expenditures by Functions, and Changes in Fund Balances (Deficits) 100 Combining Statement of Revenues, Expenditures by Account, and Changes in Fund Balances (Deficits) 101 Compact of Free Association Sector Grants: 102 Combining Balance Sheet 104 Combining Statement of Revenues, Expenditures by Function, and Changes in Fund Balances (Deficits) 105 Combining Statement of Revenues, Expenditures by Account, and Changes in Fund Balances (Deficits) 106 General Fund: 107 Combining Balance Sheet 109 Combining Statement of Revenues, Expenditures by Function, and Changes in Fund Balances (Deficits) 110 Combining Schedule of Expenditures by Account 111 Deloitte & Touche LLP 361 South Marine Corps Drive Tamuning, GU 96913-3973 USA Tel: +1 (671) 646-3884 Fax: +1 (671) 649-4265 www.deloitte.com INDEPENDENT AUDITOR’S REPORT His Excellency David Kabua President Republic of the Marshall Islands: Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Republic of the Marshall Islands (RepMar) as of and for the year ended September 30, 2021, and the related notes to the financial statements, which collectively comprise RepMar’s basic financial statements as set forth in Section III of the foregoing table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our adverse and unmodified audit opinions. -1- Summary of Opinions Opinion Unit Type of Opinion Governmental Activities Unmodified Aggregate Discretely Presented Component Units Adverse General Fund Unmodified Grants Assistance Fund Unmodified Compact Trust Fund Unmodified Aggregate Remaining Fund Information Unmodified Basis for Adverse Opinion on the Aggregate Discretely Presented Component Units RepMar’s component units’ column does not include the financial statements of the College of the Marshall Islands (CMI), Kwajalein Atoll Joint Utilities Resources, Inc. (KAJUR), Majuro Water and Sewer Company, Inc. (MWSC) and the Marshall Islands Marine Resources Authority (MIMRA). Accounting principles generally accepted in the United States of America require financial information about CMI, KAJUR, MWSC and MIMRA to be part of the aggregate discretely presented component units, thus increasing the component units’ column assets, liabilities, revenues, and expenses, and changing its net position. The amount by which this departure would affect the assets, liabilities, net position, revenues, and expenses of the aggregate discretely presented component units has not been determined. Adverse Opinion In our opinion, because of the significance of the matter discussed in the "Basis for Adverse Opinion on the Aggregate Discretely Presented Component Units" paragraph, the financial statements referred to above do not present fairly the financial position of the aggregate discretely presented component units of the Republic of the Marshall Islands as of September 30, 2021, or the changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Unmodified Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Republic of the Marshall Islands as of September 30, 2021, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis-of-Matters Federal Grants Receivable As discussed in Note 3 to the financial statements, RepMar is currently negotiating with federal grantor agencies to determine the ultimate collectability of certain receivables from federal agencies. Social Security Obligations As discussed in Note 14 to the financial statements, the Marshall Islands Social Security Administration may be unable to meet its future benefit obligations. Implementation of Governmental Accounting Standards Board (GASB) Statement No. 84 As described in Note 1 to the financial statements, RepMar implemented GASB Statement No. 84, Fiduciary Activities, during the year ended September 30, 2021. -2- Emphasis-of-Matters, Continued COVID-19 As discussed in Note 15 to the financial statements, RepMar determined that the COVID-19 pandemic may negatively impact its financial position. Our opinion is not modified with respect to these matters. Other Matters Required Supplementary Information: Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, as set forth in Section II of the foregoing table of contents, as well as the Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - General Fund, as set forth in Section IV of the foregoing table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise RepMar’s basic financial statements. The supplementary information, as set forth in Section V of the foregoing table of contents, is presented for purposes of additional analysis and is not a required part of the basic financial statements. The supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 9, 2023 on our consideration of RepMar’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of RepMar’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering RepMar’s internal control over financial reporting and compliance. March 9, 2023 -3- REPUBLIC OF THE MARSHALL ISLANDS Management’s Discussion and Analysis Year Ended September 30, 2021 As management of the Government of the Republic of the Marshall Islands (RepMar), we offer readers of RepMar’s financial statements this narrative overview and analysis of the financial activities of RepMar for the fiscal year ended September 30, 2021. We encourage readers to consider the information presented here in conjunction with RepMar’s basic financial statements, which follow this section. Fiscal year 2020 comparative information has been included, where appropriate. FINANCIAL HIGHLIGHTS · The assets of RepMar exceeded its liabilities at the close of the most recent fiscal year by $204.2 million (net position), increasing by $36 million (or 21%) from $168.2 million in the prior year. Of this amount, $76.5 million represents RepMar’s investment in capital assets; $130.1 million represents amounts restricted for various purposes, with the remaining deficiency of $2.4 million to be funded from future governmental activities. · During the current fiscal year, RepMar’s expenses for governmental activities were $176.8 million, including special appropriations made to State-Owned Enterprises, and were funded in part by $109.9 million in program revenues and $76.1 million in taxes and other general revenues. Program revenues increased by $20.5 million (or 23%) from $89.4 million in the prior year to $109.9 million, which was attributable primarily to the increase in operating grants and contributions. Taxes and other general revenues decreased by $9.7 million (or 11%) from $85.8 million in the prior year to $76.1 million, which was attributable primarily to the decrease in contributions from component units partially offset by the increase in tax receipts. Expenses increased by $7.4 million (or 4%) from $169.4 million in the prior year to $176.8 million, which was attributable primarily to an increase in mitigation expenses associated with the COVID-19 pandemic. · The Compact Trust Fund experienced an increase in fund balance of $23.1 million in the current fiscal year ending with a trust fund balance of $109.2 million, up from $86.1 million in the prior year. This increase reflects the net increase in the value of trust fund investments of $20.8 million and a net transfer in of $2.25 million from the General Fund. · For the current fiscal year, General Fund revenues (and other financing sources) of $103.9 million exceeded General Fund expenditures (and other financing uses) of $101.8 million by $2.1 million. General fund revenues (and other financing sources) were up $4.1 million (or 4.1%) from prior year primarily due to an increase in grant receipts of $8.5 million (or 47%), which included grant receipts of $16 million from the Asian Development Bank to fund COVID-19 pandemic mitigation costs, offset by a decrease in contributions from component units of $5.3 million (or 17%), which primarily represents receipts from the Marshall Islands Marine Resources Authority. Concurrently, General Fund expenditures (and other financing uses) were up $8.2 million (or 8.7%) from prior year primarily due to an increase in ministry expenditures of $11.7 million (or 15%) offset by a decrease in debt service costs of $3.3 million (or 45%) and other uses of $0.2 million (or 3%). OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to RepMar’s basic financial statements, which comprise of the following three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains additional required supplementary information in the form of a budgetary schedule, which is prepared on the budgetary basis of accounting, and other supplementary information, in addition to the basic financial statements themselves, which includes combining statements for governmental funds, fiduciary funds and component units. Government-wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of RepMar’s finances, in a manner similar to a private-sector business. The statement of net position presents information on all of RepMar’s assets and liabilities, with the difference between the two reported as net position. All of the current year’s revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. These two government-wide financial statements report RepMar’s net position and how such has changed. Net position, being the difference between RepMar’s assets and liabilities, is one way to measure RepMar’s financial health or position. Over time, increases or decreases in RepMar’s net position is an indicator of whether its financial health is improving or deteriorating, respectively. To assess the overall health of RepMar, additional non-financial factors such as changes in RepMar’s tax base, the condition of RepMar’s roads and infrastructure, and the quality of services needs to be considered. -4- REPUBLIC OF THE MARSHALL ISLANDS Management’s Discussion and Analysis Year Ended September 30, 2021 Government-wide Financial Statements, continued The government-wide financial statements of RepMar are divided into two categories: · Primary government - this grouping comprises governmental activities, which includes most of RepMar’s basic services such as education, health, special appropriations, finance, judiciary, and general administration. Compact and other federal grants finance most activities of the primary government. · Discretely presented component units - RepMar includes numerous other entities in its report. Although legally separate, these “component units” are important because RepMar is financially accountable for them. The government-wide financial statements can be found on pages 18 and 19 of this report. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. RepMar, like other governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal matters. · Some funds are required by Nitijela legislation. · RepMar establishes other funds to control and manage money for particular purposes (like the Republic of China Projects Fund) or to show that it is properly using certain grants (like federal grants reported in the U.S. Federal Grants Fund). All of the funds of RepMar can be divided into two categories - governmental and fiduciary. Governmental funds - These are used to account for essentially the same functions reported as government activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund financial statements provide a detailed short-term view of RepMar’s general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance RepMar’s programs. The basic governmental fund financial statements can be found on pages 20 and 21 of this report. Fiduciary funds - These are used to account for resources held for the benefit of parties outside of the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support RepMar’s own programs. RepMar is the trustee, or fiduciary, for other assets that because of trust arrangements, can be used only for the trust beneficiaries. RepMar is responsible for ensuring that the assets reported in these funds are used for their intended purposes. All of RepMar’s fiduciary activities are reported in a separate statement of fiduciary net position and a statement of changes in fiduciary net position. During the year ended September 30, 2021, RepMar implemented GASB Statement No. 84, Fiduciary Activities, which resulted in the reporting of certain assets previously not reported now being reported in the fiduciary fund financial statements as a custodial fund. Refer to Note 1T for additional information associated with the implementation of GASB Statement No. 84. The basic fiduciary fund financial statements can be found on pages 23 and 24 of this report. Discretely presented component unit financial statements are presented for entities where RepMar has financial accountability but are independent of the core RepMar operations. Most operate similar to private-sector businesses. The discretely presented component unit financial statements can be found on pages 25 and 26 of this report. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 27 through 66 of this report. -5- REPUBLIC OF THE MARSHALL ISLANDS Management’s Discussion and Analysis Year Ended September 30, 2021 Other Information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning budgetary comparisons. Required supplementary information can be found on pages 67 through 69 of this report. The other supplementary information referred to earlier is presented immediately following the required supplementary information on budgetary comparisons and can be found on pages 70 through 111 of this report. A FINANCIAL ANALYSIS OF REPMAR AS A WHOLE Net Position As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of RepMar, assets exceeded liabilities by $204.2 million at the close of the most recent fiscal year; however, such is either restricted as to the purpose it can be used for or is invested in capital assets. RepMar uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although RepMar’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate the liabilities. The majority of RepMar’s net position is comprised of its capital assets and long-term liabilities. Current assets and liabilities are amounts that are available in the current period and obligations that will be paid within one year, respectively. RepMar’s current assets amounted to $66.7 million (up from $63.6 million in the prior year) while current liabilities were $29.7 million (up from $28.4 million in the prior year). Restricted net position represents resources that are subject to external constraints. The table below summarizes RepMar’s net position at the close of the current year compared with prior year. RepMar’s Net Position As of September 30 Governmental Governmental Total $ Total % Activities Activities C hange C hange 2021 2020 2021-2020 2021-2020 C urrent and other assets $ 186,925,296 $ 159,412,670 $ 27,512,626 17% C apital assets 94,896,580 86,341,081 8,555,499 10% Total assets 281,821,876 245,753,751 36,068,125 15% Long-term debt outstanding 48,906,712 50,141,875 (1,235,163) (2)% C urrent and other liabilities 28,748,077 27,437,691 1,310,386 5% Total liabilities 77,654,789 77,579,566 75,223 0% Net position: Net investment in capital assets 76,562,082 69,645,290 6,916,792 10% Restricted 130,053,831 103,343,761 26,710,070 26% Unrestricted (2,448,826) (4,814,866) 2,366,040 (49)% Total net position $ 204,167,087 $ 168,174,185 $ 35,992,902 21% At the end of the current fiscal year, RepMar’s unrestricted net position deficiency was $2.4 million, a decrease in the prior year amount by $2.4 million (or 49%). This deficiency is the result of having long-term commitments that are greater than currently available resources. Specifically, RepMar did not include in past annual budgets the full amounts needed to finance future liabilities arising from ADB loans as well as to pay for unused employee annual leave balances. RepMar will include these amounts in future years’ budgets as they become due. Total liabilities increased marginally by $0.1 million from the prior year amount of $77.6 million to $77.7 million, which was primarily attributable to a decrease in long-term debt of $1.2 million (or 2%) offset by an increase in current liabilities of $1.3 million (or 5%) due primarily to an increase in accounts payable. -6- REPUBLIC OF THE MARSHALL ISLANDS Management’s Discussion and Analysis Year Ended September 30, 2021 Changes in Net Position As discussed earlier, net position of the primary government increased by $36 million, which represents an increase of 21% from the prior year’s amount of $168.2 million. This result indicates that RepMar’s financial condition, as a whole, improved from the prior year. The table below summarizes RepMar’s change in net position for the current fiscal year as compared with prior year. RepMar’s Changes in Net Position For the Years Ended September 30 Governmental Governmental Total $ Total % Activities Activities C hange C hange 2021 2020 2021-2020 2021-2020 Revenues: Program revenues: C harges for services $ 13,003,121 $ 12,973,991 $ 29,130 0% Operating grants and contributions 91,466,892 69,719,490 21,747,402 31% C apital grants and contributions 5,455,015 6,712,433 (1,257,418) (19)% 109,925,028 89,405,914 20,519,114 23% General revenues: Taxes 35,441,927 33,537,102 1,904,825 6% Grants and contributions 32,000,000 44,303,658 (12,303,658) (28)% Ship registry 8,171,815 7,386,364 785,451 11% Other general revenues 512,207 553,326 (41,119) (7)% 76,125,949 85,780,450 (9,654,501) (11)% Total revenues 186,050,977 175,186,364 10,864,613 6% Expenses: Education, sports and training 38,951,670 35,500,180 3,451,490 10% Health and human services 32,266,374 31,825,346 441,028 1% Finance, banking and postal services 30,379,879 17,129,431 13,250,448 77% Special appropriations 12,346,832 11,434,928 911,904 8% Foreign affairs and trade 5,680,340 4,939,332 741,008 15% Works, infrastructure and utilities 7,470,561 7,404,422 66,139 1% Justice, immigration and labor 4,019,170 4,640,671 (621,501) (13)% C ulture and internal affairs 5,144,078 6,439,682 (1,295,604) (20)% C apital projects 4,258,124 7,461,664 (3,203,540) (43)% Natural resources and commerce 3,339,696 10,278,185 (6,938,489) (68)% Transportation, communication and information technology 909,635 6,280,728 (5,371,093) (86)% President and cabinet 2,332,080 2,229,914 102,166 5% Nitijela 2,332,454 2,200,120 132,334 6% Nuclear claims related 1,607,010 1,680,238 (73,228) (4)% Interest 530,809 715,604 (184,795) (26)% Other 25,216,875 19,186,767 6,030,108 31% Total expenses 176,785,587 169,347,212 7,438,375 4% 9,265,390 5,839,152 3,426,238 59% Special item - gain (loss) on SDR revaluation 888,968 (1,227,718) 2,116,686 C ontributions to permanent funds 25,838,544 13,991,499 11,847,045 85% Change in net position 35,992,902 18,602,933 17,389,969 93% Net position, beginning of year 168,174,185 149,571,252 18,602,933 12% Net position, end of year $ 204,167,087 $ 168,174,185 $ 35,992,902 21% -7- REPUBLIC OF THE MARSHALL ISLANDS Management’s Discussion and Analysis Year Ended September 30, 2021 Changes in Net Position, continued Key elements of the change in net position are as follows: · Total revenues increased by $10.9 million (or 6%) compared with prior year. Program revenues increased by $20.5 million (or 23%) as compared with prior year while general revenues decreased by $9.6 million (or 11%) as compared with prior year. The increase in program revenues reflects a $21.7 million (or 31%) increase in operating grants and contributions offset by a $1.3 million (or 19%) decrease in capital grants and contributions. The increase in operating grants and contributions reflects the receipt of donor grant funds from the Asian Development Bank ($16 million), the U.S. Department of the Interior ($3 million), and the Republic of China ($1 million) to fund COVID-19 pandemic mitigation costs. · At the same time, cost of governmental activities increased in the current year by $7.4 million (or 4%) as compared with prior year, which was attributable primarily to an increase in mitigation expenses associated with the COVID-19 pandemic. · The Compact Trust Fund experienced an increase in fund balance of $23.1 million in the current fiscal year, increasing RepMar’s trust fund balance to $109.2 million from $86.1 million in the prior year (up 27%). The increase was primarily the result of investment earnings of $20.8 million, which substantially increased from the earnings experienced in prior year of $9 million due to external global financial market forces, as well as a $5 million deposit from the General Fund funded by a Section 216 Compact grant. A significant portion of RepMar’s program revenues involve contributions from the Government of the United States under the Compact of Free Association. Overall funding from Compact sector grant revenues decreased by $4.1 million (or 10%) from prior year primarily due to a decrease in public infrastructure sector activities. A graphic summary of overall Compact sector grant revenues received by RepMar for the current year compared with the prior year follows: Graph 1 RepMar’s Compact Revenues For the Years Ended September 30 Public Infrastructure Sector Education Sector 2021 Health Sector 2020 Landowner Special Needs Other 0 5 10 15 20 25 Dollars ($ millions) A significant portion of RepMar’s general revenues involves tax revenue collections. At $35.4 million in the current year, tax revenues increased marginally by $1.9 million (or 6%) compared with $33.5 million collected in the prior year. -8- REPUBLIC OF THE MARSHALL ISLANDS Management’s Discussion and Analysis Year Ended September 30, 2021 Changes in Net Position, continued A graphic summary of RepMar’s tax revenue collections for the current year compared with the prior year follows: Graph 2 RepMar’s Tax Revenues For the Years Ended September 30 Income taxes Import taxes 2021 Gross revenue taxes 2020 Immovable property Other 0 2 4 6 8 10 12 14 16 18 20 Dollars ($ millions) Graphs 3 and 4 below indicate the major components of revenues and cost of governmental activities. Graph 3 RepMar’s Revenue Sources For the Year Ended September 30, 2021 Compact funding 0% Taxes 7% 14% 20% Federal & other grants 5% 19% Ship registry 35% Charges for services Contributions from component units Other Compact funding, local taxes and federal and other grants are the major sources of revenue for RepMar, which comprise 74% of total revenues for the current year. The remaining 26% is primarily comprised of ship registry fees, fishing revenue contributions from MIMRA, and various fees and service charges. -9- REPUBLIC OF THE MARSHALL ISLANDS Management’s Discussion and Analysis Year Ended September 30, 2021 Changes in Net Position, continued Graph 4 RepMar’s Cost of Governmental Activities For the Year Ended September 30, 2021 Education Health 30% 22% Finance 18% Special appropriations 7% 17% Natural resources 4% 2% Public works Other Other expenses that make up a portion of the costs of governmental activities include ministerial expenses within the Ministry of Foreign Affairs and Trade ($5.7 million), the Ministry of Culture and Internal Affairs ($5.1 million), the Ministry of Justice, Immigration and Labor ($4 million), and the Ministry of Transportation, Communication and Information Technology ($0.9 million); legislative expenses within the Nitijela ($2.3 million); and executive expenses within the Office of Chief Secretary ($13.3 million), the Office of the Attorney General ($6.9 million), and the President’s Office and Cabinet ($2.3 million). Graphs 5 and 6 below show a comparison of the major components of revenues and cost of governmental activities for the current year compared with the prior year follows: Graph 5 RepMar’s Revenue Sources For the Years Ended September 30 Compact funding Revenue Type Federal & other grants Taxes 2021 Charges for services 2020 Contributions from component units Other 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 Dollars ($ millions) - 10 - REPUBLIC OF THE MARSHALL ISLANDS Management’s Discussion and Analysis Year Ended September 30, 2021 Changes in Net Position, continued Graph 6 RepMar’s Cost of Governmental Activities For the Years Ended September 30 Education Health Expense Category Finance Chief secretary Special appropriations Public works 2021 Attorney general 2020 Natural resources Capital projects Other 0 5 10 15 20 25 30 35 40 45 Dollars ($ millions) Other expenses in the current year includes ministerial expenses within the Ministry of Foreign Affairs and Trade of $5.7 million, up from $4.9 million in the prior year; the Ministry of Culture and Internal Affairs of $5.1 million, down from $6.4 million in the prior year; the Ministry of Justice, Immigration and Labor of $4 million, down from $4.6 million in the prior year; legislative expenses within the Nitijela of $2.3 million, up from $2.2 million in the prior year; and executive expenses within the Office of the Chief Secretary of $13.3 million, up from $11.6 million in the prior year, and the President’s Office and Cabinet of $2.3 million, up from $2.2 million in the prior year. Analysis of Changes in Net Position During the current fiscal year, RepMar’s total net position increased by $36 million compared with an increase in the prior fiscal year of $18.6 million. This represents an increase year-on-year in the change in net position of $17.4 million (or 93%). The key elements of this year-on-year increase are: (1) an increase in Compact Trust contributions and earnings of $11.8 million; (2) a decrease in expenses, net of program revenues, of $13.1 million; and (3) a decrease in general revenues of $9.6 million. Compact Trust contributions and earnings increased by $11.8 million (or 85%) from the previous year, which was primarily due to an increase in investment earnings. Expenses, net of program revenues, decreased by $13.1 million (or 16%) from the previous fiscal year. The decrease was primarily attributable to a decrease in the Ministry of Natural Resources and Commerce of $6.9 million and the Ministry of Transportation, Communication and Information Technology of $5.6 million compared with prior year. - 11 - REPUBLIC OF THE MARSHALL ISLANDS Management’s Discussion and Analysis Year Ended September 30, 2021 Analysis of Changes in Net Position, continued The elements of these changes are reflected below: RepMar’s Changes in Net Position For the Years Ended September 30 Governmental Governmental Total $ Total % Activities Activities Change Change 2021 2020 2021-2020 2021-2020 General revenues: Taxes $ 35,441,927 $ 33,537,102 $ 1,904,825 6% Grants and contributions 6,000,000 12,975,705 (6,975,705) (54)% Contributions from component units 26,000,000 31,327,953 (5,327,953) (17)% Ship registry 8,171,815 7,386,364 785,451 11% Other general revenues 512,207 553,326 (41,119) (7)% Total general revenues 76,125,949 85,780,450 (9,654,501) (11)% Expenses, net of program revenues: Education, sports and training 15,797,767 13,506,333 2,291,434 17% Health and human services 5,801,497 6,013,868 (212,371) (4)% Special appropriations 12,079,187 11,434,928 644,259 6% Finance, banking and postal services 6,929,923 6,795,558 134,365 2% Works, infrastructure and utilities 7,313,586 7,235,321 78,265 1% Natural resources and commerce 3,326,163 10,235,942 (6,909,779) (68)% Justice, immigration and labor 2,838,589 3,547,424 (708,835) (20)% Culture and internal affairs 4,611,530 6,118,828 (1,507,298) (25)% Foreign affairs and trade 5,544,012 4,846,972 697,040 14% President and cabinet 2,332,080 2,229,914 102,166 5% Capital projects 476,532 (927,968) 1,404,500 (151)% Nitijela 2,332,454 2,200,120 132,334 6% Transportation, communication and information technology 710,245 6,278,103 (5,567,858) (89)% Nuclear claims related (130,041) 24,233 (154,274) (637)% Interest 530,809 715,604 (184,795) (26)% Other (3,633,774) (313,882) (3,319,892) 1058% Total expenses 66,860,559 79,941,298 (13,080,739) (16)% 9,265,390 5,839,152 3,426,238 59% Special item - gain (loss) on SDR revaluation 888,968 (1,227,718) 2,116,686 (172)% Contributions to permanent fund 25,838,544 13,991,499 11,847,045 85% Change in net position $ 35,992,902 $ 18,602,933 $ 17,389,969 93% - 12 - REPUBLIC OF THE MARSHALL ISLANDS Management’s Discussion and Analysis Year Ended September 30, 2021 FINANCIAL ANALYSIS OF REPMAR’S FUNDS As noted earlier, RepMar uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds The focus of RepMar’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing RepMar’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, RepMar’s governmental funds reported combined ending fund balances of $165.2 million, which represents a net increase of $26.4 million (or 19%) in comparison with the prior year. This net increase is primarily attributable to an increase in the fair value of RepMar’s investments in the Compact Trust Fund of $20.8 million, loan proceeds of $3.2 million to fund the track and field Micronesian Games project and Compact revenues in excess of grant expenditures of $0.6 million. The General Fund is the chief operating fund of RepMar. At the end of the current fiscal year, the unassigned fund balance of the General Fund was $10.3 million, no change from the prior year balance. Total fund balance was $31.8 million compared with a total fund balance of $29.7 million at the end of the prior fiscal year, an increase of $2.1 million (or 7.2%). The Grants Assistance Fund has a total fund balance of $14.2 million, which primarily represents unexpended European Union, World Bank, Republic of China (ROC) and Compact Sector grants at year end. The net decrease in fund balance during the current year in the Grants Assistance Fund was $0.3 million (or 2%). The Compact Trust Fund has a total fund balance of $109.2 million, all of which is reserved for the funding of future operations of the primary government commencing in fiscal year 2023. The net increase in fund balance during the current year in the Compact Trust Fund was $23.1 million (or 27%), which reflects a net increase in the value of trust fund investments of $20.8 million and a net transfer in of $2.25 million from the General Fund. The other governmental funds have a total combined fund balance of $10 million, of which $9.3 million is committed for specific purposes that are internally imposed by the Nitijela RepMar through enabling legislation. The net increase in fund balance during the current year in the other governmental funds was $1.4 million (or 17%). GENERAL FUND BUDGETARY HIGHLIGHTS During the course of the fiscal year, budget revisions of $28.4 million were made by management and elected officials of RepMar to the General Fund budget. Revenues collected (including other financing sources) of $98 million were lower than budgeted amounts of $99.3 million (or $0.9 million) due primarily to lower than anticipated grant receipts, which fell short of budgeted amounts by $1.3 million. In addition, charges to appropriations (including other financing uses) of $107.4 million were lower than budgeted amounts of $113.7 million due primarily to lower actual ministerial expenditures. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets RepMar’s investment in capital assets for its governmental activities as of September 30, 2021 amounted to $193.5 million, net of accumulated depreciation of $98.6 million, leaving a net book value of $94.9 million. This represents an increase of $8.6 million (or 10%) from the $86.3 million reported in the prior year. RepMar’s capital assets include electrical and water infrastructure, roads and bridges, heavy equipment, ships, buildings, and various projects under construction. - 13 - REPUBLIC OF THE MARSHALL ISLANDS Management’s Discussion and Analysis Year Ended September 30, 2021 Capital Assets, continued The table below summarizes RepMar’s capital assets at the close of the current year compared with prior year. RepMar’s Capital Assets September 30, (Net of depreciation) Governmental Governmental Total $ Total % Activities Activities Change Change 2021 2020 2021-2020 2021-2020 Buildings $ 59,191,381 $ 60,615,146 $ (1,423,765) (2)% Water infrastructure system - 364,420 (364,420) (100)% Docks, roads and bridges 4,532,994 5,281,936 (748,942) (14)% Ships 2,004,560 2,957,120 (952,560) (32)% Software 1,399,651 1,624,842 (225,191) (14)% Heavy equipment 3,874,942 3,954,541 (79,599) (2)% Construction in progress 23,893,052 11,543,076 12,349,976 107% Total $ 94,896,580 $ 86,341,081 $ 8,555,499 10% Major capital asset additions during the current year were as follows: · Ongoing construction in progress of the following infrastructure projects: Current Year Total Estimated Additions To Date Completed Cost Infrastructure Project ($ millions) ($ millions) ($ millions) Track and Field 2022 Micronesian Games $ 4.35 $ 6.85 $ 7.74 Ebeye Public School Classrooms (P1 & P2) $ 1.99 $ 2.72 $ 2.83 Mid-Corridor Housing Stage 1 $ 1.25 $ 1.89 $ 2.12 OIHS Warehouse $ 0.65 $ 0.65 $ 0.69 Ebeye Hospital Isolation Ward $ 0.27 $ 0.95 $ 0.96 Ebeye Beach Park $ 0.09 $ 0.74 $ 0.75 KAJUR Gensets & Diesel Engines $ - $ 2.34 $ 2.60 Surgical Ward (P1) $ - $ 2.99 $ 3.02 MIPD Office and Jail $ - $ 0.37 $ 1.24 · $1.2 million investment in heavy equipment including the $0.6 million acquisition of 2 Fire Wolf Fire Trucks for Majuro Public Safety. Additional information on RepMar’s capital assets can be found in Note 5 to the financial statements. Long-term Debt The Government Borrowing Act of 1985 authorizes RepMar to borrow for such purposes as approved by the Nitijela. Since 1991, RepMar has entered into thirteen separate loans with the ADB (See table below). Long- term debt obligations decreased by $1.2 million (or 2%) in the current fiscal year. - 14 - REPUBLIC OF THE MARSHALL ISLANDS Management’s Discussion and Analysis Year Ended September 30, 2021 Long-term Debt, continued The table below summarizes RepMar’s long-term debt at the close of the current year compared with prior year. RepMar’s Outstanding Debt September 30, Governmental Governmental Total $ Total % Activities Activities Change Change 2021 2020 2021-2020 2021-2020 Asian Development Bank: Fisheries Development Project $ 1,259,150 $ 1,420,721 $ (161,571) (11)% Typhoon Rehabilitation 235,428 256,555 (21,127) (8)% Basic Education Project 3,908,477 4,365,508 (457,031) (10)% Majuro Water Supply Project No. 1 299,642 329,321 (29,679) (9)% Health and Population Project 2,989,738 3,342,466 (352,728) (11)% Majuro Water Supply Project No. 2 5,007,176 5,620,910 (613,734) (11)% Public Sector Reform Program 7,418,854 8,083,290 (664,436) (8)% Ebeye Health and Infrastructure Project 4,072,243 4,667,854 (595,611) (13)% Skills Training and Vocational Education Project 2,409,457 2,702,058 (292,601) (11)% Fiscal and Financial Management Program No. 2 2,097,242 2,621,552 (524,310) (20)% Outer Island Transport Infrastructure Project 246,478 272,461 (25,983) (10)% Public Sector Program Loan 7,365,340 7,896,777 (531,437) (7)% Fiscal Reform and Debt Management Project 4,439,487 4,562,402 (122,915) (3)% International Cooperation Development Fund 7,158,000 4,000,000 3,158,000 79% Total $ 48,906,712 $ 50,141,875 $ (1,235,163) (2)% As mentioned above, total long-term debt decreased by $1.2 million (or 2%) during the current year, which represents declining principal balances associated with ADB debt service payments of $3.5 million and SDR revaluation of the ADB loan portfolio of $0.9 million offset by long-term debt additions of $3.2 million. The long- term debt additions entered into during the current year were associated with the International Cooperation Development Fund in the original amount of $6.2 million, of which $3 million had been drawn down for the Track and Field 2022 Micronesian Games Project in the prior year with the final $3.2 million drawn down in the current year. Additional information on RepMar’s long-term debt can be found in Notes 7 and 8 to the financial statements. ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES RepMar has taken strong proactive measures since March 2020 to protect the health of the nation from COVID- 19 by effectively closing the borders, however this has resulted in an economic contraction.1 The economy was performing well prior to the COVID-19 outbreak, but the pandemic and containment measures have strained the economy. Real GDP is estimated to have increased by around 6.5% in FY2019 (October 1-September 30), driven by strong fishery and construction activities. The COVID-19 travel restrictions have significantly impacted fisheries, construction, transportation, and tourism related activities. As a result, GDP is expected to have contracted by 1.6% in FY2022 compared to FY2019.2 RepMar benefitted from a $71-million donor response to COVID-19, primarily from the U.S. Federal government and the Asian Development Bank (ADB). The U.S. CARES Act unemployment benefits supported affected RMI workers. Household incomes in FY2021 are projected to be 8.7% higher than they would otherwise have been without the mitigation programs and unemployment benefits. However, the end of mitigation programs will lead to a projected 2.2% reduction of household incomes in FY2022. 3 1 The data for FY20 is based on provisional economic statistics, while FY21 is based on projections 2 RMI FY22 Economic Brief, US Graduate School, November 2022 3 IBID - 15 - REPUBLIC OF THE MARSHALL ISLANDS Management’s Discussion and Analysis Year Ended September 30, 2021 ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES, CONTINUED RepMar’s economic performance from FY2004 to FY2019 and just prior to the onset of COVID-19 has been modest, with real economic growth averaging 1.4% during the period with fisheries, private sector services including finance, and public sector services being the main drivers of this growth. Public administration, education, and health have all been forces of growth supported by disbursement of the Compact sector grants in education and health. The economy is estimated to have declined by 1.8% in FY2020, grown by 1.1% in FY2021, and to have fallen by a further 0.9% in FY2022, bringing the total impact of COVID-19 to a 1.6% decline over the three years.4 COVID-19 The COVID-19 containment measures impacted economic activity through disruptions to transshipment, restaurant, and hotel services, transportation, and other business activities. Planned large investment projects continue to be delayed because of restrictions on the movement of personnel and materials. In early 2020, the National Disaster Committee (NDC), chaired by the Chief Secretary, was tasked with the primary responsibility for the development of the COVID-19 Preparedness and Response Plan. The National Disaster Management Office along with various other agencies were tasked to provide the technical support to the NDC for the implementation of the Plan. In June 2020, RepMar released the original version of the Plan with an estimated funding need of $42.3 million (18% of GDP). This was subsequently extended several times and reached $63.3 million (27% of GDP) by May 2021. To date, a funding level of $70.6 million has been reached allocated as follows: Health mitigation ($30.2 million), Household mitigation programs (CARES support and ADB funded hot lunch program - $14.1 million), Education support through College of the Marshall Islands ($1.9 million), Private sector business support ($6 million), and General budgetary support ($18.4 million).5 The major benefactor to support the Plan has been the U.S. Federal government with $34.8 million, which included support under the CARES Act unemployment benefits of $10.8 million, and $24.0 million of health- related funding disbursed through Centers for Disease Control and Prevention (CDC), the U.S. Department of the Interior (OIA), and various other Federal Programs. The ADB was the second largest donor and contributed $23.7 million largely through budgetary support. Additional health-related funding was available from the World Bank ($2.5 million), the European Union ($2.7 million), and other donors for $2.6 million. The ROC-Taiwan contributed $1.5 million in budgetary support and RepMar allocated $2.8 million of its own internal funds.6 Before COVID-19, public sector jobs grew steadily, but in the non-fisheries private sector, employment growth has been anemic. A loss of 155 jobs or a decline of 1.4% of the work force has been estimated for the FY2019- FY2022 period. The loss in total jobs has been small and similar to the reduction in GDP; however, the distribution of the reduction has been uneven. In the commercial fisheries sector, 281 jobs were lost primarily at the loining plant. Support from the U.S. CARES unemployment benefits provided a perverse incentive. The company was able cut back on loining operations and thus reduce costs of a loss-making activity. At the same time, the plant workers were able to increase their income through higher unemployment compensation available under the CARES Act. In the non-fisheries private sector, a loss of 201 jobs was recorded, with the major sectors impacted being construction, a loss of 26 jobs, wholesaling and retailing 85 jobs, and the hotel sector 68 jobs. Offsetting this decline, the recent trend of a growing public sector helped compensate for the private sector loss with the creation of 370 jobs in public administration.7 Budget and Debt Inflation has been moderate since the global financial crisis but has started to rise rapidly in FY2022. During the pandemic, inflation actually fell from the FY2019 rate of -0.1% to -0.7% in FY2020. In FY2021, prices started to rise and the CPI recorded an increase of 2.2% mainly reflecting increases in food prices. In FY2022 by the end of the June quarter, the CPI had reached 4% (year-on-year) but remained lower than other regional economies. The impact of the surge in global oil prices has resulted in a rapid increase in operational costs of Marshalls Energy Company (MEC) and, if passed onto consumers, will have a strong and negative impact on inflation. By September 2022, MEC was recording a doubling of fuel costs and was running a large deficit with projected exhaustion of reserves by year end without increasing tariffs or subsidies.8 4 IBID 5 IBID 6 IBID 7 IBID 8 IBID - 16 - REPUBLIC OF THE MARSHALL ISLANDS Management’s Discussion and Analysis Year Ended September 30, 2021 ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES, CONTINUED After a period of strong fiscal performance, RepMar recorded a fiscal deficit in FY2019 that was 1.9% of GDP, reflecting the emergence of a structural deficit as rising expenditures outstripped revenues. This balance was restored in FY2020, and 2.4% surplus was recorded. During FY2020, the rapid increase in grants led to a buildup in deposits with the accumulation of unused funds. In FY2021, the fiscal surplus fell to 0.7% of GDP as capacity limitations were overcome and cash balances were drawn down. In FY2022, a 2.6% deficit is projected while a 2.9% deficit is projected in FY2023 as the large increases in COVID-19 related grants and additional expenditures work their way through the system, and the underlying structural fiscal deficit existing pre-COVID is expected to reassert itself.9 As a result of the IMF/World Bank’s Debt Sustainability Analysis indicating the nation as being at high risk of debt distress, RepMar has been designated as a “grant only” recipient, making RepMar no longer eligible for loan financing from multilateral donors. The designation of “grant only” status has served RepMar well. External debt has fallen sharply to sustainable levels as a result of being accorded “grant only” status. This status is accorded on the proviso that RepMar does not incur debt from third parties at non-concessional rates.10 On June 8, 2021, the Fiscal Responsibility and Debt Management Act (FRDMA) was signed into law. Resulting FRDMA regulations developed by Cabinet were issued that provided for an appropriate institutional structure to guide responsible use and investment of unanticipated surplus funds. The adoption of the FRDMA regulations was a trigger for a World Bank Development Policy Operation (budgetary support). In addition, RepMar’s commitment under these regulations was a key element of the ADB’s Performance and Policy Actions, which are required for continued ADB grant support at planned program levels. The FRDMA regulations also include key assumptions regarding debt levels, ratio of operating expenses and revenues, net worth, risk management and compliance, which will be considered when preparing the annual budget and medium-term budget and investment framework moving forward. Public Financial Management Reform Reform implementation has continued in FY2022. In addition to revising and adopting the updated FRDMA, there was continued implementation of the Public Financial Management (PFM) reforms including: • Implementation of new Financial Management Information System (FMIS); • Ongoing implementation of the PFM Roadmap and PFM reforms; • Improved accounting for fiscal risks; and • Continued strengthening of fiscal projections and budget presentation including the budget book transparency to help guide policy goals. Economic Policy Statement The Economic Policy Statement (EPS) sets out the framework for Government, development partners and Marshallese stakeholders to support growth and development of the economy. The EPS complements the National Strategic Plan and the annual budget while defining the strategic direction of fiscal and reform strategy. The RMI Economic Policy Statement, approved by Cabinet in November 2021, includes a table of selected economic indicators, prepared by IMF using data from RMI government sources. The focus on these indicators moving forward with the development of macroeconomic targets provides a foundation for addressing fiscal and other budgetary issues. Some of the most critical indicators include: • Debt ratio (as a percentage of GDP); • Amount of domestic revenues including fishing and other non-tax revenues; and • Balance of payments. Government will review these indicators and projections so that realistic targets are agreed to as a guide to implementing the medium-term fiscal strategy. CONTACTING REPMAR’S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers and investors and creditors a general overview of RepMar’s finances and to demonstrate its accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Secretary of Finance, P.O. Box D, Majuro, MH 96960. 9 IBID 10 IBID - 17 - REPUBLIC OF THE MARSHALL ISLANDS Statement of Net Position September 30, 2021 Primary Component Government Units ASSETS Cash and cash equivalents $ 23,403,935 $ 27,984,269 Time certificates of deposit - 8,571,023 Receivables, net 30,850,667 32,188,092 Inventories - 14,143,953 Advances and other assets 4,615,008 3,695,124 Due from external parties 1,309,154 - Due from component units 6,479,955 - Due from primary government - 2,986,019 Investments - 9,976,328 Restricted assets: Cash and cash equivalents 11,046,159 733,486 Investments 109,220,418 - Capital assets: Nondepreciable capital assets 23,893,052 2,942,781 Capital assets, net of accumulated depreciation 71,003,528 100,820,989 Indefeasible right of use, net - 3,553,383 Total assets 281,821,876 207,595,447 LIABILITIES Accounts payable 11,591,792 9,033,866 Medical claims payable 1,101,222 - Other liabilities and accruals 4,399,931 6,901,215 Contracts payable - 1,658,205 Retention payable 3,025,593 - Payable to federal agencies 278,447 - Unearned revenues 335,320 6,135,383 Customer deposits - 1,682,742 Accrued interest payable 173,420 - Noncurrent liabilities: Due within one year 8,797,744 1,816,551 Due in more than one year 47,951,320 24,204,862 Total liabilities 77,654,789 51,432,824 Commitments and contingencies NET POSITION Net investment in capital assets 76,562,082 98,901,107 Restricted for: Future operations - nonexpendable 109,220,418 - Debt service 3,711,242 - Compact related 5,725,924 - Other purposes 11,396,247 1,619,615 Unrestricted (deficits) (2,448,826) 55,641,901 Total net position $ 204,167,087 $ 156,162,623 See accompanying notes to basic financial statements. - 18 - REPUBLIC OF THE MARSHALL ISLANDS Statement of Activities Year Ended September 30, 2021 Net (Expenses) Revenues Program Revenues and Changes in Net Position Operating Capital Charges for Grants and Grants and Primary Component Expenses Services Contributions Contributions Government Units Functions/Programs Primary government: Governmental activities: President and Cabinet $ 2,332,080 $ - $ - $ - $ (2,332,080) $ - Office of the Chief Secretary 13,260,028 - 18,550,049 - 5,290,021 - Special appropriations 12,346,832 - 267,645 - (12,079,187) - Council of Iroij 593,149 - - - (593,149) - Nitijela 2,332,454 - - - (2,332,454) - Office of the Auditor-General 1,126,040 - 215,382 - (910,658) - Public Service Commission 661,792 4,500 - - (657,292) - Judiciary 1,027,564 147,601 - - (879,963) - Office of the Attorney General 6,870,690 25,578 5,663,759 - (1,181,353) - Education, Sports and Training 38,951,670 - 20,699,960 2,453,943 (15,797,767) - Health and Human Services 32,266,374 9,288,238 17,176,639 - (5,801,497) - Transportation, Communication and Information Technology 909,635 1,485 197,905 - (710,245) - Natural Resources and Commerce 3,339,696 12,814 719 - (3,326,163) - Culture and Internal Affairs 5,144,078 64,412 468,136 - (4,611,530) - Justice, Immigration and Labor 4,019,170 1,180,581 - - (2,838,589) - Finance, Banking and Postal Services 30,379,879 1,086,015 22,363,941 - (6,929,923) - Foreign Affairs and Trade 5,680,340 135,278 1,050 - (5,544,012) - Works, Infrastructure and Utilities 7,470,561 112,034 44,941 - (7,313,586) - Environmental Protection Authority 1,677,612 944,585 3,299,195 - 2,566,168 - Nuclear claims related 1,607,010 - 1,737,051 - 130,041 - Capital projects 4,258,124 - 780,520 3,001,072 (476,532) - Unallocated interest - long-term debt 530,809 - - - (530,809) - Total primary government $ 176,785,587 $ 13,003,121 $ 91,466,892 $ 5,455,015 (66,860,559) - Component units: Air Marshall Islands, Inc. 6,703,125 5,834,993 - - - (868,132) Marshalls Energy Company, Inc. 30,820,360 35,067,001 135,833 - - 4,382,474 MI Development Bank 3,150,818 4,610,078 194,141 - - 1,653,401 MI National Telecom. Authority 9,165,564 8,990,878 - 1,762,690 - 1,588,004 MI Shipping Corporation 3,825,164 1,163,258 - 819,787 - (1,842,119) RMI Ports Authority 7,459,507 2,996,526 - 154,538 - (4,308,443) Tobolar Copra Processing Authority 11,537,006 4,462,316 - - - (7,074,690) Other nonmajor component units 7,549,718 5,273,811 587,380 283,927 - (1,404,600) Total component units $ 80,211,262 $ 68,398,861 $ 917,354 $ 3,020,942 - (7,874,105) General revenues: Taxes: Income taxes 17,410,860 - Import taxes 9,219,405 - Gross revenue taxes 7,424,215 - Immovable property 710,001 - Fuel taxes 588,613 - Penalties and interest 82,433 - Other 6,400 - Unrestricted grants and contributions 6,000,000 - Contributions from component units 26,000,000 - Ship registry 8,171,815 - Unrestricted investment earnings 121,911 830,973 Contributions from primary government - 13,451,686 Other 390,296 588,117 Total general revenues 76,125,949 14,870,776 Special item - foreign exchange gain 888,968 - Contributions to permanent funds 25,838,544 - Total general revenues, special items and contributions 102,853,461 14,870,776 Change in net position 35,992,902 6,996,671 Net position at the beginning of the year 168,174,185 149,165,952 Net position at the end of the year $ 204,167,087 $ 156,162,623 See accompanying notes to basic financial statements. - 19 - REPUBLIC OF THE MARSHALL ISLANDS Balance Sheet Governmental Funds September 30, 2021 Special Revenue Permanent Other Grants Compact Governmental General Assistance Trust Funds Total ASSETS Cash and cash equivalents $ 19,728,150 $ - $ - $ 3,675,785 $ 23,403,935 Receivables, net: Taxes 2,956,033 - - 144,375 3,100,408 Federal agencies - 19,237,357 - - 19,237,357 General 801,652 5,112,463 - 2,583,310 8,497,425 Other - - - 15,477 15,477 Due from other funds 16,010,691 13,000,207 - 6,789,588 35,800,486 Due from component units 6,479,955 - - - 6,479,955 Advances 514,008 637,346 - 473,404 1,624,758 Other assets 2,990,250 - - - 2,990,250 Restricted assets: Cash and cash equivalents 11,046,159 - - - 11,046,159 Investments - - 109,220,418 - 109,220,418 Total assets $ 60,526,898 $ 37,987,373 $ 109,220,418 $ 13,681,939 $ 221,416,628 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 5,060,852 $ 4,261,576 $ - $ 2,269,364 $ 11,591,792 Medical claims payable - - - 1,101,222 1,101,222 Other liabilities and accruals 2,732,157 1,323,757 - 344,017 4,399,931 Payable to federal agencies - 278,447 - - 278,447 Retention payable 1,125,362 1,900,231 - - 3,025,593 Due to component units 1,001,741 - - - 1,001,741 Unearned revenue 335,320 - - - 335,320 Due to other funds 18,480,641 16,010,691 - - 34,491,332 Total liabilities 28,736,073 23,774,702 - 3,714,603 56,225,378 Fund balances: Nonspendable 9,470,205 - 109,220,418 - 118,690,623 Restricted 12,022,229 9,686,075 - 688,788 22,397,092 Committed 14,251 4,568,640 - 9,278,548 13,861,439 Unassigned (deficits) 10,284,140 (42,044) - - 10,242,096 Total fund balances 31,790,825 14,212,671 109,220,418 9,967,336 165,191,250 Total liabilities and fund balances $ 60,526,898 $ 37,987,373 $ 109,220,418 $ 13,681,939 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds 94,896,580 Long-term liabilities, including loans payable, are not due and payable in the current period and therefore are not reported in the funds. These liabilities include: Accrued interest payable (173,420) Loans payable (48,906,712) Due to component units (2,536,019) Compensated absences payable (4,304,592) (55,920,743) Net position of governmental activities $ 204,167,087 See accompanying notes to basic financial statements. - 20 - REPUBLIC OF THE MARSHALL ISLANDS Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds Year Ended September 30, 2021 Special Revenue Permanent Other Grants Compact Governmental General Assistance Trust Funds Total Revenues: Taxes $ 35,441,927 $ - $ - $ - $ 35,441,927 Federal and other grants 26,734,700 80,584,393 - 602,814 107,921,907 Sales - - - 316,761 316,761 Ship registry 8,171,815 - - - 8,171,815 Net change in the fair value of investments - - 20,838,544 - 20,838,544 Interest and dividends 103,035 - - 18,876 121,911 Fees and charges 122,704 - - 12,563,656 12,686,360 Contributions from component units 26,000,000 - - - 26,000,000 Other 390,296 - - - 390,296 Total revenues 96,964,477 80,584,393 20,838,544 13,502,107 211,889,521 Expenditures: Current: President and Cabinet 2,315,102 - - - 2,315,102 Office of the Chief Secretary 14,332,326 2,077,484 - - 16,409,810 Special appropriations 11,701,139 821,625 - - 12,522,764 Council of Iroij 590,352 - - - 590,352 Nitijela 2,285,779 - - - 2,285,779 Office of the Auditor-General 1,044,482 215,382 - - 1,259,864 Public Service Commission 647,693 - - - 647,693 Judiciary - - - 1,032,881 1,032,881 Office of the Attorney General 1,186,091 5,663,759 - - 6,849,850 Ministries: Education, Sports and Training 12,940,731 22,097,795 - 2,274,573 37,313,099 Health and Human Services 5,123,425 17,174,094 - 9,643,982 31,941,501 Transportation, Communication and Information Technology 701,979 183,000 - - 884,979 Natural Resources and Commerce 1,787,306 1,528,815 - - 3,316,121 Culture and Internal Affairs 3,571,070 1,495,185 - 57,939 5,124,194 Justice, Immigration and Labor 3,877,811 196,512 - 341,316 4,415,639 Finance, Banking and Postal Services 18,658,538 16,754,531 - 815,823 36,228,892 Foreign Affairs and Trade 4,841,029 553,188 - 50,242 5,444,459 Works, Infrastructure and Utilities 4,570,713 44,941 - 129,814 4,745,468 Environmental Protection Authority 511,323 1,164,045 - - 1,675,368 Nuclear claims related - - - 1,607,010 1,607,010 Debt service: Principal repayment 3,504,195 - - - 3,504,195 Interest 571,020 - - - 571,020 Capital outlay - 7,963,105 - - 7,963,105 Total expenditures 94,762,104 77,933,461 - 15,953,580 188,649,145 Excess (deficiency) of revenues over (under) expenditures 2,202,373 2,650,932 20,838,544 (2,451,473) 23,240,376 Other financing sources (uses): Loan proceeds 3,158,000 - - - 3,158,000 Operating transfers in 3,840,556 - 5,250,000 4,736,650 13,827,206 Operating transfers out (7,076,244) (2,910,406) (3,000,000) (840,556) (13,827,206) Total other financing sources (uses), net (77,688) (2,910,406) 2,250,000 3,896,094 3,158,000 Net change in fund balances 2,124,685 (259,474) 23,088,544 1,444,621 26,398,376 Fund balances at the beginning of the year 29,666,140 14,472,145 86,131,874 8,522,715 138,792,874 Fund balances at the end of the year $ 31,790,825 $ 14,212,671 $ 109,220,418 $ 9,967,336 $ 165,191,250 See accompanying notes to basic financial statements. - 21 - REPUBLIC OF THE MARSHALL ISLANDS Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Year ended September 30, 2021 Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balances - total governmental funds $ 26,398,376 Capital outlays are reported as expenditures in governmental funds. However, in the statement of activities, the cost of capital assets is allocated over their estimated useful lives as depreciation expense. For the current year, these amounts consist of: Capital outlays, net of disposals $ 16,242,717 Depreciation expense (5,444,027) 8,843,395 Capital assets transferred to Majuro Atoll Local Government (287,896) The issuance of long-term debt (e.g. bonds, leases) provides current financial resources to governmental funds, while the repayment of principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction has any effect on net position. For the current year, these amounts consist of: ICDF loan proceeds $ (3,158,000) Repayment of ADB loans 3,504,195 346,195 Special item - gain on SDR re-evaluation (see Note 7) 888,968 Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. For the current year, these activities consist of: Change in compensated absences payable (236,347) Change in accrued interest payable 40,211 (196,136) Change in net position of governmental activities $ 35,992,902 See accompanying notes to basic financial statements. - 22 - REPUBLIC OF THE MARSHALL ISLANDS Statement of Fiduciary Net Position Fiduciary Funds September 30, 2021 Private Purpose Trust Custodial ASSETS Cash and cash equivalents $ 4,036,935 $ 3,652,812 Time certificate of deposit 3,500,000 90,337 Receivables, net 5,435,980 - Investments 93,637,998 - Due from other funds 885,118 164,484 Capital assets, net of accumulated depreciation 399,800 - Total assets 107,895,831 3,907,633 LIABILITIES Accounts payable 188,175 - Other liabilities and accruals 12,659 - Due to other funds 2,358,756 - 2,559,590 - NET POSITION Held in trust for: Individuals, organizations and other governments 104,451,123 3,907,633 Land use distributions 885,118 - Total net position $ 105,336,241 $ 3,907,633 See accompanying notes to basic financial statements. - 23 - REPUBLIC OF THE MARSHALL ISLANDS Statement of Changes in Fiduciary Net Position Fiduciary Funds Year Ended September 30, 2021 Private Purpose Trust Custodial Additions: Contributions: Private employees $ 14,785,248 $ - Government employees 7,231,746 - Penalties and interest 907,334 - Total contributions 22,924,328 - Investment earnings: Net change in the fair value of investments 13,072,322 - Interest and dividends 948,677 1,358 Total investment earnings 14,020,999 1,358 Less investment expense 164,881 - Net investment earnings 13,856,118 1,358 Other: Compact funding 22,678,200 - Transfer in 1,587,200 - Other 340,056 55,840 24,605,456 55,840 Total additions 61,385,902 57,198 Deductions: Land use distributions 22,568,306 - Benefits 21,202,996 - Other distributions - 305,125 Administrative expenses 1,208,166 153 Total deductions 44,979,468 305,278 Change in net position held in trust for: Individuals, organizations and other governments (248,080) Social security benefits 16,296,540 Land use distributions 109,894 Net position at the beginning of the year, as restated (Note 1.T.) 88,929,807 4,155,713 Net position at the end of the year $ 105,336,241 $ 3,907,633 See accompanying notes to basic financial statements. - 24 - REPUBLIC OF THE MARSHALL ISLANDS Combining Statement of Net Position Component Units September 30, 2021 Marshall Air Marshalls Marshall Islands Marshall Tobolar Marshall Energy Islands National Islands RMI Copra Nonmajor Islands, Company, Development Telecom. Shipping Ports Processing Component Inc. Inc. Bank Authority Corporation Authority Authority Units Total ASSETS Cash and cash equivalents $ 1,619,605 $ 8,944,673 $ 10,361,677 $ 626,155 $ 243,607 $ 2,417,089 $ 290,166 $ 3,481,297 $ 27,984,269 Time certificates of deposit - 3,059,214 1,868,411 845,909 - 2,667,813 129,676 - 8,571,023 Receivables, net 282,894 5,741,882 22,841,878 1,814,883 270,070 605,660 241,092 389,733 32,188,092 Inventories 983,502 11,708,266 - 334,745 60,000 - 1,016,259 41,181 14,143,953 Other assets 254,395 2,990,663 26,787 106,087 84,555 18,705 30,693 183,239 3,695,124 Investments - - 9,976,328 - - - - - 9,976,328 Due from primary government 150,000 - 2,536,019 - - - 300,000 - 2,986,019 Restricted assets: Cash and cash equivalents - 216,674 516,812 - - - - - 733,486 Capital assets: Nondepreciable capital assets - 672,129 62,842 671,330 - 1,536,480 - - 2,942,781 Capital assets, net of accumulated depreciation 9,310,322 9,831,777 291,448 20,585,837 8,774,440 49,496,230 873,203 1,657,732 100,820,989 Indefeasible right of use, net - - - 3,553,383 - - - - 3,553,383 Total assets 12,600,718 43,165,278 48,482,202 28,538,329 9,432,672 56,741,977 2,881,089 5,753,182 207,595,447 LIABILITIES Accounts payable 1,074,994 3,564,439 341,883 1,041,960 441,355 841,211 853,335 874,689 9,033,866 Other liabilities and accruals 768,767 4,613,057 99,530 217,708 161,348 147,727 69,381 823,697 6,901,215 Contracts payable - - - 1,449,861 - 208,344 - - 1,658,205 Unearned revenue 190,238 5,490,164 340,784 42,269 17,031 - - 54,897 6,135,383 Customer deposits - - 1,333,920 348,822 - - - - 1,682,742 Noncurrent liabilities: Due within one year - 347,231 - 1,005,284 - 285,714 174,557 3,765 1,816,551 Due in more than one year 3,116,890 5,132,801 1,000,000 14,655,936 - - - 299,235 24,204,862 Total liabilities 5,150,889 19,147,692 3,116,117 18,761,840 619,734 1,482,996 1,097,273 2,056,283 51,432,824 NET POSITION Net investment in capital assets 9,310,322 17,369,030 354,290 9,449,330 8,774,440 51,032,710 892,946 1,718,039 98,901,107 Restricted - 216,674 516,812 135,609 283,626 - - 466,894 1,619,615 Unrestricted (1,860,493) 6,431,882 44,494,983 191,550 (245,128) 4,226,271 890,870 1,511,966 55,641,901 Total net position $ 7,449,829 $ 24,017,586 $ 45,366,085 $ 9,776,489 $ 8,812,938 $ 55,258,981 $ 1,783,816 $ 3,696,899 $ 156,162,623 See accompanying notes to basic financial statements. - 25 - REPUBLIC OF THE MARSHALL ISLANDS Combining Statement of Revenues, Expenses, and Changes in Net Position Component Units Year Ended September 30, 2021 Marshall Air Marshalls Marshall Islands Marshall Tobolar Marshall Energy Islands National Islands RMI Copra Nonmajor Islands, Company, Development Telecom. Shipping Ports Processing Component Inc. Inc. Bank Authority Corporation Authority Authority Units Total Expenses $ 6,703,125 $ 30,820,360 $ 3,150,818 $ 9,165,564 $ 3,825,164 $ 7,459,507 $ 11,537,006 $ 7,549,718 $ 80,211,262 Program revenues: Charges for services 5,834,993 35,067,001 4,610,078 8,990,878 1,163,258 2,996,526 4,462,316 5,273,811 68,398,861 Operating grants and contributions - 135,833 194,141 - - - - 587,380 917,354 Capital grants and contributions - - - 1,762,690 819,787 154,538 - 283,927 3,020,942 Total program revenues 5,834,993 35,202,834 4,804,219 10,753,568 1,983,045 3,151,064 4,462,316 6,145,118 72,337,157 Net program revenues (expenses) (868,132) 4,382,474 1,653,401 1,588,004 (1,842,119) (4,308,443) (7,074,690) (1,404,600) (7,874,105) General revenues: Payments from RepMar 1,072,440 515,840 - 503,000 1,814,824 548,586 6,752,000 2,244,996 13,451,686 Investment earnings - - 735,240 16,813 - 78,920 - - 830,973 Other - - - - 588,069 - - 48 588,117 Total general revenues 1,072,440 515,840 735,240 519,813 2,402,893 627,506 6,752,000 2,245,044 14,870,776 Change in net position 204,308 4,898,314 2,388,641 2,107,817 560,774 (3,680,937) (322,690) 840,444 6,996,671 Net position at the beginning of the year 7,245,521 19,119,272 42,977,444 7,668,672 8,252,164 58,939,918 2,106,506 2,856,455 149,165,952 Net position at the end of the year $ 7,449,829 $ 24,017,586 $ 45,366,085 $ 9,776,489 $ 8,812,938 $ 55,258,981 $ 1,783,816 $ 3,696,899 $ 156,162,623 See accompanying notes to basic financial statements. - 26 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (1) Summary of Significant Accounting Policies The Republic of the Marshall Islands (“RepMar”) was constituted on May 1, 1979, under the provisions of the Constitution of the Republic of the Marshall Islands (the “Constitution”) as approved by the people of the Marshall Islands. The Constitution provides for the separation of powers of the executive, legislative, and judicial branches of the government. RepMar assumes responsibility for general government, public safety, health, education, and economic development. The United States dollar is the official currency and legal tender. The accompanying financial statements of RepMar have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The Governmental Accounting Standards Board (GASB) is the recognized standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of RepMar's accounting policies are described below. A. Reporting Entity The Government of RepMar is a constitutional government comprised of three branches: Legislative Branch (the Nitijela), consisting of 33 members elected for a term of four years; Executive Branch, consisting of the Cabinet; and Judiciary Branch made up of the High Court, the Supreme Court, and the Traditional Rights Court that advises the High Court on matters concerning customary law and traditional practice. The Nitijela elects one of its members at its first session following an election to serve as President. The President, in turn, appoints six to ten members of the Nitijela to serve as Ministers who collectively comprise the Cabinet. For financial reporting purposes, RepMar has included all funds, organizations, agencies, boards, commissions and institutions. RepMar has also considered all potential component units for which it is financially accountable as well as other entities for which the nature and significance of their relationship with RepMar are such that exclusion would cause RepMar’s financial statements to be misleading or incomplete. The criteria to be considered in determining financial accountability include whether RepMar, as the primary government, has appointed a voting majority of an organization’s governing body and either has the ability to impose its will on that organization or there is potential for the organization to provide specific financial benefits to or impose specific financial burdens on RepMar. Financial accountability also exists if an organization is determined to be fiscally dependent on the primary government, although the primary government does not appoint a voting majority of the organization’s governing board. Each blended and discretely presented component unit of RepMar has a September 30 year-end. The financial statements of the component units have been included in the financial reporting entity in accordance with GASB Statement No. 14, The Financial Reporting Entity, as amended by GASB Statement No. 39, Determining Whether Certain Organizations are Component Units, GASB Statement No. 61, The Financial Reporting Entity: Omnibus - an amendment of GASB Statements No. 14 and 34, and GASB Statement No. 80, Blending Requirements for Certain Component Units - an amendment of GASB Statement No. 14. Component units are entities that are legally separate organizations for which RepMar’s elected officials are financially accountable or other organizations for which the nature and significance of their relationship with RepMar are such that exclusion would cause RepMar’s basic financial statements to be misleading or incomplete. RepMar is financially accountable because it appoints the members of the governing authorities of each of the component units and because it is able to impose its will on these organizations or because the organizations provide specific financial benefits or impose specific financial burdens on RepMar. - 27 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (1) Summary of Significant Accounting Policies, Continued A. Reporting Entity, Continued Blended component units are entities that are legally separate from RepMar, but are so related to RepMar that they are, in substance, the same as RepMar or entities providing services entirely or almost entirely to RepMar. The net position and results of operations of the following legally separate entities are presented as part of RepMar’s operations: · Marshall Islands Scholarship Grant and Loan Board, a Governmental Fund Type - Special Revenue Fund. This fund was established under Public Law No. 1979-19 to account for all disbursements of scholarship funds and is governed by a seven- member Board appointed by the Cabinet of RepMar. · Marshall Islands Judiciary Fund, a Governmental Fund Type - Special Revenue Fund. This fund was established to account for all activities of the Marshall Islands Judiciary not accounted for within the General Fund. · Health Care Revenue Fund, a Governmental Fund Type - Special Revenue Fund. This fund was established under Public Law No. 1989-59 within the Ministry of Health and Human Services to control the expenditure of funds for health care related services. · Marshall Islands Health Fund, a Governmental Fund Type - Special Revenue Fund. This fund was established under Public Law No. 1990-75, as amended by Public Law Nos. 2001-31 and 2001-35, to account for the operations of the Basic and Supplemental Health Funds delivering comprehensive medical care. Discretely presented component units are entities which are legally separate from RepMar, but are financially accountable to RepMar, or whose relationships with RepMar are such that exclusion would cause RepMar’s basic financial statements to be misleading or incomplete. The component units’ column of the basic financial statements includes the financial data of the following major component units: · Air Marshall Islands, Inc. (AMI): AMI was granted a corporate charter by the Cabinet of RepMar on October 12, 1989 to provide domestic and international carrier service within and from the Marshall Islands. AMI is governed by a seven-member Board of Directors appointed by the President upon approval of the Cabinet of RepMar. RepMar provides financial support to AMI through legislative appropriations. · Marshalls Energy Company, Inc. (MEC): MEC was granted a corporate charter by the Cabinet of RepMar on February 2, 1984 to engage in the business of generating and transmitting electricity, and the import and marketing of petroleum products. MEC is governed by a seven-member RMI Combined Utilities Board of Directors appointed by the Cabinet of RepMar. The RMI Combined Utilities Board of Directors also have governance over KAJUR and MWSC. RepMar guarantees principal and interest payments to the Rural Utilities Service in the event of default by MEC on a Federal Financing Bank loan. RepMar provides financial support to MEC through legislative appropriations. · Marshall Islands Development Bank (MIDB): MIDB was established under Public Law No. 1988-1 to promote development and expansion of the Marshall Islands economy and is governed by a seven-member Board of Directors appointed by the Cabinet. MIDB has received funds under Sections 111 and 211 of the Compact of Free Association and funds from the U.S. Department of Agriculture under the Rural Housing and Community Development Service Housing Preservation Grant. RepMar has the ability to impose its will on MIDB. - 28 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (1) Summary of Significant Accounting Policies, Continued A. Reporting Entity, Continued · Marshall Islands National Telecommunications Authority (MINTA): MINTA was incorporated under Public Law No. 1990-105 to engage in the business of providing local and international telecommunication services. MINTA is governed by an eight- member Board of Directors elected by a majority vote of its shareholders. RepMar owns a voting majority of MINTA stock. RepMar guarantees principal and interest payments to the Rural Utilities Service in the event of default by MINTA on Rural Electrification and Telephone Revolving Fund loans. · Marshall Islands Shipping Corporation (MISC): MISC was established as a body corporate pursuant to the Marshall Islands Shipping Corporation Act of 2004 (Public Law No. 2005-41) to operate services for the transportation of goods, mails and passengers by sea and to carry on business as ship owners, charterers of ships and vessels, ship brokers, and shipping agents, and to make provision for purposes connected with the aforesaid matters. MISC is governed by a five-member Board of Directors appointed by the President upon approval of the Cabinet of RepMar. RepMar provides financial support to MISC through legislative appropriations. · RMI Ports Authority (RMIPA): RMIPA was incorporated under Public Law No. 2003-81 to engage in the operation and maintenance of commercial port facilities in the Marshall Islands. RMIPA is governed by a seven-member Board of Directors appointed by the President upon the approval of the Cabinet of RepMar. RepMar has the ability to impose its will on RMIPA. · Tobolar Copra Processing Authority (TCPA): TCPA was granted a corporate charter by the Cabinet of RepMar on August 13, 1977 for the primary purpose of engaging in the production, processing, and marketing of copra products. TCPA is governed by a six- member Board of Directors (with the President serving ex officio and without vote) appointed by the President upon approval by the Cabinet of RepMar. RepMar provides financial support to TCPA through legislative appropriations. The component units’ column of the basic financial statements also includes the financial data of the following nonmajor component units: Majuro Atoll Waste Company, Inc., Majuro Resort, Inc., Marshall Islands Postal Service Authority, National Environmental Protection Authority, and Office of Commerce, Investment and Tourism. The component units’ column of the basic financial statements does not include the financial data of the following major components: · College of the Marshall Islands (CMI): CMI was established as an independent institution pursuant to the College of the Marshall Islands Act of 1992 (Public Law No. 1992-13) to provide post-secondary education services to meet the needs of the Marshall Islands. CMI is governed by a nine-member Board of Regents appointed by the President upon approval of the Cabinet of RepMar. RepMar provides financial support to CMI through legislative appropriations. · Kwajalein Atoll Joint Utilities Resources, Inc. (KAJUR): KAJUR was incorporated under the laws of the Republic of the Marshall Islands on September 1, 1990, to generate and distribute utilities on the island of Ebeye. KAJUR is governed by a seven-member RMI Combined Utilities Board of Directors appointed by the Cabinet of RepMar. The RMI Combined Utilities Board of Directors also has governance over Marshalls Energy Company, Inc. and Majuro Water and Sewer Company, Inc. (MWSC). RepMar provides financial support to KAJUR through legislative appropriations. - 29 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (1) Summary of Significant Accounting Policies, Continued A. Reporting Entity, Continued · Majuro Water and Sewer Company, Inc. (MWSC): MWSC was granted a corporate charter by the Cabinet of RepMar on January 26, 1989 to engage in the business of collecting and distributing fresh water, waste water and maintaining the sewer system. MWSC is governed by a seven-member Board of Directors appointed by the President upon approval of the Cabinet of RepMar. RepMar provides financial support to MWSC through legislative appropriations. · Marshall Islands Marine Resources Authority (MIMRA): MIMRA was established as a body corporate pursuant to the Marshall Islands Marine Resources Authority Act of 1997 (Public Law No. 1997-60) to facilitate the sustainable and responsible use of the marine resources in the Marshall Islands. MIMRA is governed by a seven-member Board of Directors, including the Minister of Natural Resources and Commerce, the Minister of Foreign Affairs and Trade, the Minister of Culture and Internal Affairs, and four members appointed by the President. RepMar has the ability to impose its will on MIMRA. In addition, RepMar’s single fiduciary component unit is subject to legislative and executive controls. This component unit, while meeting the definition of a component unit and while legally separate, is presented in the fund financial statements of RepMar; however, has been omitted from the government-wide financial statements as the resources are not available to fund operations of RepMar. The fiduciary component unit is as follows: · Marshall Islands Social Security Administration (MISSA), a Fiduciary Fund Type - Private Purpose Trust Fund. MISSA was established to provide a financially sound social security system with pension benefits and early retirement and operates under the authority of a seven-member Board of Directors appointed by the Cabinet of RepMar. RepMar’s component units, departments, and funds that are separately audited issue their own financial statements. These statements may be obtained by directly contacting the various entities or obtaining them directly from the Office of the Auditor-General website www.rmioag.com. RepMar is also responsible for appointing voting members to the governing boards of additional legally separate organizations, but RepMar’s financial accountability for these organizations does not extend beyond making the appointments. Therefore, the financial data of these entities are excluded from RepMar’s financial statements. Those organizations are Alele Museum, Inc. and the Republic of the Marshall Islands Private Industry Council, Inc. B. Government-Wide Financial Statements The Statement of Net Position and the Statement of Activities report financial information on all of the non-fiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been eliminated from these statements except for other charges between the primary government and the discretely presented component units. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. - 30 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (1) Summary of Significant Accounting Policies, Continued B. Government-Wide Financial Statements, Continued Primary government activities are defined as either governmental or business-type activities. Governmental activities, which normally are supported by taxes, intergovernmental revenues and other non-exchange revenues, are reported separately from business-type activities, which rely to a significant extent on fees charged to external parties for goods or services. As such, business-type activities account for operations similarly to a for-profit business. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable. Discretely presented component unit activities are presented with their business-type focus. The Statement of Net Position presents all of the reporting entity’s non-fiduciary assets, deferred outflows of resources, liabilities and deferred inflows of resources, with the difference reported as net position. Net position is reported in three categories: · Net investment in capital assets consists of capital assets, net of accumulated depreciation and reduced by outstanding balances for bonds, notes and other debt that are attributed to the acquisition, construction or improvement of those assets. · Restricted net position results when constraints placed on net position use are either externally imposed by creditors, grantors, contributors, and the like, or imposed by law. · Unrestricted net position consists of net position, which does not meet the definition of the two preceding categories. Unrestricted net position often is designated, (for example, internally restricted), to indicate that management does not consider such to be available for general operations. The government-wide Statement of Net Position reports $130,053,831 of restricted net position, of which $11,396,247 is restricted by enabling legislation. The Statement of Activities demonstrates the degree to which the direct expenses of given functions or segments are offset by program revenues. Direct expenses are those that are clearly identifiable within a specific function or segment. Program revenues include charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges that are restricted to meeting the operational or capital requirements of a particular function. Taxes and other items not meeting the definition of program revenues are, instead, reported as general revenue. C. Fund Financial Statements Separate financial statements are provided for governmental funds and fiduciary funds even though the latter are excluded from the government-wide financial statements. Major individual governmental funds are reported as separate columns in the fund financial statements pursuant to GASB reporting standards, with nonmajor governmental funds being combined into a single column. RepMar reports its financial position and results of operations in funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures/expenses. Transactions between funds within a fund type, if any, have not been eliminated. - 31 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (1) Summary of Significant Accounting Policies, Continued D. Measurement Focus and Basis of Accounting Government-Wide Financial Statements - the government-wide financial statements are reported using the economic resources management focus and the accrual basis of accounting, as are the fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Amounts reported as program revenue include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions. Internally dedicated resources are reported as general revenues rather than as program revenues. General revenue is derived from taxation, investment income and other fees that are not allocated to specific programs. Governmental Fund Financial Statements - the governmental fund financial statements account for the general governmental activities of RepMar and are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as they become susceptible to accrual; generally when they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, RepMar considers revenues to be available if they are collected within 90 days of the end of the current fiscal period. Significant revenues susceptible to accrual include income and gross revenue taxes, federal grants, federal reimbursements and other reimbursements for use of materials and services. Miscellaneous revenues from other financing sources are recognized when received in cash because they are generally not measurable until actually received. Investment earnings are recorded as earned, since they are both measurable and available. Investments and related investment earnings are recorded at fair value. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Expenditures generally are recorded in the period in which the related fund liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Fiduciary funds and discretely presented component units financial statements - the fiduciary funds and discretely presented component units financial statements are reported using the economic resources management focus and the accrual basis of accounting, similar to government-wide financial statements, as described above. Contributions for fiduciary funds are recorded when due and expenses are recorded when a liability is incurred, regardless of the timing of the related cash flows. Additional contributions are recognized as revenue as soon as all eligibility requirements have been met. Investment earnings are recorded as earned, since they are both measurable and available. Discretely presented component units distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a component unit’s principal ongoing operations. All other revenues are reported as nonoperating. Operating expenses includes the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. - 32 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (1) Summary of Significant Accounting Policies, Continued D. Measurement Focus and Basis of Accounting, Continued GASB Statement No. 34, Basic Financial Statements - and Management’s Discussion and Analysis - For State and Local Governments, as amended by GASB Statement No. 37, Basic Financial Statements - and Management’s Discussion and Analysis - For State and Local Governments: Omnibus, sets forth minimum criteria (percentage of the assets, liabilities, revenues or expenditures/expenses for either fund category or the governmental and enterprise combined) for the determination of major funds. Major individual governmental funds are reported as separate columns in the fund financial statements. The nonmajor funds are combined in a column in the fund financial statements and detailed in the combining statements. RepMar reports the following major funds: · General Fund - this fund is the primary operating fund of RepMar. It is used to account for all governmental transactions, except those required to be accounted for in another fund. · Grants Assistance Fund - this special revenue fund accounts for all financial transactions that are sub-granted to RepMar, including United States Congress appropriations under United States Public Law 99-239, as amended, Title II, Article I, Section 211(a) and approved by Nitijela resolution 123 to promote economic advancement and budgetary self-reliance as well as other direct grants that RepMar received from the United States government and other donor countries. · Compact Trust Fund - this permanent fund accounts for RepMar’s contributions to the Trust Fund established in accordance with Section 216 of the Compact of Free Association, as amended, to provide for an additional source of revenue for the government budget that will be needed to substitute for the absence of Compact of Free Association funding in the future. The nonmajor governmental funds are comprised of special revenue funds, which account for financial resources obtained from specific revenue sources and used for restricted purposes. In addition, RepMar reports the following fund types: · Private Purpose Trust Funds - these funds are used to account for resources held in trust under which principal and income benefit certain individuals. These include funds held in trust by the Marshall Islands Social Security Administration (MISSA) for the beneficiaries of the MISSA Retirement Fund; funds received under the Interim Use Agreement for the benefit of Kwajalein landowners; and funds received under Section 177 of the Compact of Free Association for the benefit of victims related to the United States Nuclear Testing Program. · Custodial Funds - this fund is used to report resources held by the primary government in a purely custodial capacity relating to deposits made by defendants for court cases and unclaimed property. - 33 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (1) Summary of Significant Accounting Policies, Continued E. Cash and Cash Equivalents and Time Certificates of Deposit RepMar pools cash resources of its various funds in order to facilitate the management of cash. Unless otherwise required by law, interest income received on pooled cash accrues to the General Fund. Cash and cash equivalents applicable to a particular fund are readily identifiable. Cash and cash equivalents include cash on hand, demand deposits, and short- term investments in U.S. Treasury obligations with a maturity date within three months of the date acquired by RepMar. Deposits maintained in time certificates of deposit with original maturity dates greater than three months are separately classified on the statement of net position/balance sheet. F. Investments Investments and related investment earnings of the primary government and the discretely presented component units are recorded at fair value using quoted market prices. Fair value is the price that would be received to sell an asset or paid to transfer a liability (ie., the exit price) in an orderly transaction between market participants at the date as of which the fair value of an asset or liability is determined. RepMar categorizes its fair value measurements within the fair value hierarchy established by GAAP. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In certain instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy is based on the lowest level of input that is significant to the fair measurement. Investments not categorized under the fair value hierarchy are shown at either Net Asset Value (NAV) or amortized cost. Investments of 20% or more of the voting stock of an investee are presumed to give the investor significant influence and are carried using the equity method. Under the equity method, the investor records, as earnings or loss, its proportionate share of the investee’s earnings or loss. RepMar holds approximately 30% of the outstanding shares of Pacific Islands Development Bank at cost of $2,990,250. This equity interest does not meet the definition of an investment as the asset is held primarily for economic development. Accordingly, such is presented within the accompanying financial statements as other assets. G. Receivables In general, tax revenue is recognized on the government-wide financial statements, when assessed or levied and on the governmental fund financial statements to the extent that it is both measurable and available. Receivables are stated net of estimated allowances for uncollectible accounts. Reimbursements due to RepMar for expenditures on federally funded reimbursement and grant programs are reported as “receivables from federal agencies” on the governmental fund balance sheet. Receivables of the primary government and the discretely presented component units are primarily due from businesses and individuals residing on the islands of Majuro and Ebeye. The allowance for uncollectible accounts primarily represents estimated allowances for uncollectible amounts that are determined based upon past collection experience and aging of the accounts. - 34 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (1) Summary of Significant Accounting Policies, Continued H. Inventories Inventories of the discretely presented component units are valued at the lower of cost (FIFO) or market. I. Interfund Receivables/Payables During the course of its operations, RepMar records transactions between individual funds for goods provided or services rendered. Receivables and payables resulting from transactions between funds are classified as "due from other funds" or "due to other funds" on the governmental fund balance sheet. Receivables and payables resulting from transactions between component units and the primary government are classified as “due to/from primary government” or “due to/from component units” on the governmental fund balance sheet and the statement of net position. Interfund receivables and payables have been eliminated from the statement of net position. J. Restricted Assets Certain assets of the primary government and the discretely presented component units are classified as restricted assets because their use is restricted through loan agreements or enabling legislation. K. Indefeasible Right of Use RepMar has capitalized the cost of acquisition of the exclusive right to use a specified amount of fiber capacity for a period of time, which is amortized over the length of the term of the capacity agreement on the straight-line method. L. Capital Assets Capital assets, which include property, plant, equipment and infrastructure assets (e.g. roads, bridges, docks, water and sewer lines, water catchments, and other similar items), are reported in the governmental activity column of the government-wide financial statements. Such assets, whether purchased or constructed, are recorded at historical cost or estimated historical cost. Donated capital assets are recorded at estimated fair market value at the date of donation. RepMar currently holds no title to land. Singular pieces of machinery and equipment that equal or exceed $50,000 are capitalized. Buildings and infrastructure projects with a cost that equals or exceeds $100,000 are capitalized. The costs of normal maintenance and repairs that do not add to the value of assets or materially extend asset lives are not capitalized. Capital assets of the primary government and the component units are depreciated using the straight-line method over their estimated useful lives, with a full year’s depreciation charged in the year of acquisition and disposal, regardless of date. M. Deferred Outflows of Resources In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (deduction of net position) until then. RepMar has no items that qualify for reporting in this category. - 35 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (1) Summary of Significant Accounting Policies, Continued N. Unearned Revenue In the government-wide financial statements, unearned revenue is recognized when cash, receivables or other assets are recorded prior to being earned. In the governmental fund financial statements, unearned revenue represents monies received or revenues accrued which have not been earned or do not meet the “available” criterion for revenue recognition under the modified accrual basis of accounting. Unearned revenue of the discretely presented component units primarily represents amounts received for tuition and fees, certain auxiliary activities, and fuel sales prior to the end of the fiscal year but are related to the subsequent accounting period. O. Long-term Debt The liabilities reported in the government-wide financial statements include long-term obligations incurred under various Asian Development Bank loans and compensated absences payable. Long-term obligations of component units are recorded as liabilities in the discretely presented component unit’s column. P. Compensated Absences It is the government’s policy to permit employees to accumulate earned but unused vacation and sick pay benefits. There is no liability for unpaid accumulated sick leave since the government does not have a policy to pay any amounts when employees separate from service with the government. All vacation pay is accrued when incurred in the government- wide and fiduciary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. Annual leave accumulates at the rate of one working day per bi-weekly pay period. Q. Deferred Inflows of Resources In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (additions to net position) until then. RepMar has no items that qualify for reporting in this category. R. Fund Balances Fund balance classifications are based on the extent to which RepMar is bound to honor constraints on the specific purposes for which amounts in those funds can be spent and are reported under the following fund balance classifications: · Nonspendable - includes fund balance amounts that cannot be spent either because it is not in spendable form or because of legal or contractual constraints. · Restricted - includes fund balance amounts that are constrained for specific purposes which are externally imposed by providers, such as creditors or amounts constrained due to constitutional provisions or enabling legislation. · Committed - includes fund balance amounts that are constrained for specific purposes that are internally imposed by the government through formal action of the highest level of decision-making authority and does not lapse at year-end. · Unassigned - includes negative fund balances in other governmental funds. - 36 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (1) Summary of Significant Accounting Policies, Continued R. Fund Balances, Continued RepMar has a general policy to first use restricted resources for expenditures incurred for which both restricted and unrestricted (committed and unassigned) resources are available. When expenditures are incurred for which only unrestricted resources are available, the general policy of RepMar is to use committed resources first followed by unassigned. The use of restricted/committed resources may be deferred based on a review of the specific transaction. A formal minimum fund balance policy has not been adopted. S. Risk Financing RepMar is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. It is the policy of the primary government not to purchase commercial insurance for the risks of loss to which it is exposed. Instead, RepMar management believes it is more economical to manage its risks internally. In the event of claim settlements and judgments, RepMar reports all of its risk management activities in its General Fund. Claims expenditures and liabilities are reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. These losses include an estimate of claims that have been incurred but not reported. No losses have occurred as a result of these policies in any of the past three fiscal years. T. New Accounting Standards In 2020, GASB issued Statement No. 95, Postponement of the Effective Dates of Certain Authoritative Guidance, which postponed the effective dates of GASB Statements No. 84, 89, 90, 91, 92 and 93 by one year and GASB Statement No. 87 by 18 months; however, earlier application of the provisions addressed in GASB Statement No. 95 is encouraged and is permitted to the extent specified in each pronouncement as originally issued. In accordance with GASB Statement No. 95, management has elected to postpone implementation of these statements. During the year ended September 30, 2021, RepMar implemented the following pronouncements: · GASB Statement No. 84, Fiduciary Activities, which improves guidance regarding the identification of fiduciary activities for accounting and financial reporting purposes and how those activities should be reported. Certain assets previously not reported by the High Court are now reported in the fiduciary fund financial statements as a custodial fund resulting in an increase in beginning fiduciary net position of $3,991,229. · GASB Statement No. 90, Majority Equity Interests - An Amendment of GASB Statements No. 14 and 61, which improves the consistency and comparability of reporting a government’s majority equity interest in a legally separate organization and to improve the relevance of financial statement information for certain component units. The implementation of this statement did not have a material effect on the accompanying financial statements. · GASB Statement No. 93, Replacement of Interbank Offered Rates, which establishes accounting and reporting requirements related to the replacement of Interbank Offered Rates such as the London Interbank Offered Rate (LIBOR) for hedging derivative instruments. The provision removing LIBOR as an appropriate benchmark interest rate for the evaluation of the effectiveness of derivative instruments is effective for the fiscal year ending September 30, 2022. The implementation of this statement did not have a material effect on the accompanying financial statements. - 37 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (1) Summary of Significant Accounting Policies, Continued T. New Accounting Standards, Continued In June 2017, GASB issued Statement No. 87, Leases. The objective of this Statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. This Statement increases the usefulness of governments’ financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and as inflows of resources or outflows of resources recognized based on the payment provisions of the contract. Management believes that this statement, upon implementation, will have a material effect on the financial statements. In accordance with GASB Statement No. 95, GASB Statement No. 87 will be effective for the fiscal year ending September 30, 2022. In June 2018, GASB issued Statement No. 89, Accounting for Interest Cost Incurred Before the End of a Construction Period. The objectives of this Statement are (1) to enhance the relevance and comparability of information about capital assets and the cost of borrowing for a reporting period and (2) to simplify accounting for interest cost incurred before the end of a construction period. Management does not believe that this statement, upon implementation, will have a material effect on the financial statements. In accordance with GASB Statement No. 95, GASB Statement No. 89 will be effective for the fiscal year ending September 30, 2022. In May 2019, GASB issued Statement No. 91, Conduit Debt Obligations. The primary objectives of this Statement are to provide a single method of reporting conduit debt obligations by issuers and eliminate diversity in practice associated with (1) commitments extended by issuers, (2) arrangements associated with conduit debt obligations, and (3) related note disclosures. This Statement achieves those objectives by clarifying the existing definition of a conduit debt obligation; establishing that a conduit debt obligation is not a liability of the issuer; establishing standards for accounting and financial reporting of additional commitments and voluntary commitments extended by issuers and arrangements associated with conduit debt obligations; and improving required note disclosures. Management does not believe that this statement, upon implementation, will have a material effect on the financial statements. In accordance with GASB Statement No. 95, GASB Statement No. 91 will be effective for the fiscal year ending September 30, 2023. In January 2020, GASB issued Statement No. 92, Omnibus 2020. The objectives of this Statement are to enhance comparability in accounting and financial reporting and to improve the consistency of authoritative literature by addressing practice issues that have been identified during implementation and application of certain GASB Statements. This Statement addresses a variety of topics and includes specific provisions about the effective date of Statement No. 87, Leases, and Implementation Guide No. 2019-3, Leases, for interim financial reports, the terminology used to refer to derivative instruments and the applicability of certain requirements of Statement No. 84, Fiduciary Activities, to postemployment benefits. Management does not believe that this statement, upon implementation, will have a material effect on the financial statements. The requirements related to the effective date of GASB Statement No. 87 and Implementation Guide 2019-3, reissuance recoveries and terminology used to refer to derivative instruments are effective upon issuance. In accordance with GASB Statement No. 95, the remaining requirements of GASB Statement No. 92 are effective for the fiscal year ending September 30, 2022. In March 2020, GASB issued Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements. The primary objective of this Statement is to improve financial reporting by addressing issues related to public-private and public-public partnership arrangements. This Statement also provides guidance for accounting and financial reporting for availability payment arrangements. Management does not believe that this statement, upon implementation, will have a material effect on the financial statements. GASB Statement No. 94 will be effective for the fiscal year ending September 30, 2023. - 38 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (1) Summary of Significant Accounting Policies, Continued T. New Accounting Standards, Continued In May 2020, GASB issued Statement No. 96, Subscription-Based Information Technology Arrangements. This Statement provides guidance on the accounting and financial reporting for subscription-based information technology arrangements (SBITAs) for government end users (governments). This Statement (1) defines a SBITA; (2) establishes that a SBITA results in a right-to-use subscription asset - an intangible asset - and a corresponding subscription liability; (3) provides the capitalization criteria for outlays other than subscription payments, including implementation costs of a SBITA; and (4) requires note disclosures regarding a SBITA. Management does not believe that this statement, upon implementation, will have a material effect on the financial statements. GASB Statement No. 96 will be effective for the fiscal year ending September 30, 2023. In June 2020, GASB issued Statement No. 97, Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans - an amendment of GASB Statements No. 14 and No. 84, and a supersession of GASB Statement No. 32. The primary objectives of this Statement are to (1) increase consistency and comparability related to the reporting of fiduciary component units in circumstances in which a potential component unit does not have a governing board and the primary government performs the duties that a governing board typically would perform; (2) mitigate costs associated with the reporting of certain defined contribution pension plans, defined contribution other postemployment benefit (OPEB) plans, and employee benefit plans other than pension plans or OPEB plans (other employee benefit plans) as fiduciary component units in fiduciary fund financial statements; and (3) enhance the relevance, consistency, and comparability of the accounting and financial reporting for Internal Revenue Code (IRC) Section 457 deferred compensation plans (Section 457 plans) that meet the definition of a pension plan and for benefits provided through those plans. Management does not believe that this statement, upon implementation, will have a material effect on the financial statements. GASB Statement No. 97 will be effective for the fiscal year ending September 30, 2022. U. Encumbrances RepMar utilizes encumbrance accounting to identify fund obligations. Encumbrances represent commitments related to unperformed contracts for goods. As of September 30, 2021, RepMar has significant encumbrances summarized as follows: Grants Compact Other General Assistance Trust Governmental Total $ 12,114,524 $ 42,638,483 $ - $ 43,686 $ 54,796,693 V. Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and deferred outflows of resources, liabilities and deferred inflows of resources, and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, expenditures and expenses during the reporting period. Actual results could differ from those estimates. - 39 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (1) Summary of Significant Accounting Policies, Continued W. Total Columns Total columns are presented primarily to facilitate financial analysis. The Management’s Discussion and Analysis includes certain prior year summarized comparative information in total. Such information does not include sufficient detail to constitute a full comparative presentation. Accordingly, such information should be read in conjunction with RepMar’s financial statements for the year ended September 30, 2020 from which summarized information was derived. (2) Deposits and Investments The deposit and investment policies of RepMar are governed by 3 MIRC 7, Investment of Public Funds, and 11 MIRC 1, Financial Management, in conjunction with various trust agreements. Under 3 MIRC 7, the Secretary of Finance, Banking and Postal Services, subject to approval of the Cabinet, may transfer specific amounts of money from the General Fund, and invest such money in financial institution investment accounts. Investment guidelines to be followed by the Secretary of Finance, Banking and Postal Services are as follows: (a) Public monies shall not be deposited with any financial institution that is not a member of the Federal Deposit Insurance Corporation (FDIC) of the United States or the Federal Savings and Loan Insurance Corporation (FSLIC) of the United States, unless the Secretary of Finance, Banking and Postal Services is satisfied, on the advice of the Banking Commissioner, that a financial institution (although not a member of the FDIC or FSLIC), owns sufficient assets to cover the total amount of the deposit; (b) The demand deposit account shall be continuously maintained to cover not less than seventy-five percent of the cash expenditures projected to be expended over the next succeeding ninety-day period; (c) All deposits, accounts and funds maintained pursuant to this Act shall be subordinate deposits, accounts and funds of the General Fund; and (d) No withdrawal of monies shall be made out of or charged against time or savings deposits, accounts or funds maintained pursuant to this Act except to transfer funds into the demand deposit account of the General Fund. All expenditures shall be made out of or charged against the demand deposit account of the General Fund only. Under 11 MIRC 1, the Secretary of Finance, Banking and Postal Services may invest any monies of RepMar, which: (a) Are funds that have not been appropriated by an Act; (b) In his judgment are in excess of the amounts necessary for meeting the immediate requirements of RepMar; and (c) In his judgment will not impede or hamper the necessary financial operations of RepMar. Any of such investments shall be due to mature no later than one (1) year from the date of investment, unless otherwise directed and authorized by the Cabinet for a longer period. Income derived from investments may be reinvested, unless the Cabinet decides otherwise, at the discretion of the Secretary of Finance, Banking and Postal Services and shall be recognized as revenue in accordance with generally accepted accounting principles. Long-term investments shall be in time certificates of deposit, bonds, notes, prime commercial paper or other low-risk investments. - 40 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (2) Deposits and Investments, Continued The Compact Trust Fund (the Trust Fund) operates under an investment policy adopted by the Trust Fund Committee. The investment policy has been established to reflect the growth objectives and risk tolerance of the Committee. The investment policy was adjusted in May 2021 per resolution RMI 2021-4, Adoption of Investment Policy Statement With Revised Capital Market Assumptions, and requires the Trust Fund to allocate its managed investment portfolios among domestic and foreign equity and fixed income securities. All or a portion of the Trust Fund may be invested in exchange traded funds (“ETFs”), mutual funds, real estate investment trusts (“REITs”), common trust funds (“commingled vehicles”), private equity funds, and other pooled investment vehicles (“pooled vehicles”). Equity securities issued by ETFs, mutual funds, REITs, commingled and pooled vehicles which invest exclusively in fixed income securities are considered to be fixed income securities for the purpose of compliance with the Trust Fund's investment policy. The fair values of ETFs, mutual funds, commingled and pooled vehicles are generally determined by the fair value of the underlying marketable equity and debt securities owned, which are principally common stocks and bonds, respectively. The fair value of REITs is generally based upon the quoted market value of underlying REIT units owned. Publicly traded ETFs, mutual funds, REITs and similar vehicles may trade at prices above or below the fair values of the underlying investments owned; therefore the fair value of such investments may differ from the sum of the fair values of the underlying investments owned. The Trust Fund's equity investment objective is for its various portfolios to achieve total returns similar to their benchmark equity indices. Benchmark indices include the CRSP US Total Market Index, the FTSE Global All Cap ex US Index, and the MSCI ACWI Index. The core fixed income portfolios may be invested in securities issued by the U.S. government and government agencies, foreign governments, domestic and international corporate securities, including asset-backed and mortgage-backed obligations. The fixed income portfolio may invest in high yield securities; however the average quality of the fixed income portfolio must be rated "investment grade" by at least one nationally recognized rating agency at the time of purchase. Private equity funds are a form of pooled investment vehicle, typically limited partnerships controlled by a private equity firm that acts as general partner. The general partner seeks to obtain specific dollar commitments from qualified institutional and accredited investors to invest capital in the fund as limited partners. The passive limited partners fund pro rata portions of their commitments when the general partner has identified an appropriate opportunity, which may be venture capital in the form of equity securities, convertible debt securities, or real estate for which no active markets exist. Venture capital is often used to finance new products and technologies, expand working capital, make acquisitions, or finance leveraged buyouts. A typical private equity fund could make between 15 and 25 separate investments over a ten-year life, with no single investment exceeding 10% of the total capital commitment. The fair values of the underlying investments held by each private equity fund are generally determined by management of the equity investee or as determined by the general partner or manager of the private equity fund and is based upon the Trust Fund's percentage ownership of the underlying investments. Investments in private equity funds generally tend to be illiquid for significant periods of time. Derivatives, options and futures are permitted investments for the purpose of reducing risk and efficient portfolio management. Derivatives, options and futures may not be used for speculative purposes. Asset allocations are targets and will be dictated by current and anticipated market conditions and may be amended by the Trust Fund Committee from time to time. Tactical ranges anticipate fluctuation and provide flexibility for each investment manager’s portfolio to vary within the range without the need for immediate rebalancing. - 41 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (2) Deposits and Investments, Continued A. Deposits Custodial credit risk is the risk that in the event of a bank failure, RepMar’s deposits may not be returned to it. Such deposits are not covered by depository insurance and are either uncollateralized or collateralized with securities held by the pledging financial institution or held by the pledging financial institution but not in the depositor-government’s name. RepMar does not have a deposit policy for custodial credit risk. As of September 30, 2021, the carrying amount of the primary government’s total cash and cash equivalents was $34,450,094 and the corresponding bank balances were $41,283,758. Of the bank balances, $35,858,514 is maintained in financial institutions subject to Federal Deposit Insurance Corporation (FDIC) insurance. As of September 30, 2021, bank deposits in the amount of $1,890,663 were FDIC insured. Bank deposits of $5,425,244 are maintained in financial institutions not subject to depository insurance. RepMar does not require collateralization of its cash deposits; therefore, deposit levels in excess of FDIC insurance coverage are uncollateralized. Accordingly, these deposits are exposed to custodial credit risk. As of September 30, 2021, the carrying amount of the fiduciary fund’s total cash and cash equivalents and time certificates of deposit was $11,280,084 and the corresponding bank balances were $11,504,603. Of the bank balances, $3,844,104 is maintained in financial institutions subject to FDIC insurance. Bank deposits of $7,660,499 are maintained in financial institutions not subject to depository insurance. As of September 30, 2021, bank deposits in the amount of $443,108 were FDIC insured. RepMar does not require collateralization of its cash deposits; therefore, deposit levels in excess of FDIC insurance coverage are uncollateralized. Accordingly, these deposits are exposed to custodial credit risk. As of September 30, 2021, the carrying amount in the aggregate of the discretely presented component units’ total cash and cash equivalents and time certificates of deposit was $37,288,778 and the corresponding bank balances were $37,909,143. Of the bank balances, $11,942,419 is maintained in financial institutions subject to FDIC insurance. As of September 30, 2021, bank deposits in the amount of $2,866,590 were FDIC insured. Bank deposits of $25,966,724 are maintained in financial institutions not subject to depository insurance. The component units do not require collateralization of their cash deposits; therefore, deposit levels in excess of FDIC insurance coverage are uncollateralized. Accordingly, these deposits are exposed to custodial credit risk. B. Investments Primary Government Investments of the primary government as of September 30, 2021, are as follows: Compact Trust Fund: Common Trust Funds: Domestic Equity $ 41,301,065 International Equity 36,987,661 Fixed Income 23,134,257 Real Estate Investment Trust 244,185 Private Markets 7,541,074 Money Market Funds 12,176 $ 109,220,418 As of September 30, 2021, all fixed income investments were held in ETFs. - 42 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (2) Deposits and Investments, Continued B. Investments, Continued Primary Government, Continued The Trust Fund’s fixed income allocation consists of a Vanguard Total Bond Market Index (“VTBMI”), a Vanguard Intermediate-Term Investment Grade Fund (“VIT IGF”), a Vanguard Short-Term Investment-Grade Fund ("VST IGF"), and a Vanguard High-Yield Corporate Fund (“VHY CF”); the performance of the fixed income funds is expected to closely replicate the performance of the Bloomberg Barclays U.S. Aggregate Float Adjusted Index. The bonds held by VTBMI vary in credit quality with an average overall rating of “A” as rated by Moody’s as of September 30, 2021. High yield debt receiving a credit rating below “A” comprises approximately 15.6% of the VTBMI fixed income portfolio as rated by Moody’s as of September 30, 2021. As of September 30, 2021, the weighted average maturity of the bonds comprising VTBMI is 8.68 years. The bonds held by VIT IGF vary in credit quality with an average overall rating of "A" as rated by Moody’s as of September 30, 2021. High yield debt receiving a credit rating below "A" comprises approximately 56.8% of the VIT IGF fixed income portfolio as rated by Moody’s as of September 30, 2021. As of September 30, 2021, the weighted average maturity of the bonds comprising VIT IGF is 7.19 years. The bonds held by VST IGF vary in credit quality with an average overall rating of "A" as rated by Moody’s as of September 30, 2021. High yield debt receiving a credit rating below "A" comprises approximately 48.6% of the VST IGF fixed income portfolio as rated by Moody’s as of September 30, 2021. As of September 30, 2021, the weighted average maturity of the bonds comprising VST IGF is 2.80 years. The bonds held by VHY CF vary in credit quality with an average overall rating of "A" as rated by Moody’s as of September 30, 2021. High yield debt receiving a credit rating below "A" comprises approximately 92.9% of the VHY CF fixed income portfolio as rated by Moody’s as of September 30, 2021. As of September 30, 2021, the weighted average maturity of the bonds comprising VHY CF is 4.33 years. The Trust Fund’s investment policy does not require direct investment in fixed maturity securities ("Bonds") as a means of managing its exposure to loss of principal due to increasing interest rates. The Trust Fund’s investment policy requires the performance of each investment class to be periodically compared with an associated benchmark. Bonds and bond funds generally decrease in value in response to rising interest rates. Bonds, however, have a fixed date of maturity and do not have exposure to loss of principal from rising interest rates, whereas shares of a common trust fund, ETF, or similar investment vehicle have no maturity date. The Trust Fund’s exposure to foreign currency risk is derived from its investment in common trust funds and ETFs that hold investments in securities of foreign issuers and sovereigns. Foreign currency risk is the risk that changes in foreign exchange rates will adversely affect the fair values of an investment or deposit. As of September 30, 2021, the Trust Fund held approximately $24,428,000 in securities of foreign issuers held in common trust funds. Of this amount, approximately 26% was held in securities whose functional currency is the Euro, 13% whose functional currency is the Japanese Yen, 11% whose functional currency is the British pound, 10% whose functional currency is the Chinese Yuan, and 40% in functional currencies of 36 other countries. Concentration of credit risk for investments is the risk of loss attributed to the magnitude of an entity’s investment in a single issuer. As of September 30, 2021, there were no investments in any one issuer that exceeded 5% of total investments. - 43 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (2) Deposits and Investments, Continued B. Investments, Continued Primary Government, Continued The Trust Fund has the following recurring fair value measurements as of September 30, 2021: Fair Value Measurements Using Quoted Prices In Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs Total (Level 1) (Level 2) (Level 3) Investments by fair value level: Common trust funds: Domestic Equity $ 41,301,065 $ 41,301,065 $ - $ - International Equity 36,987,661 36,987,661 - - Fixed Income 23,134,257 23,134,257 - - Real Estate Investment Trust 244,185 244,185 - - 101,667,168 $ 101,667,168 $ - $ - Investments measured at NAV: Private Markets 7,541,074 Investments measured at amortized cost: Money market funds 12,176 $ 109,220,418 Fiduciary Funds Investments in marketable securities of the Marshall Islands Social Security Administration (MISSA) as of September 30, 2021, are as follows: Money market funds $ 95,931 Exchange Traded Funds 28,425,388 Mutual funds 44,083,970 $ 72,605,289 Fiduciary funds have the following recurring fair value measurements as of September 30, 2021: Fair Value Measurements Using Quoted Prices In Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs Total (Level 1) (Level 2) (Level 3) Investments by fair value level: Exchange traded funds $ 28,425,388 $ 28,425,388 $ - $ - Mutual funds 44,083,970 44,083,970 - - 72,509,358 $ 72,509,358 $ - $ - Investments measured at amortized cost: Money market funds 95,931 $ 72,605,289 - 44 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (2) Deposits and Investments, Continued B. Investments, Continued Fiduciary Funds, Continued Additionally, MISSA owns 60,250 shares of common stock of Marshall Islands Holdings, Inc. (MIHI), which represents approximately 36% of the outstanding shares of MIHI as of September 30, 2021. MIHI engages in all aspects of holding company activities in the Marshall Islands and which is the sole shareholder of Bank of Marshall Islands (BOMI). MISSA also owns 80,080 shares of common stock of Marshall Islands Service Corporation (MISC), which represents approximately 5% of the outstanding shares of MISC as of September 30, 2021. MISC is majority-owned by MIHI. The investment in MIHI is accounted for on the equity method since the investment constitutes 20% or more of the voting stock of MIHI. As of September 30, 2021, MISSA’s investment in MIHI amounted to $20,002,612. The investment in MISC is accounted for at the Net Asset Value. As of September 30, 2021, MISSA’s investment in MISC amounted to $1,030,097. During the year ended September 30, 2021, MISSA received dividend payments from MIHI of $481,400. For the year ended September 30, 2021, MISSA recognized $939,868 of equity in net earnings of MIHI. A summarized financial information of MIHI as of and for the year ended December 31, 2021 is presented on the table below: Total assets $ 185,286,064 Total liabilities $ 123,230,020 Equity: Attributable to stockholders of MIHI $ 56,127,730 Noncontrolling interest $ 5,928,314 Net income attributed to: Stockholder of MIHI $ 4,233,057 Noncontrolling interests $ 447,103 The deposit and investment policies of MISSA are governed by its enabling legislation. The Board is required to engage one or more fund custodians to assume responsibility for the physical possession of MISSA’s investments. Legally authorized investments are as follows: (i) Government obligations - Obligations issued or guaranteed as to principal and interest by RepMar or by the Government of the United States, provided that the total market value of the investments in obligations guaranteed by RepMar shall at the time of purchase not exceed twenty-five percent (25%) of the total market value of all investments of MISSA, and further provided that the principal and interest on each obligation are payable in the currency of the United States. (ii) Corporate obligations and mortgage-backed securities - Obligations of any public or private entity or corporation created or existing under the laws of RepMar or of the United States or any state, territory or commonwealth thereof, or obligations of any other government or economic community which are payable in United States dollars, or pass through and other mortgage-backed securities provided that the obligation is from an agency of the United States Government or is rated in one of the four highest categories by two nationally recognized rating agencies in the United States. No investment under this heading shall exceed five percent of the market value of the Fund or ten percent of the outstanding value of the issue at the time of purchase. - 45 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (2) Deposits and Investments, Continued B. Investments, Continued Fiduciary Funds, Continued (iii) Preferred and common stocks - Shares of preferred or common stocks of any corporation created or existing under the laws of RepMar or under the laws of the United States or any state, territory or commonwealth thereof provided that the purchase of such shares shall be considered reasonable and prudent by MISSA’s investment advisor at the time of purchase, that not more than fifteen percent (15%) of the market value of the Fund shall be invested in the stock of any one corporation, and that not more than twenty-five percent (25%) of the market value of the Fund shall be invested in any one industry group. (iv) Insurance company obligations - Contracts and agreements supplemental thereto providing for participation in one or more accounts of a life insurance company authorized to do business in the Republic or in any state, territory or commonwealth of the United States provided that the total market value of these investments at no time shall exceed ten percent (10%) of all investments of the Fund. MISSA investments are held and administered by trustees in accordance with various trustee agreements. Based on negotiated trust and custody contracts, all of these investments were held in the name of MISSA by their custodial financial institutions as of September 30, 2021. MISSA does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. Furthermore, as of September 30, 2021, there were no investments in any one issuer that exceeded 5% of total investments. Discretely Presented Component Units Investments of the discretely presented component units as of September 30, 2021, are as follows: Marshall Islands Development Bank: Common equity securities $ 9,976,328 The deposit and investment policies of MIDB are governed by MIDB’s Board of Directors. Generally, MIDB can provide financial assistance to enterprises operating in the Republic, including making equity investments in such enterprises. MIDB owns 26,376 shares of common stock of Marshall Islands Holdings, Inc. (MIHI), which represents approximately 16% of the outstanding shares of MIHI as of September 30, 2021. MIDB also owns 3,000 shares of common stock of Marshall Islands Service Corporation (MISC), which represents approximately 1% of the outstanding shares of MISC as of September 30, 2021. MISC is majority-owned by MIHI. A summary of MIDB’s investments in MIHI and MISC, which are accounted for at the Net Asset Value, follows: Marshall Islands Holdings, Inc. $ 9,920,541 Marshall Islands Service Corporation 55,787 $ 9,976,328 - 46 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (3) Receivables Primary Government Receivables as of September 30, 2021, for the primary government’s individual major governmental funds, nonmajor governmental funds in the aggregate, and fiduciary funds, including applicable allowance for uncollectible accounts, are as follows: Nonmajor Grants Compact Governmental Fiduciary General Assistance Trust Funds Funds Totals Receivables: Taxes $ 2,956,033 $ - $ - $ 144,375 $ - $ 3,100,408 Federal agencies - 19,237,357 - - - 19,237,357 General 1,358,453 5,304,400 - 8,752,613 - 15,415,466 Contributions - - - - 11,825,748 11,825,748 Loans 4,368,787 - - 14,082,436 - 18,451,223 Other - - - 521,114 246,127 767,241 8,684,273 24,541,757 - 23,500,538 12,071,875 68,797,443 Less: allowance for uncollectible accounts (4,926,588) (191,937) - (20,757,376) (6,635,895) (32,511,796) Net receivables $ 3,757,685 $ 24,349,820 $ - $ 2,743,162 $ 5,435,980 $ 36,285,647 Certain receivables due from federal grantor agencies recorded within the Grants Assistance Fund remain uncollected. RepMar is currently negotiating with these grantors for a final determination insofar as collection on these amounts. Management is of the opinion that collection efforts will be favorable and thus no allowance for uncollectible accounts is considered necessary. Loans receivable of the primary government are summarized as follows: General Fund: Notes receivable from four fishing companies incorporated and operating in the Republic of the Marshall Islands, due August 1992, interest at 6% per annum, interest and principal payable on demand. These notes have been fully provided for in the allowance for uncollectible accounts. $ 1,780,000 Loan receivable from Ebje Ruktok/Rukjenlein Fishing Company, Inc., interest at 8.5% per annum, with repayments commencing March 1995. The loan is a subsidiary loan of a loan agreement (Loan Number 1102 MAR (SF)) between RepMar and the Asian Development Bank. This loan has been fully provided for in the allowance for uncollectible accounts. 2,588,787 $ 4,368,787 Nonmajor Governmental Funds: Loans to qualified Marshallese students under a student financial assistance program, interest free, uncollateralized with no set repayment terms, and may be converted to grants at a later date if the recipients meet certain criteria. These loans have been fully provided for in the allowance for uncollectible accounts. During the year ended September 30, 2021, loans in the amount of $841,444 were converted to grants as the recipients met the criteria for conversion. $ 14,082,436 - 47 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (3) Receivables, Continued Discretely Presented Component Units Receivables as of September 30, 2021, for the discretely presented component units, including applicable allowance for uncollectible accounts, are as follows: Marshall Air Marshalls Marshall Islands Marshall Tobolar Marshall Energy Islands National Islands Copra Non-major Islands, Company, Development Telecom. Shipping RMI Ports Processing Component Inc. Inc. Bank Authority Corporation Authority Authority Units Totals Receivables: Federal agencies $ - $ - $ - $ - $ - $ 123,707 $ - $ 7,329 $ 131,036 General 491,276 19,053,756 - 2,543,984 892,319 1,847,118 1,211,207 979,381 27,019,041 Loans - - 26,431,835 - - - - - 26,431,835 Interest - - 229,776 - - 58,284 - - 288,060 Other - 231,143 570,346 98,944 241,673 16,417 134,820 93,926 1,387,269 491,276 19,284,899 27,231,957 2,642,928 1,133,992 2,045,526 1,346,027 1,080,636 55,257,241 Less: allowance for uncollectible accounts (208,382) (13,543,017) (4,390,079) (828,045) (863,922) (1,439,866) (1,104,935) (690,903) (23,069,149) Net receivables $ 282,894 $ 5,741,882 $ 22,841,878 $ 1,814,883 $ 270,070 $ 605,660 $ 241,092 $ 389,733 $ 32,188,092 Loans receivable of the discretely presented component units are as follows: Marshall Islands Development Bank (MIDB): MIDB’s loan portfolio is comprised of consumer, housing and business loans. The majority of the loan portfolio is unsecured, while the remaining portion is secured by various forms of collateral. These loans are cosigned by third parties. The basis for expected repayment of a majority of consumer and housing loans is the continued employment of the borrower and allotment agreements between MIDB and the borrower’s employer. All loans are at fixed rates ranging from 4% - 14% per annum. (4) Interfund Receivables and Payables Primary Government Receivables and payables between funds reflected as due to/from other funds in the governmental funds balance sheet as of September 30, 2021, are summarized as follows: Due From Due To Receivable Fund Payable Fund Other Funds Other Funds General Grants Assistance $ 16,010,691 $ 16,010,691 Grants Assistance General 13,000,207 13,000,207 Nonmajor governmental funds General 4,430,832 4,430,832 Nonmajor governmental funds Fiduciary Funds - Private Purpose Trust 2,358,756 - Fiduciary Funds - Private Purpose Trust General - 885,118 Fiduciary Funds - Custodial General - 164,484 35,800,486 34,491,332 Fiduciary Funds - Private Purpose Trust General 885,118 - Nonmajor governmental funds Fiduciary Funds - Private Purpose Trust - 2,358,756 Fiduciary Funds - Custodial General 164,484 - $ 36,850,088 $ 36,850,088 - 48 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (4) Interfund Receivables and Payables, Continued Primary Government, Continued Receivables and payables reflected as due to/from component units as of September 30, 2021, are summarized as follows: Due From Due To Governmental activities: Marshall Islands Development Bank $ - $ 2,536,019 General Fund: Air Marshall Islands, Inc. - 150,000 Marshalls Energy Company, Inc. 5,479,955 - Marshall Islands Development Bank 1,000,000 - Marshall Islands Marine Resources Authority - 330,000 RMI Ports Authority - 152,678 Tobolar Copra Processing Authority - 300,000 Nonmajor component units - 69,063 6,479,955 1,001,741 $ 6,479,955 $ 3,537,760 The amount recorded by the General Fund due from Marshalls Energy Company, Inc. of $5,479,955 represents a subsidiary loan agreement under an Asian Development Bank (ADB) loan (Loan Number 2659 RMI (SF)) received by RepMar from the ADB. Interest accrues at the rate of 1% per annum through September 30, 2021 and at 1.5% per annum thereafter with monthly principal and interest payments due of $37,960 and matures on May 31, 2034. Annual debt service requirements to maturity for principal and interest are as follows: Year ending September 30, Principal Interest Total 2022 $ 347,231 $ 80,050 $ 427,281 2023 381,141 74,379 455,520 2024 386,898 68,622 455,520 2025 392,741 62,779 455,520 2026 398,673 56,847 455,520 2026-2030 2,085,526 192,074 2,277,600 2031-2034 1,487,845 37,142 1,524,987 $ 5,479,955 $ 571,893 $ 6,051,848 The amount recorded by the General Fund due from Marshall Islands Development Bank of $1,000,000 represents a subsidiary loan agreement received by RepMar from the International Cooperation and Development Fund (ICDF). Total available subsidiary loan of $4,000,000 was divided into four drawdowns of $1,000,000 each. Loan drawdowns commenced in 2019 with repayment commencing on December 15, 2021 in bi-monthly installments with interest at the rate of 2% per annum. Loan repayments will be based on total drawdowns made up to 2021. The amount recorded as due from component units of the primary government of $6,479,955 does not equal the corresponding due to primary government of the discretely presented component units of $10,882,559 due to an allowance for doubtful accounts recorded by the General Fund and the Grants Assistance Fund of $2,802,604 and $1,600,000, respectively. The amount recorded as due to component units of the primary government of $3,537,760 does not equal the corresponding due from primary government of the discretely presented component units of $2,986,019 due to a $551,741 allowance for doubtful accounts recorded by the respective component units. - 49 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (4) Interfund Receivables and Payables, Continued Primary Government, Continued Due to component units includes $2,536,019 due to the Marshall Islands Development Bank (MIDB), which represents amounts drawn down on a $6,000,000 loan facility to provide additional funds to supplement the General Fund’s subsidy to Tobolar Copra Processing Authority as a result of the increase in the price of copra. The MIDB loan is governed by a Loan Agreement and related Promissory Note, which sets forth covenants to ensure compliance with the terms and conditions during the term of the loan including payment of debt service. The primary requirements are summarized below: Events of Default - Article 5A of the Loan Agreement sets forth various events of default, which occurs when the Borrower fails to fulfill a payment obligation under the loan agreement when due; or the Borrower fails to perform any of the covenants provided under Article 4 of the Loan Agreement. Acceleration of Maturity - Article 5B of the Loan Agreement sets forth certain remedies in the event of default. Upon default by the Borrower, MIDB may exercise all rights and remedies available to MIDB to enforce the Loan Agreement. Discretely Presented Component Units Receivables and payables reflected as due to/from primary government as of September 30, 2021, are summarized as follows: Due From Due To Air Marshall Islands, Inc.: General Fund $ 150,000 $ 1,516,890 Grants Assistance Fund - 1,600,000 Marshalls Energy Company, Inc.: General Fund - 5,479,955 Marshall Islands Development Bank: Governmental activities 2,536,019 - General Fund - 1,000,000 Marshall Islands National Telecommunications Authority: General Fund - 1,000,000 Tobolar Copra Processing Authority: General Fund 300,000 - RMI Ports Authority: General Fund - 285,714 $ 2,986,019 $ 10,882,559 The amount recorded by the Marshall Islands National Telecommunications Authority (MINTA) due to the General Fund of $1,000,000 includes Compact of Free Association Infrastructure Maintenance Sector grant funds borrowed by MINTA of $700,000. This loan is unsecured and interest free with annual payments due of $100,000 commencing March 2012 to be deposited into a savings account established in accordance with Section 211(d)(2) of the Compact of Free Association, as amended. The remaining amount of $300,000 represents an advance from the General Fund for the purpose of providing funding for the 4G LTE Project, which is to be reimbursed by MINTA. - 50 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (5) Capital Assets Capital asset activities for the year ended September 30, 2021, are as follows: Primary Government Estimated Balance Balance Useful October September Lives 1, 2020 Additions Transfers Retirements 30, 2021 Depreciable capital assets: Buildings 20 - 40 yrs $ 115,119,485 $ 944,143 $ - $ - $ 116,063,628 Water infrastructure system 25 yrs 9,261,029 - - - 9,261,029 Docks, roads and bridges 25 - 30 yrs 20,710,923 - - - 20,710,923 Ships 25 yrs 11,123,000 - - - 11,123,000 Software 10 yrs 3,743,327 - - - 3,743,327 Heavy equipment 3 - 10 yrs 9,150,655 1,204,560 (644,318) (1,029,178) 8,681,719 169,108,419 2,148,703 (644,318) (1,029,178) 169,583,626 Less accumulated depreciation: Buildings (54,504,339) (2,367,908) - - (56,872,247) Water infrastructure system (8,896,609) (364,420) - - (9,261,029) Docks, roads and bridges (15,428,987) (748,942) - - (16,177,929) Ships (8,165,880) (952,560) - - (9,118,440) Software (2,118,485) (225,191) - - (2,343,676) Heavy equipment (5,196,114) (785,006) 356,422 817,921 (4,806,777) (94,310,414) (5,444,027) 356,422 817,921 (98,580,098) Total depreciable capital assets, net 74,798,005 (3,295,324) (287,896) (211,257) 71,003,528 Nondepreciable capital assets: Construction in progress 11,543,076 12,474,976 - (125,000) 23,893,052 $ 86,341,081 $ 9,179,652 $ (287,896) $ (336,257) $ 94,896,580 Depreciation expense was charged to functions/programs of the primary government’s governmental activities as follows: Public Service Commission $ 15,000 Education, Sports and Training 1,598,177 Health and Human Services 715,482 Transportation, Communication and Information Technology 18,214 Natural Resources and Commerce 22,600 Culture and Internal Affairs 58,430 Justice, Immigration and Labor 207,417 Finance, Banking and Postal Services 45,907 Foreign Affairs and Trade 231,510 Works, Infrastructure and Utilities 2,472,165 President and Cabinet 10,958 Chief Secretary 9,776 Nitijela 38,391 $ 5,444,027 Discretely Presented Component Units Estimated Balance Balance Useful October September Lives 1, 2020 Additions Retirements 30, 2021 Depreciable capital assets: Buildings 3 - 34 yrs $ 22,088,477 $ 86,060 $ - $ 22,174,537 Utility plant 3 - 40 yrs 114,549,275 5,976,558 (145,495) 120,380,338 Vessels 25 yrs 8,239,074 1,639,787 - 9,878,861 Machinery and equipment 2 - 25 yrs 46,939,841 2,288,327 (407,744) 48,820,424 Infrastructure 5 - 50 yrs 89,044,521 - - 89,044,521 280,861,188 9,990,732 (553,239) 290,298,681 Less accumulated depreciation (178,847,943) (11,073,667) 443,918 (189,477,692) Total depreciable capital assets, net 102,013,245 (1,082,935) (109,321) 100,820,989 Nondepreciable capital assets: Construction in progress 4,579,297 3,648,357 (5,284,873) 2,942,781 $ 106,592,542 $ 2,565,422 $ (5,394,194) $ 103,763,770 - 51 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (6) Indefeasible Right of Use (IRU) In 2009, the Marshall Islands National Telecommunications Authority (MINTA) entered into an IRU Capital Lease agreement with a third party for the exclusive use of 8 wave lengths of fiber capacity of the two fibers of the Kwajalein Cable System (KCS) which runs between Guam and Kwajalein and which is known as the “HANTRU1 System”. Under the terms of the agreement, MINTA made certain payments of $6,500,091. The initial term of the agreement is for a period of 10 years commencing on the date MINTA is initially granted access, and which term is automatically renewable for a further 10-year period and an additional 5-year period thereafter. Prior to the tenth and twentieth anniversary dates, MINTA has the option to terminate this agreement; however, such is subject to prior approval of the Rural Utilities Services (RUS) of the U.S. Department of Agriculture. MINTA’s policy is to amortize the right of use over the 25-year period. As of September 30, 2021, accumulated amortization expense of $2,946,708 has been recorded. (7) Long-term Debt Primary Government Under the Government Borrowing Act of 1985, RepMar may borrow money for such purposes as approved by the Nitijela of RepMar. As of September 30, 2021, the primary government had the following long-term debt outstanding and payable: Dated Interest Final Outstanding Date Rate Maturity Amount Asian Development Bank (ADB): Loan No. 1102 MAR (SF) Fisheries Development Project November 28, 1991 1% July 1, 2031 $ 1,259,150 Loan No. 1218 MAR (SF) Typhoon Rehabilitation January 29, 1993 1% November 15, 2032 235,428 Loan No. 1249 MAR (SF) Basic Education Project November 17, 1993 1% October 15, 2033 3,908,477 Loan No. 1250 MAR (SF) Majuro Water Supply Project #1 November 17, 1993 1% May 15, 2033 299,642 Loan No. 1316 RMI (SF) Health and Population Project February 24, 1995 1% July 1, 2034 2,989,738 Loan No. 1389 RMI (SF) Majuro Water Supply Project #2 February 1, 1996 1% September 1, 2035 5,007,176 Loan No. 1513 RMI (SF) Public Sector Reform Program January 30, 1997 1% December 1, 2036 7,418,854 Loan No. 1694 RMI (SF) Ebeye Health and Infrastructure Project October 8, 1999 1.5% August 1, 2031 4,072,243 Loan No. 1791 RMI (SF) Skills Training and Vocational Education Project January 11, 2001 1.5% November 15, 2032 2,409,457 Loan No. 1829 RMI (SF) Fiscal and Financial Management Program #2 June 22, 2001 1.5% May 15, 2025 2,097,242 Loan No. 1948 RMI (SF) Outer Island Transport Infrastructure Project February 14, 2003 1.5% August 1, 2034 246,478 Loan No. 2659 RMI (SF) Public Sector Reform Sub Program #1 September 8, 2010 1.5% August 15, 2034 7,365,340 Loan No. 2950 RMI (SF) Public Sector Reform Sub Program #2 December 13, 2012 1.5% November 15, 2036 4,439,487 41,748,712 International Cooperation and Development Fund (ICDF): Home Energy Efficiency and Renewable Energy Project November 8, 2016 2% May 8, 2032 1,000,000 Track and Field 2022 Micronesian Games Project August 16, 2019 2% March 15, 2052 6,158,000 7,158,000 $ 48,906,712 Asian Development Bank Loans: Loan Number 1102 MAR (SF) in the amount of SDR 2,432,599 is to assist RepMar in initiating a domestic commercial fish production and marketing capability, and to strengthen RepMar's institutional capabilities to support economic self-reliance through the development of its major natural resource of fisheries. Loan Number 1218 MAR (SF) in the amount of SDR 364,000 is to provide funding for the emergency rehabilitation and restoration of facilities that were damaged or destroyed by Typhoon Gay in November 1992. Loan Number 1249 MAR (SF) in the amount of SDR 5,717,446 is to provide funding for the improvement of basic education within the Marshall Islands. Loan Number 1250 MAR (SF) and Loan Number 1389 RMI (SF) in the cumulative amount of SDR 6,540,496 is to provide funding for the Majuro Water Supply Project. Loan Number 1316 RMI (SF) in the amount of SDR 3,911,000 is to provide funding for improving the quality of health and family planning services and strengthening RepMar’s primary health care model of services. - 52 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (7) Long-term Debt, Continued Primary Government, Continued Asian Development Bank Loans, Continued: Loan Number 1513 RMI (SF) in the amount of SDR 8,241,000 is to provide funding for the Public Sector Reform Program. The proceeds are to be used to: (i) stabilize RepMar’s finances in the short run; (ii) ensure the long-term structural stability of RepMar’s finances; and (iii) create an improved enabling environment for the private sector. Loan Number 1694 RMI (SF) in the amount of SDR 6,924,000 is to provide funding for the Ebeye Health and Infrastructure Project. The proceeds are to be used to: (i) improve the delivery of quality medical care for Ebeye and proximate islands; (ii) strengthen primary health care and preventive services to the general population; (iii) rehabilitate and expand the existing water supply and sewerage systems on Ebeye; and (iv) upgrade the islets power generation and distribution system. Loan Number 1791 RMI (SF) in the amount of SDR 5,276,000 is to provide funding for the Skills Training and Vocational Education Project. The proceeds are to be used to: 1) provide funding for career awareness, skills training, special training programs for women and youth; and 2) institutional capacity building within the Marshall Islands. Loan Number 1829 RMI (SF) in the amount of SDR 6,320,000 is to provide funding for the Fiscal and Financial Management Program. The proceeds are to be used to: 1) establish a trust fund; 2) finance the payment of medical referral costs in arrears; and 3) improve the overall financial management of RepMar. Loan Number 1948 RMI (SF) in the amount of SDR 5,304,000 is to provide funding for the Outer Island Transport Infrastructure Project. The proceeds are to be used to provide or improve outer island port infrastructure, navigation aids, storage warehouses, and airstrip extensions and maintenance. Loan Number 2659 RMI (SF) and Loan Number 2950 RMI (SF) in the cumulative amount of SDR 9,655,000 is to provide funding for the Public Sector Reform Sub Program # 1 and # 2. The proceeds are to be used to: 1) improve the medium term fiscal outlook, with a view to increasing the budget surplus; 2) restrain public expenditure through selected reductions and freezes in selected major recurrent expenditure items; 3) reform and modernize the tax system, including introducing a sales tax, and by improving tax administration; 4) improve the operational and financial performance of state owned enterprises (SOEs) through introduction of a national SOE policy and related legislation, and to implement a recovery plan for MEC; and 5) support stakeholder participation and consultation in respect of the Program. The abovementioned ADB loans payable are uncollateralized and are backed by the full faith and credit of RepMar. The abovementioned loans are designated and measured by the ADB using Special Drawing Rights (SDRs). The value of a SDR is defined by a weighted currency basket of five major currencies: the U.S. Dollar, the Chinese Yuan, the Euro, the British Pound, and the Japanese Yen. Accordingly, ADB loans payable denominated in SDR are subject to remeasurement at the year-end SDR exchange rate. In addition, the International Monetary Fund (IMF) re-evaluates this currency basket every five years. The effects of foreign currency transaction gains or losses resulting from year-end remeasurement or IMF re-evaluation are included in the government-wide financial statements in the period when such remeasurement or re-evaluation occurs. During the year ended September 30, 2021, RepMar recognized a foreign exchange gain of $888,968 associated with year-end remeasurement, which is presented as a special item in the accompanying financial statements, and which results in a decrease in ADB loans payable. - 53 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (7) Long-term Debt, Continued Primary Government, Continued Asian Development Bank Loans, Continued: Annual debt service requirements to maturity for principal and interest are as follows: Year ending September 30, Principal Interest Total 2022 $ 3,563,047 $ 509,215 $ 4,072,262 2023 3,563,047 463,519 4,026,566 2024 3,563,047 417,824 3,980,871 2025 3,563,047 372,128 3,935,175 2026 3,038,737 328,399 3,367,136 2027 - 2031 15,197,072 1,074,533 16,271,605 2032 - 2036 8,876,805 255,343 9,132,148 2037 383,910 2,278 386,188 $ 41,748,712 $ 3,423,239 $ 45,171,951 ADB loans are governed by Loan Regulations, which set forth certain terms and conditions applicable to these loans as follows: Events of default with finance related consequences - in the event that the Borrower shall have failed to make payment of principal, interest charge or any other charge required under the Loan Agreement, the ADB may by notice to the Borrower suspend in whole or in part the right of the Borrower to make any further withdrawals from the Loan Account. The right of the Borrower to make withdrawals from the Loan Account shall continue to be suspended in whole or in part, as the case may be, until the event which gave rise to such suspension shall have, in the reasonable opinion of the ADB, ceased to exist or until the ADB shall have notified the Borrower that the right to make withdrawals has been restored in whole or in part, whichever is the earlier. If the right of the Borrower to make withdrawals from the Loan Account shall have been suspended with respect to any amount of the Loan for a continuous period of 30 days, the ADB may by notice to the Borrower terminate the right of the Borrower to make withdrawals. Upon the giving of such notice, the Loan shall be cancelled. Acceleration of maturity - the regulations specify that in the case of default that has occurred and continues for a period of 30 days, the ADB, at its option, may by notice to the Borrower declare the principal of the loan then outstanding, together with all accrued interest and other charges thereon, to be due and payable immediately. International Cooperation and Development Fund (ICDF) Loans: The Home Energy Efficiency and Renewable Energy Project loan in the amount of $4,000,000 aims to increase local energy resources and efficient utilization of energy through the household sector, both of which are expected to reduce pollution through a reduction in the use of imported fossil fuel for power generation. Loan proceeds are to be lent to the Marshall Islands Development Bank (MIDB) for the purpose of providing funds to household borrowers. The applicant households must take an energy audit to obtain a list of the inefficient appliances and light fittings in need of replacement, which will later be provided to MIDB for loan approval. The RMI Track and Field Project loan in the amount of $6,158,000 is to provide funding for the construction of a track and field for the purpose of hosting the 2023 Micronesian Games. - 54 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (7) Long-term Debt, Continued Primary Government, Continued International Cooperation and Development Fund (ICDF) Loans, Continued: The abovementioned ICDF loans payable are uncollateralized and are backed by the full faith and credit of RepMar. Annual debt service requirements to maturity for principal and interest are as follows: Year ending September 30, Principal Interest Total 2022 $ 50,000 $ 143,160 $ 193,160 2023 100,000 141,660 241,660 2024 100,000 139,660 239,660 2025 100,000 137,660 237,660 2026 218,423 135,660 354,083 2027 - 2031 1,684,231 583,167 2,267,398 2032 - 2036 1,234,231 432,744 1,666,975 2037 - 2041 1,184,231 313,821 1,498,052 2042 - 2046 1,184,231 195,398 1,379,629 2047 - 2051 1,184,231 76,975 1,261,206 2052 118,422 1,185 119,607 $ 7,158,000 $ 2,301,090 $ 9,459,090 ICDF loans are governed by the provisions of the General Conditions Applicable to Loan and Guarantee Agreements of the Lender (the “General Conditions”), which set forth covenants to ensure compliance with the terms and conditions of the Projects during the implementation phase and payment of debt service. The primary requirements of the General Conditions are summarized below: The Borrower shall implement the Projects with due diligence and due care and in accordance with sound financial standards and practice. Events of default with finance related consequences - Section 13.1 of the General Conditions sets forth various events of default, which occurs when the Borrower shall have failed to pay, when due, any interest or installment of principal or any other sums due under the Loan Agreement; or the Borrower shall have failed to perform any of the covenants provided under Section 11 of the General Conditions. Acceleration of maturity - Section 13.2 of the General Conditions specify that in the case of default that has occurred and continues for a period of 21 days, the ICDF, at its option, may by notice to the Borrower declare the principal of the loan then outstanding, together with all accrued interest and other charges thereon, to be due and payable immediately. Default interest at a rate equal to 4% above the applicable LIBOR, as defined in the General Conditions, shall accrue on each installment payment of the principal amount of the Loan, interest thereon, which are overdue. Changes in long-term debt of the primary government for the year ended September 30, 2021 was as follows: Balance Balance October 1, September Due Within 2020 Additions Reductions 30, 2021 One Year Loans payable: ADB loans $ 46,141,875 $ - $ (4,393,163) $ 41,748,712 $ 3,563,047 ICDF loans 4,000,000 3,158,000 - 7,158,000 50,000 $ 50,141,875 $ 3,158,000 $ (4,393,163) $ 48,906,712 $ 3,613,047 - 55 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (7) Long-term Debt, Continued Discretely Presented Component Units As of September 30, 2021, the discretely presented component units had the following long-term debt outstanding and payable: Dated Interest Final Outstanding Date Rate Maturity Amount Marshall Islands National Telecommunications Authority: Rural Utilities Service (RUS) mortgage note (Loan A) June 4, 1992 5.00% June 4, 2027 $ 3,788,798 Rural Utilities Service (RUS) mortgage note (Loan C) March 12, 2009 3.64% - 5.00% March 12, 2031 10,872,422 14,661,220 Tobolar Copra Processing Authority: Bank loan June 23, 2016 8.5% June 30, 2022 174,557 $ 14,835,777 Marshall Islands National Telecommunications Authority (MINTA): Certain portions of loan repayments of the RUS mortgage notes are unconditionally guaranteed by the primary government, under which the primary government will make debt service payments to RUS up to $1,500,000 annually in the event of default by MINTA and have been collateralized by a leasehold mortgage and security agreement over the assets of MINTA. The respective RUS Loan Agreements set forth covenants to ensure proper operation and maintenance of the telecommunications system and payment of debt service, including a requirement to meet the required times interest earned ratio (TIER). The primary requirements of the loan agreements are summarized below: Rate Covenant - MINTA has covenanted to at all times fix, prescribe and collect rates, fees and charges in connection with the services furnished by the telecommunications system that will be sufficient to yield the sum of net income during each fiscal year equal to at least 150% of the annual debt service commencing on December 31, 2012. TIER is defined as net income (after tax) plus interest divided by interest expense. The Loan Agreements prohibit MINTA, without the prior written consent of RUS, to incur additional indebtedness while MINTA maintains a TIER below 1.0; or if the additional indebtedness will cause MINTA’s TIER to fall below 1.0; or an Event of Default has occurred and is continuing. Events of default with finance related consequences - the Loan Agreements specify a number of Events of Default and related Remedies. MINTA shall furnish to RUS promptly, after becoming aware, notice of the occurrence of any default under the Loan Documents or the receipt of any notice with respect to the occurrence of any event with which the giving of notice or the passage of time, or both, could become an Event of Default. Acceleration of maturity - Upon the occurrence of an Event of Default and is continuing, RUS may, by notice in writing to MINTA, declare all unpaid principal of and all interest accrued on the Notes to be immediately due and payable and upon such declaration, all such principal and interest shall become immediately due and payable. - 56 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (7) Long-term Debt, Continued Discretely Presented Component Units, Continued Marshall Islands National Telecommunications Authority (MINTA), Continued: Annual debt service requirements to maturity for principal and interest are as follows: Year ending September 30, Principal Interest Total 2022 $ 705,284 $ 286,781 $ 992,065 2023 719,520 272,545 992,065 2024 733,852 258,213 992,065 2025 749,030 243,035 992,065 2026 763,974 228,091 992,065 2027 - 2031 4,057,474 902,850 4,960,324 2032 - 2036 4,054,111 482,630 4,536,741 2037 - 2041 2,877,975 130,528 3,008,503 $ 14,661,220 $ 2,804,673 $ 17,465,893 Tobolar Copra Processing Authority (TCPA): Loan repayments to the bank are guaranteed by Marshall Islands Development Bank (MIDB) under which MIDB will make debt service payments in the event of default by TCPA and have been collateralized by a general security agreement over the assets of TCPA. The Loan Agreement sets forth covenants to ensure payment of debt service. The primary requirements of the loan agreement are summarized below: Events of default with finance related consequences - the Loan Agreement specifies a number of Events of Default and related Remedies. Acceleration of maturity - Upon the occurrence of an Event of Default and is continuing, the bank may, without notice or demand, declare all unpaid principal of and all interest accrued on the loan to be immediately due and payable and upon such declaration, all such principal and interest shall become immediately due and payable. Annual repayment requirements to maturity for principal and interest are as follows: Year ending September 30, Principal Interest Total 2022 $ 174,557 $ 3,793 $ 178,350 Changes in long-term debt of the discretely presented component units for the year ended September 30, 2021 were as follows: Balance Balance October 1, September Due Within 2020 Additions Reductions 30, 2021 One Year Loans payable: MINTA $ 16,366,097 $ - $ (1,704,877) $ 14,661,220 $ 705,284 TCPA 486,865 - (312,308) 174,557 174,557 $ 16,852,962 $ - $ (2,017,185) $ 14,835,777 $ 879,841 - 57 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (8) Change in Other Long-term Obligations Primary Government Other long-term liabilities will be liquidated in the future primarily from the General Fund and the Grants Assistance Fund. During the year ended September 30, 2021, the following changes occurred in liabilities reported as part of the primary government’s long-term liabilities in the statement of net position: Balance Balance October 1, September Due Within 2020 Additions Reductions 30, 2021 One Year Due to component units $ 3,087,760 $ 450,000 $ - $ 3,537,760 $ 3,537,760 Other: Compensated absences 4,068,245 2,508,750 (2,272,403) 4,304,592 1,646,937 $ 7,156,005 $ 2,958,750 $ (2,272,403) $ 7,832,352 $ 5,184,697 Discretely Presented Component Units Changes in other long-term liabilities of discretely presented component units for the year ended September 30, 2021, are as follows: Balance Balance October 1, September Due Within 2020 Additions Reductions 30, 2021 One Year Due to primary government: AMI $ 3,116,890 $ - $ - $ 3,116,890 $ - MEC 5,850,336 - (370,381) 5,479,955 347,231 MIDB 1,000,000 - - 1,000,000 - MINTA 1,000,000 - - 1,000,000 1,000,000 RMIPA 285,714 - - 285,714 285,714 $ 11,252,940 $ - $ (370,381) $ 10,882,559 $ 1,632,945 (9) Fund Balances Classifications of fund balances comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reported in governmental funds. The following table enumerates the fund balance classifications: Nonmajor Grants Compact Governmental General Assistance Trust Funds Totals Fund balances: Nonspendable: Pacific Islands Development Bank investment $ 2,990,250 $ - $ - $ - $ 2,990,250 Loan receivable – MEC 5,479,955 - - - 5,479,955 Loan receivable – MIDB 1,000,000 - - - 1,000,000 Permanent fund principal - - 109,220,418 - 109,220,418 Restricted: Education and health - 843,943 - 1,500 845,443 Capacity building - 163,374 - - 163,374 Environmental - 134,564 - - 134,564 Infrastructure - 3,072 - - 3,072 Infrastructure maintenance - 1,608,900 - - 1,608,900 Disaster assistance - 4,445,199 - - 4,445,199 Compact – other - 42,663 - - 42,663 ADB COVID-19 support 4,019,878 - - - 4,019,878 ADB Hot Lunch reimbursement 3,500,000 - - - 3,500,000 ROC COVID-19 emergency response 98,729 - - - 98,729 ADB Pacific Disaster Resilience Program 350,082 - - - 350,082 ADB COVID-19 emergency response 270,699 - - - 270,699 ADB PFM 8,890 - - - 8,890 ADB loan # 2659 sinking fund 3,711,242 - - - 3,711,242 European Development Fund - 1,909,375 - - 1,909,375 World Bank - 99,880 - - 99,880 Credit card collateralization 62,709 - - - 62,709 Nuclear claims related - - - 687,288 687,288 Other - 435,105 - - 435,105 Committed: Judiciary - - - 660,615 660,615 Education and health - - - 6,764,856 6,764,856 Capital projects - 4,568,640 - - 4,568,640 Other 14,251 - - 1,853,077 1,867,328 Unassigned 10,284,140 (42,044) - - 10,242,096 $ 31,790,825 $ 14,212,671 $ 109,220,418 $ 9,967,336 $ 165,191,250 - 58 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (9) Fund Balances, Continued Restricted fund balance of the Grants Assistance Fund includes unexpended World Bank funds as follows: Beginning Ending Balance Revenues Expenditures Balance Pacific Resilience Project II $ 87,358 $ 1,000,000 $ 1,087,358 $ - Sustainable Energy Development Project - 4,908,610 4,908,610 - RMI Maritime Investment Project 37,740 498,201 535,941 - Strengthen Budget Execution and Financial Reporting - 1,508,090 1,508,090 - Multisectoral Early Childhood Development Project 252,757 457,682 710,439 - Digital RMI Project 3,000 806,966 809,966 - Education and Skills Strengthening Project - 6,891 1,578 5,313 COVID-19 Emergency Response 95,122 257,888 258,443 94,567 $ 475,977 $ 9,444,328 $ 9,820,425 $ 99,880 (10) Employee Retirement Plan The Government-Employee Retirement Plan was created by Public Law 2019-104 for the purpose of establishing a defined contribution retirement savings plan (the Plan) for RepMar employees, whereby employees eighteen years and older are eligible to participate upon regularization of employment. Plan participants may contribute any amount of their salaries to be matched 100% by RepMar up to 3% of base salaries. Withdrawal from the Plan occurs upon termination of employment, death, or financial hardship. Plan assets are held in a trust fund administered by a trustee in accordance with the trust agreement. Management has the authority to establish or amend Plan provisions and contribution requirements. RepMar contributed $91,090 to Plan participant accounts during the year ended September 30, 2021, and total combined Plan assets were $411,108 as of September 30, 2021. (11) Restricted Assets Primary Government Restricted cash and cash equivalents of the primary government are as follows: Escrow account established for the benefit of landowners of Kwajalein Atoll. $ 294,239 Savings account established in accordance with Section 211(d)(2) of the Compact of Free Association, as amended, for the purpose of funding RepMar’s infrastructure maintenance plan. 2,310,844 Savings account established in accordance with Section 211(e) of the Compact of Free Association, as amended, for the purpose of funding RepMar’s disaster assistance emergency fund. 4,559,929 - 59 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (11) Restricted Assets, Continued Primary Government, Continued Savings accounts collateralizing a credit card facility. 62,709 Deposit account established in accordance with ADB Loan 2659-RMI (SF) for the purpose of funding loan debt service payments. 3,711,242 Savings account established for the purpose of accounting for funds held by RepMar in a custodial capacity relating to unclaimed property. 107,196 $ 11,046,159 Restricted investments of the primary government are as follows: Investments held in a trust fund for the purpose of accumulating resources to fund RepMar government operations after fiscal year 2023. $ 109,220,418 Discretely Presented Component Units Restricted cash and cash equivalents of the discretely presented component units are as follows: Deposit account established by Marshalls Energy Company, Inc. in accordance with ADB Loan 2659-RMI (SF) for the purpose of funding repairs and maintenance. $ 216,674 Savings account established by the Marshall Islands Development Bank collateralizing loans funded by Rural Housing Service. 516,812 $ 733,486 (12) Operating Transfers In/Out Operating transfers in/out for each major governmental fund and nonmajor governmental funds in the aggregate, for the year ended September 30, 2021, are as follows: Transfers Out Transfers In General Fund: Compact Trust Fund $ 5,250,000 $ 3,000,000 Nonmajor governmental funds 1,826,244 840,556 7,076,244 3,840,556 Grants Assistance Fund: Nonmajor governmental funds 2,910,406 - Compact Trust Fund: General Fund 3,000,000 5,250,000 Nonmajor governmental funds: General Fund 840,556 1,826,244 Grants Assistance Fund - 2,910,406 840,556 4,736,650 $ 13,827,206 $ 13,827,206 - 60 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (12) Operating Transfers In/Out, Continued Transfers are used to 1) move revenues from the fund that enabling legislation or budget requires to collect them to the fund that enabling legislation or budget requires to expend them, 2) use unrestricted revenues collected in the General Fund to finance various programs accounted for in other funds in accordance with budgetary authorizations, and 3) record reductions in interfund loans for amounts that are not expected to be repaid. Specifically, RepMar transferred $2,250,000 from the General Fund to the Compact Trust Fund as a net trust fund contribution; $1,826,244 from the General Fund to the Nonmajor Governmental Funds to finance Judicial branch operations and scholarships; $2,910,406 from the Grants Assistance Fund to the Nonmajor Governmental Funds to finance scholarships and Four-atoll medical costs; and $840,556 from the Nonmajor Governmental Funds to the General Fund to fund general operations. (13) Compact Trust Fund Section 216(a) of the Compact, as amended, provides for annual contributions from the United States into a trust fund established in accordance with the Agreement Between the Government of the United States of America and the Government of the Republic of the Marshall Islands Implementing Section 216 and Section 217 of the Compact, as Amended, Regarding a Trust Fund (Trust Fund Agreement). The contributions by the United States were conditioned upon RepMar contributing to the trust fund at least $25,000,000 on October 1, 2003, $2,500,000 prior to October 1, 2004, and a final $2,500,000 prior to October 1, 2005. As of September 30, 2020, RepMar has contributed the required amounts to the “A Account” as required under Article 16 of the Trust Fund Agreement; however, Article 21 of the Trust Fund Agreement states that the United States may withdraw the Present Market Value of its contributions to the “A Account” if certain events occur. In 2005, RepMar entered into a Subsequent Contributor Accession Agreement with the Republic of China whereby the Republic of China agreed to contribute annually certain amounts to the “A Account”. In addition, the Republic of China agreed to contribute annually certain amounts to the “D Account”, which was established by RepMar in accordance with Article 16. However, in the event of a severing of diplomatic relations between the Government of the Republic of the Marshall Islands and the Government of the Republic of China, the Republic of China may withdraw the Present Market Value of its contributions to the “A Account”. In addition to the “A Account”, the Trust Fund Agreement requires a “C Account” be created into which annual income earnings over 6% from the “A Account” shall be deposited. The “C Account” is maintained as a memorandum account within the Trust Fund and is not separately invested. Accordingly, the Compact Trust Fund presented within the accompanying financial statements presents only the contributions made to the “A Account” by RepMar and the “D Account” by the Republic of China and the related “C Account” as well as associated undistributed income summarized as follows: RepMar - “A Account” and “C Account” $ 96,430,097 RepMar - “D Account” 12,790,321 $ 109,220,418 - 61 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (13) Compact Trust Fund, Continued As of September 30, 2021, the fair market value of contributions to the Compact Trust Fund “A Account” by the United States and the Republic of China, including associated undistributed income, and the related “C Account” is as follows: United States - “A Account” and “C Account” $ 500,114,419 Republic of China - “A Account” and “C Account” 72,390,152 $ 572,504,571 (14) Contingencies and Commitments Economic Dependency During the year ended September 30, 2021, RepMar’s General Fund recorded contributions from component units of $26,000,000, which represents 27% of total General Fund revenues. These contributions represent fisheries revenues collected by the Marshall Islands Marine Resources Authority (MIMRA) and, as a result, the General Fund is economically dependent upon such contributions. If a significant reduction in the level of budgetary support from MIMRA due to the migratory nature of this economic resource were to occur, it may have an effect on the General Fund’s programs and activities. Nuclear Claims Trust Fund (NCTF) Section 177(c) of the Compact of Free Association (the Compact) provides, on a one-time grant basis, the amount of $150,000,000 to RepMar to be used to establish a trust fund from which annual distributions are to be made in accordance with Article II of the Agreement between the Government of the United States and RepMar for Implementation of Section 177 of the Compact (the Agreement). Pursuant to the Agreement, RepMar established the NCTF from which these distributions are made. Over a period of fifteen years, the Nuclear Claims Tribunal (NCT) received $45,750,000 from the NCTF that was made available for whole or partial payment of monetary awards. As of September 30, 2021, NCT has committed to the distribution of monetary awards for personal injury claims of $23,159,963 and of property damage claims of $2,284,108,436. Accordingly, in order to satisfy these claims, additional funds will have to be made available from a renegotiated financial settlement of damages with the United States. Federal Grants RepMar participates in a number of federally assisted grant programs and other various U.S. Department of the Interior grants. These programs are subject to financial and compliance audits to ascertain if Federal laws and guidelines have been followed. Questioned costs relating to fiscal years 2005 through 2021 have been set forth in RepMar's Single Audit Report for the year ended September 30, 2021. In addition, RepMar is considered to have responsibility for any questioned costs that may result from Single Audits of subgrantees who have not satisfied the audit requirements of OMB Circular A-133 or the OMB Uniform Guidance. The ultimate disposition of these questioned costs can be determined only by final action of the respective grantor agencies. Therefore, no provision for any liability that may result upon resolution of this matter has been made in the accompanying financial statements. Litigation RepMar is party to various legal proceedings, many of which are normal recurrences in governmental operations. The Attorney General of RepMar is of the opinion that the probable outcome of suits existing as of September 30, 2021 is not predictable. No provision for any liability has been made in the accompanying financial statements because management believes that no unfavorable outcome is likely to occur. - 62 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (14) Contingencies and Commitments, Continued Marshall Islands Social Security Administration (MISSA) In 2019, MISSA obtained an actuarial valuation of the Retirement Fund as of October 1, 2018. The valuation reported actuarial accrued liabilities and market value of assets for the Retirement Fund of $428,740,000 and $79,270,000, respectively, as of October 1, 2018. The funded ratio of the Retirement Fund as of October 1, 2017 is 18%. As of September 30, 2021, MISSA recorded total fund equity of $88,122,276 in the Retirement Fund, as funds available to fund future benefit obligations. These conditions indicate that MISSA may be unable to meet its future benefit obligations. Insurance Coverage RepMar does not maintain insurance coverage for a significant amount of fixed assets. In the event of a catastrophe, RepMar may be self-insured to a material extent. Sick Leave It is the policy of RepMar to record expenditures for sick leave when leave is actually taken. Sick leave is compensated time for absence during working hours arising from employee illness or injury. The estimated accumulated amount of unused sick leave as of September 30, 2021 is $13,771,957. Leases RepMar enters into numerous leases with various landowners. The lease terms generally range from one to fifteen years. However, appropriations to fund these leases are made on an annual basis. For the year ended September 30, 2021, RepMar appropriated $1,423,972 to fund such leases. Marshall Islands National Telecommunications Authority (MINTA) has long-term commitments for several ground and satellite circuit leases. Leases are both cancelable and noncancelable operating leases. Future minimum annual lease payments under these leases are as follows: Year ending September 30, Total 2022 $ 1,530,337 2023 1,487,137 2024 1,465,537 2025 1,464,026 2026 1,025,818 2027 - 2031 144,381 2032 - 2036 139,623 2037 - 2041 69,466 $ 7,326,325 - 63 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (14) Contingencies and Commitments, Continued Operation, Management and Repair (OM&R) Agreement In 2009, MINTA, along with the Federated States of Micronesia Telecommunications Corporation (FSMTC), entered into an OM&R agreement with a third party for the purpose of operating, maintaining, and repairing the “Micronesian Addition”, which is a subset of the HANTRU1 System. The term of the agreement coincides with the term of the IRU Capital Lease agreement wherein MINTA and FSMTC are required to each make monthly payments of $6,400 less certain service credits, and which are subject to inflationary adjustments and an annual incremental increase of 3%. Approximate future minimum annual payments under this agreement are as follows: Year ending September 30, Total 2022 $ 107,904 2023 111,141 2024 114,475 2025 117,909 2026 121,447 2027 - 2031 664,120 2032 - 2034 448,223 $ 1,685,219 Trust Company of the Marshall Islands Under the Joint Venture Agreement, as amended, between RepMar and the Trust Company of the Marshall Islands, Inc. (TCMI) dated September 14, 1990, and as amended August 18, 1995, after meeting certain contractual working capital requirements, annual gross revenues of the programs managed by TCMI are shared using a graduated schedule. In 2002, RepMar agreed to set aside the financial provisions of this Joint Venture Agreement in favor of an annual payment of $1,000,000, payable in quarterly installments of $250,000 through December 31, 2006. On December 6, 2006, RepMar agreed to again set aside the financial provisions of this Joint Venture Agreement in favor of an annual payment of $2,000,000, payable in quarterly installments of $500,000 through December 31, 2009. In 2009, RepMar agreed to further amend the financial provisions of this Joint Venture Agreement whereby an annual payment of $3,000,000 is payable by TCMI through December 31, 2010 in monthly installments of $250,000, with an effective date of July 1, 2008. For the period January 1, 2011 through December 31, 2013, the annual payment amount increased to $4,000,000, payable in monthly installments of $333,333 and further increased to an annual payment amount of $5,000,000 for the period January 1, 2014 through December 31, 2018, payable in monthly installments of $416,667. - 64 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (14) Contingencies and Commitments, Continued Trust Company of the Marshall Islands, Continued In 2015, RepMar agreed to further amend the financial provisions of this Joint Venture Agreement whereby annual payments payable by TCMI through December 31 of each year would be as follows: Year ending December 31, Total 2016 $ 6,500,000 2017 $ 7,000,000 2018 $ 7,500,000 2019 $ 7,500,000 2020 $ 8,000,000 The abovementioned annual payments are contingent upon continued net earnings being generated by TCMI. In the event that net earnings of TCMI fall below 2007 levels, the annual payments are to be adjusted accordingly on a prorated basis. During the year ended September 30, 2021, TCMI made payments of $7,921,815 to RepMar. Loan Guarantees Marshall Islands Development Bank (MIDB) has pledged an escrow account in support of certain USDA Rural Development housing loans, the balance of which amounted to $12,162,878 as of September 30, 2021. In the event of default, MIDB could be exposed to an amount in excess of the escrow account balance, an amount that is presently indeterminable. No provision for any liability that may result from this matter has been provided for within the accompanying financial statements. Budgetary Compliance For the year ended September 30, 2021, significant over-expenditures exceeding appropriations within the General Fund were as follows: Office of the Chief Secretary $ 1,141,444 Outer Islands Local Government MISSA Payments $ 680,346 Majuro Landowners Electricity Bills $ 439,923 These over-expenditures of the General Fund have not been funded by legislative authorization. Other Commitments Significant commitments of the primary government as of September 30, 2021, are as follows: a) Guaranteed debt of Marshall Islands National Telecommunications Authority (MINTA) in respect of a loan from RUS with a letter of guarantee. As of September 30, 2021, MINTA had guaranteed RUS debt totaling $14,661,220. b) On October 27, 2016, the Cabinet of RepMar authorized and approved a loan from the International Cooperation and Development Fund (ICDF) for the Home Energy Efficiency and Renewable Energy Projects. On November 8, 2016, RepMar entered into a $4,000,000 loan with ICDF. As of September 30, 2021, $1,000,000 has been drawn against this loan commitment. - 65 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Financial Statements September 30, 2021 (15) COVID-19 Pandemic On January 30, 2020, the World Health Organization (WHO) declared the novel strain of coronavirus (COVID-19) outbreak a Public Health Emergency of International Concern. On February 7, 2020, RepMar’s Office of the President issued a State of Emergency declaration due to COVID-19. RepMar’s Ministry of Health and Human Services in conjunction with the National Disaster Committee and the Cabinet subsequently issued Health Travel Advisory and Restrictions Issuance No. 9 suspending passenger air travel into the Marshall Islands effective March 8, 2020. On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic and recommended the containment and mitigation measures worldwide. During the year ended September 30, 2021, four confirmed cases were identified in the Marshall Islands that were subsequently isolated and contained. On August 8, 2022, community transmission was identified, which may negatively impact RepMar’s financial position. However, the effect of the pandemic on RepMar is uncertain. Therefore, while RepMar expects this matter to potentially have a negative impact on its financial position, the related financial impact cannot be reasonably estimated at this time. Major donor organizations committed resources to assist RepMar in responding to the threat posed by the pandemic, including the Asian Development Bank (ADB) and the World Bank (WB). The ADB committed $24,500,000 for COVID-19 response in the Marshall Islands, comprising $16,000,000 from the Health Expenditure and Livelihoods Support Program, $6,000,000 from Phase 3 of the Pacific Disaster Resilience Program, and $1,000,000 from COVID-19 Emergency Response. In addition, the WB committed $2,500,000 to assist RepMar with prevention and detection of COVID-19 and to strengthening the local health system. Finally, RepMar was also able to avail of certain funding under the provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed by the U.S. Congress and signed into law by President Donald Trump on March 27, 2020. (16) Subsequent Event On September 29, 2022, Majuro Resort, Inc. obtained a RepMar guaranteed $2,000,000 loan from the Marshall Islands Development Bank for certain building projects. - 66 - REPUBLIC OF THE MARSHALL ISLANDS REQUIRED SUPPLEMENTARY INFORMATION YEAR ENDED SEPTEMBER 30, 2021 - 67 - REPUBLIC OF THE MARSHALL ISLANDS Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual General Fund (Fund 100100) Year Ended September 30, 2021 Actual - Variance with Budgeted Amounts Budgetary Final Budget - Basis Positive Original Final (see Note 1) (Negative) Revenues: Taxes $ 32,665,806 $ 32,665,806 $ 35,441,927 $ 2,776,121 MI Marine Resources Authority 26,000,000 26,000,000 26,000,000 - Ship registry 8,000,000 8,000,000 8,171,815 171,815 Asian Development Bank grant - 16,627,495 16,000,000 (627,495) Taiwan grant 4,000,000 5,173,246 5,112,268 (60,978) Other grants - 862,480 - (862,480) Fees and charges - - 55,534 55,534 Interest and dividends 110,000 110,000 103,035 (6,965) Other 4,428,000 3,859,248 363,384 (3,495,864) Total revenues 75,203,806 93,298,275 91,247,963 (2,050,312) Expenditures: President and Cabinet 3,038,667 2,580,428 2,408,441 171,987 Office of the Chief Secretary 2,188,451 15,812,054 16,953,498 (1,141,444) Special appropriations 15,464,658 17,263,263 16,728,921 534,342 Council of Iroij 596,765 595,862 597,762 (1,900) Nitijela 2,554,784 2,536,761 2,403,299 133,462 Office of the Auditor-General 1,972,353 2,301,313 2,236,187 65,126 Foreign Affairs and Trade 4,815,153 5,270,351 4,875,035 395,316 Public Service Commission 659,094 661,486 653,558 7,928 Judiciary 1,393,884 1,348,897 1,238,486 110,411 Office of the Attorney General 1,439,005 1,371,129 1,164,916 206,213 Education, Sports and Training 14,435,083 14,808,109 13,821,200 986,909 Health and Human Services 5,519,783 5,668,501 5,401,317 267,184 Transportation, Communication and Information Technology 863,727 829,846 717,799 112,047 Natural Resources and Commerce 2,435,486 2,132,224 1,836,383 295,841 Culture and Internal Affairs 3,778,300 3,874,014 3,649,385 224,629 Justice, Immigration and Labor 3,863,475 3,955,770 3,932,718 23,052 Finance, Banking and Postal Services 15,764,614 21,049,893 18,333,866 2,716,027 Work, Infrastructure and Utilities 4,387,871 10,868,182 9,749,226 1,118,956 Environment 495,637 491,176 457,175 34,001 Total expenditures 85,666,790 113,419,259 107,159,172 6,260,087 Deficiency of revenues under expenditures (10,462,984) (20,120,984) (15,911,209) 4,209,775 Other financing sources(uses): Loan proceeds - 3,158,000 3,158,000 - Operating transfers in 374,173 2,874,173 3,840,556 966,383 Operating transfers out (250,000) (250,000) (250,000) - Total other financing sources(uses), net 124,173 5,782,173 6,748,556 966,383 (10,338,811) (14,338,811) (9,162,653) 5,176,158 Encumbrances for supplies and equipment ordered but not received are reported in the year the order is placed for budgetary purposes but in the year the supplies are received for financial reporting purposes 10,338,811 10,338,811 11,699,999 1,361,188 Net change in fund balance $ - $ (4,000,000) $ 2,537,346 $ 6,537,346 See accompanying notes to required supplementary information - budgetary reporting. - 68 - REPUBLIC OF THE MARSHALL ISLANDS Notes to Required Supplementary Information - Budgetary Reporting September 30, 2021 (1) Budgetary Information The Secretary of Finance, Banking and Postal Services and the Chief Budget Officer present to the Cabinet, prior to September 30, proposed budget estimates for the fiscal year commencing October 1. The budget estimates include the overall and total proposed expenditures of RepMar and the means of financing those expenditures. The Cabinet reviews and approves these estimates making changes, as it deems appropriate. The Appropriation Committee of the Nitijela, during the second sitting of the regular session of the Nitijela, holds public hearings at which time Ministries and Offices are required to justify their budget estimates. During the second sitting of the Nitijela, an appropriation bill, as required by the Constitution, is introduced and budget estimates are then legally enacted by the Nitijela. The Budget Act for fiscal year 2021, Public Law No. 2020-14, was passed by the Nitijela on September 24, 2020. Formal budget integration is employed as a management control device during the year for all funds. The Cabinet has the authority to reprogram budgeted estimates in accordance with the Constitution. All annual appropriations lapse at fiscal year-end unless otherwise specified by law. Supplemental appropriations may occur throughout the year. Unexpended encumbrances at each fiscal year end are carried forward until they are expended or canceled without further legislative action. RepMar does not establish budgets for the operations of its other governmental funds. Encumbrance accounting is employed in governmental funds. For budgetary purposes, the encumbrances (i.e., purchase orders, contracts) are considered expenditures when incurred. For GAAP reporting purposes, encumbrances outstanding at year end are reported as reservations of fund balances and do not constitute expenditures or liabilities because the commitments will be reappropriated and honored during the subsequent fiscal year. (2) Reconciliation of Budgetary Schedule Net Change In Fund Reserve for Balance Encumbrances Budgetary basis - Fund 100100 $ 2,860,520 $ 11,699,999 GASB 54 Funds included within the General Fund: PSS Education Fund (14,602) - Reimbursable Fund (13,277) 5,094 Judiciary Fund 975 - EPA Fund (55,875) - Agricultural Supplies Fund 26,912 - ADB Development Fund (356,794) 409,431 (412,661) 414,525 General Fund $ 2,447,859 $ 12,114,524 See Accompanying Independent Auditor’s Report. - 69 - REPUBLIC OF THE MARSHALL ISLANDS OTHER SUPPLEMENTARY INFORMATION YEAR ENDED SEPTEMBER 30, 2021 - 70 - REPUBLIC OF THE MARSHALL ISLANDS Combining Schedule of Expenditures by Account Governmental Funds Year Ended September 30, 2021 Special Revenue Permanent Other Grants Compact Governmental General Assistance Trust Funds Total Expenditures: Salaries and wages $ 27,785,580 $ 24,331,014 $ - $ 1,469,672 $ 53,586,266 Unemployment benefits - 5,417,762 - - 5,417,762 Grants and subsidies 20,572,528 8,949,157 - 1,653,929 31,175,614 Financial assistance 3,890,933 - - - 3,890,933 Utilities 5,407,510 1,828,545 - 40,917 7,276,972 Contractual services 4,772,913 6,908,281 - 5,666,342 17,347,536 Capital outlay 8,221,869 9,100,424 - 892,711 18,215,004 Travel 2,543,004 988,336 - 975,330 4,506,670 Medical supplies 226,789 601,533 - 3,141,399 3,969,721 Principal repayment 3,504,195 - - - 3,504,195 Supplies and materials 633,191 1,959,694 - 271,696 2,864,581 Leased housing 2,667,259 373,643 - 70,660 3,111,562 Rentals 3,129,064 975,233 - 157,320 4,261,617 Food stuffs 4,232,941 1,331,551 - 88,008 5,652,500 Interest 571,020 - - - 571,020 Communications 667,871 581,131 - 127,903 1,376,905 POL 657,481 835,101 - 153,129 1,645,711 Allowances 1,399,694 12,221 - 18,000 1,429,915 Professional services 291,700 9,069,339 - 689,801 10,050,840 Printing and reproduction 121,153 107,635 - 29,597 258,385 Insurance 210,210 66,200 - 9,442 285,852 Freight 55,408 79,633 - 78,621 213,662 Other 3,199,791 4,417,028 - 419,103 8,035,922 $ 94,762,104 $ 77,933,461 $ - $ 15,953,580 $ 188,649,145 See Accompanying Independent Auditor's Report. - 71 - REPUBLIC OF THE MARSHALL ISLANDS GENERAL FUND September 30, 2021 The general fund is used to account for resources traditionally associated with government, which are not required legally or by sound financial management to be accounted for in another fund. See Accompanying Independent Auditors’ Report. - 72 - REPUBLIC OF THE MARSHALL ISLANDS Statement of Revenues, Expenditures by Function, and Changes in Fund Balance - General Fund (Fund 100100) Year Ended September 30, 2021 (with comparative totals for the year ended September 30, 2020) 2021 2020 Revenues: Taxes: Income $ 17,410,860 $ 16,428,709 Import 7,527,949 7,199,898 Import - CMI 1,691,456 1,619,502 Gross revenue 7,424,215 6,863,681 Immovable property 710,001 752,390 Fuel 588,613 446,554 Penalties and interest 82,433 117,395 Other 6,400 108,973 35,441,927 33,537,102 Fees and charges 55,534 40,583 Interest and dividends 103,035 113,087 Other: Asian Development Bank grant 16,000,000 - Taiwan grant 5,112,268 5,282,388 World Bank grants - 6,000,000 Other grants - 53,317 Ship registry 8,171,815 7,386,364 Contribution from MI Marine Resources Authority 26,000,000 31,300,000 Contribution from RMI Ports Authority - 27,953 Other 363,384 298,763 55,647,467 50,348,785 Total revenues 91,247,963 84,039,557 Expenditures: President and Cabinet: Office of the President 1,251,740 1,174,216 President and Ministers 672,894 6,632 Building Renovation - 6,146 Cabinet Operations 390,468 1,060,116 2,315,102 2,247,110 Office of the Chief Secretary: Administration 13,498,159 5,847,157 Deputy Chief Secretary - Ebeye 114,873 108,329 Economic Policy, Planning and Statistics Office 364,238 331,847 Disaster Management 90 - 13,977,360 6,287,333 Special appropriations: Marshall Islands Social Security Administration (MISSA) subsidy 1,587,200 1,686,400 Employee Pension Fund 126,365 10,294 National Election - Ebeye 5,900 - Kwajalein Atoll Local Government (MISSA payments) 680,346 671,220 National Election 369 611,303 Majuro Resort, Inc. (Ebeye Wellness) - (178,560) KADA Operations 25,087 29,847 Centralized Utility Billings - Majuro 636,698 794,776 Nuclear Victim's Day - 11,000 COMI Endowment Fund 92,256 99,200 MIDB Loan Repayment - 3,482,900 OIHD Solar System - 50,592 ICDF Commitment Fee 114,980 10,667 Kwajalein Solid Waste 148,800 135,000 Kwajalein Sewage Truck 148,800 - Census 2021 418,334 - Compact Negotiation 99,200 - Non State Actor Support 98,220 - Centralized Utility Billings - Ebeye 44,946 39,830 Land leases 1,689,237 1,244,134 Majuro Landowners Electricity 3,794,913 3,821,071 Leased housing 123,725 118,725 Contingency Fund 345,858 59,008 International Subscriptions/Membership Fees 504,075 485,029 Prior Year Liabilities 860,796 152,390 See Accompanying Independent Auditor's Report. - 73 - REPUBLIC OF THE MARSHALL ISLANDS Statement of Revenues, Expenditures by Function, and Changes in Fund Balance - General Fund (Fund 100100), Continued Year Ended September 30, 2021 (with comparative totals for the year ended September 30, 2020) 2021 2020 Expenditures, continued: Special appropriations, continued: Tobolar subsidy 65 - ADB loan repayment 4,075,215 3,875,401 Special Election 154,969 - 15,776,354 17,210,227 Council of Iroij: Administration 157,765 180,856 Members 432,587 415,858 590,352 596,714 Nitijela: Operations 821,738 880,919 General membership 1,244,755 1,084,107 Speaker's contingency 90,461 83,434 Committee 31,424 9,531 Legislative counsel 97,401 94,480 2,285,779 2,152,471 Office of the Auditor-General: Operations 813,050 672,931 Single audit - local match 231,432 405,247 1,044,482 1,078,178 Public Service Commission: Members 124,785 134,149 Administration 522,908 480,896 647,693 615,045 Judiciary 943,886 1,027,666 Office of the Attorney General 1,158,406 1,072,978 Ministries: Education, Sports and Training 13,808,487 11,815,674 Health and Human Services 5,123,425 4,826,912 Transportation, Communication and Information Technology 701,979 4,466,278 Natural Resources and Commerce 1,777,260 9,928,802 Culture and Internal Affairs 3,569,240 3,559,122 Justice, Immigration and Labor 3,877,811 3,792,067 Finance, Banking and Postal Services 17,994,367 7,642,389 Foreign Affairs and Trade 4,841,029 4,495,084 Works, Infrastructure and Utilities 4,570,713 3,486,548 56,264,311 54,012,876 Environmental Protection Authority 455,448 451,188 Total expenditures 95,459,173 86,751,786 Deficiency of revenues under expenditures (4,211,210) (2,712,229) Other financing sources: Loan proceeds: International Cooperation and Development Fund 3,158,000 3,000,000 Marshall Islands Development Bank - 2,035,670 Operating transfers in: Compact Trust Fund 3,000,000 3,000,000 Ministry of Justice Fund 780,582 683,006 Health Care Revenue Fund 30,495 - Marshall Islands Health Fund 29,479 - Total other financing sources 6,998,556 8,718,676 Other financing uses: Operating transfers out: Compact Trust Fund 250,000 500,000 Net change in fund balance 2,537,346 5,506,447 Fund balance at the beginning of the year 28,860,093 23,353,646 Fund balance at the end of the year $ 31,397,439 $ 28,860,093 See Accompanying Independent Auditor's Report. - 74 - REPUBLIC OF THE MARSHALL ISLANDS Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - General Fund (Fund 100100) Year Ended September 30, 2021 Budgeted Amounts Actual - Original Final Budgetary Basis Variance Revenues: Taxes: Income $ 16,681,006 $ 16,681,006 $ 17,410,860 $ 729,854 Import 6,950,000 6,950,000 7,527,949 577,949 Import - CMI 1,400,000 1,400,000 1,691,456 291,456 Gross revenue 6,465,000 6,465,000 7,424,215 959,215 Immovable property 722,000 722,000 710,001 (11,999) Fuel 325,000 325,000 588,613 263,613 Penalties and interest 54,000 54,000 82,433 28,433 Other 68,800 68,800 6,400 (62,400) 32,665,806 32,665,806 35,441,927 2,776,121 Fees and charges - - 55,534 55,534 Interest and dividends 110,000 110,000 103,035 (6,965) Other: Asian Development Bank grant - 16,627,495 16,000,000 (627,495) Taiwan grant 4,000,000 5,173,246 5,112,268 (60,978) Other grants - 862,480 - (862,480) Ship registry 8,000,000 8,000,000 8,171,815 171,815 MI Marine Resources Authority 26,000,000 26,000,000 26,000,000 - RMI Ports Authority 28,000 28,000 - (28,000) Other 4,400,000 3,831,248 363,384 (3,467,864) 42,428,000 60,522,469 55,647,467 (4,875,002) Total revenues 75,203,806 93,298,275 91,247,963 (2,050,312) Expenditures: President and Cabinet: Office of the President 1,888,534 1,380,593 1,300,402 80,191 President and Ministers 658,014 658,032 672,894 (14,862) Cabinet Operations 492,119 541,803 435,145 106,658 3,038,667 2,580,428 2,408,441 171,987 Office of the Chief Secretary: Administration 1,616,366 15,264,921 16,468,947 (1,204,026) Deputy Chief Secretary - Ebeye 107,606 116,357 116,502 (145) EPPSO 464,479 430,776 367,959 62,817 Disaster Management - - 90 (90) 2,188,451 15,812,054 16,953,498 (1,141,444) Special appropriations: MISSA subsidy 1,587,200 1,587,200 1,587,200 - Capital Building 40,625 40,625 40,625 - Employee Pension Fund 217,908 215,012 137,971 77,041 National Election - Ebeye - 6,280 5,900 380 Outer Islands Local Government MISSA payments - - 680,346 (680,346) National Election 49,646 49,196 45,669 3,527 General Fund reserve 30,000 - - - Ebeye Wellness 198,400 198,400 - 198,400 KADA operations 43,232 43,232 41,714 1,518 Infrastructure Maintenance Fund 404,981 404,981 404,981 - Centralized Utility Billings - Majuro 823,360 823,360 636,698 186,662 Outer Islands Projects 260 260 260 - Water Project 53,694 53,694 53,694 - CMI Endowment Fund 92,256 92,256 92,256 - Constitutional Convention - 297,600 - 297,600 ICDF Commitment Fee 148,800 150,000 114,980 35,020 Immovable Tax Share 274,478 274,478 - 274,478 Kwajalein Solid Waste 148,800 148,800 148,800 - Kwajalein Sewage Truck 148,800 148,800 148,800 - Census 2021 - 496,000 420,682 75,318 Compact Negotiation - 99,200 99,200 - Non State Actor Support - - 98,220 (98,220) Centralized Utility Billings - Ebeye 49,600 49,600 44,946 4,654 Land leases 1,412,580 1,872,645 1,689,237 183,408 Majuro Landowners Electricity 3,354,990 3,354,990 3,794,913 (439,923) Leased housing 160,093 155,075 123,725 31,350 Contingency Fund 207,689 387,295 350,887 36,408 International Subscriptions/Membership Fees 464,256 464,256 504,075 (39,819) Prior Year Liabilities 1,569,738 1,654,076 1,210,228 443,848 Tobolar Subsidy - - 65 (65) ADB loan repayment 3,968,000 4,000,000 4,075,215 (75,215) Constitutional Convention 15,272 195,952 177,634 18,318 15,464,658 17,263,263 16,728,921 534,342 Council of Iroij: Administration 155,437 159,508 160,718 (1,210) Members 441,328 436,354 437,044 (690) 596,765 595,862 597,762 (1,900) See Accompanying Independent Auditor's Report. - 75 - REPUBLIC OF THE MARSHALL ISLANDS Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - General Fund (Fund 100100) Year Ended September 30, 2021 Budgeted Amounts Actual - Original Final Budgetary Basis Variance Expenditures, Continued: Nitijela: Operations 844,233 905,962 853,203 52,759 General Membership 1,358,491 1,306,107 1,277,720 28,387 Speaker's Contingency 122,381 124,678 115,022 9,656 Committee 92,273 62,103 59,953 2,150 Legislative Counsel 137,406 137,911 97,401 40,510 2,554,784 2,536,761 2,403,299 133,462 Office of the Auditor-General: Operations 697,234 1,026,194 963,268 62,926 Single audit 1,275,119 1,275,119 1,272,919 2,200 1,972,353 2,301,313 2,236,187 65,126 Foreign Affairs and Trade: Administration 1,854,340 1,985,140 1,912,597 72,543 Washington D.C. Embassy 635,650 639,015 540,808 98,207 RMI-Usaka Office 114,533 97,935 98,131 (196) Honolulu Consulate 266,968 298,693 272,062 26,631 United Nations Mission - New York 500,208 620,801 541,601 79,200 Japan Embassy - Tokyo 523,373 586,510 549,806 36,704 ROC Embassy - Taipei 365,367 416,701 398,387 18,314 Fiji Embassy - Suva 483,207 510,311 479,544 30,767 Korea Embassy 71,507 115,245 82,099 33,146 4,815,153 5,270,351 4,875,035 395,316 Public Service Commission: Members 147,504 123,440 125,285 (1,845) Administration 511,590 538,046 528,273 9,773 659,094 661,486 653,558 7,928 Judiciary: General Courts 1,150,580 1,139,063 1,035,161 103,902 Traditional Rights Court 142,585 126,187 121,630 4,557 Community Court 100,344 83,272 81,320 1,952 Judicial Service Commission 375 375 375 - 1,393,884 1,348,897 1,238,486 110,411 Office of the Attorney General: Attorney General Office 1,105,083 1,014,922 896,545 118,377 Immigration - Majuro 245,662 267,947 193,563 74,384 Immigration - Ebeye 88,260 88,260 74,808 13,452 1,439,005 1,371,129 1,164,916 206,213 Education, Sports and Training: College of the Marshall Islands 2,385,639 2,385,639 2,385,638 1 National Training Council 86,347 86,338 77,596 8,742 RMI/USP Joint Project 744,000 793,600 - 793,600 Scholarship Board 1,008,751 1,008,751 1,003,866 4,885 Administration 5,327,146 5,768,522 5,807,034 (38,512) Policy and Planning 231,392 231,392 223,653 7,739 Elementary Support Services 609,833 609,833 540,426 69,407 Contracted Teachers 2,858,173 2,740,232 2,633,216 107,016 Secondary Education and Support Services 88,480 88,480 53,553 34,927 Aid to Private Schools 788,640 788,640 788,640 - Property and Maintenance 306,682 306,682 307,346 (664) PSS Teachers Certification Program - - 232 (232) 14,435,083 14,808,109 13,821,200 986,909 Health and Human Services: Office of the Secretary 1,909,886 2,083,476 1,827,303 256,173 Health Planning and Statistics 177,255 174,318 167,926 6,392 Majuro Hospital Medical Services 2,511,452 2,487,119 2,530,442 (43,323) Hospital Capital Account 197,658 197,658 197,658 - Primary Health Care 172,749 172,870 158,985 13,885 Outer Island Dispensaries 14,545 16,823 12,297 4,526 Kwajalein Atoll Public Health - - 5,174 (5,174) Kwajalein Atoll Health Services 536,238 536,237 501,532 34,705 5,519,783 5,668,501 5,401,317 267,184 Transportation, Communication and Information Technology: Office of the Secretary 529,955 497,979 426,633 71,346 Director of Civil Aviation 333,772 331,867 291,166 40,701 863,727 829,846 717,799 112,047 Natural Resources and Commerce: Administration 688,449 582,443 388,841 193,602 Agro-Forestry 657,457 539,169 467,666 71,503 Trade and Investment 351,532 272,564 241,828 30,736 Office of Commerce and Investment 738,048 738,048 738,048 - 2,435,486 2,132,224 1,836,383 295,841 See Accompanying Independent Auditor's Report. - 76 - REPUBLIC OF THE MARSHALL ISLANDS Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - General Fund (Fund 100100) Year Ended September 30, 2021 Budgeted Amounts Actual - Original Final Budgetary Basis Variance Expenditures, Continued: Culture and Internal Affairs: Administration 1,405,903 1,495,251 1,435,198 60,053 Alele Corporation 207,221 349,821 303,147 46,674 Local Government Affairs 1,489,619 1,441,664 1,324,738 116,926 Community Development 55,677 32,498 14,029 18,469 Youth Services Bureau 44,256 32,071 25,597 6,474 Gender and Development 51,994 28,705 5,187 23,518 Electoral Administration 94,792 90,202 76,016 14,186 Elections 352 352 352 - V7AB Radio Division 282,141 262,571 270,811 (8,240) Registrar Office 98,099 110,546 155,023 (44,477) Central Adoption Administration 48,246 30,333 39,287 (8,954) 3,778,300 3,874,014 3,649,385 224,629 Justice, Immigration and Labor: Public Defender 236,143 236,143 200,381 35,762 Public Safety - Majuro 2,251,237 2,295,452 2,274,630 20,822 Public Safety - Ebeye 522,314 522,303 559,006 (36,703) Sea Patrol 747,382 795,473 792,029 3,444 Land Registry Authority 106,399 106,399 106,672 (273) 3,863,475 3,955,770 3,932,718 23,052 Finance, Banking and Postal Services: Office of the Secretary 4,107,397 7,960,036 5,738,192 2,221,844 Accounting and Administration 718,878 813,898 818,183 (4,285) SOE Monitoring Unit 8,369,038 9,522,766 9,177,319 345,447 Revenue Division - Majuro 363,045 348,971 364,795 (15,824) Customs Division 373,155 387,000 301,675 85,325 Treasury Division 80,002 86,370 77,973 8,397 Budget and Procurement 550,148 541,895 455,991 85,904 State Agency SAPT - Match 36,501 36,501 48,560 (12,059) Procurement and Supply Division 240,105 455,431 495,728 (40,297) Ebeye - Finance 161,772 268,175 260,177 7,998 Ebeye - Revenue Collections - - 2,934 (2,934) Ebeye Revenue/Custom Office 265,908 130,724 126,434 4,290 Banking Commission 498,665 498,126 465,905 32,221 15,764,614 21,049,893 18,333,866 2,716,027 Work, Infrastructure and Utilities: Administration 2,751,144 8,456,577 7,385,974 1,070,603 CGMA 1,416,181 1,397,459 1,426,037 (28,578) OI Projects 1,402 1,402 1,402 - Pass (Lib and Jabot) 120,000 913,600 913,600 - Project Management Unit 99,144 99,144 22,213 76,931 4,387,871 10,868,182 9,749,226 1,118,956 Environment: Ministry Office 495,637 491,176 457,175 34,001 Total expenditures 85,666,790 113,419,259 107,159,172 6,260,087 (10,462,984) (20,120,984) (15,911,209) 4,209,775 Other financing sources (uses): Loan proceeds: International Cooperation and Development Fund - 3,158,000 3,158,000 - Operating transfers in: Compact Trust Fund - 2,500,000 3,000,000 500,000 Ministry of Justice Fund 374,173 374,173 780,582 406,409 Health Care Revenue Fund - - 30,495 30,495 Marshall Islands Health Fund - - 29,479 29,479 374,173 2,874,173 3,840,556 966,383 Operating transfers out: Compact Trust Fund 250,000 250,000 250,000 - Encumbrances for supplies and equipment ordered but not received are reported in the year the order is placed for budgetary purposes but in the year the supplies are received for financial reporting purposes 10,338,811 10,338,811 11,699,999 1,361,188 Net change in fund balance $ - $ (4,000,000) $ 2,537,346 $ 6,537,346 See Accompanying Independent Auditor's Report. - 77 - REPUBLIC OF THE MARSHALL ISLANDS NONMAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS September 30, 2021 Special revenue funds are used to account for specific revenues that are legally restricted for particular purposes. A brief discussion of RepMar's Nonmajor Governmental Funds - Special Revenue Funds as of September 30, 2021, follows: Public Works Fund This fund was established under Public Law No. 2003-24 and accounts for all charges, fees and other monies collected or generated by the Ministry of Works, Infrastructure and Utilities. Land Registration Authority Fund This fund accounts for the operations of the Marshall Islands Land Registration Authority. This Authority was established under Public Law No. 2001-26 to provide a legal framework for registration of land in the Marshall Islands in order to encourage investment and to protect land interest holders. Labor (General) Fund This fund accounts for the collection of all fees and charges levied under the Labor (Non-Resident Workers) Act of 2006 (Public Law No. 2006-60) as administered by the Ministry of Foreign Affairs and Trade. Labor (Bond) Fund This fund accounts for the collection of all bonds paid or forfeited by employers under the Labor (Non- Resident Workers) Act of 2006 (Public Law No. 2006-60) as administered by the Ministry of Foreign Affairs and Trade. Ministry of Justice Fund This fund accounts for specific operations of both the Department of Public Safety and Ministry of Justice, Immigration and Labor. This fund was established under Public Law No. 1989-70 and administers fees and fines, as collected by the courts with respect to violation of National Government laws, and any appropriations made by the Nitijela for related purposes. Marshall Islands Revised Code Fund This fund accounts for the maintenance of the Marshall Islands Revised Code. This fund was established under Public Law No. 2006-61 to administer revenue received with respect to the sale and distribution of the Marshall Islands Revised code, and any appropriations made by the Nitijela for related purposes. Recycling Fund This fund accounts for the collection of all fees and charges levied under the Styrofoam Cups and Plates, and Plastic Products Prohibition, and Container Deposit Act, 2016 (Public Law No. 2016-17) as administered by the RMI Environmental Protection Authority. Resident Workers Training Account Fund This fund was established under Public Law No. 1987-6 and accounts for all monies collected under the provisions of the Nonresident Workers Act of 1983 from employers who employ non-resident workers, and accounts for all financial transactions of the National Training Council. See Accompanying Independent Auditor’s Report. - 78 - REPUBLIC OF THE MARSHALL ISLANDS NONMAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS September 30, 2021 National Training Fund This fund was established under Public Law No. 1991-140 for the purpose of providing training, including vocational training and human resources development. Sea Patrol Fund This fund was established under Public Law No. 1991-143 and accounts for all charges, fees and fines generated and received by the Sea Patrol Division through the use of the patrol boat M.V. Lomor. Transportation Services Fund This fund was established under Public Law No. 2001-38 and accounts for all charges, fees and other monies collected or generated by the Ministry of Transportation, Communication and Information Technology through the use of their shipping vessels. Registrar General Fund This fund was established under Public Law No. 1992-4 and accounts for all charges, fees and monies collected or generated by the Ministry of Culture and Internal Affairs Registrar-General of Births, Deaths and Marriages. Ministry of Internal Affairs Fund This fund was established under Public Law No. 2003-84 and accounts for all charges, fees and monies collected or generated by Ministry of Culture and Internal Affairs through Radio V7AB, the Lands and Survey Division, the ID Card Section, the Sports and Recreation Division, and any other funds generated by the Ministry for a specific purpose. Banking Commissioner Fund This fund was established under Public Law No. 2019-114 and accounts for all activities of the Commissioner of Banking. Four-Atoll Medical Fund This fund accounts for transactions from the distribution of annual proceeds from the Nuclear Claims Trust Fund in accordance with Article II, Section 1(a) of the agreement between the Government of the United States and RepMar for the implementation of Section 177 of the Compact of Free Association. Marshall Islands Scholarship Grant and Loan Board This fund was established under Public Law No. 1979-19 and accounts for all disbursements of scholarship funds. Marshall Islands Judiciary Fund This fund was established to account for all activities of the Marshall Islands Judiciary not accounted for within the General Fund. See Accompanying Independent Auditor’s Report. - 79 - REPUBLIC OF THE MARSHALL ISLANDS NONMAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS September 30, 2021 Health Care Revenue Fund This fund was established under Public Law No. 1989-59 within the Ministry of Health and Human Services to control the expenditure of funds for health care related services. Marshall Islands Health Fund This fund was established under Public Law No. 1990-75, as amended by Public Law Nos. 2001-31 and 2001-35, to account for the operations of the Basic and Supplemental Health Funds delivering comprehensive medical care to the residents of the Marshall Islands. See Accompanying Independent Auditor’s Report. - 80 - REPUBLIC OF THE MARSHALL ISLANDS NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Combining Balance Sheet September 30, 2021 200105 200224 200318 200319 200332 200333 200334 200340 NTC 200520 Resident Land Marshall Workers Public Registration Labor Labor Ministry Islands Training National Works Authority (General) (Bond) of Justice Revised Code Recycling Account Training Sea Patrol ASSETS Cash and cash equivalents $ - $ - $ - $ - $ - $ - $ - $ - $ 228,077 $ - Receivables, net: Taxes - - - - - - - 144,375 - - General - - - - - - - - - - Other - - - - - - - 810 - - Due from other funds 330,706 18,118 562,203 183,845 678,881 - 369,830 1,416,932 386,374 9,055 Advances 100 - 4,497 - 22,021 - - (1,804) - - Total assets $ 330,806 $ 18,118 $ 566,700 $ 183,845 $ 700,902 $ - $ 369,830 $ 1,560,313 $ 614,451 $ 9,055 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 270 $ - $ 3,453 $ - $ 486,793 $ - $ 28,932 $ 557,400 $ - $ - Medical claims payable - - - - - - - - - - Other liabilities and accruals - - 447 183,845 - - - 13,240 3,538 - Total liabilities 270 - 3,900 183,845 486,793 - 28,932 570,640 3,538 - Fund balances: Restricted - - - - - - - - - - Committed 330,536 18,118 562,800 - 214,109 - 340,898 989,673 610,913 9,055 Total fund balances 330,536 18,118 562,800 - 214,109 - 340,898 989,673 610,913 9,055 Total liabilities and fund balances $ 330,806 $ 18,118 $ 566,700 $ 183,845 $ 700,902 $ - $ 369,830 $ 1,560,313 $ 614,451 $ 9,055 See Accompanying Independent Auditor's Report. - 81 - REPUBLIC OF THE MARSHALL ISLANDS NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Combining Balance Sheet, Continued September 30, 2021 200525 200527 200528 200540 300612 Marshall Islands Ministry of Scholarship, Marshall Health Marshall Transportation Registrar Internal Banking Four-Atoll Grant and Islands Care Islands Services General Affairs Commissioner Medical Loan Board Judiciary Revenue Health Elimination Total ASSETS Cash and cash equivalents $ - $ - $ - $ - $ - $ 632,088 $ 682,621 $ 1,166,168 $ 966,831 $ - $ 3,675,785 Receivables, net: Taxes - - - - - - - - - - 144,375 General - - - - 589,653 - - 317,349 1,676,308 - 2,583,310 Other - - - - - 10,904 3,763 - - - 15,477 Due from other funds 38,504 391 226,029 112,329 97,635 - - - 2,358,756 - 6,789,588 Advances - - 6,242 1,552 - - - 47,472 393,324 - 473,404 - Total assets $ 38,504 $ 391 $ 232,271 $ 113,881 $ 687,288 $ 642,992 $ 686,384 $ 1,530,989 $ 5,395,219 $ - $ 13,681,939 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ - $ - $ 2,443 $ 5,043 $ - $ 28,993 $ - $ 748,465 $ 407,572 $ - $ 2,269,364 Medical claims payable - - - - - - - - 1,101,222 - 1,101,222 Other liabilities and accruals - - - - - - 25,769 117,178 - - 344,017 Total liabilities - - 2,443 5,043 - 28,993 25,769 865,643 1,508,794 - 3,714,603 Fund balances: Restricted - - - - 687,288 1,500 - - - - 688,788 Committed 38,504 391 229,828 108,838 - 612,499 660,615 665,346 3,886,425 - 9,278,548 Total fund balances 38,504 391 229,828 108,838 687,288 613,999 660,615 665,346 3,886,425 - 9,967,336 Total liabilities and fund balances $ 38,504 $ 391 $ 232,271 $ 113,881 $ 687,288 $ 642,992 $ 686,384 $ 1,530,989 $ 5,395,219 $ - $ 13,681,939 See Accompanying Independent Auditor's Report. - 82 - REPUBLIC OF THE MARSHALL ISLANDS NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Combining Statement of Revenues, Expenditures By Function, and Changes in Fund Balances (Deficits) Year Ended September 30, 2021 200105 200224 200318 200319 200332 200333 200334 200340 NTC 200520 Resident Land Marshall Workers Public Registration Labor Labor Ministry Islands Training National Works Authority (General) (Bond) of Justice Revised Code Recycling Account Training Sea Patrol Revenues: Federal and other grants $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Fees and charges 17,150 - 135,278 - 1,133,503 - 944,585 642,276 50,000 - Interest - - - - - - - - - - Sales 94,884 - - - 47,078 - - - 161,685 - Total revenues 112,034 - 135,278 - 1,180,581 - 944,585 642,276 211,685 - Expenditures by Function: Current: Judiciary - - - - - - - - - - Ministries: Education, Sports and Training - - - - - - - 214,931 310,002 - Health and Human Services - - - - - - - - - - Culture and Internal Affairs - - - - - - - - - - Justice, Immigration and Labor - - - - 337,982 - - - - 3,334 Finance, Banking and Postal Services - - - - - - 763,944 - - - Foreign Affairs and Trade - - 50,242 - - - - - - - Works, Infrastructure and Utilities 129,814 - - - - - - - - - Nuclear claims related - - - - - - - - - - Total expenditures 129,814 - 50,242 - 337,982 - 763,944 214,931 310,002 3,334 Excess (deficiency) of revenues over (under) expenditures (17,780) - 85,036 - 842,599 - 180,641 427,345 (98,317) (3,334) Other financing sources (uses): Operating transfers in - - - - - - - - 709,230 - Operating transfers out - - - - (780,582) - - (322,856) - - Total other financing sources (uses), net - - - - (780,582) - - (322,856) 709,230 - Net change in fund balances (deficits) (17,780) - 85,036 - 62,017 - 180,641 104,489 610,913 (3,334) Fund balances (deficits) at the beginning of the year 348,316 18,118 477,764 - 152,092 - 160,257 885,184 - 12,389 Fund balances at the end of the year $ 330,536 $ 18,118 $ 562,800 $ - $ 214,109 $ - $ 340,898 $ 989,673 $ 610,913 $ 9,055 See Accompanying Independent Auditor's Report. - 83 - REPUBLIC OF THE MARSHALL ISLANDS NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Combining Statement of Revenues, Expenditures By Function, and Changes in Fund Balances (Deficits), Continued Year Ended September 30, 2021 200525 200527 200528 200540 300612 Marshall Islands Ministry of Scholarship, Marshall Health Marshall Transportation Registrar Internal Banking Four-Atoll Grant and Islands Care Islands Services General Affairs Commissioner Medical Loan Board Judiciary Revenue Health Elimination Total Revenues: Federal and other grants $ - $ - $ - $ - $ - $ - $ - $ 602,814 $ - $ - $ 602,814 Fees and charges - - 61,142 153,217 - - 138,267 514,662 8,773,576 - 12,563,656 Interest - - - - - 9,636 9,240 - - - 18,876 Sales 1,485 - 3,270 - - - 8,359 - - - 316,761 Total revenues 1,485 - 64,412 153,217 - 9,636 155,866 1,117,476 8,773,576 - 13,502,107 Expenditures by Function: Current: Judiciary - - - - - - 1,032,881 - - - 1,032,881 Ministries: Education, Sports and Training - - - - - 1,749,640 - - - - 2,274,573 Health and Human Services - - - - - - - 4,723,547 4,920,435 - 9,643,982 Culture and Internal Affairs - - 57,939 - - - - - - - 57,939 Justice, Immigration and Labor - - - - - - - - - - 341,316 Finance, Banking and Postal Services - - - 51,879 - - - - - - 815,823 Foreign Affairs and Trade - - - - - - - - - - 50,242 Works, Infrastructure and Utilities - - - - - - - - - - 129,814 Nuclear claims related - - - - 1,607,010 - - - - - 1,607,010 Total expenditures - - 57,939 51,879 1,607,010 1,749,640 1,032,881 4,723,547 4,920,435 - 15,953,580 Excess (deficiency) of revenues over (under) expenditures 1,485 - 6,473 101,338 (1,607,010) (1,740,004) (877,015) (3,606,071) 3,853,141 - (2,451,473) Other financing sources (uses): Operating transfers in - - - - 1,737,051 1,669,339 943,886 3,832,073 - (4,154,929) 4,736,650 Operating transfers out - - - - - - - (30,495) (3,861,552) 4,154,929 (840,556) Total other financing sources (uses), net - - - - 1,737,051 1,669,339 943,886 3,801,578 (3,861,552) - 3,896,094 Net change in fund balances (deficits) 1,485 - 6,473 101,338 130,041 (70,665) 66,871 195,507 (8,411) - 1,444,621 Fund balances (deficits) at the beginning of the year 37,019 391 223,355 7,500 557,247 684,664 593,744 469,839 3,894,836 - 8,522,715 Fund balances at the end of the year $ 38,504 $ 391 $ 229,828 $ 108,838 $ 687,288 $ 613,999 $ 660,615 $ 665,346 $ 3,886,425 $ - $ 9,967,336 See Accompanying Independent Auditor's Report. - 84 - REPUBLIC OF THE MARSHALL ISLANDS NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Combining Statement of Revenues, Expenditures By Account, and Changes in Fund Balances (Deficits) Year Ended September 30, 2021 200105 200224 200318 200319 200332 200333 200334 200340 NTC 200520 Resident Land Marshall Workers Public Registration Labor Labor Ministry Islands Training National Works Authority (General) (Bond) of Justice Revised Code Recycling Account Training Sea Patrol Revenues: Federal and other grants $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Fees and charges 17,150 - 135,278 - 1,133,503 - 944,585 642,276 50,000 - Interest - - - - - - - - - - Sales 94,884 - - - 47,078 - - - 161,685 - Total revenues 112,034 - 135,278 - 1,180,581 - 944,585 642,276 211,685 - Expenditures by Account: Grants and subsidies - - - - - - - - 100 - Salaries and wages - - 12,400 - - - - 200,995 8,317 - Medical supplies - - - - - - - - - - Contractual services - - - - 5,000 - 763,944 - 196,627 - Capital outlay 85,386 - 8,218 - 99,249 - - - - 3,334 Travel - - 9,153 - 31,825 - - - 35,967 - Food stuffs 8,000 - 677 - 199 - - 100 11,500 - Supplies and materials (10,592) - 4,730 - 84,985 - - - 11,537 - POL 30,408 - 3,260 - 78,446 - - - 1,614 - Rentals 8,008 - 3,140 - 1,313 - - 10,836 6,270 - Allowances - - - - - - - 3,000 15,000 - Communications - - 3,345 - - - - - 9,387 - Insurance - - - - 3,983 - - - 1,626 - Utilities - - - - 1,185 - - - 2,068 - Leased housing - - 4,200 - - - - - - - Freight 1,583 - - - 10,740 - - - 75 - Professional services - - - - - - - - - - Printing and reproduction - - - - 512 - - - 210 - Other 7,021 - 1,119 - 20,545 - - - 9,704 - Total expenditures 129,814 - 50,242 - 337,982 - 763,944 214,931 310,002 3,334 Excess (deficiency) of revenues over (under) expenditures (17,780) - 85,036 - 842,599 - 180,641 427,345 (98,317) (3,334) Other financing sources (uses): Operating transfers in - - - - - - - - 709,230 - Operating transfers out - - - - (780,582) - - (322,856) - - Total other financing sources (uses), net - - - - (780,582) - - (322,856) 709,230 - Net change in fund balances (deficits) (17,780) - 85,036 - 62,017 - 180,641 104,489 610,913 (3,334) Fund balances (deficits) at the beginning of the year 348,316 18,118 477,764 - 152,092 - 160,257 885,184 - 12,389 Fund balances at the end of the year $ 330,536 $ 18,118 $ 562,800 $ - $ 214,109 $ - $ 340,898 $ 989,673 $ 610,913 $ 9,055 See Accompanying Independent Auditor's Report. - 85 - REPUBLIC OF THE MARSHALL ISLANDS NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Combining Statement of Revenues, Expenditures By Account, and Changes in Fund Balances (Deficits), Continued Year Ended September 30, 2021 200525 200527 200528 200540 300612 Marshall Islands Ministry of Scholarship, Marshall Health Marshall Transportation Registrar Internal Banking Four-Atoll Grant and Islands Care Islands Services General Affairs Commissioner Medical Loan Board Judiciary Revenue Health Elimination Total Revenues: Federal and other grants $ - $ - $ - $ - $ - $ - $ - $ 602,814 $ - $ - $ 602,814 Fees and charges - - 61,142 153,217 - - 138,267 514,662 8,773,576 - 12,563,656 Interest - - - - - 9,636 9,240 - - - 18,876 Sales 1,485 - 3,270 - - - 8,359 - - - 316,761 Total revenues 1,485 - 64,412 153,217 - 9,636 155,866 1,117,476 8,773,576 - 13,502,107 Expenditures by Account: Grants and subsidies - - - - - 1,653,829 - - - - 1,653,929 Salaries and wages - - - - - - 689,312 200,824 357,824 - 1,469,672 Medical supplies - - - - - - - 3,141,399 - - 3,141,399 Contractual services - - - 1,584 1,607,010 - - - 3,092,177 - 5,666,342 Capital outlay - - 7,077 18,786 - 10,672 35,910 624,079 - - 892,711 Travel - - - 2,728 - 8,747 12,579 72,974 801,357 - 975,330 Food stuffs - - 33,223 2,889 - - 1,989 29,431 - - 88,008 Supplies and materials - - - 10,977 - 6,859 62,327 100,873 - - 271,696 POL - - - 350 - 2,856 10,023 26,172 - - 153,129 Rentals - - - 162 - 15,840 563 111,188 - - 157,320 Allowances - - - - - - - - - - 18,000 Communications - - - 5,839 - 28,973 47,784 32,575 - - 127,903 Insurance - - - - - - 3,833 - - - 9,442 Utilities - - - - - - 37,664 - - - 40,917 Leased housing - - - - - - 66,460 - - - 70,660 Freight - - - - - - 238 65,985 - - 78,621 Professional services - - - - - - 43,536 223,065 423,200 - 689,801 Printing and reproduction - - - - - 3,729 - 25,146 - - 29,597 Other - - 17,639 8,564 - 18,135 20,663 69,836 245,877 - 419,103 Total expenditures - - 57,939 51,879 1,607,010 1,749,640 1,032,881 4,723,547 4,920,435 - 15,953,580 Excess (deficiency) of revenues over (under) expenditures 1,485 - 6,473 101,338 (1,607,010) (1,740,004) (877,015) (3,606,071) 3,853,141 - (2,451,473) Other financing sources (uses): Operating transfers in - - - - 1,737,051 1,669,339 943,886 3,832,073 - (4,154,929) 4,736,650 Operating transfers out - - - - - - - (30,495) (3,861,552) 4,154,929 (840,556) Total other financing sources (uses), net - - - - 1,737,051 1,669,339 943,886 3,801,578 (3,861,552) - 3,896,094 Net change in fund balances (deficits) 1,485 - 6,473 101,338 130,041 (70,665) 66,871 195,507 (8,411) - 1,444,621 Fund balances (deficits) at the beginning of the year 37,019 391 223,355 7,500 557,247 684,664 593,744 469,839 3,894,836 - 8,522,715 Fund balances at the end of the year $ 38,504 $ 391 $ 229,828 $ 108,838 $ 687,288 $ 613,999 $ 660,615 $ 665,346 $ 3,886,425 $ - $ 9,967,336 See Accompanying Independent Auditor's Report. - 86 - REPUBLIC OF THE MARSHALL ISLANDS FIDUCIARY FUNDS - PRIVATE PURPOSE TRUSTS September 30, 2021 Private purpose trusts are used to report any trust arrangement not properly reported in a pension trust fund or an investment trust fund “under which principal and income benefit individuals, private organizations, or other governments.” A brief discussion of RepMar’s Private Purpose Trusts as of September 30, 2021, follows: Marshall Islands Social Security Administration (MISSA) This fund established MISSA under Public Law No. 1990-75, which administers the Marshall Islands Social Security Retirement Fund, to provide a financially sound social security system with pension benefits and early retirement. Kwajalein Atoll Trust Fund This fund accounts for funds received under the Interim Use Agreement, to be disbursed to various Kwajalein landowners. Section 212 Kwajalein Landowners Fund This fund accounts for United States Congress appropriations under United States Public Law 99-239, as amended, Title II, Article I, Section 212 and approved by Nitijela resolution 123 in accordance with the Military Use and Operating Rights Agreement. See Accompanying Independent Auditor’s Report. - 87 - REPUBLIC OF THE MARSHALL ISLANDS Combining Statement of Fiduciary Net Position Fiduciary Funds - Private Purpose Trusts September 30, 2021 DILOG Fund Number 350610 510610 Marshall Islands Section Social 212 Security Kwajalein Kwajalein Admin. Atoll Trust Landowners Total ASSETS Cash and cash equivalents $ 4,036,935 $ - $ - $ 4,036,935 Time certificate of deposit 3,500,000 - - 3,500,000 Receivables, net: Contributions 4,114,319 - - 4,114,319 Other 1,321,661 - - 1,321,661 Investments 93,637,998 - - 93,637,998 Due from other funds - 421,658 463,460 885,118 Capital assets, net of accumulated depreciation 399,800 - - 399,800 Total assets 107,010,713 421,658 463,460 107,895,831 LIABILITIES Accounts payable 188,175 - - 188,175 Other liabilities and accruals 12,659 - - 12,659 Due to other funds 2,358,756 - - 2,358,756 Total liabilities 2,559,590 - - 2,559,590 NET POSITION Restricted for: Social security benefits 104,451,123 - - 104,451,123 Land use distributions - 421,658 463,460 885,118 Total net position $ 104,451,123 $ 421,658 $ 463,460 $ 105,336,241 See Accompanying Independent Auditor's Report. - 88 - REPUBLIC OF THE MARSHALL ISLANDS Combining Statement of Changes in Fiduciary Net Position Fiduciary Funds - Private Purpose Trusts Year Ended September 30, 2021 DILOG Fund Number 350610 510610 Marshall Islands Section Social 212 Security Kwajalein Kwajalein Admin. Atoll Trust Landowners Total Additions: Contributions: Private employees $ 14,785,248 $ - $ - $ 14,785,248 Government employees 7,231,746 - - 7,231,746 Penalties and interest 907,334 - - 907,334 Total contributions 22,924,328 - - 22,924,328 Investment earnings: Net change in the fair value of investments 13,072,322 - - 13,072,322 Interest and dividends 948,677 - - 948,677 Total investment earnings 14,020,999 - - 14,020,999 Less investment expense 164,881 - - 164,881 Net investment earnings 13,856,118 - - 13,856,118 Other: Compact funding - - 22,678,200 22,678,200 Transfer in 1,587,200 - - 1,587,200 Other 340,056 - - 340,056 1,927,256 - 22,678,200 24,605,456 Total additions 38,707,702 - 22,678,200 61,385,902 Deductions: Land use distributions - - 22,568,306 22,568,306 Benefits 21,202,996 - - 21,202,996 Administrative expenses 1,208,166 - - 1,208,166 Total deductions 22,411,162 - 22,568,306 44,979,468 Change in net position held in trust for: Social security benefits 16,296,540 - - 16,296,540 Land use distributions - - 109,894 109,894 Net position at the beginning of the year 88,154,583 421,658 353,566 88,929,807 Net position at the end of the year $ 104,451,123 $ 421,658 $ 463,460 $ 105,336,241 See Accompanying Independent Auditor's Report. - 89 - REPUBLIC OF THE MARSHALL ISLANDS FIDUCIARY FUNDS - CUSTODIAL September 30, 2021 Custodial funds are used to report resources held by the reporting government in a purely custodial capacity and typically involve only the receipt, temporary investment, and remittance of fiduciary resources to individuals, private organizations, or other governments. A brief discussion of RepMar’s Agency Funds as of September 30, 2021, follows: Judiciary Fund This fund accounts for funds received by the High Court in a fiduciary capacity for deposits made by defendants for court cases. Unclaimed Property Fund This fund accounts for funds received in a fiduciary capacity for distribution to other individuals that primarily consists of Bank of Hawaii deposits and share dividends from United Micronesia Development Association. See Accompanying Independent Auditor’s Report. - 90 - REPUBLIC OF THE MARSHALL ISLANDS Combining Statement of Fiduciary Net Position Fiduciary Funds - Custodial Funds September 30, 2021 DILOG Fund Number 300430 300430 Unclaimed Property Unclaimed UMDA Bank Stock Judiciary Deposits Buyout Total ASSETS Cash and cash equivalents $ 3,652,812 $ - $ - $ 3,652,812 Time certificate of deposit 90,337 - - 90,337 Due from other funds - 93,737 70,747 164,484 Total assets 3,743,149 93,737 70,747 3,907,633 NET POSITION Restricted for: Individuals, organizations and other governments $ 3,743,149 $ 93,737 $ 70,747 $ 3,907,633 See Accompanying Independent Auditor's Report. - 91 - REPUBLIC OF THE MARSHALL ISLANDS Combining Statement of Changes in Fiduciary Net Position Fiduciary Funds - Custodial Funds Year Ended September 30, 2021 DILOG Fund Number 300430 300430 Unclaimed UMDA Bank Stock Judiciary Deposits Buyout Total Additions: Investment earnings: Interest and dividends $ 1,358 $ - $ - $ 1,358 Other 55,840 - - 55,840 Total additions 57,198 - - 57,198 Deductions: Other distributions 305,125 - - 305,125 Administrative expenses 153 - - 153 Total deductions 305,278 - - 305,278 Change in net position held in trust for: Individuals, organizations and other governments (248,080) - - (248,080) Net position at the beginning of the year 3,991,229 93,737 70,747 4,155,713 Net position at the end of the year $ 3,743,149 $ 93,737 $ 70,747 $ 3,907,633 See Accompanying Independent Auditor's Report. - 92 - REPUBLIC OF THE MARSHALL ISLANDS NONMAJOR COMPONENT UNITS September 30, 2021 Component units are legally separate organizations for which the elected officials of RepMar are financially accountable. A brief discussion of RepMar’s Nonmajor Component Units as of September 30, 2021, follows: Majuro Atoll Waste Company, Inc. (MAWC) MAWC was incorporated under the laws of the Republic of the Marshall Islands on January 30, 2007 to engage in, but not limited to, the collection and disposal of solid waste on Majuro Atoll. MAWC is governed by a five-member Board of Directors comprising the Secretary of Public Works or Secretary responsible for solid waste, the Councilman on the Executive Committee responsible for solid waste management on the Majuro Atoll Local Government, one member from a list of two or more nominations by the Marshall Islands Chamber of Commerce, one member from a list of two or more nominations by the Marshall Islands Tourism Association, and one member from a list of two or more nominations by the Marshall Islands Conservation Society. RepMar provides financial support to MAWC through legislative appropriations. Majuro Resort, Inc. (MRI) MRI was granted a corporate charter by the Cabinet of RepMar on November 8, 1995 to engage in the operation of a 150-room hotel on the atoll of Majuro. MRI is governed by a seven-member Board of Directors appointed by the President upon approval of the Cabinet of RepMar. RepMar has the ability to impose its will on MRI. Marshall Islands Postal Services Authority (MIPSA) MIPSA was created by the Postal Service Act of 1983 for the purpose of establishing an effective and efficient postal service for the Republic, both domestic and international, from three service outlets - the Uliga and Delap postal stations located on Majuro Atoll, and the Ebeye postal station located on Kwajalein Atoll. MIPSA is governed by a five-member Board of Directors appointed by the President upon approval of the Cabinet of RepMar. The Board of Directors, in turn, is responsible for the appointment of the Postmaster General who oversees the day-to-day operations of the Authority. RepMar provides financial support to MIPSA through legislative appropriations. National Environmental Protection Authority (EPA) EPA was created by the National Environmental Protection Authority Act of 1984 (Public Law No, 1984- 31, the Act). EPA began operations as a statutory corporation on December 19, 1984, in accordance with the Act. The objectives of EPA are to preserve and improve the quality of the environment of the Marshall Islands. EPA is governed by a five-member Board of Directors appointed by the President upon approval of the Cabinet of RepMar. RepMar provides financial support to EPA through legislative appropriations. See Accompanying Independent Auditor’s Report. - 93 - REPUBLIC OF THE MARSHALL ISLANDS NONMAJOR COMPONENT UNITS September 30, 2021 Office of Commerce, Investment and Tourism (OCIT) OCIT was established pursuant to the Office of Commerce, Investment and Tourism (Amendment) Act 2018 (Public Law No. 2018-57). OCIT began operations as a statutory corporation on November 25, 2013 upon receiving its first operational budget. The objectives of OCIT were to: (1) to investigate, study, develop and implement social and economic development programs and projects, alone or in conjunction with other governmental, private organizations, or agencies, for the betterment of the economic and social conditions of the inhabitants of the Republic; (2) encourage and develop, and manage, businesses of economic or social importance to the Republic, such as tourism, poultry farming and piggeries; and (3) conduct, on behalf of RepMar, such business enterprises as the RepMar Cabinet directs, on such terms and conditions as were agreed to between OCIT and the RepMar Cabinet; provided, however, in all decisions of the Board or the RepMar Cabinet, the protection of existing enterprises shall be given highest consideration. OCIT is governed by a seven-member Board of Directors appointed by the President upon approval of the Cabinet of RepMar. RepMar provides financial support to OCIT through legislative appropriations. See Accompanying Independent Auditor’s Report. - 94 - REPUBLIC OF THE MARSHALL ISLANDS NONMAJOR COMPONENT UNITS Combining Statement of Net Position September 30, 2021 Majuro Marshall Office of Atoll Islands National Commerce, Waste Majuro Postal Environmental Investment Company, Resort, Service Protection and Inc. Inc. Authority Authority Tourism Total ASSETS Cash and cash equivalents $ 596,994 $ 520,812 $ 1,337,643 $ 875,174 $ 150,674 $ 3,481,297 Receivables, net 72,339 295,069 19,557 1,041 1,727 389,733 Inventories - 31,632 9,549 - - 41,181 Other assets 85,523 74,381 23,335 - - 183,239 Capital assets: Other capital assets, net of accumulated depreciation 481,358 891,586 45,656 89,196 149,936 1,657,732 Total assets 1,236,214 1,813,480 1,435,740 965,411 302,337 5,753,182 LIABILITIES Accounts payable 76,330 698,865 71,386 - 28,108 874,689 Other liabilities and accruals 64,856 599,897 73,360 33,647 51,937 823,697 Unearned revenue - - 23,516 31,381 - 54,897 Noncurrent liabilities: Due within one year - 3,765 - - - 3,765 Due in more than one year - 299,235 - - - 299,235 Total liabilities 141,186 1,601,762 168,262 65,028 80,045 2,056,283 NET POSITION Net investment in capital assets 481,358 932,896 64,653 89,196 149,936 1,718,039 Restricted 233,525 - - 233,369 - 466,894 Unrestricted 380,145 (721,178) 1,202,825 577,818 72,356 1,511,966 Total net position $ 1,095,028 $ 211,718 $ 1,267,478 $ 900,383 $ 222,292 $ 3,696,899 See Accompanying Independent Auditor's Report. - 95 - REPUBLIC OF THE MARSHALL ISLANDS NONMAJOR COMPONENT UNITS Combining Statement of Revenues, Expenses, and Changes in Net Position Year Ended September 30, 2021 Majuro Marshall Office of Atoll Islands National Commerce, Waste Majuro Postal Environmental Investment Company, Resort, Service Protection and Inc. Inc. Authority Authority Tourism Total Expenses $ 1,781,960 $ 3,662,245 $ 937,271 $ 479,833 $ 688,409 $ 7,549,718 Program revenues: Charges for services 1,006,279 3,059,622 1,026,247 168,969 12,694 5,273,811 Operating grants and contributions - - - 560,405 26,975 587,380 Capital grants and contributions 283,927 - - - - 283,927 Total program revenues 1,290,206 3,059,622 1,026,247 729,374 39,669 6,145,118 Net program revenues (expenses) (491,754) (602,623) 88,976 249,541 (648,740) (1,404,600) General revenues: Payments from RepMar 965,393 298,766 221,414 - 759,423 2,244,996 Other - - - 48 - 48 Total general revenues 965,393 298,766 221,414 48 759,423 2,245,044 Change in net position 473,639 (303,857) 310,390 249,589 110,683 840,444 Net position at the beginning of the year 621,389 515,575 957,088 650,794 111,609 2,856,455 Net position at the end of the year $ 1,095,028 $ 211,718 $ 1,267,478 $ 900,383 $ 222,292 $ 3,696,899 See Accompanying Independent Auditor's Report. - 96 - REPUBLIC OF THE MARSHALL ISLANDS GRANTS ASSISTANCE FUND September 30, 2021 The Grants Assistance Fund accounts for all financial transactions that are subgranted to RepMar. A brief discussion of the funds that comprise the Grants Assistance Fund as of September 30, 2021, follows: Section 215(a)(1) Communications Fund This fund accounts for United States Congress appropriations under United States Public Law 99-239, Title II, Article I, Section 215(a)(1) and approved by Nitijela resolution 62. Section 216(a)(1) Surveillance and Enforcement Fund This fund accounts for United States Congress appropriations under United States Public Law 99-239, Title II, Article I, Section 216(a)(1) and approved by Nitijela resolution 62. Section 216(a)(3) Scholarship Fund This fund accounts for United States Congress appropriations under United States Public Law 99-239, Title II, Article I, Section 216(a)(3) and approved by Nitijela resolution 62. Section 213 Audit Fund This fund accounts for United States Congress appropriations under United States Public Law 99-239, as amended, Title II, Article I, Section 213 and approved by Nitijela resolution 123. Enewetak Food and Agricultural Support Fund This fund accounts for funding received pursuant to Section 103(f)(2) of the Compact of Free Association Amendments Act of 2003. U.S. Federal Grants Fund This fund accounts for all financial transactions that are subgranted to RepMar, as well as other direct federal grants that RepMar received from the United States government. European Union Grants Fund This fund accounts for all financial transactions that are subgranted to RepMar, as well as other direct grants that RepMar received from the European Union. World Bank Fund This fund accounts for all financial transactions that are subgranted to RepMar, as well as other direct grants that RepMar received from the World Bank. Other Direct Assistance Fund This fund accounts for all financial transactions related to direct grants received from non-U.S. agencies, which have historically been accounted for herein, and also includes grants from other world organizations. See Accompanying Independent Auditor’s Report. - 97 - REPUBLIC OF THE MARSHALL ISLANDS GRANTS ASSISTANCE FUND September 30, 2021 Republic of China Projects Fund This fund accounts for all financial transactions related to direct grants received from the Republic of China relating to designated projects. Compact Sector Grants Fund This fund accounts for United States Congress appropriations under United States Public Law 99-239, as amended, Title II, Article I, Section 211(a) and approved by Nitijela resolution 123 to promote economic advancement and budgetary self-reliance. These appropriations are to be used for assistance in education, health care, the environment, public sector capacity building, and private sector development, or for other areas as mutually agreed, with priorities in the education and health care sectors. See Accompanying Independent Auditor’s Report. - 98 - REPUBLIC OF THE MARSHALL ISLANDS GRANTS ASSISTANCE FUND Combining Balance Sheet September 30, 2021 DILOG Fund Number 350200 350305 350315 510130 510140 600350 700100 700200 700360 700370 Section Section 216(a)(1) Enewetak 215(a)(1) Surveillance Section Section Food and U.S. European Republic of Commu- and 216(a)(3) 213 Agricultural Federal Union World Other Direct China Compact nications Enforcement Scholarship Audit Support Grants Grants Bank Assistance Projects Sector Total ASSETS Receivables: Federal agencies $ - $ - $ - $ 366,882 $ 328,936 $ 6,173,459 $ - $ - $ - $ - $ 12,368,080 $ 19,237,357 General - - - - - - - 2,728,016 384,447 2,000,000 - 5,112,463 Due from other funds 40,380 690 1,593 - - - 1,915,546 - 266,359 3,072,849 7,702,790 13,000,207 Advances - - - - - 250,062 7,443 27,505 (6,904) 61,287 297,953 637,346 Total assets $ 40,380 $ 690 $ 1,593 $ 366,882 $ 328,936 $ 6,423,521 $ 1,922,989 $ 2,755,521 $ 643,902 $ 5,134,136 $ 20,368,823 $ 37,987,373 LIABILITIES AND FUND BALANCES (DEFICITS) Liabilities: Accounts payable $ - $ - $ - $ 36,500 $ 2,533 $ 1,259,229 $ 6,730 $ 381,509 $ 136,528 $ 316,603 $ 2,121,944 $ 4,261,576 Other liabilities and accruals - - - - - 265,291 6,884 - 2,269 13,423 1,035,890 1,323,757 Payable to federal agencies - - - - - - - - - - 278,447 278,447 Retention payable - - - - - 107,829 - 8,567 70,000 235,470 1,478,365 1,900,231 Due to other funds - - - 330,382 326,403 4,833,216 - 2,265,565 - - 8,255,125 16,010,691 Total liabilities - - - 366,882 328,936 6,465,565 13,614 2,655,641 208,797 565,496 13,169,771 23,774,702 Fund balances: Restricted 40,380 690 1,593 - - - 1,909,375 99,880 435,105 - 7,199,052 9,686,075 Committed - - - - - - - - - 4,568,640 - 4,568,640 Unassigned (deficits) - - - - - (42,044) - - - - - (42,044) Total fund balances (deficits) 40,380 690 1,593 - - (42,044) 1,909,375 99,880 435,105 4,568,640 7,199,052 14,212,671 Total liabilities and fund balances $ 40,380 $ 690 $ 1,593 $ 366,882 $ 328,936 $ 6,423,521 $ 1,922,989 $ 2,755,521 $ 643,902 $ 5,134,136 $ 20,368,823 $ 37,987,373 See Accompanying Independent Auditor's Report. - 99 - REPUBLIC OF THE MARSHALL ISLANDS GRANTS ASSISTANCE FUND Combining Statement of Revenues, Expenditures by Function, and Changes in Fund Balances (Deficits) Year Ended September 30, 2021 DILOG Fund Number 350200 350305 350315 510130 510140 600350 700100 700200 700360 700370 Section Section 216(a)(1) Enewetak 215(a)(1) Surveillance Section Section Food and U.S. European Republic of Commu- and 216(a)(3) 213 Agricultural Federal Union World Other Direct China Compact nications Enforcement Scholarship Audit Support Grants Grants Bank Assistance Projects Sector Elimination Total Revenues: Federal and other grants $ - $ - $ - $ 215,382 $ 1,355,918 $ 21,083,938 $ 3,272,427 $ 9,444,328 $ 1,347,165 $ 6,000,000 $ 37,865,235 $ - $ 80,584,393 Expenditures by Function: Current: President and Cabinet - - - - - - - - - - - - - Office of the Chief Secretary - - - - - 1,590,567 - 23,397 458,018 5,502 - - 2,077,484 Special appropriations - - - - - - 515,840 - 267,645 38,140 - - 821,625 Office of the Auditor-General - - - 215,382 - - - - - - - - 215,382 Office of the Attorney General - - - - - 5,663,759 - - - - - - 5,663,759 Ministries: Education, Sports and Training - - - - - 1,781,284 - - - - 20,316,511 - 22,097,795 Health and Human Services - - - - - 7,204,757 16,463 - - 259,540 9,693,334 - 17,174,094 Transportation, Communication and Information Technology - - - - - - 183,000 - - - - - 183,000 Natural Resources and Commerce - - - - - - - - 719 1,528,096 - - 1,528,815 Culture and Internal Affairs - - - - - 468,136 - - - 1,027,049 - - 1,495,185 Justice, Immigration and Labor - - - - - - - - - 196,512 - - 196,512 Finance, Banking and Postal Services - - - - 1,355,918 2,638,384 37,704 9,797,028 41,579 45,922 2,837,996 - 16,754,531 Foreign Affairs and Trade - - - - - - - - 1,050 552,138 - - 553,188 Works, Infrastructure and Utilities - - - - - - - - 44,941 - - - 44,941 Environmental Protection Authority - - - - - - 901,905 - 36,768 - 225,372 - 1,164,045 Capital outlay - - - - - - - - - 3,724,499 4,238,606 - 7,963,105 Total expenditures - - - 215,382 1,355,918 19,346,887 1,654,912 9,820,425 850,720 7,377,398 37,311,819 - 77,933,461 Excess (deficiency) of revenues over (under) expenditures - - - - - 1,737,051 1,617,515 (376,097) 496,445 (1,377,398) 553,416 - 2,650,932 Other financing sources (uses): Operating transfers in - - - - - - - - - - 794,367 (794,367) - Operating transfers out - - - - - (1,737,051) (386,374) - - (794,367) (786,981) 794,367 (2,910,406) Total other financing sources (uses), net - - - - - (1,737,051) (386,374) - - (794,367) 7,386 - (2,910,406) Net change in fund balances (deficits) - - - - - - 1,231,141 (376,097) 496,445 (2,171,765) 560,802 - (259,474) Fund balances (deficits) at the beginning of the year 40,380 690 1,593 - - (42,044) 678,234 475,977 (61,340) 6,740,405 6,638,250 - 14,472,145 Fund balances (deficits) at the end of the year $ 40,380 $ 690 $ 1,593 $ - $ - $ (42,044) $ 1,909,375 $ 99,880 $ 435,105 $ 4,568,640 $ 7,199,052 $ - $ 14,212,671 See Accompanying Independent Auditor's Report. - 100 - REPUBLIC OF THE MARSHALL ISLANDS GRANTS ASSISTANCE FUND Combining Statement of Revenues, Expenditures by Account, and Changes in Fund Balances (Deficits) Year Ended September 30, 2021 DILOG Fund Number 350200 350305 350315 510130 510140 600350 700100 700200 700360 700370 Section Section 216(a)(1) Enewetak 215(a)(1) Surveillance Section Section Food and U.S. European Republic of Commu- and 216(a)(3) 213 Agricultural Federal Union World Other Direct China Compact nications Enforcement Scholarship Audit Support Grants Grants Bank Assistance Projects Sector Elimination Total Revenues: Federal and other grants $ - $ - $ - $ 215,382 $ 1,355,918 $ 21,083,938 $ 3,272,427 $ 9,444,328 $ 1,347,165 $ 6,000,000 $ 37,865,235 $ - $ 80,584,393 Expenditures by Account: Salaries and wages - - - - 548,661 4,582,025 97,877 - 44,229 216,579 18,841,643 - 24,331,014 Unemployment benefits - - - - - 5,417,762 - - - - - - 5,417,762 Capital outlay - - - - 2,041 1,810,871 38,688 207,247 29,965 1,101,753 5,909,859 - 9,100,424 Grants and subsidies - - - - - 603,652 698,840 - 267,645 3,742,787 3,636,233 - 8,949,157 Utilities - - - - 16,038 300,766 1,926 522 - 480 1,508,813 - 1,828,545 Leased housing - - - - 23,650 47,996 - - - - 301,997 - 373,643 Supplies and materials - - - - 96,363 514,139 11,257 109,132 2,294 144,916 1,081,593 - 1,959,694 Contractual services - - - - 21,027 2,599,238 661,326 1,141,536 470,633 823,066 1,191,455 - 6,908,281 Travel - - - - - 589,693 2,629 21,378 350 77,817 296,469 - 988,336 Food stuffs - - - - 367,632 143,289 8,032 48,770 2,219 110,321 651,288 - 1,331,551 Professional services - - - 215,382 - 261,141 36,571 8,073,262 - 482,983 - - 9,069,339 Allowances - - - - - 9,300 - - - - 2,921 - 12,221 Medical supplies - - - - - 580,269 - - - - 21,264 - 601,533 Communications - - - - 2,920 403,074 6,997 12,428 - 1,680 154,032 - 581,131 POL - - - - 66,853 317,714 3,252 944 - 136,428 309,910 - 835,101 Rentals - - - - 620 290,908 30,600 95,739 6,990 10,582 539,794 - 975,233 Freight - - - - - 9,074 - 390 8,087 5,011 57,071 - 79,633 Printing and reproduction - - - - - 74,350 3,102 11,131 - - 19,052 - 107,635 Insurance - - - - - 8,177 2,135 3,984 1,043 - 50,861 - 66,200 Other - - - - 210,113 783,449 51,680 93,962 17,265 522,995 2,737,564 - 4,417,028 Total expenditures - - - 215,382 1,355,918 19,346,887 1,654,912 9,820,425 850,720 7,377,398 37,311,819 - 77,933,461 Excess (deficiency) of revenues over (under) expenditures - - - - - 1,737,051 1,617,515 (376,097) 496,445 (1,377,398) 553,416 - 2,650,932 Other financing sources (uses): Operating transfers in - - - - - - - - - - 794,367 (794,367) - Operating transfers out - - - - - (1,737,051) (386,374) - - (794,367) (786,981) 794,367 (2,910,406) Total other financing sources (uses), net - - - - - (1,737,051) (386,374) - - (794,367) 7,386 - (2,910,406) Net change in fund balances (deficits) - - - - - - 1,231,141 (376,097) 496,445 (2,171,765) 560,802 - (259,474) Fund balances (deficits) at the beginning of the year 40,380 690 1,593 - - (42,044) 678,234 475,977 (61,340) 6,740,405 6,638,250 - 14,472,145 Fund balances (deficits) at the end of the year $ 40,380 $ 690 $ 1,593 $ - $ - $ (42,044) $ 1,909,375 $ 99,880 $ 435,105 $ 4,568,640 $ 7,199,052 $ - $ 14,212,671 See Accompanying Independent Auditor's Report. - 101 - REPUBLIC OF THE MARSHALL ISLANDS COMPACT OF FREE ASSOCIATION SECTOR GRANTS FUND September 30, 2021 Section 211(a)(1) Education Sector Grant Fund This fund accounts for United States Congress appropriations under United States Public Law 99-239, as amended, Title II, Article I, Section 211(a)(1) and approved by Nitijela resolution 123 to support and improve the educational system of the Republic of the Marshall Islands. Supplemental Education Fund This fund accounts for United States Congress appropriations under United States Public Law 99-239, as amended, which takes the place of certain domestic grants once offered through the U.S. Department of Education, the U.S. Department of Health and Human Services and the U.S. Department of Labor. Section 211(a)(2) Health Sector Grant Fund This fund accounts for United States Congress appropriations under United States Public Law 99-239, as amended, Title II, Article I, Section 211(a)(2) and approved by Nitijela resolution 123 to support and improve the delivery of preventive, curative, and environmental healthcare services in the Republic of the Marshall Islands. Section 211(a)(4) Capacity Building Fund This fund accounts for United States Congress appropriations under United States Public Law 99-239, as amended, Title II, Article I, Section 211(a)(4) and approved by Nitijela resolution 123 to support the efforts in building an effective, accountable and transparent national and local government and other public sector institutions and systems in the Republic of the Marshall Islands. Section 211(a)(5) Environment Sector Fund This fund accounts for United States Congress appropriations under United States Public Law 99-239, as amended, Title II, Article I, Section 211(a)(5) and approved by Nitijela resolution 123 to increase environmental protection; establish and manage conservation areas; engage in environmental infrastructure planning, design construction and operation; and to involve the citizens of the Marshall Islands in the process of conserving their country’s natural resources. Section 211(b)(1) Ebeye Special Needs Fund This fund accounts for United States Congress appropriations under United States Public Law 99-239, as amended, Title II, Article I, Section 211(b)(1) and approved by Nitijela resolution 123 to support the special needs of the community at Ebeye, Kwajalein Atoll and other Marshallese communities within Kwajalein Atoll. Section 211(b)(2) Landowners Special Needs Fund This fund accounts for United States Congress appropriations under United States Public Law 99-239, as amended, Title II, Article I, Section 211(b)(1) and approved by Nitijela resolution 123 to support the special needs of the community at Ebeye, Kwajalein Atoll and other Marshallese communities within Kwajalein Atoll with emphasis on the Kwajalein Landowners. See Accompanying Independent Auditor’s Report. - 102 - REPUBLIC OF THE MARSHALL ISLANDS COMPACT OF FREE ASSOCIATION SECTOR GRANTS FUND September 30, 2021 Section 211(b)(3) Kwajalein Environment Fund This fund accounts for United States Congress appropriations under United States Public Law 99-239, as amended, Title II, Article I, Section 211(b)(1) and approved by Nitijela resolution 123 to address the special needs of the community at Ebeye, Kwajalein Atoll, with respect to environmental protection issues. Section 211(d)(1) Public Infrastructure Sector Grant Fund This fund accounts for United States Congress appropriations under United States Public Law 99-239, as amended, Title II, Article I, Section 211(d)(1) and approved by Nitijela resolution 123. The aforementioned section requires no less than 30% and no more than 50% of the total amounts appropriated by the United States Congress under Section 211 to be made available in accordance with a list of specific projects included in the infrastructure improvement and maintenance plan prepared by RepMar. Section 211(d)(2) Infrastructure Maintenance Fund This fund accounts for United States Congress appropriations under United States Public Law 99-239, as amended, Title II, Article I, Section 211(d)(2) and approved by Nitijela resolution 123. The aforementioned section requires 5% of the total amounts appropriated by the United States Congress under Section 211(d)(1) to be set aside and made available, with an equal contribution from RepMar, as a contribution to an Infrastructure Maintenance Fund. Section 211(e)(1) Disaster Assistance Emergency Fund This fund accounts for United States Congress appropriations under United States Public Law 99-239, as amended, Title II, Article I, Section 211(e)(1) and approved by Nitijela resolution 123 to support the establishment of a disaster assistance emergency fund. See Accompanying Independent Auditor’s Report. - 103 - REPUBLIC OF THE MARSHALL ISLANDS COMPACT OF FREE ASSOCIATION SECTOR GRANTS Combining Balance Sheet September 30, 2021 DILOG Fund Number 410100 410102 410110 410120 410140 410150 410160 410170 510100 510110 510120 Section Section Section Section Section Section Section Section Section 211(a)(4) Section 211(b)(1) 211(b)(2) 211(b)(3) 211(d)(1) 211(d)(2) 211(e)(1) 211(a)(1) Supplemental 211(a)(2) Capacity 211(a)(5) Ebeye Landowners Kwajalein Public Infrastructure Disaster Education Education Health Building Environment Special Needs Special Needs Environment Infrastructure Maintenance Assistance Total ASSETS Receivables: Federal agencies $ - $ 2,441,293 $ 117,063 $ - $ - $ 1,313,755 $ 1,909,118 $ - $ 5,985,202 $ 349,669 $ 251,980 $ 12,368,080 Due from other funds 715,340 - 902,968 163,374 - - - 140,952 - 1,586,937 4,193,219 7,702,790 Advances 12,245 63,369 16,554 - - 183,820 11,362 5,153 8,421 (2,971) - 297,953 Total assets $ 727,585 $ 2,504,662 $ 1,036,585 $ 163,374 $ - $ 1,497,575 $ 1,920,480 $ 146,105 $ 5,993,623 $ 1,933,635 $ 4,445,199 $ 20,368,823 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 148,287 $ 280,698 $ 530,197 $ - $ - $ 494,497 $ 252,371 $ 1,752 $ 347,064 $ 67,078 $ - $ 2,121,944 Other liabilities and accruals 432,116 148,611 309,306 - - 109,915 6,064 9,789 20,089 - - 1,035,890 Payable to federal agencies - - 29,458 - - - 248,989 - - - - 278,447 Retention payable - - - - - 190,085 319,901 - 710,722 257,657 - 1,478,365 Due to other funds - 2,075,353 - - - 173,941 1,093,155 - 4,912,676 - - 8,255,125 Total liabilities 580,403 2,504,662 868,961 - - 968,438 1,920,480 11,541 5,990,551 324,735 - 13,169,771 Fund balances: Restricted 147,182 - 167,624 163,374 - 529,137 - 134,564 3,072 1,608,900 4,445,199 7,199,052 Unassigned (deficits) - - - - - - - - - - - - Total fund balance 147,182 - 167,624 163,374 - 529,137 - 134,564 3,072 1,608,900 4,445,199 7,199,052 Total liabilities and fund balances $ 727,585 $ 2,504,662 $ 1,036,585 $ 163,374 $ - $ 1,497,575 $ 1,920,480 $ 146,105 $ 5,993,623 $ 1,933,635 $ 4,445,199 $ 20,368,823 See Accompanying Independent Auditor's Report. - 104 - REPUBLIC OF THE MARSHALL ISLANDS COMPACT OF FREE ASSOCIATION SECTOR GRANTS Combining Statement of Revenues, Expenditures by Function, and Changes in Fund Balances Year Ended September 30, 2021 DILOG Fund Number 410100 410102 410110 410120 410140 410150 410160 410170 510100 510110 510120 Section Section Section Section Section Section Section Section Section 211(a)(4) Section 211(b)(1) 211(b)(2) 211(b)(3) 211(d)(1) 211(d)(2) 211(e)(1) 211(a)(1) Supplemental 211(a)(2) Capacity 211(a)(5) Ebeye Landowners Kwajalein Public Infrastructure Disaster Education Education Health Building Environment Special Needs Special Needs Environment Infrastructure Maintenance Assistance Total Revenues: Compact funding $ 10,450,788 $ 5,444,820 $ 7,279,311 $ - $ - $ 5,893,345 $ 2,837,996 $ 251,980 $ 5,219,788 $ 235,227 $ 251,980 $ 37,865,235 Expenditures by Function: Current: Ministries: Education, Sports and Training 10,022,052 5,444,820 - - - 2,737,900 - - 2,111,739 - - 20,316,511 Health and Human Services - - 7,573,757 - - 2,119,577 - - - - - 9,693,334 Finance, Banking and Postal Services - - - - - - 2,837,996 - - - - 2,837,996 Environmental Protection Authority - - - - - - - 225,372 - - - 225,372 Capital outlay - - - - - 895,327 - - 3,108,052 235,227 - 4,238,606 Total expenditures 10,022,052 5,444,820 7,573,757 - - 5,752,804 2,837,996 225,372 5,219,791 235,227 - 37,311,819 Excess (deficiency) of revenues over (under) expenditures 428,736 - (294,446) - - 140,541 - 26,608 (3) - 251,980 553,416 Other financing sources (uses): Operating transfers in - - - - - - - - - 542,387 251,980 794,367 Operating transfers out (592,202) - - - - (194,779) - - - - - (786,981) Total other financing sources (uses), net (592,202) - - - - (194,779) - - - 542,387 251,980 7,386 Net change in fund balances (deficits) (163,466) - (294,446) - - (54,238) - 26,608 (3) 542,387 503,960 560,802 Fund balances at the beginning of the year 310,648 - 462,070 163,374 - 583,375 - 107,956 3,075 1,066,513 3,941,239 6,638,250 Fund balances at the end of the year $ 147,182 $ - $ 167,624 $ 163,374 $ - $ 529,137 $ - $ 134,564 $ 3,072 $ 1,608,900 $ 4,445,199 $ 7,199,052 See Accompanying Independent Auditor's Report. - 105 - REPUBLIC OF THE MARSHALL ISLANDS COMPACT OF FREE ASSOCIATION SECTOR GRANTS Combining Statement of Revenues, Expenditures by Account, and Changes in Fund Balances (Deficits) Year Ended September 30, 2021 DILOG Fund Number 410100 410102 410110 410120 410140 410150 410160 410170 510100 510110 510120 Section Section Section Section Section Section Section Section Section 211(a)(4) Section 211(b)(1) 211(b)(2) 211(b)(3) 211(d)(1) 211(d)(2) 211(e)(1) 211(a)(1) Supplemental 211(a)(2) Capacity 211(a)(5) Ebeye Landowners Kwajalein Public Infrastructure Disaster Education Education Health Building Environment Special Needs Special Needs Environment Infrastructure Maintenance Assistance Total Revenues: Compact funding $ 10,450,788 $ 5,444,820 $ 7,279,311 $ - $ - $ 5,893,345 $ 2,837,996 $ 251,980 $ 5,219,788 $ 235,227 $ 251,980 $ 37,865,235 Expenditures by Account: Salaries and wages 7,874,705 2,555,999 5,820,759 - - 1,924,778 108,499 197,226 359,677 - - 18,841,643 Capital outlay 117,200 627,301 94,357 - - 770,319 1,675,023 11,080 2,614,579 - - 5,909,859 Grants and subsidies 987,003 338,325 - - - 600,273 1,039,901 - 670,731 - - 3,636,233 Utilities 229,929 39,195 516,645 - - 721,839 - 1,205 - - - 1,508,813 Leased housing - - 259,197 - - - 9,000 - 33,800 - - 301,997 Supplies and materials 88,969 563,473 78,024 - - 330,159 2,785 4,616 13,567 - - 1,081,593 Contractual services - 687,405 397,717 - - 106,333 - - - - - 1,191,455 Travel 59,382 122,563 13,903 - - 80,990 2,215 3,045 14,371 - - 296,469 Food stuffs 238,362 100,880 116,149 - - 195,897 - - - - - 651,288 Professional services - - - - - - - - - - - - Allowances - 2,921 - - - - - - - - - 2,921 Medical supplies - - - - - 21,264 - - - - - 21,264 Communications 25,260 27,351 13,943 - - 79,778 - - 7,700 - - 154,032 POL 90,222 32,680 36,951 - - 139,497 - 1,000 9,560 - - 309,910 Rentals 73,382 42,209 41,100 - - 375,903 - 7,200 - - - 539,794 Freight 15,111 21,695 1,067 - - 19,198 - - - - - 57,071 Printing and reproduction 8,008 170 3,601 - - 6,700 573 - - - - 19,052 Insurance 23,304 17,612 4,623 - - 1,669 - - 3,653 - - 50,861 Other 191,215 265,041 175,721 - - 378,207 - - 1,492,153 235,227 - 2,737,564 Total expenditures 10,022,052 5,444,820 7,573,757 - - 5,752,804 2,837,996 225,372 5,219,791 235,227 - 37,311,819 Excess (deficiency) of revenues over (under) expenditures 428,736 - (294,446) - - 140,541 - 26,608 (3) - 251,980 553,416 Other financing sources (uses): Operating transfers in - - - - - - - - - 542,387 251,980 794,367 Operating transfers out (592,202) - - - - (194,779) - - - - - (786,981) Total other financing sources (uses), net (592,202) - - - - (194,779) - - - 542,387 251,980 7,386 Net change in fund balances (deficits) (163,466) - (294,446) - - (54,238) - 26,608 (3) 542,387 503,960 560,802 Fund balances (deficits) at the beginning of the year 310,648 - 462,070 163,374 - 583,375 - 107,956 3,075 1,066,513 3,941,239 6,638,250 Fund balances at the end of the year $ 147,182 $ - $ 167,624 $ 163,374 $ - $ 529,137 $ - $ 134,564 $ 3,072 $ 1,608,900 $ 4,445,199 $ 7,199,052 See Accompanying Independent Auditor's Report. - 106 - REPUBLIC OF THE MARSHALL ISLANDS GENERAL FUND September 30, 2021 Education Fund This fund was established under Public Law No. 2013-23 to account for and administer monies collected and paid under the provisions of the Marshall Islands Public School System Act 2013 and any appropriations made by the Nitijela for related purposes. Reimbursable Fund This fund accounts for the operations of the Majuro Weather Station that is funded by the United States Department of Commerce National Weather Service and overtime charges for Customs and Immigration personnel whose attendance is required at the various ports of entry into the Marshall Islands. Changed Circumstances Fund This fund accounts for the expenditures related to the Changed Circumstances Study using excess annual proceeds from the Section 177 Nuclear Claims Trust Fund. Judiciary Fund This fund accounts for all financial transactions related to RepMar's judicial system as required under Public Law No. 1989-69. Alternative Energy Fund This fund accounts for the development, marketing, and operation of alternative energy systems. This fund was established under Public Law No. 1989-63 to administer revenue received with respect to alternative energy systems, and any appropriations made by the Nitijela for related purposes. EPA Fund This fund accounts for all financial transactions related to RepMar's Environmental Protection Authority Fund prior to the creation of the separate statutory body under Public Law No. 1984-31. Agricultural Supplies Fund This fund was established under Public Law No. 1979-18 to account for and administer monies collected and paid under the provisions of the Agricultural Supplies Account Act 1979 and any appropriations made by the Nitijela for related purposes. Postal Service Fund This fund was established under Public Law No. 1985-4 to account for and administer monies collected and paid under the provisions of the Postal Service Act 1983 and any appropriations made by the Nitijela for related purposes. See Accompanying Independent Auditor’s Report. - 107 - REPUBLIC OF THE MARSHALL ISLANDS GENERAL FUND September 30, 2021 Marshall Islands Development Authority (MIDA) Fund This fund accounts for capital projects specified under Public Law No. 1988-14, Section 12 and Schedule 3, appropriated to MIDA from Capital Account funds provided under Section 211 of the Compact of Free Association. Those appropriations do not lapse at the end of the fiscal year, but continue until either the purpose of the appropriation is complete, or the funds are expended, whichever occurs first. Local Government Fund This fund accounts for the disbursement of funds to Local Governments. The fund was established under Public Law No. 1981-2 to channel monies appropriated by the Nitijela and granted by RepMar to local governments. Asian Development Bank (ADB) Development Projects This fund accounts for projects funded by Asian Development Bank loans. These projects include the fisheries development (ADB Loan Number 1102 MAR (SF)), typhoon emergency rehabilitation program (ADB Loan Number 1218 MAR (SF)), improvement of basic education (ADB Loan Number 1249 MAR (SF)), Majuro water supply project (ADB Loan Numbers 1250 MAR (SF) and 1389 RMI (SF)), improvement of health care (ADB Loan Number 1316 RMI (SF)), the Ebeye health and infrastructure project (ADB Loan Number 1694 RMI (SF)), the skills training and vocational education project (ADB Loan Number 1791 RMI (SF)), and the fiscal debt management project (ADB Loan Number 2950 RMI (SF)). Treasury Fund This fund accounts for cash account balances centrally maintained by RepMar within the Ministry of Finance, Banking, and Postal Services for the government as a whole unless otherwise required by law to be maintained outside of the treasury. Payroll Revolving Fund This fund accounts for all accounts associated with the payment of compensation to employees and officers of RepMar and distributions of all amounts withheld therefrom pursuant to law and amounts authorized by employees to be withheld. See Accompanying Independent Auditor’s Report. - 108 - REPUBLIC OF THE MARSHALL ISLANDS GENERAL FUND Combining Balance Sheet September 30, 2021 100100 200090 200317 200330 200335 200337 200507 200515 300400 300600 500617 800405 950000 960000 ADB Changed Alternative Agricultural Postal Local Compact Development Payroll General Education Reimbursable Circumstances Judiciary Energy EPA Supplies Service MIDA Government Section 111 Projects Treasury Revolving Elimination Total ASSETS Cash and cash equivalents $ - $ 337,815 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 22,268 $ 19,368,067 $ - $ - $ 19,728,150 Receivables, net: Taxes 2,956,033 - - - - - - - - - - - - - - - 2,956,033 General 553,590 - 8,508 - - - - - - - - - 241,120 (1,566) - - 801,652 Due from other funds 27,646,031 - - 54,458 421,470 444 - 100,238 - - 14,251 - - 16,392,302 18,320 (28,636,823) 16,010,691 Due from component units 6,479,955 - - - - - - - - - - - - - - - 6,479,955 Advances 569,281 - 6,966 - - - - - - - - - 1,493 (63,732) - - 514,008 Other assets 2,990,250 - - - - - - - - - - - - - - - 2,990,250 Restricted assets: Cash and cash equivalents - - - - - - - - - - - - - 11,046,159 - - 11,046,159 - Total assets $ 41,195,140 $ 337,815 $ 15,474 $ 54,458 $ 421,470 $ 444 $ - $ 100,238 $ - $ - $ 14,251 $ - $ 264,881 $ 46,741,230 $ 18,320 $ (28,636,823) $ 60,526,898 LIABILITIES AND FUND BALANCE (DEFICIT) Liabilities: Accounts payable $ 4,652,906 $ 337,981 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 69,965 $ - $ - $ - $ 5,060,852 Other liabilities and accruals 2,682,372 - 16,103 - - 28 2,754 - - - - - 7,203 5,377 18,320 - 2,732,157 Retention payable 1,125,362 - - - - - - - - - - - - - - - 1,125,362 Due to component units 1,001,741 - - - - - - - - - - - - - - - 1,001,741 Unearned revenue 335,320 - - - - - - - - - - - - - - - 335,320 Due to other funds - - 177,996 - - - 88,466 - 658 - - - 114,491 46,735,853 - (28,636,823) 18,480,641 Total liabilities 9,797,701 337,981 194,099 - - 28 91,220 - 658 - - - 191,659 46,741,230 18,320 (28,636,823) 28,736,073 Fund balance: Nonspendable 9,470,205 - - - - - - - - - - - - - - - 9,470,205 Restricted 7,968,689 - - - - - - - - - - - 279,589 3,773,951 - - 12,022,229 Committed - - - - - - - - - - 14,251 - - - - - 14,251 Unassigned (deficits) 13,958,545 (166) (178,625) 54,458 421,470 416 (91,220) 100,238 (658) - - - (206,367) (3,773,951) - - 10,284,140 Total fund balance (deficits) 31,397,439 (166) (178,625) 54,458 421,470 416 (91,220) 100,238 (658) - 14,251 - 73,222 - - - 31,790,825 Total liabilities and fund balance $ 41,195,140 $ 337,815 $ 15,474 $ 54,458 $ 421,470 $ 444 $ - $ 100,238 $ - $ - $ 14,251 $ - $ 264,881 $ 46,741,230 $ 18,320 $ (28,636,823) $ 60,526,898 See Accompanying Independent Auditor's Report. - 109 - REPUBLIC OF THE MARSHALL ISLANDS GENERAL FUND Combining Statement of Revenues, Expenditures By Function, and Changes in Fund Balances (Deficits) Year Ended September 30, 2021 100100 200090 200317 200330 200335 200337 200507 200515 300400 300600 500617 800405 950000 960000 ADB Changed Alternative Agricultural Postal Local Compact Development Payroll General Education Reimbursable Circumstances Judiciary Energy EPA Supplies Service MIDA Government Section 111 Projects Treasury Revolving Elimination Total Revenues: Taxes $ 35,441,927 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 35,441,927 Federal and other grants 21,112,268 - - - - - - - - - - 5,000,000 622,432 - - - 26,734,700 Ship registry 8,171,815 - - - - - - - - - - - - - - - 8,171,815 Interest and dividends 103,035 - - - - - - - - - - - - - - - 103,035 Fees and charges 55,534 - 66,195 - 975 - - - - - - - - - - - 122,704 Contributions from component units 26,000,000 - - - - - - - - - - - - - - - 26,000,000 Other 363,384 - - - - - - 26,912 - - - - - - - - 390,296 Total revenues 91,247,963 - 66,195 - 975 - - 26,912 - - - 5,000,000 622,432 - - - 96,964,477 Expenditures by Function: Current: President and Cabinet 2,315,102 - - - - - - - - - - - - - - - 2,315,102 Office of the Chief Secretary 13,975,530 - - - - - - - - - - - 356,796 - - - 14,332,326 Special appropriations 11,701,139 - - - - - - - - - - - - - - - 11,701,139 Council of Iroij 590,352 - - - - - - - - - - - - - - - 590,352 Nitijela 2,285,779 - - - - - - - - - - - - - - - 2,285,779 Office of the Auditor-General 1,044,482 - - - - - - - - - - - - - - - 1,044,482 Public Service Commission 647,693 - - - - - - - - - - - - - - - 647,693 Office of the Attorney General 1,158,406 - 27,685 - - - - - - - - - - - - - 1,186,091 Ministries: Education, Sports and Training 7,839,843 5,100,888 - - - - - - - - - - - - - - 12,940,731 Health and Human Services 5,123,425 - - - - - - - - - - - - - - - 5,123,425 Transportation, Communication and Information Technology 701,979 - - - - - - - - - - - - - - - 701,979 Natural Resources and Commerce 1,777,260 - 10,046 - - - - - - - - - - - - - 1,787,306 Culture and Internal Affairs 3,571,070 - - - - - - - - - - - - - - - 3,571,070 Justice, Immigration and Labor 3,877,811 - - - - - - - - - - - - - - - 3,877,811 Finance, Banking and Postal Services 17,994,367 - 41,741 - - - - - - - - - 622,430 - - - 18,658,538 Foreign Affairs and Trade 4,841,029 - - - - - - - - - - - - - - - 4,841,029 Works, Infrastructure and Utilities 4,570,713 - - - - - - - - - - - - - - - 4,570,713 Environmental Protection Authority 455,448 - - - - - 55,875 - - - - - - - - - 511,323 Debt service: Principal repayment 3,504,195 - - - - - - - - - - - - - - - 3,504,195 Interest 571,020 - - - - - - - - - - - - - - - 571,020 Total expenditures 88,546,643 5,100,888 79,472 - - - 55,875 - - - - - 979,226 - - - 94,762,104 Excess (deficiency) of revenues over (under) expenditures 2,701,320 (5,100,888) (13,277) - 975 - (55,875) 26,912 - - - 5,000,000 (356,794) - - - 2,202,373 Other financing sources (uses): Loan proceeds 3,158,000 - - - - - - - - - - - - - - - 3,158,000 Operating transfers in 3,840,556 5,086,286 - - 689,312 - - - - - - - - - - (5,775,598) 3,840,556 Operating transfers out (7,162,530) - - - (689,312) - - - - - - (5,000,000) - - - 5,775,598 (7,076,244) Total other financing sources (uses), net (163,974) 5,086,286 - - - - - - - - - (5,000,000) - - - - (77,688) Net change in fund balances (deficits) 2,537,346 (14,602) (13,277) - 975 - (55,875) 26,912 - - - - (356,794) - - - 2,124,685 Fund balances (deficits) at the beginning of the year 28,860,093 14,436 (165,348) 54,458 420,495 416 (35,345) 73,326 (658) - 14,251 - 430,016 - - - 29,666,140 Fund balances (deficits) at the end of the year $ 31,397,439 $ (166) $ (178,625) $ 54,458 $ 421,470 $ 416 $ (91,220) $ 100,238 $ (658) $ - $ 14,251 $ - $ 73,222 $ - $ - $ - $ 31,790,825 See Accompanying Independent Auditor's Report. - 110 - REPUBLIC OF THE MARSHALL ISLANDS GENERAL FUND Combining Schedule of Expenditures By Account Year Ended September 30, 2021 100100 200090 200317 200330 200335 200337 200507 200515 300400 300600 500617 800405 ADB Changed Alternative Agricultural Postal Local Compact Development General Education Reimbursable Circumstances Judiciary Energy EPA Supplies Service MIDA Government Section 111 Projects Total Expenditures by Account: Salaries and wages $ 27,651,462 $ - $ 78,243 $ - $ - $ - $ 55,875 $ - $ - $ - $ - $ - $ - $ 27,785,580 Capital outlay 8,196,240 20,375 - - - - - - - - - - 5,254 8,221,869 Grants and subsidies 19,769,377 803,151 - - - - - - - - - - - 20,572,528 Financial assistance 3,871,983 - - - - - - - - - - - 18,950 3,890,933 Medical supplies 226,789 - - - - - - - - - - - - 226,789 Contractual services 4,056,821 42,277 - - - - - - - - - - 673,815 4,772,913 Travel 2,508,603 31,935 - - - - - - - - - - 2,466 2,543,004 Utilities 5,288,373 119,137 - - - - - - - - - - - 5,407,510 Supplies and materials 593,281 32,583 - - - - - - - - - - 7,327 633,191 Leased housing 2,047,516 619,743 - - - - - - - - - - - 2,667,259 POL 648,384 4,217 - - - - - - - - - - 4,880 657,481 Rentals 3,039,441 10,250 - - - - - - - - - - 79,373 3,129,064 Food stuffs 890,445 3,321,863 - - - - - - - - - - 20,633 4,232,941 Professional services 281,917 - - - - - - - - - - - 9,783 291,700 Principal repayment 3,504,195 - - - - - - - - - - - - 3,504,195 Interest 571,020 - - - - - - - - - - - - 571,020 Allowances 1,357,740 41,954 - - - - - - - - - - - 1,399,694 Communications 664,294 960 - - - - - - - - - - 2,617 667,871 Freight 46,595 6,140 - - - - - - - - - - 2,673 55,408 Printing and reproduction 119,963 - - - - - - - - - - - 1,190 121,153 Insurance 210,210 - - - - - - - - - - - - 210,210 Other 3,001,994 46,303 1,229 - - - - - - - - - 150,265 3,199,791 Total expenditures $ 88,546,643 $ 5,100,888 $ 79,472 $ - $ - $ - $ 55,875 $ - $ - $ - $ - $ - $ 979,226 $ 94,762,104 ir See Accompanying Independent Auditor's Report. - 111 -