FSMC, TITLE 27.  ESSENTIAL SERVICES

CHAPTER 2
FSM Petroleum Corporation Act of 2007

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SUBCHAPTER V
Corporate Finances and Reporting

SECTIONS

§ 251. Debts and obligations of the Corporation.
§ 252. Funds of the Corporation.
§ 253. Annual Budget and Costs of Administration.
§ 254. Accounts, Annual Report, and Audit.
§ 255. Tax liability.

Editor’s note: Section 3 of PL 15-8 enacted a new chapter 2 of title 27 entitled Federated States of Micronesia Petroleum Corporation Act of 2007. While section 3 of PL 15-8 did not create subchapters for this chapter the numbering of the sections indicated an intent to have the chapter subdivided into subchapters. This has been done for easier reference and to comport with standard code format.

§ 251. Debts and obligations of the Corporation.

(1) Unless otherwise expressly provided by law, the debts and obligations of the Corporation shall not be debts or obligations of the Government of the Federated States of Micronesia or of a Government of a State, nor shall the Government of the Federated States of Micronesia or that of a State be responsible for any such debts or obligations.

(2) Unless an express assumption of liability shall be executed by the Corporation and approved by Resolution of Congress, the Corporation shall not assume, or be deemed to have assumed, the liability of any third party whose assets or operations are acquired by the Corporation, including, without limitation, liabilities arising from any breach of legal or contractual obligation or arising from violation of any law, rule, ordinance, regulation or decree.

(3) During such periods of time there remains outstanding any loans or obligations payable to the Government of the Federated States of Micronesia or any loans or obligations payable by the Corporation to any other party for which the Government of the Federated States of Micronesia may be a guarantor, borrower or otherwise obligated, no new loans or indebtedness (except credit extended pursuant to energy/fuel supply agreements) in excess of an aggregate amount of $1,000,000 shall be incurred unless approved by Resolution of Congress.

Source: PL 15-8 § 25.

Cross-reference: The statutory provisions on the President and the Executive are found in title 2 of this code. The statutory provisions on the FSM Congress are found in title 3 of this code.

§ 252. Funds of the Corporation.

(1) The funds of the Corporation consist of—

(a) money appropriated from time to time by the FSM Congress and the State legislatures and paid to the Corporation;

(b) money derived from the disposal, lease, or hire of, or any other dealing with, any property vested in or acquired by the Corporation;

(c) money borrowed by the Corporation in accordance with subsection (2) of this section;

(d) income from interest referred to in subsection (3) of this section; and

(e) except as provided herein, any other moneys that may become payable to the Corporation in respect of the sale of Product or any matter incidental to its functions and powers.

(2) Subject to section 251 of this chapter, the Corporation may borrow such sums as shall be required by the Corporation to meet any of its obligations or to perform any of its functions.

(3) The Corporation shall, to the extent practicable, maintain its funds in the form of liquid, interest bearing bank deposits or such other investments as shall be approved in writing by the Board.

(4) The Corporation shall conserve its funds by performing its functions and exercising its powers under this chapter so as to ensure that the total revenues of the Corporation are sufficient to meet all sums properly chargeable to its revenue account including depreciation and interest on capital.

Source: PL 15-8 § 26.

Cross-reference: The statutory provisions on the President and the Executive are found in title 2 of this code. The statutory provisions on the FSM Congress are found in title 3 of this code.

§ 253. Annual Budget and Costs of Administration.

(1) At such time and in such manner as the Board may prescribe, the Chief Financial Officer shall submit to the Board and to the Executive Council a detailed budget for the next ensuing fiscal year which shall include:

(a) for the last completed fiscal year, audited accounts indicating the prevailing rates and charges applicable to the Product, the amount of gross income generated by the Corporation, and the amount of all capital and operational expenditures made by the Corporation, together with the closing balance of all bank accounts maintained by the Corporation;

(b) for the fiscal year in progress, a statement showing the estimated amount of gross income and the estimated amount of all capital and operational expenditures made by the Corporation, together with such summaries, schedules, and supporting data as the Board may deem necessary; and

(c) for the next ensuing fiscal year, a budget showing anticipated rates and charges for the Product, the estimated amounts of gross income of the Corporation and a statement of all estimated capital and operational expenditures anticipated by the Corporation.

(2) In the event the expenditures identified in subsection (1)(c) of this section are anticipated to exceed the estimated amount of gross income to be generated by the Corporation in the next ensuing fiscal year, plus appropriations, grants, loans or subsidies fully approved by the Congress of the Federated States of Micronesia and the amount of any funds, including the balance of any applicable capital expenditure sinking funds earmarked for the current year’s expenditures, carried over from previous fiscal years, the proposed budget shall include a plan for financing the deficit.

(3) For any fiscal year during which the Corporation is expected to have outstanding loan balances owing to the Federated States of Micronesia or in which the Federated States of Micronesia continues to be obligated or liable for repayment of any portion of a loan or debt of the Corporation, or if the proposed plan to finance a budget deficit pursuant to subsection (2) of this section includes a grant, loan, guarantee or subsidy from the Federated States of Micronesia, the budget of the Corporation shall be submitted to Congress for approval and no further loans or indebtedness shall be incurred by the Corporation until the budget has been approved by Resolution of Congress.

Source: PL 15-8 § 27.

Cross-reference: The statutory provisions on the President and the Executive are found in title 2 of this code. The statutory provisions on the FSM Congress are found in title 3 of this code.

§ 254. Accounts, Annual Report, and Audit.

(1) The Board, the CEO and the Chief Financial Officer of the Corporation are jointly responsible for ensuring that the Corporation at all times keeps adequate accounts of its transactions and financial affairs, and must, without limitation, ensure that—

(a) all moneys received by the Corporation are properly brought to account;

(b) all payments by the Corporation are properly authorized;

(c) adequate control is maintained over the Corporation’s property and the incurring of liabilities; and

(d) the accounts are kept in accordance with generally accepted accounting principles.

(2) Within three months after the end of each financial year, the Chief Financial Officer must prepare a report of the Corporation’s activities during the financial year (referred to as the “Annual Report”) and shall submit a copy of the Report to the Secretary, the Board and to the Executive Council.

(3) The Annual Report must contain, among other things—

(a) a statement of financial performance, which shall include a balance sheet, operating statements, a statement of changes in financial position, and an analysis of changes in retained earnings;

(b) a statement summarizing the rates and charges prevailing throughout the prior year with respect to the Product and the outlook for such rates in the coming year;

(c) a statement concerning the condition of the Works and the capital expenditure plan of the Corporation;

(d) the CEO’s one and five-year plans required pursuant to section 231 of this chapter; and

(e) such other information as is required to give a true and fair view of the Corporation’s financial and operational affairs.

(4) The annual accounts of the Corporation must be audited by the FSM Public Auditor. For this purpose, the Chief Financial Officer must, within three months after the end of each financial year submit to the Public Auditor—

(a) the statement of financial performance and accompanying accounts of the Corporation for the year;

(b) the most recent budget prepared pursuant to section 253 of this chapter; and

(c) the Annual Report for the year prepared in accordance with subsection (2) of this section.

Source: PL 15-8 § 28.

Cross-reference: The statutory provisions on the President and the Executive are found in title 2 of this code. The statutory provisions on the Public Auditor are found in chapter 5 of title 55 of this code.

§ 255. Tax liability.

The Corporation shall be liable for the payment of any tax, assessment or contribution as may be required by law. Nothing herein shall be deemed to exempt employees and independent contractors of the Corporation from any tax liability for services rendered to the Corporation.

Source: PL 15-8 § 29.