The Federated States of Micronesia's Public Auditor office says the country's payroll system has widespread problems, including paycheques going to terminated employees.
The office says the widespread violations of the fundamental internal controls puts into question the integrity of the government's payroll system.
In a review of the past 2 years, it found significant overpayments made to active employees for hours not authorised and not requested, and that these overpayments were not detected or corrected by the Finance Department.
The audit also found significant improper payments made to former workers and these were not detected by the Department.
The Public Auditor says the gravity of the findings if not corrected, will eventually erode the integrity of the payroll system.
The government issues approximately 25,000 cheques annually to a value of more than 15 million US dollars.