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GAO-07-514R 1 (2007-05-25)

handle is hein.gao/gaocrptavab0001 and id is 1 raw text is: Sai --Accountability * Integrity * Reliability United States Government Accountability Office Washington, DC 20548 May 25, 2007 Congressional Committees Subject: Compacts of Free Association: Micronesia's and the Marshall Islands' Use of Sector Grants Supplementing our December 2006 report entitled Compacts of Free Association: Micronesia and the Marshall Islands Face Challenges in Planning for Sustainability, Measuring Progress, and Ensuring Accountability,' this report provides information on the uses of economic assistance provided under the amended U.S. compacts with the Federated States of Micronesia (FSM) and the Republic of the Marshall Islands (RMI) from 2004 through 2006. From 1987 through 2003,2 the United States provided $2.1 billion in economic assistance to the FSM3 and the RMI through a Compact of Free Association. In 2003, the U.S. government approved amended compacts with the FSM and the RMI,4 providing a combined total of $3.6 billion for the two countries in 2004 through 2023.5 The amended compacts identify the 20 years of grant assistance as intended to assist the FSM and RMI governments in promoting the economic advancement and budgetary self-reliance of their people. Under the amended compacts, U.S. grant funding decreases annually,6 paired with increasing contributions to trust funds for the FSM and the RMI; earnings from the trust funds are intended to provide a source of revenue when the grants expire in 2023. In addition, the annual grant funding is 'GAO, Compacts of Free Association: Micronesia and the Marshall Islands Face Challenges in Planning for Sustainability, Measuring Progress, and Ensuring Accountability, GAO-07-163 (Washington, D.C.: Dec. 15, 2006). 2 In this report, all years cited are fiscal years (Oct. 1-Sept. 30) unless otherwise indicated. 'The FSM comprises four states: Chuuk, Kosrae, Pohnpei, and Yap. 4 Whereas the original compact was a single agreement among the U.S., FSM, and RMI governments, the amended compacts (approved in Pub. L. No. 108-188, Dec. 17, 2003) are separate agreements between the United States and each of the two countries. The $3.6 billion in assistance includes (1) compact grants; (2) trust fund contributions; (3) Kwajalein impact funding; (4) estimated values of compact-authorized federal services, such as weather, aviation, and postal services over the 20-year period; and (5) inflation adjustments. Services related to disaster relief have been excluded. 'The decrement in grant funding is deposited into the FSM's and the RMI's trust funds. The RMI's annual decrement of $500,000 began in 2004, and the FSM's annual decrement of $800,000 began in 2007. GAO-07-514R Compact Use Page I

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