Foreign Relations:

Better Accountability Needed Over U.S. Assistance to Micronesia and the Marshall Islands

RCED-00-67: Published: May 31, 2000. Publicly Released: May 31, 2000.

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Pursuant to a congressional request, GAO reviewed the federal assistance the United States provides to the Federated States of Micronesia and the Republic of the Marshall Islands, focusing on the: (1) cost to the United States of providing assistance to Micronesia and the Marshall Islands in accordance with the existing Compact of Free Association from fiscal year (FY) 1987 through FY 1999; (2) funds provided prior to the Compact (earlier than FY 1987) for the effects of nuclear weapons testing to what is now the Marshall Islands; and (3) accuracy and reliability of the data the Department of the Interior uses to monitor and supervise the federal assistance programs.

GAO noted that: (1) since the implementation of the Compact of Free Association in 1986, the United States has provided more than $2.6 billion in financial and other assistance, of which more than $1.5 billion was provided to Micronesia and over $1.1 billion was provided to Marshall Islands during fiscal years 1987 through 1999; (2) Interior provided the majority of the assistance, about $2 billion, through quarterly payments to the islands' bank accounts to be used for such purposes as capital construction projects, energy production, communication capabilities, and current account costs, such as those for payroll, maintenance, and other governmental activities; (3) the remaining half billion dollars was provided by 19 federal agencies in the form of grants, loans, equipment, and technical assistance, such as weather forecasting support and airport training activities; (4) prior to the Compact, the United States provided about $250 million in funding and assistance to what is now Marshall Islands for the effects of the U.S. nuclear weapons testing program that took place in the Marshall Islands during the 1940s and 1950s; (5) the Department of Defense, the Department of Energy, and Interior provided direct payments to the Marshall Islands' governments and individuals, rehabilitation and resettlement services, and health care and monitoring of islanders exposed to radioactive fallout; (6) in gathering and verifying data on the cost of U.S. assistance provided to the Islands, GAO found inaccuracies and inconsistencies with the data being used by Interior to supervise and monitor federal assistance programs; (7) for example, Interior had a number of errors in the budget data it reported annually to Congress on direct payments to the Islands; (8) there were significant inconsistencies in Interior's data on the assistance provided by other agencies to the Islands and the data the agencies reported to GAO; (9) Interior had not used the annual audit information available from the Islands to corroborate its figures; and (10) collectively, therefore, Interior's ability to accurately report on assistance provided is called into question.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: The decision as to who, if anyone, has monitoring responsibility for all Federal programs will be outlined in a new executive order, which, as of May 14, 2004, is currently being drafted by the Department of State.

    Recommendation: In the event Interior retains monitoring and coordination oversight as a result of the current negotiations, the Secretary of the Interior should direct the Office of Insular Affairs to develop a system to obtain and maintain data on all U.S. financial and program assistance provided to Micronesia and the Marshall Islands. Such a system might include making agreements with other agencies to regularly report assistance provided and making use of the annual audit reports from Micronesia and the Marshall Islands to help identify how funds are allocated.

    Agency Affected: Department of the Interior

  2. Status: Closed - Implemented

    Comments: The Department of Interior's Office of Insular Affairs adjusted their budget justification tables to reflect a consolidated request covering Federal services and single audits. Also, the actual financial information about amounts obligated in reimbursable agreements and the amounts paid as reimbursements are retained in the official accounting records of the Department.

    Recommendation: The Secretary of the Interior should direct the Office of Insular Affairs to reconcile the amounts reimbursed to other agencies shown in the budget justification table to the amounts reported by the agencies that receive reimbursements from Interior.

    Agency Affected: Department of the Interior

  3. Status: Closed - Implemented

    Comments: The Department of State fully concurred with the recommendation, and reported that the Department has negotiated provisions with the Island governments that will require that reliable data be maintained to ensure better accountability of assistance provided by the U.S. government. Currently, a formal proposal with the negotiated provisions has been made to the Federated States of Micronesia and an informal proposal has been made to the Republic of the Marshall Islands. The Department of State predicts that the provisions will be finalized by approximately August 2002.

    Recommendation: Given that negotiations are under way on provisions of the Compact that expire in 2001, the Secretary of State should negotiate provisions that require that reliable data be maintained to ensure better accountability of the assistance provided. Requiring periodic reconciliation of accounts between Interior, the other agencies providing assistance, and the Islands is one means to achieve this objective.

    Agency Affected: Department of State


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