Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1694265474921.pdf (Marshall Islands)
s Republic of the Marshall Islands Jepilpilin Ke Ejukaan APPROPRIATION (FINANCIAL YEAR 2017) ACT 2016 Sponsored by: HON.

MINISTER BRENSON S. WASE Received: HON.

SPEAKER KENNETH A. KEDI BILL NO.


52ND2 Appropriation (Financial Year 2017) Act 2016 BILL No: 52ND2 Index NITIJELA OF THE REPUBLIC OF THE MARSHALL ISLANDS 37TH CONSTITUTIONAL REGULAR SESSION, 2016 s Republic of the Marshall Islands Jepilpilin Ke Ejukaan APPROPRIATION (FINANCIAL YEAR 2017) ACT 2016 Index Section APPROPRIATION (FINANCIAL YEAR 2017) ACT 2016 Page 1 §101.

§102.
§102.

§103 §104 §105 §106 §107 §108 §109 §110 §111 §112 §113 §114 §115 §116 §117 Short title.

.............................................................................................................................. 6 Statement of National Objective.

........................................................................................ 6 Interpretation.
....................................................................................................................... 6 Appropriation from the Marshall Islands General Fund.

.............................................. 6 Appropriations from the Special Revenue Fund.

............................................................ 7 Compact Funds.
.................................................................................................................... 7 Appropriation of U.S. Federal Grants and other Foreign Grants.

................................. 8 Funding of the Office of the Auditor General.

................................................................. 8 Contingencies Fund.

............................................................................................................ 9 Unanticipated Income.
......................................................................................................... 9 Notification to the Cabinet by the Minister.

..................................................................... 9 Lapsing of Certain Appropriations.................................................................................... 9 Delegation of Authority to Approve.

.............................................................................. 10 Reprogramming of Funds.
................................................................................................ 10 General.

................................................................................................................................ 10 Special Revenue Fund........................................................................................................ 11 Effective Date.
..................................................................................................................... 12 SCHEDULE 1 APPENDIX A l I I Page3 IndexBILL No: 52ND2 Appropriation (Financial Year 2017) Act Page4 r Appropriation (Financial Year 2017) Act 2016 BILL No: 52ND2 §101 NITIJELA OF THE REPUBLIC OF THE MARSHALL ISLANDS 37TH CONSTITUTIONAL REGULAR SESSION, 2016 s Republic of the Marshall Islands Jepilpilin Ke Ejukaan APPROPRIATION (FINANCIAL YEAR 2017) ACT 2016 A BILL FOR AN ACT to provide: (a) (b) (c) (d) (e) in accordance with Article VIII of the Constitution, for the issuance from the Marshall Islands General Fund, including funds provided under the Compact of Free Association, as Amended, and other funds, a total sum of $201,498,187 $202,085,196 to meet the expenditure of the Government for the Financial Year 2017, and to appropriate sums to program areas; and for a Contingencies Fund in accordance with Section 9 of Article VIII of the Constitution; and for contingent appropriation of amounts that may be received in the future; and for delegation of expenditures approval under Section 5 of Article VIII of the Constitution; and for controls on reprogramming and transfer of funds within appropriation areas; and (f) for control on specific expenditures.
20 21 BE IT ENACTED BY THE NITIJELA OF THE REPUBLIC OF THE MARSHALL ISLANDS l Page5 BILL No: 52ND2 §101 Appropriation (Financial Year 2017) Act 2016 §101.

Short title.

This Act may be cited as the Appropriation (Financial Year 2017) Act 2016.

§102.

Statement of National Objective.


(1) (2) It is the intention of the Government of the Republic of the Marshall Islands to enact and implement a national budget for the whole of the Financial Year 2017 as provided in the FY 2017 Budget Schedule which includes the Economic Policy Statement attached under Schedule 1 as Appendix A and B respectively.
In this Act, a Medium Term Financial Management Framework (MTFMF), which is strategic in nature, is provided as policy guidance for the Government of the Republic of the Marshall Islands spending and as direction for budgeting process in the medium term, attached herewith as Appendix C to this Act.

§103 Interpretation.

In this Act: (1) (2) “program area” means program areas set out in Schedules 1 to Schedule 5 as indicated by the headings in those schedules.
“unanticipated income” means any money, not being loan money, that: (a) (b) becomes available for expenditures from a source at a time when the Nitijela is not meeting pursuant to Article VIII, Section 7 of the Constitution; and has not been specifically included in the budget estimates for the Financial Year, which the Cabinet is satisfied should, in the interests of the Republic of the Marshall Islands, be expended, pursuant to Article VIII, Section 7 of the Constitution, before the expenditures could reasonably be authorized by an Appropriation Act or a Supplementary Appropriation Act.
§104 Appropriation from the Marshall Islands General Fund.

Total Appropriation.


 Page6 r Appropriation (Financial Year 2017) Act 2016 BILL No: 52ND2 §102 The sum of $83,150,290 $83,222,299 is hereby appropriated, may be withdrawn from the Marshall Islands General Fund and shall be expended pursuant to Article VIII of the Constitution for program areas as set out in Schedule 1 – inclusive of the amount that may be spent or payable under the continuing appropriation.
§105 Appropriations from the Special Revenue Fund.

Special Revenue Funds.

The sum of $8,215,074 $8,730,074 is hereby appropriated, and may be withdrawn from the Special Revenue Funds as set out in Schedule 3 subject to Section 16 of this Act.

§106 Compact Funds.

(1) Total Appropriations.


All Funds provided under the Compact of Free Association, as Amended, in the amount $80,039,387 shall be credited to the General Fund and shall be appropriated in accordance with the relevant provisions and Schedule 2 of Appendix A of this Act.

(2) Restrictions on Reprogramming of Compact Funds.
Fund received under the Compact of Free Association, as Amended shall not be transferred to any other activity, or reprogrammed or expended for any purpose during the Financial Year other than the permissible uses of those funds as provided for in the Compact of Free Association as Amended and its Subsidiary Agreements.

(3) Lapse of Compact Funds.

All moneys received under the Compact of Free Association, as Amended and appropriated herein shall not lapse at the end of the Financial Year.
However any unspent funds thereof shall be returned to US Department of Interior and shall be regranted in the subsequent year.

(4) Unaudited entities and organizations.
Notwithstanding the provisions of any other law or agreement, any entity or organization receiving funds under the Compact of Free Association as Amended, shall not receive such funding if the Auditor General or its contractors have determined that the books, l Page7 BILL No: 52ND2 §102 Appropriation (Financial Year 2017) Act 2016 accounts and financial records of any such entity or organization have not been auditable for the past three preceding fiscal years until such time as the Auditor General or its contractor determine that such entity or organization has taken necessary corrective action to render such books, accounts and financial records in an auditable condition to permit a financial audit to proceed.
§107 Appropriation of U.S. Federal Grants and other Foreign Grants.

(1) (2) (3) The sum of $30,093,436 being the total amount of special U.S. Federal Grants including capital grants from the Republic of China (Taiwan), Asian Development Bank, World Bank (PROP), Global Fund, UNFPA Fund and UH Grant is appropriated and may be withdrawn from the Marshall Islands General Fund pursuant to Article VIII of the Constitution, for program areas in accordance with Schedules 4 and 5, during the Financial Year.
The amounts set out in Schedules 4 and 5 are not available for expenditure as reprogrammed expenditure under Article VIII Section 7 of the Constitution, except as authorized by or under the agreements with the donor nation and/or institution.

The appropriation made by Subsection (1) shall not lapse at the end of the Financial Year, but shall continue until either the grant expires or the funds are expended, whichever occurs first.

§108 Funding of the Office of the Auditor General.


(1) The Secretary of Finance shall withhold and deposit in the special account in the Marshalls Islands General Fund, zero point eight percent (0.8%) of all amounts appropriated in Schedules 1, 3 and 5, and the sum so withheld and deposited may be withdrawn and expended by the Auditor-General in accordance with the budget approved for his/her office by the Cabinet, for the operations and activities of his/her office.
(2) The zero point eight percent (0.8%) of funds to be withheld and deposited under Subsection 1 shall apply only to the General Fund in Schedule 1, Schedule 3 and Republic of China (ROC) capital grants as appropriated in Schedule 5.
Provided however, any funds under Schedule 1, Schedule 3 and Schedule 5 which are not subject to the Page8 r Appropriation (Financial Year 2017) Act 2016 BILL No: 52ND2 §102 zero point eight percent (0.8%) shall be identified by the Secretary of Finance with the concurrence of the Minister of Finance pursuant to the Financial Management Act.

§109 Contingencies Fund.


(1) In accordance with Article VIII, Section 9(1) of the Constitution, up to $200,000 is authorized to be advanced against the General Fund for purposes of the Contingencies Fund.

(2) Where, during the Financial Year, an amount of unanticipated income is received by the Government for the purpose of an urgent and unforeseen need, the amount prescribed in Subsection (1) for the Contingencies Fund is increased by the amount of that unanticipated income, to meet such need.
§110 Unanticipated Income.

Where, during the Financial Year, an amount of unanticipated income is received by the Government for a specified program area, other than as set out in Section 9 (2), that amount is appropriated for the corresponding program area in Schedules as the case may be, and the amount of the appropriation for that program area is increased accordingly.

§111 Notification to the Cabinet by the Minister.


When any money is received under Section 10 herein above, the Minister of Finance shall notify the Cabinet of the receipt of such money, and such money shall not be expended without the approval of the Cabinet.

§112 Lapsing of Certain Appropriations.
Any increase in the amount prescribed for the Contingencies Fund provided for by Section 9 (2) ceases, and any increase in the amount of an appropriation affected by Section 10 lapses: (a) on the effective date of the next Appropriation Act or Supplementary Appropriation Act enacted after the date referred to in Section (1) of this Act; or l Page9 BILL No: 52ND2 §102 Appropriation (Financial Year 2017) Act 2016 (b) on the adoption of a Resolution to that effect by the Nitijela, whichever occurs first.
§113 Delegation of Authority to Approve.
(1) For the purposes of Article VIII, Section 5 (1) of the Constitution, the authority to approve expenditure in a program area in accordance with Schedules 1 to 5 is hereby delegated to: (a) (b) (c) The member of the Cabinet primarily responsible for that program area and; If the responsible member of the Cabinet so directs by instrument in writing, and subject to any limitations imposed by the instrument and to general control by the member, an appropriate person, authority, or agency; The Chief Justice of the High Court pursuant to the Judiciary Fund in accordance with the provisions of 27 MIRC Chapter 1; or (d) The Minister of Finance in particular to appropriations made under special appropriations in schedule 1.
(2) Any expenditure other than in accordance with Schedule 1, 2, 3, 4 and 5 shall require the approval of the Cabinet Minister responsible for the program areas in accordance with Article VIII, Section 5(1) of the Constitution.

§114 Reprogramming of Funds.

Before any reprogramming of expenditure between program areas is approved under Article VIII, Section 7 (1) of the Constitution, the Cabinet shall approve such reprogramming.

§115 General.
§115 General.

(1) In the event the actual receipts into the Marshall Islands General Fund fall short of the total amount appropriated in Schedules 6, 7 and 8, the Cabinet pursuant to Article VIII, Section 7 of the Constitution, may make the necessary adjustments to Schedules 1, 2, 3, 4and 5 to accommodate the shortfall.
Page10 r Appropriation (Financial Year 2017) Act 2016 BILL No: 52ND2 §102 (2) All contracts awarded by the Government and associated agencies must comply with the provisions of the Republic of the Marshall Islands Procurement Code.

Funds will only be released by the Ministry of Finance upon proof of compliance with the code.
(3) Gross Revenue Tax of 3% on all Government contracts will be withheld by the Ministry of Finance at the time of payment, and credited against the contractor’s liability to pay gross revenue tax for the period of the payment.

The contractor is still required to file a tax for return for the period.

(4) All Government Ministries, statutory corporations and agencies must have been audited and have complied with all the audit recommendations prior to receiving any quarterly allocation.
Any Government Ministries, statutory corporations and agencies unable to comply with all the audit requirements must provide an expense report before release of any funds.
(5) No funds appropriated under this Act shall be released to any Local Government, statutory corporation or agency whose financial records have not been audited for the past two preceding fiscal years, until such Local Government, statutory corporation or agency has taken the necessary steps to render such records auditable, or provides a full and complete report of its expenses to Cabinet.
(6) Any Government Ministry, statutory corporation and or agency that receive funds appropriated under this Act or any other Act, or subsidies or any other government funds shall enter into a Memorandum of Agreement with the Government in accordance with Regulations and guidelines established by the Secretary of Finance pursuant to the Financial Management Act.

§116 Special Revenue Fund.


Any money in excess of an appropriation made in Schedule 3 (Special Revenue Funds) may be expended during the Financial Year only in accordance with terms of the Act establishing such Special Revenue Fund.

 l Page11 BILL No: 52ND2 §102 Appropriation (Financial Year 2017) Act 2016 §117 Effective Date.
This act shall take effect on the date of certification in accordance with Article IV, Section 21 of the Constitution and in accordance with the Rules of Procedures of the Nitijela.
Page12 r Appropriation (Financial Year 2017) Act 2016 BILL No: 52ND2 §102 l Page13 Appropriation (Financial Year 2017) Act 2016 BILL No: 52ND2 §102 SCHEDULE 1 APPENDIX A APPENDIX A RECURRENT GENERAL FUND APPROPRIATIONS PRESIDENT & CABINET Office of the President President & Ministers Cabinet Operations V7AB Red Cross Postal Services-Ebeye SDGs Disaster Response & Unforseen Emergency Fund CHIEF SECRETARY Administration Deputy Chief Secretary-Ebeye Office EPPSO OEPPC SPECIAL APPROPRIATIONS Majuro Electricity Land and Building Leases International Subscriptions/Membership Fees ADB Loan Repayment Centralized Utility Bills-Majuro Centralized Utility Bills-Ebeye Lease Housing Contingency Fund National Energy Support Account MISSA Subsidy Solid Waste Matching Capital Building Border Management System Court Judgement Seawall project COUNCIL OF IROIJ l FY2017 Page1 BILL No: 52ND2 §102 Appropriation (Financial Year 2017) Act 2016 Administration Council of Iroij Members NITIJELA Nitijela Operation General Membership Speaker's Contingency Committee Expense Legislative Counselors Senators office Rental Systems Gratuity AUDITOR GENERAL
 Administration (0.8%) Office of the Auditor General Single Audit Match FOREIGN AFFAIRS Administration Compact Office Washington D.C. Embassy RMI-USAKA Office Honolulu Consulate United Nations Mission - New York Japan Embassy - Tokyo ROC Embassy - Taipei Fiji Embassy - Suva Arkansas Consulate Korea Embassy Climate Change Ambassador Nuclear Victims Day Nuclear Claims Tribunal PUBLIC SERVICE COMMISSION Public Service Commission PSC Administration Additional Operation JUDICIARY General Courts Traditional Rights Court Community Court Judicial Service Commission Judicial Fund Page2 107,375 437,817 2,338,017 557,864 1,151,809 120,452 133,644 149,248 - r Appropriation (Financial Year 2017) Act 2016 BILL No: 52ND2 §102 Micronesian Legal Service Corporation Majuro Jail Project ATTORNEY GENERAL Attorney General Office Immigration - Majuro Immigration - Ebeye HEALTH Health Administration Health Planning & Statistics Majuro Hospital Medial Services Kwajalein Atoll Hospital Services Wellness Enviornmental Sector EPA Surveillance Vessel EDUCATION National Board of Education College of the Marshall Islands CMI-CLCC Scholarship Board Administration Leadership & Management Policy and Planning Elementary Support Services Seconday Ed.
& Support Services Contracted Teachers Property and Maintenance RMI/USP Joint Project National Training Council PSS Outer Island District PSS Budget PSS Reform Hot Lunch CMI Endowment Aid to Private Schools Achieve 3000 Distant Learning 4 Specialist TRANSPORTATION & COMMUNICATION Office of the Secretary 6,552,494 385,144 l Page3 BILL No: 52ND2 §102 Appropriation (Financial Year 2017) Act 2016 Directorate of Civil Aviation AMI Marshall Islands Shipping Cooperation Repairs & Maintenace (MISC) NTA Aviation Task Force Uliga Terminal RESOURCES & DEVELOPMENT Administration Agro-Forestry Trade & Investment Renewable Energy Office Small Business Development Center OCI Copra Price Stabilization Subsidy (Tobolar) 1 Island 1 product Small & Medium Business Loan Program MIVA INTERNAL AFFAIRS Administration Historic Preservation Office Land & Surveys Local Government Affairs Local Government Trust Fund Grant in Aid Child Rights Office Youth Services Bureau Gender and Development Sports & Recreation Bureau Electoral Administration Identification Division Registrar's Office Central Adoption Administration Price Monitoring Office Ebeye Office Community Development Community Training Center Alele Corporation Disability
 office Constitution Day Constitutional Convention (CONCON) Outer Island Economic Development Fund Weto in mour (WUTMI) Page4 r Appropriation (Financial Year 2017) Act 2016
 BILL No: 52ND2 §102 Youth Service Corp Mayor Salary Adjustments Social workers JUSTICE Public Defender - Majuro Public Safety - Majuro Public Safety - Ebeye Sea Patrol Land Registration Authority FINANCE Secretary's Office Accounting & Administration Revenue Division Majuro Custom Division Treasury Division Budget & Procurment Procurement & Supply Division Ebeye - Finance Ebeye Revenue/Custom Office Division of International Development Assistance Pacific Islands Development Bank (RMI Contribution) New Post PFM including information MOF Supplies & Vehicles BANKING COMMISSION Administration PUBLIC WORKS Operation & Maintenance - Majuro Carpentry (CGMA) AC & Electrical Landing Craft/Outer Islands Projects Road & Grounds Equipment Repair & Maintenance MAWC Ebeye Public Works Public Works Repair & Maintence -Majuro Public Works Repair & Maintence -Ebeye Outer Island & Majuro Public Works Project MIR (Sea Wall reinforcement) Jaluit & Wotje CIP Engine (MEC) Solar Household Due Outer islands runway projects l Page5 BILL No: 52ND2 §102 Appropriation (Financial Year 2017) Act 2016 Ebeye Morge Port Authority (Delap Dock Repair - Matching Fund)
 200,000 1,477,000 TOTAL GENERAL FUND EXPENDITURES 83,222,299 COMPACT FUNDS AUDITOR GENERAL Single Audit HEALTH MOH Utility Kumit Wellness Majuro Hospital Primary Health Care Outer Islands Dispensaries Leprosy Program TB Program One Stop Shop NCD Kwajalein Atoll Health Administration Ebeye Preventive Services Ebeye Dental Services Kwajalein Atoll Dispensaries Ebeye Hospital Operations EBEYE SPECIAL NEEDS - HEALTH Ebeye Hospital Ebeye Wellness Center ENVIRONMENTAL SECTOR Kwajalein Environmental Impact Assessment
 Majuro Atoll Waste Company EDUCATION College of the Marshall Islands (Compact Designated) Scholarship Board PSS Administration & Human Resources PSS Budget & Finance MOE Policy, Planning and Research MOE Curriculum Instructions and Assessment Elementary Education and Support Services Majuro Middle School Schedule Page6 r Appropriation (Financial Year 2017) Act 2016 BILL No: 52ND2 §102 Elementary Education - UES Elementary Education - RES Elementary Education - DES Elementary Education - APES Elementary Education - WES Elementary Education - LES Elementary Education - RRES Ellementary Education- LIES Elementary Education - EES Elementary Education - EPES Elementary Education Northern School District Elementay Education Southen School District Elementary Education Eastern School District Elementary Education Western School District Elementary Education Central School District Secondary Education - MIHS Secondary Education - LHS Secondary Education - JHS Secondary Education - NIHS Secondary Education - KAHS Aid to Private School MOE Property & Maintenance EBEYE SPECIAL NEEDS - (EDUCATION) Elementary and Secondary Schools Kwajalein Scholarship Adult Education - CMI SUPPLEMENTAL EDUCATION GRANT (SEG) National Training
 Council World Teach and Dartmouth Programs Industrial Arts & Life Skills Program School Enrichment Program Elementary Schools Equip, Supplies and Materials Secondary Schools Equip, Supplies and Materials School accreditation High School Practicum Program Secondary Textbook Music/Arts Program Student Exchange Program School Debate Program Majolizing the Curriculum (Pre-Ninth) Adult Education and Literacy (CMI) Close Up Program Instructional Technology Supportt 274,051 419,071 447,807 151,702 113,392 187,439
l Page7 BILL No: 52ND2 §102 Appropriation (Financial Year 2017) Act 2016 Instructional Service Center Professional Development MOE Contractual Elementary Textbook Kindergarten Program MOE Data Improvement Project 101,013 519,102 220,000 250,000 1,585,909 278,876 TOTAL COMPACT SECTOR GRANTS 29,544,263 COMPACT CAPITAL FUND College of the Marshall Islands PSS Projects (Majuro) Pss Projects (Kwaj) MOH Hospital (Majuro) PMU Operation MAWC Water & Sewer Improvemet Proect -Ebeye EBEYE SPECIAL NEEDS - Capital IN KARE OTHER COMPACT DESIGNATED Kwajalein Landowners Compact Disaster Grant Compact Trust Fund Kwajalein Developemen Fund PMU Midcorridor Kajur Ebeye Water Sewer Project 9,132,288 500,000 900,000 1,123,450 2,000,338 608,500 2,000,000 2,000,000 1,409,076 1,409,076 37,694,470 21,403,800 237,820 16,052,850 2,259,290 200,000 275,000 1,327,860 456,430 TOTAL COMPACT EXPENDITURES 80,039,387 SPECIAL REVENUE EXPENDITURES Health Care Fund Environment Protection Authority Ministry of Internal Affairs Fund Ministry of Justice Fund National Training Council Fund Sea Patrol Fund Labor Special Revenue Fund Page8 Schedule 3 8,730,074 7,400,000 100,000 40,000 350,000 500,000 5,000 40,000 r
 Appropriation (Financial Year 2017) Act 2016 BILL No: 52ND2 §102 Public Work Fund MAWC OTHER DEVELOPMENT ASSISTANCE EXPENDITURES U.S. FEDERAL GRANT EXPENDITURES Health Programs Education Programs CMI Federal Grant R&D 4 Atoll Feeding IA ASIAN DEVELOPMENT BANK PFM Others 100,000 195,074 Schedule 4 30,093,436 14,373,447 7,334,859 1,682,139 4,528,999 64,000 574,000 189,450 6,000,000 2,000,000 4,000,000 ROC CAPITAL PROJECTS 7,400,000 Office of the President Hosted International Confernce Office of Chief Secretary
 Disaster Matching Ministry of Inernal Affairs Outer Islands Economic Development Fund Ministry of Public Works Infrastructure Capital Maintenance Fund (Compact Matching) Ebeye Boat Ebeye Public Ramp NCD Sports Facility Majuro Seawall Ministry of R&D Tobolar Laura Farm MIVA Ministry of Finance Trust Repayment l 150,000 150,000 237,820 237,820 1,500,000 1,500,000 1,570,680 449,080 100,000 400,000 310,000 311,600 1,391,500 991,500 350,000 50,000 1,450,000 350,000 Page9 BILL No: 52ND2 §102 Appropriation (Financial Year 2017) Act 2016 Majuro Developmen Project Outer Islands Community Development Project 600,000 500,000 Ministry of Health RMI Medical & Services Upgrade project MOH Internship MOH DATA System Ministry of Justice Public Safety Uniform & Equipment World Bank PROP-MIMR World Health Organization Human Resources Universy of Hawaii UH Global Fund HIV/ST/TB UNFPA Reproductive Health 950,000 450,000 200,000 300,000 150,000 150,000 1,830,000 1,830,000 78,617 78,617 85,673 85,673 160,378 160,378 165,321 165,321 TOTAL ALL FUNDS EXPENDITURE 202,085,196 ALL REVENUES APPROPRIATION GENERAL FUND REVENUES Tax Items Marshallese Income Tax Expat Income Tax Business Gross Revenue Tax Non-resident Business Gross Income Tax CMI Tax Import Tax Hotel & Resort Tax Fuel Tax Schedule 5 83,222,299 30,546,499 8,956,339 4,821,639 8,368,335 91,776 960,100 5,877,298 59,396 608,400 Page10 r Appropriation (Financial Year 2017) Act 2016 BILL No: 52ND2 §102 Immovable Property Tax
 Penalties and Interest Charges Tax Auidt Adjustments Non Tax Items Fishing Rights Fees and Charges Ship Registry ROC (Taiwan) Grants Anticipated MIMRA Revenue SPECIAL REVENUE FUNDS Health Care Fund Environment Protection Authority Ministry of Internal Affairs Fund Ministry of Justice Fund National Training Council Fund Sea Patrol Fund Labor Special Revenue Fund Public Work Fund MAWC COMPACT REVENUE FUNDS Compact Base Grants Compact Base Grants - Ebeye Special Needs Compact Special Education Grant (SEG) Compact
 Disaster Assistance Matching Compact Single Audit Compact Capital Funds Kwajalein Environmental Impact Assessment Kwajalein Development Fund Kwajalein Landowners Trust Fund (Compact Contribution) ALL OTHER REVENUE U.S. Federal Grants World Bank (PROP) ROC (Taiwan) Capital Grants World Health Organization (MOH) Asian Development Bank (ADB) Grant Global Funds UNFPA l 690,000 40,428 72,788 52,675,800 40,129,700 2,374,100 6,500,000 3,600,000 72,000 Schedule 6 8,730,074 7,400,000 100,000 40,000 350,000 500,000 5,000 40,000 100,000 195,074 Schedule 7 80,039,387 18,573,643 6,064,410 5,577,466 237,820 500,000 9,132,288 237,820 2,259,290 21,403,800 16,052,850 Schedule 8 30,093,436 14,373,447 1,830,000 7,400,000 78,617 6,000,000 160,378 165,321 Page11 BILL No: 52ND2 §102 Appropriation (Financial Year 2017) Act 2016 UH Grant 85,673 TOTAL ALL REVENUE 202,085,196 Total ALL EXPENDITURES Variance 202,085,196 - Page12 r Appropriation (Financial Year 2017) Act 2016 BILL No: 52ND2 §102 APPENDIX B APPENDIX B:ECONOMIC POLICY STATMENT (EPS) Section 1: Economic Performance Overview (FY15) This overview provides information from FY15.
lackluster RMI Economic Growth: RMI economic growth recorded a positive, but performance in FY2015 with a 0.6 percent growth in GDP, an improvement over the previous year’s decline of 0.9 percent.

However, the economy was largely flat; fisheries output was unchanged on the prior year as well as construction activity, which remained at low levels reflecting the continuing absence of Compact infrastructure grant usage.
While activity in the wholesale and retail trade fell, financial intermediation and education services showed signs of growth.

Reflecting the large reductions in international fuel prices, inflation as recorded through the CPI, fell by 2.2 percent, but by the first quarter of 2016 had returned to positive territory.

The RMI Budget Status: Preliminary data for FY2015 indicates the RMI fiscal outturn in FY2015 recorded a positive result with a fiscal surplus of 2.9 percent of GDP.
Tax revenues grew by 6 percent, which mainly reflected a significant increase in ship registry fees.

Without the ship registry fees, tax revenues grew by 0.5 percent reflecting the weak growth in the economy.

Receipt of grants grew although use of the Compact infrastructure grant fell.

A large increase of $3.5 million was recorded in the use of fishing royalties.

On the expense side payroll costs were contained and grew by a modest 1.4 percent while use of goods and services fell by 0.8 percent.
The major growth item of expense was a large increase in subsidy payments to the SOE sector of $5.6 million.

Transfers to government agencies also increased by $1.5 million.

RMI External Debt: RMI external debt remains significant, and was characterized by the IMF in a recent Debt Sustainability Analysis (DSA) as reaching levels that placed the RMI at a “high risk of debt distress”.
Nevertheless, external debt continued to decline as a percentage of GDP, falling from a level of 72 percent of GDP at the start of the amended Compact to 50 percent in FY2015.

The RMI Compact Trust Fund (CTF):experienced market losses during FY2015 of -4.14 percent; however, scheduled contributions from the U.S. and Republic of China (ROC) and an additional contribution from the RMI enabled the fund to grow in size by just over $7 million to an end of FY15 balance of $247.1 million.
During the period of investment since the outset of FY2006, the annualized rate of return has been 5.12 percent.
Assuming the pledged contributions from the Republic of China (ROC) continue, the fund would only need to grow at 4.27 percent annually to achieve a level sufficient to provide a smooth transition to CTF l Page13 BILL No: 52ND2 §102 Appropriation (Financial Year 2017) Act 2016 distributions from FY2024 onward at the real value of sector grants that terminate at the end of FY2023 and in the absence of market volatility.
However, achieving such a level does not mean the risk of subsequent periodic fiscal shocks are eliminated.

Such risks primarily result from the fundamental reliance upon market returns which carries with it volatility.

In addition, certain design characteristics of the mutually agreed CTF distribution mechanism require the attention of the CTF Committee in collaboration with the U.S. and RMI governments.
Characteristics of the CTF Agreement that may require attention include:  problematic design characteristics of the buffer account mechanism;  a distribution mechanism that conflicts with the prevailing practice of confirming annual allocation decisions each August; and  distribution rules that could better protect the real value of the corpus over the long-run while also reducing the volatility of distribution levels and reducing the frequency of shortfalls in annual fiscal support to the RMI.
Changes to the Agreement itself, of course, require approval by the U.S. Congress.

RMI economic growth recorded a positive, but lackluster performance in FY2015 with a 0.6 percent growth in GDP, an improvement over the previous year’s decline of 0.9 percent.

However, the economy was largely flat; fisheries output was unchanged on the prior year as well as construction activity, which remained at low levels reflecting the continuing absence of Compact infrastructure grant usage.
While activity in the wholesale and retail trade fell, financial intermediation and education services showed signs of growth.

Reflecting the large reductions in international fuel prices, inflation as recorded through the CPI, fell by 2.2 percent, but by the first quarter of 2016 had returned to positive territory.

Social security sustainability.

The major pressing fiscal issue facing the RMI is the imminent collapse of the Social Security System.
Without reform the system is projected to collapse by FY2020 and beneficiaries will only receive 50 cents on the dollar.

In 2011 a set of reforms were proposed and tabled in the Nitijela as bill 43.

The reforms were not acted upon in the intervening years, until the new President established a task force in 2016 to come up with a revised set of proposals.
While the proposals currently under consideration are not as far reaching as those in bill 43, they will initiate the process, and are an important step in the right direction, although further action will be required down the road.

Booming donor support and capacity limitations.

After a period of relative calm in donor support, the RMI is set for a period of significant activity.
As a result of the policy to declare the RMI at risk of high debt stress, the ADB has placed the nation on a grant only basis with a commitment to an annual transfer of $6 million.

The former World Bank ICT reform project under IDA 17, which failed to garner support, has a remaining $11 million of funds available for other projects.

The EU has an EDF 11 grant of €9 million for energy related investments and budgetary support.
There is further support of another $11 million from the World Bank for climate resilience, and an on-going donor supported Post Disaster Needs Assessment for rehabilitation subsequent to the 2016 El Nino.
Finally, the government is proposing an enhanced budget of $14 million drawing on MIMRA reserves; major components include Page14 r Appropriation (Financial Year 2017) Act 2016 BILL No: 52ND2 §102 renovations to the national government capital complex ($3 million), disaster response ($2 million), runway reconstruction ($2 million), $1 million additional price support for copra plus many other smaller projects.
All in all, there is a quantum leap in planned activity but severely limited capacity to implement the projects on the ground.

For an office that has limited capacity to prepare its annual audits on-time, the Ministry of Finance hardly has time to entertain all the visiting missions, let alone prioritize and organize implementation.
Development of an RMI Decrement Management Plan (DMP) dominated JEMFAC meetings between the RMI and the U.S. in recent years, highlighting the need to develop a planned response to the annual decline in sector funding and lack of full inflation adjustment contained in the Compact.

In July of 2014, a RMI leadership meeting was held to develop a DMP.
A series of measures were incorporated into the framework: expenditure reduction, tax reform, regularization of a substantial portion of fishing fee income into the annual budgetary process, reductions in subsidies to SOEs and a reduction of special transfers to Majuro landowners.

While the regularization of MIMRA proceeds into the budget has occurred, implementation of the program has stalled in the face of the changed revenue environment.

The Reform Agenda.
The Reform Agenda.

During the amended Compact the RMI has entertained numerous reform initiatives that have failed to achieve successful implementation.

The expenditure proposals of the Comprehensive Adjustment Program (CAP) were not implemented, and although new government has requested an assessment of the tax reform initiative, the outcome is uncertain with a lack of public awareness of what the reforms entail.
While the SOE Act has become law, adoption of the “best practices” enshrined in the Act require effective implementation.

The fiscal responsibility and debt management bill of 2012 appears to be no longer part of the legislative agenda.

While there is no doubt the refinancing of the Marshalls Energy Corporation (MEC) debt under an ADB program (policy reform) loan was a beneficial move, the fiscal targets of the program were not achieved.
Given the medium-term boom in revenues from donor funding, and long-term fiscal realities of reduced grant availability from the Compact Trust Fund post FY2023, the RMI needs to take stock of the reform agenda.

A long-term fiscal strategy needs to be developed that ensures increased donor funding finds its way into productive investment, booming fishing revenues are used to resolve pressing needs such as the failing Social Security System, and funds are set aside to shore up the CTF.
Without a disciplined and structured policy environment, booming revenues and grants are likely to wind up in low-priority projects.

l Page15