TREATIES AND OTHER INTERNATIONAL ACTS SERIES 18-919.2

________________________________________________________________________

REGIONAL ISSUES

Compact of Free Association

Section 432 Review

Agreements Between the 

UNITED STATES OF AMERICA

and PALAU

Signed at Honolulu September 3, 2010

with Appendices

and

Amendment to Agreement

Signed at Koror September 19, 2018
 

NOTE BY THE DEPARTMENT OF STATE

 Pursuant to Public Law 89—497, approved July 8, 1966

(80 Stat. 271; 1 U.S.C. 113)—

“. . .the Treaties and Other International Acts Series issued

under the authority of the Secretary of State shall be competent

evidence . . . of the treaties, international agreements other than

treaties, and proclamations by the President of such treaties and

international agreements other than treaties, as the case may be, 

therein contained, in all the courts of law and equity and of maritime

jurisdiction, and in all the tribunals and public offices of the

United States, and of the several States, without any further proof

or authentication thereof.”
 

 PALAU

 Regional Issues: Compact of Free Association

 Section 432 Review

 Agreement signed at Honolulu September 3, 2010,

 with appendices; and

 Amendment to agreement signed at Koror 

 September 19, 2018;

 Entered into force September 19, 2018.

 

.

 
AGREEMENT BETWEEN THE 

GOVERNMENT OF THE UNITED STATES OF AMERICA 

AND THE 

GOVERNMENT OF THE REPUBLIC OF PALAU 

FOLLOWING THE COMPACT OF FREE ASSOCIATION 

SECTION 432 REVIEW 

In recognition of the ties that were developed between the United States of America and Palau 

during World War Two, and the subsequent half century of United States administration of Palau 

and the continuing close relationship between the Governments of the United States and Palau 

under the Compact of Free Association ("Compact"), following the fifteenth anniversary review 

of the relationship conducted pursuant to Section 432 of the Compact (which provides: '·Upon 

the fifteenth and thirtieth and fortieth anniversaries of the effective date of this Compact, the 

Government of the United States and the Government of Palau shall formally review the terms of 

this Compact and its related agreements and shall consider the overall nature and development of 

their relationship. In these formal reviews, the governments shall consider the operating 

requirements of the Government of Palau and its progress in meeting the development objectives 

set forth in the plan referred to in Section 231(a). The governments commit themselves to take 

specific measures in relation to the findings of conclusions resulting from the review. Any 

alteration to the terms of this Compact or its related agreements shall be made by mutual 

agreement, the terms of this Compact and its related agreements shall remain in force until 

otherwise amended or terminated pursuant to Title Four of this Compact"), and in light of the 

desire of the United States of America and the Republic of Palau to deepen their relationship, 

now, therefore, the Government of the United States of America and the Government of the 

Republic ofPalau agree as follows: 

1. Compact Section 21 l(f) Fund 

The Government of the United States of America (the "Government of the United States") shall 

contribute $30.25 million to the Fund referred to in Section 211 (f) of the Compact in accordance 

with the following schedule: $3 million annually for ten years beginning with Fiscal Year 2013 

through Fiscal Year 2022, and $250,000 in Fiscal Year 2023. 

2. Infrastructure Maintenance Fund 

(a) The Government of the United States shall provide a grant of $2 million annually from the 

beginning of Fiscal Year 2011 through Fiscal Year 2024 to create a trust fund (the 

"Infrastructure Maintenance Fund") to be used for the routine and periodic maintenance of major 

capital improvement projects financed by funds provided by the United States. The Government 

of the Republic of Palau (the "Government of Palau") will match the contributions made by the 

United States by making contributions of $150,000 to the Infrastructure Maintenance Fund on a 

quarterly basis from the beginning of Fiscal Year 2011 through Fiscal Year 2024. 

Implementation of this subsection shall be carried out in accordance with the provisions of 

Appendix A to this Agreement. 
~ TIie S3 million owed to the Government ofthe United States under paragraph 3(d) of Article 

V ol the Agreement Concerning Special Programs Related to the Entry Into Force of the 

Compact offree Association Between the Government ofthe United States and the Government 

of the Republic of Palau (the Guam Accords) done at Guam, May 26, 1989. plus accumulated 

intaest, shall be paid into the Infrastructure Maintenance Fund. The $3 million shall remain in 

the Infrastructure Maintenance Fund and not be expended for any purpose. All past and future 

income generated by the $3 million shall be used exclusively for the routine maintenance ofthe 

Compact Road provided by the United States under Section 212 ofthe Compact. 

3. Fiscal Consolidation Fund 

The Government ofthe United States shall provide the Government of Palau $5 million in Fiscal 

Year 2011 and $5 million in Fiscal Year 2012 for deposit in an interest bearing account to be 

used to reduce government payment arrears of Palau. Implementation of this section shall be 

carried out in accordance with the provisions ofAppendix B to this Agreement. 

4. Direct Economic Assistance 

(a) In addition to the $13.25 million in economic assistance provided to the Government of Palau 

by the Government of the United States in Fiscal Year 2010, and unless otherwise specified in 

this Agreement or in an Appendix to this Agreement, the Government of the United States shall 

provide the Government of Palau $107.5 million in economic assistance as follows: $13 million 

in Fiscal Year 2011; $12.75 million in Fiscal Year 2012; $12.5 million in Fiscal Year 2013; 

$12 million in Fiscal Year 2014; $11.5 million in Fiscal Year 2015; $10 million in Fiscal Year 

2016; $8.5 million in Fiscal Year 2017; $7.25 million in Fiscal Year 2018; $6 million in Fiscal 

Year 2019; $5 million in Fiscal Year 2020; $4 million in Fiscal Year 2021; $3 million in Fiscal 

Year 2022; and $2 million in Fiscal Year 2023. The funds provided in any fiscal year under this 

subsection shall be provided in four (4) quarterly payments (thirty percent (300/o) in the first 

quarter, thirty percent (30%,) in the second quarter, twenty percent (200/o) in the third quarter, and 

twenty percent (20%) in the fourth quarter) unless otherwise specified in this Agreement or in an 

Appendix to this Agreement. 

(b) Notwithstanding the provisions of Compact section 21 l(f) and the Agreement Between the 

Government of the United States and the Government of Palau Regarding Economic Assistance 

Concluded Pursuant to Section 21 l(f) of the Compact of Free Association, with respect to Fiscal 

Years 2011 through Fiscal Year 2023 and except as otherwise agreed by the Government of the 

United States and the Government of Palau, the Government of Palau agrees not to exceed the 

following distributions from the Section 2ll(f) Fund: $5 million annually beginning in Fiscal 

Year 2011 through Fiscal Year 2013; $5.25 million in Fiscal Year 2014; $5.5 million in Fiscal 

Year 2015; $6.75 million in Fiscal Year 2016; $8 million in Fiscal Year 2017; $9 million in 

Fiscal Year 2018; $10 million in Fiscal Year 2019; $10.5 million in Fiscal Year 2020; $11 

million in Fiscal Year 2021; $12 million in Fiscal Year 2022; and $13 million in Fiscal Year 

2023. 

(c) No portion ofthe funds provided to the Government ofPalau under this section, including the 

funds distributed from the Section 21 l(f) Fund, shall be used, directly or indirectly, to fund state 

2 
block gl'.'d.Ilts, or the activities of the Office of the President of Palau, of the Olbiil Era Kelulau 

(the Palau National Congress), or of the Palau Judiciary. Annually, $15 million of the funds 

provided to the Government of Palau under this section, including the funds distributed from the 

Section 211 (f) Fund, shall be used exclusively for purposes related to education, health, and the 

administration of justice and public safety, recognizing that these funds are subject to the 

provisions ofsubsection 4(h) herein. 

(d) In order to increase the long term economic stability of Palau and to maximize the benefits of 

the economic assistance provided by the Govenunent of the United States. the Government of 

Palau shall undertake economic. legislative, financial, and management reforms, and shall give 

due consideration to reforms such as those described in the International Monetary Fund's (IMF) 

Country Report No. 08/162, Republic of Palau: Selected Issues and Statistical Appendix, (May 

2008), and the Asian Development Bank's (ADB) Strategy and Program Assessment, Palau: 

Policies for Sustainable Growth, A Private Sector Assessment (July 2007) and any other similar 

subsequent and future reports and recommendations issued by the IMF, the ADB, and other 

credible institutions, organizations or professional firms. To the extent that anticipated fiscal 

and economic reforms require substantial financial resources to design, implement, or mitigate 

negative impacts, the Government of Palau may propose and the two governments may agree to 

the use of additional funds from the Section 211 (f) Fund, provided that the two governments 

agree in writing that the additional withdrawals from the Section 21 l(f) Fund will not impair the 

ability of the fund to provide $15 million annually from Fiscal Year 2024 through Fiscal Year 

2044, and that the proposed reforms are a necessary and prudent use of the funds. Government 

to government communications shall be through diplomatic channels. 

(c) The Government of the United States and the Government of Palau shall establish, effective 

on the day this Agreement enters into force, an Advisory Group on Economic Reform (the 

"Advisory Group'"). The purpose of the Advisory Group is to contribute to the long-term 

economic sustainability of Palau by recommending economic, financial, and management 

reforms. The Advisory Group shall be composed of five (5) members, two (2) of whom shall be 

designated by the President of Palau and two (2) of whom shall be designated by the 

Government of the United States, the fifth of whom shall be chosen by the Government of the 

United States from a list of not fewer than three (3) persons not residents of Palau submitted by 

the President of Palau. In the event the Government of the United States rejects the persons 

enumerated in the list submitted by the President of Palau, then the fifth member shall be chosen 

by the President of Palau from a list of not fewer than three (3) persons submitted by the 

Government of the United States. In making their designations, the President and the 

Government of the United States shall give consideration to the mix of expertise that would be 

most beneficial to the work of the Advisory Group. The Advisory Group will be chaired by a 

member chosen by the members from among their number. Its meetings will be held once a year 

in Palau and once a year in Hawaii, unless otherwise agreed by the members. Each govenunent 

shall provide the necessary support for its designated representatives on the Advisory Group. 

Support for the fifth member shall be borne by the government that recommended the member. 

Unless otherwise agreed by the two governments the Advisory Group shall terminate at the end 

of Fiscal Year 2023. 

3 
(f) The Advisory Group shall recommend economic, financial and management reforms and the 

schedule on which the reforms should be implemented. The Advisory Group shall report 

annually not less than thirty (JO) days prior to the annual bilateral economic consultations to be 

held on or about June 1 every year on the Government of Palau's progress in implementing 

reforms recommended by the Advisory Group or other reforms taken by the Government of 

Palau. The two governments are committed to these annual economic consultations being 

meaningful, substantive and comprehensive. 

(g) The Government of Palau's progress in achieving reforms shall be reviewed at the annual 

bilateral economic consultations. Examples of significant progress in a fiscal year would be, 

but are not limited to: meaningful improvements in fiscal management, including the 

elimination and prevention of operating deficits; a meaningful reduction in the national operating 

budget from the previous fiscal year; a meaningful reduction in the number of government 

employees from the level the previous fiscal year; a meaningful reduction in the annual amount 

of the national operating budget dedicated to government salaries from the previous fiscal year; 

demonstrable reduction of government subsidization of utilities, and meaningful tax reform . 

(h) If the Government of the United States determines after the annual bilateral economic 

consultations that the Government of Palau has not made significant progress in implementing 

meaningful reforms, then, after direct consultation with the President of Palau, the Government 

of the United States may, after ninety (90) days notice to the Government of Palau, delay 

payment of economic assistance under this section. The Government of the United States shall 

determine the amount of the economic assistance to be delayed. Any assistance delayed shall be 

held and released when the Government of the United States determines that Palau has made 

sufficient progress on the reforms. 

5. Infrastructure Projects 

The Government of the United States shall provide grants totaling $40 million to the 

Government of Palau as follows: $8 million annually in Fiscal Years 2011 through Fiscal Year 

2013; $6 million in Fiscal Year 2014; and $5 million annually in Fiscal Years 2015 and 2016; 

towards one or more mutually agreed infrastructure projects in accordance with the provisions of 

Appendix C to this Agreement. 

6. Reporting and Auditing 

Palau shall resolve all deficiencies in the Annual Single Audit such that by 2018 no deficiency or 

recommendation dates from before Fiscal Year 2016. By the first day of the fourth quarter of 

each fiscal year or as soon as practicable thereafter, in the annual report it submits under Section 

231 (b) of the Compact, the Government of Palau shall report on the status and use of all funds 

provided under this Agreement. The status and use of all funds provided under this Agreement 

shall also be discussed in the annual bilateral economic consultations. The financial information 

relating to this funding shall conform to the standards of the Government Accounting Standards 

Board. All funds provided under this Agreement shall be subject to a financial and compliance 

audit and other requirements in accordance with the provisions of Appendix D to this 

Agreement. 

4 
7. Federal Programs and Services 

The Government of the United States shall make available to Palau through Fiscal Year 2024, in 

accordance with and to the extent provided through amendments to the Federal Programs and 

Services Agreement Concluded Pursuant to Article II of Title Two and Section 232 of the 

Compact of Free Association, signed at Palau on January 10, 1986, the services and related 

programs covered in that agreement as amended herein. The amendments to that agreement 

constitute Appendix E to this Agreement. 

8. Telecommunication Services 

The Agreement Regarding the Provision of Telecommunication Services by the Government of 

the United States to Palau Concluded Pursuant to Section 131 of the Compact of Free 

Association, signed at Koror, Republic of Palau, January 10, 1986 and the Agreement Regarding 

the Operation of Telecommunication Services of the Government of the United States in Palau 

Concluded Pursuant to Section 132 of the Compact of Free Association, signed at Koror, 

Republic of Palau, January 10, 1986 are amended and these amended agreements constitute 

Appendix F to this Agreement. 

9. Passport Requirement 

Section 141 of Article IV of Title One of the Compact shall be construed and applied as if it read 

as follows: 

··section 141 

(a) Any person in the following categories may be admitted to, lawfully engage in 

occupations, and establish residence as a nonimmigrant in the United States and its 

territories and possessions without regard to paragraphs (5) or (7)(B)(i)(II) of section 

212(a) of the Immigration and Nationality Act, 8 U.S.C. § l 182(a)(5) or (a)(7)(B)(i)(II), 

provided that the passport presented to satisfy section 212(a)(7)(B)(i)(I) of such Act is a 

valid unexpired machine-readable passport that satisfies the internationally accepted 

standard for machine readability: 

(1) a person who, on September 30, 1994, was a citizen of the Trust Territory of the 

Pacific Islands, as defined in Title 53 of the Trust Territory Code in force on January 

1, 1979, and has become and remains a citizen of Palau; 

(2) a person who acquires the citizenship of Palau, at birth, on or after the effective date 

of the Constitution of Palau; or 

(3) a naturalized citizen of Palau, who has been an actual resident of Palau for not less 

than five years after attaining such naturali7.ation and who holds a certificate of actual 

residence. 

5 
Such persons shall be considered to have the permission of the Secretary of Homeland Security 

of the United States to accept employment in the United States. 

(b) The right of such persons to establish habitual residence in a territory or possession of the 

United States may, however, be subjected to non-discriminatory limitations provided for: 

( 1) in statutes or regulations of the United States; or 

(2) in those statutes or regulations of the territory or possession concerned which are 

authorized by the laws of the United States. 

(c) Section 14I(a) does not confer on a citizen of Palau the right to establish the residence 

necessary for naturalization under the Immigration and Nationality Act or to petition for 

benefits for alien relatives under that Act. Section 141 (a), however, shall not prevent a 

citizen of Palau from otherwise acquiring such rights or lawful permanent resident alien 

status in the United States.'' 

10. Effective Date, Amendment, and Duration 

(a) This Agreement, including its Appendices, shall enter into force on the date of the last 

note of an exchange of diplomatic notes by which the Government of the United States 

and the Government of Palau inform each other that all internal procedures necessary for 

its entry into force have been fulfilled. 

(b) This Agreement may be amended at any time by the mutual written consent of the 

Goverrunent of the United States and the Government of Palau. 

(c) This Agreement shall remain in full force and effect until terminated by mutual written 

consent, or until termination of the Compact, whichever occurs first. 

IN WITNESS WHEREOF, the undersigned, duly authorized by their respective Governments, 

have signed this Agreement. 

DONE AT \:\:010..0\v....\v.... 

the English language. 1 

us IA , in duplicate, this ~ ~ day of~kb~ , 2010, in 

FOR THE GOVERNMENT FOR THE GOVERNMENT 

OF THE UNITED ST A TES OF AMERICA: OF THE REPUBLIC OF PALAU: 

6 
AGREEMENT BETWEEN THE 

GOVERNMENT OF THE UNITED ST ATES OF AMERICA 

AND THE 

GOVERNMENT OF THE REPUBLIC OF PALAU 

FOLLOWING THE COMPACT OF FREE ASSOCIATION 

SECTION 432 REVIEW 

APPENDIX A-INFRASTRUCTURE MAINTENANCE FUND 

I. Subject to the terms of this Appendix, the Government of the United States shall provide 

the grants specified in section 2(a) of the Agreement between the United States of 

America and the Government of the Republic of Palau following the Compact of Free 

Association Section 432 Review (the "Agreement") to which this document is an 

appendix. 

2. If, in a given Fiscal Year, the Government of Palau docs not make the contributions 

agreed to in section 2(a) of the Agreement, economic assistance funds to be provided to 

Palau in the following fiscal year under section 4 of the Agreement will be redirected to 

the Infrastructure Maintenance Fund to make up the contributions owed by the 

Government of Palau. 

3. Grant funds from the Government of the United States and Government of Palau 

contributions to the Infrastructure Maintenance Fund shall be deposited in an account 

established by the Government of Palau. Fiscal control and accounting procedures shall 

be sufficient to permit the preparation of required reports and to permit the tracing of 

funds to a level of expenditure adequate to establish that such funds have been used in 

compliance with this Appendix. 

4. Palau shall report, at the annual bilateral economic consultations, the sources of its 

contributions to the Infrastructure Maintenance Fund. 

5. The Infrastructure Maintenance Fund, and any interest accruing thereon, is to be used by 

the Government of Palau for the maintenance of United States financed capital 

improvement projects such as the road system (Compact Road) provided by the United 

States under Section 212 of the Compact and the capital improvements provided by the 

United States to the Airai International Airport. The Government of Palau may request in 

writing the use of the Infrastructure Maintenance Fund for maintenance of U.S, financed 

capital improvement projects other than these two, such as the U.S. financed capital 

improvements reflected in the Palau national hospital and schools. The Government of 

the United States shall give due consideration to any such request and shall endeavor to 

make a determination within sixty (60) days of receipt of the request. Although the 

primary purpose of the Infrastructure Maintenance Fund is to provide for routine and 

periodic maintenance, it may be used, when mutually agreed upon in writing, to mitigate 

damage and make emergency repairs to capital improvement projects funded by the 

United States. 
6. The Government of Palau shall identify to the Government of the United States the 

Government of Palau official and office responsible for maintenance of the infrastructure 

with Fund monies. The official shall be responsible for activities necessary to plan and 

implement annual programs of maintenance of the Compact Road and the International 

Airport at Airai, and all other public infrastructure. The official shall be responsible for 

keeping each facility as nearly as possible in its original condition as constructed. The 

official shall develop an annual maintenance plan and related budget for reactive, 

preventive, repetitive, non-recurrent, and emergency-generated maintenance of the 

infrastructure specified in paragraph 5 and for all other public infrastructure. The plan 

will include descriptions and schedules of planned activities and shall identify the related 

costs. The plan for the infrastructure specified in paragraph 5 shall be submitted to the 

Government of the United States for its approval no less than sixty (60) days prior to the 

beginning of each fiscal year. 

7. The Government of the United States will base its approval or disapproval of the plan for 

the infrastructure specified in paragraph 5 on its consideration of the effectiveness of the 

plan within the bounds of annual resources. Approval by the Government of the United 

States will be in the form of an annual grant which incorporates the approved 

maintenance plan and budget. Acceptance of the grant by the Government of the 

Republic of Palau will obligate the Government of Palau to the implementation of the 

annual maintenance plan and budget for the infrastructure specified in paragraph 5. 

8. The grant, annual maintenance plan, and budget for the infrastructure specified m 

paragraph 5 may be amended by written mutual agreement. 

9. Use of the Fund monies shall be subject to 43 Code of Federal Regulations 12 and all 

other applicable laws and regulations governing the use of grant funds provided by the 

Government of the United States. These funds may not be used for any purpose other 

than that for which they are offered. 

l0. Any grant funds remaining unexpended at the end of a fiscal year shall remain in the 

Infrastructure Maintenance Fund and may be included in subsequent annual maintenance 

plans and budgets. 

11. Reporting Requirements: 

(a) A Standard Form SF 425 (or successor form) and a narrative project status report 

shall be submitted quarterly. 

(b) Reports are due within thirty (30) days of the end of each quarter. Final reports are 

due ninety (90) days after the expiration or termination of the award. 

(c) All required plans and reports must be submitted to the U.S. Department of the 

Interior Office of Insular Affairs grant manager for the grant. 

2 
AGREEMENT BETWEEN THE 

GOVERNMENT OF THE UNITED STATES OF AMERICA 

AND THE 

GOVERNMENT OF THE REPUBLIC OF PALAU 

FOLLOWING THE 

COMPACT OF FREE ASSOCIATION 

SECTION 432 REVIEW 

APPENDIX B--FISCAL CONSOLIDATION FUND 

1. Subject to the terms of this Appendix, the Government of the United States shall provide the 

Government of Palau the amounts specified in section 3 of the Agreement of the United 

States of America and the Government of the Republic of Palau following the Compact of 

Free Association Section 432 Review (the "Agreement") to which this document is an 

appendix. Until disbursed, these funds will be deposited in an interest bearing account and 

the interest generated shall also be used to reduce Palau's government payment arrears in 

accordance with the provisions of this Appendix. 

2. The purpose of these funds is to allow the Government of Palau to discharge the level of 

debts accumulated prior to September 30, 2009. None of the principal or interest accrued on 

these funds may be disbursed to discharge a debt until the governments agree upon a specific 

list of debts to be paid with each annual contribution. The funds may not be used to pay off 

debt owed to another government, to pay an international organization, or to pay off debts 

which are the subject of current or pending litigation. Unless agreed to in writing by the 

Government of the United States, the funds may not be used to pay any entity owned or 

controlled by any member of the government, elected or appointed; to pay any entity owned 

or controlled by any member of the immediate family of any member of the government; to 

pay any entity from which a member of the government derives income; or to pay any 

creditor if the creditor owes money to the Government of Palau unless arrangements are 

made immediately to offset amounts owed to the Government of Palau from the funds made 

available to the creditor. Debts owed to U.S. creditors must receive priority. All debts to be 

paid with these funds must be properly documented as legitimate debts of the Republic of 

Palau using generally accepted accounting principles. The total amount of the debt to be paid 

shall not exceed the general fund deficit established by the Single Audit Report as of 

September 30, 2009. 

3. The Government of Palau shall report quarterly to the Government of the United States on 

the use of these funds until they are expended and, until expended, the status and use of these 

funds shall be a regular agenda item for annual bilateral economic consultations to be held 

around June I of every year. If eligible debts do not amount to $IO million, upon the request 

of the Government of Palau, the funds remaining after payment of the eligible debts shall be 

added to the amounts provided for infrastructure projects in section 5 of the Agreement. 
AGREEMENT BETWEEN THE 

GOVERNMENT OF THE UNITED ST A TES OF AMERICA 

AND THE 

GOVERNMENT OF THE REPUBLIC OF PALAU 

FOLLOWING THE COMPACT OF FREE ASSOCIATION 

SECTION 432 REVIEW 

APPENDIX C-INFRASTRUCTURE PROJECTS 

1. Subject to the terms of this Appendix, the Government of the United States shall provide 

grants towards one or more mutually agreed infrastructure projects as specified in section 

5 of the Agreement of the United States of America and the Government of the Republic 

of Palau following the Compact of Free Association Section 432 Review (the 

"Agreement") to which this document is an appendix. These infrastructure grants shall 

be subject to 43 Code of Federal Regulations 12 and all other applicable laws and 

regulations governing the use of grant funds provided by the Government of the United 

States. Grant funds may not be used for any purpose other than that for which they are 

offered. 

2. Payment of grant funds shall be made as reimbursement of actual or accrued 

expenditures, using a format provided by the Government of the United States or as 

mutually agreed. 

3. Prior to requesting reimbursement or payment, the Government of Palau shall, as 

applicable, provide the following documentation to the Government of the United States: 

(a) Evidence of title, leasehold agreement, or other legal authority for use of the land 

upon which the capital improvement project(s) is (are) to be constructed. 

(b) A detailed project budget for each infrastructure project. The budget shall include a 

breakdown of costs (in-house and contract) for planning, engineering and design, 

real estate, supervision and administration, construction, and construction 

management and inspection. The Government of Palau and the Government of the 

United States shall mutually agree to the format of this submission. 

(c) A scope of work that describes the work to be performed and the schedule from 

planning through completion of construction. A certified professional engineer or 

architect shall sign both the scope of work and budget for each construction project. 

4. Prior to disbursing funds requested to reimburse for actual project construction, the 

Government of the United States may review construction plans and specifications, any 

revised detailed cost estimate, and a detailed construction schedule. 

5. All grant monies shall remain available until expended, unless otherwise provided in this 

Appendix. 
6. Failure to comply with objectives, terms and conditions, or reporting requirements may 

result in the suspension of grant payments until the deficiency is corrected. 

7. Reporting Requirements: 

(a) A Standard Form SF 425 (or successor form) and a narrative project status report 

shall be submitted quarterly. 

(b) Reports are due within thirty (30) days of the end of each quarter. Final reports are 

due ninety (90) days after the expiration or termination of the award. 

(c) All required documents and reports must be submitted to the U.S. Department of 

the Interior Office of Insular Affairs grant manager for the grant. 

2 
AGREEMENT BETWEEN THE 

GOVERNMENT OF THE UNITED ST A TES OF AMERICA 

AND THE 

GOVERNMENT OF THE REPUBLIC OF PALAU 

FOLLOWING THE COMPACT OF FREE ASSOCIATION 

SECTION 432 REVIEW 

APPENDIX D-AUDIT STANDARDS AND RESPONSIBILITIES 

1. The Government of Palau shall perform a financial and compliance audit, within the 

meaning of the Single Audit Act, as amended (31 U.S.C. 7501 et seq.), of the uses of the 

funding provided pursuant to the Agreement Between the Government of the lJnited 

States of America and the Government of the Republic of Palau following the Compact 

of Free Association Section 432 Review (the "Agreement") for each fiscal year during 

which the Agreement is in effect. The results of these Audits shall be available not later 

than the beginning of the fourth fiscal quarter following the end of the fiscal year under 

review, as required by the Single Audit Act. The costs of these audits are to be borne by 

the Government of Palau, and may be a recognized expense to funds provided under 

section 4 of the Agreement. If the Government of the Republic of Palau does not 

endeavor to perform a Single Audit in any given fiscal year, economic assistance funds to 

be provided to Palau in the following fiscal year under section 4 of the Agreement shall 

be redirected to pay for the required Single Audit. 

2. In conducting the audits required under this Appendix, the auditors shall take into 

account relevant laws and regulations of the United States and Palau, including U.S. laws 

and regulations on the conduct of audits, and Palauan laws and regulations which relate 

in a material, substantial or direct way to financial statements and operations of the 

Government of Palau. 

3. The authority of the Government of the United States set forth this Appendix shall 

continue for at least three (3) years after the last Grant or element of assistance by the 

Government of the United States under this Agreement has been provided and expended. 

4. Audit officials or agents of the Government of the United States may perform audits on 

the use of all funding provided pursuant to this Agreement, including grants and other 

assistance provided to the Government of Palau. The Government of the United States is 

responsible for all costs attendant to the discharge ofthis authority. 

5. Audit officials from the Government of the United States are the officials and employees 

of the Government of the United States who are responsible for the discharge of its audit 

responsibilities, including those of the Comptroller General of the United States and any 

Inspector General of an agency of the Government of the United States with programs 

operating in or otherwise serving the Republic of Palau. While present in the Republic of 

Palau for the purposes of this Appendix, audit officials from the Government of the 

United States shall be immune from civil and criminal process relating to words spoken 

or wTitten and all acts performed by them in their official capacity and falling within their 
functions, except insofar as such immunity may be expressly waived by the Government 

of the United States. The Comptroller General and his duly authorized representatives, 

and other audit officials from the Government of the United States, shall not be liable to 

arrest or detention pending trial, except in the case of a grave crime and pursuant to a 

decision by a competent judicial authority, and such persons shall enjoy immunity from 

seizure of personal property, immigration restrictions, and laws relating to alien 

registration, fingerprinting, and the registration of foreign agents. Such persons shall 

enjoy the same taxation exemptions as are set forth in Article 34 of the Vienna 

Convention on Diplomatic Relations. The privileges, exemptions and immunities 

accorded under this paragraph are not for the personal benefit of the individuals 

concerned but are to safeguard the independent exercise of their official functions. 

Without prejudice to those privileges, exemptions and immunities, it is the duty of all 

such persons to respect the laws and regulations of the Government of the Republic of 

Palau. 

6. Audit officials from the Government of the United States shall provide the Government 

of Palau with advance notice of the specific dates and nature of their visits prior to 

entering the Republic of Palau and shall show verifiable identification to officials of the 

Government of Palau when seeking access to records. In the performance of their 

responsibilities under this Agreement, audit officials from the Government of the United 

States shall have due regard for the laws of the Republic of Palau and the duties and 

responsibilities of the officials of the Government of Palau. Officials of the Government 

of Palau shall cooperate fully to the extent practicable with the United States audit 

officials to enable the full discharge of their responsibilities. 

7. The Comptroller General of the United States, and officials of the United States 

Government Accountability Office acting on his or her behalf: shall have coextensive 

authority with the executive branch of the Government of the United States as provided 

by this Appendix. The audit officials from the executive branch of the Government of 

the United States shall avoid duplication between their audit programs and those of the 

United States Government Accountability Office. The Government of Palau shall 

cooperate fully to the extent practicable with the Comptroller General of the United 

States in the conduct of such Audits as the Comptroller General of the United States 

determines necessary in accordance with this Appendix to enable the full discharge of his 

responsibilities. 

8. The Government of Palau shall provide audit officials from the Government of the 

United States with access, without cost and during normal working hours, to all records, 

documents, working papers, automated data, and files which are relevant to the uses of 

funding received pursuant to the Agreement by the Government of Palau. To the extent 

that such information is contained in confidential official documents, the Government of 

Palau shall undertake to extract information that is not of a confidential nature and make 

it available to the audit officials from the Government of the United States in the same 

manner as other relevant information or to provide such information from other sources. 

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9. In order to reduce the level of interference in the daily operation of the activities of the 

Government of Palau, audit officials from the Government of the United States shall. to 

the extent practicable, inform the Government of Palau of their need for information, 

including the type of information and its relation to their annual audit schedule. To the 

extent practicable, the Government of Palau shall make available the information 

requested by audit officials from the Government of the United States relevant to Audits 

and available in a manner consistent with generally accepted accounting procedures that 

allows for the distinction of the Grants, assistance. and payments provided by the 

Government of the United States from any other funds of the Government of Palau. Such 

information shall be used and returned as quickly as accurate audit testing and surveying 

allow. 

I0. The Government of Palau shall maintain records, documents, working papers, automated 

data, files, and other information regarding each such Grant or other assistance for at least 

three (3) years after such Grant or assistance was provided. 

11. Audit organizations and officials from the Government of the United States, including the 

Comptroller General of the United States and his duly authorized representatives, shall 

provide the Government of Palau with at least thirty (30) days to review and comment on 

draft audit reports prior to .the release of the reports. The comments of the Government of 

Palau shall be included, in full, in the final audit reports. Should a draft audit report be 

revised based on the comments of the Government of Palau. the Government of Palau 

shall have an additional period to review and comment on the report prior to its release. 

3 
AGREEMENT 

BETWEEN 

THE GOVERNMENT OF THE UNITED STATES OF AMERICA 

AND 

fflE GOVERNMENT OF THE REPUBLIC OF PALAU 

TO AMEND THE AGREEMENT BETWEEN THE GOVERNMENT OF 

THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF 

THE REPUBLIC OF PALAU FOLLOWING THE COMPACT OF FREE 

ASSOCIATION SECTION 432 REVIEW 

The Government ofthe United States ofAmerica and the Government ofthe Republic ofPalau 

hereby agree to amend the Agreement between the Government ofthe United States ofAmerica 

and the Government ofthe Republic ofPalau Following the Compact ofFree Association 

Section 432 Review, signed at Honolulu on September 3,2010 (the "Compact Review 

Agreement") as follows: 

Section 1 is replaced ill its entirety by the following: 

"'The Government ofthe United States ofAmerica (the ''Government ofthe United States") shall 

contribute $6S.25 million t;<> the Fund referred to in Section 211(f) ofthe Compact in accordance 

with the following schedule: $65.25 million as soon as practicable following the entry into force 

ofthis Agreement as hereby amended.,. 

Section 2(a) is replaced in its entirety by the foUowing: 

..The Government ofthe United States shall provide a grant of$2 million annually from Fiscal 

Year 2018, or as soon as practicable following this Agreement's entry into force, through Fiscal 

Year 2024 to create a trust fund (the "Infrastructure Maintenance Fund") to be used for the 

routine and periodic maintenance ofmajor capital improvement projects financed by funds 

provided by the Government ofthe United States. The Government ofthe Republic ofPalau 

(the "Government ofPalau'') will mate~ the contnoutions made by the Government ofthe United 

States by making contnoutions of: $150,000 to the Infrastructure Maintenance Fund on a 

quarterly basis from the beginning ofFiscal Year 2019 through Fiscal Year 2024. 

Implementation ofthis subsection shall be carried out in accordance with'the provision of 

Appendix A to this agreement." 
Section 3 is replaced in its entirety by the following: 

'"Ibe Govemment ofthe United States shall provide the Government ofPalau with no funds for 

deposit in ail interest bearing account to be used to reduce government payment arrears of 

Palau." 

Section 4(a) is replaced ia its entirety by the following: 

"In addition to the $107.644 million in economic assistance provided to the Government ofPalau 

by the Government ofthe United States in Fiscal Years 2010 through 2018, and unless otherwise 

specified in this Agreement, as amended, or in an Appendix to this Agreement, the Government 

ofthe United States shall provide the Government ofPalau with $22.106 million as follows: 

$22.106 in Fiscal Year 2018, or as soon as practicable following this Agreement's entry into 

furce." 

Section 4(b) is replaced in its entirety by the following: 

"With respect to Fiscal Years 2018 through 2023, and except as otherwise agreed by the 

Government ofthe United States and the Government ofPalau, the Government ofPalau agrees 

not to exceed the annual Section 211(t) Fund distributions established in the provisions of 

Compact section 21 l(t) and the Agreement Between the Government ofthe United States and 

the Government ofPalau Regarding Economic Assistance Concluded Pursuant to Section 21 l(f) 

ofthe Compact ofFree Association." 

Section S is replaced in its entirety by the following: 

"The Government ofthe United States shall make available $20 million as soon as practicable 

following the en~ into force ofthis Agreement, as amended, for grants to the Government of 

Palau for one or more mutually agreed upon infrastructure projects in accordance with the 

provisions ofAppendix C to this Agreement, as amended." 
This ~entshall enter into force on the date the Compact Review Agreement ente,s into 

force. 

This Agreement shall remain in full force and effect until terminated by mutual written consent, 

or until termination ofthe Compact Review Agreement, whichever occurs first. 

IN WITNESS TIIEREOF. the undersigned, duly authorized by their respective governments. 

have signed this Agreement 

Done at f<,tnA. on f 1¥fh2018, in duplicate. in the English language. 

FOR TIIBGOVERNMENT OF THE FOR THE GOVERNMENT OF THE 

UNITED STATES OF AMERICA: REPUBLIC OF PALAU: