II 

112TH CONGRESS 

1ST SESSION S. 343 

To amend Title I of Public Law 99–658 regarding the Compact of Free 

Association between the Government of the United States of America 

and the Government of Palau, to approve the results of the 15-year 

review of the Compact, including 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, 

and to appropriate funds for the purposes of the amended Public Law 

99–658 for fiscal years ending on or before September 30, 2024, to 

carry out the agreements resulting from that review. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 14, 2011 

Mr. BINGAMAN (for himself and Ms. MURKOWSKI) introduced the following 

bill; which was read twice and referred to the Committee on Energy and 

Natural Resources 

A BILL 

To amend Title I of Public Law 99–658 regarding the Compact of Free Association between the Government of 

the United States of America and the Government of 

Palau, to approve the results of the 15-year review of 

the Compact, including 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, and to appropriate funds for the purposes of the amended Public 

Law 99–658 for fiscal years ending on or before SepVerDate Mar 15 2010 07:29 Feb 18, 2011 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6652 E:\BILLS\S343.IS S343

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tember 30, 2024, to carry out the agreements resulting 

from that review. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. IMPLEMENTATION OF AGREEMENT BETWEEN 

4 THE UNITED STATES AND THE REPUBLIC OF 

5 PALAU. 

6 Title I of Public Law 99–658 is hereby amended by 

7 inserting a new section 105 as follows: 

8 ‘‘SEC. 105. RESULTS OF COMPACT REVIEW. 

9 ‘‘(a) The Agreement between the Government of the 

10 United States of America and the Government of the Re11 public of Palau Following the Compact of Free Associa12 tion Section 432 Review set forth in subsection (b) of this 

13 section, is hereby approved. 

14 ‘‘(b) 

15 AGREEMENT BETWEEN THE

16 GOVERNMENT OF THE 

17 UNITED STATES OF AMERICA 

18 AND THE 

19 GOVERNMENT OF THE REPUBLIC OF PALAU 

20 FOLLOWING THE COMPACT OF FREE 

21 ASSOCIATION 

22 SECTION 432 REVIEW 

23 ‘‘In recognition of the ties that were developed between 

24 the United States of America and Palau during World 


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1 War Two, and the subsequent half century of United 

2 States administration of Palau and the continuing close 

3 relationship between the Governments of the United 

4 States and Palau under the Compact of Free Association 

5 (‘Compact’), following the fifteenth anniversary review of 

6 the relationship conducted pursuant to Section 432 of the 

7 Compact (which provides: ‘Upon the fifteenth and thir8 tieth and fortieth anniversaries of the effective date of this 

9 Compact, the Government of the United States and the 

10 Government of Palau shall formally review the terms of 

11 this Compact and its related agreements and shall con12 sider the overall nature and development of their relation13 ship. In these formal reviews, the governments shall con14 sider the operating requirements of the Government of 

15 Palau and its progress in meeting the development objec16 tives set forth in the plan referred to in Section 231(a). 

17 The governments commit themselves to take specific 

18 measures in relation to the findings of conclusions result19 ing from the review. Any alteration to the terms of this 

20 Compact or its related agreements shall be made by mu21 tual agreement, the terms of this Compact and its related 

22 agreements shall remain in force until otherwise amended 

23 or terminated pursuant to Title Four of this Compact’), 

24 and in light of the desire of the United States of America 

25 and the Republic of Palau to deepen their relationship, 


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1 now, therefore, the Government of the United States of 

2 America and the Government of the Republic of Palau 

3 agree as follows: 

4 ‘‘1. Compact Section 211(f) Fund 

5 ‘‘The Government of the United States of America (the 

6 ‘Government of the United States’) shall contribute 

7 $30.25 million to the Fund referred to in Section 211(f) 

8 of the Compact in accordance with the following schedule: 

9 $3 million annually for ten years beginning with Fiscal 

10 Year 2013 through Fiscal Year 2022, and $250,000 in 

11 Fiscal Year 2023. 

12 ‘‘2. Infrastructure Maintenance Fund 

13 ‘‘(a) The Government of the United States shall provide 

14 a grant of $2 million annually from the beginning of Fis15 cal Year 2011 through Fiscal Year 2024 to create a trust 

16 fund (the ‘Infrastructure Maintenance Fund’) to be used 

17 for the routine and periodic maintenance of major capital 

18 improvement projects financed by funds provided by the 

19 United States. The Government of the Republic of Palau 

20 (the ‘Government of Palau’) will match the contributions 

21 made by the United States by making contributions of 

22 $150,000 to the Infrastructure Maintenance Fund on a 

23 quarterly basis from the beginning of Fiscal Year 2011 

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1 section shall be carried out in accordance with the provi2 sions of Appendix A to this Agreement. 

3 ‘‘(b) The $3 million owed to the Government of the United 

4 States under paragraph 3(d) of Article V of the Agree5 ment Concerning Special Programs Related to the Entry 

6 Into Force of the Compact of Free Association Between 

7 the Government of the United States and the Government 

8 of the Republic of Palau (the Guam Accords) done at 

9 Guam, May 26, 1989, plus accumulated interest, shall be 

10 paid into the Infrastructure Maintenance Fund. The $3 

11 million shall remain in the Infrastructure Maintenance 

12 Fund and not be expended for any purpose. All past and 

13 future income generated by the $3 million shall be used 

14 exclusively for the routine maintenance of the Compact 

15 Road provided by the United States under Section 212 

16 of the Compact. 

17 ‘‘3. Fiscal Consolidation Fund 

18 ‘‘The Government of the United States shall provide the 

19 Government of Palau $5 million in Fiscal Year 2011 and 

20 $5 million in Fiscal Year 2012 for deposit in an interest 

21 bearing account to be used to reduce government payment 

22 arrears of Palau. Implementation of this section shall be 

23 carried out in accordance with the provisions of Appendix 

24 B to this Agreement. 

25 ‘‘4. Direct Economic Assistance 


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1 ‘‘(a) In addition to the $13.25 million in economic assist2 ance provided to the Government of Palau by the Govern3 ment of the United States in Fiscal Year 2010, and unless 

4 otherwise specified in this Agreement or in an Appendix 

5 to this Agreement, the Government of the United States 

6 shall provide the Government of Palau $107.5 million in 

7 economic assistance as follows: $13 million in Fiscal Year 

8 2011; $12.75 million in Fiscal Year 2012; $12.5 million 

9 in Fiscal Year 2013; $12 million in Fiscal Year 2014; 

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

11 Year 2016; $8.5 million in Fiscal Year 2017; $7.25 million 

12 in Fiscal Year 2018; $6 million in Fiscal Year 2019; $5 

13 million in Fiscal Year 2020; $4 million in Fiscal Year 

14 2021; $3 million in Fiscal Year 2022; and $2 million in 

15 Fiscal Year 2023. The funds provided in any fiscal year 

16 under this subsection shall be provided in four (4) quar17 terly payments (30 percent in the first quarter, 30 percent 

18 in the second quarter, 20 percent in the third quarter, and 

19 20 percent in the fourth quarter) unless otherwise speci20 fied in this Agreement or in an Appendix to this Agree21 ment. 

22 ‘‘(b) Notwithstanding the provisions of Compact section 

23 211(f) and the Agreement Between the Government of the 

24 United States and the Government of Palau Regarding 

25 Economic Assistance Concluded Pursuant to Section 


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1 211(f) of the Compact of Free Association, with respect 

2 to Fiscal Years 2011 through Fiscal Year 2023 and except 

3 as otherwise agreed by the Government of the United 

4 States and the Government of Palau, the Government of 

5 Palau agrees not to exceed the following distributions from 

6 the Section 211(f) Fund: $5 million annually beginning 

7 in Fiscal Year 2011 through Fiscal Year 2013; $5.25 mil8 lion in Fiscal Year 2014; $5.5 million in Fiscal Year 2015; 

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

10 Year 2017; $9 million in Fiscal Year 2018; $10 million 

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

12 $11 million in Fiscal Year 2021; $12 million in Fiscal 

13 Year 2022; and $13 million in Fiscal Year 2023. 

14 ‘‘(c) No portion of the funds provided to the Government 

15 of Palau under this section, including the funds distrib16 uted from the Section 211(f) Fund, shall be used, directly 

17 or indirectly, to fund state block grants, or the activities 

18 of the Office of the President of Palau, of the Olbiil Era 

19 Kelulau (the Palau National Congress), or of the Palau 

20 Judiciary. Annually, $15 million of the funds provided to 

21 the Government of Palau under this section, including the 

22 funds distributed from the Section 211(f) Fund, shall be 

23 used exclusively for purposes related to education, health, 

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1 nizing that these funds are subject to the provisions of 

2 subsection 4(h) herein. 

3 ‘‘(d) In order to increase the long-term economic stability 

4 of Palau and to maximize the benefits of the economic as5 sistance provided by the Government of the United States, 

6 the Government of Palau shall undertake economic, legis7 lative, financial, and management reforms, and shall give 

8 due consideration to reforms such as those described in 

9 the International Monetary Fund’s (IMF) Country Report 

10 No. 08/162, Republic of Palau: Selected Issues and Statis11 tical Appendix, (May 2008), and the Asian Development 

12 Bank’s (ADB) Strategy and Program Assessment, Palau: 

13 Policies for Sustainable Growth, A Private Sector Assess14 ment (July 2007) and any other similar subsequent and 

15 future reports and recommendations issued by the IMF, 

16 the ADB, and other credible institutions, organizations or 

17 professional firms. To the extent that anticipated fiscal 

18 and economic reforms require substantial financial re19 sources to design, implement, or mitigate negative im20 pacts, the Government of Palau may propose and the two 

21 governments may agree to the use of additional funds 

22 from the Section 211(f) Fund, provided that the two gov23 ernments agree in writing that the additional withdrawals 

24 from the Section 211(f) Fund will not impair the ability 

25 of the fund to provide $15 million annually from Fiscal 


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1 Year 2024 through Fiscal Year 2044, and that the pro2 posed reforms are a necessary and prudent use of the 

3 funds. Government to government communications shall 

4 be through diplomatic channels. 

5 ‘‘(e) The Government of the United States and the Gov6 ernment of Palau shall establish, effective on the day this 

7 Agreement enters into force, an Advisory Group on Eco8 nomic Reform (the ‘Advisory Group’). The purpose of the 

9 Advisory Group is to contribute to the long-term economic 

10 sustainability of Palau by recommending economic, finan11 cial, and management reforms. The Advisory Group shall 

12 be composed of five (5) members, two (2) of whom shall 

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

14 whom shall be designated by the Government of the 

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

16 Government of the United States from a list of not fewer 

17 than three (3) persons not residents of Palau submitted 

18 by the President of Palau. In the event the Government 

19 of the United States rejects the persons enumerated in 

20 the list submitted by the President of Palau, then the fifth 

21 member shall be chosen by the President of Palau from 

22 a list of not fewer than three (3) persons submitted by 

23 the Government of the United States. In making their des24 ignations, the President and the Government of the 

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1 tise that would be most beneficial to the work of the Advi2 sory Group. The Advisory Group will be chaired by a 

3 member chosen by the members from among their num4 ber. Its meetings will be held once a year in Palau and 

5 once a year in Hawaii, unless otherwise agreed by the 

6 members. Each government shall provide the necessary 

7 support for its designated representatives on the Advisory 

8 Group. Support for the fifth member shall be borne by 

9 the government that recommended the member. Unless 

10 otherwise agreed by the two governments the Advisory 

11 Group shall terminate at the end of Fiscal Year 2023. 

12 ‘‘(f) The Advisory Group shall recommend economic, fi13 nancial and management reforms and the schedule on 

14 which the reforms should be implemented. The Advisory 

15 Group shall report annually not less than thirty (30) days 

16 prior to the annual bilateral economic consultations to be 

17 held on or about June 1 every year on the Government 

18 of Palau’s progress in implementing reforms recommended 

19 by the Advisory Group or other reforms taken by the Gov20 ernment of Palau. The two governments are committed 

21 to these annual economic consultations being meaningful, 

22 substantive, and comprehensive. 

23 ‘‘(g) The Government of Palau’s progress in achieving re24 forms shall be reviewed at the annual bilateral economic 

25 consultations. Examples of significant progress in a fiscal 


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1 year would be, but are not limited to: meaningful improve2 ments in fiscal management, including the elimination and 

3 prevention of operating deficits; a meaningful reduction in 

4 the national operating budget from the previous fiscal 

5 year; a meaningful reduction in the number of government 

6 employees from the level the previous fiscal year; a mean7 ingful reduction in the annual amount of the national op8 erating budget dedicated to government salaries from the 

9 previous fiscal year; demonstrable reduction of govern10 ment subsidization of utilities, and meaningful tax reform. 

11 ‘‘(h) If the Government of the United States determines 

12 after the annual bilateral economic consultations that the 

13 Government of Palau has not made significant progress 

14 in implementing meaningful reforms, then, after direct 

15 consultation with the President of Palau, the Government 

16 of the United States may, after ninety (90) days notice 

17 to the Government of Palau, delay payment of economic 

18 assistance under this section. The Government of the 

19 United States shall determine the amount of the economic 

20 assistance to be delayed. Any assistance delayed shall be 

21 held and released when the Government of the United 

22 States determines that Palau has made sufficient progress 

23 on the reforms. 

24 ‘‘5. Infrastructure Projects 


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1 ‘‘The Government of the United States shall provide 

2 grants totaling $40 million to the Government of Palau 

3 as follows: $8 million annually in Fiscal Years 2011 

4 through Fiscal Year 2013; $6 million in Fiscal Year 2014; 

5 and $5 million annually in Fiscal Years 2015 and 2016; 

6 towards one or more mutually agreed infrastructure 

7 projects in accordance with the provisions of Appendix C 

8 to this Agreement. 

9 ‘‘6. Reporting and Auditing 

10 ‘‘Palau shall resolve all deficiencies in the Annual Single 

11 Audit such that by 2018 no deficiency or recommendation 

12 dates from before Fiscal Year 2016. By the first day of 

13 the fourth quarter of each fiscal year or as soon as prac14 ticable thereafter, in the annual report it submits under 

15 Section 231(b) of the Compact, the Government of Palau 

16 shall report on the status and use of all funds provided 

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

18 provided under this Agreement shall also be discussed in 

19 the annual bilateral economic consultations. The financial 

20 information relating to this funding shall conform to the 

21 standards of the Government Accounting Standards 

22 Board. All funds provided under this Agreement shall be 

23 subject to a financial and compliance audit and other re24 quirements in accordance with the provisions of Appendix 

25 D to this Agreement. 


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1 ‘‘7. Federal Programs and Services 

2 ‘‘The Government of the United States shall make avail3 able to Palau through Fiscal Year 2024, in accordance 

4 with and to the extent provided through amendments to 

5 the Federal Programs and Services Agreement Concluded 

6 Pursuant to Article II of Title Two and Section 232 of 

7 the Compact of Free Association, signed at Palau on Jan8 uary 10, 1986, the services and related programs covered 

9 in that agreement as amended herein. The amendments 

10 to that agreement constitute Appendix E to this Agree11 ment. 

12 ‘‘8. Telecommunication Services 

13 ‘‘The Agreement Regarding the Provision of Tele14 communication Services by the Government of the United 

15 States to Palau Concluded Pursuant to Section 131 of the 

16 Compact of Free Association, signed at Koror, Republic 

17 of Palau, January 10, 1986 and the Agreement Regarding 

18 the Operation of Telecommunication Services of the Gov19 ernment of the United States in Palau Concluded Pursu20 ant to Section 132 of the Compact of Free Association, 

21 signed at Koror, Republic of Palau, January 10, 1986 are 

22 amended and these amended agreements constitute Ap23 pendix F to this Agreement. 

24 ‘‘9. Passport Requirement 


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1 ‘‘Section 141 of Article IV of Title One of the Compact 

2 shall be construed and applied as if it read as follows: 

3 ‘Section 141 

4 ‘(a) Any person in the following categories may 

5 be admitted to, lawfully engage in occupations, and 

6 establish residence as a nonimmigrant in the United 

7 States and its territories and possessions without re8 gard to paragraphs (5) or (7)(B)(i)(II) of section 

9 212(a) of the Immigration and Nationality Act, 8 

10 U.S.C. § 1182(a)(5) or (a)(7)(B)(i)(II), provided 

11 that the passport presented to satisfy section 

12 212(a)(7)(B)(i)(I) of such Act is a valid unexpired 

13 machine-readable passport that satisfies the inter14 nationally accepted standard for machine readability: 

15 ‘(1) a person who, on September 30, 1994, 

16 was a citizen of the Trust Territory of the Pa17 cific Islands, as defined in Title 53 of the Trust 

18 Territory Code in force on January 1, 1979, 

19 and has become and remains a citizen of Palau; 

20 ‘(2) a person who acquires the citizenship 

21 of Palau, at birth, on or after the effective date 

22 of the Constitution of Palau; or 

23 ‘(3) a naturalized citizen of Palau, who has 

24 been an actual resident of Palau for not less 

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1 tion and who holds a certificate of actual resi2 dence. 

3 ‘Such persons shall be considered to have the permission 

4 of the Secretary of Homeland Security of the United 

5 States to accept employment in the United States. 

6 ‘(b) The right of such persons to establish ha7 bitual residence in a territory or possession of the 

8 United States may, however, be subjected to non-dis9 criminatory limitations provided for: 

10 ‘(1) in statutes or regulations of the 

11 United States; or 

12 ‘(2) in those statutes or regulations of the 

13 territory or possession concerned which are au14 thorized by the laws of the United States. 

15 ‘(c) Section 141(a) does not confer on a citizen 

16 of Palau the right to establish the residence nec17 essary for naturalization under the Immigration and 

18 Nationality Act, or to petition for benefits for alien 

19 relatives under that Act. Section 141(a), however, 

20 shall not prevent a citizen of Palau from otherwise 

21 acquiring such rights or lawful permanent resident 

22 alien status in the United States.’. 

23 ‘‘10. Effective Date, Amendment, and Duration 

24 ‘‘(a) This Agreement, including its Appendices, shall enter 

25 into force on the date of the last note of an exchange of 


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1 diplomatic notes by which the Government of the United 

2 States and the Government of Palau inform each other 

3 that all internal procedures necessary for its entry into 

4 force have been fulfilled. 

5 ‘‘(b) This Agreement may be amended at any time by the 

6 mutual written consent of the Government of the United 

7 States and the Government of Palau. 

8 ‘‘(c) This Agreement shall remain in full force and effect 

9 until terminated by mutual written consent, or until termi10 nation of the Compact, whichever occurs first. 

11 ‘‘IN WITNESS WHEREOF, the undersigned, duly au12 thorized by their respective Governments, have signed this 

13 Agreement. 

14 ‘‘DONE AT Honolulu, Hawaii, USA, in duplicate, this 

15 3rd day of September 2010, in the English language. 

‘‘FOR THE GOVERNMENT FOR THE GOVERNMENT 

OF THE UNITED STATES OF OF THE REPUBLIC OF PALAU: 

AMERICA: 

Frankie A. Reed Johnson Toribiong 

[Title] [Title] 


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1 ‘‘APPENDIX A—INFRASTRUCTURE 

2 MAINTENANCE FUND 

3 ‘‘1. Subject to the terms of this Appendix, the Gov4 ernment of the United States shall provide the grants 

5 specified in section 2(a) of the Agreement between the 

6 United States of America and the Government of the Re7 public of Palau following the Compact of Free Association 

8 Section 432 Review (the ‘Agreement’) to which this docu9 ment is an appendix. 

10 ‘‘2. If, in a given Fiscal Year, the Government of 

11 Palau does not make the contributions agreed to in section 

12 2(a) of the Agreement, economic assistance funds to be 

13 provided to Palau in the following fiscal year under section 

14 4 of the Agreement will be redirected to the Infrastructure 

15 Maintenance Fund to make up the contributions owed by 

16 the Government of Palau. 

17 ‘‘3. Grant funds from the Government of the United 

18 States and Government of Palau contributions to the In19 frastructure Maintenance Fund shall be deposited in an 

20 account established by the Government of Palau. Fiscal 

21 control and accounting procedures shall be sufficient to 

22 permit the preparation of required reports and to permit 

23 the tracing of funds to a level of expenditure adequate to 

24 establish that such funds have been used in compliance 

25 with this Appendix. 


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1 ‘‘4. Palau shall report, at the annual bilateral eco2 nomic consultations, the sources of its contributions to the 

3 Infrastructure Maintenance Fund. 

4 ‘‘5. The Infrastructure Maintenance Fund, and any 

5 interest accruing thereon, is to be used by the Government 

6 of Palau for the maintenance of United States financed 

7 capital improvement projects such as the road system 

8 (Compact Road) provided by the United States under Sec9 tion 212 of the Compact and the capital improvements 

10 provided by the United States to the Airai International 

11 Airport. The Government of Palau may request in writing 

12 the use of the Infrastructure Maintenance Fund for main13 tenance of U.S. financed capital improvement projects 

14 other than these two, such as the U.S.-financed capital 

15 improvements reflected in the Palau national hospital and 

16 schools. The Government of the United States shall give 

17 due consideration to any such request and shall endeavor 

18 to make a determination within sixty (60) days of receipt 

19 of the request. Although the primary purpose of the Infra20 structure Maintenance Fund is to provide for routine and 

21 periodic maintenance, it may be used, when mutually 

22 agreed upon in writing, to mitigate damage and make 

23 emergency repairs to capital improvement projects funded 

24 by the United States. 


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1 ‘‘6. The Government of Palau shall identify to the 

2 Government of the United States the Government of 

3 Palau official and office responsible for maintenance of the 

4 infrastructure with Fund monies. The official shall be re5 sponsible for activities necessary to plan and implement 

6 annual programs of maintenance of the Compact Road 

7 and the International Airport at Airai, and all other public 

8 infrastructure. The official shall be responsible for keeping 

9 each facility as nearly as possible in its original condition 

10 as constructed. The official shall develop an annual main11 tenance plan and related budget for reactive, preventive, 

12 repetitive, non-recurrent, and emergency-generated main13 tenance of the infrastructure specified in paragraph 5 and 

14 for all other public infrastructure. The plan will include 

15 descriptions and schedules of planned activities and shall 

16 identify the related costs. The plan for the infrastructure 

17 specified in paragraph 5 shall be submitted to the Govern18 ment of the United States for its approval no less than 

19 sixty (60) days prior to the beginning of each fiscal year. 

20 ‘‘7. The Government of the United States will base 

21 its approval or disapproval of the plan for the infrastruc22 ture specified in paragraph 5 on its consideration of the 

23 effectiveness of the plan within the bounds of annual re24 sources. Approval by the Government of the United States 

25 will be in the form of an annual grant which incorporates 


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1 the approved maintenance plan and budget. Acceptance of 

2 the grant by the Government of the Republic of Palau will 

3 obligate the Government of Palau to the implementation 

4 of the annual maintenance plan and budget for the infra5 structure specified in paragraph 5. 

6 ‘‘8. The grant, annual maintenance plan, and budget 

7 for the infrastructure specified in paragraph 5 may be 

8 amended by written mutual agreement. 

9 ‘‘9. Use of the Fund monies shall be subject to 43 

10 Code of Federal Regulations 12 and all other applicable 

11 laws and regulations governing the use of grant funds pro12 vided by the Government of the United States. These 

13 funds may not be used for any purpose other than that 

14 for which they are offered. 

15 ‘‘10. Any grant funds remaining unexpended at the 

16 end of a fiscal year shall remain in the Infrastructure 

17 Maintenance Fund and may be included in subsequent an18 nual maintenance plans and budgets. 

19 ‘‘11. Reporting Requirements: 

20 ‘‘(a) A Standard Form SF 425 (or successor 

21 form) and a narrative project status report shall be 

22 submitted quarterly. 

23 ‘‘(b) Reports are due within thirty (30) days of 

24 the end of each quarter. Final reports are due ninety 


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1 (90) days after the expiration or termination of the 

2 award. 

3 ‘‘(c) All required plans and reports must be 

4 submitted to the U.S. Department of the Interior 

5 Office of Insular Affairs grant manager for the 

6 grant. 

7 ‘‘APPENDIX B—FISCAL CONSOLIDATION FUND 

8 ‘‘1. Subject to the terms of this Appendix, the Gov9 ernment of the United States shall provide the Govern10 ment of Palau the amounts specified in section 3 of the 

11 Agreement of the United States of America and the Gov12 ernment of the Republic of Palau following the Compact 

13 of Free Association Section 432 Review (the ‘Agreement’) 

14 to which this document is an appendix. Until disbursed, 

15 these funds will be deposited in an interest bearing ac16 count and the interest generated shall also be used to re17 duce Palau’s government payment arrears in accordance 

18 with the provisions of this Appendix. 

19 ‘‘2. The purpose of these funds is to allow the Gov20 ernment of Palau to discharge the level of debts accumu21 lated prior to September 30, 2009. None of the principal 

22 or interest accrued on these funds may be disbursed to 

23 discharge a debt until the governments agree upon a spe24 cific list of debts to be paid with each annual contribution. 

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1 other government, to pay an international organization, or 

2 to pay off debts which are the subject of current or pend3 ing litigation. Unless agreed to in writing by the Govern4 ment of the United States, the funds may not be used 

5 to pay any entity owned or controlled by any member of 

6 the government, elected or appointed; to pay any entity 

7 owned or controlled by any member of the immediate fam8 ily of any member of the government; to pay any entity 

9 from which a member of the government derives income; 

10 or to pay any creditor if the creditor owes money to the 

11 Government of Palau unless arrangements are made im12 mediately to offset amounts owed to the Government of 

13 Palau from the funds made available to the creditor. Debts 

14 owed to U.S. creditors must receive priority. All debts to 

15 be paid with these funds must be properly documented as 

16 legitimate debts of the Republic of Palau using generally 

17 accepted accounting principles. The total amount of the 

18 debt to be paid shall not exceed the general fund deficit 

19 established by the Single Audit Report as of September 

20 30, 2009. 

21 ‘‘3. The Government of Palau shall report quarterly 

22 to the Government of the United States on the use of these 

23 funds until they are expended and, until expended, the sta24 tus and use of these funds shall be a regular agenda item 

25 for annual bilateral economic consultations to be held 


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1 around June 1 of every year. If eligible debts do not 

2 amount to $10 million, upon the request of the Govern3 ment of Palau, the funds remaining after payment of the 

4 eligible debts shall be added to the amounts provided for 

5 infrastructure projects in section 5 of the Agreement. 

6 ‘‘APPENDIX C—INFRASTRUCTURE PROJECTS 

7 ‘‘1. Subject to the terms of this Appendix, the Gov8 ernment of the United States shall provide grants towards 

9 one or more mutually agreed infrastructure projects as 

10 specified in section 5 of the Agreement of the United 

11 States of America and the Government of the Republic 

12 of Palau following the Compact of Free Association Sec13 tion 432 Review (the ‘Agreement’) to which this document 

14 is an appendix. These infrastructure grants shall be sub15 ject to 43 Code of Federal Regulations 12 and all other 

16 applicable laws and regulations governing the use of grant 

17 funds provided by the Government of the United States. 

18 Grant funds may not be used for any purpose other than 

19 that for which they are offered. 

20 ‘‘2. Payment of grant funds shall be made as reim21 bursement of actual or accrued expenditures, using a for22 mat provided by the Government of the United States or 

23 as mutually agreed. 

24 ‘‘3. Prior to requesting reimbursement or payment, 

25 the Government of Palau shall, as applicable, provide the 


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1 following documentation to the Government of the United 

2 States: 

3 ‘‘(a) Evidence of title, leasehold agreement, or 

4 other legal authority for use of the land upon which 

5 the capital improvement project(s) is (are) to be con6 structed. 

7 ‘‘(b) A detailed project budget for each infra8 structure project. The budget shall include a break9 down of costs (in-house and contract) for planning, 

10 engineering and design, real estate, supervision and 

11 administration, construction, and construction man12 agement and inspection. The Government of Palau 

13 and the Government of the United States shall mu14 tually agree to the format of this submission. 

15 ‘‘(c) A scope of work that describes the work to 

16 be performed and the schedule from planning 

17 through completion of construction. A certified pro18 fessional engineer or architect shall sign both the 

19 scope of work and budget for each construction 

20 project. 

21 ‘‘4. Prior to disbursing funds requested to reimburse 

22 for actual project construction, the Government of the 

23 United States may review construction plans and speci24 fications, any revised detailed cost estimate, and a detailed 

25 construction schedule. 


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1 ‘‘5. All grant monies shall remain available until ex2 pended, unless otherwise provided in this Appendix. 

3 ‘‘6. Failure to comply with objectives, terms and con4 ditions, or reporting requirements may result in the sus5 pension of grant payments until the deficiency is cor6 rected. 

7 ‘‘7. Reporting Requirements: 

8 ‘‘(a) A Standard Form SF 425 (or successor 

9 form) and a narrative project status report shall be 

10 submitted quarterly. 

11 ‘‘(b) Reports are due within thirty (30) days of 

12 the end of each quarter. Final reports are due ninety 

13 (90) days after the expiration or termination of the 

14 award. 

15 ‘‘(c) All required documents and reports must 

16 be submitted to the U.S. Department of the Interior 

17 Office of Insular Affairs grant manager for the 

18 grant. 

19 ‘‘APPENDIX D—AUDIT STANDARDS AND 

20 RESPONSIBILITIES 

21 ‘‘1. The Government of Palau shall perform a finan22 cial and compliance audit, within the meaning of the Sin23 gle Audit Act, as amended (31 U.S.C. 7501 et seq.), of 

24 the uses of the funding provided pursuant to the Agree25 ment Between the Government of the United States of 


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1 America and the Government of the Republic of Palau fol2 lowing the Compact of Free Association Section 432 Re3 view (the ‘Agreement’) for each fiscal year during which 

4 the Agreement is in effect. The results of these Audits 

5 shall be available not later than the beginning of the 

6 fourth fiscal quarter following the end of the fiscal year 

7 under review, as required by the Single Audit Act. The 

8 costs of these audits are to be borne by the Government 

9 of Palau, and may be a recognized expense to funds pro10 vided under section 4 of the Agreement. If the Govern11 ment of the Republic of Palau does not endeavor to per12 form a Single Audit in any given fiscal year, economic as13 sistance funds to be provided to Palau in the following 

14 fiscal year under section 4 of the Agreement shall be redi15 rected to pay for the required Single Audit. 

16 ‘‘2. In conducting the audits required under this Ap17 pendix, the auditors shall take into account relevant laws 

18 and regulations of the United States and Palau, including 

19 U.S. laws and regulations on the conduct of audits, and 

20 Palauan laws and regulations which relate in a material, 

21 substantial or direct way to financial statements and oper22 ations of the Government of Palau. 

23 ‘‘3. The authority of the Government of the United 

24 States set forth this Appendix shall continue for at least 

25 three (3) years after the last Grant or element of assistVerDate Mar 15 2010 07:29 Feb 18, 2011 Jkt 099200 PO 00000 Frm 00026 Fmt 6652 Sfmt 6201 E:\BILLS\S343.IS S343

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1 ance by the Government of the United States under this 

2 Agreement has been provided and expended. 

3 ‘‘4. Audit officials or agents of the Government of 

4 the United States may perform audits on the use of all 

5 funding provided pursuant to this Agreement, including 

6 grants and other assistance provided to the Government 

7 of Palau. The Government of the United States is respon8 sible for all costs attendant to the discharge of this author9 ity. 

10 ‘‘5. Audit officials from the Government of the 

11 United States are the officials and employees of the Gov12 ernment of the United States who are responsible for the 

13 discharge of its audit responsibilities, including those of 

14 the Comptroller General of the United States and any In15 spector General of an agency of the Government of the 

16 United States with programs operating in or otherwise 

17 serving the Republic of Palau. While present in the Repub18 lic of Palau for the purposes of this Appendix, audit offi19 cials from the Government of the United States shall be 

20 immune from civil and criminal process relating to words 

21 spoken or written and all acts performed by them in their 

22 official capacity and falling within their functions, except 

23 insofar as such immunity may be expressly waived by the 

24 Government of the United States. The Comptroller Gen25 eral and his duly authorized representatives, and other 


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1 audit officials from the Government of the United States, 

2 shall not be liable to arrest or detention pending trial, ex3 cept in the case of a grave crime and pursuant to a deci4 sion by a competent judicial authority, and such persons 

5 shall enjoy immunity from seizure of personal property, 

6 immigration restrictions, and laws relating to alien reg7 istration, fingerprinting, and the registration of foreign 

8 agents. Such persons shall enjoy the same taxation exemp9 tions as are set forth in Article 34 of the Vienna Conven10 tion on Diplomatic Relations. The privileges, exemptions 

11 and immunities accorded under this paragraph are not for 

12 the personal benefit of the individuals concerned but are 

13 to safeguard the independent exercise of their official 

14 functions. Without prejudice to those privileges, exemp15 tions and immunities, it is the duty of all such persons 

16 to respect the laws and regulations of the Government of 

17 the Republic of Palau. 

18 ‘‘6. Audit officials from the Government of the 

19 United States shall provide the Government of Palau with 

20 advance notice of the specific dates and nature of their 

21 visits prior to entering the Republic of Palau and shall 

22 show verifiable identification to officials of the Govern23 ment of Palau when seeking access to records. In the per24 formance of their responsibilities under this Agreement, 

25 audit officials from the Government of the United States 


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1 shall have due regard for the laws of the Republic of Palau 

2 and the duties and responsibilities of the officials of the 

3 Government of Palau. Officials of the Government of 

4 Palau shall cooperate fully to the extent practicable with 

5 the United States audit officials to enable the full dis6 charge of their responsibilities. 

7 ‘‘7. The Comptroller General of the United States, 

8 and officials of the United States Government Account9 ability Office acting on his or her behalf, shall have coex10 tensive authority with the executive branch of the Govern11 ment of the United States as provided by this Appendix. 

12 The audit officials from the executive branch of the Gov13 ernment of the United States shall avoid duplication be14 tween their audit programs and those of the United States 

15 Government Accountability Office. The Government of 

16 Palau shall cooperate fully to the extent practicable with 

17 the Comptroller General of the United States in the con18 duct of such Audits as the Comptroller General of the 

19 United States determines necessary in accordance with 

20 this Appendix to enable the full discharge of his respon21 sibilities. 

22 ‘‘8. The Government of Palau shall provide audit offi23 cials from the Government of the United States with ac24 cess, without cost and during normal working hours, to 

25 all records, documents, working papers, automated data, 


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1 and files which are relevant to the uses of funding received 

2 pursuant to the Agreement by the Government of Palau. 

3 To the extent that such information is contained in con4 fidential official documents, the Government of Palau shall 

5 undertake to extract information that is not of a confiden6 tial nature and make it available to the audit officials from 

7 the Government of the United States in the same manner 

8 as other relevant information or to provide such informa9 tion from other sources. 

10 ‘‘9. In order to reduce the level of interference in the 

11 daily operation of the activities of the Government of 

12 Palau, audit officials from the Government of the United 

13 States shall, to the extent practicable, inform the Govern14 ment of Palau of their need for information, including the 

15 type of information and its relation to their annual audit 

16 schedule. To the extent practicable, the Government of 

17 Palau shall make available the information requested by 

18 audit officials from the Government of the United States 

19 relevant to Audits and available in a manner consistent 

20 with generally accepted accounting procedures that allows 

21 for the distinction of the Grants, assistance, and payments 

22 provided by the Government of the United States from 

23 any other funds of the Government of Palau. Such infor24 mation shall be used and returned as quickly as accurate 

25 audit testing and surveying allow. 


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1 ‘‘10. The Government of Palau shall maintain 

2 records, documents, working papers, automated data, 

3 files, and other information regarding each such Grant or 

4 other assistance for at least three (3) years after such 

5 Grant or assistance was provided. 

6 ‘‘11. Audit organizations and officials from the Gov7 ernment of the United States, including the Comptroller 

8 General of the United States and his duly authorized rep9 resentatives, shall provide the Government of Palau with 

10 at least thirty (30) days to review and comment on draft 

11 audit reports prior to the release of the reports. The com12 ments of the Government of Palau shall be included, in 

13 full, in the final audit reports. Should a draft audit report 

14 be revised based on the comments of the Government of 

15 Palau, the Government of Palau shall have an additional 

16 period to review and comment on the report prior to its 

17 release. 

18 ‘‘(c) The amendments to the Compact subsidiary 

19 agreements referenced in sections 7 and 8 of the Agree20 ment set forth in section 105(b) above are hereby con21 sented to (except for the extension of Article X of the Fed22 eral Programs and Services Agreement Concluded Pursu23 ant to Article II of Title Two and Section 232 of the Com24 pact of Free Association). 


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1 ‘‘(d) There are authorized and appropriated to the 

2 Department of the Interior, out of any funds in the Treas3 ury not otherwise appropriated, to remain available until 

4 expended, such sums as are necessary to carry out the 

5 purposes of sections 1, 2(a), 3, 4(a), and 5 of the Agree6 ment set forth in section 105(b) above. 

7 ‘‘(e) If this section 105 and the Agreement set forth 

8 in section 105(b) above become effective during fiscal year 

9 2011, and if between September 30, 2010, and the date 

10 the Agreement set forth in section 105(b) becomes effec11 tive, the Government of Palau withdraws more than 

12 $5,000,000 from the trust fund established under section 

13 211(f) of the U.S.-Palau Compact, amounts payable under 

14 sections 1, 2(a), 3, and 4(a) of the Agreement set forth 

15 in section 105(b) above, shall be withheld from the Gov16 ernment of Palau until Palau has reimbursed the trust 

17 fund for the amount, above $5,000,000, withdrawn. 

18 ‘‘(f) There are authorized to be appropriated to the 

19 Departments, agencies, and instrumentalities named in 

20 paragraphs 1, 3, and 4 of section 221(a) of the U.S.-Palau 

21 Compact, and their successor Departments, agencies, and 

22 instrumentalities, such sums as are necessary to carry out 

23 the purposes of those paragraphs, to remain available until 

24 expended. 


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1 ‘‘(g) There are authorized to be appropriated to the 

2 Department of the Interior $1.5 million annually for 14 

3 years—Fiscal Year 2011 through Fiscal Year 2024—to 

4 subsidize United States Postal Service (USPS) postal 

5 services provided to Palau, the Republic of the Marshall 

6 Islands, and the Federated States of Micronesia, to re7 main available until expended. 

8 ‘‘(h) Section 105(f)(1)(B)(ix) of the Compact of Free 

9 Association Amendments Act of 2003 (48 U.S.C. 

10 1921d(f)(1)(B)(ix)) shall be applied by substituting ‘2024’ 

11 for ‘2009’.’’ 

Æ 


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