```

[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 343 Introduced in Senate (IS)]

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 ResourcesYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYYY

_______________________________________________________________________

                                 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 September 30, 2024, to carry out the 
                 agreements resulting from that review.

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

SECTION 1. IMPLEMENTATION OF AGREEMENT BETWEEN THE UNITED STATES AND 
              THE REPUBLIC OF PALAU.

    Title I of Public Law 99-658 is hereby amended by inserting a new 
section 105 as follows:

``SEC. 105. RESULTS OF COMPACT REVIEW.

    ``(a) 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 set forth in subsection 
(b) of this section, is hereby approved.
    ``(b)

                         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 of Palau agree as follows:
    ``1. Compact Section 211(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.
``(b) The $3 million owed to the Government of the United States under 
paragraph 3(d) of Article V of the Agreement Concerning Special 
Programs Related to the Entry Into Force of the Compact of Free 
Association Between the Government of the United States and the 
Government of the Republic of Palau (the Guam Accords) done at Guam, 
May 26, 1989, plus accumulated interest, 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 of the Compact Road provided by 
the United States under Section 212 of the Compact.
    ``3. Fiscal Consolidation Fund
``The Government of the 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 of Appendix 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 (30 percent in the first quarter, 30 percent in the 
second quarter, 20 percent in the third quarter, and 20 percent in the 
fourth quarter) unless otherwise specified in this Agreement or in an 
Appendix to this Agreement.
``(b) Notwithstanding the provisions of Compact section 211(f) and the 
Agreement Between the Government of the United States and the 
Government of Palau Regarding Economic Assistance Concluded Pursuant to 
Section 211(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 211(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 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, directly or indirectly, to fund state block 
grants, 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 of subsection 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 
Government 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 211(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.
``(e) 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 
government 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.
``(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 (30) 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.
    ``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. Sec.  1182(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 naturalization and who holds 
                a certificate of actual residence.
`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 141(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 Government 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 Honolulu, Hawaii, USA, in duplicate, this 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]
 

             ``APPENDIX A--INFRASTRUCTURE MAINTENANCE FUND

    ``1. 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 does 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 in 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.
    ``10. 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.

                ``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 1 of every year. If eligible debts 
do not amount to $10 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.

                 ``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.

           ``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 United 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 of this 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 written 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.
    ``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.
    ``10. 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.
    ``(c) The amendments to the Compact subsidiary agreements 
referenced in sections 7 and 8 of the Agreement set forth in section 
105(b) above are hereby consented to (except for the extension of 
Article X of the Federal Programs and Services Agreement Concluded 
Pursuant to Article II of Title Two and Section 232 of the Compact of 
Free Association).
    ``(d) There are authorized and appropriated to the Department of 
the Interior, out of any funds in the Treasury not otherwise 
appropriated, to remain available until expended, such sums as are 
necessary to carry out the purposes of sections 1, 2(a), 3, 4(a), and 5 
of the Agreement set forth in section 105(b) above.
    ``(e) If this section 105 and the Agreement set forth in section 
105(b) above become effective during fiscal year 2011, and if between 
September 30, 2010, and the date the Agreement set forth in section 
105(b) becomes effective, the Government of Palau withdraws more than 
$5,000,000 from the trust fund established under section 211(f) of the 
U.S.-Palau Compact, amounts payable under sections 1, 2(a), 3, and 4(a) 
of the Agreement set forth in section 105(b) above, shall be withheld 
from the Government of Palau until Palau has reimbursed the trust fund 
for the amount, above $5,000,000, withdrawn.
    ``(f) There are authorized to be appropriated to the Departments, 
agencies, and instrumentalities named in paragraphs 1, 3, and 4 of 
section 221(a) of the U.S.-Palau Compact, and their successor 
Departments, agencies, and instrumentalities, such sums as are 
necessary to carry out the purposes of those paragraphs, to remain 
available until expended.
    ``(g) There are authorized to be appropriated to the Department of 
the Interior $1.5 million annually for 14 years--Fiscal Year 2011 
through Fiscal Year 2024--to subsidize United States Postal Service 
(USPS) postal services provided to Palau, the Republic of the Marshall 
Islands, and the Federated States of Micronesia, to remain available 
until expended.
    ``(h) Section 105(f)(1)(B)(ix) of the Compact of Free Association 
Amendments Act of 2003 (48 U.S.C. 1921d(f)(1)(B)(ix)) shall be applied 
by substituting `2024' for `2009'.''
                                 <all>
```