Compact of Free Association: Micronesia Faces Challenges to Achieving Compact Goals
Published: 2008-06-10T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: From 1987 through 2003, the Federated States of Micronesia (FSM) received more than $1.5 billion in economic assistance under the original Compact of Free Association with the United States. In 2003, the U.S. government approved an amended compact with the FSM that provides an additional $2.3 billion from 2004 through 2023. The Department of the Interior's Office of Insular Affairs (OIA) is responsible for administering and monitoring this assistance. The amended compact identifies the additional 20 years of grant assistance as intended to assist the FSM in its efforts to promote the economic advancement and budgetary self-reliance of its people. The assistance is provided in the form of annually decreasing grants that prioritize health and education, paired with annually increasing contributions to a trust fund intended as a source of revenue for the country after the grants end in 2023. The amended compact also contains several new funding and accountability provisions intended to strengthen reporting and bilateral interaction. Among these provisions is a requirement for the establishment of a joint economic management committee and a trust fund committee to, respectively, among other duties, review the FSM's progress toward compact objectives and assess the trust fund's effectiveness in contributing to the country's economic advancement and long-term budgetary self-reliance. In 2003, we testified that these provisions could improve accountability over the assistance provided but that successful implementation of these provisions would require appropriate resources and sustained commitment from both the United States and the FSM. Drawing on several more recent reports as well as updated information, this report will discuss the FSM's economic prospects, implementation of the amended compact to meet its long-term goals, and potential trust fund earnings.
section_title: What GAO Found
paragraphs: The FSM has limited prospects for achieving budgetary self-reliance and long-term economic advancement, and the FSM government has not yet implemented policy reforms needed to enable economic growth. The FSM economy depends on public sector spending of foreign assistance; government expenditures, over half of which are funded by external grants, account for about 65 percent of the FSM's gross domestic product (GDP). The FSM government's budget is characterized by limited tax revenue and a growing wage bill, and the two private sector industries identified as having growth potential--fisheries and tourism--face significant barriers to expansion because of the FSM's remote geographic location, inadequate infrastructure, and poor business environment. Moreover, progress in implementing key tax, public sector, land, and foreign investment policy reforms necessary to improve growth has been slow. For example, although the FSM has agreed on principles of reform to address its tax system that has been characterized by experts as inefficient and inequitable, the FSM government has made limited progress in implementing fundamental tax reform. Also, the FSM's failure to implement key public sector reforms to reduce wage and subsidy expenditures resulted in fiscal crisis in Chuuk and Kosrae. In August 2006, nearly 2 years after the amended compact entered into force, the FSM Joint Economic Management Committee (JEMCO) began discussions of economic policy reform and has since approved some funding to support FSM reform efforts; however, challenges to private sector growth remain. Numerous factors have negatively affected the use of the compact grants for FSM development goals. The FSM's grant allocations have reflected compact priorities by targeting education, health, and infrastructure. However, as of April 2008, the FSM had completed only three infrastructure projects and approximately 82 percent of the $82.5 million in infrastructure funds remained unexpended. Lack of progress in this sector is owed to national and state disagreements over infrastructure priorities, problems associated with the project management unit, and Chuuk's inability to secure land leases. Additionally, the FSM has almost $15 million in unspent funds for other sectors, or around 7 percent of funds allocated from 2004 to 2007. Furthermore, the FSM's distribution of grants among its four states has not been based on need, leading to significant differences in per capita funding, while the FSM's long-term planning has not taken into account the likely effects of the annual funding decrement and other budgetary changes. The FSM has also lacked accountability for the use of compact funds, as demonstrated by weaknesses in its yearly financial statements and lack of compliance with requirements of major federal programs. Moreover, the FSM has not consistently monitored day-to-day grant operations or reported on progress toward program and economic goals, owing to inadequate data, a lack of required reporting, and an unwillingness to dedicate the resources necessary. OIA has conducted administrative oversight of the sector grants, but its oversight has been constrained by the need to assist the FSM with its compact implementation activities such as preparing budgets and addressing financial management problems such as the misuse of compact funds by Chuuk and Kosrae in 2006 and 2007, respectively.

section_title: Letter
paragraphs: I am pleased to be here today to discuss GAO’s recent work regarding the  amended Compact of Free Association between the United States and the  Federated States of Micronesia (FSM).
From 1987 through 2003, the FSM received more than $1.5 billion in  economic assistance under the original Compact of Free Association with  the United States. In 2003, the U.S. government approved an amended  compact with the FSM that provides an additional $2.3 billion from 2004  through 2023. The Department of the Interior’s Office of Insular Affairs  (OIA) is responsible for administering and monitoring this assistance.
The amended compact identifies the additional 20 years of grant  assistance as intended to assist the FSM in its efforts to promote the  economic advancement and budgetary self-reliance of its people. The  assistance is provided in the form of annually decreasing grants that  prioritize health and education, paired with annually increasing  contributions to a trust fund intended as a source of revenue for the  country after the grants end in 2023. The amended compact also contains  several new funding and accountability provisions intended to strengthen  reporting and bilateral interaction. Among these provisions is a  requirement for the establishment of a joint economic management  committee and a trust fund committee to, respectively, among other  duties, review the FSM’s progress toward compact objectives and assess  the trust fund’s effectiveness in contributing to the country’s economic  advancement and long-term budgetary self-reliance. In 2003, we testified  that these provisions could improve accountability over the assistance  provided but that successful implementation of these provisions would  require appropriate resources and sustained commitment from both the  United States and the FSM.
Today, drawing on several more recent reports as well as updated  information, I will discuss the FSM’s economic prospects, implementation  of the amended compact to meet its long-term goals, and potential trust  fund earnings.
subsections: section_title: Background
subsections: section_title: Compact of Free Association: 1986-2003
paragraphs: In 1986, the United States entered into its original Compact of Free  Association with the FSM. The compact comprised a framework for the  United States to work toward achieving three main goals: (1) to secure  self-government for the FSM, (2) to ensure certain national security rights  for all parties, and (3) to assist the FSM in its efforts to advance economic  development and self-sufficiency. Under the original compact, the FSM  also benefited from numerous U.S. federal programs, and their citizens  were allowed to live and work in the United States as nonimmigrants and  to stay for long periods of time.
Although the original compact’s first and second goals were met, the FSM  did not achieve economic self-sufficiency. The FSM gained independence  in 1978, and key defense rights were established. However, the compact’s  third goal was to be accomplished primarily through U.S. direct financial  assistance totaling about $1.5 billion from 1987 through 2003. Although  U.S. financial assistance maintained higher income levels than the FSM  could have achieved without support, FSM estimated per capita GDP at  the compact’s close did not differ substantially, in real terms, from its per  capita GDP in the early 1990s. In addition, we found that the U.S. and  FSM governments provided little accountability over compact  expenditures and that many compact-funded projects encountered  problems related to poor planning and management, inadequate  construction and maintenance, or misuse of funds.
section_title: Amended Compact of Free Association: 2004-2023
paragraphs: In 2003, the United States approved an amended compact with the FSM  that (1) continues the defense relationship; (2) strengthens immigration  provisions; and (3) provides an estimated $2.3 billion to the FSM for 2004  through 2023 (see attachment II). The amended compact, which took  effect in June 2004, identifies the additional 20 years of grant assistance as  intended to assist the FSM in its efforts to promote the economic  advancement and budgetary self-reliance of its people. Financial  assistance is provided in the form of annual sector grants and  contributions to the trust fund.  The amended compact and its subsidiary  agreements, along with the FSM’s development plan, target the grant  assistance to six sectors—education, health, public infrastructure, the  environment, public sector capacity building, and private sector  development—prioritizing two sectors, education and health. To provide  increasing U.S. contributions to the FSM’s trust fund, grant funding  decreases annually and will likely result in falling per capita grant  assistance over the funding period and relative to the original compact  (see attachment III). For example, in 2004 U.S. dollar terms, FSM per  capita grant assistance will likely fall from around $1,352 in 1987 to around  $562 in 2023.
Under the amended compact, annual grant assistance is to be provided  according to an implementation framework with several components (see  attachment IV). For example, prior to the annual awarding of compact  funds, the FSM must submit a development plan that identifies goals and  performance objectives for each sector. The FSM government is also  required to monitor day-to-day operations of sector grants and activities,  submit periodic financial statements and performance reports for the  tracking of progress against goals and objectives, and ensure annual  financial and compliance audits. In addition, the U.S. and JEMCO are to  approve annual sector grants and evaluate the countries’ management of  the grants and their progress toward program and economic goals. The  amended compact and subsidiary trust fund agreement also provide for  the formation of an FSM trust fund committee to, among its other duties,  hire a money manager, oversee the fund’s operation and investment, and  provide annual reports on the fund’s profitability.
section_title: FSM Economic Prospects Remain Limited
paragraphs: The FSM economy shows limited potential for developing sustainable  income sources other than foreign assistance to offset the annual decline  in U.S. compact grant assistance. Moreover, the FSM has not enacted  economic policy reforms needed to improve its growth prospects.
The FSM’s economy shows continued dependence on government  spending of foreign assistance and limited potential for expanded private  sector and remittance income.
Total government expenditures in 2006, over half of which were funded by  external grants, accounted for about 65 percent of GDP.
The FSM’s government budget is characterized by limited tax revenue  paired with growing government payrolls. For example, FSM taxes have  consistently provided less than 25 percent of total government revenue;  however, payroll expenditures have increased as a percentage of total  government spending, from 38 percent in 2000 to 45 percent in 2006.
The FSM development plan identifies fishing and tourism as key potential  private sector growth industries. However, the two industries together  provide only about 6 percent of employment. Further, according to  economic experts, growth in these industries is limited by factors such as  the FSM’s geographic isolation, lack of tourism infrastructure, inadequate  interisland shipping, limited pool of skilled labor, and growing danger of  overfishing.
Although remittances from emigrants could provide increasing monetary  support to the FSM, evidence suggests that FSM emigrants are currently  limited in their income-earning opportunities abroad, owing to inadequate  education and vocational skills.
Although the FSM has undertaken some efforts aimed at economic policy  reform, it has made limited progress in implementing key tax, public  sector, land, and foreign investment reforms that are needed to improve its  growth prospects. For example:    Tax reform. After several years of national policy dialogue to address a tax  system that economic experts describe as inequitable and inefficient, the  FSM established a tax reform executive steering committee in December  2005. The committee endorsed key elements of tax reform recommended  by experts and the FSM’s Tax Reform Task Force, such as a value-added  tax (VAT), a net profit tax, and a unified tax authority. In April 2007, the  committee endorsed a 3-year implementation plan. However, as of April  2008, legislation required for implementing these measures had not yet  been passed.
Public sector reform. Although the FSM has endorsed public sector reform  aimed at reducing wage and subsidy expenditures, limited progress has  been made in addressing annual fiscal deficits, which amounted to about 5  percent of GDP in 2005 and 2006. Slow progress in implementing public  sector reforms, combined with a lower level of grant assistance,  precipitated fiscal crises in Kosrae and Chuuk. Fiscal adjustment programs  were subsequently created for the two states based on, among other  things, reductions-in-force wage savings and increased state tax rates.  Kosrae completed its adjustment program in 2007, but Chuuk’s  implementation of its program began only recently. Moreover, all FSM  governments continue to conduct a wide array of commercial enterprises  that require subsidies.
Land reform. In attempts to modernize a complex land tenure system, the  FSM has established land registration offices. However, these offices have  lacked a systematic method for registering parcels, instead waiting for  landowners to voluntarily initiate the process. Continued uncertainties  over land ownership and land values create costly disputes, disincentives  for investment, and problems regarding the use of land as an asset.
Foreign investment reform. Economic experts and private sector  representatives describe the overall climate for foreign investment in the  FSM as complex and nontransparent. Despite attempts to streamline the  process, foreign investment regulations remain relatively burdensome,  with reported administrative delays and difficulties in obtaining permits  for foreign workers. Some FSM states also require a certain percentage of  local ownership in foreign investment.
Although the FSM development plan includes objectives for economic  reform, JEMCO did not begin to address the country’s slow progress in  implementing these reforms until August 2006, 2 years into the amended  compact. Further, while JEMCO recently approved some funding to  support FSM efforts at public sector reform, key challenges to improving  private sector growth remain.
section_title: Numerous Factors Hinder Use of Compact Funds to Advance FSM Development Goals
paragraphs: Although the FSM has allocated compact grants to the sectors targeted by  the compact, immediate problems in some sectors persist, and several  factors have hindered the FSM’s use of the funds to meet long-term  development goals. In addition, administrative deficiencies have limited  the FSM’s ability to account for its use of the grants for these long-term  goals. Further, although OIA has monitored early compact activities,  program implementation challenges have hampered its oversight.
In 2004 through 2008, the FSM targeted compact grants largely according  to compact priorities, allocating 35 percent of the funds for education, 27  percent for infrastructure, and 22 percent for health (see attachment V).  However, the FSM has completed only three infrastructure projects, and  more than $67 million of the $82.5 million (approximately 82 percent)  allocated for infrastructure grants in 2004 through 2007 remains unspent.  Lack of progress in this sector is owed to national and state disagreements  over infrastructure priorities, problems associated with the project  management unit, and Chuuk’s inability to secure land leases. Unspent  funds for other sector grants from 2004 to 2007 amounts to an additional  $14.9 million, or around 7 percent of funds allocated (see attachment VI).
Additionally, numerous factors have limited the government’s use of  compact funds to meet long-term development needs. For example:    Lack of government consensus. Interior and State officials reported that  the FSM’s weak federal structure inhibits compact grant implementation.  Because each state has its own constitution and authority over budgetary  policies, the FSM central government, which is represented on JEMCO,  does not control the majority of compact funds and has been unable to  secure agreement from the state governments regarding the use of  compact funds.
Lack of needs analysis. The allocation of FSM grants among its four states  is not needs based and has resulted in significant differences in per capita  funding, creating varying levels of government services across the states.   For example, in 2006, Yap state received approximately $1,963 in  education funding per student, while Chuuk state received $626 per  student. More recently, in 2007, the national government’s share of grant  funding increased from 8.65 percent to 10 percent and the allocation of  compact funds to the four states decreased.
Lack of planning for declining U.S. assistance. A lack of viable plans to  address the annual decrement in compact funding and the elimination of  nonconforming uses of the public-sector capacity building (PSCB) grant  could limit the FSM’s ability to sustain current levels of government  services. JEMCO required the FSM in 2004 to develop a plan to eliminate  funding for the nonconforming uses of the PSCB by 2009. While FSM  officials indicated that they plan to replace the PSCB funds with local  monies, recent tax revenues have largely stagnated and, in 2006, the FSM  requested that the deadline for its elimination of nonconforming funding  be extended to 2011. OIA indicated that the steps the FSM takes toward  overall public sector reform will affect whether it recommends to JEMCO  to approve this request.
Lack of accountability over compact funds. The FSM’s accountability for  its use of compact funds has been limited. Although the timeliness of the  FSM’s single audits has improved—in 2006, only Chuuk and the national  government submitted audit reports after the deadlines—auditors have  continued to find weaknesses with financial statements and lack of  compliance with requirements of major federal programs. For example,  the lack of audited financial statements for several subgrantees led the  auditors to render qualified and disclaimed opinions.
The FSM has failed to consistently monitor day-to-day sector grant  operations or report on progress.
Inadequate authority. The FSM’s first effort to monitor and report on  compact progress was through the Office of Compact Management (OCM),  which lacked the authority and resources to carry out its function. In 2007,  the FSM created a Statistics, Budget and Overseas Development  Assistance and Compact Management (SBOC) office. According to OIA,  the SBOC may have a role in conducting compact coordination, ensuring  sector-by-sector compliance, and providing technical assistance to the  states. Nonetheless, as of April 2008, SBOC had not addressed  performance problems, such as missing reports and data, and had failed to  hold the FSM governments accountable for not meeting JEMCO  resolutions and grant requirements.
Data deficiencies. Although the FSM established performance  measurement indicators, a lack of complete and reliable data prevents the  use of these indicators to assess progress. For example, the FSM provided  the first complete set of education indicators in 2007. However, OIA found  that the data were not consistently reliable for monitoring scholastic  improvements, owing to problems in establishing baselines and collecting  data for all of the indicators. Likewise, determining performance in the  health sector was difficult due to a lack of standardized data collection.
Report problems. The FSM continues to have difficulty in submitting its  required annual report to the U.S. President on time. As of April 2008, the  FSM had not begun work on the 2007 annual report to the U.S. President,  which was due in February 2008, and it submitted the 2006 annual report  10 months late. The quarterly reports have also been regularly incomplete  or inconsistent, preventing their use for monitoring progress. Most  recently, OIA rejected the FSM’s 2007 fourth quarter reports, stating that  most of the submitted forms were completely blank or missing data.
Capacity constraints. The FSM has not allocated available compact  resources to develop the capacity for, and to provide, regular monitoring  of sector grants. As a result, the skills necessary to improve financial and  programmatic reporting are lacking. For example, the FSM’s single audit  reports for 2005 and 2006 showed that the FSM’s ability to account for the  use of compact funds was limited, as shown by weaknesses in its financial  statements and lack of compliance with requirements of major federal  programs. The FSM’s Compact Fiscal Adjustment and Transition Plan, in  August 2006, reiterated that capacity weaknesses continue, especially in  the areas of financial management, economic planning, and statistics.
OIA has carried out various duties as administrator of the amended  compact grants but has not addressed the FSM’s worsening compliance  with compact reporting requirements, and several challenges continue to  hamper its compact oversight. For example, in monitoring the sector  grants, OIA determined that Chuuk, in 2006, and Kosrae, in 2007, had each  misused approximately $1 million in compact funds through the  commingling of compact and general funds. OIA required both states to  repay the misused funds, a requirement met in 2007. However, OIA has  generally failed to hold the FSM accountable for not submitting required  reports, including 2006 and 2007 quarterly performance reports and the  annual report to the U.S. President, and for not meeting requirements  imposed as grant conditions by JEMCO. Additionally, OIA’s oversight  continues to be constrained by time-consuming demands associated with  poor compact implementation. For example, because the FSM state and  national government budgets are not presented in unified format or linked  to performance measures, OIA reports that it has continued to spend an  inordinate amount of time reviewing them for the JEMCO meetings.
section_title: FSM Trust Fund May Not Provide Sustainable Income after Compact Grants End
paragraphs: FSM trust fund balances in 2023 could vary widely owing to market  volatility and choice of investment strategy, preventing trust fund  disbursements in some years. Moreover, the FSM’s ability to supplement  its trust fund balance with additional contributions or other sources of  income is uncertain and entails risks. Further, the FSM’s trust fund  committee has faced challenges in managing the fund’s investment and has  not evaluated the fund’s adequacy as a source of future revenue.
Market volatility and investment strategy could have a considerable  impact on projected trust fund balances in 2023 (see attachment VII). Our  analysis indicates that, under various scenarios, the FSM’s trust fund could  fall short of the maximum allowed disbursement level—an amount equal  to the inflation-adjusted compact grants in 2023—after compact grants  end, with the probability of shortfalls increasing over time (see attachment  VIII). For example, under a moderate investment strategy, the fund’s  income is about 30 percent likely to fall short of the maximum distribution  by 2031; however, this probability rises to almost 70 percent by 2050.  Additionally, our analysis indicates a positive probability that the fund will  yield no disbursement in some years; under a moderate investment  strategy, the probability is around 19 percent by 2050.
FSM trust fund income could be supplemented by sources such as other  donors, increased taxes, and securitization. However, this potential is  uncertain.
Other donors. The trust fund agreement allows the FSM to seek funding  from other donors; however, the FSM has not yet received other  contributions.
Increased taxes. The FSM’s limited development prospects constrain its  ability to raise tax revenues to supplement the fund’s income.
Securitization. Securitization—issuing bonds against future U.S.  contributions—could increase the fund’s earning potential by raising its  balances through bond sales. However, securitization could also lead to  lower balances and reduced fund income if interest owed on the bonds  exceeds investment returns. In October, 2007, the committee contracted  for a study of securitization.
The FSM trust fund committee has experienced management challenges in  establishing the trust fund to maximize earnings and has not yet evaluated  the fund’s adequacy as a source of future revenue. Contributions to the  trust fund were initially placed in a low-interest savings account and were  not invested until 22 months after the initial contribution. The months  when the fund remained in a low-interest account prior to investment  likely reduced its potential investment earnings significantly; we estimate  this loss at $720,000 per month, after taking into account stock market  investment fees. As we reported in June 2007, contractual delays and  committee processes for reaching consensus and obtaining administrative  support contributed to the time taken to establish and invest funds. The  committee has since hired an Executive Administrator in September 2007,  and some steps were taken to improve committee processes; however, the  Administrator reports that communication and administrative delays  remain. Also, despite the likely impact of market volatility and investment  strategy, the trust fund committee’s reports have not yet assessed the  fund’s potential adequacy as a source of revenue for meeting the FSM’s  long-term economic goals.
section_title: Concluding Remarks and Prior Recommendations
paragraphs: Since enactment of the amended compact, the U.S. and FSM governments  have made efforts to meet new requirements for implementation,  performance measurement, and oversight. However, after 5 years—one  quarter of the amended compact’s duration—the FSM faces significant  challenges in working toward the compact goals of economic  advancement and budgetary self-reliance. The FSM economy shows  continued dependence on government spending of foreign assistance.  However, despite the budgetary impact of declining annual grant  assistance, the FSM has made little progress in implementing key reforms  needed to improve tax income or increase private sector investment  opportunities. The FSM has also been unable to utilize more than $67  million in infrastructure and almost $15 million in other sector grant  monies. Moreover, persistent deficiencies in needs assessment, long-term  planning, and financial accountability continue to hinder the U.S. and FSM  governments and JEMCO from ensuring effective implementation of those  grants that have been spent. Although OIA has carried out various duties  as administrator of compact grants, U.S. and FSM monitoring of grant  operations remains deficient owing to continued problems with oversight  authority in the FSM, consistently poor data and reporting, and  unaddressed capacity constraints. Further, the FSM trust fund committee  has yet to assess the potential status of the trust fund as an ongoing source  of revenue after compact grants end in 2023. Because the trust fund’s  earnings are intended as a main source of U.S. assistance to the FSM after  compact grants end, the fund’s potential inadequacy as a source of  sustainable income in some years could impact the FSM’s ability to  provide future government services.
To maximize the benefits of compact assistance, our prior reports  include recommendations that the Secretary of the Interior direct the  Deputy Assistant Secretary for Insular Affairs, as chair of the FSM  management and trust fund committees, to take a number of actions,  including the following:    ensure that JEMCO address the lack of FSM progress in implementing  reforms to increase investment and tax income;    coordinate with other U.S. agencies on JEMCO to work with the FSM to  establish plans to minimize the impact of declining assistance;    coordinate with other U.S. agencies on JEMCO to work with the FSM to  fully develop a reliable mechanism for measuring progress toward  compact goals; and    ensure the FSM trust fund committee’s assessment and timely reporting of  the fund’s likely status as a source of revenue after 2023.  Interior generally concurred with our recommendations and has taken  actions in response to several of them. However, unless the challenges we  identified are addressed, the U.S. and FSM are unlikely to meet compact  goals of the FSM’s economic advancement and budgetary self-reliance.
Mr. Chairman and members of the subcommittee, this completes my  prepared statement. I would be happy to respond to any questions you  may have at this time.
section_title: Contacts and Acknowledgements
paragraphs: For future contacts regarding this testimony, please call David Gootnick at  (202) 512-3149 or gootnickd@gao.gov. Individuals making key  contributions to this testimony included Emil Friberg, Jr. (Assistant  Director), Ming Chen, Julie Hirshen, Reid Lowe, Mary Moutsos, Kendall  Schaefer, and Eddie Uyekawa.
section_title: Attachment I: Related GAO Products
paragraphs: Compacts of Free Association: Trust Funds for Micronesia and the  Marshall Islands May Not Provide Sustainable Income, GAO-07-513  (Washington, D.C.: July 15, 2007).
Compact of Free Association: Micronesia and the Marshall Island’s Use of  Sector Grants, GAO-07-514R (Washington, D.C.: May 25, 2007).
Compacts of Free Association: Micronesia and the Marshall Islands Face  Challenges in Planning for Sustainability, Measuring Progress, and  Ensuring Accountability, GAO-07-163 (Washington, D.C.: Dec. 15, 2006).
Compacts of Free Association: Development Prospects Remain Limited  for the Micronesia and the Marshall Islands, GAO-06-590 (Washington,  D.C.: June 27, 2006).
Compacts of Free Association: Implementation of New Funding and  Accountability Requirements is Well Under Way, but Planning Challenges  Remain, GAO-05-633 (Washington, D.C.: July 11, 2005).
Compact of Free Association: Single Audits Demonstrate Accountability  Problems over Compact Funds, GAO-04-7 (Washington, D.C.: Oct. 7, 2003).
Compact of Free Association: An Assessment of the Amended Compacts  and Related Agreements, GAO-03-988T (Washington, D.C.: June 18, 2003).
Foreign Assistance: Effectiveness and Accountability Problems Common  in U.S. Programs to Assist Two Micronesian Nations, GAO-02-70  (Washington, D.C.: Jan. 22, 2002.
Foreign Relations: Migration From Micronesian Nations Has Had  Significant Impact on Guam, Hawaii, and the Commonwealth of the  Northern Mariana Islands, GAO-02-40 (Washington, D.C.: Oct. 5, 2001).
Foreign Assistance: U.S. funds to Two Micronesian Nations Had Little  Impact on Economic Development, GAO/NSIAD-00-216 (Washington, D.C.:  Sept. 22, 2000).
section_title: Attachment II: U.S. Assistance to the FSM under the Amended Compact, 2004-2023
paragraphs: (Dollars in millions)
FSM grants (Section 211)  FSM trust fund (Section 215)
The annual grant amounts include $200,000 to be provided directly by the Secretary of the Interior to  the Department of Homeland Security, Federal Emergency Management Agency, for disaster and  emergency assistance purposes. The grant amounts do not include the annual audit grant, capped at  $500,000.
These dollar amounts shall be adjusted each fiscal year for inflation by the percentage that equals  two-thirds of the percentage change in the U.S. gross domestic product implicit price deflator, or 5  percent, whichever is less in any one year, using the beginning of 2004 as a base. Grant funding can  be fully adjusted for inflation after 2014, under certain U.S. inflation conditions.
section_title: Attachment III: Estimated FSM Per Capita Compact Grant Assistance, Fiscal Years 1987- 2023
section_title: Attachment IV: Amended Compact Implementation Framework
subsections: section_title: Annual sector grant budget
paragraphs: FSM propo grnt budget for ech ector tht inclde proviion    –  Expenditre, performnce go, nd pecific performnce indictor  –  Brekdown of peronnel expenditre nd other co  –  Informtion on U.S. federl progr nd other donor  United Ste evuate the propoed ector grnt budget for:   –  Contency with fnding requirement in the compct nd relted –  Identify poitive event thccelerte  performnce otcome nd prolem  encontered nd their impct on grnt  ctivitie nd performnce measurereport to used to: – Monitor generopertion to ensure complince with  grnt condition  Submit nnual report to the U.S.
section_title: Joint management and accountability committee
section_title: Attachment V: FSM Sector Grant Allocations, Fiscal Years 2004-2008
section_title: Attachment VII: Projections of FSM Account Balance with Three Possible Investment Strategies
paragraphs: U.S. dollar (in illion)
U.S. dollar (in illion)
section_title: Attachment VIII: Probability of FSM Trust Fund Income Not Reaching the Maximum Disbursement Levels Allowed, Fiscal Years 2024-2050
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