Since the FSM and the RMI became sovereign nations, the U.S. relationship with the two countries has been defined by the original Compact of Free Association and the subsequent amended Compacts of Free Association. In 1986, the United States, the FSM and the RMI entered into the Compact of Free Association. This compact represented a new phase of the unique and special relationship that has existed between the United States and these island areas since World War II. The compact provided a framework for the United States to work toward achieving its three main goals: (1) to secure self-government for the FSM and the RMI, (2) to ensure certain national security rights for all of the parties, and (3) to assist the FSM and the RMI in their efforts to advance economic development and self- sufficiency. The first goal was met; the FSM and the RMI are independent nations and are members of international organizations such as the United Nations. The second goal was also achieved. At the time that the compact was negotiated, the United States was concerned about the use of the islands of the FSM and the RMI as “springboards for aggression” against the United States, as they had been used in World War II, and the Cold War incarnation of this threat—the Soviet Union. The compact and its related agreements established several key defense rights for all three countries. For example, the compact obligates the United States to defend the FSM and the RMI against an attack, or the threat of attack, in the same way it would defend its own citizens. Further, through a compact-related agreement, the United States secured access to military facilities on Kwajalein Atoll in the RMI through 2016. The third goal of the compact—advancing economic development and self- sufficiency for both countries—was to be accomplished primarily through U.S. direct financial payments to the FSM and the RMI. For 1987 through 2003, U.S. assistance to the FSM and the RMI to support economic development was estimated, on the basis of Interior data, to be about $2.1 billion. We found previously that many compact-funded projects in the FSM and the RMI experienced problems because of poor planning and management, inadequate construction and maintenance, or misuse of funds. Economic self-sufficiency had advanced but had not been achieved; although total U.S. assistance as a percentage of total government revenue fell in both countries, the two nations remained dependent on U.S. funds. U.S. direct assistance maintained standards of living that were higher than could be achieved in the absence of U.S. support. Another aspect of the special relationship between the FSM and the RMI and the United States involves the unique immigration rights that the compact grants. Under the original compact, citizens of both nations were allowed to live and work in the United States as “nonimmigrants” and could stay for long periods of time, with few restrictions. Further, the compact exempted FSM and RMI citizens from meeting U.S. passport, visa, and labor certification requirements when entering the United States. In recognition of the potential adverse impacts that Hawaii and nearby U.S. commonwealths and territories could face as a result of an influx of FSM and RMI citizens, the Congress authorized compact impact payments to address the financial impact of these nonimmigrants on Guam, Hawaii, and the Commonwealth of the Northern Mariana Islands (CNMI). In the fall of 1999, the United States, represented by the Department of State, and the two Pacific island nations began negotiating economic assistance and defense provisions of the compact that were due to expire in 2003. The negotiations also addressed immigration issues. Separate compacts were completed for the RMI and the FSM and went into effect on May 1, 2004, and June 25, 2004, respectively. Prior to formal implementation of the amended compacts, the United States provided funding via a continuing resolution and the Department of the Interior’s fiscal year 2004 appropriation legislation. According to the Department of State, the aims of the amended compacts are to (1) continue economic assistance to advance self-reliance, while improving accountability and effectiveness; (2) continue the defense relationship, including a 50-year lease extension (beyond 2016) of U.S. military access to Kwajalein Atoll in the RMI; (3) strengthen immigration provisions; and (4) provide assistance to lessen the impact of Micronesian migration on Guam, Hawaii, and the CNMI. The amended compacts’ second objective, continuing the U.S.-RMI defense relationship, has been addressed, as expiring defense provisions of the compact have been renewed and U.S. access to Kwajalein Atoll has been extended. However, one notable difficulty remains regarding this objective; although the U.S. government negotiated an agreement with the RMI government that allows for U.S. access to Kwajalein Atoll until 2086, the RMI government has not reached an agreement with Kwajalein Atoll landowners (who own the land under use by the U.S. government) that allows for this long-term access. The U.S. government is not involved in efforts to negotiate such an agreement, and neither the RMI government nor the Kwajalein Atoll landowners are actively pursuing resolution of this issue. The third and fourth objectives have also been addressed. Compact immigration provisions have been strengthened by, for example, requiring passports from FSM and RMI citizens entering the United States and clarifying requirements for bringing FSM and RMI children into the United States for adoption. Further, the amended compacts’ enabling legislation appropriates specific annual nonimmigrant impact compensation of $30 million for Guam, Hawaii, and the CNMI for fiscal years 2004 through 2023, with the distribution of funding between the locations based on periodic surveys identifying the number of FSM and RMI nonimmigrants in each location. The U.S. government intends to achieve its first objective—continuing economic assistance to advance self-reliance, while improving accountability and effectiveness under the amended compacts—by annually providing direct financial assistance, in the form of grant agreements, to the FSM and the RMI, for 20 years (fiscal years 2004 through 2023) (see tables 1 and 2). Grant assistance to the FSM and RMI is targeted to six specific sectors—education, health, public infrastructure, the environment, public sector capacity building, and private sector development—although the priority sectors are education and health. RMI grants must also target some funding to Ebeye and other Marshallese communities within Kwajalein Atoll. The U.S. Congress, in approving the amended compacts, also authorized a supplemental education grant for each country. The Congress determined that rather than remaining eligible for appropriations under certain education and labor program assistance, such as Head Start and Job Corps, the FSM and the RMI would instead receive supplemental direct grant assistance. In addition to providing sector grant funds, the amended compacts provide for the establishment of trust funds for both countries. While providing the direct grant assistance, the U.S. government will also contribute to the trust funds for both countries, and the FSM and the RMI will replace the grant assistance with trust fund earnings beginning in 2024. In addition, the FSM and the RMI must each make one-time contributions to its trust fund of $30 million, and other donors can contribute to the funds as well. Except for the fixed amounts set aside as audit grants, the amounts listed in tables 1 and 2 will be partially adjusted for inflation, with fiscal year 2004 as the base year. Grant funding can be fully adjusted for inflation after fiscal year 2014 under certain economic conditions. Including estimated inflation adjustments, total U.S. assistance to both countries combined is projected at more than $3.5 billion over the 20-year assistance period. The amended compacts and their subsidiary fiscal procedures agreements (FPA) also establish numerous new accountability requirements. For example, under the amended compacts, the United States established a Joint Economic Management Committee (JEMCO) with the FSM and a Joint Economic Management and Financial Accountability Committee (JEMFAC) with the RMI to strengthen management and accountability and to promote the effective use of the compact funding. Each committee comprises five members, three from the United States and the other two from the FSM for the JEMCO and from the RMI for the JEMFAC. The Departments of the Interior, State, and HHS supply the three U.S. representatives, with the Department of the Interior representative serving as Chairman. The FSM and RMI governments select their respective representatives. The amended compacts require the committees to meet at least once annually, no later than 30 days before the beginning of the fiscal year, to review the budgeting and development plans of each of the governments, approve grant allocations and performance objectives, attach special conditions to any or all annual grant awards to improve program performance and fiscal accountability, and evaluate progress made under the amended compacts. JEMCO and JEMFAC render decisions by majority vote, except decisions regarding the division of RMI grants, which are made by consensus. Budget consultations with each country are also required prior to JEMCO and JEMFAC meetings to ensure that proposed compact budgets estimate sector grant requirements for the upcoming fiscal year. In addition, trust fund committees are required to address issues associated with the operations and investments of the FSM and RMI trust funds. The trust fund committee for each country is comprised of representatives from the United States and the FSM or the RMI, and other contributors may also join the committees.