U.S. insular areas receive hundreds of millions of dollars in federal grants from a variety of federal agencies, including the Departments of Agriculture, Education, Health and Human Services, Homeland Security, the Interior, Labor, and Transportation. The Secretary of the Interior has administrative responsibility over the insular areas for all matters that do not fall within the program responsibility of another federal department or agency. OIA, established in 1995, is responsible for carrying out the Secretary’s responsibilities for U.S. insular areas. OIA’s mission is to promote the self-sufficiency of the insular areas by providing financial and technical assistance, encouraging private sector economic development, promoting sound financial management practices in the insular governments, and increasing federal responsiveness to the unique needs of the island communities. Much of the assistance that OIA administers to insular areas is in the form of what it considers mandatory assistance, including compact assistance, permanent payments to U.S. territories, American Samoa operations funding, and capital improvement project grants. OIA also administers discretionary assistance through, for example, technical assistance grants and operations and maintenance improvement program grants. The administration and management of OIA grants is guided by OIA’s Financial Assistance Manual. OIA grants other than compact assistance are subject to Interior’s Grants Management Common Rule, relevant Office of Management and Budget (OMB) circulars, and specific terms and conditions that OIA outlines in each grant agreement, such as semiannual narrative and financial reporting and grant expiration dates. Within OIA, two divisions are largely responsible for grant administration and management—the Technical Assistance Division and the Budget and Grants Management Division. The Technical Assistance Division, which administers general technical assistance grants in addition to several other types of technical assistance, has a director and two grant managers. The Budget and Grants Management Division, which covers capital improvement project and operations and maintenance improvement program grants, has a director and three grant managers. A third OIA division—the Policy and Liaison Division—also provides some staff for grant-related tasks, including staff that focus on OIA’s accountability and audit responsibilities. The majority of OIA’s budget is directed to compact assistance and permanent fiscal payments (see table 1). About 2 percent of OIA’s budget is dedicated to administrative costs, leaving less than 16 percent for noncompact grants and technical assistance. Among the random sample of 173 OIA grant project files that we reviewed in our March 2010 report, we identified 49 OIA technical assistance grant projects from a variety of technical assistance grant types (see table 2). The 49 technical assistance grant projects that we reviewed in our March 2010 report, were geographically dispersed among the insular areas and the State of Hawaii (see table 3). On the basis of our review of grant files from a random sample of grant projects, we determined that the long-standing internal control weaknesses that we, Interior’s Office of Inspector General, and others, identified between 2000 and 2009 still exist. We estimated that 39 percent of the 1,771 grant projects in OIA’s grant management database demonstrate at least one internal control weakness that may increase the projects’ susceptibility to mismanagement. Of the 49 technical assistance grant projects in our sample, 47 grant projects demonstrated one or more of the internal control weaknesses that we assessed, which is more than double our estimated 39 percent occurrence rate for OIA grants as a whole. The eight internal control weaknesses that we assessed can be grouped into three categories based on the entity responsible for the activities: grant recipient activities, OIA grant management activities, or joint activities between grant recipients and OIA. Table 4 shows (1) how often we estimated each internal control weakness would occur within the universe of OIA grants based on our random sample, and (2) specific data on the 49 technical assistance grants included in our sample. The most prevalent weaknesses for the 49 technical assistance grant projects were insufficient reporting and record-keeping discrepancies. Table 5 shows how many internal control weaknesses were demonstrated by the 49 technical assistance grant projects in our sample. For example, one general technical assistance grant project that we reviewed in detail—the 2005 grant for the USVI Household Income and Expenditures Survey (HIES) project—had 4 out of 5 applicable internal control weaknesses. In 2005, OIA awarded a general technical assistance grant to the Eastern Caribbean Center (ECC) at the University of the Virgin Islands for the purpose of collecting data to update important economic and demographic indicators for the territory. Because of funding constraints, OIA was not able to award the entire amount requested at that time. In addition, OIA later reduced its financial support of the project after data collection was underway, thereby reducing the scope of data collection efforts. The Director of the ECC reported that OIA’s decision to reduce available funding after data collection had begun was disastrous to the statistical integrity of the survey. In reviewing this grant project, we found the following four internal control weaknesses, (1) failure to submit the required status report in full and on time, (2) failure to submit the required final reports on time, (3) expected or actual completion dates that occurred after grant expiration, and (4) information in OIA’s grant management database that did not match information in the grant file. These weaknesses and other problems affected project completion in several ways, including the loss of additional funding that OIA later awarded. In 2007, OIA granted additional funds for the HIES project to complete tabulation of the data that had been collected. However, because so much time had passed since the initial data collection effort, the Director of the ECC stated that it was not possible to complete the data collection as originally planned. Due to the lack of activity with the grant and the fact that no narrative status reports were submitted, OIA deobligated these additional grant funds in their entirety in February 2009. The final HIES report also was not completed until September 2009, more than 4 years after the initial grant was awarded. OIA has taken several important steps to improve grant project implementation and management but faces several obstacles in its efforts to compel insular areas to complete their projects in a timely and effective manner. Over the past 5 years, OIA has taken the following steps to improve grant project implementation and management: Competitive allocation system. In fiscal year 2005, OIA implemented a new competitive allocation system for the $27.7 million in capital improvement project grants that it administers to the insular areas. This system provides incentives for financial management improvements and project completion by tying a portion of each insular area’s annual allocation to the insular governments’ efforts in these areas—such as their efforts to submit financial and status reports on time. Through this system, OIA scores each insular area against a set of performance-based criteria and increases allocations to those insular areas with higher scores, thereby lowering allocations to insular areas with lower scores. Grant expiration dates. Beginning in 2005, to encourage expeditious use of funds, OIA established 5-year expiration dates in the terms and conditions of new capital improvement project grants. Beginning in 2008, OIA also notified insular area officials of expiration dates for grant projects that had been ongoing for more than 5 years with no or limited progress. OIA officials explained that while the expiration dates have not yet pushed all of the insular areas to complete projects, they have encouraged some areas to do so. The officials also stated that the expiration dates have helped OIA grant managers administer and manage grants—which they believe has improved accountability—and have been useful for insular area grantees whose agencies have high staff turnover and were unaware of the status of older grants. Technical assistance projects have shorter grant terms than capital improvement projects, with expiration dates within 1 to 2 years; we found that OIA extended the grant expiration date at least once for 18 of the 49 technical assistance grant projects in our sample. Actions to improve insular area grant management continuity. OIA has also taken steps to help with the continuity of grant administration at the insular level. For example, in March 2008, OIA awarded a $770,000 grant for capital improvement project administration in the CNMI, which provided funding for positions in the local central grant management office in that insular area. According to the grant manager for CNMI capital improvement projects, the grant was given to help ensure that the central grant management office had the staff necessary to help move implementation of projects forward. Despite OIA’s efforts, some insular areas are still not completing their projects in a timely and effective manner, and OIA faces the following key obstacles in compelling them to do so: Lack of sanctions for delayed or inefficient projects. Current OIA grant procedures provide few sanctions for delayed or inefficient projects. For example, although OIA established grant expiration dates, they have little practical effect. In theory, a grant expiration date encourages timely completion of a project because if a project is not completed on time, the funds are taken away from the recipient. However, if an insular area’s OIA grant funds expire, while the funds do not remain immediately available for the project, the insular area does not lose the funds because OIA treats its capital improvement project grants as mandatory funding with “no-year funds,” based on the agency’s interpretation of relevant laws. Thus, after a grant expires, OIA deobligates the funds and they are returned to the insular area’s capital improvement project account to be reobligated for the same or other projects. Recently, OIA has taken steps to identify possible solutions and actions that could help provide effective sanctions for insular areas that do not efficiently complete projects and expend funds. In doing so, OIA has faced uncertainty regarding the authorities it has to change its current policies and practices, which are guided by many special agreements, laws, and regulations. OIA resource constraints. OIA officials report that resource constraints impede effective project completion and proactive monitoring and oversight.