The March 24, 1989, Exxon Valdez oil spill in Alaska’s Prince William Sound was the largest oil spill in U.S. history, contaminating about 1,500 miles of Alaska’s coastline. A map depicting the area affected is included as appendix I. Under a civil settlement agreement approved in the U.S. District Court for the District of Alaska in October 1991, Exxon agreed to pay civil claims totaling $900 million to the federal government and the state of Alaska by September 1, 2001. Under a criminal settlement reached at the same time, Exxon agreed to pay a $25 million fine and to pay the federal government and the state of Alaska each $50 million as remedial and compensatory payments to be used exclusively for restoring natural resources damaged by the spill or for research on the prevention or amelioration of future oil spills. Administration of the civil settlement is carried out under a memorandum of agreement between the federal government and the state of Alaska. The agreement established a six -member federal/state trusteeship, which later became the Trustee Council, to review and approve expenditures of civil settlement funds for restoration projects. The three federal trustees are the Secretary of the Interior; the Secretary of Agriculture; and the Administrator of the National Oceanic and Atmospheric Administration, Department of Commerce, or their representatives. The three state trustees are the Commissioner of the State Department of Environmental Conservation, the Commissioner of the State Department of Fish and Game, and the Attorney General for the state of Alaska, or their representatives. A staff headed by an executive director conducts day-to-day activities. Under the agreement, Exxon’s civil settlement payments flow to three areas. The first two are to reimburse federal and state agencies for past spill-related work and a credit to Exxon for the reimbursement of agreed-upon cleanup performed following the spill. These reimbursements go directly to the United States and Alaska, and the credit to Exxon was treated as a reduction in one of Exxon’s payments. The reimbursements and credit were called for in the civil settlement agreement, and therefore the council had no control over these payments. The remainder of Exxon’s payments are deposited into a joint federal/state trust fund under the jurisdiction of the U.S. district court system. This trust fund is currently an interest-bearing account within the Court Registry Investment System (CRIS), a system utilized for U.S. district court settlements. To release any of these funds, the federal and state trustees must petition the court to make the funds available for the purposes and activities specified in the settlement agreement and the memorandum of agreement. Federal agencies in Alaska and Alaska state agencies responsible for the management of the land and species within the spill area take the lead in carrying out restoration activities. For restoration activities that are to be carried out by federal agencies, funds are transferred to an interest-bearing account of the Department of the Interior, where they are transferred to specific agency accounts as needed. For restoration activities to be carried out by the state, funds are deposited in a state trust fund, from which they are drawn directly by state agencies following an appropriation from the state legislature. Figure 1 shows the flow of Exxon settlement payments and fund distributions. Decisions about the types of restoration activities to fund with civil settlement payments are governed by the agreement and a Trustee Council-developed restoration plan, which was the subject of substantial public comment. The plan calls for public participation in all council decisions and identifies five categories of restoration activities. (See table 1.) The first three categories primarily involve activities to help restore damaged resources to their pre-spill condition. The two remaining categories cover the council’s general administration and the provision of funds once Exxon’s payments end. The restoration plan emphasizes the need for studies to adhere to high scientific standards and address any injured resources and services in the spill area, with emphasis on those that have not yet recovered. The plan also states that government agencies will be funded only for restoration projects that the agencies would not have conducted had the spill not occurred, or in other words, for projects that go beyond normal agency management activities. In August 1993, we reported on the use of Exxon Valdez oil spill settlement funds and raised a number of issues that needed attention to ensure that the funds were expended as intended. Among other things, we recommended completing restoration and land acquisition plans to provide direction for restoration planning in the oil spill area, increasing open competition for restoration projects to encourage nongovernmental participation, and improving internal controls to better track expenditures and management controls to ensure that expenditure decisions were reached objectively. By July 6, 1995, the council had taken steps to address all of our recommendations. As of September 30, 1997, Exxon had made seven annual settlement payments totaling $620 million. To complete its commitment, Exxon will need to make four additional annual payments totaling $280 million by September 2001. Most of the money disbursed through September 30, 1997, was used to (1) reimburse federal and state agencies for cleaning up the oil spill and assessing oil spill damage; (2) reimburse Exxon through a credit for cleanup work; (3) acquire habitat to protect resources damaged by the spill; and (4) fund monitoring, research, and general restoration projects. Exxon’s civil payments during the first 3 years of the period were for $90 million, $150 million, and $100 million; annual payments since then have been for $70 million each. The remaining four payments are also scheduled to be $70 million each. As of September 30, 1997, $198 million, or 32 percent, of the amount paid by Exxon had been used to reimburse federal and state agencies for oil spill cleanup or damage assessment or to credit Exxon for similar work the company had done itself. Another $187 million, or 30 percent, went to acquire habitat or purchase easements to restore resources damaged by the spill. The remaining 38 percent went to monitoring, research, and general restoration projects; went to administration; was deposited in the future restoration reserve; or represents funds not yet allocated as of September 30, 1997. Table 2 shows the distribution of the settlement payments. The Trustee Council has not finalized decisions on the uses of the four remaining payments. According to the council’s Executive Director, however, it has estimated how these funds are likely to be used, based on past experience, ongoing negotiations and offers for additional land acquisitions, and annual goals and objectives. The council expects that about $129 million of the $280 million, or slightly less than half, will likely be targeted for habitat acquisition. Of the remaining $151 million not designated for habitat acquisition, about $65 million will likely be used for monitoring and research and general restoration projects, and the rest will be used for future reimbursements to the state, administration and public information, and the future restoration reserve. Table 3 shows the estimated distribution of Exxon’s final four payments. Of the $620 million in payments, $481 million had been distributed as of September 30, 1997, to federal agencies and Alaska for either reimbursements for spill-related expenses; council-approved projects; or science management, public information, and other council administrative expenses. In addition, $40 million was applied as a credit to Exxon for cleanup expenses. Of the $481 million distributed, federal agencies received $222 million, and the state of Alaska received $259 million. These distributions can be further divided by activity type as follows: Reimbursements for spill-related expenses. As shown in table 2, a total of $158 million went to the federal government and Alaska to reimburse agencies for costs incurred during oil spill cleanup and damage assessment efforts. The federal government received $69 million, or 44 percent, and Alaska received $89 million, or 56 percent. An additional $40 million represents a credit to Exxon for cleanup expenses. This credit was applied to one of the Exxon payments. Council-approved projects. The Trustee Council approved the disbursement of $323 million for the restoration and administrative activities called for in the memorandum of agreement and restoration plan. Of this amount, the federal government received $153 million, or 47 percent, and Alaska received $170 million, or 53 percent. Appendix II provides a summary of the civil settlement funds received by federal agencies and Alaska through September 30, 1997. Balance. About $99 million of Exxon’s payments through September 30, 1997, had not been disbursed. This amount included four annual deposits of $12 million for a total of $48 million to the future restoration reserve savings account and a fund balance of $51 million that had not been allocated to any specific activity as of September 30, 1997. For the most part, the approved activities to help restore injured resources funded by the Trustee Council—habitat acquisition, general restoration, and monitoring and research—appear consistent with the agreement and the policies in the restoration plan. However, a few research projects that were approved may not be consistent with one of two policies contained in the restoration plan: (1) Projects should be clearly linked to the oil spill, and (2) approved projects should not be ones that would be funded under normal agency mission activities. The council has attempted to clarify its policies in an effort to eliminate funding of projects with questionable links to the oil spill. A few projects with questionable links to the oil spill or normal agency mission activities, however, continue to be funded. We found that nearly all disbursements by the Trustee Council were consistent with the memorandum of agreement and policies set forth in the restoration plan. The memorandum of agreement states that funds be used for restoring, replacing, rehabilitating, enhancing, or acquiring the equivalent of the natural resources damaged and the reduced or lost services provided by such resources; be spent on natural resources in Alaska; and be spent as a result of the oil spill. The restoration plan provides the policy guidance in implementing the memorandum of agreement as well as guidance on funding projects that may be normal agency management activities.