    Foreign Assistance: Effectiveness and Accountability Problems
    Common in U.S. Programs to Assist Two Micronesian Nations
    (22-JAN-02, GAO-02-70).

    The domestic programs extended by the United States to the
    Federated States of Micronesia (FSM) and the Republic of the
    Marshall Islands (RMI) were used to provide a wide range of
    critical services, such as health care, education,
    telecommunications, and job training, but in most cases local
    conditions have impaired their effectiveness. GAO found that
    local conditions limited the effectiveness of nine of the 13
    programs in both countries. GAO found that these programs,
    originally designed for the United States, faced a variety of
    problems operating in developing island nations because of
    differing geographic, economic, and social conditions. The two
    nations' administration of the 13 programs GAO reviewed generally
    did not ensure financial accountability. Nine of the 13 programs
    GAO reviewed experienced accountability problems, including five
    that experienced instances of theft or misuse of program funds.
    The two nations lacked the administrative capacity necessary to
    meet the complex accountability requirements of federal programs,
    and federal program managers did not provide the necessary
    training. Just as the two nations were unable to ensure financial
    accountability for their program administration, so too was U.S.
    government oversight unable to ensure financial accountability.
    Although some federal departments attempted to provide oversight,
    even these departments could not ensure effective accountability
    because of the travel cost, distance, and time involved, and
    because of the relatively small size of the programs in the
    region.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-02-70
        ACCNO:   A02690
      TITLE:     Foreign Assistance: Effectiveness and Accountability
    Problems Common in U.S. Programs to Assist Two Micronesian
    Nations
         DATE:   01/22/2002
      SUBJECT:   Accountability
    	     Economic development
    	     Foreign economic assistance
    	     Foreign governments
    	     International agreements
    	     International relations
    	     Reporting requirements
    	     Economically depressed areas
    	     Compact of Free Association
    	     Federal Disaster Assistance Program
    	     Freely Associated States Educational
    	     Grant

    	     Head Start Program
    	     HHS Maternal and Child Health Program
    	     Job Training Partnership Act Program
    	     Marshall Islands
    	     Maternal and Child Health Block Grant
    	     Micronesia
    	     Pell Grant
    	     Pohnpei Head Start Program
    	     Special Education Program for Pacific
    	     Island Entities

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    GAO-02-70

    A

    Report to Congressional Requesters

    January 2002 FOREIGN ASSISTANCE Effectiveness and Accountability Problems
    Common in U. S. Programs to Assist Two Micronesian Nations

    GAO- 02- 70

    Letter 1 Results in Brief 3 Background 5 Federal Programs Provided Important
    Services, but

    Effectiveness Was Generally Hindered by Many Factors 11 Most Programs Have
    Accountability Problems 44 Federal Administration Has Not Ensured Financial

    Accountability 54 Conclusions 59 Recommendation for Executive Action 60
    Agency Comments 61

    Appendixes

    Appendix I: Objectives, Scope, and Methodology 64

    Appendix II: GAO Assessment of 13 Programs in the Federated States of
    Micronesia and the Republic of the Marshall Islands 66

    Appendix III: Comments from the Department of the Interior 88 GAO Comments
    90

    Appendix IV: Comments from the Department of State 91 GAO Comments 94

    Appendix V: Comments from the Department of Health and Human Services 95 GAO
    Comments 100

    Appendix VI: Comments from the Government of the Federated States of
    Micronesia 102 GAO Comments 109

    Appendix VII: Comments from the Government of the Republic of the Marshall
    Islands 113 GAO Comments 123

    Appendix VIII: GAO Contact and Staff Acknowledgments 125 GAO Contact 125
    Acknowledgments 125

    Related GAO Products 126 Tables Table 1: Overview of 13 Programs Reviewed by
    GAO 13

    Table 2: The Head Start Program 66 Table 3: The Special Education Program
    for Pacific Island Entities

    (SEPPIE) 68 Table 4: The Freely Associated States Educational Grant (FASEG)
    Program 70

    Table 5: The Pell Grants Program 72 Table 6: The Job Training Partnership
    Act (JTPA) Program 73 Table 7: The Maternal and Child Health (MCH) Block
    Grants Program 75

    Table 8: The U. S. Department of Agriculture?s (USDA) Rural Housing Service
    (RHS) Housing Loan Program 76 Table 9: U. S. Department of Agriculture?s
    (USDA) Rural Utilities

    Service (RUS) Telecommunications Loans Program 79 Table 10: The U. S.
    Department of Agriculture?s (USDA) Rural Utilities Service (RUS) Electrical
    Loans Program 81

    Table 11: The Federal Emergency Management Agency (FEMA) Program 83 Table
    12: The U. S. Postal Service (USPS) Program 84 Table 13: The Federal
    Aviation Administration (FAA) Program 86 Table 14: The National Weather
    Service (NWS) Program 87

    Figures Figure 1: Location and Map of the Federated States of Micronesia and
    the Republic of the Marshall Islands 7

    Figure 2: SEPPIE, Child Find Poster for Special Education, Pohnpei, FSM 18
    Figure 3: FASEG, Marshallese- English Story Book and Marshallese Phonics
    Book, Developed by and Published with FASEG

    Support, Majuro, RMI 19 Figure 4: Pell Grant- Assisted Students in Class,
    College of the Marshall Islands, Majuro, RMI 20

    Figure 5: JTPA Carpentry Class, Majuro, RMI 21 Figure 6: Maternal and Child
    Health Laboratory in Hospital,

    Majuro, RMI 22 Figure 7: FEMA Assistance (Bridge Replacement) in Pohnpei,

    FSM 23 Figure 8: FEMA Drought Assistance (Home Water Catchment

    Container), Kosrae, FSM 24 Figure 9: Head Start Center, Science Area [shows
    lack of space],

    Majuro, RMI 27 Figure 10: Head Start Playground [shows inadequate
    playground],

    Majuro, RMI 28

    Figure 11: Mail Awaiting Sorting and Placement in Post Office Boxes at the
    Pohnpei Post Office, FSM 34 Figure 12: FSM Telecommunications Corporation
    Building Exterior,

    Pohnpei, FSM 36 Figure 13: Rural Utilities Service Electric Loan: New
    Electric Power

    Facility, Marshalls Energy Corporation, Majuro, RMI 37 Figure 14: Aviation
    Services: FAA- Provided Electrical Power

    Generator in Honolulu, Hawaii, Headed for the FSM and the RMI 39 Figure 15:
    Aviation Services: FAA- Provided Equipment in Honolulu, Hawaii, Headed for
    the FSM and the RMI 40

    Figure 16: Weather Service: Sign Showing Close Collaboration between NWS and
    Pohnpei Weather Service Office in Pohnpei, FSM 41

    Figure 17: Rural Housing Loans: Home of the FSM President, Financed with Two
    RHS loans; Typical RHS Loan- Financed Homes, Pohnpei, FSM 48 Figure 18:
    Rural Housing Loan: Home of Former Pohnpei State

    Housing Authority Director, Financed with an RHS Loan, Pohnpei, FSM 50
    Figure 19: Postal Services: Open Safe Reflects Lax Security,

    Pohnpei, FSM 52

    Abbreviations

    FAA Federal Aviation Administration FASEG Freely Associated States
    Educational Grants FEMA Federal Emergency Management Agency FSM Federated
    States of Micronesia FSMTC Federated States of Micronesia Telecommunications

    Corporation HHS Health and Human Services JTPA Job Training Partnership Act
    MCH Maternal and Child Health MINTA Marshall Islands National
    Telecommunication Authority NWS National Weather Service RHS Rural Housing
    Service RMI Republic of the Marshall Islands RUS Rural Utilities Service
    SEPPIE Special Education Program for Pacific Island Entities USDA U. S.
    Department of Agriculture USPS U. S. Postal Service

    Lett er

    January 22, 2002 The Honorable James V. Hansen Chairman Committee on
    Resources House of Representatives

    The Honorable Tom Lantos Ranking Minority Member Committee on International
    Relations House of Representatives

    The Honorable James A. Leach Chairman, Subcommittee on East Asia and the
    Pacific Committee on International Relations House of Representatives

    The Honorable Doug Bereuter House of Representatives In 1986, the U. S.
    government entered into a Compact of Free Association (Compact) with the
    Federated States of Micronesia and the Republic of the Marshall Islands.
    Under the Compact, the United States was authorized to provide federal
    programs, such as grants, services, technical assistance,

    and loans to the two nations. The United States was also authorized to
    provide aviation, disaster relief, postal, and weather services. 1 The cost
    of program assistance extended to the two countries was about $700 million

    for the period beginning in fiscal year 1987 and ending in fiscal year 2001.
    2 The United States designated the Department of the Interior as the agency
    responsible for coordinating and monitoring these federal programs, loans,
    and services.

    1 Under the Compact, the United States also provided direct financial
    assistance. We reported on this assistance in Foreign Assistance: U. S.
    Funds to Two Micronesian Nations Had Little Impact on Economic Development
    (GAO/ NSIAD- 00- 216, Sept. 22, 2000). 2 Relying on information from U. S.
    agencies, we previously documented the amount of program assistance provided
    during 1987- 99. See Foreign Relations: Better Accountability

    Needed over U. S. Assistance to Micronesia and the Marshall Islands (GAO/
    RCED- 00- 67, May 31, 2000). We have estimated program costs for fiscal
    years 2000 and 2001. The figure of $700 million does not include payments to
    the Republic of the Marshall Islands related to nuclear testing compensation
    and is based on partial data, known to understate amounts.

    In the fall of 1999, the United States and the two nations began
    negotiations on extending the financial provisions of the Compact, which
    expired in 2001. These negotiations also included discussions about the
    continued

    provision of several U. S. programs. 3 To assist the Congress in its review
    of proposals for extending assistance, you asked us to report on the
    effectiveness and accountability of U. S. programs, loans, and services
    provided to the Federated States of Micronesia and the Republic of the
    Marshall Islands. In response, we (1) assessed the use and effectiveness of
    key U. S. programs, loans, and services provided to both nations; (2)
    evaluated whether each nation?s administration of these programs ensured
    financial accountability; and (3) evaluated whether the U. S. government?s
    oversight of these programs ensured financial accountability. 4 We selected
    13 programs and services to review, 5 including those with the largest
    expenditures and loans over the past 15 years, as well as each of the
    services that the U. S. government agreed to provide under the Compact. To
    determine the use and effectiveness of U. S. programs and services, we
    reviewed legislation, regulations, and monitoring reports. We also
    interviewed program recipients and program managers in the United States, in
    Pohnpei and Kosrae States of the Federated States of Micronesia, and in
    Majuro, in the Republic of the Marshall Islands. We determined that these U.
    S. domestic programs were effective by using two separate measures. The
    first considered whether the programs met their program

    performance requirements and standards, as detailed in their legislation 3
    Compact provisions related to economic assistance, access to U. S. federal
    services and certain programs, and defense obligations were to expire on
    October 21, 2001, for the Republic of the Marshall Islands and on October 1,
    2001, for the Federated States of Micronesia. The expiring provisions of the
    Compact remain in full force and effect for up to 2 additional years while
    negotiations are underway.

    4 At your request, we attempted to report on the administrative costs of
    implementing these programs in the islands. However, this information was
    not available. Most agencies administering programs in the islands from
    Washington, D. C., or San Francisco were unable to segregate their costs for
    running the programs. 5 These programs were (1) Head Start for preschoolers,
    (2) Special Education Program for Pacific Island Entities, (3) Freely
    Associated States Education Grants, (4) Pell Grants for college education,
    (5) job training for adults (Job Training Partnership Act), (6) Maternal and
    Child Health, (7) U. S. Department of Agriculture?s Rural Housing Service
    single family home loans, (8) U. S. Department of Agriculture?s Rural
    Utilities Service Telecommunications loans, (9) U. S. Department of
    Agriculture?s Rural Utilities Service Electrical loans, (10) Federal
    Emergency Management Agency?s assistance, (11) U. S. Postal Service, (12)
    Federal Aviation Administration service, and (13) U. S. National Weather
    Service.

    and regulations. The second measure considered whether the programs were
    able to achieve broader program goals given the conditions that existed in
    the Federated States of Micronesia and the Republic of the Marshall Islands,
    including those that could significantly reduce potential program
    accomplishments or increase costs. To be considered effective, the program
    had to meet all performance requirements and standards and had to overcome
    conditions that could significantly reduce broader program accomplishments
    or increase costs. To evaluate whether the joint U. S., Micronesian, and
    Marshallese administration of these programs ensured financial
    accountability, we identified requirements in legislation

    and regulations, reviewed monitoring reports and financial audits, and
    discussed accountability issues with program managers in each country. (For
    further details regarding our scope and methodology, see app. I.)

    Results in Brief The domestic programs extended by the United States to the
    Federated States of Micronesia and the Republic of the Marshall Islands were
    used to provide a wide range of critical services, such as health care,
    education,

    telecommunications, and job training, but in most cases local conditions
    have impaired their effectiveness. In total, we found that local conditions
    limited the effectiveness of 9 of the 13 programs in both countries. 6 We
    found that these programs, originally designed for the United States, faced

    a variety of problems operating in developing island nations because of
    differing geographic, economic, and social conditions. 7 For example, four
    education and health programs were hindered by the lack of local government
    financial support for each sector, the poor state of the local education
    system, or the lack of medical capacity commonly found in the

    United States. The four effective programs generally shared the following
    characteristics: they were focused in scope, they were principally managed
    by U. S. employees or well- trained nationals, and they used the same
    infrastructure that supported these services in the United States. 8 A

    6 Programs that either could not meet their performance requirements or
    faced local conditions that hampered their effectiveness were (1) Head Start
    for preschoolers, (2) special education, (3) elementary and secondary school
    improvements, (4) Pell Grants for college education, (5) job training for
    adults, (6) Maternal and Child Health, (7) housing loans, (8) disaster
    response, and (9) postal services. 7 These programs were ineffective,
    despite generally meeting their performance

    requirements and standards, because of problems related to implementing
    domestic programs in the FSM and the RMI: (1) special education, (2)
    elementary and secondary school improvements, (3) Pell Grants for college
    education, (4) housing loans , (5) disaster response, and (6) postal
    services.

    separate problem, loan repayment, may adversely affect the three loan
    programs in the future if U. S. Compact assistance to the two countries is
    reduced. The two nations? administration of the 13 programs we reviewed
    generally did not ensure financial accountability. In all, 9 of the 13
    programs we reviewed experienced accountability problems, including 5 that
    experienced instances of theft or misuse of program funds. 9 Instances of

    theft, fraud, or abuse of program funds were documented in (1) Head Start,
    (2) elementary and secondary school improvement grants, (3) rural housing
    loans, (4) disaster response, and (5) postal services. In general, the two
    nations lacked the administrative capacity necessary to meet the complex
    accountability requirements of federal programs, and federal program
    managers did not provide the necessary training. In contrast, accountability
    was adequate for aviation and weather services and for power and
    telecommunications loans, primarily because the United States controlled
    program funds and little direct funding was provided to each

    nation. Just as the two nations were unable to ensure financial
    accountability for their program administration, so too was U. S. government
    oversight unable to ensure financial accountability. The Department of the
    Interior, which was charged with coordinating and monitoring the individual
    federal programs, neither coordinated nor monitored the federal programs

    because it lacked the necessary resources, according to Interior officials.
    In addition, the State Department, whose chief of mission was responsible
    for direction and coordination of U. S. agency officials in foreign
    countries, could not meet its responsibility because the U. S. program
    managers often bypassed the State Department and U. S. embassies. Although
    some federal departments attempted to provide oversight, such as for the
    Head Start and

    Pell Grants programs, even these departments could not ensure effective
    accountability because of the travel cost, distance, and time involved, and
    8 Programs that generally met their performance requirements and did not
    face limitations attributable to local conditions were (1) aviation
    services, (2) weather services, (3) telecommunications loans, and (4)
    electric power loans. 9 We found that several of the programs had met their
    program performance requirements yet still had accountability problems; in
    many cases, the program and finance offices were completely separate offices
    and operations. Programs that experienced accountability

    problems included (1) Head Start for preschoolers, (2) special education,
    (3) education grants, (4) Pell Grants for college education, (5) job
    training for adults, (6) Maternal and Child Health, (7) rural housing loans,
    (8) disaster response, and (9) postal services.

    because of the relatively small size of the programs in the region, as
    compared with larger programs in the United States. During the Compact?s
    existence, few U. S. program managers had ever visited the region to conduct
    on- site assessments. In this report, we recommend that the Secretaries of
    the Interior and State report to the Congress on strategies for improving
    the performance and delivery of any future program assistance.

    We provided a draft of this report to the Departments of the Interior,
    State, Agriculture, Commerce, Health and Human Services, Education, Labor,
    and Transportation, as well as to the Federal Emergency Management Agency
    (FEMA); the U. S. Postal Service; and the governments of the Federated
    States of Micronesia and the Republic of the Marshall Islands. The
    Departments of Agriculture, Commerce, Education, Labor, and

    Transportation, as well as FEMA and the U. S. Postal Service, chose to
    provide informal comments, which we incorporated into the report as
    appropriate. The Departments of the Interior, State, and Health and Human
    Services generally agreed with our draft report. The Federated States of
    Micronesia government generally agreed with our findings and recommendation.
    The government also provided technical comments and indicated that we did
    not fully appreciate that the programs have been

    ?surprisingly successful against almost insurmountable odds.? The Republic
    of the Marshall Islands government also generally agreed with the draft
    report but had numerous comments on individual programs, as well as a
    historical perspective on the Compact and its relation to U. S. program

    management and oversight options. Where we agreed that the additional
    information was appropriate, we incorporated the changes into the final
    report. Background The Federated States of Micronesia (FSM) is a grouping of
    607 small islands with a total land area of about 270 square miles. FSM is
    located in the western Pacific, about 2,500 miles southwest of Hawaii, lying
    just above

    the equator. FSM comprises four states- Chuuk, Pohnpei, Yap, and Kosrae-
    that had an estimated total population of 107, 000 in 2000. 10 The Republic
    of the Marshall Islands (RMI) is made up of more than 1,200

    10 The FSM Department of Foreign Affairs provided this population figure to
    us. The FSM Department of Economic Affairs is finalizing the FSM 2000 census
    results and has not yet released the updated FSM population figure.

    islands, islets, and atolls, with a total land area of about 70 square
    miles. RMI is located in the central Pacific, about 2,100 miles southwest of
    Hawaii. The RMI had a total population of approximately 50,840. See figure 1
    for a map of the FSM and the RMI.

    Figure 1: Location and Map of the Federated States of Micronesia and the
    Republic of the Marshall Islands

    Note: These maps do not represent the actual territory of the FSM and the
    RMI. Source: GAO.

    Since World War II, the United States has provided government support to the
    FSM and the RMI and extended federal programs, such as housing and food
    assistance. 11 In addition, the United States provided for their defense;
    built roads, hospitals, and schools; provided support for government
    operations; and funded health and education systems. In 1986, the United
    States entered into a Compact of Free Association with the FSM and the RMI,
    a process that ended U. S. administration under a United Nations mandate and
    secured both nations? self- governance and certain defense rights for the
    FSM, the RMI, and the United States. The Compact provided direct financial
    payments to promote economic development in each

    nation. These annual financial payments totaled about $2 billion from fiscal
    year 1987 through fiscal year 2001. Previously we reported that these
    payments supported general government operations but had led to little
    improvement in economic development, with both nations remaining highly
    dependent on U. S. assistance. Economic self- sufficiency at current

    living standards remains a distant goal for the FSM and the RMI. In
    addition, in reviewing these expenditures, we found that the island
    governments and the U. S. Departments of the Interior and State have
    provided limited accountability over the Compact expenditures. 12

    The Compact also stated that U. S. federal agencies could provide direct
    program assistance as authorized by the Congress, which included the grants,
    loans, and technical assistance provided by individual federal agencies. In
    addition, the Compact identified several federal services to be supplied by
    specifically identified agencies: postal services, aviation, and

    weather were to be provided by specific agencies (and then reimbursed by
    Interior), while the Federal Emergency Management Agency was to provide
    disaster relief. In total, the program assistance provided by 19 U. S.
    departments and agencies from 1987 through 2001 totaled about $700 million,
    which included money for the 13 grant, loan, and service programs that were
    the focus of this report. 11 See David Hanlon, Remaking Micronesia:
    Discourses over Development in a Pacific Territory, 1944- 1982 (Honolulu:
    University of Hawaii Press, 1998). Having driven the

    Japanese from these islands in World War II, the U. S. Department of the
    Navy began civil administration of Micronesia and the Marshall Islands on
    July 18, 1947, as part of the United Nations Trust Territory of the Pacific
    Islands. This responsibility was transferred to the Department of the
    Interior in July 1951.

    12 See Foreign Assistance: U. S. Funds to Two Micronesian Nations Had Little
    Impact on Economic Development (GAO/ NSIAD- 00- 216, Sept. 22, 2000). Our
    estimate of Compact payments excludes payments to the RMI related to nuclear
    compensation.

    Under the Compact?s implementing legislation and by executive order,
    Interior was made responsible for supervising, coordinating, and monitoring
    program assistance to the FSM and the RMI. 13 The Foreign Service Act of
    1980 (P. L. 96- 465) stated that the Department of State Chief of Mission
    was responsible for the direction and coordination of all U. S.

    government employees in foreign countries. Further, presidential
    instructions to U. S. chiefs of mission in foreign nations charged them with
    the direction, coordination, and supervision of all executive branch offices
    and personnel in their nation. 14 The FSM and the RMI were developing
    countries that, like other Pacific

    island nations, faced significant development challenges because of their
    small economies, few natural resources, remote location, and limited
    institutional capacity. 15 The economies of both nations were dependent on
    U. S. assistance provided through the Compact for most of their income, as
    they had almost no commercial production. U. S. assistance accounted for a
    majority of government revenues in both nations, and the governments were
    the primary employer in both nations. Significant unemployment

    existed and has increased as the governments have cut employment in response
    to scheduled reductions in U. S. payments made under the Compact,
    contributing to outward migration. 16 The FSM and the RMI, as developing
    nations, faced unique challenges in operating their health and education
    programs, as compared with the United States. According to a 1998 study,
    challenges for the FSM and the

    RMI?s delivery of health care services included (1) lack of preventive
    health care, (2) long distances to travel in order to provide care in remote
    places, (3) dependence on declining levels of U. S. foreign aid, (4)
    inadequate fiscal and personnel management systems, (5) poorly maintained
    and equipped

    13 The Compact of Free Association Act of 1985, Public Law 99- 239. The
    Compact implementing legislation said that all programs and services
    provided to the FSM and the RMI may be provided only after consultation with
    and under the supervision of the Secretary of the Interior. This role and
    responsibility was reinforced in Executive Order 12569, issued in 1986. 14
    This does not apply to employees under the command of U. S. area military
    commander.

    15 See Foreign Assistance: Lessons Learned from Donors? Experiences in the
    Pacific Region (GAO- 01- 808, Aug. 17, 2001). 16 The Compact grants the
    citizens of the FSM and the RMI the right to live and work in the United
    States. See Foreign Assistance: Migration from Micronesian Nations Has Had
    Significant Impact on U. S. Island Areas (GAO- 02- 40, Oct. 5, 2001).

    health care facilities, (6) the enormous costs associated with sending
    patients off- island for specialized care, and (7) shortages of adequately
    trained health professionals. 17 Likewise, the education system in both
    countries faced challenges not found throughout the United States, including
    high drop- out rates, poorly trained teachers, lack of adequate buildings
    and supplies, and low academic achievement. The education

    systems of both nations were also dependent on declining levels of U. S.
    aid, which may place additional challenges on the education systems. In the
    RMI, 68 percent of education funding came from the United States; in the
    FSM, 98 percent of education funds were from the United States.

    In June 2000, the Department of State?s negotiator for the Compact testified
    that the general approach to the new negotiations with the FSM and the RMI
    included sector grants, a trust fund, and continued provision of some U. S.
    program assistance for the term of the annual financial assistance. The
    negotiator testified that the executive branch was considering reporting
    annually to the Congress on actions that could improve program

    effectiveness, including the consideration of grant consolidation across
    programs. The November 2000 U. S. proposal to the FSM for future economic
    assistance through fiscal year 2016 included a reduction in total assistance
    but an increase in U. S. Compact funds for health and education, as compared
    with current levels. The proposal also included a section on services and
    program assistance scheduled through 2016. Weather and aviation services
    were to be continued at a level to be negotiated. The proposal eliminated
    the commitment of disaster relief from the United States, but it included a
    modest disaster preparedness grant for the first 5 years of the agreement.
    Additionally, the USPS was to continue service, with the provision of
    special services set forth in a subsidiary agreement.

    These special services to be negotiated may include "express mail" and money
    orders, but not collect- on- delivery. The proposal stated that the United
    States would continue to provide, through fiscal year 2016, the programs of
    the Departments of Education, Health and Human Services, and Labor on the
    same basis or to the same extent as they were provided on October 1, 1999.
    The United States did not propose providing Department of Agriculture
    programs to the FSM. 18 The United States had not presented an assistance
    proposal to the RMI. 19

    17 See Pacific Partnerships for Health, Charting a New Course (Washington,
    D. C.: National Academy Press, Institute of Medicine, 1998).

    Federal Programs The 13 federal grant, loan, and service programs we
    reviewed provided a

    Provided Important wide array of assistance to the FSM and the RMI that U.
    S. embassy and

    country officials viewed as critical to these nations. However, local
    Services, but conditions limited the effectiveness of 9 of the 13 programs.
    We determined Effectiveness Was that these U. S. domestic programs were
    effective by using two separate Generally Hindered by measures: first,
    whether the programs met their program performance

    requirements and standards, as detailed in their legislation and
    regulations; Many Factors

    second, whether the programs were able to achieve broader program goals,
    given the conditions that existed in the FSM and the RMI, including those
    that could significantly reduce potential program benefits or increase

    costs. To be considered effective, the program had to meet all performance
    requirements and standards and to overcome conditions that could
    significantly reduce broader program accomplishments or increase costs. We
    found that, even in programs that met their requirements and standards,
    local conditions often reduced their potential effectiveness. Almost all of
    them faced problems caused by attempting to implement programs in the FSM
    and the RMI that were designed for the United States. Such problems included
    (1) the lack of complementary public and private health care

    services and financing typically found in the United States, necessary to
    support the Head Start, special education, and Maternal and Child Health
    programs; (2) limited opportunities for graduates of the job training
    program; and (3) the lack of contractors, building supplies, and support
    services typically found in the United States and used to respond to
    disasters. In addition, the federal education and health programs and
    resources usually supplement state and local resources in the United States.
    These resources did not exist in the FSM or the RMI, where federal programs
    were the primary and often the only funding source for an

    activity. As a result of these problems, the effectiveness of the U. S.
    programs was limited. The aviation and weather programs, as well as two of
    the three loan programs, were effective in large part because they were
    narrow in scope or relied on well- trained local staff and dedicated U. S.
    resources. In 18 The U. S. proposal discusses additional programs and
    services that were not part of this report?s scope. In addition, there were
    sections dealing with sector grants, a trust fund, and

    accountability requirements. 19 During 2001, the United States has met with
    both the FSM and the RMI regarding extending Compact provisions.

    addition, all three loan programs (two of which were effective, and one
    ineffective) may experience future repayment problems if U. S. Compact
    assistance levels are reduced. (See app. II for a more detailed discussion
    of each program, including the program performance requirements and
    standards, our assessment against those standards, and our assessment of
    whether the program encountered conditions in the countries that
    significantly reduced potential program accomplishments.)

    Programs Provided Diverse We found that the 13 programs we reviewed, which
    encompassed grants,

    and Important Services loans, and operational support, provided numerous,
    and in many cases

    important, services to the citizens of the FSM and the RMI. For example,
    because of the U. S. programs, preschool children received health,
    education, and nutritional services; special needs children received special
    education services; elementary and secondary schools received school
    supplies and teacher training; and college students received tuition grants.
    In addition, mothers and children were provided health services, and adults
    received job training to improve their employment prospects. The housing

    stock, telecommunications capacity, and electrical supply were improved
    through U. S. loan programs, while disaster response, postal delivery,
    aviation, and weather forecasting were provided by U. S. agencies.

    U. S. embassy, FSM, and RMI officials reported that these were critical
    programs in each country. Without exception, FSM and RMI program officials
    said that their countries were dependent on these programs. For example,
    according to FSM and RMI officials, the loss of U. S. programs would end
    special education assistance, the poorly supplied school systems might stop
    functioning entirely, and the sole U. S.- accredited colleges in the FSM and
    the RMI might collapse. Program officials further

    stated that the loss of disaster assistance, postal services, aviation
    programs, and weather services would severely affect their economic
    development. Program managers doubted that their own governments would have
    sufficient resources to finance these activities in the absence of the U. S.
    federal programs.

    Table 1 identifies the 13 programs we reviewed, the purpose and funding
    level of each program, and a brief description of program accomplishments in
    each country.

    Table 1: Overview of 13 Programs Reviewed by GAO Accomplishments Program,
    department, and purpose funding - FY 1987- 1999/ FY 2000 FSM RMI

    dollars in millions Head Start:

    Head Start provided comprehensive health, Head Start provided comprehensive
    health, education, and nutrition services to about 1, 800 education, and
    nutrition services to about 1,200 Department of Health and preschool
    children each year through 94 centers preschool children each year. Services
    were Human Services

    and 391 support staff. Accomplishments included provided through 48 centers
    and 74 teachers, 54 (HHS)

    (1) helping children with health, nutrition, and teachers? aides, and 71
    support staff. The program learning deficits; (2) creating preschool
    programs; has served more than 8,400 children since it began Provides
    health, education,

    (3) encouraging parental support for the children?s in 1994. Accomplishments
    included (1) helping

    and other services to prekindergarten education; and (4) initiating a
    preschool teaching children with health, nutrition, and learning deficits;
    children

    certificate program at the College of Micronesia. (2) preparing children for
    school; and (3) fostering parental support for education.

    FSM: $12. 8 /$ 4.1 RMI: $17.6/$ 2. 6

    Special Education Program This grant provided the majority of program funds
    This grant provided the majority of program funds

    for Pacific Island Entities for children with disabilities needing special
    for children with disabilities needing special (SEPPIE):

    education. In school year 1998- 99, about 2,074 education. In September
    2000, about 625 students students were in the special education program in
    were in the special education program in the RMI. Department of Education

    the four states of the FSM. They were taught by They were taught by about 86
    teachers. The about 191 teachers. The special education

    program was at work in 54 public schools Provides direct service needs
    program provided assistants for home- bound throughout the RMI. The special
    education and long- term capacity children, transportation to schools, and
    facility program provided assistants for home- bound building for children
    with modifications. Because of the low educational level

    children, transportation to schools, and facility special needs

    of special education teachers, approximately 16 modifications. Because of
    the low educational level percent of the grant was spent providing teacher
    of special education teachers, almost 19 percent of FSM: $ 23. 7/ $3.8
    training. SEPPIE funded almost all special

    the grant was spent providing staff training. RMI: $ 9.4/ $1. 7

    education expenses. The remaining expenses SEPPIE funded all special
    education expenses.

    were covered by U. S. Compact funds passed In instances where disabilities
    were so severe that

    through the FSM governments. the children would never achieve independence,

    In instances where disabilities were so severe that parents reported that
    SEPPIE training made the the children would never achieve independence,
    children less of a burden at home. parents reported that SEPPIE training
    made the children less of a burden at home.

    (Continued From Previous Page)

    Accomplishments Program, department, and purpose funding - FY 1987- 1999/ FY
    2000 FSM RMI

    dollars in millions

    Freely Associated States This grant has provided most of the school supplies
    This grant has provided most of the school supplies Educational Grant
    (FASEG)

    in the FSM. Each state administered its own grant. in the RMI. Throughout
    this island nation, 77 public Program: a Nationwide, 166 public elementary
    schools served elementary schools served almost 8,800 children, about 23,
    600 children, and 28 public secondary and 3 public secondary schools served
    almost Department of Education

    schools served about 5, 500 students. Generally 1,200 students. Generally,
    FASEG?s $860,000 FASEG?s $3. 1 million in grants provided most grant
    provided most educational materials, books, Provides funds for direct
    educational materials, books, school supplies, vocational education
    materials, computers, etc. It educational services in

    copiers, computers, air conditioners, etc. It also also provided teacher
    training funds, with about 200 elementary and secondary provided teacher
    training funds. Generally, teachers trained annually. Teachers? salaries
    were schools such as school

    teachers? salaries were paid by using Compact paid from Compact funds.

    supplies, teacher training, and funds. school improvement

    FSM: $8. 3/ $3. 1 RMI: $2. 4/ $0. 860

    Pell Grants: Pell Grants provided 13, 704 students with grant

    Pell Grants provided 4,375 students with grant assistance to attend the
    College of Micronesia (a 2year, assistance to attend the College of the
    Marshall Department of Education U. S.- accredited college) between 1988 and

    Islands (a 2- year, U. S.- accredited college) between 2000. In addition,
    Pell Grants also provided grant 1993 and 2000. In addition, Pell Grants also
    Provide access to college assistance for FSM students attending U. S.
    provided grant assistance for RMI students education colleges. Pell Grants
    were the major source of attending U. S. colleges. Pell Grants were the
    major funding for the college; loss of Pell Grants would

    source of funding for the college; loss of Pell Grants FSM: $19. 3/$ 4.4
    bankrupt the college and eliminate the sole

    would bankrupt the college and eliminate the sole RMI: $6. 6/$ 1.7
    opportunity for most citizens to obtain a local, U. S. accredited
    opportunity for most citizens to obtain a local U. S.-

    college education. accredited college education.

    [The Department of Education provided an additional $6 million for Pell
    Grants from 1987 through 1991 but could not report the amount by country.]
    Job Training Partnership Act FSM JTPA officials said that 3,263 adults and

    The JTPA program reported that it provided (JTPA): Adult Training teenagers
    were trained from 1995 to 1999, of training to 2,474 clients from 1995 to
    1999. JTPA whom 1,204 were employed 90 days after their

    was the primary job training program in RMI. It Department of Labor
    training. JTPA was the primary job training employed 28 staff persons to
    administer the program in the FSM. The Pohnpei program

    program and provide training. RMI officials said that Provides job training
    for adults

    employed 23 staff in training and administrative JTPA was critical in
    helping the disadvantaged for increased employment and

    positions. Officials said that the training significantly improve the lives
    of trainees through employment. earnings

    contributed to their ability to improve the lives of trainees through
    employment. This included 210 FSM: $10.9/$ 0. 2 b youths working in the
    United States as nurses and RMI: $5. 5/$ 0.4 b amusement park attendants.
    The Kosrae program trained 270 clients, and 65 were placed in employment.
    Many trainees have moved overseas for better- paying jobs.

    (Continued From Previous Page)

    Accomplishments Program, department, and purpose funding - FY 1987- 1999/ FY
    2000 FSM RMI

    dollars in millions Maternal and Child Health The FSM reported that health
    services were The RMI reported that health services were (MCH) Block Grants
    Program:

    provided to 70, 810 mothers and children in 1999 provided to 4, 756 mothers
    and children in 1999

    alone. Services were provided by 36 staff in alone. Services were provided
    at 2 hospitals and Department of Health and hospitals and clinics. The
    program has resulted in 60 clinics. The program has resulted in a large
    Human Services

    a large increase in health services provided to increase in health services
    provided to mothers and mothers and their children. Reported their children.
    RMI/ MCH officials listed the following

    Provides health services to accomplishments include (1) an increase in MCH
    as accomplishments of the MCH program: (1) the

    mothers and children services to the target population; (2) a reduction in
    provision of preventive health services to the fertility rates; (3) no
    recent outbreaks of measles, majority of the population and (2) reduced

    FSM: $7. 0/$ 0. 56 mumps, or polio because of immunizations; and (4)

    childhood diseases through immunizations. RMI: $3. 9/$ 0. 24

    greater social acceptance of children with special needs.

    Rural Housing (loans and USDA loans have built or renovated an estimated
    USDA loans have built 14 percent of the RMI

    grants): 37 percent of the FSM housing stock since the

    housing stock, making RHS the primary housing beginning of the Compact. In
    fact, the Rural financier. Between 1987 and 2000, about 937 U. S. Department
    of Housing Service was the primary financier of home

    housing loans, valued at almost $3.2 million, and Agriculture (USDA)

    construction and renovation in the FSM. Each 218 housing grants, valued at
    about $913, 000, state of the FSM had a separately administered

    were provided to residents to build, renovate, or Provides housing grants
    and program. Between 1987 and 2000, more than

    repair their housing structures. low- interest housing loans to

    5, 500 loans, valued at more than $27.6 million, and This assistance was all
    provided specifically for the the economically

    more than 1,200 grants, valued at more than $4.26 Majuro Atoll, which
    comprised 47 percent of the disadvantaged million, were provided to
    residents to build,

    RMI population. USDA planned to expand renovate, or repair their housing
    structures. assistance to Ebeye Island (18 percent of RMI FSM: c $30.0/ $1.
    9 Although Chuuk State comprised 50 percent of the

    population) in the Kwajelein Atoll with more housing RMI: c $3. 5/ $0.590

    FSM population and some 46 percent of the programs and other assistance.

    housing units, it received only 14 percent of the housing loan dollars.
    Pohnpei, with 32 percent of the population, received 67 percent of housing
    dollars loaned in the FSM. Telecommunications:

    The USDA loans have resulted in an increase in The USDA loans have resulted
    in an increase in telephones and communications available to telephones and
    communications available to U. S. Department of homes and businesses. In
    1987, when USDA homes and businesses. In 1987, when USDA Agriculture (USDA)

    approved a loan to the FSM Telecommunications approved the loan application
    from the Marshall Corporation (FSMTC), the company had 1,300

    Islands National Telecommunications Authority Provides rural telephone
    telephone subscribers. By 1993, the number of

    (MINTA), the company had 653 subscribers. In loans and loan guarantees
    telephone subscribers in the FSM had increased to June 2001, MINTA provided
    telephone service to

    6, 000. In 2001, the FSMTC provided telephone 4,183 subscribers on major
    islands of the Majuro

    FSM: $40.0/$ 0 service to more than 9,870 customers on four

    and Kwajalein Atolls, with a total population of RMI: $22.8/$ 0

    islands of the FSM, with a total population of some 32,799. More than half
    of these customers 69, 000. FSMTC provided service to about 38 purchased
    residential service. MINTA provided percent of FSM households. service to
    more than 32 percent of RMI households.

    (Continued From Previous Page)

    Accomplishments Program, department, and purpose funding - FY 1987- 1999/ FY
    2000 FSM RMI

    dollars in millions Electric Power:

    The Pohnpei Utilities Company had a loan The USDA loans have resulted in a
    large increase application with USDA?s Rural Utilities Service

    in electricity available to homes and businesses. U. S. Department of (RUS).
    The proposed loan for $10.8 million had not The Marshalls Energy Company
    commissioned its Agriculture (USDA)

    yet been approved by RUS, as of October 2001. new, 12.8 megawatt generating
    station on

    The difficulty of obtaining clear title to the land December 16, 1999. This
    plant, the island?s Provides loans for electric where the power plant would
    be built was second, was built with a $12. 5 million loan from power
    facilities

    preventing groundbreaking according to company USDA to relieve the old power
    plant?s five officials. generators, all of which operated at peak hours with
    FSM: $0/$ 0

    no backup. The number of private electricity RMI: $12.5/$ 0

    consumers rose by 11 percent, and the number of new business users rose by
    34 percent from 1997 through the end of 1999. Disaster Assistance: Since
    1986, FEMA has provided $36. 3 million in Since 1986, FEMA has provided
    $18.5 million in

    direct assistance and through other U. S. agencies direct assistance and
    through other U. S. agencies Federal Emergency provided an additional $6.3
    million for seven

    provided an additional $7. 5 million for seven Management Agency (FEMA)

    typhoons and two droughts. Through FEMA?s disasters including typhoons,
    droughts, and high assistance programs (Disaster Preparedness

    wave actions. Through FEMA?s assistance Provides typhoon and severe
    Improvement Grants, Hazard Mitigation Grant programs, the RMI has been able
    to ensure that drought disaster assistance Program, and disaster
    assistance), the FSM has

    almost all funds for the disaster relief and hazard including individual and
    family been able to ensure that almost all the disaster mitigation
    assistance and preparedness were grants, temporary housing, assistance funds
    have been obligated over the past obligated over the past 15 years.
    infrastructure assistance, and 15 years. hazard mitigation grants FSM:
    $35.9/$ 0. 4 RMI: $17.4/$ 1. 1

    Postal Services: USPS has provided for transportation of mail and USPS has
    provided for transportation of mail and

    parcels and has given equipment, materiel, parcels and has given equipment,
    materiel, U. S. Postal Service (USPS) supplies, technical advice, and
    assistance to the supplies, technical advice, and assistance to the FSM.
    During 2000, the FSM received 1.2 million

    RMI. During 2000, the RMI received 0.5 million Transports mail, provides
    pounds of mail and sent out almost 220,000 pounds of mail and sent out
    almost 73, 000 pounds. money orders, and furnishes pounds. Intrastate mail
    volume for the same period Records for intrastate mail volume and for other
    supplies

    totaled about 67, 000 pounds. years were not maintained by the RMI.

    FSM: d $ 4.9/$ 0. 9 RMI: d $ 1. 6/$ 0. 3

    (Continued From Previous Page)

    Accomplishments Program, department, and purpose funding - FY 1987- 1999/ FY
    2000 FSM RMI

    dollars in millions Aviation Services:

    FAA?s main task was to provide for safe air travel. FAA?s main task was to
    provide for safe air travel. The 15- year record of air traffic safety
    showed two

    The RMI?s record showed no reported aircraft Federal Aviation aircraft
    accidents, both within the past 2 years, but accidents, injuries, or
    fatalities over the past 15 Administration (FAA) no serious injuries and no
    fatalities. The two years. accidents were attributed to factors, events, and
    Provides for safe air transport conditions unrelated to FAA assistance. and
    transit around and through FSM and RMI air space

    FSM: e $ 5.4/$ 3.3 RMI: e $ 0. 9/$ 0.1 Weather Services:

    The FSM weather service offices located at The RMI weather service office
    provided weather Pohnpei, Yap, and Chuuk provided weather

    forecasts and data to RMI citizens. The office was National Weather Service
    forecasts and data to FSM citizens. These offices

    fully staffed by RMI citizens. It received funding on (NWS) were fully
    staffed by FSM citizens. They received a cost- reimbursable contract
    arrangement, funding on a cost- reimbursable contract

    technical assistance, advice, and training through Provides weather
    forecasting arrangement, technical assistance, advice, and the U. S. NWS.
    According to NWS evaluations, the capacity

    training through the U. S. NWS. According to NWS weather service office was
    as capable and as well evaluations, the three weather service offices are

    trained as comparable U. S.- based weather service FSM: $ 28. 9/$ 2.0

    as capable and as well trained as comparable U. S. based offices.

    RMI: $ 10. 6/$ 0.9 weather service offices. a The program has been changed
    to include U. S. insular territories under the reauthorization of the

    Elementary and Secondary Education Act in fiscal year 2002. As of
    publication, the Department is in process of determining the program name
    and implementation timetable for new competitions and awards. b This figure
    is for the Workforce Investment Act, which supplanted JTPA beginning in
    fiscal year 2000.

    c We used data provided by USDA. d This figure represents the Department of
    the Interior?s payments to USPS for services under the Compact. According to
    USPS, the actual cost was much higher, and it has sought an additional $30
    million in reimbursement from Interior. e This figure represents the
    Department of the Interior?s payments to the FAA for services under the

    Compact. This figure excludes the cost of air traffic control to the region,
    which is provided from Los Angeles, and FAA provided airport improvements
    funded from the Department of the Interior?s capital improvement funds.

    Sources: Program documentation and GAO analysis.

    Photographs of U. S. Assistance at Work

    Figure 2: SEPPIE, Child Find Poster for Special Education, Pohnpei, FSM

    Source: GAO.

    Figure 3: FASEG, Marshallese- English Story Book and Marshallese Phonics
    Book, Developed by and Published with FASEG Support, Majuro, RMI

    Source: GAO.

    Figure 4: Pell Grant- Assisted Students in Class, College of the Marshall
    Islands, Majuro, RMI

    Source: GAO.

    Figure 5: JTPA Carpentry Class, Majuro, RMI

    Source: GAO.

    Figure 6: Maternal and Child Health Laboratory in Hospital, Majuro, RMI

    Source: GAO.

    Figure 7: FEMA Assistance (Bridge Replacement) in Pohnpei, FSM Source: GAO.

    Figure 8: FEMA Drought Assistance (Home Water Catchment Container), Kosrae,
    FSM Source: GAO.

    Foreign Environment and Local conditions in the FSM and the RMI
    significantly reduced the Other Factors Hindered

    effectiveness of 9 of the 13 programs, loans, and services. These programs
    Effectiveness of Nine were (1) Head Start, (2) special education, (3)
    elementary and secondary Programs

    school improvement grants, (4) Pell Grants, (5) the Job Training Program for
    Adults, (6) Maternal and Child Health Block Grants, (7) housing loans, (8)
    disaster assistance, and (9) the USPS. We found that programs

    designed for the United States faced a variety of problems because of
    geographic, economic, and social conditions in the FSM and the RMI. For
    example, the four states of the FSM are separated by as much as 2,000

    miles, and the RMI is made up of 1,200 atolls and islands scattered over
    750,000 square miles of ocean. In addition, the lack of local financial
    support, the poor performance of the education system, and the lack of
    medical capacity commonly found in the United States hindered the education
    and health programs. 20 Limited private sector opportunities and government
    downsizing reduced the value of the job training program. Geographic and
    social conditions reduced the effectiveness of disaster relief. Finally, the
    poor performance of FSM and RMI postal services delayed mail service. Most
    managers of the nine programs recognized that they lacked the resources,
    training, and technical capacity to meet all program requirements. See
    appendix II for a more detailed discussion of each program, including

    the program performance requirements and standards, our assessment against
    those standards, and our assessment of whether the program encountered
    conditions in the countries that significantly reduced broader program
    accomplishments or increased program costs. Each table contains separate
    sections that provide specific examples of whether or not each program met
    requirements and standards and whether the program encountered conditions in
    each country that significantly reduced its potential accomplishments. To be
    effective, each program had to meet the performance requirements and
    standards and had to demonstrate that it did not encounter conditions that
    significantly reduced potential program

    accomplishments or increased costs. Specifically, in terms of program
    effectiveness, we found the following:  Head Start: Head Start was intended
    to promote school readiness by

    enhancing the social and cognitive development of preschool children.
    However, the FSM and the RMI programs could not meet a variety of program
    requirements because of a lack of equipment, medical capacity,

    and government support for the elementary and secondary education system.
    For example, the FSM and the RMI lacked the equipment and 20 In commenting
    on this report, U. S. Department of Education officials said that neither
    the FSM nor the RMI could comply with all program procedures, noting that it
    was difficult to comply with the Federal Acquisition Act requirements for
    competitive bidding, since few providers wanted to do business there because
    of the cost of travel and transporting supplies.

    medical expertise necessary to meet dental and health requirements.
    Additionally, the Head Start program could not meet playground and space
    standards of the program (see figures 9 and 10). The program also

    lacked data to show short- or long- term benefits to the children. In
    addition, both FSM and RMI Head Start managers and parents were concerned
    that any head start provided by the program was lost because of the poor
    performance of the school system. 21

    21 For example, according to a 2001 RMI Ministry of Education study,
    students leave the 8th grade with ?barely a 2nd- or 3rd- grade level in
    English reading ability, and many were unable to read even in their own
    language.? An FSM National Division of Education study found that 10th-
    grade students barely achieved the expected 2nd- grade score of U. S.

    students in the English language.

    Figure 9: Head Start Center, Science Area [shows lack of space], Majuro, RMI

    Source: GAO.

    Figure 10: Head Start Playground [shows inadequate playground], Majuro, RMI

    Source: GAO.

     SEPPIE: This program was intended to provide special education and related
    services to children with disabilities. Although the program met its limited
    performance requirements and standards, it encountered conditions that
    significantly reduced potential program accomplishments. For example, for
    some children, the program?s effectiveness was limited by the lack of on-
    island medical care available

    to those suffering severe disabilities. In addition, post- graduation
    employment opportunities for program graduates were rare. Lastly, since
    neither the FSM nor the RMI contributed funding for special education, as
    states and localities do in the United States, this program was the primary
    funding source for special education.

     Freely Associated States Educational Grant: The program was intended to
    provide elementary and secondary schools with funds for direct educational
    services such as school supplies, teacher training, and school improvement.
    Although it met its limited program goals to provide funding for school
    supplies and teacher training, because the FSM and the RMI did not provide
    much funding in these areas, many needs continued to go unmet. The program
    was never intended to be the sole source of funding for these activities.
    For example, in the United States, most school funding comes from state and
    local funds, and the federal government provides only 6.8 percent of the
    total elementary and secondary school budgets. In contrast, the FSM and the
    RMI provided almost no funding in this area, relying instead on FASEG and
    other U. S. grants. However, because the program was so small relative

    to needs, it could not meet all school requirements for school supplies and
    teacher training.  Pell Grants: Pell Grants were intended to provide
    college students with

    financial assistance for educational expenses. In addition, the grants
    provided graduates with the potential to improve their employment
    opportunities and help meet the development and financial needs of the FSM
    and the RMI. The Pell Grants program met its limited program goal to provide
    financial assistance to FSM and RMI college students. However, the poor
    conditions of the elementary and secondary school system, the limitations of
    a 2- year college, and the lack of employment opportunities limited the
    potential accomplishments of the Pell Grant program. According to the FSM
    and the RMI college presidents,

    because of the inadequate school systems, many students exhausted their Pell
    Grants on remedial classes. 22 As a result, many students could not use Pell
    Grants for the credited classes they needed to graduate. In

    22 Pell Grants were limited to 1 year of remedial classes.

    the RMI, for example, one- half of high school graduates entered the college
    with the equivalent of a 4 th to 6 th -grade U. S. education and required 1
    to 2 years of remedial classes. This reduced the amount of Pell Grants
    available for graduation and contributed to the low, 9percent

    graduation rate. In both countries, the low graduation rate and the
    limitations of a 2- year college have reduced the contribution of the Pell
    Grant program to the economy. As a result, skilled workers and managers were
    brought in from the United States, the Philippines, and other countries to
    meet the demand for technical and mid- and upperlevel management positions.
     Job Training for Adults: The program was intended to foster increased

    employment and earnings. However, poor economic conditions in both the FSM
    and the RMI have limited the potential accomplishments of the program. 23
    For example, because of the lack of jobs in the FSM, program success in job
    placement for graduates dropped from 65 percent in 1995 to 26 percent in
    1999. FSM officials said that the program was training people for jobs that
    did not exist. In the RMI, poor data precluded determining JTPA?s
    effectiveness, and poor economic conditions limited employment
    opportunities. For example, the RMI reported that the percentage of trained
    adults finding jobs rose from 44 percent in 1993 to 100 percent in 1999.
    However, another 1999 report from the RMI stated that only 14 percent found
    employment. Neither RMI nor Labor officials could explain the discrepancy,
    and Labor officials agreed that such problems precluded determining the
    program?s effectiveness. In addition, because of poor economic conditions,
    the RMI boosted the

    number of adults it reported as being employed by counting numerous ?self-
    employed? graduates as employed and simply estimating their potential
    income. According to U. S. Department of Labor officials, the subsistence
    economy in the RMI and the lack of employment opportunities pushed the
    program to categorize people as ?selfemployed? when they were actually
    undertaking subsistence work and not receiving market income. Because of the
    lack of jobs, as well as the lack of those basic academic and personal
    competencies necessary to benefit fully from job training, the RMI has begun
    providing training in ?survival skills,? which include subsistence fishing,
    agriculture, and

    handicraft production. 23 The U. S. Department of Labor exempted the FSM and
    the RMI from meeting some performance requirements and standards, including
    a key standard for the number of trainees that found employment.

     MCH Block Grants Program: The program was intended to improve the health
    of mothers and children and to reduce mortality rates. However, the lack of
    equipment, medical specialists, data collection capabilities,

    and local government support for preventive health care limited the
    accomplishments of this program. Moreover, the FSM and the RMI programs were
    exempt from meeting 6 of the 18 performance measures for the program, and
    they had difficulty in meeting others, because of a lack of needed
    equipment, medical capacity, and support programs (such as Medicaid) that
    were available only in the United States.

    Additionally, the high mortality rate, a key measure of program success,
    could not be reduced because of health care limitations and the lack of
    basic sanitary conditions, like clean water and healthy food, necessary for
    public health. 24 Moreover, data collection limitations within the FSM and
    the RMI have hindered the ability of the HHS to determine program

    effectiveness. 25 Lastly, the U. S. MCH Program generally supplements state
    and local health care initiatives; both the FSM and the RMI governments
    lacked these state or local services. According to the FSM and the RMI MCH
    directors, because the FSM and the RMI relied on the program as their
    primary preventive health care system, the program was overwhelmed by the
    social and economic conditions that were causing declines in the general
    health of the populations, including maternal and child health. 26 The
    former U. S. MCH officer responsible for the FSM and the RMI programs was
    pessimistic about the ability of the MCH programs to succeed because of the
    social and economic problems in each nation. 27

    24 Officials from HHS said that similar limitations seriously impeded the
    goal of reducing infant mortality in many parts of the United States, as
    they do in the FSM and the RMI. 25 The U. S. MCH official in charge of the
    MCH program in the FSM said he had doubted the accuracy of the data the FSM
    states submitted to the FSM national government to send to the MCH program
    in Washington, D. C., but that verifying the accuracy of the data was not an
    option because of the travel costs involved.

    26 For example, the RMI reported that the health of the maternal and child
    population has declined as the rates of diabetes, hypertension, heart
    disease, tuberculosis, and malnutrition have risen, causing increases in
    infant and childhood illness. The RMI?s MCH Director said that, despite the
    assistance provided by the Maternal and Child Health program, the positive
    effect of the program was being blunted by the social, economic, and
    educational problems in the RMI. 27 In commenting on this report, HHS
    officials stated the current MCH program officer also acknowledges the
    overwhelming needs for technical assistance because of the social and
    economic problems in the FSM and the RMI.

     Housing Loans: This program was intended to provide housing loans to the
    most needy. However, legal requirements not designed for use in foreign
    countries precluded targeting loans to only the most needy. As a result, the
    program could not meet its performance requirement to target only the
    neediest in each country. To determine program

    eligibility, the Rural Housing Service (RHS) was required to use adjusted
    income limits set by the U. S. Department of Housing and Urban Development
    (HUD). HUD in turn used U. S. Census income data. Because the FSM and the
    RMI last participated in the U. S. Census in 1980, prior to their
    independence, there were no income data available from the U. S. Census
    Bureau. Instead, RHS used HUD?s ?Western Pacific

    Islands? adjusted income limits. These limits were relevant only to the
    population of Guam and were not an accurate measure for the much poorer
    populations of the FSM and the RMI. Consequently, most households in the FSM
    and the RMI qualified for the program. This violated the program eligibility
    regulations, which stated that it was to serve only those with less than 80
    percent of the local median income,

    adjusted for household size. Both nations have conducted censuses since 1998
    that contained information on household income, so such data was available.
     Disaster Assistance: This program was intended to help localities

    prepare for and respond to disasters. Although the program met its
    performance requirements and standards, it encountered conditions that
    significantly reduced potential program accomplishments and increased costs.
    28 For example, because of the vast distances involved and the absence of
    capabilities comparable to those in the United States, the implementation of
    FEMA?s disaster assistance programs has been costly, difficult, and labor
    intensive. In addition, according to FEMA documents, the cultural and social
    practices in the FSM and the RMI adversely affected the effectiveness of
    FEMA assistance. For example, contrary to FEMA?s mission to foster self-
    reliance for disaster preparedness and response, FEMA found that providing
    disaster assistance to the FSM and the RMI fostered a dependency on FEMA
    assistance. FEMA found that people who would otherwise rebuild their 28 FEMA
    maintains that it would be much more appropriate, cost- effective, and
    consistent

    with efforts toward self- sufficiency to assist the FSM and the RMI through
    other U. S. programs and agencies, such as the Office of U. S. Foreign
    Disaster Assistance in the U. S. Agency for International Development. The
    FSM and the RMI are independent countries and, according to FEMA officials,
    should be afforded the same assistance as other foreign nations. FEMA has
    formally notified the Department of State that it no longer finds it
    appropriate for FEMA to provide disaster assistance to the FSM and the RMI
    beyond 2003.

    lives immediately after an event did nothing until FEMA money and resources
    arrived. Lastly, FEMA officials said that, as a domestic agency, it was not
    structured or intended to provide disaster assistance to foreign countries.

     USPS: Postal Services were intended to provide for mail and mailrelated
    financial services between the United States and the FSM and the RMI.
    Although the program met its performance requirements and standards, it
    encountered conditions that significantly reduced potential program
    accomplishments and increased costs. For example, the postal

    service has had to contract for air transport of mail, at the cost of $2
    million annually, because of limited space on the few commercial flights to
    the region. Because flights to the region were limited, USPS was not able to
    meet delivery guarantees on certain classes of mail. Moreover,

    despite USPS?s investment in chartered flights, once the mail arrived, FSM
    and RMI postal services delayed delivering the mail to its citizens.
    Citizens from both nations said that mail was routinely 2 to 3 months late.
    (See figure 11.) In the RMI, mail often sat in the facilities, waiting for
    local postal officials to sort and place the mail in post office boxes. In
    the FSM, mail was delayed as it awaited clearance through customs.

    USPS operations in the FSM and the RMI have also proven costly. In addition
    to $5.9 million in costs reimbursed by Interior, USPS estimated that it has
    incurred an additional $30 million in extra mail transportation costs.

    Figure 11: Mail Awaiting Sorting and Placement in Post Office Boxes at the
    Pohnpei Post Office, FSM Source: GAO.

    Four Programs Were Two of the loan programs and two of the services have
    been effective.

    Effective These programs were (1) telecommunications loans, (2) electrical
    loans, (3) aviation services, and (4) weather services. These programs met
    their performance requirements and standards and did not encounter problems

    that reduced potential program benefits or substantially increased costs.
    These programs? success was partly attributed to their resource management
    approach. The two loan programs were effective in meeting

    their narrow program requirements to provide loans to areas that meet the
    economic and social conditions that make them eligible for the loans. In
    addition, USDA, which managed the loan programs, provided guidance and

    strong oversight during the construction of the telecommunication and
    electrical systems, to ensure that they met U. S. building standards. For
    the aviation and weather services, U. S. employees or well- trained
    nationals managed and performed the work.

    The following programs were effective:  Telecommunications Loans: The Rural
    Utilities Service?s

    telecommunications loans met its program goal to expand modern
    telecommunication facilities in remote areas by financing telephone system
    improvements in both nations. For example, in 1987, when USDA approved a
    loan to the FSM Telecommunications Corporation (FSMTC), the company had 1,
    300 telephone subscribers. By 1993, the telephone subscribers in the FSM had
    increased to 6,000. USDA ensured that both nations? telephone companies met
    the eligibility requirements of the program, conducted the feasibility
    studies necessary to determine

    their economic viability, had the telecommunications systems built to USDA
    specifications, and provided construction oversight to ensure that all
    specifications were met. (See figure 12.)

    Figure 12: FSM Telecommunications Corporation Building Exterior, Pohnpei,
    FSM

    Source: GAO.

     Electrical Loans: The Rural Utilities Service?s electrical loans were
    intended to expand access to modern electrical systems by providing loans
    for electrical power facilities, and the USDA met this programmatic goal in
    the RMI. 29 The RMI used the loan to build new electric power facilities
    that have allowed large increases in electricity 29 One FSM utility had a
    loan application pending with USDA as of October 2001.

    available to both homes and businesses. The 1999 generating station almost
    doubled the RMI?s electrical capacity and allowed the nation to meet its
    growing electricity needs. For example, the number of private electricity
    consumers rose by 11 percent and the number of new business users rose by 34
    percent between 1997 and 1999. USDA ensured that RMI?s power company met the
    eligibility requirements, conducted the feasibility studies necessary to
    determine their economic viability, had the power facilities built to U. S.
    specifications, and provided construction oversight to ensure that all U. S.
    specifications were met. (See figure 13.)

    Figure 13: Rural Utilities Service Electric Loan: New Electric Power
    Facility, Marshalls Energy Corporation, Majuro, RMI

    Source: GAO.

     Aviation Services: FAA effectively provided air safety services as
    required under the Compact. FAA provided (1) en route air traffic services,
    (2) flight inspections and equipment certifications, (3)

    assistance in developing and updating aviation procedures and standards, and
    (4) technical assistance to help the FSM and the RMI governments develop
    civil aviation safety authorities and aviation safety and certification
    programs. FAA was effective because of its direct management and
    implementation of program activities. Rather than

    provide funds directly to the FSM and the RMI governments for air safety,
    FAA provided the training, material, equipment, and facilities construction
    and maintenance necessary to meet FAA standards. For example, when FAA
    funded construction and maintenance, FAA selected the contractors to perform
    the work and provided oversight and contract management to ensure that the
    work met contract standards. (See figures 14 and 15.)

    Figure 14: Aviation Services: FAA- Provided Electrical Power Generator in
    Honolulu, Hawaii, Headed for the FSM and the RMI

    Source: GAO.

    Figure 15: Aviation Services: FAA- Provided Equipment in Honolulu, Hawaii,
    Headed for the FSM and the RMI

    Source: GAO.

     Weather Service: The NWS provided weather services as stipulated in the
    Compact. NWS provided the FSM and the RMI with the facilities, equipment,
    technical assistance, and resources needed to operate their weather
    services. To ensure that program goals were met, it maintained control of
    the funds provided to each government through cost reimbursement contracts.
    This allowed NWS to review and disallow inappropriate or unauthorized FSM or
    RMI expenditures. NWS officials also performed regular visits and monitored
    weather operations by

    reviewing required reports and weather data. In addition, NWS required that
    local FSM and RMI officials working for the weather stations met the same
    educational and proficiency standards as NWS employees in the United States.
    For example, NWS provided assistance to local nationals for up to 5 years of
    training so that they could meet NWS

    standards for meteorologists. (See figure 16.)

    Figure 16: Weather Service: Sign Showing Close Collaboration between NWS and
    Pohnpei Weather Service Office in Pohnpei, FSM

    Source: GAO.

    Three Loan Programs May The USDA operated the three loan programs for
    homeowners and utilities

    Face Future Repayment (telecommunications and electric power) discussed
    above. Because of Problems FSM and RMI dependence on U. S. assistance, a
    reduction in this assistance could result in future repayment problems.
    During the first 15 years of the

    Compact, U. S. funding to the FSM and the RMI was decreased every 5

    years, and the FSM government has estimated that the November 2000 U. S.
    proposal reduces real per capita income in 2017 by almost 40 percent from
    its 2001 levels. 30 Moreover, the United States has proposed an end to
    annual financial assistance to the FSM and the RMI in 2016, although the
    time for repaying these types of loans extends from 2017 to 2030.
    Administrators at all three programs were unaware that this extension could
    adversely impact their loan repayments. According to USDA officials, there
    were no requirements for the U. S. program officials to consider future
    reductions in U. S. economic assistance as a condition for extending

    authorized program assistance. Also, such considerations of future
    reductions in U. S. assistance would have significantly raised the price of
    loans to those needing assistance. Specifically:  Housing Loans: USDA did
    not, nor was it required to, consider the

    effect that a future reduction in U. S. economic assistance could have on
    the ability of its borrowers to repay their loans. USDA officials
    administered its housing loans and grants based on the applicants?
    eligibility for the program and their repayment ability at the time of loan
    closing, in accordance with the way in which the programs were administered
    in the United States. USDA officials said that they were not required to
    consider the effect that future reductions in U. S.

    economic assistance could have on the ability of its borrowers to repay
    their housing loans. Not considering the effect of such an economic downturn
    in nations whose entire economies could shrink dramatically put the U. S.
    government at risk of losing some $24.7 million in housing

    loans. In addition, many loans have a 33- year term, and some could have up
    to a 38- year term, far exceeding the time when U. S. economic assistance is
    scheduled to end. According to Rural Housing Service

    officials, if they had considered the effect of ending U. S. assistance
    payments, they would not have made the loans.

    30 The United States has not prepared a similar analysis regarding the
    effect of its funding proposal.

     Telecommunications Loans: Because USDA did not generally make such loans
    to foreign countries, it did not consider that U. S. assistance might be
    reduced in the future, jeopardizing loan repayments. Officials

    of both the FSM Telecommunications Company and the Marshall Islands National
    Telecommunications Authority stated that severe decreases in Compact funding
    could decrease their companies? revenues enough to jeopardize their ability
    to repay their USDA loans. 31  Electrical Loans: USDA?s feasibility study
    did not include the possibility that Compact funds might be severely reduced
    over the life of the loan,

    resulting in a decreased demand for power as the economy contracts.
    Officials of the Pohnpei Utilities Company and Marshalls Energy Company
    stated that severe decreases in Compact funding to the island nations could
    decrease their companies? revenues enough to jeopardize their ability to
    repay their USDA loans. Although in all three cases the FSM and the RMI
    governments have assumed responsibility for these secured loans if the
    borrowers were

    unable to pay, the dependence of the governments on U. S. funds may put such
    repayment at risk. According to an FSM analysis, under the November 2000 U.
    S. assistance proposal, which would decrease assistance levels, ?The economy
    would be caught in a vicious circle of low growth, compounded by a series of
    shocks, requiring downward adjustment, loss of real incomes, unemployment,
    and outward migration.? 32 In addition, USDA administrators had not
    adequately considered how their programs could be terminated if U. S.
    program assistance were to end in 2016.

    31 After USDA approval of the telecommunications loans, the Federal
    Communications Commission issued an order, effective January 1, 1998, to
    reduce the settlement rates paid by U. S. telecommunications companies to
    foreign companies for international calls originating in and terminating
    outside the United States. According to the order, these benchmark rates
    were necessary because, under the current system, the settlement rates U. S.
    carriers paid foreign carriers to terminate U. S.- originated traffic were
    in most cases substantially above the costs that foreign carriers incur to
    terminate that traffic. FSMTC and MINTA both protested that this action
    would seriously damage their revenues, cutting their income substantially
    and endangering the companies? ability to repay their loans to the

    U. S. government. Both companies relied on incoming long distance telephone
    calls for a significant portion of their revenue.

    32 ?The U. S. Compact Counter Proposal,? Economic Management Policy Advisory
    Team of the Federated States of Micronesia (Feb. 8, 2001).

    Most Programs Have We found that the FSM and the RMI?s administration of
    most of the 13 Accountability

    programs we reviewed did not ensure accountability. The accountability of
    these 13 programs varied, from being adequate to having a significant loss
    Problems of financial control, based on our review of audit and financial
    reports; discussions with U. S., FSM, and RMI program managers; and our
    evaluation of whether each program?s reporting requirements were met. Nine
    of the programs had poor accountability, and five of the nine had

    instances of theft, fraud, or misuse of federal funds. Four had adequate
    accountability, in large measure because program funds were controlled from
    the United States and little direct funding was provided to each nation. FSM
    and RMI Officials

    We found that nine programs in the FSM or the RMI had not met program
    Provided Inadequate accountability standards. These problems were documented
    in annual Accountability for Nine

    audit reports required under the Single Audit Act of 1984 (P. L. 99- 502)
    for Programs federal programs, technical reviews conducted by U. S.
    executive branch departments, and discussions with program managers. Each
    program had different accountability requirements.

    The following programs had instances of theft, fraud, mismanagement,
    inadequate accountability, or poor recordkeeping:

     The Pohnpei Head Start Program fired its entire accounting department in
    1999 for stealing program funds. A 1999 audit report identified $341,000
    that was unaccounted for and found significant mismanagement, fraud, and
    loss of control over finances. 33 In response to our questions about the
    report, Pohnpei program officials told us that the accounting department
    officials admitted to stealing about $11,500.

    They said that the head of the accounting department was forging checks and
    changing receipts in an attempt to cover up the theft, while her two
    assistants were stealing money donated by parents of children in the Head
    Start program. A 2000 review of the program in the RMI found that key
    management staff did not clearly understand the

    program?s 1997 performance requirements or their responsibilities. The 33
    HHS, in commenting on this report, said that the Pohnpei program
    subsequently provided appropriate documentation for the $341, 000 in
    questioned costs. However, neither HHS nor FSM officials indicated during
    the audit that the Pohnpei program subsequently provided appropriate
    documentation for the questioned costs. As a result, we were not able to
    independently verify HHS?s statement or review the supporting documentation.

    review also found that key management staff lacked training in basic
    financial requirements. Although U. S. program officials said that they
    provided training in response to these problems, RMI officials told us that
    this training was not sufficient for them to understand how to comply with
    the requirements.  For the Special Education Programs for Pacific Island
    Entities, both the

    FSM and the RMI failed to comply, according to audit documents, with
    requirements for (1) awarding contracts competitively, (2) financial
    reporting, and (3) reporting on property purchased with federal money.
    Under the Freely Associated States Educational Grant program in the RMI,
    both the Minister of Education and a staff person used program funds
    intended for teacher training to travel to Paris for more than 3 weeks for a
    1999 United Nations Educational, Scientific, and Cultural Organization
    meeting.

     Although the Pell Grants program in the FSM has had problems complying
    with the program?s accountability requirements since the early 1980s,
    improvements have resulted in the college?s meeting its accountability
    requirements for the past several years. For example, the 1997 audit
    questioned $359,000 in costs from audits performed in 1995,

    1996, and 1997. Furthermore, in 1995 the college discovered a ?double
    drawdown? of program funds of $1. 2 million and alerted the U. S. Department
    of Education. An audit the following year reported that the College of
    Micronesia had an outstanding liability to the U. S. Department of Education
    for $1.2 million. In response, the Department of Education placed the
    college under a provisional certification and

    conducted a technical assistance review in 1999. The review concluded that
    the colleges in both the FSM and the RMI lacked sufficient knowledge to
    administer the federal program adequately, and the Department of Education
    subsequently provided the necessary training.

    According to the FSM college president and its chief financial officer, the
    school has since instituted the improvements necessary to meet program
    requirements. The school received its first unqualified opinion in its 1999
    audit, 12 years after the Compact went into effect. According to FSM
    officials, the college also received an unqualified opinion from its
    auditors in 2000.

     The JTPA programs in the FSM and the RMI were exempt from having to meet
    the standardized reporting systems used by the U. S. Department of Labor to
    verify program performance. Department of Labor managers

    exempted the FSM and the RMI because they lacked the necessary data
    collection capabilities. Furthermore, U. S. program managers said that they
    generally ignored the performance data submitted by the two

    nations because it was considered unreliable. As a result, the Department of
    Labor cannot verify program performance.  Officials in the MCH program in
    the FSM state of Kosrae were not aware of any HHS reporting requirements and
    had not submitted any progress or financial reports to the FSM government
    for at least 2 years,

    according to the Kosrae MCH director. In addition, they lacked any
    supporting documentation on how program funds were spent. The FSM assistant
    director for public health confirmed this information and said that the
    government simply ?guessed? at Kosrae?s financial and

    performance data when submitting its annual report to HHS. 34  The Rural
    Housing Service in the FSM state of Pohnpei made housing loans to the FSM
    president and others that violated program regulations. The service also
    mismanaged more than $100,000 of local funds. The loan program was intended
    to provide loans to the economically disadvantaged. However, according to
    audit reports and rural housing

    officials, the local program manager provided 12 unauthorized loans that
    violated program regulations. These included loans to the FSM president, the
    head of the Rural Housing Services trustee agency, and others, which, among
    other problems, violated the program?s requirement that homes built with
    program funds be considered modest for the area. The president?s home
    exceeded this standard. In addition,

    the reports documented other violations of program regulations, including
    (1) a loan to the FSM president that exceeded USDA limits, (2) loans for
    income- generating buildings, (3) another loan for a

    ?nonmodest? home, and (4) numerous other weaknesses in internal controls.
    (See figures 17 and 18.)

    34 HHS officials, who were not aware of this situation, said that such
    fabrication could be considered ?criminal wrongdoing,? if true. They noted
    that under MCH guidelines, estimates were acceptable, and that all such
    estimates should be explained in a footnote. However, based on a review of
    the FSM?s 2000 Annual Report, none of the reported performance data from
    Kosrae were footnoted.

    Figure 17: Rural Housing Loans: Home of the FSM President, Financed with Two
    RHS loans; Typical RHS Loan- Financed Homes, Pohnpei, FSM

    Source: GAO.

    Figure 18: Rural Housing Loan: Home of Former Pohnpei State Housing
    Authority Director, Financed with an RHS Loan, Pohnpei, FSM

    Source: GAO.

     FEMA experienced fraud and mismanagement in the FSM and the RMI. In the
    FSM, for example, FEMA reported that some citizens bought new pickup trucks
    and other items not authorized by the home repair assistance. FSM officials
    said that they lacked the staff and expertise needed to audit and pursue
    most of these cases. In the RMI, FEMA provided the national government
    almost $70, 000 to replace flooddamaged hospital facilities, supplies, and
    equipment on the island of Ebeye. However, the RMI government never released
    the money to the

    hospital. FEMA has spent 3 years attempting to rectify this problem.
    According to FEMA officials, the incidence of fraud and mismanagement were
    no more prevalent in the FSM and the RMI than in the United States. However,
    FEMA could not take routine legal action

    to recoup fraudulent or mismanaged funds, such as garnishment of wages,
    since the FSM and the RMI are sovereign nations.  The USPS, which provided
    the FSM and the RMI with money orders and

    other financial services, reported theft and misuse of funds and had
    difficulty collecting owed funds from the FSM and the RMI postal systems.
    The FSM and the RMI have fired several staff for money order theft and
    misuse of funds, and both continue to experience theft and financial
    irregularities with money order and other cash transactions. In the largest
    known case, a postal worker stole $7, 000 in funds. Although the USPS had
    difficulty collecting owed funds from the FSM and the RMI postal systems,
    both nations ultimately transferred appropriate funds to USPS. In one FSM
    case, a special legislative appropriation

    enabled stolen and misappropriated funds to be repaid to USPS, although the
    payment was late. (See figure 19.)

    Figure 19: Postal Services: Open Safe Reflects Lax Security, Pohnpei, FSM

    Source: GAO.

    Program managers and staff often received little or no training in either
    accounting principles or program requirements, causing many of the
    accountability problems. For example, the Head Start program manager in
    Kosrae was not aware of Head Start performance or reporting requirements
    because he had never been trained. Also, the MCH program implementers in
    Kosrae had never received training on program performance goals and lacked
    the staff to meet reporting requirements. 35 In some cases, training was
    provided to the wrong officials. For example,

    in the RMI, a manager received training in how to meet MCH financial 35
    During our visit to Kosrae, the director of health services told us that the
    MCH/ Kosrae office had been unable to obtain the nation?s MCH goals. When we
    provided him with a copy of the MCH goals, the director told the FSM
    assistant secretary for health, ?Now we have our goals!?

    requirements, even though the Ministry of Finance, not the MCH office,
    controlled and reported on funding.

    FSM and RMI program managers for the education, job training, and health
    programs reported that they had difficulty in meeting federal accountability
    requirements. They said that their program staff needed extensive onisland

    training in how to comply with federal reporting requirements. Offisland
    training was not effective, the managers said, because (1) only one or two
    members of their staff could attend training; (2) the training was often too
    fast- paced for them to understand, or it involved technology not available
    in the FSM or the RMI; and (3) they lacked the skills and

    proficiency to transfer the training to their staff upon return. Moreover,
    the program managers said that on- island training for the entire staff was
    necessary to reduce the number of accountability problems commonly found in
    the federal programs.

    Adequate Accountability There was adequate accountability for the
    telecommunications and electric Existed for Four Programs

    power loans and the aviation and weather services. U. S. personnel managed
    these programs, controlled program accounting from the United States, or
    simply required the FSM and the RMI to meet loan repayment schedules. The
    following examples illustrate how the four programs provided adequate
    accountability:  Telecommunications Loans: When applying for loans to build
    new telecommunications facilities, USDA required both the FSM and the RMI

    telecommunications companies to meet a variety of USDA requirements. These
    requirements included conducting financial and engineering feasibility
    studies during the loan application process. These feasibility studies
    showed the projects to be viable. USDA

    ensured that the companies complied with their required safeguards,
    including regular inspection visits from Rural Utilities Service officials
    during construction. Once construction was completed, RUS officials

    continued to make periodic loan- servicing visits to review operations,
    maintenance practices, and procedures for problems that could impair the
    companies? ability to repay their federal loans. The RUS also required
    companies to submit annual financial and statistical reports, as well as
    financial statements to be reviewed in Washington, D. C., for

    indicators of financial downturns, improprieties, or management concerns.
    Electrical loans: Before loans were extended to build new power generation
    facilities, USDA required both local power companies to

    meet engineering and financial feasibility study requirements. These
    feasibility studies showed the projects to be both necessary and financially
    viable. The Marshalls Energy Company complied with required safeguards, such
    as building to U. S. standards. The company withdrew only the loan money
    actually needed for its facility and sent annual audited financial
    statements to USDA in Washington, D. C. The FSM?s Pohnpei Utilities Company
    has not yet received money for its proposed power generation facilities but
    has undertaken the same process.

     Aviation Services: The FAA assisted the FSM and the RMI with aviation
    services by providing materiel and equipment. FAA services included testing,
    inspection, and maintenance of equipment. In addition, facilities
    construction was performed either under direct FAA oversight or by
    contractors hired by FAA. Under this arrangement, FAA exercised

    significant control and accountability over the assistance and thereby the
    funding to the FSM and the RMI.  Weather Services: The NWS provided
    assistance to the FSM and the RMI through cost- reimbursable contracts.
    Expenditures made by the FSM

    and the RMI were submitted to the NWS for approval. If the expenditures (for
    example, to pay for salaries, materiel, and equipment) were appropriate,
    then the weather service authorized reimbursement of expended funds. A
    review of FSM and RMI records showed cases in which the NWS requested
    additional justification for expenditures and disallowed inappropriate ones.

    These programs share the common characteristics of having a narrow mission
    and being run directly by the U. S. agencies. The four programs achieved
    accountability largely because each agency controlled program

    funds from the United States, and little direct funding was provided to
    either nation.

    Federal Administration We found that the level of U. S. federal oversight
    over programs in the FSM Has Not Ensured

    and the RMI varied from adequate to almost nonexistent. Sources such as
    audits, financial reports, monitoring reports, and U. S., FSM, and RMI
    Financial

    program managers documented this lack of accountability. Neither the
    Accountability

    Department of the Interior, which was charged with monitoring and
    coordinating the individual federal programs, nor the State Department,
    whose ambassadors were responsible for the direction and coordination of U.
    S. agency officials in foreign countries, fulfilled these responsibilities,
    because federal program managers often bypassed both departments to work
    directly with FSM and RMI program managers. Each federal

    department was responsible for ensuring program compliance and
    accountability. Most federal departments could not ensure accountability,
    and oversight was generally neglected because of the cost, distance, and

    time involved. In addition to communications difficulties and distance
    barriers, the small size of the programs in the nations, compared with the
    programs? size in large U. S. states, contributed to poor oversight.

    Interior Did Not Provide The legislation and executive order implementing
    the Compact designated Effective Monitoring or Interior to coordinate and
    monitor program assistance to the FSM and the Coordination

    RMI. However, the department has neither monitored nor coordinated the
    program assistance. In 1987, the Secretary of the Interior determined that
    the most effective method to provide programs to the FSM and the RMI was to
    allow the other agencies to create a direct grant relationship with the
    Pacific Island governments. In addition, Interior officials reported that
    they were not given sufficient authority or resources to coordinate and
    monitor the activities of the departments providing program assistance.

    Instead, Interior?s principal role has been to provide supplemental
    technical assistance and respond to assistance issues identified by federal
    agencies or the FSM and the RMI. In a previous review, we found that the
    Department of the Interior had not maintained reliable data on the amount of
    assistance provided to each country, and that there were inconsistencies
    between Interior?s data and that of other agencies. 36

    According to Interior officials, Interior did not meet its legislative
    requirement to place three monitors in the region for the federal programs
    because no funding was provided for the positions. The Palau Compact of

    Free Association Implementation Act, Public Law 101- 219, states that the
    Secretary of the Interior shall station representatives in the FSM, the RMI,
    and Palau in order to provide federal program coordination and technical
    assistance to each government. However, Interior did not fill any of these
    positions until 1997, 11 years after the Compact went into effect and 8
    years

    after the public law was enacted. As of 2001, Interior had never stationed
    representatives in all three nations but instead relied on one
    representative to cover the numerous programs funded by the 19 agencies with
    program locations thousands of miles apart. Interior officials said that no
    funding

    was provided for these positions and that it was able to finance the one
    position only when funding was supplied in 1997. Disputes between the 36 See
    Foreign Relations: Better Accountability Needed over U. S. Assistance to
    Micronesia and the Marshall Islands (GAO/ RCED- 00- 67, May 31, 2000).

    Departments of the Interior and State concerning Interior staff selected to
    work in the RMI contributed to the lack of Interior staff for the RMI. In
    addition, other limitations negated the Interior representative?s ability to
    affect the management of federal programs. For example,  the Interior
    representative had no authority to modify or suspend

    mismanaged programs operated by other executive departments;  although the
    Interior official in the field sent weekly reports to Interior

    headquarters, the Interior representative made few if any recommendations to
    improve program coordination, and no program improvements were implemented
    for any program under review; and,

     U. S. departments often do not alert or coordinate with the Interior
    representative on proposed or continuing programs, thereby reducing the
    ability of the Interior to provide even informal coordination. The number of
    programs and the vast distances between islands also precluded effective
    monitoring by a single U. S. official. Department of the Interior officials
    in Washington, D. C., as well as the Interior representative and the U. S.
    ambassador to the RMI, all agreed that one person was insufficient to
    monitor federal programs in the region. For example, the Interior
    representative was not aware of problems identified in our review, such as
    the firing of the Head Start/ FSM accounting staff or the fraudulent
    activities of FSM postal employees. In his 1997 report to Interior, the

    Interior representative stated that grants should be strictly controlled and
    closely monitored, with full- time, on- site monitoring and administration
    by the U. S. government. This recommendation was never implemented.

    Interior officials said that the United States used to actively coordinate
    and monitor federal grants. Prior to the Compact, before the FSM and the RMI
    gained political independence, a large U. S. staff located in the region

    managed federal programs. For example, in 1985, the year before the Compact
    was signed, 31 U. S. officials provided management, coordination, oversight,
    and reporting for U. S. programs to the region. In addition, these officials
    could modify or suspend programs for poor performance. Once the Compact was
    signed, the FSM and the RMI began direct grant relations

    with each federal department, and the regional U. S. staff disbanded. Now
    Interior has only one official in the region, trying to help coordinate and
    monitor programs formerly managed by 31 staff members.

    State Could Not Fulfill The State Department, whose chief of mission was
    responsible for

    Program Coordination Role direction and coordination of U. S. agency
    officials in foreign countries,

    could not meet its responsibility because the U. S. program managers often
    bypassed the State Department and U. S. embassies. The Foreign Service Act
    of 1980 (P. L. 96- 465) states that the Department of State Chief of Mission
    was responsible for the direction and coordination of all U. S.

    government employees in the country. 37 Further, presidential instructions
    to U. S. Chiefs of Mission charge them with the direction, coordination, and
    supervision of all executive branch offices and personnel in their nation.
    However, both the former ambassador to the FSM and the current ambassador to
    the RMI said that most U. S. departments ignored this requirement and
    bypassed State because of their long- standing relationships with FSM and
    RMI ministries. 38 As a result, the Department of State, through its
    embassy, could not direct, coordinate, or supervise

    employees of other federal agencies in either the FSM or the RMI. Federal
    Departments We found that most federal departments have not provided
    adequate Generally Provide

    oversight of their programs in the FSM and the RMI. While weather and
    Inadequate Oversight

    federal aviation services? accountability requirements included independent
    verification of work performed by others, as well as tests, inspections, and
    frequent visits to the islands to ensure that services were meeting U. S.
    standards, most programs provided far less oversight. Of the

    educational, job training, and health programs, only Head Start and the
    special education program required on- island assessments. The job training
    and MCH programs simply reviewed information submitted by each nation, and
    U. S. program managers said that this information was too

    unreliable to determine program effectiveness. We found that many program
    managers knew little about the programs, as illustrated by the following
    examples:

     The SEPPIE program manager reported that she had never conducted a program
    assessment in the region, could not discuss the FSM or the RMI?s program
    objectives or accomplishments, and had no idea whether

    37 This does not apply to employees under the command of a U. S. area
    military commander. 38 In commenting on this draft, USDA officials said that
    they were not aware of this requirement and did not coordinate with State;
    in addition, the National Weather Service indicated that its policy is to
    coordinate with embassies, and their staff members always obtain country
    clearances prior to visits.

    the programs were operating as intended. Moreover, the manager was not aware
    that any on- island assessments were conducted, even though this was the
    only program in our review that conducted on- island assessments annually.
    Instead, the program manager relied on information collected from annual
    meetings in Washington, D. C. with representatives from the FSM and the RMI,
    and on semiannual reports,

    to monitor this program.  MCH program managers said that they had to rely
    on the FSM and the

    RMI?s annual reports to determine program effectiveness because they were
    the only data available, even though the program managers recognized that
    the reports lacked the reliability necessary to determine

    program effectiveness.  The JTPA programs in the FSM and the RMI were
    exempted from having to meet the program?s national standardized reporting
    systems, which

    the U. S. Department of Labor used to verify program performance in the
    United States. Department of Labor managers exempted these nations because
    they lacked the necessary data collection capabilities and the accuracy of
    the FSM and the RMI data was suspect. Labor officials said that they lacked
    the travel funds necessary to verify FSM or RMI reporting. The FSM and the
    RMI provided their program information to

    a Department of Labor regional office, where the data could be reviewed but
    not verified by program managers. The program managers said that they
    generally ignored all performance data that the two nations submitted
    because the data were unreliable and because the FSM and

    the RMI programs were considered a low priority as compared with the larger
    programs in the United States. Most program managers attributed the lack of
    oversight to the cost and time needed to visit the FSM and the RMI-- the
    islands are about 5,000 miles from the United States-- as well as to the
    small size of the programs relative to programs located in states like
    California and New York. For example,

    according to representatives from the Departments of Labor and of Education,
    lack of travel funds severely limited trips needed to provide oversight and
    reduced their ability to ensure program effectiveness.

    Federal Managers Federal program managers with programs in the FSM and the
    RMI were Concerned about Lack of concerned about the lack of impact,
    accountability, and training provided Impact and Accountability to the
    region. On this subject, the Federal Regional Council, a consortium of U. S.
    Programs in the

    of 20 federal departments and agencies based in San Francisco, including
    program managers for Head Start, the Job Training Partnership Act, and
    Pacific Maternal and Child Health in the Pacific area, released a March 2000
    report,

    Grants to the Outer Pacific. The report stated that all council members were
    concerned about the quality of results achieved with federal funds,
    accountability levels, and problems related to training. They found that
    fragmented services, inadequate systems of data collection, and inconsistent
    attention and follow- up attributable to limited time and travel budgets had
    all contributed to the sense that the federal government was simply
    ?throwing money at problems,? with little effect.

    The council reported that limited travel budgets, time, and technical
    assistance resources made it difficult for federal agencies to monitor
    programs and provide the consistent training necessary to improve program
    performance. It also noted that problems and solutions could not be
    identified from the United States. Council members reported that onsite
    reviews were necessary to disclose causes of program problems and provide
    the best solutions necessary for successful program performance. They also
    found that an on- site federal presence and follow- through were important
    to implement corrective action and coordinate federal programs

    for maximum effect. They concluded that it was essential that an on- site
    representative be appointed with a mandate to improve the effectiveness of
    federal programs. The report also recommended that a working relationship be
    established between the federal program managers and the Department of the
    Interior to better use federal programs to support monitoring, coordination,
    and training.

    Conclusions After 15 years of U. S. program assistance, this is an
    appropriate time to reassess the basis and conditions of the provision of U.
    S. domestic programs to the FSM and the RMI. Three considerations appear
    particularly important in this assessment.

    First, we found that many of these programs suffered from weaknesses in
    effectiveness and accountability, many of which were attributable to the
    difficulties associated with delivering programs designed for the United
    States to small island nations. For example, we found local administrative
    capabilities that were not able to meet the complex requirements of many

    federal programs, and U. S. administrative capabilities that were not
    designed to implement U. S. programs in foreign countries. These are likely
    to be difficult problems to address. Some of the problems are a consequence
    of distance, which is immutable, and the state of the islands? economic
    development, which is unlikely to improve in the near future.

    Second, the U. S. programs provided several fundamental government services
    in the FSM and the RMI. The provision of power, telecommunications,
    aviation, and postal services are critical for island economic development.
    Because of their importance, these services may well be government
    priorities if U. S. program support were to end. Other

    programs, such as Head Start, special education, and Pell Grants, primarily
    assisted individuals. Program administrators believed that these programs,
    while also important for economic development, would not be funded if the
    United States were to end its support.

    Finally, although the U. S. negotiating strategy calls for annual assistance
    to end after another term of assistance, the United States has made no such
    determination for the program assistance. We believe that the United States
    should establish a policy regarding the duration of ongoing program
    assistance during the current negotiations. If the United States were to end
    the program assistance for U. S. domestic programs when annual assistance
    ends, this would involve transferring the responsibility for financing and
    providing these services to the FSM and the RMI. Transferring these
    responsibilities to the FSM and the RMI will require U. S. agencies to
    emphasize the development of local capabilities. Without advance

    planning for an ?exit? for the program assistance, it is unlikely that a new
    round of U. S. assistance would advance the ability of either nation to
    provide these services at the end of the term of new economic assistance.

    As a result, the decisions that must be made are how to improve the
    performance and accountability of the programs and whether, and for how
    long, these programs should be provided to the two nations. We believe

    that these decisions should also be made in a way that is consistent with
    the U. S. strategy to end annual assistance at a set time.

    Recommendation for In order to assist congressional consideration of
    continued U. S. program

    Executive Action operations in conjunction with its consideration of new
    economic assistance to the FSM and the RMI, we recommend that the
    Departments of

    the Interior and State, in consultation with the relevant government
    agencies and the Federal Regional Council, jointly report to the Congress on
    (1) whether individual programs should be continued and for how long, with
    an exit strategy developed for any concluding program; (2) how local
    capabilities can be enhanced in order that the FSM and the RMI can provide
    the services; (3) how programs can be redesigned to work more effectively
    and efficiently, including the use of alternative mechanisms (such as grant
    consolidation, trust funds, foundations, or nonprofit

    organizations) to deliver the assistance; (4) how program coordination and
    accountability can be improved; (5) what government authority and resources
    are required to monitor and coordinate U. S. programs, grants, loans, and
    services; and (6) what the future roles and responsibilities of the
    Departments of the Interior and State should be in monitoring and

    coordinating U. S. programs, grants, loans, and services. Agency Comments We
    provided a draft of this report to the Departments of the Interior, State,

    Agriculture, Commerce, Education, Health and Human Services, Labor, and
    Transportation, as well as to the Federal Emergency Management Agency, the
    National Weather Service, the U. S. Postal Service, and the governments of
    the FSM and the RMI. The Departments of Agriculture, Commerce, Education,
    Labor, and Transportation, as well as the Federal Emergency Management
    Agency, and the U. S. Postal Service chose not to provide formal comments on
    the draft report. However, we incorporated their informal comments into the
    report as appropriate.

    The Department of the Interior generally agreed with the draft?s findings,
    conclusions, and recommendations. The Department of State generally agreed
    with our draft findings and recommendation but raised concerns about the
    department?s lack of technical expertise and resources to conduct the
    comprehensive assessment we recommended. State also

    recommended that no new programs be authorized without assessments to
    determine whether the programs could be implemented effectively in the
    region. The department also requested changes to improve the balance and

    accuracy of the draft. In our response to State?s comments, we agreed that
    State lacks the necessary resources and expertise and emphasized that State
    should use the resources and expertise of Interior and the other departments
    to implement our recommendation. The Department of Health and Human Services
    generally agreed with our draft report, stating that the

    Federal Regional Council?s Outer Pacific Committee had expressed similar
    concerns about the lack of impact, accountability, and technical assistance
    to the two nations. In our response to HHS?s comments, we incorporated their
    requested changes as appropriate.

    The FSM government also generally agreed with our findings, noting that
    performance and accountability problems could be expected in adapting
    programs designed for the United States to culturally different, undeveloped
    regions in the middle of the Pacific Ocean. However, the FSM government
    provided a number of specific suggestions to improve the format, balance,
    and accuracy of the draft. While the RMI government

    agreed that there were effectiveness and accountability problems in the
    programs, the RMI emphasized the need for these programs. The RMI?s comments
    also stated that the Department of the Interior, not the State Department,
    should manage the federal programs. In response, we noted that neither the
    draft nor the final report recommended that State be given management
    responsibility for the federal programs. The government also requested that
    additional information be added to six of the programs under review. We made
    a number of clarifications and additions in response to FSM and RMI
    comments.

    We are sending copies of this report to interested congressional committees
    and to the secretaries of the Departments of the Interior, State,
    Agriculture, Commerce, Education, Health and Human Services, and Labor, as
    well as to the administrator of the Federal Emergency Management Agency, the
    Postmaster General, and the presidents of the Federated States of Micronesia
    and the Republic of the Marshall Islands. We will also make

    copies available to other interested parties on request. If you or your
    staff have any questions regarding this report, please contact me at (202)
    512- 4128. Another GAO contact and staff acknowledgments are listed in
    appendix VIII.

    Loren Yager Director, International Affairs and Trade

    Appendi Appendi xes x I

    Objectives, Scope, and Methodology At the request of the Chairman of the
    House Committee on Resources; the Ranking Minority Member of the House
    Committee on International Relations; the Chairman of the House Committee on
    International Relations, Subcommittee on East Asia and the Pacific; and
    Congressman Doug Bereuter, we (1) assessed the use and effectiveness of key
    U. S. programs, loans, and services provided to the Federated States of
    Micronesia (FSM) and the Republic of the Marshall Islands (RMI); (2)

    evaluated whether the administration of these programs by each nation
    ensures financial accountability; and (3) evaluated whether the oversight of
    these programs by the U. S. government ensures financial accountability. To
    gather information for our analysis, we interviewed more than 100 key

    officials in the Departments of the Interior, State, Education, Health and
    Human Services, Labor, and Agriculture; in the Federal Aviation
    Administration, the National Weather Service (NWS), the Federal Emergency
    Management Agency (FEMA), and the U. S. Postal Service

    (USPS); and in the governments of the FSM and the RMI that were involved
    with the provision of U. S. assistance to the two nations between 1987 and
    2000.

    To assess the use and effectiveness of key U. S. programs and services
    provided to both nations, we reviewed the Compact of Free Association,
    legislation, regulations, and procedures to determine what the programs were
    intended to accomplish and the performance requirements used to assess
    whether programs were being effectively implemented. 39 To determine whether
    the programs were effectively implemented and performance requirements were
    met, we reviewed monitoring reports,

    program assessments, site visit reports, and progress reports. To ensure
    that we had a full understanding of the programs? intent and to determine
    whether the programs were effective, we conducted detailed interviews with
    program managers in Washington, D. C., San Francisco, and Honolulu; in the
    two Federated States of Micronesia- Pohnpei and Kosrae; and in Majuro, in
    the Republic of the Marshall Islands. In addition, we visited clinics,
    schools, post offices, weather stations, and other facilities to determine
    the use of the assistance, and we spoke with the intended beneficiaries of
    the assistance to obtain an independent assessment of its uses. To ensure
    accuracy, we shared our program summaries with program managers in the
    United States, the FSM, and the RMI, and we incorporated

    their comments into the final draft. 39 See appendix 2, Purpose and
    legislation section, for the specific program legislation we reviewed.

    To assess whether the administration of these programs, by each nation as
    well as by the U. S. government, ensured financial accountability, we
    determined the accountability requirements for each by reviewing
    legislation, regulations, and procedures. 40 To determine whether the
    programs were meeting their accountability requirements, we reviewed audit
    reports, financial reports, monitoring reports, and site visit reports. To
    ensure that we had a full understanding of the programs? accountability
    requirements and whether they were met, we conducted detailed interviews
    with program managers in Washington, D. C., San Francisco, and Honolulu; in
    the two Federated States of Micronesia- Pohnpei and Kosrae; and in Majuro,
    in the Republic of the Marshall Islands. In both nations, we conducted
    detailed interviews with the accounting departments of each program,
    reviewed findings of audit reports with them to obtain their views, and
    reviewed financial and audit reports for the past 5 years. We also conducted
    a detailed review of the past 14 years of audit reports from

    the four Federated States of Micronesia and the Republic of the Marshall
    Islands to identify historical trends in accountability problems for the
    region. To ensure accuracy, we shared our program summaries with program
    managers in the United States, the FSM, and the RMI, and we incorporated
    their comments into the final draft.

    We performed our work from August 2000 through December 2001, in accordance
    with generally accepted government auditing standards. 40 See appendix 2,
    Purpose and legislation section, for the specific program legislation we
    reviewed.

    GAO Assessment of 13 Programs in the Federated States of Micronesia and the

    Appendi x II

    Republic of the Marshall Islands The following provides our evaluation of
    the13 grant, loan, and service programs to the Federated States of
    Micronesia and the Republic of the Marshall Islands that we reviewed. Each
    table covers one grant, loan, or service and includes information on its
    intent, its performance and accountability standards, our assessment of
    whether the programs met their performance and accountability standards, and
    our assessment of any problems related to implementing programs in the two
    foreign countries.

    Table 2: The Head Start Program

    Purpose and The Head Start program of the Department of Health and Human
    Services (HHS) was intended to promote school legislation readiness by
    enhancing the social and cognitive development of low- income children
    through the provision of health, educational, nutritional, and other
    services to children and their families. The Head Start Act (P. L. 97- 35)
    authorized FSM and RMI participation.

    Requirements Performance: Head Start had numerous results- based performance
    standards to measure the quality and effectiveness of programs operated by
    Head Start agencies and the effect of services provided through the programs
    to children and their families. HHS required full on- site reviews at least
    every 3 years to determine compliance with program, administrative,
    financial management, and other requirements.

    Accountability: Quarterly financial reports and annual Program Information
    Reports were required. Audits were to be conducted annually to determine
    compliance with program standards and financial requirements.

    U. S./ FSM U. S./ RMI Assessment of

    Head Start?s overall effectiveness could not be determined because the
    program lacked impact data to evaluate its Perfor mance effect on school
    readiness and cognitive development. (GAO assessments of Head Start programs
    in the United States have concluded that, because of research limitations,
    program effectiveness could not be determined.) In addition, the program was
    not able to meet all its performance requirements and standards in the FSM
    and the RMI. The program was not able to meet all its performance

    The program was not able to meet all its performance requirements and
    standards. HHS found the FSM to be

    requirements and standards. HHS assessments found in general compliance with
    most performance standards, the RMI to be in general compliance with most of
    its despite identifying numerous problems. Problems performance standards,
    but HHS reviews found

    included lack of on- island medical capabilities, numerous instances of
    standards not being met. The

    inadequate space, and unsafe playgrounds. A 1999 1998 site visit found that
    no observations or review summarized the program?s ?paramount

    assessments of children?s progress were being done, challenges of inadequate
    funds, limited or unavailable and the Program Information Report was not
    accurate. A resources, and small windows of opportunity for

    2000 site visit found that management did not economic growth.?

    understand the 1997 performance standards or their responsibilities. HHS
    officials said they provided training later that year, although RMI
    officials said that the training received from HHS was helpful but not
    adequate

    to meet all program needs. RMI officials stated the program was effective,
    despite numerous constraints.

    Assessment of Despite its efforts, HHS was unable to ensure adequate
    accountability over the FSM and the RMI programs. HHS accountability used
    site visits and audit reports to identify problems and responded with
    training and technical assistance. However, the training did not result in
    full compliance with Head Start accountability requirements. After a 1999
    audit identified theft and mismanagement in Pohnpei, HHS took corrective
    measures.

    (Continued From Previous Page) The Pohnpei Head Start program had
    significant

    A 1998 HHS visit found financial management only accountability problems.
    The entire accounting division marginally in compliance and identified a
    number of was fired for theft in 1999. Nor was the FSM able to

    management weaknesses, including noncompliance with provide any financial or
    progress reports for the past 5 standards to maintain budgetary control, to
    provide cost years. In 1999, HHS found the program substantially out data on
    a timely basis, and to conduct inventories of of compliance in
    recordkeeping. Head Start properties. Problems in The program encountered
    conditions that significantly The program encountered conditions that
    significantly implementing U. S. reduced potential program accomplishments.
    HHS

    reduced potential program accomplishments. HHS programs in the

    reported that the FSM had difficulty meeting Head Start?s reported that the
    RMI had difficulty meeting Head Start?s

    FSM and the RMI performance standards because they were not designed

    performance standards because they were not designed for small island
    economies. Examples included unmet for small island economies. Examples
    included unmet playground and space standards attributable to limited

    health and dental requirements attributable to limited land, and unmet
    standards for mental, hearing, and

    medical staff; unmet partnerships requirements because dental health,
    because the FSM lacked the necessary few private sector companies existed
    for partnering; and medical facilities and expertise. In addition, FSM Head
    unmet environmental requirements because of high air Start officials were
    concerned that Head Start conditioning costs. In addition, officials were
    concerned accomplishments could be lost once children entered the

    that Head Start accomplishments could be lost once resource- poor elementary
    school system. According to children entered the resource- poor school
    system. For the FSM National Division of Education, 10 th -grade example,
    according to a 2001 RMI Ministry of Education students barely achieved the
    expected 2 nd -grade score of study, students leave the 8 th grade with
    ?barely a 2 nd -or U. S. students in the English language. 3 rd -grade level
    in English reading ability, and many were

    unable to read even in their own language.? a See Head Start: Research
    Insufficient to Assess Program Impact (GAO/ T- HEHS- 98- 126, Mar. 26,
    1998). Source: GAO.

    Table 3: The Special Education Program for Pacific Island Entities (SEPPIE)

    Purpose and legislation SEPPIE was a competitive, direct grant program
    provided by the U. S. Department of Education to supply special education
    and related services to children with disabilities as authorized under the
    Individuals with Disabilities Education Act, as amended (P. L. 91- 230). The
    act made children with disabilities aged 3 through 21 eligible for special
    education. Requirements Performance: The FSM and the RMI were required to
    provide information demonstrating that they will meet all conditions that
    apply to states under the Individuals with Disabilities Education Act. These
    special education grants were awarded on the basis of a competition among
    the eligible islands with the requirements that the funds be used to provide
    special education and related services to children with disabilities and to
    enhance the capacity of the FSM and the RMI to make available to these
    children free, appropriate public education. Performance goals of the grants
    that fulfill the performance requirements were explained in the grant

    applications by the special education departments of the FSM and the RMI.
    Each identified child with a disability was to receive specially designed
    instruction, at no cost to the parents, to meet the unique needs of that
    child. An annual report on grant performance was required for continued
    funding.

    Accountability: SEPPIE recipients were required to meet all conditions that
    applied to U. S. states and to use funds only to provide special education
    and related services directly to children with disabilities and to enhance
    capacity to make a free, appropriate public education available to all
    children with disabilities. The program was subject to the 1984 Single Audit
    Act. U. S./ FSM U. S./ RMI Assessment of

    SEPPIE fulfilled its performance requirements. Each country?s programs
    supported the Individuals with performance Disabilities Education Act?s
    requirements. This included (1) providing direct special education and
    related

    services, such as physical and speech therapists, for eligible children with
    disabilities; and (2) building the capacity to provide improved special
    education in the future, for example by providing teacher training and
    training for the various therapists in these programs, and (3) improving
    facilities. The students, GAO saw, seemed to be receiving the level of
    education the law requires. Teachers received training. Related service
    assistants visited homes. Special education classrooms existed that were
    better equipped than regular

    classrooms. However, progress toward achieving those goals was slow, because
    both school systems were ineffective. Teachers and administrators seemed to
    want to improve the systems. Both special education programs had increasing
    parental involvement as a specific goal. Both countries had active
    organizations for

    parents of children with disabilities. This was a step toward increasing
    oversight of the programs. About 6 percent of the total student body was
    identified

    About 4 percent of the total student body was identified for special
    education. for special education. Of the 24 inhabited atolls, 23 The FSM
    Special Education (SpEd) Program were staffed to provide special education
    services.

    performed its own annual internal evaluation of In 1999- 2000, the RMI
    Ministry of Education monitored individual state programs. Teams made up of
    the FSM

    37 schools on 10 atolls through personal visits. SpEd Director, another FSM
    state?s SpEd Director, a Between October 2000 and March 2001, 6 additional
    consultant from San Diego State University, a schools on 3 atolls were
    monitored. professor from the College of Micronesia, and parents visited a
    state program, reviewed progress toward its performance goals, assessed
    problems, and listened to parents.

    Assessment of During the annual audits of U. S. programs in the islands,
    both countries? programs were found to have accountability problems
    complying with federal regulations. These included problems (1) procuring
    materials and services competitively, (2) documenting the purposes and costs
    for expenditures, and (3) not fulfilling requirements for reporting the
    program?s financial status or the status of property purchased with federal
    money.

    (Continued From Previous Page) Problems in

    The program encountered conditions that significantly reduced potential
    program accomplishments. The U. S. implementing U. S. Department of
    Education provided no direct oversight. The Washington, D. C., program
    officer had never visited programs in the FSM

    these nations and had limited knowledge of the program. No other Department
    of Education Special Education and the RMI

    program officials had visited these island nations since 1992. Direct U. S.
    Department of Education oversight was a missing element in the FSM and the
    RMI special education programs, which were funded almost entirely by the
    United States, placing a greater responsibility on the department than it
    had in the United States.. This responsibility was greater because, although
    the Department of Education does not conduct any direct oversight of U. S.
    local special education programs, a variety of other organizations and
    government agencies

    provide oversight of the local school systems and their performance. No
    comparable system of oversight existed in the FSM and the RMI. That left the
    SEPPIE funds to be overseen by no one but the FSM and the RMI school
    systems. In the United States, federal funds supplement local and state
    funds. However, in the FSM and the RMI, U. S. funds accounted for the great
    majority of the school systems? budgets. SEPPIE dollars funded virtually the
    entire special education program. In the FSM, the states contributed some
    money for teachers from Compact funds. Both nations? school systems were
    staffed by underqualified teachers: for example, in the RMI, about 68
    percent of special education teachers and aides had only a high school
    degree. Because of the inadequate medical infrastructure in both the FSM and
    the RMI, the special education programs had to deal with severe cases of
    disability, where children?s problems were fundamentally medical rather than

    educational. Without the proper medical attention, the special education
    program could do little to solve the underlying medical conditions. Also,
    because of the poor economy and the high unemployment, there were few
    employment opportunities for children with disabilities once they had
    completed schooling. Source: GAO.

    Table 4: The Freely Associated States Educational Grant (FASEG) Program

    Purpose and FASEG funds were provided by the U. S. Department of Education
    through competitive, direct grants for local legislation programs to
    strengthen and improve elementary and secondary education. These included
    teacher training, curriculum development, instructional materials, and
    general school improvement. The program was

    authorized under the Elementary and Secondary Education Act of 1965, as
    amended (P. L. 89- 10). Requirements Performance: These grants were awarded
    on the basis of a competition among the eligible islands with the
    requirements that the funds be used only for programs described in the
    Improving America?s Schools Act.

    Performance goals for the grants that fulfill their performance requirements
    were explained in the grant applications by the state education departments
    of the FSM and the education ministry of the RMI: instructional materials,
    curriculum development, teacher training, etc. Department of Education
    program officials said that an annual report on grant performance was
    required for continued funding.

    Accountability: U. S. FASEG grantees were required to submit financial
    reports. The program was subject to the 1984 Single Audit Act. U. S./ FSM U.
    S./ RMI Assessment of

    FASEG has met its performance requirements and standards, according to its
    program documents. Each performance country?s programs supported the
    Improving America?s Schools Act?s requirements: for example, each state?s
    performance goals addressed (1) developing curriculum for improved
    achievement standards, (2) providing training for teachers, and (3)
    improving the involvement of parents and the community in the school system.
    The individual programs used the money to pursue the goals stated in their
    grant applications. Pohnpei used its funds to improve the curriculum and The
    RMI used its funds to develop curriculum, train train teachers while
    developing better ties with

    staff and teachers, improve community involvement, communities. Kosrae had
    similar goals.

    and provide instructional materials. Almost 70 percent of Pohnpei?s and
    nearly 40 percent

    Almost 40 percent of the RMI grant budget was spent of Kosrae?s grant budget
    were spent on supplies, on supplies, including instructional materials. The
    including instructional materials. These supplies

    other funds supported the goals outlined in the grant supported the goals
    outlined in the grant application. application.

    Assessment of During the annual audits of U. S. programs in the islands,
    both countries? programs were found to have accountability problems
    complying with federal regulations. Both countries had problems (1)
    procuring materials and services competitively, (2) documenting the purposes
    and costs for expenditures, and (3) fulfilling requirements for reporting
    the financial status of the program or the status of property purchased with
    federal money. Although financial reports were required, program officials
    in Washington, D. C., told us that only the annual performance report was
    required in order for the FSM and the RMI to receive funds.

    In the FSM, the state education offices were Audits and reviews identified
    questionable responsible for maintaining supporting documentation
    transactions. For example, when we were in the RMI, for FASEG. Pohnpei and
    Kosrae, according to the

    we found that about $13,000 in FASEG funds were annual audits, have had
    consistent problems adhering

    spent in October 1999 to send the minister of to U. S. federal property
    standards.

    education and the assistant secretary of education to a United Nations
    Educational, Social, and Cultural Organization meeting in Paris for more
    than 3 weeks. However, this information was not included in any

    audit reports submitted to the U. S. Department of Education. Further, in
    2000 and 1999, auditors found $350, 000 and $477,000, respectively, in
    contracts that did not appear to follow appropriate procurement guidelines.

    (Continued From Previous Page) Problems in

    The program encountered conditions that reduced potential program
    accomplishments. Furthermore, implementing U. S. progress toward achieving
    the performance goals was slow, because both school systems were
    ineffective. programs in the FSM For example, RMI students left the 8 th
    grade with barely a 2 nd - or 3 rd -grade level English reading ability, and
    and the RMI

    many were unable to read in their own language. The FSM students were
    comparable. The dropout rate was also extremely high. Many eligible children
    did not go to school, and if they did, the school buildings in many cases
    were not conducive to learning, oftentimes lacking running water and
    necessary space, as well as teachers and supplies. Moreover, both nations?
    school systems were staffed by underqualified teachers.

    The FASEG program was hampered by the lack of FSM and RMI financial support
    for the school systems. By contrast, in the United States, federal funds
    supplement local and state funds and account for only about 6.8 percent of
    total elementary and secondary school spending. However, the FSM and the RMI
    relied on federal funds for most of their school systems? budgets. For
    example, FASEG funds, along with other U. S. grants, provided almost all
    education material, and Compact funds provided money for teachers? salaries,
    building construction, maintenance, and repairs. Because the FSM and the RMI
    did not adequately fund their

    educational systems with local revenues, FASEG and other U. S. grants were
    not adequate to make significant improvements in the school systems. There
    was little U. S. oversight of the program. Although the Washington, D. C.,
    program officer knew about the program and its performance goals, she had
    never visited the nations before July 2001. According to Department of
    Education officials, the U. S. Department of Education did not perform
    direct monitoring of the use of the FASEG funds, and there were no periodic
    site visits or reports by the department. Great distances and expense
    prevented the program from performing a more regular cycle of onsite visits,
    annual or otherwise. Oversight of the FASEG program has generally included
    long- distance monitoring activities such as telephone, fax, and e- mail
    communications to address implementation issues, review performance reports,
    and conduct annual meetings of grantees for technical assistance workshops
    during the Department of Education?s annual regional meetings for Improving
    America?s Schools.

    a The program has been changed to include U. S. insular territories under
    the reauthorization of the Elementary and Secondary Education Act in fiscal
    year 2002. As of publication, the department is in the process of
    determining the program name and implementation timetable for new
    competitions and awards.

    Source: GAO.

    Table 5: The Pell Grants Program

    Purpose and Pell Grants, from the Department of Education, were intended to
    provide eligible undergraduate students with legislation financial
    assistance for educational expenses. The Higher Education Act of 1965, as
    amended (P. L. 89- 329),

    authorized FSM and RMI participation. Requirements Performance: Pell Grants
    were to provide eligible undergraduate students who have demonstrated
    financial need with grant assistance to help meet educational expenses. The
    student was expected to make satisfactory academic progress. Pell Grants may
    only be used for 1 year of remedial education.

    Accountability: Annual financial and audits reports were required. U. S./
    FSM U. S./ RMI Assessment of

    The program has met its performance requirements and standards. The Pell
    Grants program effectively provided performance grants to eligible FSM and
    RMI students. Because of low income levels, most students met the financial
    need requirement. Students from both nations used Pell Grants to attend U.
    S. colleges as well as their national college. From 1988 to 2000, Pell
    Grants provided 13, 704 eligible From 1993 to 2001, Pell Grants helped 4,375
    students students with grant assistance to attend the College of

    attend the College of the Marshall Islands. More than 90 Micronesia. About
    85 percent of the students received percent of the students received Pell
    Grants. U. S. and Pell Grants; most others were disqualified for not meeting

    RMI Pell Grant managers said the program was highly the academic achievement
    requirement. effective.

    Assessment of Financial accountability had improved. The Department of
    Education used financial and audit reports to identify accountability
    administrative weaknesses and provide training. U. S. officials said that
    accountability problems in the region were related to inadequate training
    necessary to comply with complex program requirements. The Department
    provided the FSM and the RMI with training in 2000. The FSM had
    accountability problems from the early A 1995 audit concluded that the
    College of the Marshall 1980s, including a $1. 2- million double drawdown in
    1994;

    Islands complied with all major requirements of the Pell the FSM repaid this
    in 1997. Because of recent Grants program. RMI officials said that the 1999
    audit improvements, a 1999 audit found that all Pell financial found that
    all Pell financial requirements were met. The requirements were met. All
    financial reports were college had all required annual reports for the past
    5 provided.

    years, with the exception of 1997. Problems in

    The program encountered conditions that significantly The program
    encountered conditions that significantly implementing U. S. reduced
    potential program accomplishments. Social and

    reduced potential program accomplishments. Social and programs in the

    economic conditions blunted the potential impact of Pell economic conditions
    blunted the potential of Pell Grants

    FSM and the RMI Grants to support the FSM?s development goals. Many to
    support the RMI?s development goals. One- half of K12

    freshman needed 1 to 2 years of remedial classes before graduates entered
    the college with the equivalent of a

    they could enter accredited courses, because the K- 12 4 th - to 6 th -grade
    U. S. education and required 1 to 2 years system did not prepare them for U.
    S. college- level of remedial classes. Because Pell Grants were limited to
    courses. Because Pell Grants were limited to 1 year of 1 year of remedial
    classes, many students could not remedial classes, many students could not
    qualify or qualify or afford the credited classes needed to graduate, afford
    the credited classes needed to graduate.

    contributing to the low 9 percent graduation rate. A 2000 Furthermore, the
    ability to meet national needs was

    study found that the RMI?s 1 st -12 th -grade school system hampered by the
    limitations of a 2- year college, lack of

    had not improved since 1986 and may have declined, in jobs, and low pay.
    Moreover, most college operating part because of a lack of RMI financial
    support. In funds came from U. S. funds, including Pell Grantsupported
    addition, U. S. funds, including Pell Grant- supported tuition payments.
    Loss of these funds could

    tuition payments, made up 90 percent of the college?s bankrupt the FSM
    college.

    annual budget, and any reduction could bankrupt the RMI college.

    Source: GAO.

    Table 6: The Job Training Partnership Act (JTPA) Program

    Purpose and JTPA, of the Department of Labor, was intended to establish job
    training programs that would result in increased legislation employment and
    earnings and enhance the nation?s productivity. Compact implementing
    legislation authorized that this program be made available to the FSM and
    the RMI. Further, the Job Training Partnership Act, as amended (P. L. 97-
    300), authorized FSM and RMI participation. As of July 1, 2000, the JTPA
    program was replaced by the Workforce Investment Act. Requirements
    Performance: Annual Job Training Plans were to include performance goals and
    past achievements for

    employment and retention. In addition, Labor was to determine whether
    performance measures were met and also to provide an annual report to the
    state governors on whether performance goals were met.

    Accountability: JTPA fund recipients must submit quarterly financial reports
    and annual independent audits. U. S./ FSM U. S./ RMI Assessment of

    The program was exempt from key performance Inconsistent data precluded
    determining JTPA?s

    performance requirements and standards because of inadequate effectiveness.
    The RMI reported that the percentage of data. In addition, the program was
    not effective. While trained adults finding jobs rose from 44 percent in
    1993 to the program trained 1,799 adults between 1995 and

    100 percent in 1999. The RMI credited its success to 1998, the percentage of
    adults who have entered

    paying employers to hire JTPA trainees and counting the employment fell from
    about 65 percent in 1990 to about

    ?self- employed? as employed, which was allowed under the 26 percent in
    1999. (By comparison, the U. S. average program. However, another RMI 1999
    report stated that was 66 percent.) Because of the worsening economy only 14
    percent found employment. Neither RMI nor Labor and lack of private sector
    jobs, FSM officials reported

    officials could explain the discrepancy. that they were training people for
    jobs that do not exist. Program graduates have found jobs in the United

    States. Assessment of

    Financial accountability needed improvement. Labor officials were unable to
    conduct assessments of past accountability performance because of unreliable
    data submitted by each nation and the lack of sufficient funds to provide
    on- site

    monitoring. The program manager said that none of JTPA?s reporting systems
    could be used to assess program effectiveness, and FSM and RMI data were not
    included in Labor?s annual report on whether performance goals were met. In
    addition, the JTPA programs in the FSM and the RMI were exempt from JTPA?s
    national standardized reporting system, used by the Department of Labor to
    verify program performance. Both the FSM and the RMI lacked the necessary
    data on unemployment rates, poverty levels, and welfare statistics used by
    Labor?s performance system to evaluate JTPA performance. Instead, Labor
    required each nation to establish goals and submit performance data.
    However, the Labor program manager was not able to verify the accuracy of
    the performance data submitted by the FSM or the RMI, and Labor program
    managers acknowledged the unreliability of the data. Labor did provide
    training and site visits from 1993 to 1997 in an attempt to resolve a
    variety of

    problems cited in their reports, such as inaccurate data and the inability
    of three of the four FSM states to meet their performance requirements.
    However, while the Labor program managers recognized the need for
    substantial training, lack of funds precluded providing this level of
    training. In fact, despite Labor?s training and other technical assistance,
    we found many of the same problems in 2001 that Labor identified in 1995.

    The FSM, with one exception, provided the required The RMI provided
    quarterly reports late in 1997, and they quarterly financial reports for
    1995 through 1999. were not provided at all in 1996, though they were Annual
    audits were conducted, and they document submitted at a later date. A
    limited review of audit reports performance and financial accountability
    problems. provided in the RMI found a variety of accounting problems For
    example, the 1999 audit found no evidence that and questioned costs. For
    example, in 1994, $8,500 was trainees attended or completed training
    programs.

    advanced to a vendor for supplies that were still not delivered as of 1997.

    (Continued From Previous Page) Problems in

    The program encountered conditions that significantly reduced potential
    program accomplishments. JTPA and its implementing U. S. successor, the
    Workforce Investment Act, were designed for the economically advanced U. S.
    states expected to programs in the

    have the staff and financial resources to conduct oversight and provide the
    necessary assistance to ensure that FSM and the RMI performance standards
    were met, according to Labor officials. The FSM and the RMI lacked these
    capabilities, and U. S. Labor lacked the resources necessary to assist the
    FSM and the RMI. In addition, both nations had high unemployment rates (the
    RMI?s 1999 unemployment rate was 31 percent) and little private sector
    activity. The

    primary employer of JTPA graduates had been the government sector, but both
    nations have implemented government layoffs and reduced the hiring of JTPA
    graduates. JTPA graduates often migrated in search of betterpaying jobs.

    Source: GAO.

    Table 7: The Maternal and Child Health (MCH) Block Grants Program

    Purpose and MCH, of the Department of Health and Human Services (HHS), was
    authorized by Title V of the 1935 Social legislation Security Act, as
    amended (49 Stat 620). MCH was intended to help states to provide mothers
    and children (in

    particular those with low incomes) access to quality health services and to
    reduce infant mortality and the incidence of preventable disease. The block
    grant allowed states to implement the program with maximum flexibility and
    minimum reporting requirements. Requirements Performance: Annual
    applications must be submitted that include a plan for meeting and funding
    health care needs. The MCH program had 18 national performance measures and
    6 national outcome measures, such as

    prenatal care, immunizations, and mortality rates; states develop 7 to10
    additional measures. MCH officials stated that these measures were ambitious
    national health goals and that many states had not met all these goals. MCH
    officials said that it was not expected that all performance measures would
    be met in any given state and that they were targets only.

    Accountability: An annual report must be submitted to evaluate the extent to
    which the state has met its goals and objectives and the extent to which
    funds were spent consistent with the state?s application. Audits were
    required every 2 years. U. S./ FSM U. S./ RMI

    Assessment of The program could not meet all its performance measures. In
    addition, the FSM and the RMI data limitations, performance combined with
    the small population, precluded an accurate assessment of MCH effectiveness.
    Because of

    unreliable data, for example, neither nation could document annual decreases
    in mortality rates, a key measure of program effectiveness in states with
    large populations and more advanced data collection systems. The FSM
    reported that it was able to meet some The RMI reported that it met some
    national performance national performance measures, such as those for
    measures for immunizations, breast- feeding, and prenatal immunizations and
    breast- feeding, but was not able to care but was not able to meet other
    measures, such as meet other measures, such as Pap smears or those screening
    newborns for a variety of illnesses. Morbidity for prenatal care (fewer than
    10 percent of pregnant

    (illness) rates were also increasing in areas targeted by women received
    early prenatal care in 1999). MCH.

    Assessment of In accordance with MCH guidelines, HHS officials said that
    they provided limited oversight and had not conducted accountability any
    rigorous assessment in the FSM or the RMI. Instead, HHS relied on its annual
    assessments of the FSM and

    the RMI annual reports. HHS officials stated that they must rely on these
    reports, despite the limited accuracy of the data. These limitations make it
    difficult to determine FSM and RMI progress toward meeting MCH performance
    goals.

    The FSM provided the annual reports as required. The RMI provided the annual
    reports as required. Audits Audits were conducted as required, but neither
    FSM

    were conducted as required, but neither RMI nor U. S. MCH nor U. S. MCH
    program officials had read them. officials had read the reports. According
    to U. S. MCH According to U. S. MCH officials, this responsibility
    officials, this responsibility rests with HHS financial staff.

    rests with HHS financial staff. Problems in

    The program encountered conditions that significantly reduced potential
    program accomplishments. The FSM and implementing U. S. the RMI were exempt
    from 6 of the 18 national performance measures and had difficulty meeting
    others because programs in the

    MCH was designed for use in the United States. In addition, the FSM and the
    RMI had difficulty in accurately FSM and the RMI reporting on its
    performance measures because the MCH reporting system was designed for use
    in the United States, where the U. S. Vital Statistics System has been
    developed over the past 65 years. An MCH official

    estimated that the FSM and the RMI data collection capabilities were 20 to
    30 years behind those of the United States. Moreover, U. S. per capita
    spending on health care was about $4,000, as compared with $250 in the FSM
    and the RMI, and both nations lacked the level of medical expertise,
    facilities, and support services used by MCH in the United States. For
    example, MCH generally supplements Medicaid, state health programs, and
    private health care systems in the United States, while the FSM and the RMI
    used MCH as their primary preventive health care system.

    Source: GAO.

    Table 8: The U. S. Department of Agriculture?s (USDA) Rural Housing Service
    (RHS) Housing Loan Program

    Purpose and The USDA?s RHS has provided direct housing loans and grants for
    single- family dwellings among other legislation services. RHS was
    authorized under the Housing Act of 1949, as amended (P. L. 81- 171).

    Requirements Performance: Section 502 of the Housing Act of 1949, as
    amended, allowed loans to low- income borrowers to buy, build, rehabilitate,
    improve, or relocate eligible, modest dwellings for use by the borrower as a
    permanent residence. Section 504 allowed loans and grants to very low-
    income homeowners to make general improvements to their homes as long as the
    dwelling remained modest and was not used for commercial purposes. To be
    eligible, applicants were required to have low or very low incomes ?Low
    income? was defined as an adjusted income that was greater than the
    Department of Housing and Urban Development?s (HUD) established very low-
    income limit, but that did not exceed the HUD established low- income limit
    (generally 80 percent of median income adjusted for household size for the
    area where the property was located. ?Ver y l ow income? was defined as an
    adjusted income that did not exceed the HUD- established very low- income
    limit

    (generally 50 percent of median income adjusted for household size) for the
    area where the property was located. For Micronesian or Marshallese
    applicants, their income had to be ?low? or ?very low? as determined by the
    Department of Housing and Urban Development?s Adjusted Income Limits for
    Western Pacific Islands. Section 502 loan terms extended for up to 33 years
    and in some cases 38 years but were not to exceed the expected useful life
    of the property as a dwelling, at a subsidized interest rate that varied
    with the borrower?s income. Section 504 loan terms extended for no longer
    than 20 years, at 1 percent interest. Building sites could be inspected by
    RHS officials during construction. Loans and grants had to be deposited into
    a

    supervised account to ensure that funds were disbursed for work completed.

    Accountability: Local Rural Housing Offices were to be subjected to a State
    Internal Review (SIR) at least once every 5 years. In instances where
    problems existed, reviews could be performed more often at the discretion of
    the state director.

    For each construction or rehabilitation loan, inspections should have
    occurred as contractors were paid for work completed. No post- construction
    reports were requested or required, although supervised bank accounts were
    to be reconciled. USDA delegated responsibility for this program to the
    local RHS representative, the community development manager.

    U. S./ FSM U. S./ RMI Assessment of

    Legal requirements not designed for use in foreign countries precluded
    targeting loans to the most needy. The performance Rural Housing Service?s
    compliance with its legal and program requirements inadvertently resulted in
    its not

    targeting housing assistance to low- and very low- income households,
    thereby providing assistance to households whose incomes exceeded the local
    low- and very low- income levels. This was not attributable to a deficiency
    in the FSM or the RMI but to the legal requirement that RHS was required to
    use adjusted income limits set by the Department of Housing and Urban
    Development (HUD) to determine program eligibility. By the Housing Act of
    1949 as amended, RHS was required to use income levels set by HUD. HUD in
    turn used U. S. Census income data. Because the FSM and the RMI last
    participated in the U. S. Census in 1980, prior to their

    independence, there were no current income data available from the U. S.
    Census Bureau for HUD to use in writing adjusted income limits on which
    program eligibility was based, according to U. S. officials. RHS had used
    adjusted income limits published as HUD?s ?Western Pacific Islands? adjusted
    income limits table. According to a HUD official, these data were relevant
    only to the population of Guam and were not comparable to the much poorer
    populations of the FSM and the RMI. As a result, most households in the FSM
    and the RMI qualified for

    the program, even though the regulations stated that it was to serve those
    with less than 80 percent of the local median income, adjusted for household
    size.

    (Continued From Previous Page) Although many houses were built and repaired
    in

    With the support of the RMI government, the RHS was accordance with the
    requirements, the Pohnpei RHS increasing the programs provided in the RMI
    and office clearly violated program requirements with some extending them to
    Ebeye on the Kwajelein Atoll.

    loans, including loans to the FSM president and the head of the local
    housing trustee agency that works with the RHS office. a Specifically, the
    Pohnpei office (1) made loans to 12 borrowers who constructed or

    repaired houses that were subsequently used for income- producing purposes;
    (2) made loans to 2 borrowers, including the president, who constructed
    houses that exceeded what would be considered a ?modest design?; and (3)
    approved a loan to the FSM president that exceeded the authorized maximum
    loan limit by $15, 000. According to the Department of the

    Interior audit report, these problems occurred because the Pohnpei office
    (1) was not aware that the regulations prohibited using loans for commercial
    purposes, (2) did not adequately review loan

    documents, (3) did not believe that one house was unacceptably elaborate,
    and (4) did not adequately monitor the construction of the elaborate house.

    Assessment of Accountability was insufficient and ineffective. The Hawaii
    State Office failed to exercise adequate oversight in accountability the FSM
    and the RMI. Because of the distance and cost, the RHS state office in
    Hawaii had not performed a

    state level evaluation of the FSM and the RMI offices since 1993. The SIR
    for the Pohnpei office in 1999 was the first since 1993.

    (Continued From Previous Page) The Hawaii State Office suspended loan-
    making in

    Since uncovering the problems in Pohnpei, RHS has Pohnpei and the rest of
    the Western Pacific because of

    increased its oversight of the RMI program. In May high delinquency rates
    from June 1998 until June 2001, the Hawaii State Office conducted a State
    1999. In December 1998, the Hawaii State Office Internal Review for the
    local office in Majuro. The identified irregularities in loans made to the
    president

    review team discovered weaknesses in the Section of the FSM. On January 8,
    1999, the state office 502 and 504 programs and instructed that more
    instructed the Rural Development manager in Guam,

    attention be paid to the programs. Still, because of the who had direct
    oversight of the Pohnpei local office, to relatively strong compliance, no
    further state internal review loans made by the Pohnpei office. This review
    reviews were scheduled until 2006.

    found that the total outstanding loan amount of approximately $95, 000
    exceeded the maximum loan limit of $81,548. Upon these findings, the state
    office revoked the loan- making authority of the Community Development
    manager in Pohnpei on February 19,

    1999. On January 12, 1999, the Department of the Interior Inspector General
    began an audit of the Pohnpei office at the request of the U. S. deputy
    chief of mission at the Pohnpei embassy. Only after these events was a State
    Internal Review undertaken in July 1999 by the Hawaii State Office. Other
    audits ensued.

    The Hawaii State Office demanded and collected the FSM president?s loans in
    full on June 8, 2000. The next day, June 9, 2000, the Pohnpei office was
    closed and the Community Development manager removed at the insistence of
    the U. S. embassy. The office was quickly reopened under the management of
    U. S. citizen employees of USDA. Since uncovering the problems in Pohnpei,
    RHS has increased its oversight of the other FSM programs. In May 2001, the
    Hawaii State Office conducted a State Internal Review for the local office
    in Kosrae. The review team discovered weaknesses in the Section 502 and 504
    programs and instructed that more attention be paid to the programs.

    Still, because of the relatively strong compliance, no further state
    internal reviews were scheduled until 2006. Problems in

    The timeline for repayment of many of these loans extends beyond the end of
    further Compact assistance. implementing U. S. Because USDA began this
    program in the FSM and the RMI before independence and did not modify the
    programs in the FSM

    program when the islands became foreign countries, USDA failed to consider
    that future reductions in U. S. and the RMI economic assistance could affect
    the ability of its borrowers to repay their loans. In addition, some loans
    had up to a 33- year team, and some had a 38- year term, far beyond the time
    when U. S. economic assistance is scheduled to end. Time differences made it
    difficult for RHS borrowers to contact USDA?s Centralized Servicing Center
    in St. Louis by telephone. In addition, it put the burden of repayment
    tracking and collection on the local

    RHS offices and officials in the islands. The Rural Housing Service?s (RHS)
    compliance with its legal and program requirements inadvertently resulted in
    its not targeting housing assistance to low- and very low- income
    households. a These issues were extensively covered in these reports: U. S.
    Department of the Interior Office of the Inspector General, Audit Report:
    Pohnpei Local Office, Rural Development Program, U. S. Department of
    Agriculture, Federated States of Micronesia, Report No. 99- I- 953
    (Washington, D. C.: Department of the Interior, Sept. 1999); and U. S.
    Department of Agriculture, State Internal Review (SIR) Report, Pohnpei Local
    Office (Hawaii State Office: U. S. Department of Agriculture, July 12- 22,
    1999).

    Source: GAO.

    Table 9: U. S. Department of Agriculture?s (USDA) Rural Utilities Service
    (RUS) Telecommunications Loans Program

    Purpose and The Rural Electrification Act of 1936, as amended (49 Stat
    1363), authorized USDA to make loans for legislation furnishing and
    improving telephone service in rural areas. The loans were intended to be
    used to furnish,

    improve, expand, construct, and operate telephone facilities or systems in
    rural areas. Compact- implementing legislation authorized programs of the
    Rural Electrification Administration to be made available to the FSM and the
    RMI. The Rural Utilities Service was the successor to the Rural
    Electrification Administration. Requirements Performance: Telecommunications
    facilities were required to be built and operated according to USDA
    specifications, and loans were required to be repaid in a timely manner. The
    length of the loans was not

    allowed to exceed the expected life of the equipment built, except as
    approved by the administrator of RUS. The interest rate varied by the type
    of loan: hardship loans were at 5 percent; cost of money loan rates varied
    but could not exceed 7 percent.

    Accountability: Each loan application was subject to review and to
    engineering and financial feasibility studies. A variety of safeguards were
    in place to protect U. S. funds. The borrower received no loan funds until
    he showed that the work was either under contract or completed. As
    contractors completed phases of each project, the borrower?s engineer and
    architect were required to provide extensive documentation to RUS. RUS
    inspected the site at the completion of major project phases. After
    construction, annual audits kept USDA aware of the companies? financial
    status. U. S./ FSM U. S./ RMI Assessment of

    This program met its performance requirements. Both companies, the FSM
    Telecommunications Corporation performance (FSMTC) and the Marshall Islands
    National Telecommunications Authority (MINTA), provided access to telephone
    service to a significant portion of the national populations. They were also
    repaying their loans. The loan to FSMTC totaled $39.9 million for 35 years,
    at 5 percent interest. The loans to MINTA totaled $22.80 million and were
    also for 35 years, at 5 percent interest.

    Assessment of Accountability was effective. Both countries?
    telecommunications companies were subject to the feasibility accountability
    study requirement. Both feasibility studies showed the projects to be
    financially viable. USDA and the companies complied with required
    safeguards. Each company was subject to loan fund and accounting reviews
    during construction. Each audit had minor findings that were quickly
    resolved. The Rural Utilities Service- financed projects had strict
    oversight by USDA employees, who required the builders to meet USDA
    specifications.

    (Continued From Previous Page) Problems in

    The program encountered conditions that could significantly increase costs
    to USDA. For example, several implementing U. S. developments could
    jeopardize loan repayment. Although the feasibility studies predicted the
    projects? viability, programs in the FSM

    the studies did not assess the possibility that Compact funds might be
    severely reduced over the life of the and the RMI

    loans. During the first 15 years of the Compact, U. S. funding to the island
    nations was decreased every 5 years. Officials of both companies stated that
    future severe decreases in Compact funding to the island nations could
    decrease their companies? revenues enough to jeopardize their ability to
    repay their USDA loans. In addition, USDA administrators had not adequately
    considered how their programs could be terminated if U. S. program
    assistance were to end in 2016. Also, in 1997 the Federal Communications
    Commission issued

    an order to establish benchmarks that would govern the international
    settlement rates that U. S. carriers were permitted to pay foreign carriers
    to terminate international traffic originating in the United States.
    According to the order, these benchmark rates were necessary because under
    the current system, the settlement rates that

    U. S. carriers paid foreign carriers to terminate international traffic
    originating in the United States were substantially above the cost that
    foreign carriers incurred to terminate that traffic. FSMTC and MINTA both
    protested that this would seriously damage their revenues, cutting their
    income substantially and endangering the companies? ability to repay their
    loans to the U. S. government. Both companies relied on incoming long
    distance telephone calls for a significant portion of their revenue. As of
    October 2001, settlement rates had not

    been adjusted, but negotiations were underway between U. S. carriers and
    FSMTC and MINTA to reach an agreement on this issue. The loan to MINTA was
    guaranteed by the government of the Marshall Islands. The loan to FSMTC was
    secured by the facilities of the company. Under the November 2000 U. S.
    proposal for future FSM assistance, U. S. funding would decrease, and as it
    decreased, real per capita gross domestic product (GDP) in the islands would
    also decrease. As GDP decreased, funds available to the governments

    would also decrease, calling into question the governments? ability to repay
    any guaranteed loans. Source: GAO.

    Table 10: The U. S. Department of Agriculture?s (USDA) Rural Utilities
    Service (RUS) Electrical Loans Program

    Purpose and legislation RUS electrical loans, authorized under the Rural
    Electrification Act of 1936, as amended, were intended to furnish and
    improve electrical service in rural areas and to finance the construction of
    electric distribution, transmission, and generation facilities. Compact-
    implementing legislation authorized programs of the Rural Electrification
    Administration to be made available to the FSM and the RMI. The Rural
    Utilities Service was the successor to the Rural Electrification
    Administration.

    Requirements Performance: Electrical facilities were to be built and
    operated according to USDA specifications, and the loan( s) were to be
    repaid in a timely manner. The terms of the loans varied up to 35 years but
    were not to exceed the useful life of the equipment built. The USDA
    regulations defined electrical engineering, architectural and design
    policies and procedures, electric system construction policies and
    procedures, and electric standards and specifications for materials and
    construction. Each loan application was required to be reviewed and assessed
    through detailed engineering and financial feasibility studies to determine
    the

    usefulness of the facilities and the borrower?s ability to repay the loans.

    Accountability: A variety of safeguards were in place to protect U. S.
    funds. The borrower was to receive no loan funds until it showed that the
    work was either under contract or completed. Once the borrower received
    funds, it was to submit detailed financial reports and annual audited
    financial statements. RUS field accountants perform a loan review to ensure
    that all funds have been expended for the purposes for which they were
    granted. On- site inspections of facilities were supposed to occur every 3
    years to ensure that the facilities were being maintained in a satisfactory
    manner. U. S./ FSM U. S./ RMI Assessment of

    This program has met its performance requirements to date. Both local power
    companies were subject to performance engineering and financial feasibility
    study requirements. Feasibility studies showed the projects to be both

    necessary and financially viable. No loans have yet been made to FSM
    electric utilities. The Marshalls Energy Company?s (MEC) RUS loan The
    Pohnpei Utilities Company (PUC) currently has an financed the construction
    of a new power plant in

    application pending with RUS. No construction has Majuro, consisting of two
    6.4- megawatt diesel engines occurred. Approval of the application was
    contingent and related facilities. This was the first RUS electrical on the
    PUC?s obtaining clear title to a parcel of land as loan to the FSM, the RMI,
    or Palau. a The new facilities

    a site for the plant. This would provide additional became functional in
    December 1999. MEC borrowed power to the main island of Pohnpei State.

    about $12 million. The terms were 6.9 percent for 20 years. Assessment of
    Accountability was effective. The Rural Utilities Service- financed projects
    had oversight by USDA- approved accountability consulting engineers, who
    required the builders to meet USDA specifications. USDA and the companies

    complied with required safeguards. PUC had not yet received loan approval as
    of October 2001. MEC borrowed only the money actually needed. MEC had sent 1
    year?s audited financial statements. MEC came through loan fund and
    accounting reviews during construction, with minor findings that were
    quickly resolved. Problems in

    Future developments may jeopardize loan repayment. Although the financial
    feasibility studies predicted the implementing U. S. projects? viability,
    neither study assessed the possibility that Compact funds might be reduced
    over the life of programs in the FSM

    the loans. Indeed, during the first 15 years of the Compact, U. S. funding
    to the island nations was decreased and the RMI every 5 years. Officials of
    both companies stated that future severe decreases in Compact funding to the
    island nations could diminish their companies? revenues enough to jeopardize
    their ability to repay their USDA loans. RUS managers stated that they had
    discussed the possibility of severely reduced funding to the FSM and the RMI
    and had decided that such a funding decrease was unlikely. The MEC provided
    documentation showing that its leases for property on which the plant would
    be built were extended until 2017. MEC also provided documentation that the
    Republic of the Marshall Islands? legislative assembly, the Nitijela,
    authorized the Marshall Islands to guarantee the repayment of the loan.
    Under the November 2000 proposal for U. S. assistance to the FSM, U. S.
    funding would decrease and, as it decreased, real per capita gross domestic
    product (GDP) in the islands would also decrease. As GDP decreased, funds
    available to the governments

    would also decrease, calling into question the governments? ability to repay
    any guaranteed loans.

    a Palau was another nation that, along with the FSM and the RMI, is a Freely
    Associated State and likewise was formerly subject to U. S. administration
    under the Trust Territory of the Pacific Islands. Source: GAO.

    Table 11: The Federal Emergency Management Agency (FEMA) Program

    Purpose and FEMA assistance was intended to help states and localities
    respond to, plan for, recover from, and mitigate against legislation
    disasters. Disaster assistance services and programs were to be made
    available to the FSM and the RMI in the same manner as assistance was made
    available to a U. S. state. The assistance was to be provided in accordance

    with the Disaster Relief Act of 1974, as amended, and applicable executive
    orders and FEMA regulations. FEMA?s authority for conducting disaster
    assistance in the FSM and the RMI was contained in the Compact of Free
    Association, sections 221 and 232, and in article X of the Federal Programs
    and Services Agreement concluded pursuant to the Compact of Free
    Association.

    Requirements Performance: FEMA was to make disaster preparedness improvement
    grants on an annual basis and to provide hazard mitigation grants and
    disaster assistance as determined by the president. The actual amount of
    direct disaster assistance provided in a given year varied and was
    completely dependent on U. S. presidential disaster

    declarations.

    Accountability: According to FEMA- provided documents, FEMA exercised
    accountability over a variety of programs to the FSM and the RMI, including
    disaster preparedness grants, for which it awarded up to $50, 000 per year
    on a matching basis, and hazard mitigation grants, to reduce future losses
    from disasters. FEMA was required to provide assistance to the FSM and the
    RMI at levels equivalent to those available to the Trust Territory of the
    Pacific Islands in 1986. The FSM and the RMI were required to provide annual
    performance reports to FEMA. U. S./ FSM U. S./ RMI

    Assessment of The program has met its performance requirements and
    standards. FEMA has provided the assistance required in performance the
    Compact; however, the FSM and the RMI have not fully used the available
    funds to improve their disaster preparedness as allowed under the grant
    agreements. Neither the FSM nor the RMI appeared to be developing the
    capability for their states and localities to respond to, plan for, recover
    from, and mitigate against disasters. The disaster preparedness grants were
    awarded to help develop the capability to respond to disasters. However, the
    FSM and the RMI have not taken full advantage of the available funds.

    Since 1995, FEMA has responded to a 1997 typhoon Since 1995, FEMA has
    responded to a 1998 drought in and a 1998 drought in the FSM. The
    obligations totaled

    the RMI. The obligations totaled $7. 9 million. Regional $2.7 million and
    $1. 8 million, respectively. Regional financial records show that the RMI
    has expended financial records show that the FSM has expended only $11,598
    of $100, 000 awarded for disaster preparedness $12, 525 of $138,000 awarded
    for disaster preparedness grants since fiscal year 1998. Since the start of
    the grants since fiscal year 1997. Since the start of the hazard mitigation
    grants in 1988, the RMI has committed

    hazard mitigation grants in 1988, six disasters occurred less than 100
    percent of the available funds. in the FSM, and less than 100 percent of the
    available funds were committed.

    Assessment of Accountability needed improvements to be more effective.
    accountability The FSM last submitted a performance report in October

    The RMI did not submit a performance report during 1999 and did not submit a
    report as required in 2000. 1996- 2000, although it is required to do so
    annually. Problems in

    The program encountered conditions that significantly reduced potential
    program accomplishments and increased implementing U. S. program costs.
    FEMA?s programs were designed to support and supplement viable state
    programs and efforts. programs in the

    They were not intended to go directly to local communities, supplanting
    marginal central government programs. FSM and the RMI Some of the biggest
    problems encountered related to implementing traditional programs, developed
    for the United States, in a distant island environment and culture.
    According to FEMA, providing money and assistance consistent with U. S-
    based regulations and laws disrupts social structures and changes relative
    priorities in communities, fosters a counter- productive dependency, and
    frequently results in adverse long- term effects. For example, temporary and
    sustained free food programs discourage traditional fishing and farming.
    Assistance as currently provided delayed rebuilding after a disaster until
    FEMA resources arrived, and it proved to be difficult to manage.

    Source: GAO.

    Table 12: The U. S. Postal Service (USPS) Program

    Purpose and USPS assistance under the Compact was intended to provide for
    (1) mail service between U. S. locations and legislation exchange points in
    the FSM and the RMI, including special services; and (2) dispatch,
    documentation, statistical, accounting, and settlement operations in
    connection with the international exchange of mail. The assistance was to be
    provided to help the FSM and the RMI develop the infrastructure and capacity
    for independent postal operations. Requirements Performance: USPS was
    required to provide mail transportation, technical assistance, postal
    financial services such as money orders, and postal transaction and
    reporting forms. USPS was authorized to establish cost- related

    postal rates for mail going from the United States to the FSM and the RMI.
    Additionally, USPS was required to transfer ownership of postal facilities
    and equipment in use as of 1986 to the FSM and the RMI. The FSM and the RMI
    were required to (1) protect the postal services provided by the United
    States from exploitation for monetary gain by individuals and organizations
    and (2) ensure that outgoing mail complies with international and U. S.
    postal requirements.

    Accountability: USPS was required to provide services at levels equivalent
    to those available in 1986, such as dispatching and keeping records on
    international mail exchanges and reconciling activity on transactions with
    the FSM and the RMI. USPS was also required to pay and be reimbursed by
    Department of the Interior from appropriations for the cost of transporting
    mail to and from six designated FSM and RMI exchange points. The FSM and the
    RMI were required to (1) adequately fund internal postal services so the
    USPS may perform its responsibilities; (2) issue money orders in compliance
    with USPS regulations; and (3) remit money collected to the USPS; for
    example, from collect- on- delivery parcels and money orders. U. S./ FSM U.
    S./ RMI Assessment of

    The program has met its performance requirements and standards. USPS has
    provided assistance and services in performance accordance with the Compact,
    including mail transportation, technical assistance, postal financial
    services such as money orders, and postal transaction and reporting forms.
    Additionally, USPS has transferred postal facilities and equipment to the
    FSM and the RMI. The FSM has experienced internal problems with its The RMI
    has experienced internal problems with its operations; however, reasonable
    efforts have been made operations; however, reasonable efforts have been
    made to avoid exploitation and to comply with international and

    to avoid exploitation and to comply with international and U. S. postal
    requirements.

    U. S. postal requirements. Assessment of

    Accountability needed to be improved. USPS has had difficulties receiving
    remittances in a timely manner from the accountability FSM and the RMI post
    offices for collect- on- delivery parcels and money order transactions;
    however, it has no enforcement or control authority over FSM and RMI postal
    operations. The FSM has dismissed staff persons over the past 5 The RMI has
    dismissed staff persons over the past 5 years for money order- related and
    other theft and misuse years for theft of funds. The RMI continues to
    experience of funds. The most recent national public audit of FSM theft and
    financial irregularities with money order and postal operations, for fiscal
    years 1997- 1998, concluded other cash transactions. External audits of its
    postal that internal controls, especially involving revenue, were operations
    were not conducted. Internal postal generally inadequate. An FSM legislative
    appropriation in operations in the RMI were not adequately funded, fiscal
    year 2000 repaid outstanding obligations due to because operating expenses
    were not paid. For USPS. Shortages accumulating over a 10- year period
    example, monthly rental on the main post office building resulted from bank
    deposit errors and money order

    was more than 1 year in arrears. Additionally, post office shortages and
    errors. The FSM decided to clear all telephone service has been terminated
    at least three arrears at one time; thus, it required FSM congressional

    times in the past year because of delinquency. action for funding.
    Liquidating obligations was a Minister of Finance rather than a postal
    responsibility.

    (Continued From Previous Page) Problems in

    The program has encountered conditions that have significantly reduced
    potential program accomplishments and implementing U. S. increased costs.
    For example, mail delivery has not met postal standards for prompt and
    efficient delivery. Despite programs in the

    USPS investment in special contracted mail flights to the islands, mail
    delivery was not prompt. Since in- transit mail FSM and the RMI was under
    USPS control, the USPS had a shared responsibility for delays when mail was
    offloaded from aircraft. The USPS incurred significant costs in providing
    mail to the FSM and the RMI. USPS was reimbursed almost $7.6 million from
    Interior in transportation, administration, and technical assistance costs
    during fiscal years 1987- 2000. However, according to USPS officials,
    accumulated though not reimbursed costs for transporting mail totaled $30
    million in extra mail transportation costs during those years. Interior was
    aware of the USPS?s additional costs but said that USPS has only recently
    documented the additional incurred expenses. Interior did not believe a
    special appropriation was possible, because the USPS has taken almost 10
    years to uncover its costs. Furthermore, though granted authority to
    establish cost- related rates for mail going from the United States to the
    FSM and the RMI and to apply international postal rates, the USPS has failed
    to exercise this authority, thereby contributing to its lack of sufficient
    revenue to cover its expenses, including the $30 million in accumulated but
    not reimbursed costs.

    Source: GAO.

    Table 13: The Federal Aviation Administration (FAA) Program

    Purpose and The Compact has required the U. S. government to provide
    aviation safety services in the FSM and the RMI in order legislation to: (1)
    foster safe and efficient air travel and (2) facilitate the establishment of
    aviation safety authorities and aviation safety statutory and regulatory
    regimes in the FSM and the RMI. Requirements Performance: FAA was the
    federal entity that provided aviation services to the FSM and the RMI. The
    Compact

    required FAA to provide (1) en route air traffic services, (2) flight
    inspection and equipment evaluation and certification, (3) assistance in
    developing and updating procedures and standards, and (4) technical
    assistance to help the FSM and the RMI governments develop civil aviation
    safety authorities and aviation safety and certification programs.

    Accountability: FAA was required to provide services at levels equivalent to
    those provided to the FSM and the RMI in 1986. FAA did not provide any
    direct grants or other funds directly to the FSM and the RMI. Therefore, the
    accountability for funds was indirect, meaning that FAA was required to
    account only for materiel, equipment, facilities, and training.

    U. S./ FSM U. S./ RMI Assessment of

    The program has met its performance requirements and standards. FAA has
    carried out its responsibilities as performance stipulated in the Compact,
    according to U. S., RMI, and FSM officials and the FAA?s overall safety
    record. FAA has provided training to develop infrastructure (including
    rescue and firefighter training), assisted in aviation security, and funded
    travel and lodging expenses for local nationals to attend the FAA Training
    Academy in Oklahoma City, Oklahoma, and other FAA training facilities.

    The FSM?s 14- year record of air traffic safety showed two The RMI has
    reported no aircraft accidents, injuries, or aircraft accidents within the
    past 2 years, but no serious

    fatalities over the past 14 years. injuries and no fatalities.

    Assessment of Accountability appeared to be effective, according to U. S.,
    RMI, and FSM officials. FAA did not provide any grants or accountability
    other funds directly to the FSM and the RMI. As a result, FAA directly
    accounted for all materiel, equipment, facilities, and training. There have
    been no FAA findings of theft or misuse of materiel or equipment provided by
    the United States. FAA was helping local nationals to take over airport
    operations and had drafted a plan for the FSM and the RMI to assume a large
    share of responsibility for airport operations over the next 10 years.
    Problems in Retention of trained staff necessary to operate airports was an
    issue for the FSM and the RMI, though some implementing U. S. workforce
    stability has been achieved in the past 4 to 5 years. FAA provided training
    to local nationals in

    programs in the airworthiness safety, certification, and inspection; in
    airport operations; and in operating, inspecting, testing, and FSM and the
    RMI

    maintaining existing and newly installed equipment. Once trained, however,
    local nationals have commanded better pay elsewhere and have often left.
    Training was also a challenge because of the differences in educational
    background, culture, and experience of FSM and RMI trainees in comparison
    with U. S.- educated trainees.

    In addition, construction costs were usually two to four times higher than
    in the United States, because most items had to be imported, including the
    contractors. When local contractors or others with the appropriate expertise
    were available, FAA hired them and gained savings by employing local
    contractors.

    Source: GAO.

    Table 14: The National Weather Service (NWS) Program

    Purpose and NWS has generally provided weather forecasts and warnings for
    the United States and its territories, adjacent legislation waters, and
    ocean areas for the protection of life and property and the enhancement of
    the national economy. The NWS services and programs were provided in the FSM
    and the RMI as required in the Compact and pursuant to legal provisions
    cited in article VII of the Federal Programs and Services Agreement
    authorized under section 232 of the Compact of Free Association. The NWS
    assistance program under the Compact allowed for the FSM and the

    RMI to establish and maintain their own weather services. Requirements
    Performance: Under the Compact, NWS was to provide public and aviation
    weather forecasts and severe weather

    warnings in the FSM and the RMI. The FSM and the RMI weather offices were
    required to provide warnings, observations, and forecasts, and also to give
    inputs to Guam?s weather service for its daily Western Pacific area
    forecasts.

    Accountability: NWS was required to provide or reimburse the FSM and the RMI
    for materials, equipment, facilities, salaries, maintenance, and other
    expenses of its weather service operations. Appropriated funds to support
    the FSM and the RMI weather offices went to the Department of the Interior,
    and Interior was to reimburse NWS. The reimbursements included costs
    incurred by the FSM, the RMI, and the NWS/ Pacific Region to manage,
    supervise, operate, and maintain the facilities and offices. NWS was
    required to provide assistance to the FSM and the RMI at levels equivalent
    to those available to the Trust Territory of the Pacific Islands in 1986.

    U. S./ FSM U. S./ RMI Assessment of

    The program has met its performance requirements and standards. The program
    was effective in that NWS performance provided the FSM and the RMI with
    facilities, equipment, technical assistance, and resources for operating
    their

    weather services. NWS has also trained the FSM and the RMI weather staffs.
    The FSM weather offices provided warnings, The RMI weather offices provided
    warnings, observations, and forecasts and gave inputs to Guam?s

    observations, and forecasts and gave inputs to Guam?s weather service for
    its daily Western Pacific area weather service for its daily Western Pacific
    area forecasts.

    forecasts. Assessment of

    The accountability actions appeared responsive to the NWS requirements. NWS
    had direct oversight of the FSM accountability and the RMI weather service
    offices and exercised quality control over their operations and products.
    NWS had undertaken regular inspections of weather stations and required that
    the stations operate at U. S. standards. NWS

    performed comprehensive audits and regularly received monthly reports on
    activities to facilitate exercising quality control over FSM and RMI weather
    observations. According to U. S., FSM, and RMI officials, NWS provided
    services in accordance with the Compact. NWS reviewed and approved all
    reimbursements for FSM and RMI payrolls and their equipment, facilities, and
    materials costs. NWS, using Interior- provided funding, paid the operating
    costs. NWS had trained the FSM and the RMI weather

    staffs and reimbursed these countries for costs incurred for all NWS-
    approved training and partly funded the meteorologist training program. The
    reimbursements included costs incurred by the FSM, RMI, and NWS/ Pacific
    Region to manage, supervise, operate, and maintain the facilities and
    offices. The FSM provided reports to NWS and had not been

    The RMI provided reports to NWS and has not been cited for significant
    deficiencies in observations, reports,

    cited for significant deficiencies in observations, reports, and
    inspections. Since NWS has the option to refuse and inspections. Since NWS
    has the option to refuse any reimbursements or to request justification for
    any any reimbursements or to request justification for any reimbursements,
    problems with reimbursements to FSM reimbursements, problems with
    reimbursements to RMI have been minimal.

    have been minimal. Problems in

    NWS officials have reported no significant implementation problems.
    implementing U. S. programs in the

    FSM and the RMI Source: GAO.

    Comments from the Department of the

    Appendi x II I Interior Note: GAO?s comments supplementing those in the
    report text appear at the end of the appendix.

    See comment 1. Now on p. 55.

    See comment 2 Now on p. 56.

    Now on p. 56. Now on p. 51.

    GAO Comments The following are GAO?s comments on the Department of the
    Interior?s letter dated December 11, 2001. 1. We amended the draft on page
    55 to clarify that the Department of the

    Interior did not fill the position of federal programs coordinator until
    1997. The Department of the Interior, in commenting on this draft, stated
    that a field representative covered the FSM, the RMI, and Palau in 1990,
    implying that it met its requirement to provide federal program
    coordination. However, discussions with the field representative revealed
    that he was neither given the authority, nor had the means, to coordinate
    the federal programs in the FSM and the RMI until 1997.

    2. We amended the draft on page 56 to clarify that the Department of the
    Interior?s federal program coordinator?s report did not usually include
    recommendations.

    Appendi x V I Comments from the Department of State Note: GAO?s comments
    supplementing those in the report text appear at the end of the appendix.

    See comment 1.

    See comment 2. Now on p. 60.

    GAO Comments The following are GAO?s comments on the Department of State?s
    letter dated November 16, 2001.

    1. In commenting on our draft report, the Department of State reported that
    it supported GAO?s recommendation but lacked the resources and technical
    expertise to conduct a comprehensive assessment of program assistance to the
    FSM and the RMI. We recognize that State lacks the resources and technical
    expertise. For that reason, our recommendation calls for State to work in
    consultation with the Department of the Interior and those federal
    departments with

    programs in the region, as well as with the Federal Regional Council, to
    take advantage of their resources and technical expertise to develop the
    joint report to the Congress. Given the unique opportunity presented by the
    Compact renegotiations, we believe this is an appropriate time to reassess
    the basis and conditions for providing U. S. program assistance to the FSM
    and the RMI.

    2. We have added language to page 60 to clarify State?s current position.

    Comments from the Department of Health and

    Appendi x V

    Human Services GAO?s comments supplementing those in the report text appear
    at the end of the appendix.

    See comment 1.

    See comment 2. See comment 3.

    See comment 4. See comment 5. See comment 6.

    See comment 7.

    GAO Comments The following are GAO?s comments on the Department of Health
    and Human Service?s letter dated December 3, 2001.

    1. We believe our report provides a balanced review of the program?s
    achievements. We state in the lead sentence of our Results in Brief that
    many federal programs provided numerous, and in many cases critical,
    services to the FSM and the RMI. Head Start was included in this assessment.
    In addition, we stated on page 13 that the Head Start program provided
    comprehensive health, education, and nutrition services to 1,800 preschool
    children each year in the FSM and 1, 200

    each year in the RMI. For both countries, we noted specific accomplishments
    of the Head Start program. 2. Our report did not state that Federal Regional
    Council made a recommendation; rather, it simply quoted the council report,
    in which

    the council ?concluded that it was essential that an on- site federal grants
    coordinator be appointed...? to each nation. We removed the statement that
    council members were not aware that an Interior representative already
    provided an on- site presence.

    3. We added a footnote to page 44 to incorporate HHS?s statement that the
    grantee provided documentation for the $341, 378 in questioned costs.
    However, neither HHS nor FSM officials indicated during the audit that the
    Pohnpei program subsequently provided appropriate documentation for the
    questioned costs. As a result, we were not able to independently verify
    HHS?s statement or to review the supporting documentation. 4. HHS is not
    correct in stating that GAO and research findings have concluded that the
    Head Start program is effective. GAO, in its 2001 report on Head Start,
    stated that there is still insufficient research to draw conclusions about
    the effectiveness of the program. 41 The report

    also stated that, based on GAO?s recommendation, Congress mandated that HHS
    fund and conduct an evaluation of the impact of the Head Start program. The
    final report is not due until 2006.

    5. We added language to page 31 to clarify this point. 41 Early Childhood
    Programs: The Use of Impact Evaluations to Assess Program Effects

    (GAO- 01- 542, Apr. 16, 2001).

    6. We added language to page 31 attributing these statements. 7. We have
    clarified on page 31 that it was the former Maternal and Child

    Health program manager who provided us with this information just prior to
    his retirement. We also added a footnote that the current U. S. MCH officer
    responsible for the FSM and the RMI programs also acknowledges the
    overwhelming need for technical assistance because of the social and
    economic problems in the FSM and the RMI.

    Comments from the Government of the

    Appendi x VI

    Federated States of Micronesia GAO?s comments supplementing those in the
    report text appear at the end of the appendix.

    See comment 1. See comment 2.

    See comment 3.

    See comment 4. Now on p. 4.

    See comment 5. Now on p. 12.

    See comment 6. Now on p. 13.

    See comment 7. Now on p. 25.

    See comment 8. Now on pp. 29, 14, and 72.

    See comment 9.

    See comment 10. Now on p. 44.

    See comment 11. Now on p. 45.

    See comment 12. Now on p. 46.

    Now on p. 69.

    GAO Comments The following are GAO?s comments on the Government of the
    Federated States of Micronesia?s letter dated December 10, 2001.

    1. Because of past FSM and RMI concerns about formatting issues, the draft
    that GAO provided had separate evaluations of each nation?s performance in
    appendix II of the report, to ensure that the two nations

    were separately listed. 2. According to the Asian Development Bank and
    others, although the college does not track student attrition rates, and
    consequently lacks hard data on student graduation rates, it has a low
    graduation rate. According to the Asian Development Bank?s study (Federated
    States of Micronesia: Human Resources Study: Health and Education, Dec.
    1999), the ?actual graduate output of the COM system is quite small, with
    only 139 graduates from the national campus in 1998.? During this period,
    there were 775 full- time enrollments. In addition, the report

    noted that the college lacked an accurate student tracking system necessary
    to develop correct statistics. For example, no data were kept on student
    attrition rates. In addition, the college?s 1998 accreditation

    report found that the college lacked information on student retention rates,
    completion rates, and graduation rates, and that with 80 percent of the
    incoming freshmen academically unprepared for college, the college could not
    effectively help students who experienced academic difficulty. According to
    the college president, only 50 percent of the applicants to the college met
    the college requirements for entrance; of those, 80 percent were placed in
    remedial math and English classes. According to the president, those
    students often exhausted their Pell Grants before they were ready for credit
    courses and thus lost the financial resources necessary to continue their
    schooling, contributing to the low graduation rate from the college.

    3. GAO did not state in the report that any of the nine programs were
    ?failures.? We stated, in the opening sentence of our Results in Brief, that
    the programs we reviewed provided numerous, and in many cases important,
    services to the citizens of the FSM and the RMI and that U. S. embassy, FSM,
    and RMI officials reported that these were critical programs in each
    country. We also documented those

    accomplishments, by program and by country, in table I of this report. To
    the question that the FSM posed concerning how many programs within the
    United States itself could meet the assessment standard, we

    point out that four of the programs in the FSM and the RMI successfully met
    program standards and goals without significantly increased costs. 4. We are
    not in a position to know whether or not these programs are rife

    with theft, fraud, and abuse. Because of time and resource constraints while
    in- country, we were able to conduct only limited evaluations of the
    accountability of each program, and we are unable to say what was
    undetected. However, the auditors were surprised to find accountability
    problems in two- thirds of the programs they selected and instances of
    theft, fraud, and abuse in 5 of the 12 programs.

    5. We incorporated this clarification on page 12 of the report. 6. Program
    managers from SEPPIE, FASEG, Head Start, and other

    programs consistently told us that almost all program funds came either from
    U. S. program or U. S. Compact funds. In addition, the Asian Development
    Bank found in 1998 that only $560,000, or 2 percent of the FSM national and
    state budget allocations for education, came from locally generated
    revenues. The remaining 98 percent came from U. S. grants or Compact funds.
    Although these locally generated revenues may be increasing, FSM special
    education officials told us that it is unlikely that greater levels of local
    funding for special education would

    become available unless new funding sources were identified. We repeatedly
    asked FSM program managers, as well as our liaison officer from the FSM
    finance department, for data specifying by program the amount of locally
    generated revenue, but these data were never provided.

    7. We changed the text on page 25 to state that mail delivery was delayed.
    8. This information was included in the draft report and can be found on

    pages 14 and 72. We agree that Pell Grants offer an important opportunity
    for FSM students to pursue college studies in the United States. Although we
    tried to examine this aspect of the program, for example, by quantifying the
    number of FSM students who graduated from U. S. institutions, neither the
    FSM government nor the U. S. Department of Education was able to provide
    this information.

    9. There is overwhelming evidence that, without Pell Grants, the FSM college
    would collapse. For example, in documentation prepared for our visit, the
    college provided an analysis of the loss of U. S. student financial aid, of
    which Pell Grants are the largest source. The analysis

    found that the loss of these funds would have a ?devastating effect,? as 50
    percent of the college revenues is derived from this assistance. It also
    stated that the FSM government funds are ?non- existent? to make

    up for the loss of U. S. student assistance funds and that, therefore, if
    the college ?were to lose access to U. S. student financial assistance
    programs, most, if not all, of the programs would close down.? In addition,
    in its December 1999 report, the Asian Development Bank found that financing
    for education was ?almost totally reliant on U. S. funding either through
    Compact funds or access to U. S. grant programs. The FSM is largely
    dependent on external sources of funding

    for its education system- without these funds the system in its current form
    would collapse.?

    10. We added clarifying language to page 44 of the report. The three
    accounting department officials admitted to stealing about $11,500.

    11. We added language to page 45 clarifying this point and to emphasize the
    efforts made by the FSM college to improve accountability. 12. When people
    at or near the top of any nation?s government receive

    assistance that was designed for the neediest, they should not be surprised
    that such assistance receives extra scrutiny. Our findings draw on our own
    review, as well as on reports by the Inspector General. The Department of
    the Interior Inspector General detailed this particular case in a September
    1999 report:

    The Pohnpei Local Office made Rural Development Direct Single Family Housing
    Program loans to borrowers who constructed houses that exceeded what would
    be considered a modest house design on the island of Pohnpei and made a loan
    to one borrower that exceeded the maximum authorized loan amount by
    $15,000?.

    The Code of Federal Regulations (7 CFR 3550. 57( a)), in defining a ?modest
    dwelling,? states, ?The property must be one that is considered modest for
    the area, must not be designed for income providing purposes?.?

    Our [the Inspector General?s] review of the floor plans in the loan file
    disclosed that the design of the house appeared to exceed what would be
    considered a modest house on the island of Pohnpei. In addition, we noted a
    May 23, 1998, entry in the running case record stating that the Pohnpei
    local office?s engineer visited the construction site and found that the
    design of the house had been changed to include the construction of a second
    floor. However, no action was taken by the Pohnpei local office to stop the
    construction of the second floor. We also noted, based on documents in the
    loan file, that the borrower had

    required an additional loan of $38, 000 to complete the construction of the
    house. However, in an October 29, 1998, letter to the borrower, the Pohnpei
    local office stated that ?we are unable to approve your application on the
    basis that your total indebtedness with the agency

    will exceed the present authorized loan limit.? As a result of our review of
    the loan file, on March 16, 1999, we visited the construction site and found
    that a two- story house, which appeared to be more than modest, was under
    construction.

    We were told in April 2001 that the local trustee agency for the Rural
    Housing Service, the Pohnpei State Housing Authority, had paid off the USDA
    loans from the escrow account set up to pay off any defaulted loans. This
    depleted the escrow account, and the Pohnpei State Legislature had to
    appropriate funds to replenish the account.

    We have also added another photograph in figure 17 of a modest house to
    contrast with the photographs of the nonmodest houses.

    Comments from the Government of the

    Appendi x VII

    Republic of the Marshall Islands GAO?s comments supplementing those in the
    report text appear at the end of the appendix.

    See comment 1. See comment 2.

    See comment 3.

    See comment 4. See comment 5. See See comment comment 6.

    6. See comment 7.

    See comment 8. See comment 9.

    See comment 10.

    See comment 12.

    GAO Comments The following are GAO?s comments on the Government of the
    Republic of the Marshall Islands letter dated December 10, 2001. 1. We do
    not assert that the neediest residents were not served. The

    report stated that, because of the lack of accurate income data, loans could
    not be targeted only to the most needy, which is the purpose of the program.
    We assert that, if income data specifically for the FSM and the RMI were
    used to calculate the low- and very low- income levels

    for each country, fewer people would likely be eligible for the program than
    are now eligible with the current Western Pacific income levels.

    2. Additional language was inserted to clarify this issue on page 42. 3. The
    JTPA Title II Quarterly Status Report, July 1, 1999, to June 2000

    (Final Report), signed by the local program manager on September 11, 2000,
    reported that only 14 percent of the job training graduates entered
    employment. In contrast, RMI reported in its Program Year 1999 Annual Report
    that 100 percent entered employment. Both documents stated that 35 trainees
    finished their job training; however, the first document reported that only
    5 entered employment, while the second

    document states that all 35 entered employment. 4. Although the RMI was
    exempted from having to meet the program?s

    national reporting requirements, the RMI was required to provide accurate
    performance reports to the Department of Labor?s regional office in San
    Francisco. The Department of Labor?s program manager, as well Department of
    Labor documentation stretching back to 1993, documents Labor?s concerns
    about the unreliability of the data submitted to the regional office. For
    example, a 1994 Department of Labor memorandum on a Pacific Basin JTPA
    liaison meeting stated that ?the enrollment and termination rates, as
    reported by the RMI, cannot

    be trusted.? In 2001, the Department of Labor?s program manager expressed
    these same concerns.

    5. As noted above, the program was not exempt from providing performance
    reports to the regional office.

    6. GAO based its conclusion that ?poor economic conditions limited
    employment opportunities? on the fact that the program is now focused on
    teaching ?survival skills,? or subsistence living, because of a lack of

    jobs.

    7. We agree with the RMI that having unreliable data precludes knowing with
    certainty whether the JTPA program was effective. However, the program was
    designed so that the burden of proof was on those implementing the program,
    and program effectiveness was determined by having reliable data on the
    numbers of trainees that found

    employment. 8. We have added this to the report on page 30. 9. Table I
    describes the ?usefulness? of this program to the RMI. To further clarify
    this point, we have added information on the number of teachers

    trained using FASEG funds. 10. Additional language has been added to page 29
    to clarify this point. 11. The 9- percent graduation rate was stated by the
    president of the

    college, who also provided documentation to support the graduation rate.

    12. The report notes on page14 that the program has made college education
    available for thousands of students and funded the creation of the only U.
    S.- accredited college in the RMI.

    13. FEMA, not GAO, concluded that these programs should be terminated. 14.
    FEMA, not GAO, concluded that these programs foster dependency. 15. Disaster
    Preparedness Improvement Grants over two years totaled

    $100,000 and are matching grants. According to FEMA records, the funds had
    not been expended at the time of our review. The RMI confirmed that the
    information had not been timely and properly reported, and added that
    reorganization and capacity issues hindered

    the timely reporting of these expenditures. GAO agrees that the RMI needs to
    institute improvements to better comply with FEMA?s reporting requirements.

    Appendi x VI II

    GAO Contact and Staff Acknowledgments GAO Contact Emil Friberg, (202) 512-
    8990 Acknowledgments In addition to the contact named above, Eugene Beye,
    Edward George,

    Wyley Neal, Rona Mendelsohn, and Mary Moutsos made key contributions to this
    report.

    Related GAO Products

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    Foreign Assistance: U. S. Funds to Two Micronesian Nations Had Little Impact
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    Foreign Relations: Better Accountability Needed over U. S. Assistance to
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    (711558)

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    a

    GAO United States General Accounting Office

    Page i GAO- 02- 70 Micronesian Programs

    Contents

    Contents

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    Contents

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    Contents

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    Page 1 GAO- 02- 70 Micronesian Programs United States General Accounting
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    Appendix I

    Appendix I Objectives, Scope, and Methodology

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    Appendix II

    Appendix II GAO Assessment of 13 Programs in the Federated States of
    Micronesia and the Republic of the Marshall Islands

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    Appendix II GAO Assessment of 13 Programs in the Federated States of
    Micronesia and the Republic of the Marshall Islands

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    Appendix II GAO Assessment of 13 Programs in the Federated States of
    Micronesia and the Republic of the Marshall Islands

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    Appendix II GAO Assessment of 13 Programs in the Federated States of
    Micronesia and the Republic of the Marshall Islands

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    Appendix II GAO Assessment of 13 Programs in the Federated States of
    Micronesia and the Republic of the Marshall Islands

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    Appendix II GAO Assessment of 13 Programs in the Federated States of
    Micronesia and the Republic of the Marshall Islands

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    Appendix II GAO Assessment of 13 Programs in the Federated States of
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    Appendix II GAO Assessment of 13 Programs in the Federated States of
    Micronesia and the Republic of the Marshall Islands

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    Appendix II GAO Assessment of 13 Programs in the Federated States of
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    Appendix II GAO Assessment of 13 Programs in the Federated States of
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    Appendix II GAO Assessment of 13 Programs in the Federated States of
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    Appendix II GAO Assessment of 13 Programs in the Federated States of
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    Appendix II GAO Assessment of 13 Programs in the Federated States of
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    Appendix II GAO Assessment of 13 Programs in the Federated States of
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    Appendix II GAO Assessment of 13 Programs in the Federated States of
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    Appendix II GAO Assessment of 13 Programs in the Federated States of
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    Appendix II GAO Assessment of 13 Programs in the Federated States of
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    Appendix II GAO Assessment of 13 Programs in the Federated States of
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    Appendix II GAO Assessment of 13 Programs in the Federated States of
    Micronesia and the Republic of the Marshall Islands

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    Appendix II GAO Assessment of 13 Programs in the Federated States of
    Micronesia and the Republic of the Marshall Islands

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    Appendix II GAO Assessment of 13 Programs in the Federated States of
    Micronesia and the Republic of the Marshall Islands

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    Appendix III

    Appendix III Comments from the Department of the Interior

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    Appendix III Comments from the Department of the Interior

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    Appendix IV

    Appendix IV Comments from the Department of State

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    Appendix IV Comments from the Department of State

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    Appendix IV Comments from the Department of State

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    Appendix V

    Appendix V Comments from the Department of Health and Human Services

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    Appendix V Comments from the Department of Health and Human Services

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    Appendix V Comments from the Department of Health and Human Services

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    Appendix V Comments from the Department of Health and Human Services

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    Appendix V Comments from the Department of Health and Human Services

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    Appendix V Comments from the Department of Health and Human Services

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    Appendix VI

    Appendix VI Comments from the Government of the Federated States of
    Micronesia

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    Appendix VI Comments from the Government of the Federated States of
    Micronesia

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    Appendix VI Comments from the Government of the Federated States of
    Micronesia

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    Appendix VI Comments from the Government of the Federated States of
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    Appendix VI Comments from the Government of the Federated States of
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    Appendix VI Comments from the Government of the Federated States of
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    Appendix VI Comments from the Government of the Federated States of
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    Appendix VI Comments from the Government of the Federated States of
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    Appendix VI Comments from the Government of the Federated States of
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    Appendix VI Comments from the Government of the Federated States of
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    Appendix VII

    Appendix VII Comments from the Government of the Republic of the Marshall
    Islands

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    Appendix VII Comments from the Government of the Republic of the Marshall
    Islands

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    Appendix VII Comments from the Government of the Republic of the Marshall
    Islands

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    Appendix VII Comments from the Government of the Republic of the Marshall
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    Appendix VII Comments from the Government of the Republic of the Marshall
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    Appendix VII Comments from the Government of the Republic of the Marshall
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    Appendix VII Comments from the Government of the Republic of the Marshall
    Islands

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    See comment 13. See comment 14. See comment 15.

    Appendix VII Comments from the Government of the Republic of the Marshall
    Islands

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    Appendix VII Comments from the Government of the Republic of the Marshall
    Islands

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    Appendix VII Comments from the Government of the Republic of the Marshall
    Islands

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    Appendix VIII

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