    Foreign Relations: Better Accountability Needed Over U.S. Assistance to
    Micronesia and the Marshall Islands (Letter Report, 05/31/2000,
    GAO/RCED-00-67).

    Pursuant to a congressional request, GAO reviewed the federal assistance
    the United States provides to the Federated States of Micronesia and the
    Republic of the Marshall Islands, focusing on the: (1) cost to the
    United States of providing assistance to Micronesia and the Marshall
    Islands in accordance with the existing Compact of Free Association from
    fiscal year (FY) 1987 through FY 1999; (2) funds provided prior to the
    Compact (earlier than FY 1987) for the effects of nuclear weapons
    testing to what is now the Marshall Islands; and (3) accuracy and
    reliability of the data the Department of the Interior uses to monitor
    and supervise the federal assistance programs.

    GAO noted that: (1) since the implementation of the Compact of Free
    Association in 1986, the United States has provided more than $2.6
    billion in financial and other assistance, of which more than $1.5
    billion was provided to Micronesia and over $1.1 billion was provided to
    Marshall Islands during fiscal years 1987 through 1999; (2) Interior
    provided the majority of the assistance, about $2 billion, through
    quarterly payments to the islands' bank accounts to be used for such
    purposes as capital construction projects, energy production,
    communication capabilities, and current account costs, such as those for
    payroll, maintenance, and other governmental activities; (3) the
    remaining half billion dollars was provided by 19 federal agencies in
    the form of grants, loans, equipment, and technical assistance, such as
    weather forecasting support and airport training activities; (4) prior
    to the Compact, the United States provided about $250 million in funding
    and assistance to what is now Marshall Islands for the effects of the
    U.S. nuclear weapons testing program that took place in the Marshall
    Islands during the 1940s and 1950s; (5) the Department of Defense, the
    Department of Energy, and Interior provided direct payments to the
    Marshall Islands' governments and individuals, rehabilitation and
    resettlement services, and health care and monitoring of islanders
    exposed to radioactive fallout; (6) in gathering and verifying data on
    the cost of U.S. assistance provided to the Islands, GAO found
    inaccuracies and inconsistencies with the data being used by Interior to
    supervise and monitor federal assistance programs; (7) for example,
    Interior had a number of errors in the budget data it reported annually
    to Congress on direct payments to the Islands; (8) there were
    significant inconsistencies in Interior's data on the assistance
    provided by other agencies to the Islands and the data the agencies
    reported to GAO; (9) Interior had not used the annual audit information
    available from the Islands to corroborate its figures; and (10)
    collectively, therefore, Interior's ability to accurately report on
    assistance provided is called into question.

    --------------------------- Indexing Terms -----------------------------

     REPORTNUM:  RCED-00-67
         TITLE:  Foreign Relations: Better Accountability Needed Over U.S.
    	     Assistance to Micronesia and the Marshall Islands
          DATE:  05/31/2000
       SUBJECT:  Accountability
    	     Foreign economic assistance
    	     International relations
    	     Data integrity
    	     International agreements
    	     Foreign governments
    	     Financial management
    	     Internal controls
    	     Federal agency accounting systems
    IDENTIFIER:  Compact of Free Association with Micronesia
    	     Marshall Islands
    	     Micronesia

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    GAO/RCED-00-67

    Appendix I: Financial Provisions of the Compact of Free
    Association

    30

    Appendix II: Agency Assistance Provided to the Federated
    States of Micronesia and the Marshall Islands

    33

    Appendix III: Comments From the Department of the Interior

    56

    Appendix IV: Comments From the Department of State

    64

    Appendix V: Comments From the Republic of the Marshall
    Islands

    65

    Appendix VI: Comments From the Federated States of
    Micronesia

    78

    Table 1: Assistance Provided to the Federated States of
    Micronesia by Agency, Fiscal Years 1987 Through 1999 14

    Table 2: Types and Amounts of Assistance Provided to the
    Federated States of Micronesia, Fiscal Years 1987 Through
    1999 16

    Table 3: Assistance and Compensation Provided to the Marshall
    Islands, Fiscal Years 1987 Through 1999 16

    Table 4: Assistance and Compensation Provided to the Marshall
    Islands, Fiscal Years 1987 Through 1999 18

    Table 5: Authorized Payments to the Marshall Islands for Effects of Nuclear
    Testing, Prior to the Compact 20

    Table 6: Section 211 Annual Economic Self-Sufficiency Funding
    Provided by the United States 30

    Table 7: Section 216 Direct Annual Payments 32

    Table 8: USDA Assistance to the Federated States of Micronesia,
    Fiscal Years 1987 Through 1999 33

    Table 9: USDA's Assistance to the Marshall Islands, Fiscal Year 1987 Through
    1999 34

    Table 10: Department of Commerce's Assistance to the Federated
    States of Micronesia, Fiscal Year 1987 Through 1999 36

    Table 11: Department of Commerce's Assistance to the Marshall
    Islands, Fiscal Year 1987 Through 1999 36

    Table 12: Department of Defense's Assistance to the Federated
    States of Micronesia, Fiscal Year 1995 Through 1999 37

    Table 13: Department of Education's Assistance to the Federated
    States of Micronesia, Fiscal Years 1987 Through 1999 37

    Table 14: Department of Education's Assistance to the Marshall
    slands, Fiscal Years 1987 Through 1999 38

    Table 15: DOE's Assistance to the Marshall Islands, Fiscal Years
    1987 Through 1999 40

    Table 16: EPA's Assistance to the Federated States of Micronesia,
    Fiscal Years 1987 Through 1999 41

    Table 17: EPA's Assistance to the Marshall Islands, Fiscal Years 1987
    Through 1999 41

    Table 18: FEMA's Assistance to the Federated States of Micronesia,
    Fiscal Years 1987 Through 1999 42

    Table 19: FEMA's Assistance to the Marshall Islands, Fiscal Years
    1987 Through 1999 42

    Table 20: HHS' Assistance to the Federated States of Micronesia,
    Fiscal Years 1987 Through 1999 44

    Table 21: HHS' Assistance to the Marshall Islands, Fiscal Years 1987 Through
    1999 44

    Table 22: HUD's Assistance to the Federated States of Micronesia,
    Fiscal Years 1987 Through 1989 45

    Table 23: HUD's Assistance to the Marshall Islands, Fiscal Years 1987
    Through 1989 45

    Table 24: Institute of Museum and Library Services Assistance to the
    Federated States of Micronesia, Fiscal Years 1998 and 1999 46

    Table 25: Institute of Museum and Library Services Assistance to the
    Marshall Islands, Fiscal Years 1998 and 1999 46

    Table 26: Interior's Assistance to the Federated States of Micronesia,
    Fiscal Years 1987 Through 1999 47

    Table 27: Interior's Assistance to the Marshall Islands, Fiscal Years 1987
    Through 1999 48

    Table 28: Labor's Assistance to the Federated States of Micronesia,
    Fiscal Years 1987 Through 1999 49

    Table 29: Labor's Assistance to the Marshall Islands, Fiscal Years 1987
    Through 1999 50

    Table 30: Legal Services Corporation Assistance, Fiscal Years 1987
    Through 1999 50

    Table 31: NSF's Assistance to the Federated States of Micronesia,
    Fiscal Years 1987 Through 1999 51

    Table 32: U.S. Postal Service's Assistance to the Federated States of
    Micronesia, Fiscal Years 1987 Through 1998 51

    Table 33: U.S. Postal Service's Assistance to the Marshall Islands,
    Fiscal Years 1987 Through 1998 52

    Table 34: SBA's Assistance to the Federated States of Micronesia,
    Fiscal Years 1987 Through 1999 52

    Table 35: SBA's Assistance to the Marshall Islands, Fiscal Years 1987
    Through 1999 53

    Table 36: SSA's Assistance to the Federated States of Micronesia,
    Fiscal Years 1998 and 1999 53

    Table 37: SSA's Assistance to the Marshall Islands, Fiscal Years 1998
    and 1999 54

    Table 38: Department of State Assistance to the Federated States of
    Micronesia, Fiscal Years 1987 Through 1999 54

    Table 39: Department of State Assistance to the Marshall Islands,
    Fiscal Years 1987 Through 1999 54

    Table 40: Department of Transportation's Assistance to the
    Federated States of Micronesia, Fiscal Years 1987
    Through 1999 55

    Table 41: FAA's Assistance to the Marshall Islands, Fiscal Years 1987
    Through 1999 55

    Figure 1: Location of the Federated States of Micronesia and
    the Marshall Islands 9

    EPA Environmental Protection Agency

    FAA Federal Aviation Administration

    FEMA Federal Emergency Management Agency

    FNS Food and Nutrition Service

    HHS Health and Human Services

    HUD Housing and Urban Development

    NOAA National Oceanic Atmospheric Administration

    NSF National Science Foundation

    O&M Operation and Maintenance

    PCB polychlorinated biphenyl

    SBA Small Business Admoinistration

    SSA Social Security Administration

    USDA United States Department of Agriculture

    Resources, Community, and
    Economic Development Division

    B-284387

    May 31, 2000

    The Honorable Frank H. Murkowski
    Chairman, Committee on Energy
    and Natural Resources
    United States Senate

    The Honorable Doug Bereuter
    Chairman, Subcommittee on Asia
    and the Pacific
    Committee on International Relations
    House of Representatives

    The Honorable Larry E. Craig
    United States Senate

    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. The Compact granted these former Trust Territory districts
    their independence and provided a framework for future governmental
    relations. The Compact provided for 15 years of direct U.S. payments made by
    the Department of the Interior to the bank accounts of the Federated States
    of Micronesia and the Republic of the Marshall Islands. The direct payments
    from Interior were to be used for such purposes as capital construction
    projects, energy production, communication capabilities, and recurring
    operational activities, such as infrastructure maintenance. The Compact and
    its enacting legislation also gave U.S. federal agencies the authority to
    provide other assistance such as grants, loans, equipment, and technical
    assistance. Under the Compact's enacting legislation and by executive order,
    Interior is designated as the agency responsible for supervising,
    coordinating, and monitoring the federal assistance programs being provided.
    Interior's Office of Insular Affairs is responsible for carrying out these
    responsibilities. In addition, the Compact provided for continuing financial
    compensation to the Republic of the Marshall Islands for effects from the
    tests of U.S. nuclear weapons in the islands during the 1940s and 1950s.

    In the fall of 1999, negotiations between the Department of State and the
    Islands began on the financial provisions of the Compact that expire in
    2001. To assist the United States in its negotiations, you asked us to
    report on the (1) cost to the United States of providing assistance to the
    Federated States of Micronesia and to the Republic of the Marshall Islands
    in accordance with the existing Compact of Free Association from fiscal year
    1987 through fiscal year 1999 and (2) funds provided prior to the Compact
    (earlier than fiscal year 1987) for the effects of nuclear weapons testing
    to what is now the Republic of the Marshall Islands. We are also providing
    information on the accuracy and reliability of the data Interior uses to
    monitor and supervise the federal assistance programs. In a separate review,
    you have asked us to report on the expenditures of Compact funds and
    accountability for those expenditures, the state of economic development and
    factors that affected development.

    To identify the cost of providing assistance to the Federated States of
    Micronesia and the Republic of the Marshall Islands, we obtained data from
    the Office of Insular Affairs to determine amounts provided in direct
    payments. We verified the amounts by examining the supporting documentation
    and identified errors needing correction. In addition, we obtained and
    examined the annual audits conducted in the Federated States of Micronesia
    and the Republic of the Marshall Islands. Furthermore, we obtained data from
    19 U.S. federal agencies on the assistance provided in the form of direct
    payments, grants, loans, equipment, and technical assistance, which was the
    best information available, according to agency officials. To determine the
    amount of funding provided prior to the Compact for the effects of nuclear
    weapons testing, we identified direct payments to or for the affected people
    of the Marshall Islands, trust funds, health care and monitoring,
    agricultural support, land rehabilitation and resettlement, and radiological
    cleanup.

    Since the implementation of the Compact of Free Association in 1986, the
    United States has provided more than $2.6 billion in financial and other
    assistance, of which more than $1.5 billion was provided to the Federated
    States of Micronesia and over $1.1 billion was provided to the Republic of
    the Marshall Islands during fiscal years 1987 through 1999. The Department
    of the Interior provided the majority of the assistance, about $2 billion,
    through quarterly payments to the Islands' bank accounts to be used for such
    purposes as capital construction projects, energy production, communication
    capabilities, and current account costs, such as those for payroll,
    maintenance, and other general government activities. The remaining half
    billion dollars was provided by 19 federal agencies in the form of grants,
    loans, equipment, and technical assistance, such as weather forecasting
    support and airport training activities.

    Prior to the Compact, the United States provided about $250 million in
    funding and assistance to what is now the Republic of the Marshall Islands
    for the effects of the U.S. nuclear weapons testing program that took place
    in the islands during the 1940s and 1950s. The departments of Defense,
    Energy, and the Interior provided direct payments to the Islands'
    governments and individuals, rehabilitation and resettlement services, and
    health care and monitoring of islanders exposed to radioactive fallout.

    In gathering and verifying data on the cost of U.S. assistance provided to
    the Islands, we found inaccuracies and inconsistencies with the data being
    used by Interior to supervise and monitor federal assistance programs. For
    example, Interior had a number of errors in the budget data it reported
    annually to the Congress on direct payments made to the Islands. In
    addition, there were significant inconsistencies in Interior's data on the
    assistance provided by other agencies to the Islands and the data the
    agencies reported to us. Furthermore, Interior's budget data showed that it
    reimbursed over $124 million to other agencies for federal services provided
    to the Islands. However, the other agencies reported to us that they
    received about $53 million. After discussions with Interior about the $71
    million difference, Interior was unable to provide documentation for about
    $27 million. Finally, Interior had not used the annual audit information
    available from the Islands to corroborate its figures. Collectively,
    therefore, Interior's ability to accurately report on assistance provided is
    called into question. We are making recommendations to improve the
    reliability of Interior's data and accountability for the assistance
    provided under the Compact.

    We presented a draft of this report to the Department of the Interior, the
    Department of State, the Federated States of Micronesia, and the Republic of
    the Marshall Islands for comment. Interior raised several concerns,
    especially regarding our presentation of its monitoring and coordination
    roles. The State Department concurred with our recommendation calling for
    greater accountability of the assistance provided under the Compact. The
    Federated States of Micronesia did not comment on the draft report. The
    Republic of the Marshall Islands raised concerns about how much of the
    reported assistance provided for the effects of nuclear weapons testing is
    actually compensation. Collectively, in response to the comments that we
    received, we modified our recommendations and made some modest changes to
    the report's presentation.

    The Federated States of Micronesia is a grouping of 607 small islands in the
    Western Pacific about 2,500 miles southwest of Hawaii, lying just above the
    Equator. The Federated States of Micronesia has a total land area of about
    270 square miles but occupies more than 1 million square miles of the
    Pacific Ocean. The Federated States of Micronesia comprises four
    states--Chuuk, Pohnpei, Yap, and Kosrae--with an estimated total population
    of 131,500.1 The Republic of the Marshall Islands is made up of more than
    1,200 islands, islets, and atolls, with a total land area of about 70 square
    miles. The Marshall Islands are located in the Central Pacific about 2,100
    miles southwest of Hawaii and about 2,300 miles southeast of Japan. The
    Marshall Islands occupy about 750,000 square miles of the Pacific Ocean and
    have a total population of approximately 50,500.2

    Islands

    The U.S. Department of 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.3 This responsibility transferred to
    Interior in July 1951. During the time that the Federated States of
    Micronesia and the Marshall Islands were districts of the Trust Territory,
    the United States aided them by, among other things, building roads,
    hospitals, and schools and providing support for government operations. In
    1986, the United States entered into a Compact of Free Association with the
    Federated States of Micronesia and the Republic of the Marshall Islands.
    With the implementation of the Compact, the Federated States of Micronesia
    and the Marshall Islands became Freely Associated States. As Freely
    Associated States, which were subsequently granted admission to the United
    Nations, the governments could engage in world affairs as sovereign states
    with very limited restraint and operate their own fiscal systems. Their
    citizens are not U.S. citizens, but they may live, work, and study in the
    United States as resident aliens. According to State Department officials,
    this is unique under U.S. immigration law. Additionally, by law there is no
    requirement that these persons possess either a valid passport or visa to
    enter the United States. Under the agreement, the United States is obligated
    to defend the Freely Associated States and has, among other things, obtained
    military operating rights and the right to continue using the U.S. missile
    range on Kwajalein--a Marshall Islands atoll--until 2016. The governments of
    the Marshall Islands, the Federated States of Micronesia, and the United
    States established that through 2001 these Freely Associated States would
    refrain from actions that the U.S. government determines, after consultation
    with the other governments, to be incompatible with its authority and
    responsibility for security and defense of the Freely Associated States.4

    Executive Order 12569 requires Interior to provide direct payments deposited
    in the Islands' bank accounts.5 In addition, the Compact provides that
    Interior and other U.S. federal agencies may provide program assistance.
    This other assistance includes

    � direct program assistance, which includes grants and loans provided by
    individual federal agencies;

    � indirect program assistance, which includes goods and services provided by
    federal agencies; and

    � guaranteed federal services, which are provided by specifically identified
    agencies and reimbursed by Interior.

    The Compact's authorizing statute gave Interior the responsibility for
    dispensing the majority of the funds, most of which are provided in direct
    payments. Of the direct payments for promoting self-sufficiency, both the
    Federated States of Micronesia and the Marshall Islands must dedicate an
    average over 15 years of no less than 40 percent to their capital accounts.6
    In addition, Interior is responsible for supervising, coordinating, and
    monitoring federal program assistance being provided by other U.S. federal
    agencies. According to the Office of Territorial and Insular Affairs'
    Administrative Manual, in 1987, the Secretary of the Interior determined
    that the most effective method for U.S. federal agencies to provide
    continuing federal programs to the Freely Associated States was to create a
    direct grant relationship between the other agencies and the Island
    governments.7 As a result, the principal role of Interior has been to
    provide technical assistance and respond to assistance issues identified by
    either the federal agencies or the Freely Associated States.

    The Marshall Islands was the site of 67 U.S. nuclear weapons tests in the
    1940s and 1950s. In order to conduct these tests, the United States moved
    167 people from Bikini Atoll and 142 people from Enewetak Atoll to other
    locations. In addition, during one of the tests, called BRAVO, the residents
    of Rongelap and Utrik were exposed to radioactive fallout and subsequently
    were moved from their homes. The people of Bikini began to return to their
    atoll in 1969 but were removed again in 1978 after it was found that they
    were being exposed to too much radiation. After the cleanup and
    reconstruction was completed in 1980, the people of Enewetak returned.8 The
    people of Rongelap were returned to their homes after about 3 years, but in
    1985 they moved from their homeland after they expressed concern about their
    exposure to radiation. The people of Utrik were returned a few months after
    being removed.9 At this time, most of the people of Bikini and Rongelap are
    not living on their home islands. Since the time of the testing, the United
    States has compensated the people of the Marshall Islands for hardships they
    experienced, such as being moved from their homeland and health problems due
    to exposure from fallout.

    Fiscal Years 1987 Through 1999

    According to data reported by federal agency officials, the United States
    provided over $2.6 billion in assistance and compensation to the Federated
    States of Micronesia and the Republic of the Marshall Islands during fiscal
    years 1987 through 1999. The officials said that over $1.5 billion in
    assistance was provided to the Federated States of Micronesia and over $1.1
    billion was provided to the Marshall Islands, almost $303 million of which
    was provided as compensation for the effects of nuclear weapons testing.

    Micronesia

    The United States provided over $1.5 billion in assistance to the Federated
    States of Micronesia during fiscal years 1987 through 1999. As shown in
    table 1, Interior provided approximately $1.2 billion, or about 78 percent
    of the funding, over the 13-year period. The departments of Agriculture and
    Education reported that they provided assistance totaling about $82 million
    and $79 million, respectively, with each agency providing about 5 percent of
    all assistance provided to the Federated States of Micronesia during that
    time period. Fifteen other agencies provided the remaining assistance.
    Appendix II provides additional details on the assistance each agency
    provided.

     Dollars in thousands

     Agency or Department                            Total       Percent of
                                                                 total
     Interior                                        $1,188,658  77.6
     Agriculture (USDA)a                             81,873      5.3
     Educationb                                      78,954      5.2
     Health and Human Services (HHS)                 62,124      4.1
     Federal Emergency Management Agency (FEMA)a     45,182      2.9
     Commerce/National Oceanic Atmospheric
     Administration (NOAA)                           28,915      1.9
     Labor                                           18,539      1.2
     Defense                                         10,557      0.7
     Transportation/Federal Aviation Administration
     (FAA)                                           4,765       0.3
     U.S. Postal Servicec                            4,398       0.3
     Environmental Protection Agency (EPA)           3,878       0.3
     Small Business Administration (SBA)a            1,878       0.1
     Housing and Urban Development (HUD)             1,256       0.1
     State                                           1,079       0.1
     Social Security Administration (SSA)d           240         0.0
     Institute of Museum and Library Services        111         0.0
     National Science Foundation (NSF)               100         0.0
     Total Federated States of Micronesia
     assistancee                                     $1,532,507  100.0

    aIncludes loans of $61.615 million from USDA, $1.859 million from FEMA, and
    $1.878 million from SBA. Does not include about $18 million in assistance
    from USDA provided to the Federated States of Micronesia, the Marshall
    Islands, and the Republic of Palau because USDA could not identify the
    amount of funding that went to each individual country.

    bDoes not include about $10.1 million that Education provided to the
    Federated States of Micronesia and the Marshall Islands for supplemental
    education opportunity grants, federal work study, and additional Pell
    grants, because it could not identify the amount of funding that went to
    each individual country.

    cThe Postal Service did not report data for fiscal year 1999.

    dThe amount reported for SSA includes only fiscal years 1998 and 1999 and
    excludes 3 months of data. Additional amounts are included in the total for
    HHS, where the SSA existed before becoming an independent agency in 1995.

    eIncludes direct payments, grants, loans, indirect assistance, and
    guaranteed federal services. Legal Services Corporation provided about $16
    million in assistance to the Federated States of Micronesia, the Marshall
    Islands, the Commonwealth of the Northern Marianas Islands, and the Republic
    of Palau, but Legal Services could not identify the amount of funding that
    went to each individual country.

    Source: Prepared by GAO using data provided by agencies.

    Assistance provided by U.S. agencies was disbursed in a variety of ways:
    direct payments, direct program assistance, indirect program assistance, and
    guaranteed federal services. Interior provided almost $1.2 billion in direct
    payments. These funds were deposited into the Federated States of
    Micronesia's bank account and were to be used for such purposes as capital
    construction projects; energy production; communication capabilities; and
    recurring operational activities, including infrastructure maintenance.
    Direct program assistance was provided by agencies in the form of grants,
    loans, and payments. For example, HHS provided over 200 grants amounting to
    $62.1 million for such programs as childhood immunization, Head Start,
    substance abuse and mental health services, and tuberculosis control. Agency
    officials also reported providing a variety of indirect program assistance,
    such as technical support and equipment. Interior reimbursed four federal
    agencies--the Department of State, Transportation's FAA, Commerce's NOAA,
    and the U.S. Postal Service--for services provided. The reimbursements were
    for services such as Foreign Service training and weather forecasting
    support. Types of assistance and the reported amounts of funding provided
    during fiscal years 1987 through 1999 are shown in table 2.

                  Dollars in thousands
                   Type of assistance                  Amount
     Direct payments from Interior                   $1,185,411
     Direct program assistance
     Grants                                          192,757
     Loans                                           65,352
     Other                                           15,600
     Indirect program assistance                     34,244
     Guaranteed federal service                      39,143
     Total Federated States of Micronesia assistance $1,532,507

    Source: Prepared by GAO using data provided by agencies.

    Republic of the Marshall Islands

    Agency officials reported that more than $1.1 billion in assistance and
    compensation was provided to the Marshall Islands during fiscal years 1987
    through 1999. As shown in table 3, Interior provided about $864 million, or
    approximately 78 percent of the funding. Officials from five other agencies,
    including FEMA, USDA, HHS, and the departments of Education and Energy,
    reported providing between $25 million and $75 million in assistance. Ten
    other agencies provided the remaining assistance. Appendix II provides
    additional information on the assistance each agency reported.

     Dollars in thousands
     Agency or Department                     Total       Percent of total
     Interior                                 $864,202    77.7
     Energy                                   75,425      6.8
     USDAa                                    50,386      4.5
     HHS                                      34,572      3.1
     Educationb                               31,924      2.9
     FEMAa                                    26,041      2.3
     Agency or Department                     Total       Percent of total
     Commerce/NOAA                            10,621      1.0
     Labor                                    10,547      0.9
     EPA                                      1,864       0.2
     SBAa                                     1,621       0.1
     U.S. Postal Servicec                     1,466       0.1
     SSAd                                     1,129       0.1
     State                                    1,097       0.1
     Transportation/FAA                       881         0.1
     HUD                                      275         0.0
     Institute of Museum and Library Services 94          0.0
     Total Marshall Islands assistancee       $1,112,145  100.0

    aIncludes loans of $37.366 million from USDA, $0.689 million FEMA, and
    $1.621 million from SBA. Does not include about $18 million in assistance
    provided to the Federated States of Micronesia, the Marshall Islands, and
    the Republic of Palau because USDA could not identify the amount of funding
    that went to each individual country.

    bDoes not include about $10.1 million that Education provided to the
    Federated States of Micronesia and the Marshall Islands for supplemental
    education opportunity grants, federal work study, and additional Pell grants
    because it could not identify the amount of funding that went to each
    individual country.

    cThe Postal Service did not report data for fiscal year 1999.

    dThe amount reported for the SSA includes only fiscal years 1998 and 1999
    and excludes 3 months of data.

    eIncludes direct payments, grants, loans, indirect assistance, and
    guaranteed federal services. Legal Services Corporation provided about $16
    million in assistance to the Federated States of Micronesia, the Marshall
    Islands, the Commonwealth of the Northern Marianas Islands, and the Republic
    of Palau, but Legal Services could not identify the amount of funding that
    went to each individual country.

    Source: Prepared by GAO using data provided by agencies.

    As they did with the Federated States of Micronesia, U.S. agencies provided
    assistance to the Marshall Islands through direct payments, direct program
    assistance, indirect program assistance, and guaranteed federal services.
    Interior provided almost $861 million in direct payments, which includes
    almost $303 million provided as compensation to the people of Bikini,
    Rongelap, Utrik, and Enewetak for the effects of nuclear weapons testing. In
    addition, federal agencies reported that they provided a total of over $137
    million in direct program assistance in the form of grants, loans, and
    payments. For example, Education reported providing over 70 grants under 17
    programs totaling about $27.3 million, which were used for such assistance
    as special education, federal work study, and school improvement. Agency
    officials also reported providing a variety of indirect assistance, such as
    technical assistance and equipment. The Department of State, FAA, NOAA, and
    the U.S. Postal Service reported providing federal services that were
    reimbursed by Interior. Types of assistance and the reported amounts of
    funding provided during fiscal years 1987 through 1999 are shown in table 4.

     Dollars in thousands
     Type of assistance                Amount
     Direct payments from Interiora    $860,955
     Direct program assistance
     Grants                            96,160
     Loans                             39,686
     Other                             1,889
     Indirect program assistance       95,323
     Guaranteed federal service        14,065
     Nuclear testing compensationb     4,067
     Total Marshall Islands assistance $1,112,145

    aDirect payments from Interior include almost $303 million provided as
    compensation for the effects from nuclear weapons testing.

    bNuclear testing compensation was provided by USDA and does not include
    almost $303 million in direct payments made by Interior as compensation for
    the effects from nuclear weapons testing.

    Source: Prepared by GAO using data provided by agencies.

    Compact to the Marshall Islands

    In addition to compensation provided under the Compact for the 67 nuclear
    weapons tests on the Marshall Islands' Bikini and Enewetak atolls, the
    United States provided about $250 million prior to the Compact for the
    effects of nuclear weapons testing. The departments of Defense, Energy, and
    the Interior provided this funding and assistance in a variety of forms,
    including payments to affected people; trust funds; health care and
    monitoring; agricultural support; remediation, rehabilitation, and
    resettlement of land; and radiological cleanup.

    Defense provided about $134 million prior to the Compact for radiological
    cleanup, equipment, building construction, and logistical support. For
    example, on Enewetak Atoll, Defense planned the cleanup approach, removed
    debris and about 100,000 cubic yards of contaminated soils, and provided
    support for the construction of new homes and other facilities. The
    Department also constructed a disposal site in a bomb crater on Runit where
    contaminated materials and soils were mixed with cement, and a concrete cap
    was installed. During its work, Defense had about 8,000 workers involved in
    the cleanup.

    Prior to the Compact, Energy and its predecessor agencies (the Energy
    Research and Development Administration and the Atomic Energy Commission)
    provided about $52 million to what is now the Republic of the Marshall
    Islands, primarily in the form of radiological monitoring and health care.
    Energy's Brookhaven National Laboratory and Lawrence Livermore National
    Laboratory conducted radiological surveys of the area, periodically tested
    those exposed, and provided medical care to the people of the four affected
    atolls of Bikini, Rongelap, Utrik, and Enewetak.

    We were able to identify over $66 million that Interior provided prior to
    the Compact. Authorized payments to those affected totaled about $15
    million, as shown in table 5. About 36 percent of these funds was to be paid
    directly to the affected people or to their communities, while the remaining
    64 percent was placed in trust, and the individuals received payments from
    the interest. Interior also provided more than $9 million in supplemental
    food for Enewetak from 1980 through 1986.10 In addition, Interior funded
    rehabilitation and resettlement efforts totaling about $42 million.11

     Fiscal year Purpose                                           Amount

     1956        Displacement assistance to the people of Bikini;  $325,000
                 $25,000 authorized payment and $300,000 in trust
                 Displacement assistance to the people of
     1956        Enewetak; $25,000 authorized payment and $150,000 175,000
                 in trust

     1964        Authorized payment to the people of Rongelap for  950,000
                 accidental exposure to nuclear fallout

     1969        Authorized payment made to the people of          1,020,000
                 Enewetak, placed in trust

     1975        Authorized payment for displacement hardship to   3,000,000
                 people of Bikini, placed in trust

     1977        Authorized payment to Rongelap, Bikini, and Utrik 300,000
                 communities
                 Authorized payment for displacement hardship to
     1978        the people of Bikini, which increased the Bikini  3,000,000
                 trust fund

     1978-1980   Authorized payments to the people of Rongelap and 1,700,000
                 Utrik
     1979        Authorized payment to the people of Bikini        1,400,000

     1982        Immediate authorized payment of $1 million to the 3,000,000
                 people of Bikini and $2 million placed in trust
     Totala                                                        $14,870,000

    aThe total reflects direct payments and the amount placed in the trust
    funds. The total does not reflect any interest accrued on the accounts.

    Micronesia and the Marshall Islands Are Not Accurate nor Reliable

    While the Compact assigns Interior responsibility for coordinating and
    monitoring the federal assistance programs and activities provided to the
    Federated States of Micronesia and the Marshall Islands, we identified a
    number of inaccuracies and inconsistencies with Interior's data on the
    amount of assistance provided. For example, we found that errors or
    inconsistencies existed (1) in the data that Interior included in its annual
    budget justification submittals to the Congress on the direct payments made
    to the Federated States of Micronesia and the Marshall Islands; (2) between
    Interior's data on assistance provided by other agencies to the Islands and
    the data provided to us by those agencies; (3) in Interior's $124 million
    "Federal Services" account, which it uses to reimburse some of the other
    agencies for their assistance to the Islands; and (4) between Interior's
    records of direct payments and figures contained in the Federated States of
    Micronesia's and the Marshall Islands' audited financial statements.

    When we asked Interior for information on how much funding it provided to
    the Federated States of Micronesia and the Marshall Islands, officials
    responsible for the program directed us to a table in the United States
    Department of the Interior Budget Justification, Fiscal Year 2000.12 The
    table contains Interior's appropriation allocation of funds provided for
    fiscal years 1987 through 1999 and projected allocations for fiscal years
    2000 and 2001. The table includes a breakdown of the amounts in various
    subaccounts, such as ones labeled current, capital, inflation, energy
    production, and communication hardware.13 To determine whether the amounts
    shown were accurate and whether they represented actual payments to the
    Federated States of Micronesia and the Marshall Islands, we obtained
    documents showing the amounts transferred into the respective bank accounts.
    Additionally, we examined entries made to Interior's budgetary accounting
    system to determine how budget allocations were made for these funds to
    various subaccounts. We found that the total payments made to each country
    were generally accurate, with the exception of those made in 3 years for the
    Federated States of Micronesia and 2 years for the Marshall Islands. The
    five errors resulted in an overstatement of $404,000 in the total reported
    assistance provided of about $2 billion. In addition, there were 13
    incorrect amounts shown in the table's subaccounts. For example, in fiscal
    year 1997, the table showed the current account for the Marshall Islands at
    $5,460,000 and the capital account at $13,640,000. These amounts, according
    to the budgetary accounting system entries, should have been $12 million and
    $7.1 million, respectively.14 The accuracy of the subaccounts is important
    since the Compact requires that at least 40 percent of the direct payments
    provided to promote self-sufficiency be used for capital account purposes
    and the accounts provide information on how the Federated States of
    Micronesia and the Marshall Islands may have used the funds. Interior
    corrected the table after we identified the errors.

    As specified in the Compact's enacting legislation, Interior is responsible
    for coordinating and monitoring federal assistance programs and activities
    provided to the Federated States of Micronesia and the Marshall Islands.
    Interior officials provided us with a schedule they had prepared for the
    Department of State showing the dollar amount of assistance being provided
    by other agencies. This was the only document they had available that
    provided such information. In examining the schedule, we found that
    Interior's data disagreed with the information we had collected from the
    individual agencies. For example, Interior's schedule showed that the
    Department of Education provided the Marshall Islands $17.5 million while
    data we obtained from Education showed that it provided about $31.9
    million.15 Interior officials told us that while they have attempted to get
    better information from the other agencies on the assistance they provide,
    there is no requirement for them to report to Interior. As a result,
    Interior has had limited success in obtaining such information from the
    other agencies.

    Interior established a "Federal Services" account for reimbursing the cost
    of assistance provided by four agencies--NOAA, the Department of State, FAA,
    and the U.S. Postal Service. Interior's fiscal year 2000 budget
    justification table indicates that Interior made payments to other agencies
    from this account of $124,432,000 from fiscal year 1987 through fiscal year
    1999. However, the agencies that receive these reimbursements told us that
    they had received $53 million from Interior.16 In attempting to explain the
    $71 million difference, Interior identified (1) a $20 million reprogramming
    from this account in fiscal year 1997 that was not accounted for in the
    table (thus overstating the amount of assistance provided in that year by
    $20 million), (2) about $9 million that it reimbursed to the Federated
    States of Micronesia and the Marshall Islands for annual audits required by
    the Compact and completed by the accounting firm Deloitte & Touche, (3)
    about $11.6 million in funds that was obligated but not yet expended (some
    dating back to 1989--Interior is now examining these funds to determine if
    they should be maintained), and (4) a balance available of $3.9 million.
    Interior officials were unable to provide documentation for the remaining
    $26.5 million difference, explaining that their data for the first 2 years
    of the program were not readily available due to a change in the
    Department's computer systems. In addition, the officials explained that
    Interior had reimbursed the Department of Education for some of the
    assistance it provided in the early years of the Compact, but Interior was
    not able to identify the amount it reimbursed Education during those years.

    The Compact requires that the Federated States of Micronesia and the
    Marshall Islands conduct an annual audit of the assistance provided. We
    planned to use the information contained in these audits to cross-check
    information we obtained from Interior. However, this could not be
    accomplished because the Federated States of Micronesia and the Marshall
    Islands did not always allocate the direct funding provided in the same way
    as Interior records show.17 For example, in the most recent audit of the
    Federated States of Micronesia, the capital account is shown as receiving
    $18,048,768, while Interior shows that it provided $16,000,000 in funds. We
    found that Interior had not used the audit data available from the Islands
    to corroborate its figures. While Interior is not required to use the audit
    data to reconcile its figures, it is important that Interior understand how
    the Islands have allocated the funding in order to determine whether the
    Islands are in compliance with Compact requirements regarding the use of the
    funds.

    While we found errors and inconsistencies in Interior's data on the
    financial and program assistance provided to the Islands, we took steps to
    ensure that the data provided in this report are as accurate as possible. We
    verified and corrected Interior's data on direct payments made to the
    Islands. In addition, while we did not verify the program assistance
    provided by the 19 agencies, we reviewed the data, followed up with agency
    officials in instances where questions existed, and received agency
    confirmation on the accuracy of the amounts reported.

    Although Interior is identified as the agency responsible for providing a
    majority of the funding as well as coordinating and monitoring the
    assistance programs and activities provided to the Federated States of
    Micronesia and the Marshall Islands, it has not maintained reliable data on
    the amount of assistance provided. Numerous inconsistencies exist in
    Interior's own records as well as between Interior's records and those of
    both other U.S. federal agencies that provided assistance and figures in the
    annual audits conducted by Deloitte & Touche. These inconsistencies call
    into question Interior's ability to accurately report on assistance provided
    and the effectiveness of its coordination and monitoring responsibilities.
    This lack of reliable information could impact the Department of State as it
    proceeds with negotiations on provisions of the Compact that expire in 2001.

    In the event Interior retains monitoring and coordination oversight as a
    result of the current negotiations, we recommend that the Secretary of the
    Interior direct the Office of Insular Affairs to develop a system to obtain
    and maintain data on all U.S. financial and program assistance provided to
    the Federated States of Micronesia and the Republic of the Marshall Islands.
    Such a system might include making agreements with other agencies to
    regularly report assistance provided and making use of the annual audit
    reports from the Federated States of Micronesia and the Marshall Islands to
    help identify how funds are allocated. In addition, we recommend that the
    Secretary direct the Office of Insular Affairs to reconcile the amounts
    reimbursed to other agencies shown in the budget justification table to the
    amounts reported by the agencies that receive reimbursements from Interior.

    Given that negotiations are currently under way on provisions of the Compact
    of Free Association that expire in 2001, we recommend that the Secretary of
    State negotiate provisions that require that reliable data be maintained to
    ensure better accountability of the assistance provided. Requiring periodic
    reconciliation of accounts between Interior, the other agencies providing
    assistance, and the Islands is one means to achieve this objective.

    We provided a draft of this report to the Department of the Interior, the
    Department of State, the Republic of the Marshall Islands, and the Federated
    States of Micronesia for their review and comment.

    Interior's comments fall into two general categories. First, Interior said
    that while it has a coordinating and monitoring role with respect to grants
    from other agencies, it does not have the authority to affect the manner,
    amount, and use of these funds because the entire system has been designed
    to be decentralized. Our draft report did not suggest that Interior affect
    the manner, amount, or use of the grants and other program assistance
    provided by other agencies. However, Interior is identified in the Compact's
    enacting legislation and by executive order as the agency responsible for
    coordinating and monitoring federal programs being provided. In fulfilling
    that role, it is important that Interior know the type and amount of grants
    and other program assistance provided by other federal agencies. Second,
    Interior believes that we have misrepresented the financial information it
    provided. We disagree. Interior did not have accurate data on the direct
    grants it provided, the amounts other agencies provided, or the
    reimbursements it made to other agencies. Given that Interior is the agency
    responsible for providing oversight and monitoring of U.S. assistance to the
    Islands, we expected the agency to maintain accurate information on such
    assistance. Instead, to develop this information, we had to, among other
    things, examine Interior office files and request data from 19 agencies on
    the assistance that they provided to the Federated States of Micronesia and
    to the Marshall Islands and the amounts of the reimbursements they received
    from Interior. Finally, Interior also believes that the draft report
    recommendations make sense only if federal programs are extended in the next
    Compact term, if it is determined that one agency should account for all
    grant funding and if necessary legislation is enacted to create and enforce
    such a central grant authority. We agree with Interior and have modified the
    recommendations to make them applicable to the agency or agencies deemed
    responsible for monitoring and supervising assistance in the next term of
    the Compact. Interior's comments and our detailed response are in appendix
    III. Interior also provided technical clarifications, which we incorporated
    as appropriate.

    The Department of State concurred with our recommendation calling for
    greater accountability for assistance provided under the Compact. However,
    the agency did not concur with our recommendation regarding funds not
    included in Interior's budget. The agency said that new policies and
    procedures are being considered that would relieve Interior of the
    responsibility to monitor and supervise assistance not included in
    Interior's budget. As noted previously, we have modified our recommendation
    accordingly. The Department of State's comments are in appendix IV. State
    also provided technical clarifications, which we incorporated as
    appropriate.

    The Republic of the Marshall Islands said that it had serious concerns that
    the draft report misrepresented the unique history of U.S. financial
    assistance to the Islands and that some of the assistance provided also
    benefits the United States. We provided additional information to the report
    to put the discussion of Compact funding in an historical context. Most of
    the Republic of the Marshall Islands' comments however, focused on the use
    of the term "compensation." The Marshall Islands viewed our use of this term
    as being too broad and said that the only true form of compensation was the
    direct payments made to the people who were affected by nuclear weapons
    testing. We recognize that there can be differing views on what constitutes
    compensation. As a result, we have modified the report so that funding
    provided prior to the Compact in connection with the effects of nuclear
    weapons testing is no longer characterized as compensation. The Republic of
    the Marshall Islands' comments and our response are included as appendix V.

    The Federated States of Micronesia said that it did not have comments on the
    draft because they did not have access to Interior's or other U.S. federal
    agencies' accounting records. The officials pointed out that without the
    records, they were unable to respond to our findings. The Federated States
    of Micronesia's letter is in appendix VI.

    To obtain information on the cost to the United States in providing
    assistance to the Federated States of Micronesia and the Republic of the
    Marshall Islands, we reviewed the Compact of Free Association and subsequent
    agreements, applicable U.S. laws, reports of congressional hearings, and
    annual audit reports from the Federated States of Micronesia and the
    Marshall Islands. We also obtained data and interviewed officials from 19
    federal agencies: the departments of the Interior, State, Agriculture,
    Commerce, Defense, Education, Energy, HHS, HUD, Labor, and Transportation as
    well as EPA, SSA, FEMA, the Institute of Museum and Library Services, Legal
    Services Corporation, NSF, the U.S. Postal Service, and SBA. We provided the
    financial data reported in appendix II to 17 agencies that confirmed the
    accuracy of the data. In addition, we met with representatives from the
    Federated States of Micronesia and the Marshall Islands.

    We performed several steps to verify the data we obtained from the agencies.
    We compared Interior figures for direct payments with records of payments
    made to the Federated States of Micronesia's and the Marshall Islands' bank
    accounts. Furthermore, to the extent possible, we compared figures for grant
    assistance that we obtained from various agencies with data in the Deloitte
    & Touche single audit reports from the Federated States of Micronesia and
    the Marshall Islands and discussed some of the differences with agency
    officials.

    In performing the audit work to determine the costs to the United States of
    providing assistance in accordance with the Compact, we were faced with
    several limitations. For instance, Department of Justice officials were not
    able to identify any individuals within the department who were
    knowledgeable of the subject matter. Likewise, the U.S. Coast Guard could
    not identify an individual who could provide us with information on the
    amount of assistance provided to the Federated States of Micronesia and the
    Marshall Islands. In addition, some agencies, for example, SSA and the
    Postal Service, were not able to provide the information for all years.
    Furthermore, USDA, Education, and the Legal Services Corporation were not
    always able to allocate the assistance provided to each individual country.
    We also identified discrepancies between data received from federal agencies
    and figures in the single audit reports from the Federated States of
    Micronesia and the Marshall Islands. We were not able to resolve all the
    differences. Furthermore, we were not able to verify all direct payments
    made through Interior because of missing records. Finally, while we
    identified loans provided by the agencies, we did not evaluate the value of
    any debts that were forgiven under authority of the Compact.

    To determine the amount of funding and assistance provided prior to the
    Compact for the effects of nuclear weapons testing to what is now the
    Republic of the Marshall Islands, we reviewed applicable U.S. laws and
    reports of congressional hearings. As part of this effort, we included such
    funding and assistance as direct payments to the affected people of the
    Marshall Islands, trust funds, health care and monitoring, agricultural
    support, land rehabilitation and resettlement, and radiological cleanup. In
    addition, we reviewed 68 reports from 1947 through 1986 by the Islands' High
    Commissioner and the Department of State on the activities of the Trust
    Territory of the Pacific Islands, and we examined selected archived
    microfilm records at the National Archives. We also interviewed departments
    of Defense, Energy, and Interior officials.

    The departments of Defense and Energy provided estimates of the amount of
    funding that they provided prior to the Compact but had limited
    documentation for their estimates. Interior did not provide an estimate.
    Agency officials said that they faced difficulties identifying funding
    amounts because all records had not been retained for the period in
    question, and personnel who were involved were no longer available.

    All dollar figures in this report are presented in nominal terms, with no
    adjustment for inflation. We were not able to present total assistance and
    compensation provided over the years in 1999 constant dollars, which would
    adjust for inflation, because the data available did not always identify the
    specific year in which the funds or assistance was provided. If we could
    have converted all figures to 1999 dollars, the amounts for total assistance
    and compensation provided would have been higher.

    We conducted our work from August 1999 through April 2000 in accordance with
    generally accepted government auditing standards.

    Copies of this report are being sent to the Honorable Bruce Babbitt, the
    Secretary of the Interior; the Honorable Madeleine K. Albright, the
    Secretary of State; His Excellency Leo A. Falcam, President of the Federated
    States of Micronesia; His Excellency Kessai Note, President of the Republic
    of the Marshall Islands; and other interested parties. We will also make
    copies available to others upon request.

    If you or your staff have any questions about this report, please call me at
    (202) 512-3841. Key contributors to this report were A. Don Cowan, Jessica
    Martinson, Barbara Scharl, and Glen Trochelman.
    (Ms.) Gary L. Jones
    Associate Director, Energy,
    Resources, and Science Issues

    Financial Provisions of the Compact of Free Association

    The Compact of Free Association contains a number of financial provisions,
    many of which will expire on October 1, 2001, its 15th year.18 These
    provisions involve direct financial payments for such items as economic
    self-sufficiency, U.S. military Civic Action Teams, energy production,
    operation and maintenance of communication facilities, and other assistance,
    such as surveillance and enforcement of maritime zones, health and medical
    assistance, and post-secondary education. The following provides additional
    information on the financial provisions in title II, articles I and II of
    the Compact.

    This section provides direct grant payments to the Federated States of
    Micronesia and the Republic of Marshall Islands to advance the economic
    self-sufficiency of their people.19 Of these funds, both the Federated
    States of Micronesia and the Marshall Islands must dedicate an average over
    15 years of no less than 40 percent to the capital account. This account is
    to be used for purposes that include funding construction or major repair of
    capital infrastructure or for financing public and private sector projects
    identified in the 5-year economic development plan. Up to 60 percent of
    section 211 funds may be used for general government operations. Table 6
    shows the assistance to be provided during the 15 years this provision is in
    effect.

     Dollars in millions
                         The Federated States of Micronesia  Marshall Islands
     First 5 Years       $60                                 $26.1
     Second 5 Years      $51                                 $22.1
     Last 5 Years        $40                                 $19.1

    The Compact provides the Federated States of Micronesia $1 million annually
    for 14 years, commencing on the first anniversary of the Compact, to defray
    costs associated with U.S. military Civic Action Teams.20 Civic Action Teams
    are comprised of such members as engineers, construction specialists,
    equipment operators, carpenters, masons, welders, mechanics, and plumbers.
    Similar funds were not provided to the Marshall Islands.

    This section of the Compact provides $1.9 million annually, not adjusted for
    inflation, to the Marshall Islands specifically to take into account the
    impact of the activities of the United States in the Kwajalein Atoll area.
    It also provided $160,000 in the first year of the Compact to the Federated
    States of Micronesia specifically to take into account the impact of the
    activities of the United States in the State of Yap.

    This section provides the Federated States of Micronesia $3 million and the
    Marshall Islands $2 million annually for 14 years, commencing on the first
    anniversary of the Compact, to help achieve increased self-sufficiency in
    energy production.

    This section provides the Federated States of Micronesia $600,000 and the
    Marshall Islands $300,000 annually for 15 years, commencing on the effective
    date of the Compact, for the operation and maintenance of communications
    systems. In addition, section 215 provided one-time payments of $6 million
    to the Federated States of Micronesia and $3 million to the Marshall Islands
    to acquire communication hardware during the first year.

    This section provides $5.369 million annually for 15 years, commencing on
    the effective date of the Compact, for a variety of purposes. These funds
    are to be split between the Federated States of Micronesia and the Marshall
    Islands in accordance with a distribution agreement between them. Table 7
    shows the purposes and annual payments set forth in the Compact.

     Purpose of assistance                          Annual payments
     Surveillance and enforcement of maritime zones $890,000
     Health and medical programs                     $1.791 million
     Post secondary education support               $2.687 million

    The Compact also provided for a one-time payment of $1.333 million to help
    begin the surveillance and enforcement of maritime zones.

    This section provides inflation adjustments for each fiscal year for
    payments under section 211, 212, 214, and 215 as well as for extension
    payments required under section 231. This adjustment is based on the percent
    which equals two thirds of the percentage change in the U.S. Gross National
    Product Implicit Price Deflator, or 7 percent, whichever is less in any one
    year, using the beginning of the fiscal year 1981 as the base. The
    Department of the Interior estimates inflation adjustments provided over the
    life of the Compact will be about $485 million.

    This section provides the Federated States of Micronesia and the Republic of
    the Marshall Islands $10 million annually to be used for education and health
    care. Of this amount, the Federated States of Micronesia receives $7
    million, while the Marshall Islands receives $3 million.

    Agency Assistance Provided to the Federated States of Micronesia and the
    Marshall Islands

    We identified 19 U.S. federal agencies that have provided assistance to the
    Federated States of Micronesia and the Marshall Islands. This assistance
    came in the form of direct payments, grants, loans, indirect assistance, and
    guaranteed federal services.

    The Department of Agriculture (USDA) provided assistance to the Federated
    States of Micronesia and the Marshall Islands through the Food and Nutrition
    Service (FNS); Rural Housing Service; Rural Utilities Service; Forest
    Service; Cooperative State Research, Education, and Extension Service; and
    Natural Resources Conservation Service. During fiscal years 1987 through
    1999, USDA provided grants, loans, and indirect assistance of over $81.8
    million to the Federated States of Micronesia and over $50.3 million to the
    Marshall Islands, as shown in tables 8 and 9. FNS provided food assistance,
    transitional assistance, bonus commodities, and nuclear compensation. Rural
    Housing Service funding was provided for community programs and home repair
    and Rural Utilities Service assistance was provided for water and waste
    systems and telecommunications improvement. Examples of assistance provided
    by the Forest Service include research grants, technical assistance, fire
    and forestry assistance, and fire fighting equipment. Examples of assistance
    provided by the Cooperative State Research, Education, and Extension Service
    include grants to reduce foodborne illness and waterborne disease. The
    Natural Resources Conservation Service provided financial assistance to the
    Federated States of Micronesia and technical assistance to both the
    Federated States of Micronesia and the Marshall Islands.

     Dollars in thousands
                                                                 Amount
     Grants
     Home repair and preservation                                $4,778
     Water and wastewater systems                                1,843
     Forestry and fire assistance                                1,065
     Transitional assistance                                     161
     Other                                                       318
     Totala                                                      $8,166
                                                                 Amount
     Loans
     Telecommunications corporation                              $39,960
     Home repair                                                 16,039
     Single-family housing                                       4,156
     Loan servicing, nonsubsidized                               964
     School improvements                                         248
     Community facilities loan                                   248
     Total                                                       $61,616
     Indirect assistance
     Food- disaster assistance                                   $9,637
     Estimate: technical assistance                              1,779
     Estimate: program management                                483
     Fire trucks and engines                                     144
     Forestry- technical assistance, formal training, or meeting 50
     Totala                                                      $12,092
     Total Federated States of Micronesia assistance b           $81,873

    a Total does not add due to rounding.

    b Total does not include approximately $18 million of assistance provided
    through the Cooperative State Research, Education, and Extension Service to
    the Federated States of Micronesia, the Marshall Islands, and the Republic
    of Palau. The amount of funding provided to the individual countries was not
    available. Total does not add due to rounding.

    Source: Prepared by GAO from USDA's data.

     Dollars in thousands
                                                                  Amount
     Grants
     Home repair and preservation                                 $1,265
     Transitional assistance                                      459
     Fire and forestry assistance                                 280
     Reducing waterborne disease                                  24
     Total                                                        $2,028
     Loans
     Telecommunication authority                                  $22,799
     Marshalls Energy Company, Inc.                               12,500
                                                                  Amount
     Home repair                                                  2,067
     Total                                                        $37,366
     Indirect assistance
     Food disaster assistance                                     $6,365
     Estimate: program management                                 230
     Forestry- technical assistance, formal training, or meetings 106
     Fire engines                                                 84
     Bonus commodities                                            76
     Estimate: technical assistance                               63
     Total                                                        $6,924
     Compensation
     Nuclear testing compensation                                 $4,067
     Total Marshall Islands assistancea                           $50,386

    a Total does not include approximately $18 million of assistance provided
    through the Cooperative State Research, Education, and Extension Service to
    the Federated States of Micronesia, the Marshall Islands, and the Republic
    of Palau. The amount of funding provided to the individual countries was not
    available. Total does not add due to rounding.

    Source: Prepared by GAO from USDA's data.

    The National Oceanic Atmospheric Administration (NOAA), which oversees the
    National Weather Service, established upper air weather observation offices
    in the Federated States of Micronesia and the Marshall Islands in the
    mid-1950s. Since the implementation of the Compact, funds to support the
    weather offices were transferred to Interior, which now reimburses NOAA (see
    tables 10 and 11). The reimbursements include costs incurred by the
    Federated States of Micronesia and the Marshall Islands and the National
    Weather Service/Pacific Region to manage, supervise, operate, and maintain
    the offices. In addition to weather service support, NOAA provided a grant
    to the Federated States of Micronesia for snail reseeding that took place in
    the outer islands of Yap state.

     Dollars in thousands
                                                       Amount
     Grants
     Snail reseeding in the outer islands of Yap state $14
     Guaranteed federal service
     Weather service support                           $28,901
     Total Federated States of Micronesia assistance   $28,915

     Dollars in thousands
                                Amount
     Guaranteed federal service
     Weather service support    $10,621

    Source: Prepared by GAO from the Department of Commerce's data.

    The Department of Defense provided indirect assistance to the Federated
    States of Micronesia through U.S. military Civic Action Teams that assisted
    in national development projects. Costs for providing the assistance
    included per diem and travel, equipment, facilities, and maintenance. During
    fiscal years 1995 through 1999, the Department of Defense spent
    approximately $10.6 million to provide Civic Actions Teams to the Federated
    States of Micronesia, as shown in table 12. The Department provided teams
    prior to fiscal year 1995, but according to an agency official, records
    containing cost information for that period were destroyed in a hurricane.
    The Department did not report any assistance provided to the Marshall
    Islands in response to our request.

     Dollars in thousands
                          Amount
     Indirect assistance
     Civic Action Teams   $10,557

    Source: Prepared by GAO from the Department of Defense's data.

    The Department of Education provided assistance to the Federated States of
    Micronesia and the Marshall Islands during fiscal years 1987 through 1999.
    During this period, Education provided over $78.9 million to the Federated
    States of Micronesia and over $31.9 million to the Marshall Islands in both
    grants and indirect assistance, as shown in tables 13 and 14. The Department
    of Education provided grant funding for a variety of programs, including
    adult education, honors scholarships, client assistance, special education,
    vocational education, federal work study, and Pell Grants.21 In addition,
    technical assistance and research, provided by Pacific Resources for
    Education and Learning, was funded by the Department of Education.

     Dollars in thousands
                                                             Amount
     Grants
     Pell Grantsa                                            $19,282
     Special education grants to states and preschool grants 23,729
     Chapter 1/title I grants to local educational agencies  9,058
     Freely Associated States- education grant program       8,345
     School improvement state grants                         3,510
                                                             Amount
     Vocational education                                    3,235
     Territorial teacher training                            1,367
     Vocational rehabilitation state grants                  1,350
     Federal work-studyb                                     1,122
     Bilingual education                                     1,034
     Goals 2000                                              969
     Adult education                                         666
     Supplemental educational opportunity grantsc            486
     Byrd honors scholarships                                182
     Client assistance                                       30
     Total                                                   $74,365
     Indirect assistance
     Technical assistance and research                       $4,589
     Total Federated States of Micronesia assistance         $78,954

    a The Department of Education provided an additional $6 million for Pell
    Grants to the Federated States of Micronesia and the Marshall Islands from
    fiscal year 1987 through 1991. The Department was not able to report the
    amount by country. According to Education, these costs were reimbursed by
    Interior.

    b Education provided an additional $2 million for federal work study to the
    Federated States of Micronesia and the Marshall Islands from fiscal years
    1987 through 1991. The Department was not able to report the amount by
    country. According to Education, the costs were reimbursed by Interior.

    c The Department of Education provided an additional $2.1 million for
    supplemental educational opportunity grants to the Federated States of
    Micronesia and the Marshall Islands between fiscal years 1987 through 1991.
    The Department was not able to report the amount by country. According to
    Education, the costs were reimbursed by Interior.

    Source: Prepared by GAO from the Department of Education's data.

     Dollars in thousands
                                                             Amount
     Grants
     Pell Grantsa                                            $6,562
     Special education grants to states and preschool grants 9,484
     Chapter 1/title I grants to local educational agencies  3,513
     Freely Associated States grant program                  2,424
     School improvement state grants                         1,287
                                                             Amount
     Territorial teacher training                            839
     Adult education                                         774
     Vocational education                                    715
     Goals 2000                                              487
     Upward Bound                                            381
     Federal work studyb                                     350
     Vocational rehabilitation state grants                  161
     Supplemental educational opportunity grantsc            149
     Byrd honors scholarship                                 117
     Bilingual education                                     75
     Client assistance                                       17
     Total                                                   $27,335
     Indirect assistance
     Technical assistance and research                       $4,589
     Total Marshall Islands assistance                       $31,924

    a The Department of Education provided an additional $6 million for Pell
    Grants to the Federated States of Micronesia and the Marshall Islands from
    fiscal year 1987 through 1991. The Department was not able to report the
    amount by country. According to Education, these costs were reimbursed by
    Interior.

    b Education provided an additional $2 million for federal work study to the
    Federated States of Micronesia and the Marshall Islands from fiscal years
    1987 through 1991. The Department was not able to report the amount by
    country. According to Education, the costs were reimbursed by Interior.

    c The Department of Education provided an additional $2.1 million for
    supplemental educational opportunity grants to the Federated States of
    Micronesia and the Marshall Islands between fiscal years 1987 through 1991.
    The Department was not able to report the amount by country. According to
    Education, the costs were reimbursed by Interior.

    Source: Prepared by GAO from the Department of Education's data.

    The Department of Energy (DOE) provided indirect assistance to the Marshall
    Islands in the form of medical care and environmental monitoring and
    research. DOE provided over $75 million to the Marshall Islands from fiscal
    year 1987 through 1999, as shown in table 15. The assistance included
    mandated health care to approximately 230 people, environmental monitoring
    services, and operational support, such as procuring equipment and
    transporting individuals. DOE officials said that they did not provide
    assistance to the Federated States of Micronesia during this time period.

     Dollars in thousands
                                                      Amount
     Indirect assistance
     Special medical care and radiological monitoring $73,639
     Medical and environmental monitoring equipment   1,786
     Total                                            $75,425

    Source: Prepared by GAO from DOE's data.

    The Environmental Protection Agency (EPA) provided direct grant assistance
    and indirect assistance to both the Federated States of Micronesia and the
    Marshall Islands during the Compact time period, totaling about $5.7 million
    (see tables 16 and 17). EPA provided grants for wastewater construction and
    environmental program assistance to the Federated States of Micronesia and
    the Marshall Islands during a 3-year phaseout beginning with the
    implementation of the Compact in 1987. In addition to grants, EPA provided
    cleanup of hazardous chemical sites in the Marshall Islands during the early
    1990s at an approximate cost of $750,000.

    Furthermore, EPA's region IX (in San Francisco) provided, and continues to
    provide, ad hoc technical assistance to citizens of the Federated States of
    Micronesia and the Marshall Islands in response to requests for information
    received via telephone or e-mail. EPA provided additional indirect
    assistance through a 1994 preliminary assessment of polychlorinated biphenyl
    (PCB) contamination in the Federated States of Micronesia and the
    preparation of a conceptual solid waste management plan in the Marshall
    Islands in 1996. According to an agency official, the costs of performing
    the PCB assessment and the waste management plan were relatively small,
    consisting of the travel cost and 3 weeks time for three individuals.

     Dollars in thousands
                                        Amount
     Grants
     Construction wastewater system     $3,328
     Consolidated environmental program 550
     Total                              $3,878

     Dollars in thousands
                                        Amount
     Grants
     Construction wastewater system     $871
     Consolidated environmental program 243
     Total                              $1,114
     Indirect assistance
     Cleanup of PCB contaminated sites  $750
     Total Marshall Islands assistance  $1,864

    Source: Prepared by GAO from EPA's data.

    The Federal Emergency Management Agency (FEMA) provided assistance to the
    Federated States of Micronesia and the Marshall Islands in the form of
    disaster assistance, loans, and performance partnership agreements. During
    fiscal years 1987 through 1999, FEMA provided over $45.2 million to the
    Federated States of Micronesia and over $26.0 million to the Marshall
    Islands, as shown in tables 18 and 19. Disaster assistance grants were
    provided on a cost-share basis, with the foreign government responsible for
    providing a percentage of the funding. When the foreign government is unable
    to provide its share of the funding, FEMA may provide loans to cover that
    share. The amount of assistance provided in a given year was largely
    dependent on extreme weather events that may have taken place. FEMA also
    provides annual grants not to exceed $50,000 to cover up to 50 percent of
    the cost of improving, maintaining, and updating disaster assistance plans.

     Dollars in thousands
                                                                       Amount
     Grants
     Typhoons- public assistance, hazard mitigation, and individuals
     and families                                                      $18,766
     Severe drought- public assistance and hazard mitigation           1,613
     Disaster preparedness improvement                                 338
     Totala                                                            $20,716
     Loans
     Typhoon- public assistance and individuals and families           $1,859
     Other direct assistance
     Temporary housing payments                                        $15,600
     Indirect assistance
     Typhoons and severe drought- mission assignments, technical
     assistance, and inspection services                               $7,006
     Total Federated States of Micronesia assistancea                  $45,182

    a Total does not add due to rounding.

     Dollars in thousands
                                                                       Amount
     Grants
     Severe drought- public assistance and hazard mitigation           $7,576
     Typhoons- public assistance, hazard mitigation, and individuals
     and families                                                      3,001
     Tropical storms- public assistance, hazard mitigation, and
     individuals and families                                          2,867
     High surf and wave action- public assistance and hazard mitigation1,906
                                                                       Amount
     Disaster preparedness improvement                                 $290
     Fire- public assistance                                           178
     Total                                                             $15,818
     Loans
     Typhoon and tropical storm- public assistance and individuals and
     families                                                          $699
     Other direct assistance
     Temporary housing payments                                        $1,889
     Indirect assistance
     Typhoons, tropical storms, high surf and wave action, and severe
     drought- mission assignments, technical assistance, and inspection$7,635
     services
     Total Marshall Islands assistance                                 $26,041

    Source: Prepared by GAO from FEMA's data.

    The Department of Health and Human Services (HHS) provided program and
    technical assistance to the Federated States of Micronesia and the Marshall
    Islands during fiscal years 1987 through 1999. A variety of agencies within
    HHS provided the assistance, including the Centers for Disease Control and
    Prevention, the Administration for Children and Families, the Health
    Resources and Services Administration, and the Substance Abuse and Mental
    Health Services Administration. The Social Security Association (SSA) also
    provided assistance before it became an independent agency in 1995, however
    because of data availability problems for this period, the agency reported
    only partial information for the Federated States of Micronesia and no data
    for the Marshall Islands. During fiscal years 1987 through 1999, the HHS
    provided over $62.1 million to the Federated States of Micronesia and over
    $34.5 million to the Marshall Islands, as shown in tables 20 and 21. HHS
    provided funding for a variety of programs including Head Start, family
    planning, childhood immunizations, and tuberculosis control.

     Dollars in thousands
                                                                      Amount
     Grants
     Head Start                                                       $12,763
     Social security- disability, retirement, and survivors insurance 12,735
     Maternal and child health programs and services                  7,048
     Supplemental security income                                     6,742
     Childhood immunization grants                                    5,821
     Substance abuse and mental health services                       5,487
     Preventive health and health services                            2,649
     Community health centers and services                            1,920
     Programs and services for aging                                  1,545
     Family planning services                                         1,260
     Community services and youth activity program                    992
     Tuberculosis control                                             911
     HIV/AIDS surveillance and prevention activities                  763
     Developmental disabilities- basic support and advocacy           398
     Diabetes control program                                         305
     Other                                                            785
     Total                                                            $62,124

     Dollars in thousands
                                                                      Amount
     Grants
     Head Start                                                       $17,626
     Maternal and child health programs and services                  3,869
     Community health centers and services and youth activity program 3,060
     Substance abuse and mental health services                       2,386
     Preventive health and health services                            1,751
     Childhood immunization grants                                    1,730
     HIV/AIDS surveillance and prevention activities                  998
     Family planning services                                         787
     Programs and services for aging                                  621
     CDC - Investigations Technical Assistance                        551
     Developmental disabilities- basic support and advocacy           469
     Tuberculosis control                                             357
     Diabetes control program                                         227
     Other                                                            139
     Total                                                            $34,572

    Source: Prepared by GAO from HHS' data.

    The Department of Housing and Urban Development (HUD) provided assistance
    for infrastructure and utility development to the Federated States of
    Micronesia and the Marshall Islands during a 3-year phase-out period that
    began with the implementation of the Compact in fiscal year 1987. During
    fiscal years 1987 through 1989, HUD provided over $1.2 million to the
    Federated States of Micronesia and over $275,000 to the Marshall Islands, as
    shown in tables 22 and 23. The assistance was provided for a variety of
    purposes, including constructing water systems, renovating housing, and
    building recreational facilities.

     Dollars in thousands
                                            Amount
     Grants
     Infrastructure and utility development $1,256

     Dollars in thousands
                                            Amount
     Grants
     Infrastructure and utility development $275

    Source: Prepared by GAO from HUD's data.

    The Institute of Museum and Library Services provided grants for library
    services to the Federated States of Micronesia and the Marshall Islands in
    fiscal years 1998 and 1999. The Institute provided about $111,000 to the
    Federated States of Micronesia and about $94,000 to the Marshall Islands
    during fiscal years 1998 and 1999, as shown in tables 24 and 25. The
    Institute uses an application and review process administered by the Pacific
    Resources for Education and Learning to allocate the funding. The Federated
    States of Micronesia, the Marshall Islands, Palau, Guam, American Samoa, and
    the Commonwealth of the Northern Marianas Islands all compete for the funds
    derived from the allotments of the three Freely Associated States.

     Dollars in thousands
                          Amount
     Grants
     Library services     $111

     Dollars in thousands
                          Amount
     Grants
     Library services     $94

    Source: Prepared by GAO from the Institute of Museum and Library Services'
    data.

    The Department of the Interior funded a majority of the assistance provided
    to the Federated States of Micronesia and the Marshall
    Islands--approximately 77 percent of the total financial assistance provided
    to the Federated States of Micronesia and approximately 78 percent to the
    Marshall Islands. During fiscal years 1987 through 1999, the Interior
    provided approximately $1.2 billion to the Federated States of Micronesia
    and about $864.2 million to the Marshall Islands, as shown in tables 26 and
    27. Interior is required by the Compact to provide specified dollar amounts
    in direct payments for various development efforts, such as communications,
    marine surveillance, and energy production. In addition to direct payments,
    Interior provided grant assistance for a variety of purposes, including
    providing advisors and consultants, performing studies and surveys, and
    conducting workshops and conferences.

     Dollars in thousands
                                                        Amount
     Direct payments
     Current                                            $405,000
     Capital                                            270,000
     Inflation                                          279,171
     Energy production                                  36,000
     Communication O&M                                  7,800
     Communication hardware                             6,000
     Yap impact                                         160
     Tax and trade compensation                         20,000
     Maritime surveillance/med. ref/scholarship         48,354
     Health and education block grant                   91,000
     Other construction                                 9,926
     Civic action teams                                 12,000
     Total                                              $1,185,411
     Grants
     Advisors/consultants                               $766
     Studies/survey/needs assessment                    589
     Comprehensive education needs                      379
     Newsletters/quarterlys                             368
     Training, workshops, conferences                   305
     Multiagency, antifraud project                     141
     National health care and health related activities 134
                                                        Amount
     Pohnpei utilities corporation                      110
     Accounting/computer interns and staff              91
     Office equipment                                   68
     Other                                              296
     Total                                              $3,247
     Total Federated States of Micronesia assistance    $1,188,658

     Dollars in thousands
                                                         Amount
     Direct Payments
     Current                                             $151,525
     Capital                                             146,775
     Inflation                                           125,460
     Kwajalein impact                                    24,700
     Energy production                                   24,000
     Communication O&M                                   3,900
     Communication hardware                              3,000
     Tax and trade compensation                          10,000
     Maritime surveillance/med. ref/scholarship          22,767
     Health and education block grant                    39,000
     Other construction                                  6,888
     Nuclear compensation                                302,940
     Total                                               $860,955
     Grants
     Rongelap resettlement and professional services     $1,025
     Training, workshops, conferences                    345
     Advisors, consultants                               341
     Historic preservation/tourism                       312
     Municipal management and administration improvement 198
     Water monitoring                                    124
     Canoes                                              113
     Study, survey, census                               108
     Privatization of public works                       100
                                                         Amount
     Reverse osmosis system for Ejit island              85
     Youth to Youth in Health                            79
     Investment development fund                         70
     Enewetak transshipment and fishing base             51
     Other                                               295
     Total                                               $3,247
     Total Marshall Islands assistance                   $864,202

    Source: Prepared by GAO from Interior's data.

    The Department of Labor provided assistance to the Federated States of
    Micronesia and the Marshall Islands during fiscal years 1987 through 1999.
    During that time, Labor provided over $18.5 million to the Federated States
    of Micronesia and over $10.5 million to the Marshall Islands in grants for
    adult and youth training programs, summer youth programs, dislocated
    workers, and older Americans, as shown in tables 28 and 29.

     Dollars in thousands
                                                              Amount
     Grants
     JTPA II-A, Adult Training                                $10,890
     JTPA III, Dislocated Workers (formula and discretionary) 5,355
     JTPA-C, Youth Training                                   1,158
     JTPA II-B, Summer Youth                                  633
     Older Americans                                          504
     Totala                                                   $18,539

    aTotal does not add due to rounding.

     Dollars in thousands
                                                              Amount
     Grants
     JTPA II-A, Adult Training                                $5,465
     JTPA III, Dislocated Workers (formula and discretionary) 3,929
     JTPA-C, Youth Training                                   695
     JTPA II-B, Summer Youth                                  267
     Older Americans                                          191
     Total                                                    $10,547

    Source: Prepared by GAO from Labor's data.

    Legal Services Corporation provided assistance to the Federated States of
    Micronesia and the Marshall Islands during fiscal years 1987 through 1999.
    During that time, the Corporation provided about $16 million in grants for
    legal services to individuals living below the poverty level in the
    Federated States of Micronesia, the Marshall Islands, the Commonwealth of
    the Northern Marianas Islands, and the Republic of Palau. While Legal
    Services Corporation was able to identify the total amount of funding
    provided, it was not able to identify the amounts that went to the
    individual countries of the area.

     Dollars in thousands
                           Amount
     Legal assistance     $15,997

    Source: Prepared by GAO from Legal Services Corporation data.

    The National Science Foundation (NSF) provided grant assistance to the
    Federated States of Micronesia during fiscal years 1987 through 1999. A
    total of two grants amounting to about $100,000 were provided to the College
    of Micronesia for Internet access of the four branch campuses (see table
    31).

     Dollars in thousands
                          Amount
     Grants
     Internet access      $100

    Source: Prepared by GAO from NSF's data.

    The U.S. Postal Service provides mail service in the Federated States of the
    Federated States of Micronesia and the Republic of the Marshall Islands. The
    Postal Service spent almost $5.9 million in transportation, administration,
    and technical assistance costs during fiscal years 1987 through 1998, as
    seen in tables 32 and 33. The Postal Service was reimbursed for the cost of
    providing the mail service through the Department of the Interior. The
    Postal Service was not able to provide data for fiscal year 1999 because the
    billed costs to the Department of the Interior are currently undergoing
    approval.

     Dollars in thousands
                                Amount
     Guaranteed federal service
     Postal services            $4,398

     Dollars in thousands
                                Amount
     Guaranteed federal service
     Postal services            $1,466

    Source: Prepared by GAO from the Postal Service's data.

    During fiscal years 1987 through 1999, the Small Business Administration
    (SBA) provided 171 loans, totaling about $1.9 million to the Federated
    States of Micronesia, and 242 loans, totaling about $1.6 million to the
    Marshall Islands, as shown in tables 34 and 35. Most of the loans were
    provided as subsidized direct physical disaster loans for disaster victims
    to repair, replace, or rehabilitate property damaged or destroyed by a
    declared disaster. Loans were made directly to the victims, which included
    individual homeowners, renters, businesses of all sizes, and nonprofit
    organizations. In addition, SBA provided a small number of economic injury
    disaster loans to small businesses without credit available elsewhere.
    Generally, loans were made at an interest rate of 4 percent or lower, with a
    maximum 30-year term.

     Dollars in thousands
                                                 Amount
     Loans
     Physical and economic injury disaster loans $1,878

     Dollars in thousands
                             Amount
     Loans
     Physical disaster loans $1,621

    Source: Prepared by GAO from SBA's data.

    The Social Security Administration (SSA) provided old age, survivors, and
    disability insurance benefits to individuals in the Federated States of
    Micronesia and the Marshall Islands since SSA separated from HHS to become
    an independent agency in 1995. Some of the beneficiaries may include U.S.
    citizens living in the Federated States of Micronesia and the Marshall
    Islands. The SSA provided over $240,000 to the Federated States of
    Micronesia and over $1.1 million to the Marshall Islands during fiscal years
    1998 and 1999, as shown in tables 36 and 37. These amounts do not include
    assistance payments for 1 month in fiscal year 1998 and 2 months in fiscal
    year 1999 because SSA could not identify the amounts provided during those
    months. In addition, SSA could not provide figures for fiscal years 1995
    through 1997.

     Dollars in thousands
                                                  Amount
     Grants
     Old age, survivors, and disability insurance $240

     Dollars in thousands
                                                  Amount
     Grants
     Old age, survivors, and disability insurance $1,129

    Source: Prepared by GAO from SSA's data.

    The Department of State has provided the Foreign Service Institute
    diplomatic training for the Federated States of Micronesia and the Marshall
    Islands during fiscal years 1987 through 1999. Interior reimbursed the State
    Department for the assistance provided−approximately $1.1 million for
    each Island government, as shown in tables 38 and 39. In total, 54 students
    from the Federated States of Micronesia and 53 students from the Marshall
    Islands have attended the training.

     Dollars in thousands
                                Amount
     Guaranteed federal service
     Foreign service training   $1,079

     Dollars in thousands
                                Amount
     Guaranteed federal service
     Foreign service training   $1,097

    Source: Prepared by GAO from Department of State's data.

    The Department of Transportation's Federal Aviation Administration (FAA)
    provided technical assistance to the Federated States of Micronesia and the
    Marshall Islands during fiscal years 1987 through 1999 at a total cost of
    about $4.8 million for the Federated States of Micronesia and about $0.9
    million for the Marshall Islands, as shown in tables 40 and 41. Some of the
    assistance was provided for the upgrade, modernization, and continuous
    preventative maintenance and emergency repair of navigational aids and VHF
    radio communications equipment, installation and maintenance of Aeronautical
    Fixed Telecommunications flight data and weather reporting systems,
    performance of flight inspections, control of enroute air traffic, onsight
    aviation security training, and flight standards training. FAA personnel or
    their contractors performed all assistance, and no funds were provided
    directly to either government to pay for any project or program. Interior
    reimbursed FAA for the cost of providing the assistance. The Coast Guard has
    been unable to acquire records of its involvement in either the Federated
    States of Micronesia or the Marshall Islands.

     Dollars in thousands
                                Amount
     Guaranteed federal service
     Technical assistance       $4,765

     Dollars in thousands
                                Amount
     Guaranteed federal service
     Technical assistance       $881

    Source: Prepared by GAO from the Department of Transportation's data.

    Comments From the Department of the Interior

    Comments From the Department of State

    Comments From the Republic of the Marshall Islands

    Comments From the Federated States of Micronesia

    (141368)

    Table 1: Assistance Provided to the Federated States of
    Micronesia by Agency, Fiscal Years 1987 Through 1999 14

    Table 2: Types and Amounts of Assistance Provided to the
    Federated States of Micronesia, Fiscal Years 1987 Through
    1999 16

    Table 3: Assistance and Compensation Provided to the Marshall
    Islands, Fiscal Years 1987 Through 1999 16

    Table 4: Assistance and Compensation Provided to the Marshall
    Islands, Fiscal Years 1987 Through 1999 18

    Table 5: Authorized Payments to the Marshall Islands for Effects of Nuclear
    Testing, Prior to the Compact 20

    Table 6: Section 211 Annual Economic Self-Sufficiency Funding
    Provided by the United States 30

    Table 7: Section 216 Direct Annual Payments 32

    Table 8: USDA Assistance to the Federated States of Micronesia,
    Fiscal Years 1987 Through 1999 33

    Table 9: USDA's Assistance to the Marshall Islands, Fiscal Year 1987 Through
    1999 34

    Table 10: Department of Commerce's Assistance to the Federated
    States of Micronesia, Fiscal Year 1987 Through 1999 36

    Table 11: Department of Commerce's Assistance to the Marshall
    Islands, Fiscal Year 1987 Through 1999 36

    Table 12: Department of Defense's Assistance to the Federated
    States of Micronesia, Fiscal Year 1995 Through 1999 37

    Table 13: Department of Education's Assistance to the Federated
    States of Micronesia, Fiscal Years 1987 Through 1999 37

    Table 14: Department of Education's Assistance to the Marshall
    slands, Fiscal Years 1987 Through 1999 38

    Table 15: DOE's Assistance to the Marshall Islands, Fiscal Years
    1987 Through 1999 40

    Table 16: EPA's Assistance to the Federated States of Micronesia,
    Fiscal Years 1987 Through 1999 41

    Table 17: EPA's Assistance to the Marshall Islands, Fiscal Years 1987
    Through 1999 41

    Table 18: FEMA's Assistance to the Federated States of Micronesia,
    Fiscal Years 1987 Through 1999 42

    Table 19: FEMA's Assistance to the Marshall Islands, Fiscal Years
    1987 Through 1999 42

    Table 20: HHS' Assistance to the Federated States of Micronesia,
    Fiscal Years 1987 Through 1999 44

    Table 21: HHS' Assistance to the Marshall Islands, Fiscal Years 1987 Through
    1999 44

    Table 22: HUD's Assistance to the Federated States of Micronesia,
    Fiscal Years 1987 Through 1989 45

    Table 23: HUD's Assistance to the Marshall Islands, Fiscal Years 1987
    Through 1989 45

    Table 24: Institute of Museum and Library Services Assistance to the
    Federated States of Micronesia, Fiscal Years 1998 and 1999 46

    Table 25: Institute of Museum and Library Services Assistance to the
    Marshall Islands, Fiscal Years 1998 and 1999 46

    Table 26: Interior's Assistance to the Federated States of Micronesia,
    Fiscal Years 1987 Through 1999 47

    Table 27: Interior's Assistance to the Marshall Islands, Fiscal Years 1987
    Through 1999 48

    Table 28: Labor's Assistance to the Federated States of Micronesia,
    Fiscal Years 1987 Through 1999 49

    Table 29: Labor's Assistance to the Marshall Islands, Fiscal Years 1987
    Through 1999 50

    Table 30: Legal Services Corporation Assistance, Fiscal Years 1987
    Through 1999 50

    Table 31: NSF's Assistance to the Federated States of Micronesia,
    Fiscal Years 1987 Through 1999 51

    Table 32: U.S. Postal Service's Assistance to the Federated States of
    Micronesia, Fiscal Years 1987 Through 1998 51

    Table 33: U.S. Postal Service's Assistance to the Marshall Islands,
    Fiscal Years 1987 Through 1998 52

    Table 34: SBA's Assistance to the Federated States of Micronesia,
    Fiscal Years 1987 Through 1999 52

    Table 35: SBA's Assistance to the Marshall Islands, Fiscal Years 1987
    Through 1999 53

    Table 36: SSA's Assistance to the Federated States of Micronesia,
    Fiscal Years 1998 and 1999 53

    Table 37: SSA's Assistance to the Marshall Islands, Fiscal Years 1998
    and 1999 54

    Table 38: Department of State Assistance to the Federated States of
    Micronesia, Fiscal Years 1987 Through 1999 54

    Table 39: Department of State Assistance to the Marshall Islands,
    Fiscal Years 1987 Through 1999 54

    Table 40: Department of Transportation's Assistance to the
    Federated States of Micronesia, Fiscal Years 1987
    Through 1999 55

    Table 41: FAA's Assistance to the Marshall Islands, Fiscal Years 1987
    Through 1999 55

    Figure 1: Location of the Federated States of Micronesia and
    the Marshall Islands 9

    1. Population figure is from July 1999 estimates from the Central
    Intelligence Agency's World Factbook 1999.

    2. Population figure supplied by Marshall Islands based on recent census.

    3. In addition to Micronesia and the Marshall Islands, the Trust Territory
    included what are now the Republic of Palau and the Commonwealth of the
    Northern Marianas Islands.

    4. Marshall Islands officials said that this allows the United States to
    veto any exercise of sovereignty by the Marshall Islands that the United
    States determines unilaterally to be incompatible with U.S. security policy.

    5. Payments are made quarterly. Appendix I provides additional information
    on the Compact's financial provisions.

    6. The capital account is to be used for, among other things, construction
    or major repair of the capital infrastructure and selected public and
    private sector projects.

    7. The Office of Territorial and Insular Affairs is the predecessor to the
    Office of Insular Affairs.

    8. According to Marshall Islands officials, the people of Enewetak have
    limited use of their atoll because of contamination in the northern islands
    and environmental degradation that occurred as a result of cleanup
    activities. They continue to pursue claims for their losses, according to
    these officials.

    9. According to Marshall Islands officials, the people of Utrik are deeply
    concerned about health effects they attribute to living in a contaminated
    environment.

    10. This amount includes funding for the construction and delivery of the
    Wetak II Motor Sailer.

    11. P. L. 95-74, July 26, 1977, authorized $900,000 for a human development
    project in the Marshall Islands that required that matching funds be
    provided. This assistance is not included in the $42 milion because we were
    unable to determine if the Marshall Islands received these funds.

    12. U.S. Department of the Interior, Office of Insular Affairs, Compact of
    Free Association, Marshall Islands and Federated States of Micronesia,
    Estimated Payments 1987-2001. The table indicates estimated payments because
    it includes future fiscal years, 2000 and 2001.

    13. The capital account can generally be used for construction or repair of
    infrastructure, debt service, and training activities while the current
    account can be used to fund general operations.

    14. The errors in these accounts appear to have resulted from a
    misclassification of $6,540,000 between the accounts.

    15. We did not verify the information provided by the Department of
    Education.

    16. Interior officials gave us a schedule showing that they had provided
    about $40 million to these agencies but explained that their data were
    incomplete because of a change in their computer systems in the first 2
    years of the program.

    17. The financial statements for Micronesia and the Marshall Islands
    indicated that they were prepared on a modified accrual basis of accounting,
    which also may cause difficulties in attempting to compare or cross-check
    amounts. In addition, the reports contained qualifications related to
    entities that were excluded from the financial statements, which would also
    represent an impairment to comparing amounts.

    18. The Compact allows for an extension of not more than 2 years if
    negotiations have not been concluded by the end of the 15th year. Certain
    affected financial assistance provisions would continue during the extension
    at a level that is the average of the annual amounts granted during the
    first 15 years, adjusted for inflation.

    19. A portion of the funds provided to the Republic of the Marshall Islands
    ($7.1 million annually adjusted for inflation) is related to the U.S.
    government's use of Kwajalein Atoll.

    20. The Compact provides that these payments begin on the first anniversary
    of the Compact and continue for 14 years.

    21. A Pell Grant is a federal nonreimbursable grant awarded to undergraduate
    students who have not earned a bachelor or professional degree.
    *** End of document. ***