Trust Funds for Micronesia and the Marshall Islands Unlikely to Fully Replace Expiring U.S. Grants

U.S. Government Accountability Office, Jul 23, 2019

The Federated States of Micronesia (FSM) and the Republic of the Marshall Islands (RMI) rely on U.S. grants and programs, including several that are scheduled to end in 2023.

In fiscal year 2016, U.S. compact sector grants and supplemental education grants, both scheduled to end in 2023, supported a third of the FSM’s expenditures and a quarter of the RMI’s.


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Agreements providing U.S. aviation, disaster relief, postal, weather, and other programs and services are scheduled to end in 2024, but some U.S. agencies may provide programs and services similar to those in the agreements under other authorities.

GAO’s 2018 report noted that the FSM and RMI compact trust funds face risks and may not provide disbursements in some future years.

GAO projected a 41 percent likelihood that the FSM compact trust fund would be unable to provide any disbursement in 1 or more years in fiscal years 2024 through 2033, with the likelihood increasing to 92 percent in 2054 through 2063.

GAO projected a 15 percent likelihood that the RMI compact trust fund would be unable to provide any disbursement in 1 or more years in fiscal years 2024 through 2033, with the likelihood increasing to 56 percent in 2054 through 2063.

Potential strategies such as reduced trust fund disbursements would reduce or eliminate the risk of years with no disbursement. However, some of these strategies would require changing the trust fund agreements, and all of the strategies would require the countries to exchange a near-term reduction in resources for more-predictable and more-sustainable disbursements in the longer term.

Interior has not yet implemented the actions GAO recommended to prepare for the 2023 transition to trust fund income.

The trust fund committees have not developed distribution policies, required by the agreements, which could assist the countries in planning for the transition to trust fund income.

The committees have not developed the required fiscal procedures for oversight of disbursements or addressed differences between the timing of their annual determinations of the disbursement amounts and the FSM’s and RMI’s annual budget cycles.

https://www.gao.gov/assets/710/700412.pdf

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