Delayed release of US funds stalls COFA projects in Palau, FSM, Marshall Islands
- Admin
- 2 hours ago
- 3 min read
By Pacific Island Times News Staff
The delayed disbursement of grants under the Compacts of Free Association has stalled the implementation of U.S.-funded projects in Palau, the Marshall Islands and the Federated States of Micronesia, according to the Government Accountability Office.
Officials of the three compact nations, collectively known as freely associated states, told GAO auditors that the compact funds scheduled by law to be disbursed for fiscal 2024, were deposited into their respective trust funds after the fiscal year ended.
“Consequently, FAS governments were unable to fully expend FY 2024 funds and some FY 2024 programs were not fully implemented,” states the GAO report issued last week.
The delayed release of the pledged funds has "created challenges affecting budget processes and implementation plans built around expected assistance,” the GAO report said, citing FAS officials.
GAO said the State Department has paused plans to establish a unit to support FAS relations and compact implementation by March 2029 due to the federal government’s hiring freeze and operational constraints
The U.S. signed amended compacts with the FSM, the Marshall Islands and Palau in 2023, extending economic packages for another 20 years. The Compact Amendment Law provides more than $6 billion for the freely associated states through 2043.
“Although all three of the FAS raise revenue via taxes, fishing fees and other assistance from bilateral and multilateral partners, U.S. assistance is a substantial source of annual government revenue for the FAS governments,” GAO said. “In FY 2022, U.S. assistance represented over a third of each country’s total revenue.”
Throughout the grant cycle, the FSM stands to receive $3.3 billion, the Marshall Islands, $2.3 billion, and Palau, $889 million. The individual treaties grant Washington the rights to use the island nations’ air, water and land for military use.
The FAS governments have earmarked the majority of the compact grant funding for their education and health sectors.
In fiscal 2025, the FSM planned to allocate $86.1 million, or 62 percent, and the Marshall Islands planned to allocate $29.2 million, or 57 percent, of their sector grant funding, while Palau planned to allocate $20.4 million (100 percent)
of its annual economic assistance to support education and health care.
While using most of the health and education funding to cover personnel salaries and wages, the FAS governments planned to use compact infrastructure funds for capital improvement projects, GAO said.
The FSM proposed the construction of new schools and medical dispensaries, as well as improvements to roads and upgrades of the Kosrae International Airport.
“However, FAS officials told GAO that project implementation has encountered obstacles such as delayed compact funds disbursement, rising construction costs and labor shortages,” states the report.
The U.S. made $51 million in sector grant funding available to the Marshall Islands in FY 2025. Sector grants represent 53 percent of the $2.3 billion of total compact assistance to the Marshall Islands through FY 2043.
Marshallese officials, however, reported that $8 million of the compact trust fund was used to cover expenses from October 2023 to February 2024 due to a gap in U.S. funding caused by the delayed renewal of the compact agreement.
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The FAS governments, however, have their own shortcomings, failing to meet certain oversight requirements established by the amended compacts, while U.S. oversight efforts are underway, albeit with some delays, GAO said.
"For example, since FY 2019, all three countries’ required single audit reports—critical to U.S. compact oversight efforts—have been late," the report says. "FAS officials said they are taking steps to improve the reports’ timeliness, such as by increasing financial accounting capacity. U.S. agencies have begun to implement
oversight efforts."
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