GAO: Trust funds for Micronesia, RMI not enough to replace grants

The U.S. Government Accountability Office has indicated that trust funds for Micronesia and the Republic of the Marshall Islands would not be enough to replace expiring U.S. annual grant assistance.

In testimony to the U.S. Senate Committee on Energy and Natural Resources, GAO said that, with several annual grant assistance programs expiring in fiscal year 2023, both the Federated States of Micronesia and RMI would have trouble disbursing money based purely off Compact Trust Funds.

GAO is the accounting and auditing arms of the U.S. Congress and is considered the supreme audit institution of the U.S. government.

GAO projects a 41% likelihood that the FSM Compact Trust Funds would be unable to provide any disbursement in one or more years in fiscal years 2024 through 2033, with the likelihood increasing to 92% from fiscal years 2054 through 2063.

For RMI, GAO projects the likelihood of RMI Compact Trust Funds to be unable to provide any disbursement in one or more years in fiscal years 2024 through 2033. The likelihood increases to 56% in fiscal years 2054 through 2063.

This is because both the FSM and RMI rely heavily on U.S. grants and programs, GAO said.

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

Solving this issue, however, would be tricky according to GAO.

“…Potential strategies such as reduced trust fund disbursements would reduce or eliminate the risk of years with no disbursement,” GAO said, adding that some strategies require changes in trust fund agreements and all of the strategies would require countries to “exchange a near-term reduction in resources for more predictable and more sustainable disbursements in the long term.”

In GAO’s May 2018 report, it made three recommendations for both FSM and RMI to the U.S. Department of the Interior: to develop distribution policies; develop fiscal procedures required by the Compact Trust Fund agreements; and address the timing of the calculation of Compact Trust Fund disbursements.

“[The Department of the Interior] concurred with our recommendations and has stated that it plans to implement them before the FSM and RMI transition to [Compact] Trust Fund income in fiscal year 2023,” GAO reported in its May 2018 report, adding that FSM and RMI also concurred with the recommendations.

However, GAO noted that the DOI has yet to implement the recommendations.