Compact of Free Association: Single Audits Demonstrate Accountability Problems over Compact Funds

The Department of the Interior's (DOI) Office of Insular Affairs (OIA) took two actions to implement this recommendation. OIA opened a field office in Honolulu, Hawaii to monitor federal assistance to the Federated States of Micronesia (FSM) and the Republic of the Marshall Islands (RMI). This Hawaii office was established to be the focal point of OIA's efforts to ensure there is proper accountability for Compact funds. Among other duties, the Hawaii field office staff will be responsible for the day-to-day monitoring of grant assistance under the Compact. The Hawaii field office staff will also perform work to support the U.S. delegations that are involved in establishing budgets for Compact funds, applying performance measures and standards to Compact grants and oversee the trust funds established under the compacts. The second action was the hiring of an accountability policy specialist for OIA's D.C. office. The accountability policy specialist, was hired to coordinate OIA's efforts to promote accountability for federal grants to the FSM, RMI, and the four insular areas. The corrective actions taken are sufficient to close this recommendation.

Based upon our recommendation, the Office of Insular Areas (OIA), within the Department of the Interior, hired an accountability policy specialist in May 2004, who has specific responsibility for the monitoring of the timeliness and other aspects of the single audits for the Federated States of Micronesia (FSM) and the Republic of the Marshall Islands (RMI) as well as for the other insular areas. While accountability policy specialist's first priority was to get the single audits submitted in a timely manner. Now, that these single audits are on time, the focus has shifted to the correction of audit findings. The accountability policy specialist reviews all of the findings in the single audits as well as the corrective action plans (CAP) to determine whether or not the planned corrective action will resolve the finding. The corrective actions taken are sufficient to close this recommendation.

The Office of Insular Affairs (OIA) of the Department of the Interior has hired an accountability policy specialist who is responsible for monitoring the performance of the Federated States of Micronesia (FSM) and the Republic of the Marshall Islands (RMI) on such factors as the timeliness of required single audits, resolution of audit findings in these audits, and accountability over federal grant dollars. The results of the accountability policy specialist's work are communicated with the Outer Pacific Committee of the Federal Regional Council and in meetings and conferences held by the Island Government Finance Officers Association. The corrective actions taken are sufficient to close this recommendation.

The Department of the Interior's Office of Insular Affairs (OIA)has established a competitive process by which certain of its grant funding to the compact states and insular areas is allocated based on competitive criteria. These criteria have been developed to measure the demonstrated ability of the governments(includes the Federated States of Micronesia (FSM) and the Republic of the Marshall Islands (RMI) and the insular areas to exercise prudent financial management practices and meet federal grant requirements. The evaluation criteria used include the government's performance on recent audits, financial management practices, and ability to meet established timelines in response to OIA queries and deadlines. Thus, OIA is taking action to address those situations when the compact states and insular areas do not undertake adequate actions to address audit findings in a timely manner. The corrective actions taken are sufficient to close this recommendation.

The Office of Insular Affairs (OIA) has hired an accountability and policy specialist. This specialist reviews all of the single audit reports and communicates with the compact states regarding the resolution of all outstanding findings, including those that indicate a possible misuse of grant funds. The corrective actions taken are sufficient to close this recommendation.