Compacts of Free Association: Education and Health Remain Priorities, but Implementation and Oversight Are Delayed

Love-Grayer, Latesha (2026-05-05). Compacts of Free Association: Education and Health Remain Priorities, but Implementation and Oversight Are Delayed. Report to Congressional Committees (Report). Washington, D.C.: United States Government Accountability Office.

• Has attachment: File:RV5REJ6S.pdf

Abstract: This U.S. Government Accountability Office (GAO) report examines implementation of the 2023 amended Compacts of Free Association between the United States and the Freely Associated States (FAS): the Federated States of Micronesia (FSM), Republic of the Marshall Islands (RMI), and Republic of Palau. The report describes economic conditions and associated risks in the three countries, outlines funding provided under the amended compacts and planned uses of that funding, and evaluates the extent to which the FAS governments and U.S. agencies have met selected oversight and reporting requirements established under the compacts.

GAO found that FSM and RMI have experienced substantial population decline driven largely by migration to the United States and its territories. FSM’s population declined by 26 percent between the 2010 and 2023 censuses, while RMI’s population declined by 20 percent between the 2011 and 2021 censuses, with later unofficial estimates suggesting additional losses. Population decline has contributed to shortages of skilled labor, increased per-capita costs for public services, and fiscal pressures on government operations. Palau’s population remained comparatively stable, though its economy suffered a sharp contraction during the COVID-19 pandemic due to the collapse of tourism. The report also documents the broader geopolitical and economic environment in the FAS, including development assistance and investment from the United States, Japan, Taiwan, the People’s Republic of China, Australia, the World Bank, and the Asian Development Bank.

The report details the structure and scale of compact assistance under the renewed agreements. Through 2043, the United States has committed more than $6 billion collectively in grants, infrastructure assistance, and trust fund contributions to the three countries. FSM and RMI receive most compact assistance through sector grants and trust fund contributions, while Palau receives annual grant assistance and infrastructure funding. In fiscal year 2025, the governments of all three countries proposed allocating the majority of compact assistance to education and health sectors, including personnel salaries, schools, hospitals, infrastructure maintenance, technical education, and public health projects. The report documents specific projects such as technical education facilities in Pohnpei, sea walls and school construction in Ebeye, and infrastructure repairs and school expansion projects in Palau.

GAO also identifies numerous barriers to implementation of compact-funded projects. Officials in the FAS and the United States cited delays in disbursement of compact funding, labor shortages, high construction and shipping costs, inflation, geographic isolation, land tenure complexities, procurement delays, and limited local contractor capacity as obstacles to implementation. The report notes that population decline further complicates long-term planning for infrastructure and public services.

A major focus of the report is oversight and accountability. GAO found that most required reports from FSM, RMI, and Palau were submitted late, including annual implementation plans, financial reports, and single audit reports required under U.S. law and compact agreements. As of December 30, 2025, all three governments’ fiscal year 2024 single audits were overdue, while RMI and Palau also had unresolved overdue fiscal year 2023 audits. U.S. oversight efforts, including activities by the Joint Economic Management Committee (JEMCO), Joint Economic Management and Financial Accountability Committee (JEMFAC), and the Interagency Group on the Freely Associated States (IAG), were also delayed due to staffing shortages and delayed federal appointments. The report further discusses State Department plans for a dedicated FAS unit, technical assistance grants intended to improve audit capacity, and broader concerns regarding compact implementation and financial accountability.

The report includes extensive statistical appendices, figures, tables, oversight timelines, descriptions of migration trends, analysis of foreign assistance patterns, and comments submitted by the FSM and Palau governments in response to the draft report.