1. Compacts of Free Association Federated States of Micronesia Republic of the Marshall Islands Office of Insular Affairs U.S. Department of the Interior

2. Level and Structure of Assistance Goal – supporting increased self-reliance of FASGoal – supporting increased self-reliance of FAS $3.5 billion U.S. commitment over 20 years$3.5 billion U.S. commitment over 20 years Direct Grants – $125 million per yearDirect Grants – $125 million per year Trust Fund Contributions - $34 million per yearTrust Fund Contributions - $34 million per year Targeted Sectors – Education, Health, Public Sector Capacity Building, Private Sector Development, EnvironmentTargeted Sectors – Education, Health, Public Sector Capacity Building, Private Sector Development, Environment 30% set-aside for construction of public infrastructure facilities with priority on supporting delivery of education and health services30% set-aside for construction of public infrastructure facilities with priority on supporting delivery of education and health services

3. Program Management The RMI and FSM governments are responsible for the management and monitoring of the day-to-day operations of all Sector grants and their activities.The RMI and FSM governments are responsible for the management and monitoring of the day-to-day operations of all Sector grants and their activities. Interior is not charged with program delivery.Interior is not charged with program delivery. Interior has limited resources for oversight. Compact program funding is not dedicated to oversight.Interior has limited resources for oversight. Compact program funding is not dedicated to oversight. Interior supports (with limited funds) targeted technical assistance throughout all insular areas.Interior supports (with limited funds) targeted technical assistance throughout all insular areas. Comparatively, USAID allocates between 8%-15% of program funds for delivery, administration and monitoring of its programs.Comparatively, USAID allocates between 8%-15% of program funds for delivery, administration and monitoring of its programs.

4. Target: Accountability and Self-Sufficiency Security, political independence, and stability was achieved – Compact 1987-2003Security, political independence, and stability was achieved – Compact 1987-2003 Economic provisions are not designed to guarantee results but rather to enhance opportunities.Economic provisions are not designed to guarantee results but rather to enhance opportunities. Accountability standards under “Compact 2”are greatly enhanced- they have not translated into better outcomes or overall performance.Accountability standards under “Compact 2”are greatly enhanced- they have not translated into better outcomes or overall performance. Sector grants are not directly targeted toward increased economic self-sufficiency.Sector grants are not directly targeted toward increased economic self-sufficiency. Still, increased self-reliance, at whatever level may be attained, is expected as of FY 2023.Still, increased self-reliance, at whatever level may be attained, is expected as of FY 2023.

5. Challenges FAS political and social conditions challenge, respectively, effective compact grant implementation and better health and education performance.FAS political and social conditions challenge, respectively, effective compact grant implementation and better health and education performance. Success is immensely reliant upon:Success is immensely reliant upon: Commitment of our FAS partners to design and implement fiscal and economic policy reforms;Commitment of our FAS partners to design and implement fiscal and economic policy reforms; FAS Capacity to manage, implement and administer available resources;FAS Capacity to manage, implement and administer available resources; Political courage to realign resource allocations to match stated policy objectives;Political courage to realign resource allocations to match stated policy objectives; Quality of the partnershipQuality of the partnership

6. Where do we have influence? overall quality and use of professional design standards for infrastructure projects. overall quality and use of professional design standards for infrastructure projects. minimally on what is happening inside the classrooms. Requiring qualified teachers and supplies in the classroom, allocation of funds toward basic instruction. minimally on what is happening inside the classrooms. Requiring qualified teachers and supplies in the classroom, allocation of funds toward basic instruction.

12. Tools Country level diplomacy: voice of the Ambassador and the USG country teamCountry level diplomacy: voice of the Ambassador and the USG country team JEM committee control of sector allocations (thumbs up/down)JEM committee control of sector allocations (thumbs up/down) Leverage at the margin in special casesLeverage at the margin in special cases TA targeted at identified weaknessesTA targeted at identified weaknesses Donor coordinationDonor coordination