FSM AND MARSHALLS SQUANDER US$ 1.6 BILLION: U.S GOVERNMENT INVESTIGATOR

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By Susan Roth Advertiser Washington Bureau

WASHINGTON, D.C. (June 30, 2000 – Honolulu Advertiser)---Micronesia and the Marshall Islands wasted at least $1.6 billion in U.S. aid since fiscal 1987 through poor planning and management, bad business judgment and fraud, a government investigator testified this week.

All the while, the Interior Department, which was supposed to be monitoring the use of the money, ignored the problems, according to the General Accounting Office, Congress’ investigative arm.

A GAO official spoke to the House Subcommittee on Asia and the Pacific on Wednesday at a hearing to examine the issue of accountability for the aid to the Federated States of Micronesia and the Republic of the Marshall Islands.

In 1986, the United States agreed to a Compact of Free Association with the two former U.S. territories, granting them independence and providing 15 years of direct payments through the Interior Department for capital construction, energy production, communications and infrastructure projects aimed to encourage development.

The financial provisions of the compact expire in 2001, and the State Department has recently begun negotiations to renew them. Congress will have to approve the terms of any new provisions.

Leaders of the committee used the hearing to put both Interior and State officials on notice that the level of money is likely to be drastically reduced and congressional oversight increased.

"The neglect and indifference of the Interior Department is nothing more than a failure by our own government to fulfill its basic responsibility to the American Taxpayer," said Rep. Doug Bereuter, R-Neb., the committee chairman. "Given what the GAO has revealed, I have serious concerns about the Interior Department’s ability to manage U.S. assistance and advance economic development" in the two countries.

Ferdinand "Danny" Aranza, director of the Interior’s Office of Insular Affairs, said the compact provided "no system of goal setting and accountability" and unclear definitions of appropriate uses of the money. The United States took a "hands-off" approach out of deference to the two new governments, Aranza said.

He also repeatedly said his office needs more staff to properly monitor the flow of money.

"Sometimes, it’s better just to take the lump," responded Delegate Robert Underwood, D-Guam, who participated in the hearing. "It’s rather obvious that Interior hasn’t done the job it could’ve done."

Underwood emphasized that Guam, the closest neighbor to Micronesia and the Marshall Islands, is disproportionately affected by their lack of economic development because their people are increasingly fleeing to Guam for jobs, education and health care.

Susan Westin, an associate director of international relations and trade issues at the GAO, said that instead of using the aid to reach for economic self-sufficiency, Micronesia and the Marshall Islands used it "to maintain an artificially high standard of living."

Warehouses and factories built with the U.S. aid are empty, new mechanical equipment and buildings are rusting away, half-built roads go nowhere. Newly repaired schools have no desks, chairs or books and hospitals lack of money for medicines and supplies as basic as sheets for the beds.

Meanwhile, Westin told the committee, the Micronesian state of Chuuk spent at least $188,000 on a dock built directly in front of the mayor’s house and a road that leads from the mayor’s house to a small village. The project was originally intended to upgrade basic social and economic infrastructure.

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