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«Compacts of Free Association with the Federated States of Micronesia (FSM) and the Republic of the Marshall Islands (RMI) For Fiscal Year 2006 Table ...»

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Public-Sector Capacity Building: Public-sector capacity building grants are to support efforts of the two governments to build effective, accountable, and transparent national and local governments and other public sector institutions and systems. Funding priorities are to improve economic planning, financial management, auditing, law enforcement, immigration controls, the judiciary, and the compilation and analysis of appropriate statistical indicators. The goal is to ensure that both governments have the means to carry out essential functions and fill essential positions with qualified personnel.

Environment: Environment sector grants support government efforts to protect the countries’ land and marine environment and to conserve and achieve the sustainable use of natural resources. Allowable activities include the ongoing development, adoption and enforcement of policies, laws and regulations; the reduction and prevention of environmental pollution and degradation; the protection of biological diversity; the establishment of conservation areas;

environmental infrastructure planning, design construction and operation;

interaction and cooperation with nongovernmental organizations; the promotion of increased environmental awareness; and, the promotion of increased citizen involvement in conservation.

In addition to the sector grants described above, Supplemental Education Grants (SEGs), first funded in fiscal year 2005, support the educational objectives of each government's Development Plan. The SEGs replace certain categorical grants previously provided by the Departments of Labor, Health and Human Services, and Education for which the FSM and RMI were eligible. Different from sector grants, the SEGs are subject to an annual appropriation from the U.S. Congress. These adjunctive grants do not supplant basic sector grant funding; nor do they satisfy the priorities mandated by the amended Compacts. Fiscal year 2006 marked the first full year of grant funding, using fiscal year 2005 funds.

Fiscal Year 2006 Sector Allocations for the FSM The following is a breakdown of grant allocations to the FSM by sector, and within

sectors, by government entity:

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Total 26,132,059 16,394,939 6,175,914 4,039,163 2,137,452 58,703,993 * Combination of 2004-2006 funding Education Most FSM states aligned their goals with the following five education goals cited in the

FSM Strategic Development Plan:

1. Improve the quality of learning in the FSM.

2. Improve the quality of teaching in the FSM.

3. Consolidate performance monitoring and data based decision-making systems.

4. Strengthen participation and accountability of the education system to communities.

5. Ensure education is relevant to the life and aspirations of the FSM people.

The FSM National Division of Education focused on teacher certification and the national education strategic reform plan. New national standards and benchmarks were developed in mathematics, science, English language arts and vernacular language arts.

The nationally funded College of Micronesia-FSM (COM-FSM) met U.S. accreditation requirements, including renovation of Chuuk campus facilities, communication improvements across and between all campuses, and development of a COM-FSM Strategic Plan 2006-2011.

Under new educational leadership, Chuuk made progress addressing needs cited in its Education Reform Plan, and responded to federal concerns regarding the secondary schools nutrition program, such that Compact funding for that activity was restored. New student and teacher desks and chairs were ordered and distributed to some schools.

English language arts and mathematics textbooks were ordered; English language arts materials were received and distributed to all schools. Teacher training on the new materials was conducted.

Kosrae maintained its focus on teacher certification and only 15 of 196 teachers now lack a minimum AA/AS degree. Site-based management was implemented, enabling principals in the seven public schools to have control over their budgets for the first time.

The Early Childhood Program expanded from one Head Start program to all six public elementary schools. Pohnpei continued a leadership training program for principals, and met the mandate that all secondary teachers must possess a BA degree. Pohnpei was the first FSM state to welcome Peace Corps and World Teach volunteers into the schools, and to complete a multi-year textbook purchasing plan. Half of Yap’s teachers lack an AA or AS degree and struggle to obtain on-line and other courses that will lead to certification of their geographically dispersed teachers. Like all FSM states, Yap commenced textbook purchases, although distribution to schools was delayed due to shipment delays.

The FSM continued to provide performance data of varying quality. Only16 of 20 indicators of educational progress were submitted; however, this information allowed preliminary comparisons to be made among the four states and against last year’s baseline data. Difficulties collecting, verifying and analyzing data at the state and national levels were acknowledged by FSM officials.

Fiscal year 2006 Supplemental Education Grant funding to the FSM supported the nation’s five strategic goals. The grant award was released late in the fiscal year due to the late enactment of the fiscal year 2006 appropriation, logistics issues regarding the transfer of funds from the U.S. Department of Education to the Department of the Interior, and the late submission by the FSM of its plans for the use of the SEG funds.

The delays caused hardship to some education programs.


The FSM received a total Compact health sector grant of $16,394,939 for fiscal year 2006, approximately $1 million less than the previous year’s award. Although analysis shows this funding level represented a growth of 6 percent from fiscal year to fiscal year, the increase was not evenly applied among the four FSM States and the National Government.

The budgets of Chuuk, Kosrae, and the National Department of Health, Education and Social Affairs increased while sector funding decreased significantly for Pohnpei and Yap. This variability arose from competing financial support needs within the states and different budget formulation policies and priorities, and did not translate into more health care improvements in the states that received proportionately higher grant funding. Were it not for special health revenue accounts used by Pohnpei and Yap to supplement their budgets during emergencies and shortfalls, these downward budget adjustments would have had a negative impact on areas such as utilities, communication, and pharmaceutical and medical supply purchases, recruitment and hiring, and equipment purchases.

As has been the case historically, health sector grant funding primarily supported regular recurring operations of in-patient facilities in the four states. It enabled long-neglected salary adjustments for some categories of health professionals, supported better managed tertiary medical referral management and care, facilitated the purchase of essential equipment, provided resources to hire staff to expand in- and out-patient service capacity and funded minor and emergency repairs.

For the hospitals, direct assistance enabled the improvement of supply inventories that alleviated, in the short term, chronic shortages and the restoration of minimally adequate diagnostic capacity. Pohnpei was able to equip and improve its dental facility, for example, but the service is vulnerable. Unless the FSM takes steps to ensure reliable inventory systems and procurement procedures, a supply of willing vendors, adequate facilities and equipment maintenance, and systematic recruitment, the dental program and other health care will likely deteriorate. The deficiencies cited above have already affected the ability of all health departments to execute sound spending plans and will continue to do so until remedied.

The lack of local revenue to replace decrements in Compact assistance will likely compromise the growth and future performance of the health departments in the near to medium terms. Almost none of the FSM’s five health departments received general revenue support in fiscal year 2006. Compact assistance alone supported the operating budgets of Kosrae and Chuuk, and was the dominant source of revenue for Pohnpei and Yap. Other financial support came from U.S. grants, primarily for public health and prevention, the basic social services loan from the Asian Development Bank, small targeted foreign assistance, health insurance reimbursement, and very nominal service fees. For public health programs and services, Compact funds were not the budgetary mainstay but used to supplement the discretionary categorical grants long provided by the U.S. Department of Health and Human Services.

Despite the FSM Strategic Development Plan’s espoused emphasis on primary health care, funding continued to follow the path of curative care. This was, in large measure, due to the continuing need to play “catch up” to normalize those services and programs that were adversely affected during the step down phase of the Compact’s first financial assistance period. Public health and primary care received comparatively less attention, even though the population of the FSM is far-flung and still vulnerable to both infectious and debilitating chronic diseases.

Improvements to Chuuk’s dispensary program, made possible by heightened policy attention and increased fiscal year 2006 Compact funding to targeted areas, were evident but problems remained with maintaining adequate drug and supply stocks, supervising health assistant performance and attendance, up-keep and repair of facilities, supporting transportation, and communicating with the outer islands. Yap, a state that once had a premier network of distant outposts until it fell victim to stepped-down funding at the close of the first Compact period, reestablished four health centers on Yap’s main island.

These newly opened and renovated facilities now serve as best-practice models of administrative support, staffing, in-service training, and community support.

Another of Yap’s innovations has been its competitive department-wide quality assurance program that rewards unit performance on a quarterly basis and boosts employee morale.

No other FSM health department has followed suit.

The overall impact of these service and organizational enhancements over the medium and longer terms depends on the safety and adequacy of the health sector’s physical infrastructure. Facility repair, renovation, and construction that needed redress years ago are still issues. The likelihood of health projects receiving expedited attention and priority is not very high.

Public Infrastructure

The FSM received a public sector infrastructure grant of $58,703,993 during fiscal year

2006. This was a combination of fiscal years 2004-2006 funding. Due to internal differences between the FSM National Government and the state governments regarding the process of project implementation and the inability to demonstrate how the funding would be managed in a unified comprehensive method, funds were not approved for expenditure during fiscal year 2004 and fiscal year 2005.

In May 2005, the FSM National Government signed a contract with a professional architectural and engineering design firm to provide the FSM with expertise in managing the formulation and implementation of Compact funded infrastructure projects. Once again, due to delays resulting from internal differences regarding costing of projects and an apparent conflict of interest by the selected engineering design firm, no capital projects were completed during fiscal year 2006.

Projects approved for funding during fiscal year 2006 are as follows:

–  –  –

Public-Sector Capacity Building The FSM received $6,175,914 for the capacity-building sector. The amount, representing approximately eight percent of all direct Compact financial assistance in fiscal year 2006, was a proportionately larger amount than intended or foreseen by the negotiators of the amended Compact but necessitated by the FSM’s apparent lack of local revenue to cover a range of government operations.

From the outset of the amended Compact, U.S. delegates to JEMCO made clear that the purpose of the public sector capacity building grant was to build capacity in certain key functional areas such as accounting, financial management, budgeting, auditing and law enforcement, rather than the maintenance of pre-existing capacity. The funds were not meant to subsidize general government operations. JEMCO recognized, however, that the FSM did not have sufficient local revenue to support certain key public sector functions. It found that preventing the use of public sector capacity grant money for preexisting operating expenses had the real potential to reduce capacity in critical areas.

JEMCO consequently allowed pre-existing operating expenses in core areas but with the proviso that the public sector capacity building grant be subject to a 5-year phase-out period.

As shown by the chart below, the FSM has maintained its targeted phase-out schedule and has begun to separate the grant into conforming and non-conforming amounts. In fiscal year 2006, the conforming use total was $1,248,504. Non-conforming uses totaled $4,927,410. Although the grant supports an assortment of true capacity building initiatives, these uses still have not been well articulated by the FSM states and there is no short-term or medium-term plan to guide how the sector grant should be best used.

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Environment The FSM received an allocation of $2,131,452 for its environment sector. The grant continued to fund government operations rather than environmental projects. Each State received funding for an Environmental Protection Agency or similar agency with a like mission. Financial assistance also supported marine and forestry conservation efforts.

Public education programs were a part of all programs funded under this sector.

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