Summary: Pursuant to a congressional request, GAO reviewed issues concerning the Republic of Palau's transition to self-government, focusing on: (1) the Department of the Interior's oversight of Palau; (2) Palau's financial condition and practices; (3) Palau's law enforcement system and U.S. law enforcement assistance; and (4) problems with Palau's 1987 referenda to approve a Compact of Free Association with the United States.
GAO found that: (1) Interior's 1979 decision to provide Palau with greater autonomy effectively reduced Interior's authority and responsibility for interceding in local decisions, and Interior has since not closely monitored Palau's financial situation and contract negotiations; (2) Interior's technical assistance program has been slow in achieving benefits, partly due to weaknesses in Interior's management and Palau's slowness in implementing projects; (3) Palau has not ensured that it will use compact funds as intended; (4) since 1981, Palau has experienced serious financial problems, resulting in several ill-advised contracts; and (5) Palau did not require competition for service contracts, and its draft procurement manual was deficient. GAO also found that: (1) Palau's housing policy did not provide specific guidance on housing for government officials or the extent to which government funds could be used to pay for renovations to privately owned property leased for those officials; (2) Palau has not implemented its special prosecutor law, has experienced delays in hiring a public auditor, and lacks effective conflict-of-interest legislation; (3) five Palauan officials and businessmen received questionable payments totalling $775,000 from a firm that built Palau's power plant; (4) Palau's public safety officers have improved their skills in routine law enforcement, but need U.S. assistance in more difficult cases; and (5) U.S. agencies have differing views on the applicability of U.S. laws in Palau and on U.S. authority to conduct investigations or make arrests there.
