funding since their respective Compacts of Free Association were implemented in 1987.

Our proposed Trust Territory budget for fiscal year 1989 is predicated on an assumption that the Compact with the Republic of Palau will be put into effect during fiscal year 1988. As you are aware, Compact implementation for Palau requires a Congressional resolution. Thus far, only the Senate has taken action to implement the Compact. Should the House not take similar action during this Congress, the budget for fiscal year 1989 will have to be amended, possibly to include restoration of operations funds under the Trust Territory appropriation. At the very least, fiscal year 1989 would become the first year of Compact funding and the estimates would have to be adjusted accordingly. We sincerely hope such a major adjustment is not necessary and the Palau Compact can be implemented on a timely basis. We sincerely believe, as does the Republic of Palau, that Compact implementation is the most viable solution to Palau's current financial and political problems.

Compact of Free Association

The proposed fiscal year 1989 budget for this account includes third-year Compact funding for the Federated States of Micronesia and the Republic of the Marshall Islands and second-year Compact funding for the Republic of Palau. Total funding in fiscal year 1989 is $179.1 million. of this total, $144.2 million is permanent-indefinite authority that was appropriated in fiscal year 1986. This represents the portion of the Compact funding that is secured with a pledge of the full faith and credit of the United States.

The new budget authority that we are requesting is $34.9 million. This includes $27.2 million for the Federated States of Micronesia and the Republic of the Marshall Islands and $7.7 million for the Republic of Palau.

These funds will be used to pay for a variety of Federal programs and services that were extended and guaranteed to the freely associated states. This includes services provided by the U.S. Postal Service, the National Weather Service, the Federal Aviation Administration and the Federal Emergency Management Agency. It also includes financial assistance for post-secondary education of Micronesian students who were enrolled at the time of Compact implementation.

The budget request also will fund direct assistance to the government in the form of block grants for health and education; and special grants for maritime surveillance and enforcement, medical referrals, energy production, communications, and annual audits.

The first two-years of the Compact for the Federated States of Micronesia and the Marshall Islands have not been without problems, but both the United States and the freely associated states have generally approached problem-solving in a spirit of cooperation and understanding. Given the complexity of several of the issues, the transition has been smooth. We hope that the Republic of Palau can enjoy the benefits of the experience we have gained, and that the free association relationship will be implemented for Palau in the very near future.

Thank you once again for this opportunity to present our budget. My staff and I are willing to respond to any questions you may

have.

OTIA VACANCIES

Mr. MURTHA. We have gotten some complaints, Mr. Secretary. A lot of paperwork isn't being done in some of these administrative positions because they haven't been filled. Things have been backed up in your office.

Has the nomination to fill the position of assistant secretary been taken care of?

Mr. HAYWARD. No, Mr. Chairman, it has not. I am pleased to report that Mrs. Janet McCoy, who is the former Trust Territory High Commissioner, has been appointed by the Secretary to serve as the principal deputy assistant secretary. And she will be coming on board as of May 2. As far as the nomination to be forwarded to the Senate, that is clearly within the prerogative of the White House to submit that.

Mr. MURTHA. How many vacancies exist in the assistant secretary's office?

Mr. HAYWARD. In the immediate offices of the assistant secretary, we have no vacancies, Mr. Chairman.

Mr. MURTHA. How about in the Office of Territorial and International Affairs?

Mr. HAYWARD. Approximately seven vacancies, Mr. Chairman. Mr. MURTHA. Do you expect to fill those positions?

Mr. HAYWARD. We have FTE's and our budget authority is sufficient that we expect to be up to level staffing.

Mr. MURTHA. Last June, the former assistant secretary reported to Congress he intended to fill DOI positions in the Federated States of Micronesia and the Marshall Islands as directed by Congress and funded in the 1987 Appropriations Act, subsequent to Deputy Assistant Secretary Baier's report. The report was to be submitted to him upon her return from closing down the Office of the High Commissioner last summer. He stated he would keep the Committee advised of the final resolution of the matter. Since we received no further communication on this matter, can you tell the Subcommittee what has happened in the interim period?

Mr. HAYWARD. Mr. Chairman, we have not filled the positions in the freely associated states at this time. The Secretary has written. to Members of Congress to advise them of his intention to fill the field representative in the Republic of Palau. Mr. Chairman, in a letter sent by Secretary Hodel to Senators Johnston, McClure and Byrd concerning this same subject-

Mr. MURTHA. What is the date of the letter?

Mr. HAYWARD. December 30.

We raised the question regarding the filling of the vacancies in the freely associated states. We pointed out that the estimates for filling those positions were approximately $150,000 per FTE for foreign posts. And the reason for that, there are additional benefits above and beyond a Federal employee who would be located here in Washington, D.C. that would have to be incurred in a position such as that, such as foreign post differentials. It includes permanent change of station costs, education for the dependents, home leave and other costs which are not normally incurred for a position station in Washington. So, we pointed out that the amount appropriated was insufficient to cover those three positions.

PALAU FUNDING

Mr. MURTHA. What is the status of the Palau lawsuit?

Mr. HAYWARD. The status of the Palau lawsuit is two days ago Judge Heffner ruled that the amendment to the constitution was null and void. And I believe, Mr. Chairman, that that is being appealed before the Palau Supreme Court.

Mr. MURTHA. What do we do now? They're running out of money. What do you recommend here?

Mr. HAYWARD. Mr. Chairman, we believe that the best solution is an advance in the form of a loan from Compact funds which are currently in the Treasury. They were appropriated in 1986. We have proposed an amendment to the authorizing and appropriations committees which has been forwarded to the Office of Management and Budget for their review that would allow the Secretary of the Interior to advance up to $3.5 million for this fiscal year from existing Compact funds.

Mr. MURTHA. If this doesn't work, have you looked at reprogramming?

Mr. HAYWARD. We have looked at all other avenues, Mr. Chairman. Reprogramming is difficult. There are not many accounts that can be reprogrammed from, and we believe that this is the best solution for the problem at this time. However, we have not ruled out anything.

Mr. MURTHA. Once this is resolved, where does the money come from then? They have borrowed the money. Then how do you pay back the loan? Do you do that with 1989 funds? What's the solution there?

Mr. HAYWARD. We believe that there would be adequate funds, balance of funds, in the operations account if the Compact came on line in fiscal year 1989 using the appropriated money. Mr. Chairman, Palau currently receives $11.5 million under trust territory appropriations for operations. The first increment of Compact funds avails $18 million to the Republic of Palau. If $3.5 million was advanced to the Republic of Palau from the existing Compact funds, that would give them $14.5 million in this fiscal year, fiscal year 1988. If the Compact came on line in fiscal year 1989, it would give them $14.5 million for operations in fiscal year 1989.

REPORT ON CIP PROJECT DEFICIENCIES

Mr. MURTHA. A draft report was recently submitted to the Committee entitled Evaluating Quality Defects of Specific Projects, which involved an examination of the CIP projects in the former trust territory to determine any deficiencies in the program. The total amount that would be needed to address all identified deficiencies according to the draft report is as high as $29.3 million. How do you intend to address the needs identified in that report? Mr. HAYWARD. First of all, Mr. Chairman, there were some residual funds that were held back from some of the projects from which some corrections can be made.

Secondly, the report also states that a lot of the problems concerning the projects themselves were for lack of routine maintenance to the projects, which are of concern to us, that should have been ongoing by those individual governments.

We have received the report in its final draft, but have not received the final report and have not given official comments.

Mr. MURTHA. Say that again about the maintenance.

Mr. HAYWARD. The condition of many of the projects cited in the Lewis Berger report was due to lack of routine maintenance to those specific projects, which is of concern to us. And, Mr. Chairman, Congress has appropriated in previous years operations and maintenance monies. I believe $12 million was appropriated, and those monies were expended to the governments. But basically there is a routine maintenance problem in the majority of the projects.

Mr. MURTHA. Did they use the money for maintenance and then do a poor job of it? Or did they not use the money for maintenance?

Mr. HAYWARD. Most of the money was used for maintenance, and the money did not cover all maintenance. Some of that money should have been coming out of the regular operations budgets.

Mr. MURTHA. I'm not sure I follow. You are saying that they did not follow the proper procedures for routine maintenance, and that's the problem? Is that what you're saying?

Mr. HAYWARD. On certain projects, yes.

Mr. MURTHA. So, they used the money for maintenance, but they used it in your judgment

Mr. HAYWARD. Sometimes on different projects also.

On some of the more specific areas, I believe there was a question concerning Palau roads. There are residual monies which are left in the trust territory account of which we are moving forward to correct those particular problems.

Mr. MURTHA. What is the remaining balance of the trust territory construction to be completed?

Mr. HAYWARD. Approximately $43 million.

Mr. MURTHA. Will you provide for the record a complete listing of the uncompleted projects and their status?

Mr. HAYWARD. We will be more than happy to, Mr. Chairman. [The information follows:]