A US Government Accountability Office report says Palau has improved its financial accountability but still has internal control problems in managing U.S. federally-funded grants.
The Accountability Office gave Palau high marks for meeting most Compact and subsidiary agreement accountability requirements.
It says single audit reports for the fiscal years 1995-2006 show that Palau has made progress in its financial accountability through improvements in the timeliness and reliability of its financial statements.
However, it said Palau has persistent internal control weaknesses over financial reporting and over compliance with laws and regulations governing federal grants.
The report said these weaknesses put at risk Palau's ability to sustain its progress in financial accountability and to operate a major federal program according to applicable requirements.
The Accountability Office estimated that by fiscal year 2009, U.S. aid to Palau will exceed $852 million since 1995, with direct Compact direct assistance accounting for 48 percent of this.