The Compact of Free Association between the Republic of Palau and the U.S. entered into force on Oct. 1, 1994, with the U.S. interest of promoting Palau¿s self-sufficiency and economic advancement. The compact and its related subsidiary agreements provide for a 15-year term of economic assistance. In FY 2009, the two governments must review the terms of the compact and related agreements and agree on any modifications. This is a report on: (1) the provision of compact and other U.S. assistance to Palau in FY 1995-2009; (2) Palau¿s and U.S. agencies¿ efforts to provide accountability over Palau¿s use of fed. funds in 1995-2006; and (3) Palau¿s prospects for achieving economic self-sufficiency. Includes recommendations. Illus.