Interior, V.I. to launch a joint audit next year of Public Finance Authority
Published: August 19, 2013
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ST. THOMAS - The Public Finance Authority will be the focus of a joint federal and local audit after the Senate's Finance Committee became frustrated with what senators perceived as the entity's lack of transparency and inability to account for unexpended funds during a June 27 budget hearing.
Sen. Terrence Nelson made the motion to call for an audit, which was voted on favorably, and committee chairman Sen. Clifford Graham sent a letter requesting the audit to V.I. Inspector General Steven van Beverhoudt.
Van Beverhoudt replied July 12 that his office, together with the Department of the Interior, would initiate the audit in the first half of 2014. Van Beverhoudt described the audit as "similar to the joint audits of the Schneider Hospital and the V.I. Legislature."
Graham specified in his request that "the scope of the audit should include, but not be limited to ... receipt and expenditure of funds, administrative processes and all accounts and balances."
The agency is prepared to comply with all the requests for documentation the fiscal investigation would entail, said the Public Finance Authority's executive director Angel Dawson Jr., who is also the Finance commissioner.
As the main instrumentality for funding public capital projects through the floating of bonds, the Public Finance Authority has a long list of ongoing and completed projects and their funding sources, which it has supplied the Legislature.
At issue, for Nelson and other senators, is that the agency has not given a clear indication of exactly how much money in residual funds the V.I. government has.
Residual money would come from a series of public bonds issued over the last 12 years and reside in interest bearing accounts. It could also come from money allocated to capital projects that have been abandoned or from extra money available after a completed capital project ran under budget.
According to Nelson, the Senate has no clear idea of how much residual funds and interest may have accumulated in accounts the Public Finance Authority has control over.
"With over $3 billion in borrowing over the past 12 years, we have not seen the impact of this borrowing on our infrastructures. There seems to be some residual funds sitting around in various accounts that we need to quantify," Nelson said.
Further, Nelson said, a lack of accountability originating with the Public Finance Authority and spreading to other government entities has led to the Virgin Islands misspending money reserved for public use. Recent budget testimony had led him to suspect that the PFA is instrumental in securing funding for many contracts for off-island consultants and for private use while public projects such as road repairs and improvements to schools and government buildings go neglected or get delayed.
"Just from a cursory analysis, a lot of what was borrowed in the name of public infrastructure projects actually went to private investors and private establishments," Nelson said.
Further, not having an accurate picture of how much money the V.I. government has on hand complicates the task of creating a balanced budget from year to year, according to Nelson and Graham.
"Part of the difficulty of us doing our jobs as senators is getting one hundred percent of the information accurately," Graham said. "I don't say this has been happening just with this administration. It has been a systematic problem for a long time."
Since May, Graham has requested, and the PFA has supplied, multiple documents outlining the territory's debt, bond agreements, capital projects and the balances remaining on capital projects.
The documents have been posted to the Legislature's web site.
Graham said the information still did not supply a complete account of available funds.
In a letter dated June 7, Graham requested an updated list of projects, completed, pending or not yet begun, tied to appropriations totalling $19,980,000 issuing from interest earned on debt service returns since FY 2010.
Nelson said a rough estimate of residual funds would amount to about $70 million in unused funds, judging from lists of capital projects in both districts. However, questions remain about the amount of interest accumulated by the balances of what has been gathered through bonds and allocated to projects but not yet spent, Nelson said.
Dawson said the idea that the residual funds could be put to use balancing budget shortfalls is a fallacy because of the strict IRS regulations dividing working capital from capital projects. Tax exemption rules are more strictly applied to working capital bonds than to capital projects funds, Dawson said.
Dawson pointed out that the Legislature has just been asked to vote on a bill identifying a way to pay a penalty of $13.6 million to the IRS for violations of these tax category divisions when the PFA used a portion of a series of 2006 bonds considered for capital projects purposes to refund another series of working capital bonds from 1999.
However, if senators want to reprogram capital project residual funds for new projects, they are free to do that, Dawson said.
Nelson said that the Senate often had difficulty identifying ways to reprogram funds for high priority projects because the PFA is not fully forthcoming about the money available to do so.
- Contact Amanda Norris at 714-9104 or email firstname.lastname@example.org.