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HomeNewsArchivesFLAWS FOUND IN ECONOMIC DEVELOPMENT, TAX COLLECTION

FLAWS FOUND IN ECONOMIC DEVELOPMENT, TAX COLLECTION

At a time when economic recovery is the top issue in the territory, past federal audits have found cases where the government has failed small businesses and agriculture while squandering over $15 million by not collecting delinquent taxes and fees.
These problems, and the financial mismanagement identified in more than two dozen other audits that the V.I. government has either neglected or only partially recognized, are viewed by many as key contributors to the fiscal crisis now dragging the central treasury towards bankruptcy.
A 1995 audit of the Small Business Development Organization, which remains ignored by the government since its release in 1997, found serious deficiencies in loans made by the agency. The audit found SBDA had a delinquency rate of 70 percent on loans totaling $6.1 million, some of which date back to 1971.
The SBDA provides low interest loans, managerial and technical assistance for small businesses.
"We found that the agency did not always adequately verify and analyze data in loan application packages to determine the applicants' credit worthiness, financial stability, and ability to repay the loans (and) did not always secure adequate collateral to protect the government's interest," Inspector General Wilma Lewis wrote in the 1995 audit.
The SBDA also did not maintain up-to-date records of outstanding loans or report defaults to collection agencies, the audit found.
The audit recommended SBDA follow provisions in the V.I. code that specify eligibility requirements for loan programs, the review of applications, and the types of collateral that can be accepted. The audit also urged SBDA to adhere to the code in its collection practices, such as sending letters to delinquent borrowers and referring cases to a collection agency within 180 days. In his response to the audit, Gov. Roy Schneider concurred with the recommendations made, saying the SBDA would be directed to establish the new policies; the inspector general, however, considered the procedures unimplemented.
In a 1997 audit of the now defunct Department of Economic Development and Agriculture, auditors found a series of leasing and fee collections problems with government owned agricultural lands.
"We found the Division of Agriculture did not ensure that farmers were issued and complied with the terms and conditions of, formal rental agreements for the use of government- owned land . . . (or) collect all revenues due the government for the rental of land and equipment, the resale of agricultural products and veterinary services," Lewis wrote in the audit, to which the Schneider administration did not respond.
As of September 1994, the audit found, of 125 farmers authorized to use government-owned land, 51 had formal lease agreements, 64 had land use permits and 10 had only verbal authorization. The absence of formal leases made it difficult for the government to hold landholders accountable for complying with land use and permit requirements.
In some cases, consequently, agricultural lands were being used for purposes other than farming; a few farmers had even built residences on their land. Delinquent farmers also owed about $6,500 in rental fees.
The audit found the Department of Agriculture did not know if 62 acres of land in St. Croix were being utilized or were vacant.
The audit recommended the Department of Agriculture keep better records, reevaluate its fees, comply with the V.I. code's cash collection procedures, and establish policies to ensure land is being used for agricultural purposes only and that farmers are adhering to their leases.
"Based on our reevaluation of the findings and recommendations, we believe that, although some of the specific examples cited in the findings may now be dated, the recommendations presented in this report are still valid," Lewis wrote. "The recommendations, if implemented, should result in long-term improvements in the operations of the Department of Agriculture."
Other audits have found several glaring instances where various government departments did not collect all the fees and taxes owed to them.
A 1999 audit revealed the government is owed $15.4 million in delinquent property taxes and that taxpayers received $300,000 more in farmland, nonprofit and industrial exemptions than they were entitled to.
"The Department of Finance did not maintain accounts receivable records for delinquent real property tax bills and did not effectively enforce the collection of delinquent taxes," Inspector General Robert Williams wrote in that audit.
The audit recommended the government develop a comprehensive real property tax administration system to maintain accurate records, establish more detailed exemption eligibility requirements, better staff the Tax Assessor's Office and fill vacancies on the Board of Tax Review.
As of April, the Inspector General's Office had not received a response to the property tax audit.
A 1997 audit of Department of Planning and Natural Resources' building fees found correct fees were not always assessed, architectural plans were not always reviewed, and $155,069 in potential fees were lost because the agency was not aware of all construction projects.
"The Division (of Permits) did not adequately enforce building code requirements and document actions taken with regard to building deficiencies," Lewis wrote in the audit. "As a result, building deficiencies were not corrected, violators were not penalized for building code violations, and the public was potentially at risk because of construction that was not in compliance with building codes."
Auditors also found many contractors were frequently performing work not covered by their permit. The failure to assess correct permit fees cost DPNR $11,623 in fees.
Building deficiencies construction without permits went unchallenged because of inspection weaknesses. Auditors found inspectors did not always keep records of site visits or perform assigned inspections.
"The enforcement weaknesses occurred because the Division did not have formal policies and procedures in place for its enforcement efforts, and supervisors did not provide adequate oversight of the inspectors' work efforts," the audit said.
The audit recommended DPNR develop formal written procedures for permit application, approval, fee assessment and site inspection, and better inform of the public about permit requirements.
The Inspector General considered a majority of the audit's recommendations, including those listed above, unimplemented.
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