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HUD POSITIONING FOR POSSIBLE VIHA TAKEOVER

Aug. 4, 2003 – The U.S. Department of Housing and Urban Development has identified the V.I. government as part of the problem as opposed to part of the solution at the V.I. Housing Authority.
Specifically, HUD Assistant Secretary Michael Liu says, the interim VIHA board that Gov. Charles W. Turnbull appointed last week after dissolving the former board could represent a conflict of interest.
In rejecting that action to address the Housing Authority's problems, Liu wrote in a letter to Turnbull on Friday: "Given the fact that some of VIHA's fiscal irregularities involve debts owed to them by the government of the Virgin Islands, we believe that a board appointed by that government at this time presents a potential conflict of interest."
In an 11th hour move, Turnbull had asked the Senate for authorization to dissolve the Housing Authority board of governors and set up an interim board. Approval came on a vote of 8-6 during a special session July 28.
VIHA was designated as "troubled" in June 2002 and notified in writing of that designation due to "failing scores" on the Public Housing Assessment System test for Fiscal Year 2001.
Liu's letter to the governor dated Aug. 1, 2003, indicates that the governor told Liu he had "not been able to identify and document that VIHA has been designated as 'troubled.'"
Liu, HUD's assistant secretary for Indian and public housing, assured Turnbull VIHA had been properly notified. Further, he told the governor, VIHA received a second letter on Thursday notifying the authority that it had again been designated "troubled" based on its FY 2002 Public Housing Assessment score.
Despite HUD's rejection of Turnbull's proposal, Government House announced on Sunday that the new interim board would meet Monday at 9 a.m. Representatives of HUD's Troubled Agency Recovery Center showed up at the meeting, along with Sen. Celestino A. White Sr.
Pat Knight, director of the Troubled Agency Recovery Center, told the interim board that she had brought with her a team of six experts prepared to work with territorial officials to address the Housing Authority problems identified by HUD.
The team, she said, comprises two engineers, two financial analysts and two "generalists." Their objective, she said, is "the initial assessment of the agency and a voluntary memorandum of agreement which will be used to lay out all goals you'll need to bring it out of 'troubled' status."
Gloria Waterman, who was elected chair of the interim board at Monday's meeting, told Knight: "We do not have a formal notification that we have been declared a troubled agency."
Knight replied that the follow-up letter concerning the fiscal year ending Sept. 30, 2001, "should have gone out July 31." She added that the Housing Authority would have 30 days in which to appeal the action.
However, Liu's position is that VIHA is in default of its "annual contributions contract" with HUD, and he has given the authority until Aug. 11 to justify in writing why it is not.
Donna White, HUD public information officer, said Monday afternoon that "HUD had hoped they would voluntarily hand over control."
Sen. White, who voted against dissolution of the original VIHA board, said on WVWI Radio earlier Monday that HUD knew "full well they couldn't go into any agency without voluntary assistance."
He said he didn't see the new interim board just stepping aside and "saying to HUD, Okay, Big Brother, you go ahead; you're in charge.'"
But federal officials see it otherwise. One official, speaking on condition of anonymity, was clear: "They don't need the agreement of the agency."
Some think the expected takeover of VIHA spells further trouble for the V.I. government, which is already considered a "high-risk grantee" for federal funding in other areas.
If other federal agencies were to decide to pull in their purse strings, a knowledgeable source said, one option would be restricting grants to a reimbursement-only basis. That wouldn't be so bad, the source said, as long as the necessary documentation was properly in place.
In fact, if the paperwork is in order, the turn-around time in such cases could be literally the same day, according to that source.
However, if VIHA is any indication — not to mention dozens of audit reports faulting other agencies of the V.I. government for their grant handling — a reimbursement program could get bogged down, leaving the local government without federal funds.
In a letter Monday addressed to Lorelei Farrington, Turnbull's designee as VIHA interim executive director to succeed Ray Fonseca, who was fired by the former board last week, Liu laid out a multitude of deficiencies leading up to VIHA being considered in default of its contract with HUD.
Outstanding among more than a dozen deficiencies he cited were:
– Lack of performance of reconciliation of account balances during the conversion from an old accounting system to a new one that resulted in a discrepancy of more than $6 million.
– VIHA's reporting of no funding for development revenue while HUD's financial system showed it had received $230,449.
– VIHA's reporting of $6.9 million for capital fund revenue, while HUD showed VIHA had received $10.1 million.
– An inadequate financial management system that does not facilitate detailed tracking and reporting of funds to a level that would substantiate proper use of funds and compliance with restriction and prohibition of applicable statutes.
"The problems at VIHA are serious and widespread," Liu wrote to Turnbull. And, he said, "time is of the essence in our need to address VIHA's challenges."
In a Government House release issued Monday night, Turnbull reiterated his stand that he does "not support a voluntery or involuntary receivership" for the authority. The release said he "is confident that the individuals he has appointed to the interim board have the expertise, knowledge and ability to steer the authority back to sound stability."
Donna White declined to speculate on what might happen on Aug. 11 if VIHA fails to "demonstrate that HUD's determination of substantial default is not substantively accurate," as Liu's letter to Farrington put it.
White said she couldn't comment "on future actions" until HUD has had a chance to "review the response" from VIHA. Thus far, however, all of HUD's actions appear to indicate that the process of federal takeover has begun.

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