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Senators Wary of OMB's Request for Lump-Sum Budget

July 26, 2005- During Tuesday's Finance Committee hearing, Office of Management and Budget Director Ira Mills' request for approval of a $2.9-million lump-sum budget was met with strong opposition by committee members.
Mills said that the lump-sum budget would allow for greater flexibility in managing resources within the agency, and enable officials to respond quickly to any unforeseen circumstances which may arise during the year. "For example, if utility costs go up within a certain period of time, a lump-sum budget would allow an agency to move around money to accommodate the cost," Mills said.
Mills added that the current line-item budget system is not effectively because money is allocated for a specific purpose, and is therefore harder to transfer.
Showing strong opposition to the idea, Sen. Terrence "Positive" Nelson told Mills that most senators would have a hard time approving lump-sum budget requests because they are concerned that most departments would mismanage the funds. "Once the money is in your possession, you could do whatever you wanted to do with it … and there’s no good accounting system to show where it would be going," Nelson said.
While admitting the possibility that some government agencies might mismanage the money, Mills stated that on the whole, most departments are very responsible in accounting for fund distribution. "This is not a fair response — most of the money that has been requested by these departments is dedicated to the hiring of personnel or to salary increases. After that money is distributed, there is very little left over for other areas," Mills said.
"It is incorrect to imply that a lump-sum budget would be a free-for-all. It only allows for flexibility in the total amount and nothing else. This is the only year we have been able to give everybody their full amounts. What happens if we are unable to do this next year? With a lump-sum budget, these departments can prepare for the future."
Continuing the debate with Sen. Norman Jn Baptiste, Mills asked why the Legislature chooses a lump-sum budget for itself when senators seem to be so opposed to the idea. "No one has given me an answer to that question yet … the Legislative branch has a lump-sum budget, and the courts. So the only branch of government that doesn’t have a lump-sum budget is the executive branch—a branch which has to distribute its money into 26 different parts. This doesn’t make sense—if we want to be responsible, then we should all be responsible," Mills said.
In response, Jn Baptiste said that the executive branch is the only branch that has been indicted because "fiscal restraint and discipline has not been exercised."
Mills said that his financial team is actively working on measures to quell federal concerns about the financial state of the Virgin Islands, including the creation of an internal audit unit, and a new financial management system (FMS).
Suggested by the federal government in the compliance agreement between the United States and local education departments, a new FMS will give government departments and agencies the ability to access and document various financial information. Mills said that this new system will take three to five years to implement and is still in its beginning stages.
Not happy with this information, senators asked Mills what was taking so long, and what would be done in the meantime to secure financial accountability. Mills explained that until the system is complete, a third-party fiduciary—an individual working on behalf of the federal government to manage financial affairs—would be set up to manage the Education Department’s finances.
"Because of the conditions in the compliance agreement, this has to be implemented first. But, because this is also a governmentwide problem, we are working on a new Enterprise Resource Planning System [to replace the old FMS] so that there will be more accountability with fund management," Mills said.
Present at Tuesday's hearing were Sens. Lorraine Berry, Jn Baptiste, Roosevelt C. David, Adlah "Foncie" Donastorg, Nelson, Usie Richards and Juan Figueroa-Serville. Sen. Neville James was absent.
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