Inspector General Still Investigating Flawed Property Auctions

People with money and property titles left up in the air after flawed real property tax auctions may see some resolution by early next year, after the V.I. Inspector General’s Office finishes a detailed report around the end of the year, according to Senate budget testimony Wednesday.

The V.I. government auctioned off hundreds of V.I. properties in 2012 and 2013 to pay off extremely delinquent property taxes. But a 2014 Inspector General’s audit found “highly irregular and questionable practices,” particularly in the St. Thomas-St. John district auctions, and determined many of the sales should be voided.

Along with sloppiness with giving notice of sales, with accounting for the money and in recovering government expenses, the audit found evidence of collusion among buyers to rig the bidding so that high bidders would not pay their deposits, leaving the property to extremely low second-bids. (See Inspector General: Questionable Practices Invalidate Property Auctions)

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As a result of last year’s inspection, "we found the need to review the dispositions of funds collected, deposited and returned to the various bidders and original property owners," Inspector General Steven van Beverhoudt said during a Finance Committee budget hearing Wednesday.

"The objective of the inspection is to determine if the funds collected during the real property auctions were properly distributed in accordance with the provisions of the Virgin Islands Code," he said. “We are in the fieldwork phase of this inspection, and we hope to complete it within the next two months. We anticipate a report to be issued by the end of the calendar year or early in 2016.”

In some cases, the sales will need to be voided and an accounting of who is owed what needs to happen, he said.

Deputy Inspector General Delia Thomas said the second part of the inspection "has to do with what happened to the funds after they were collected and were they distributed properly according to the law."

Sen. Marvin Blyden asked if the government coffers could expect new revenues as a result of the accounting.

Thomas said the government would likely gain and lose revenue, depending on the transaction, and could end up losing money instead of getting new revenues.

"Some people may need to be reimbursed," she said.

To read the full audit report, go to www.viig.org.

Created in 1999, the Inspector General’s Office is the main auditing arm of the Virgin Islands government. It is the only local agency with authority to examine operations in all three branches of government and in semiautonomous agencies, such as the V.I. Water and Power Authority.

Van Beverhoudt presented the Office of the Inspector General’s proposed Fiscal Year 2016 budget of $2 million – all from the General Fund. This is identical to last year’s appropriation, but half a million more than Gov. John deJongh Jr.’s proposed FY15 budget.

This includes $1.2 million for wages and salaries; $465,000 for fringe benefits, Social Security and Medicare taxes; $100,000 in capital expenses for new computers; $175,000 in "other services and charges"; and $45,000 for utilities.

In other presentations before the committee, Nellie Varlack, director of business and administration for the Governor’s Office, presented the executive office’s FY16 General Fund budget request of $9 million – about $200,000 less than last year. It also includes $150,000 in funding from the Tourism Revolving Fund and about $140,000 in federal funding, for $9.3 million in total.

The Governor’s Office budget allocates $8.3 million for the Office of the Governor and $710,000 for the Bureau of Economic Research.

Several budget items are funded through the Office of the Governor, in the miscellaneous section of the budget, totaling $6.5 million.

The V.I. Economic Development Authority is the largest agency funded through the governor’s office, with $4.8 million this year. Legal Services of the Virgin Islands is budged at $1.1 million. Some $250,000 is budgeted for Hovensa closure expenses; $130.000 for the Governor’s Access Channel; $70,000 for the Early Childhood Advisory Committee; and several smaller expenses round out the total.

No votes were taken during the information gathering budget hearing.

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