Finance Commissioner Valdamier Collens, who also serves as Public Finance Authority executive director, found himself justifying and clarifying funding sources for multimillion-dollar government contracts involved in the territory’s post-hurricane recovery.
Collens, who was presenting the PFA’s fiscal year 2019 budget to the Senate Finance Committee on Thursday, corrected the record on how much the government is actually paying Witt O’Brien’s, the emergency management and disaster response company based in Washington D.C., hired to help the territory secure and manage disaster funding. According to Collens, Witt O’Brien’s contract for each year of its five-year contract with the government is $50 million, not the $15 million submitted to the Legislature’s post auditor.
The $35 million variance was approved during the PFA board’s last meeting, Collens said. To date, some $8 million has been expended, and Collens said the government expects to use up all $50 million by the end of the fiscal year.
The contract for accounting company Ernst & Young stands at $10 million annually for five years, with two extensions for a total of nine years. The Witt O’Brien’s and Ernst & Young contracts alone amount to some $340 million for five years.
Sen. Kurt Vialet, chairman of the Senate Finance Committee, asked if the contracts allow the V.I. government to compensate the contractors based on how much in federal funds they are able to draw down for the territory.
“Are you doing an analysis every year to make a determination as to exactly how much of their services that we actually need and how much is going to be the cost?” Vialet asked.
Collens said that the PFA does a monthly analysis, looking at detailed invoices and weekly activity reports to make sure they accurately state the services that the two entities report. This means that the cost of the contract could vary four years down the road, Collens agreed.
According to Collens, some 95 percent of the contract costs for these two companies come from federal funds, not the local general fund nor from revenues from municipal bonds, except in cases where invoices do not fit the funding source’s requirements.
One of the three categories of federally funded expenses are state management costs, into which the Ernst & Young contract fits. The Federal Emergency Management Agency currently caps the state administrative costs for the territory at $20 million, but Collens said the local government is working to waive that ceiling and prove the need for $56 million for which the Virgin Islands is eligible.
The direct administrative costs for work associated with various government projects covers the Witt O’Brien’s contract, said Collens. Some five percent of the Community Development Block Grant-Disaster Relief funds may also be used toward payment of the contracts, he said, and possibly even as much 15 percent.
Sen. Nereida Rivera-O’Reilly (D-STX) called out one government contract in particular: some $10,416.66 per month to Bruckner Business Management & Consulting spanning September 2016 to August 2018. To date within the fiscal year, the government has paid more than $100,000 to the company for consulting services.
“This consulting company is actually Ms. Juel Molloy, the health policy advisor for this administration,” O’Reilly said. “To the extent of the services provided by the consulting company generate a return for us, then I am not opposed to it. But when our hospitals, our Department of Health and Human Services, which are the entities that fall under the health policy advisor’s purview, are failing miserably, then I wonder if there is any real return on our investment or if this is just a favor.”
O’Reilly went on to question the PFA board’s judgment.
“Does that not bother you or does that not bother the board, the perception that we give by granting people who should have retired long ago or should actually be home resting, contracts for $100,000 a year, with no real legitimate benefit to the taxpayers. Yes, I said it.”
Collens said the board evaluates contracts to make sure that the scope of services have been met. He said he will do his best to communicate O’Reilly’s concerns to the board, not only on the contract in question but all contracts the PFA oversees.
The PFA’s budget must be approved by its seven-member board, chaired by Gov. Kenneth Mapp and of which Collens and Office of Management and Budget Director Julio Rhymer are ex-officio members. Due to scheduling conflicts, the board could not meet in time for the agency’s appearance before the Senate Finance Committee.
Collens, however, stated that this year, he expects payroll, office expenses and administrative costs to amount to $1.8 million.
The PFA also lists some $8.2 million in professional services contracts consisting of accounting and auditing services, financial advisors, legal and investment advisors, and underwriters. That amount is $1.1 million less than last year’s professional contracts costs.
Collens also presented the Department of Finance’s fiscal year 2019 budget on Thursday, amounting to almost $14 million. Some $12.9 million of that amount will be drawn from the general fund, $829,000 from the government insurance fund, and $222,000 from he indirect cost fund.
The recommended general fund appropriation is more than double last year’s budget of $5.44 million. While supplies was slashed in half and capital outlay disappeared entirely, other services and charges went up eight-fold to fund various professional services contracts.