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Home Commentary Open forum The Territory’s Financial Instability Requires a Comprehensive Plan

The Territory’s Financial Instability Requires a Comprehensive Plan

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Money. (Shutterstock image)

“We can be that shining light on a hill with proper vision, wisdom, knowledge and guidance.”

Governor Bryan has appointed the fiscal team to both acclaim and admonish the spending of funds in the territory. This move comes well into the 2nd year of his term and can be considered too little, too late in light of the fiscal crisis his administration stepped into over a year ago. The current health crisis in the form of COVID-19 can be to blame for many things, except the financial instability of the territory. The course we have changed to is barely a line alongside the “business as usual” attitude exhibited by this team. A comprehensive economic plan was necessary prior to the hurricanes of 2017 and the economic plan of the pandemic should all be considered in any current plan. Standing up a Tax Study Commission would have addressed all outstanding financial matters.

The administration is plagued with mismanagement, the lack of the completion of documents and the unfinished financial statements dating back years, prior to the two unprecedented hurricanes of 2017. The engagement of Whitt O’Brien by the former administration has proved to be not only unfruitful but also expensive as we find ourselves obligated to more than $80 million annually to the firm. Whitt O’Brien has not shown any visible efforts at managing the task that they were contracted for nor has the government has not addressed “underlying procedural weaknesses” in its auditing and accounting processes, particularly at agencies and departments, that are holding up the reports.

During the upcoming meeting, the legislative body will be asked to read, debate and vote on an emergency measure that will give Government House the ability to approach the bond market. The creation of the Matching Fund Securitization Corporation is to establish an entity removed from the failing economic government as a creditworthy entity based on the receipt of funds directly into this account by the United States Treasury. As the legislature struggles with making sense of a bleak picture and passes a fiscally responsible budget, they have little time to filibuster for or against this proposed entity.

The meeting of report deadlines is crucial to this proposed process. The lack of current financial statements from all departments, particularly those in financial failure such as WAPA, will directly impact the creditworthiness of the Territory as a whole. The reports are crucial in achieving sound government finances which would facilitate the Territory’s return to the capital markets—a source of funds for key infrastructure, operational projects and consolidated general fund working capital. A bond anticipation note with a low-interest rate will absorb the bank line of credits and other high-interest loans.

The Territorial government has been unable to resort to the bond market for financing and has seen a steady decline in its bond ratings. In 2017, there existed 7 billion dollars in debt prior to the hurricanes. 11 billion dollars was added to that figure consisting of local community damages to key infrastructures. The Federal Government designated 8 billion dollars in recovery funds to assist with the damages sustained in the hurricanes and aftermath. “Best practices” call for CAFRs (Comprehensive Annual Financial Report) for a given fiscal year to be issued no later than six months after the close of the fiscal year. This report differs from the annual report by presenting a wider variety of important information such as a benchmark of actual results of the prior and present financial activities. The transparency will assist the Legislature in marking the progress of any entity including the financial health of the Territory as a whole.

The current health pandemic has been a challenge to the territory as we lack the technology to maintain virtual environments. This has created a lag from an operational standpoint. Offices have been closed due to a rising rate of COVID-19 positives and any fieldwork by IRB has been curtailed for employee safety. However, taking into view the entire picture, the deeper structural issues within Territorial departments have created a systemic lack of timely reporting and audits-qualified and/or unqualified audits.

There are many entities, particularly from the private sector, that can issue their corresponding financial information, audited and reviewed, in a timely fashion. But they were better prepared to face the COVID-19 challenges due to technology—technology not currently in place in critical areas such as IRB.

The oversight of the Matching Fund Securitization Corporation will be a large task. The proposal calls to “elect, appoint and employ such officers and agents as the Corporation considers advisable to operate and manage the affairs of the Corporation, and to define their duties and fix, adjust, and define their compensations as it determines to be appropriate.” The current number for the board is set at 3, one of which must be the Governor. The potential for financial duplication of responsibilities must be monitored for any conflict of interest.

The entire territory and its direct reports, semi-autonomous and autonomous agencies must ramp up monitoring and reporting, not necessarily in a reactive fashion. The need is for procedural monitoring utilizing enforcement mechanisms for financial reporting compliance at each agency and department with the assignment of possible liaisons at each agency responsible for the information and the reporting of such to the Department of Finance.

At the end of the day, we are in a fiscal emergency and we have to take extreme measures. The federal monies in the territory has to be maximized and the requirements strictly adhered to and that includes the fiscal reporting responsibility.

The citizens of the United States Virgin Islands have heard a lot of those promises before and the people are a little bit tired of just waiting for things to happen. We, as a people, need the governing bodies to be bold in creating both community and financial wellness.

Kent E. Bernier Sr. of St. Thomas

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