Oct. 24, 2002 – Gov. Charles W. Turnbull said Thursday that his administration "takes strong exception to nearly all of the findings" in the draft report of an audit of the Public Finance Authority conducted by the Interior Department's inspector general. The governor also decried the unauthorized release of the draft report to the news media this week by persons he said were acting "with reckless disregard of the facts and the law."
It is the Office of Inspector General's practice to circulate a draft version of a report on its audit findings to the key officials of the audited entity for written responses to both the findings and the recommended corrective actions. When the final report is released, it includes those responses.
In a release issued Wednesday, Turnbull said he had signed a "draft response" to the draft report last Friday morning. No details were provided as to what the response was. (See "Turnbull: PFA audit report unseen as of Oct. 17".) In Thursday's release, he said "the analysis and conclusions" in the PFA draft report "are substantiated by neither law nor fact."
Thursday's release concluded with the sentence, "A copy of the government's formal response to the draft audit report accompanies this statement." However, no such material was faxed to the Source along with the release.
Turnbull said that by its nature a draft report "contains preliminary findings which are not fully determined or proved, and is subject to revision in the regular course of the audit process by the Inspector General."
For a summary of the draft report, see "Audit faults PFA for management, spending ills".
Specifically, the governor said in response to the report:
– $30 million in "bungled" or "misspent" bond proceeds actually were "advance refunded and defeased [undone]in 1998." All of the money, he said, is "currently held in interest-bearing accounts, contrary to the draft report's finding that it was misused or misspent." Also, he said, the administration's bond counsel "issued an opinion advising that these bonds were never at risk of losing their tax-exempt status."
– $7.3 million in bond proceeds that the Inspector General said was unused as of Sept. 30, 2001, has "been reprogrammed for other capital purposes as authorized by the Legislature."
– There is "no evidence" to support the contention in the report that "poor planning" contributed to cost overruns of $17.3 million in the reconstruction of three schools on St. Thomas. And the assertion of cost overruns in that amount "is unsubstantiated by fact and inconsistent with reality."
– Assertions that the PFA has been "lax" in pursuing certain loans to private developers, notably to Development Consultants Inc. for the redevelopment of the King's Alley complex in Christiansted and to the developers of the former Yacht Haven Hotel and Marina on St. Thomas, are unfounded. He said that the authority "exercised its security interest in King's Alley, foreclosed on the property and has acquired ownership," and that the Yacht Haven loan was paid off with interest last July.
The audit for the most part covered a period from the latter 1990s through the end of 2001.
In an apparent reference to Amadeo Francis, the top administrator of the PFA from 1995 until Turnbull fired him last December, the governor said there was a need for "the audit process to proceed on a regular course, shorn of political posturing, election-year grandstanding or the self-serving comments of a departed employee who seems by his own statements to confirm the reason for his present status with the government of the Virgin Islands."
The draft report makes repeated references to objections raised by Francis to actions that he said were in violation of bond revenue regulations or procedures. Francis, who also was provided a copy of the draft report for comment, said that "I virtually accepted it verbatim."
Turnbull faulted the Office of Inspector General for issuing the draft report "without interviewing the government's bond counsel, financial adviser, legal counsel or, for that matter, any other certified expert in the highly specialized area of tax-exempt municipal finance." He said he has asked that his advisers in these areas "be afforded the opportunity to meet with the Inspector General in Washington, D.C., to discuss the government's position and to ensure that any findings in the final audit report are fully supported by fact and law."
The governor said he expects the Inspector General to "consider the government's response before issuing a final report and to make the necessary changes and corrections to his unsubstantiated findings." He warned that "the unauthorized disclosure of a seriously flawed draft report, if not corrected, could have serious adverse financial consequences to the Public Finance Authority and to the government in current pending financial transactions."
He said he has asked Attorney General Iver Stridiron to determine whether any laws were broken in the premature release of the draft report, and "to consider all legal remedies against all persons involved to mitigate any such damage."
Turnbull said that "no one should draw any conclusions or any inferences from the reported draft audit until the audit process is completed and a final report issued."

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