March 24, 2003 – David Cohen, head of the U.S. Interior Department's Office of Insular Affairs, plans to look into funding woes outlined in a letter last week from V.I. Inspector General Steven van Beverhoudt to the Office of Management and Budget's director, Ira Mills.
The 24th Legislature appropriated $1,095,794 for the Inspector General's Office for Fiscal Year 2003, but OMB now says the allotment must be cut to $986,215, according to van Beverhoudt, and this could jeopardize millions of dollars in federal funding.
Van Beverhoudt said in the letter that his agency "cannot absorb reduced funding … without serious consequences to the operations" of the office, including possibly shutting it down by this summer. He said salaries and fringe benefits alone account for $959,087, leaving barely $27,000 for all other operating, supplies and utility expenses — "an impossible task."
An aide to Cohen said the ability of local government agencies to demonstrate that they are accountable for federal funding is imperative. Losing the ability to monitor funding locally is "walking into a minefield," his spokesman, Keith Parsky, said.
Van Beverhoudt said that in earlier discussions, Mills had indicated that he didn't anticipate a problem in funding the full appropriation. However, the inspector general said, Mills' staff members continue to insist that he submit a reduced spending plan for his office — "a plan that I refuse to submit."
He told Mills that, because of funding shortages and no office staff on St. Croix, audits on the island were at a standstill for more than two months until the second-quarter allotment was released. As a result, he said, employees voluntarily used their own money to continue their work, severely compromising the office's independence and operations.
"Please be advised, that if the appropriate level of funding is not received, our funds will be depleted by the summer of 2003 and we will be forced to close the office and cease operations," van Beverhoudt wrote.
On Monday, he said had received no response from OMB to his letter, dated March 17. Mills did not return telephone calls to his office.
In December, Cohen announced that federal funding from Insular Affairs would henceforth depend in part on the "strength and independence" of a territory's public auditor's office. The Source faxed a copy of van Beverhoudt's letter to Cohen's office on Monday. Parsky said Cohen had seen the letter but that it was "premature" to comment. Parsky did say that the agency plans to "see what, if any, action needs to be taken."
Parsky said Insular Affairs has not set any "hard and fast" time frames for the mandate, as each insular area has different auditing capabilities. But, he added: "The message we were trying to give was sincere: They need to be able to have the ability to generate audited financial statements."
Insular Affairs awarded a technical assistance grant to the Virgin Islands to conduct across-the-board government audits for 1999 and 2000. The results of those audits have helped the office to track federal funding to the local government.
Parsky said the territory has made an effort to keep accurate financial statements coming in, "and they have been good, maybe because we helped fund that."
He said these are "steps in the right direction," but "to underfund the local auditor is a serious mistake."
A problem common to auditing agencies in the U.S. islands is a "revolving door" administration, in which there is no institutional knowledge of audit results, and no ongoing "pool of talent to draw from," Parsky said. "What this office is trying to do is pick up the slack for the islands that don't have the funds to get the training" that employees need, he said.
Van Beverhoudt said he has discussed the situation informally with several senators and has gotten indications of support. Sen. Lorraine Berry wrote to Gov. Charles W. Turnbull on Friday, urging him to direct Mills to release the remaining appropriation.
"This is the one and only government entity upon which we depend to conduct honest, independent audits," Berry wrote, "one that has been scrupulous in ferreting our malfeasance and which is of particular interest to your office in operating an honest government."
Van Beverhoudt said on Monday that he is not asking for anything more than the approved FY 2003 appropriation. "I know the condition of the government," he said. "All we need OMB to do is allot what the Legislature appropriated."

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