Senators Decry Federal Financial Oversight “Trap”

Senators called federal financial oversight via a third-party fiduciary “a trap” ensnaring the territory, a “racket,” and “a foot on our throat” at a Wednesday hearing on St. Thomas even as Virgin Islands government officials and the fiduciary outlined ongoing systemic problems in various departments.

Sen. Donna Frett-Gregory, chair of the Committee on Budget, Appropriations, and Finance, held her head in visible dismay as Sharon Murphy, a partner at third-party fiduciary McConnell & Jones, listed eight areas of key concern to be addressed before a 2006 compliance agreement with the federal Education Department could be lifted. In 2006, the federal government labeled the U.S. Virgin Islands a “high-risk grantee” because of myriad difficulties keeping track of federal funds. Paying roughly $2.5 million a year to the fiduciaries, the territory has spent more than $42 million on third-party overseers since 2007, Frett-Gregory said.

“I am having little heart palpitations now because the same conversation we are having here is the same one we’ve been having for the last 17 years,” Frett-Gregory said. “What is out of compliance?” In March 2007, the first third-party fiduciary, Alvarez and Marsal, pointed out areas of dysfunction that led to the territory losing tens of millions of dollars in federal education grants. The fiduciaries’ scope of operations extended to other areas of government, including Human Services, Property and Procurement, and the Finance Department. Although it still monitors those areas, the primary work is now, again, in the Virgin Islands Education Department.