Although I currently serve as the Virgin Islands inspector general, I write this also as a taxpayer and resident of the Virgin Islands.
With the upcoming Economic Summit, hopefully some of the revenue and expense issues that have a direct effect on the cash flow of the government will be discussed and more importantly acted upon.
All governments, except maybe those that make their own money, depend on taxes and fees to generate funds to pay for the services that we all need and demand. So, we must ask — is the Virgin Islands government collecting its fair share of taxes and fees to adequately pay for these services?
Let us look at just one revenue issue — accounts receivables/collections — and you can be the judge.
From 1993 to the present, with the government's financial condition becoming more and more critical, several audit reports were written. They were issued by both the local and federal inspectors general showing, among other things, the amount of accounts receivables that remain outstanding to the government.
To jog your memory little, here are some of the larger numbers:
Hospital Fees (both islands) $170,000,000
Internal Revenue Taxes 92,000,000
Property Taxes 20,000,000
Health Fees 8,000,000
SBDA Loans 6,000,000
Licensing Fees 3,000,000
Property Rentals 2,000,000
These seven categories represent a total of $301,000,000 in accounts receivables. . . . THAT IS $301 MILLION IN UNCOLLECTED TAXES AND FEES. MONEY THAT IS OUT ON THE STREET!
You might ask, is it all collectible? Of course not. However, if the government were to collect 10 percent, $30 million in badly needed revenues will be realized. Twenty percent would yield $60 million; 30 percent . . . $90 million; etc. Need I say more?
How can these accounts receivables be collected? The answer is not always simple, but can we do better? Again, you judge.
As an example, let us look at property taxes. All jurisdictions throughout the United States use property taxes as a major source of revenues, and the Virgin Islands is no different. Our audit of property taxes showed that announcements of pending property auctions resulted in 70-80 percent of the delinquent property owners paying their taxes. So, what does this tell you? When was the last time properties were listed in the local papers for delinquent taxes?
Another major source of revenue, withholding taxes, are taken out from each of our paychecks every time we are paid. These taxes are required to be paid by our employers to the V.I. Bureau of Internal Revenue, on our behalf, as advance payments of our income tax obligations. Yet millions are owed to the bureau from employers for withholding taxes. This is a fiduciary responsibility of the employers; this money is not theirs. It is our money. When we file our tax returns and seek refunds, if employers have not paid our withholdings, the government is burdened with finding the money to pay us, and as we all know that is becoming more and more difficult to do.
The government must be more aggressive in its collection activities. The time of political, family and friendly favors must come to an end.
In addition, we the citizens must stop relying solely on the government and expecting the government to provide everything for us at no cost. Even if we cannot pay the full price of medical services, for example, we should and must pay something.
On the issue of expenses, we all know that the government can function much more effectively and economically. Numerous audits have pointed out waste and abuse. Again, as a reminder, here are a few examples:
— Professional service contracts amount to about $50 million per year . . . THAT'S PROFESSIONAL SERVICE CONTRACTS! Imagine the millions if we include equipment supplies, and construction contracts. Are all of these services really necessary, and are we getting the BEST deals for the government?
— The government loses the immediate use of about $2 million each year due to individuals who bounce checks payable to the government. Some individuals use the government as an interest- and penalty-free lending institution. What happens to you if you bounce a check at your local supermarket or business? Why should the government treat you any differently?
— An audit of government overtime expenses, recently initiated, shows an annual cost of $15,000,000 to $25,000,000. I say again: $15 MILLION TO $25 MILLION IN OVERTIME PAYROLL COSTS EACH YEAR. I am sure that the audit will reveal some very interesting results.
— Government rental payments total about $8 million per year. Consider all of the government properties that are being underutilized.
— And of course, we have government employees (classified, unclassified and "stipended"), who represent 70-80 percent of the budget. This area will have to be addressed. I do not advocate mass firing of employees; however, we must utilize the employees that we have more effectively.
An editorial in the Saturday, March 13, issue of the Virgin Islands Independent entitled "Falling on deaf ears?" was right on target. Audit reports are issued on a regular basis showing where revenues are not being collected and precious funds are being wasted. A truly independent audit function must be an important part of any government operation. Every free government throughout the world has audit agencies. So do all state, city and county governments throughout the United States, as well as all major private businesses.
Audit oversight is the only way managers in the legislative and executive branches can know how funds are being collected and expended. It is, however, up to these managers to require and implement actions to correct any deficiencies found.
In closing, I sincerely hope for a successful summit. I guess we will know once serious and sincere actions have been taken as a result of the discussions and plans that will be formulated due to the Economic Summit.
Editor's note: Steven van Beverhoudt is the inspector general for the Virgin Islands Bureau of Audit and Control.
