April 20, 2001 – Starting with an audit that revealed questionable practices in the Labor Department, the Senate Labor and Veterans Affairs Committee took a look Friday at staffing shortages, a surplus in the Unemployment Fund, and the way the V.I. government uses federal funds earmarked to cover the indirect costs of administering grants.
Nearly 20 top- and middle-management Labor employees spent the day at the Legislature on St. Thomas to answer questions from Sen. Norma Pickard Samuel, who chairs the committee, and its other members.
Also testifying were Steven Van Beverhoudt, inspector general, and Ira Mills, budget director. Samuel lashed out at Attorney General Iver Stridiron, who had been invited to attend the session but did not appear.
The committee also approved two bills. One increases the fine for an employer's willful violation of fair labor standards to $2,500 from $500. The other provides a supplemental appropriation of $166,844 from the Unemployment Trust Fund for the administration of the Unemployment Insurance Program and the Public Employment Service.
The meeting opened with testimony from Van Beverhoudt, who summarized the findings of an audit his office released in January. Responding to questions, he said an investigation sparked by the audit is stalled because the attorney who had been prosecuting public corruption cases resigned. The government has interviewed two replacement candidates, he said, but neither is available before July, so it will be at least that long before the case can proceed.
Auditors examined 14 employers who received refunds or credits for unemployment insurance taxes and found that for 11 of them the refunds or credits were improper. The total amount involved was $5.7 million. Van Beverhoudt said the 14 employers were targeted specifically for audit because of the size of their refunds and/or because a refund had raised other questions. There have been talks with some of the employers about repayment, he told the committee.
He also said Labor officials "have initiated significant steps to improve" operations.
Among those steps, according to commissioner-designate Cecil Benjamin, is a change from the former practice of allowing one employee to sign checks. Now two signatures are required.
John Sheen, executive assistant commissioner and acting commissioner before Benjamin's appointment, said the department also has changed the system for approving refunds, now requiring review at a higher level than previously.
Sen. Donald "Ducks" Cole zeroed in on another audit finding — that the Virgin Islands has overpaid into the federal Unemployment Trust Fund and has a surplus of roughly $49.5 million there. He got Benjamin to promise he would seek to have Congress release the surplus to the local government, despite V.I. Delegate Donna Christian Christensen's expressed doubts that such an effort would succeed.
Samuel helped department officials make a case for getting more money from another source, the Indirect Cost Fund.
Mills said the Office of Management and Budget receives $1 million to $3 million annually from the federal government to help defray the indirect costs of administering federal grants. Typically, Labor is charged 10 percent of all federal grants for that indirect cost.
Elutaria Roberts, assistant commissioner, said the department writes its own grant proposals, administer the grants and defends them. She argued that Labor, not OMB, should control the indirect cost money.
Labor officials reported staff shortages in virtually every division. Sheen said the department has qualified people ready to step into four positions that are federally funded, the governor has been notified, and still the department cannot fill the vacancies. Marcelle Heywood, Occupational Safety and Health director, ticked off five specialist vacancies in her division and said the territory is in danger of losing federal backing because of them.
Samuel dismissed the witnesses around 4:30 p.m., saying she would continue the hearing next week.
