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Feds Order Education Department to Hire Financial Overseer

June 22, 2005 – The V.I. Department of Education has been ordered to hire a third-party chief financial officer to oversee the spending of the federal grants it receives.
A June 17 letter from Edward R. McPherson, an undersecretary at the U.S. Department of Education, to Gov. Charles W. Turnbull said, "We regret having to take this action but have determined, after careful review of all the facts, that it is necessary in order to insure that federal education funds are invested and managed effectively and used well to serve the students of the Virgin Islands."
The federal government is calling the order "remedial action" under the compliance agreement the Virgin Islands entered into with the federal government in September 2002. (See "V.I. Posts Education Pact Compliance Data Online".)
The agreement allows the federal government to set special conditions if it believes the V.I. government is not living up to its part of the agreement. McPherson states the new special condition as "The Virgin Islands will not receive any pending or new awards subject to the Compliance Agreement until such a time as the fiduciary agent procurement is complete and the contractor is prepared to manage federal grant funds on behalf of the Virgin Islands."
He also writes that federal officials will have final approval over this contractor.
The order goes into effect July 1.
The federal government has been threatening action all year in an effort to get the V.I. Department of Education to act, but that did not happen.
In March the federal government told the V.I. Department of Education to hire a fiduciary agent within 15 days.
(See "Feds Losing Patience with Education Department ".)
On April 15, the V.I. government filed a report with the federal Department of Education. Office of Management and Budget Director Ira Mills, who serves as chairman of the Compliance Agreement Task Force, was quoted at the time as saying that the way things were being done in the V.I. Department of Education needed to change. He mentioned a new financial management system but not a financial management officer.
After reviewing the material from the federal government, Delegate Donna M. Christensen said Wednesday the findings and pending action provides additional support for her initiative to temporarily create a Chief Financial Officer (CFO) for the Territory and a fully integrated financial management system.
She said, "The federal findings specifically point to the ‘lack of progress on developing and implementing a credible central financial management system……and the impact that has on the Virgin Islands' ability to meet performance measures that are dependent on having a credible central financial management system' as the major reason why the territory will be found in non-compliance and will be facing remedial action in the near future," Christensen said.
She continued in a press release, "The problems rests squarely on a system that fails to effectively manage the federal dollars that account for a significant portion of the territory's revenues and which without major overhaul will remain inefficient. The failure to comply with the agreement also points to the difficulty in trying to fix a dysfunctional system while managing the day-to-day fiscal and management issues that may arise.
She also noted, "The V.I. Department of Education is the single largest agency that receives federal funds and failure to manage those funds effectively point to the broader problems that the territory continues to experience."
Sen. Ronald Russell, who chaired the Education and Youth Committee in the 25th Legislature, said Wednesday night that the administration "never felt sufficient urgency about the situation."
When the federal government first brought up the need to hire a financial officer in early March, V.I. officials responded by saying they would do so sometime before Sept. 23.
Russell said he had been telling administration officials, such as Education Commissioner Noreen Michaels, that more had to be done to conform to the compliance agreement, but he says his words "fell on deaf ears."
Russell now wants to work out a compromise with federal officials.
In a press release Wednesday, Russell said he is "requesting that members of the 26th Legislature of the Virgin Islands meet with representatives of the U.S. Department of Education when they visit the territory next week to discuss the ongoing problems concerning the management of federal education grants."
He said in a telephone interview that he "was deeply disturbed" by what was happening. He said his hope was that by meeting with federal officials, senators could convince them that there are local agencies that will do a fine job overseeing the education grants.
Russell also pointed out that besides the money management part, federal officials had little problem with how the V.I. Government was living up to its end on the compliance agreement.
McPherson noted in his letter that the V.I. Department of Education had made significant process in program planning, design and evaluation.
He wrote, "VIDE has been productive in completing the development of uniform territorywide standards and assessments and in performing assessments of students in the spring 2005. This progress is an indicator that it is possible for VIDE, with continued diligent efforts, to achieve compliance with the Compliance Agreement's requirements."
Similarly, he wrote the VIDE has made progress as far as human capital. He cites "class coverage, increasing recruitment of specialized personnel, and improving the hiring process."
But those are just two of four areas covered by the Compliance Agreement. The other two concern finances, and these evidently give the federal department concerns.
McPherson concludes his letter, "Taking this action enables us to continue providing funds to the Virgin Islands under special conditions, while you continue the process of implementing a credible central FMS (Financial Management System) and making other systemic improvements."
"This is beyond any minority or majority divisions and party politics," Russell said. "This is about the future of the territory and the education of our people, particularly our children."
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