The Public Finance Authority is exploring ways to address roughly $115 million in unexpended capital projects funding, a chronic problem among local agencies. Reprogramming them for other purposes is not off the table, Nathan Simmonds, the director of finance administration at the Public Finance Authority, told lawmakers Monday.
Simmonds made the remarks while leading the Public Finance Authority team in defending the agency’s Fiscal Year 2020 budget before the Senate Finance Committee at the Earle B. Ottley Legislative Hall on St. Thomas.
“We have advised the new commissioners and agency heads of their funds availability and we’re evaluating the funded projects to determine which are completed and where funds are available for reprogramming,” Simmonds told the committee, which is chaired by Sen. Kurt Vialet (D-STX).
Sen. Marvin Blyden (D-STT) expressed concern about capital improvement projects in last year’s budget with funds that remain completely unspent. In 2019, for example, the Department of Public Works had a balance of $72.3 million, roughly 67 percent of the $107.2 million in available funding, while the Department of Education had $6.4 million left out of $19.6 million in funding. Sports, Parks and Recreation had $13.2 million – about 68 percent – left of roughly $19.2 million in funds, while the Bureau of Corrections still had $2.66 million, or 86 percent, left out of $3.09 million in capital projects funding.
In total, some $115 million in capital projects funding remained unexpended in 2019, according to the Senate’s post audit report on Public Works.
Some of these agencies, Simmonds said, have indicated that the projects are “in progress.” But without any documentation on how the agencies intend to spend the amounts, Public Finance Authority is left in the dark. Simmonds said Public Finance needs to sit down with various agencies to find out why project funds were not expended, but could not provide a timeline on when the discussion will take place.
Sen. Novelle Francis (D-STX) asked where the difficulties lie in spending money the government already borrowed for capital projects. Since he joined the Legislature in 2015, unspent capital funds hovered in the $140 million range. Four years later, he said, the numbers still stand close to $100 million. According to Simmonds, the change of administrations in the last election brought in new leadership unfamiliar with the availability of funds, which contributed to the delays.
To fund various expenses such as capital improvements, the Public Finance Authority is authorized to issue general obligation bonds, up to 10 percent of the total value of taxable property in the territory. With an estimated $11.4 billion worth of taxable property, the territory’s debt ceiling stands at $1.14 billion. According to Simmonds, the territory’s outstanding general obligation debt stands at $826 million, including roughly $206 million in community disaster loans that went to local government coffers, as well as Schneider Regional Medical Center and Juan F. Luis Hospital, which are both semi-autonomous agencies.
Meanwhile, the territory’s matching fund revenue obligation debt – backed by the revenues from the projects funded by the issued bonds – stands at $803 million. The territory also has $254 million in special obligation debt, paid back by revenues from Diageo and Cruzan Rum.
This year, the Public Finance Authority is asking for an operating budget of $8.5 million, a 15 percent decline from last year’s budget. Of that amount, only $1.8 million will go toward administrative costs; the remaining $6.5 million will fund professional services, including accounting, auditing and financial services.
Office of Management and Budget
Jenifer O’Neal, director of the Office of Management and Budget, also shared a similar problem with expending federal grant money, saying the agency is struggling to nail down numbers.
“I’m having difficulties in finding out exactly how many grants we have. What’s the full total? Where are we on what’s been drawn down? What’s critical and what’s high risk,” O’Neal said.
O’Neal made the remarks while also defending her agency’s $20.1 million budget. Of that amount, roughly $18.2 million will come from the general fund, $300,000 from the Tourism Revolving Fund and $1.6 million from the Indirect Cost Fund. The total budget reflects a $16.9 million reduction compared with last year’s budget.
A bulk of the request, about $12.2 million, will cover personnel and fringe benefits for 59 full-time employees, including 22 vacancies.
In response to the territory’s difficulty in spending federal grant monies, nine full-time employees are dedicated to managing federal grants. Hiring highly qualified staff and acquiring a full grants management software that is also being used by Puerto Rico is part of the solution.
Management and Budget’s Fiscal Year 2020 budget reflects a $27 million decline, with the agency transferring money appropriated for various agencies directly to those agencies.
Department of Finance
Finance Commissioner Kirk Callwood also appeared before the Senate Finance Committee to present his agency’s budget, which is roughly $18.1 million this fiscal year. Some $16.9 million from the general fund, $937,000 from the Government Insurance Fund, and $233,000 from the Indirect Cost Fund. The budget includes $3.23 million in funding for salaries and $1.25 million in fringe benefits for 53 employees.
The Finance Department manages several funds currently containing $58 million, including $13.5 million in the Insurance Guaranty Fund. Finance also manages the Transportation Trust Fund’s $11.5 million, the Internal Revenue Matching Fund’s $16.5 million and the Caribbean Basin Initiative’s $8.5 million.
When asked what he considered his agency’s greatest challenges, Callwood said “(f)irst of all, liquidity, and liquidity as it pertains to semi-autonomous agencies such as WAPA, Waste Management, so forth. That keeps me up at night and that will be a challenge that we need to resolve expeditiously.”
The audit is also one area that Callwood said needs drilling down on. In spite of having a competent staff, he said, there are process improvements and areas outside of Finance and within other agencies that need to be improved.
The territory currently has 47 days of cash on hand, a significant improvement from 10 to 15 days of cash on hand that lawmakers said they are used to hearing. But according to Callwood, in spite of the surge in post-recovery dollars that help buoy the economy, the territory’s finances still need work.
“Though the federal funding received in the aftermath of Hurricanes Irma and Maria has provided much needed financial assistance, the challenge to manage financial resources remains constant,” Callwood said.
Callwood touted the agency’s accomplishments in the last several months, including the processing of roughly $17 million in outstanding tax refunds and the launch of the first government transparency website. According to Callwood, the agency also upgraded their systems to a software called Munis 11.3, which improved their reporting and management of capital assets.
Looking ahead, Callwood said the Finance Department aims to reduce the number of negative findings issued in the annual audit report, as well as ensure that the Fiscal Year 2018 audit is issued on time. It is also working with other government agencies, conducting quarterly trainings to address snags in processes like federal drawdowns, processing of Notices of Personnel Action and vendor payments.
The Finance Department’s budget reflected a 27 percent increase compared with last year’s budget.
What a mess! They don’t know how much they have, how much they owe, how they need and how is coming in!! Really? Almost all government agencies are spinning around in circles trying to figure which way is up. More training? And more training and more training.