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ADDITIONAL COMMITTEE QUESTIONS

Hospital Facilities

Question: Why should the federal government finance territorial hospitals?

Answer: The Virgin Islands Government currently estimates, for both FY 79 and FY 80, a substantial deficit. Thus they feel that a further strain on their already precarious cash availability problem in paying their operating obligations will not permit them to undertake any large capital improvement program. The GVI is reluctant to use such available funding sources as the federal loan guarantees to fund hospital construction since they feel repayment during this period (CY 79 and 80) would prove to be difficult if not impossible.

The Virgin Islands wishes it had the local resources to undertake this project without having to seek federal assistance and they have concluded that none are available. Certain anticipated resources may or may not be available within the next few years. Since there is no certainty, and since it is crucial that construction not be delayed any further federal funding for construction of new hospital facilities is being sought by the GVI as authorized by Public Law 95-348. Should any of the additional anticipated funds become available within the next few years, the hospital construction funds, if appropriated now, would be considered as an offset against those funds due the Virgin Islands.

The

Extensive "patchwork" and additions have been made over the years to the existing hospitals, but at great cost and with no real improvement in the facilities. location of the existing hospitals and inefficient floor plans absolutely bar further expansion. The buildings are judged because of structural and operational deficiencies to be hazardous to the health and safety of patients. Accreditation, HEW grants, and payments for Medicare/Medicaid are in jeopardy of being cancelled. Delay in the planned accelerated construction program will only compound the problems associated with the existing facilities.

VIRGIN ISLANDS FISCAL PROGRAM

Question: Give us the details on this situation over the last few years. For the record, provide a listing of all construction funding that has been reapplied to general operating costs. Include dollar amounts and project descriptions.

Question: A July 1978 report on the fiscal condition of the Virgin Islands concluded that conditions were precarious and that an overhaul of the fiscal management and budgeting systems was urgently needed. What has the government of the Virgin Islands done to address these major problem areas? What kind of technical assistance is

the federal government providing to help establish the kind of management information system necessary to clear up these problems? What auditing procedures does the comptroller have for monitoring federal grants?

Answer: The Office of Territorial Affairs, Department of the Interior has offered to provide technical expertise from their office, through the Comptroller for the Virgin Islands, in surveying, identifying, and evaluating our existing accounting and information systems with a view to making recommendations for its modernization and upgrading. A memorandum of understanding between the Government of the Virgin Islands and the Comptroller is presently being formalized for the commencement of this task.

Question: What has the Virgin Islands government

done to cut its operating expenditures?

Answer: In an attempt to reduce operating expenditures, the IT is imposing mandatory spending ceilings through the budget process; initiating a study to identify nonessential programs or services which may be curtailed or eliminated; imposing a freeze on new hiring and promotions; reducing payroll expenses by attrition; revising the present pay plan which provides increments annually to nonunion employees to one which provides increments every two years based on merit and requiring mandatory purchase of compact cars which meet energy saving standards.

Question: What are you doing to improve tax

collections?

Answer: The Department of Finance has taken positive steps to improve the administration of the tax laws, namely: (1) appointment of two retired IRS technical advisers to work on appellate tax cases; (2) assignment of two tax attorneys to the staff; (3) recruitment of former IRS special agent to work on suspected fraud cases; (4) intensive training of revenue officers and agents designed to improve the quality of performance in the collection of revenues.

Question: A recent audit of procurement actions of the VI Water and Power Authority resulted in recommendations for uniform policies to protect government interests in any future actions. What has been the response to that recommendation?

Answer: The V.I. Water and Power Authority is currently reviewing its purchasing practices and is in the process of rewriting its procurement manual aimed at standardizing procedures with those of the Federal and V. I. Governments. When completed and implemented, the discrepancies alluded to should be eliminated.

Repayment of Customs Duties

Question: In October 1978, a U.S. District Court

judge ordered the federal government to repay customs duties to the Virgin Islands What is the status of that order?

Answer: The Justice Department filed an appeal of Judge Gasch's order and the matter is now pending before the United States Court of Appeals for the District of Columbia. It is anticipated that a decision will be arrived at sometime in early 1980.

Question: How would that funding be applied to government operations?

Answer: It would be inappropriate to speculate at this time. However, the VI assures that this resource, if received, will be invested wisely to relieve the Territory of its recurring fiscal problems. Income earned from these investments would generate a steady source of revenues into the General Fund to cover operating expenses. Additionally, portions of the funds will be used to initiate and complete many deferred capital improvement projects which, in the process, will create badly needed jobs for the Territory's unemployed.

Question: What is the current estimate of that

repayment, if the order stands?

Answer: Current estimate of repayment, if Judge Gasch's order is upheld, is between $250 and $300 million.

Desalinization Plants

Question: Criticism was raised last fall of the proposed awarding of a $15 million contract to an Israeli firm to construct three desalinization plants. The bid was significantly higher than one received from an American firm. What action has the Virgin Islands government taken on the awarding of this contract?

Answer: Up to this time, the Government of the Virgin Islands has taken no specific action concerning awarding of the contract. The agency of the Government of the Virgin Islands that is responsible for the procurement of the desalinization plants is the Water and Power Authority (WAPA), an autonomous instrumentality of the government. The government nor WAPA have yet acted on the recommendation of the Federal Comptroller to reject all bids and undertake another solicitation. Currently the matter is before the Legislature of the Virgin Islands which authorized the project, and now must appropriate the necessary funds to WAPA in order to construct the desalinization plants. At this time it is not known what course of action the Legislature will take. Consummation of the contract is conditioned upon the appropriation and availability of the funds to WAPA.

Question: What is the source of funds for these desalinization plants?

Answer: The funding source for financing the construction of the plants is the proceeds of $15.1 million General Obligation Bonds sold by the Government of the Virgin Islands in the private sector. The appropriation of these funds to VIWAPA is currently under consideration by the Legislature of the Virgin Islands.

Question: Were there any irregularities in the procurement procedures? Has the government comptroller taken any action to investigate the awarding of these contracts?

Answer: The U.S. Government Comptroller completed an audit of the procurement procedures used in the bidding and award of this contract. That audit reported a number of irregularities in the procurement procedures and recommended that the contract not be consummated and that the procurement be re-bid. That recommendation has not, thus far, been implemented.

SUBCOMMITTEE RECESS

Senator BURDICK. We are going to go into recess now, but I might announce that the groups yet to be heard are Guam and the Federal Comptrollers, which we will hear this afternoon. So we will be in recess until 1 o'clock.

I might say before we sound the gavel, Mrs. Van Cleve, will you be back?

Mrs. VAN CLEVE. Yes, sir.

Senator BURDICK. We will recess until 1 o'clock.

[Whereupon, at 11:30 a.m., the subcommittee was recessed, to reconvene at 1 p.m., the same day.]

(AFTERNOON Session, 1:10 p.m., Tuesday, March 20, 1979)

DEPARTMENT OF THE INTERIOR

TERRITORIAL AFFAIRS

GUAM

STATEMENT OF JOSEPH F. ADA, LIEUTENANT GOVERNOR
ACCOMPANIED BY:

ANTONIO B. WON PAT, DELEGATE

EDWARD PANGELINAN, BUDGET DIRECTOR

RUTH G. VAN CLEVE, DIRECTOR, OFFICE OF TERRITORIES

Senator BURDICK. The subcommittee will now reconvene. The delegation from Guam will be next. Will you approach the witness table? I want you to introduce your panel. Introduce the fellow to the immediate right. I have never seen him before.

[Laughter.]

STATEMENT OF DELEGATE WON PAT

Mr. WON PAT. This is indeed a real honor and pleasure to be here before you to plead our cause. As you know, you and I have been working in the interest of the territory for over a decade. You have been responsible for much of the legislation now in the books that provides the benefits for the territory. That is a real tribute to your compassionate understanding and generosity. Today I have the honor and pleasure to introduce to you-unfortunately Senator Stevens is not here, because the witnesses from Guam are literally of the same persuasion as Senator Stevens.

[Laughter.]

I am pleased to first introduce the distinguished Lieutenant Governor of Guam, Joseph Ada, who was formerly the Speaker of the Guam Legislature. With him are Mr. Pangelinan who is budget director. Next to him is the planning director.

Senator BURDICK. I might say I had the privilege of speaking to the legislature of Guam at one time.

Mr. WON PAT. I remember that. I am very much indebted to you for the generous praise that you had given in my behalf. I do hope the people in Guam would in some way be able to return such gesture of confidence and I will say the personal interests

Senator BURDICK. You covered the ground, Tony.

Mr. WON PAT. I don't feel I have to read my statement in full, sir. I would rather that the Lieutenant Governor, who will be able to justify the authorized budget and his staff, speak to you. But I would simply want to add on-not only as a member of the House Committee on Interior-that I have been honored recently to be designated as the

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