ACTIONS IN VIRGIN ISLANDS

Mr. FLEMING. In the past-I say in the past, 2 years ago and beyond, for the past 2 or 3 years before that, a great deal of the time of the audit staff of the Comtroller's Office in the Virgin Islands was spent in followup on audit recommendations. I think I could speak generally to the conclusion of that, that in the majority of instances-in the very large majority-corrective action wasn't taken. We determined there were many reasons for that, not the least of which were perhaps some of the recommendations were too sophisticated for the operators to be able to implement. We let off on that effort a bit in the last year or two, because it wasn't producing a great deal.

In the Virgin Islands, however, this past year the Governor implemented a task force of his own to analyze the outstanding recommendations of our reports and other audit reports. Members of my staff are advisers to that task force.

There is ongoing effort though we don't have an arithmetical computation, as Mrs. Van Cleve stated.

PROBLEMS IN GUAM, TRUST TERRITORY

Mr. FUKUTOME. As far as Guam, trust territory, and Northern Mariana Islands are concerned, we had come to the conclusion that there are some sophisticated areas which require corrective action.

With the recommendation of the House Appropriations Subcommittee staff we have set up a technical assistance staff of our own, wherein we have assisted the government personnel in implementing some of these problem areas that have been existing for years. Major problems. Right now our technical assistance is in the area of financial management that Mrs. Van Cleve has indicated to you previously was a major problem.

Right now we have in the Trust Territory three auditors out in the various outlying districts who are actually helping out on a day-to-day basis. We have two technical assistants at Saipan helping out the Northern Marianas, as well as the Trust Territory headquarters financial management system. We have two technical assistants on Guam to help the Guam financial management system.

Senator BURDICK. You mentioned problem areas. What are the problem areas? Aren't you keeping proper books? What are the problem areas?

Mr. FUKUTOME. Basically, the accounting for the transactions that are being initiated. Somehow, and I think Lieutenant Governor Ada indicated some of the problems, mid-management-the individuals themselves, lack of training, so forth. It's basically making sure that all transactions that have been incurred have been recorded on a financial record. It's very simple.

Senator BURDICK. Is it negligence, dishonesty? What is it?

Mr. FUKUTOME. It's the way of life out in the islands. This is one of the problems that we have to overcome. Regardless of how many recommendations you make, you can't-the corrective action necessarily would not come about.

VIRGIN ISLANDS DIFFICULTIES

Senator BURDICK. That is the way it has always been done.
Would the other Comptroller like to comment on this area?

Mr. FLEMING. Excuse me. We found also many of the other deficiencies such as program accomplishments and productivity stem also from a lack of good information, not knowing really where they stand, fiscally or as far as activity is concerned. I feel the Virgin Islands, for example, is not unlike the situation or condition in which many of the States found themselves 9 to 10 years ago.

They are just that far behind in recognizing the same problems they had. The implementation of good accounting and information systems will be a long way to correcting all types of deficiencies we find in our reports.

We certainly have the complete cooperation of the territories in all regards to the implementation of recommendations, to get to your base question. They are not fighting the recommendations at all.

Senator BURDICK. What does the Appropriations Committee do when it hears the story that territorial governments don't know what is happening to money or how it's spent or whether it's spent? What do you do? What rules do we go by?

Mr. FLEMING. In the case of Guam, it was testified a few moments ago, they are well into their implementation of their new accounting and financial information system.

As Governor Luis stated in his statement, we just embarked on a joint effort between our office and his departments in that same effort. We are somewhat behind in starting, but we are just now beginning the planning for implementaton of an entirely new accounting and information system.

You have to start there or you can't correct anything from the outside in.

Senator BURDICK. What was going on for the last 20 years?

Mr. FLEMING. Running deficits and not knowing in advance in many cases and a lot of inefficiency in the expenditure of funds.

ATTITUDE IN AMERICAN SAMOA

Mr. JONES. Mr. Chairman, with respect to America Samoa, of course our situation is somewhat different, because we have a new elected government that has been in office about a year, and we have a Federal Comptroller's Office that has been in existence about the same period of time.

As to any historical perspective on the action they take on our recommendations, we don't have it. We are just getting into all this. Most of our efforts to date have been in trying to help the Government of American Samoa in trying to get a handle on where they stand fiscally and financially.

The GAO report said their accounting system was in chaos. I am sure the Governor would agree with you. He so testified before this and other committees.

Insofar as attitude and cooperation, it was tremendous.

We had several suggestions of what ought to be done, and they have marshalled resources together with our staff in revising systems and getting accountability controls built into the system.

As to why these things occur, you asked Mr. Fleming what happened in the last 20 years. It's hard to say, except that we have not had accountability of the nature and type we would expect, and I think perhaps it's only now that people are beginning to realize that something ought to be done-and I think it's being done through such hearings as this and the efforts of the Department of Interior through our office and through some recognition on the part of some of the new administration, at least, that you have to get your house in order. I think we are on the way to doing so.

NEED FOR LEGISLATION

Mrs. VAN CLEVE. The second part of your three-part question had to do

Senator BURDICK. The need for legislation, yes.

Mrs. VAN CLEVE [continuing]. To give the Comptrollers enforcement power.

I have a two-part answer to the question. The first is that we did prepare about a year and a half ago and sent forward to the Congress roughly a year ago legislation that would have vested greater authority in the Comptrollers, in the sense that they could have taken exceptions to individual transactions.

The bill further required a certain procedure with respect to management recommendations to the Governors, so that the Governors would be required to respond positively within a given period of time to them. That bill was introduced in the Senate. It was not introduced in the House. We learned informally that it was not well-received in the House.

It was, I think, equated with a new form of colonialism by some who read the bill. That fact, however, is not the reason for my answer to your question.

My two-part answer is, first, that I am inclined to think-and my associates are inclined to think-after a year to year and a half of observing the situation, that we may not need the legislation as much as we once thought we did. It may be we still do and the point of assessment is not upon us, for a reason I will state, but fundamentally, I am inclined to think that the gentlemen sitting to my right have been so effective in-I realize this sounds terribly self-serving, but I am trying to be objective-I think they have been so effective in bringing about improvements in financial accountability in the territories through, fundamentally, informal working relationships, that the kind of harsh enforcement authority that I once thought was necessary may not be.

So, the first answer to part two of your question is I think we are not as sure as we thought we were a while ago that this is necessary.

The second answer is that we have set the question aside for the moment because it is being explored by an interdepartmental group that is looking into the question of the nature of the Federal presence in the territories.

Differently stated, the question is being looked at by not only Interior but other interested agencies, plus OMB. The question is whether the Federal Government should have a presence in the territories that differs from what we now have. What we now have is the comptrollers.

That is the only Federal presence in all the territories except for the trust territory. That question will be answered, we expect, by July 1.

It would be appropriate to consider in connection with that question whether the Federal presence we have should be beefed up by giving to such people as these gentlemen greater powers than they have now. It seemed to me unwise, therefore, to resurrect last year's bill and send it forward pending the completion of that study. A long answer to part two. Now I have forgotten part three of the question.

CONDITIONING FEDERAL FUNDS

Senator BURDICK. Should Federal grants and appropriations be conditioned on the willingness of Territorial governments to correct management problems by Federal audits?

Mrs. VAN CLEVE. I really would not want to answer that question without thinking about it more fully than I can at this moment. What you are suggesting is a kind of enforcement device, as I hear the question. It is very tempting.

At the same time, you have been in this business, Mr. Chairman, so long that you know that some of the problems we are dealing with here are not insoluable, but they are certainly intractable. They are just terribly hard to get at.

I am therefore a little reluctant to say yes to your question, though it sounds logical. I am reluctant to say yes because that could be hurtful to human beings in the territories who have needs we all, I think, agree must be met. That is not a very good answer but that is as close as I can come on the spot.

Senator BURDICK. A correlary to the answer will be that we will appropriate money out of this committee not knowing for sure whether it will be used for the purposes intended.

Mrs. VAN CLEVE. I don't think the situation is that bad. I can understand why you would feel that way, on the basis of what you heard today and what you heard in other years. I think the situation is improving markedly.

I think the new direction that we have taken within the last year of trying terribly hard to help the local governments put their houses in order through the services of people on the spot, trained people who are not only competent in their fields but good at dealing with their peers in the Territorial governments, that kind of thing, I think, we can be very hopeful about.

You adverted earlier to the report of Mr. Fleming of last July on the fiscal condition of the Virgin Islands. It is the first time in living memory that that kind of report had been done in the case of the Virgin Islands. Things are happening that are more effective today than were some years back.

I think you can be optimistic. I don't want to reject the suggestion

implicit in your question. I just want to say that one has to think about the consequences. If the result is the deprivation of dollars where they are terribly sorely needed, I would be very hesitant to say yes.

The problem-I want one more sentence. The problem, I think, is not knavery. There was some suggestion earlier that that was the problem. I think it is not knavery. I think it is a lack of the kind of training needed in this complicated century. We are trying to do our best to help with the training.

Senator BURDICK. One problem I see facing committee members when they read this record is we are in this year of 1979 working on a very tight budget and if my colleagues learn they can't be sure the money we will appropriate will go for the purposes intended, it will be difficult to get increases in these budgets. That is our problem. You can see that as a practical matter.

Mrs. VAN CLEVE. Absolutely. Absolutely. I think diversion of funds is not, however, a problem that is at this moment in the territories a major one. It is the less efficient use of funds than we would wish. That is the problem

Senator BURDICK. Well, we may submit further questions to any and all of you perhaps. I think we are all trying to achieve the same thing and be of help to these areas and make sure it is effectively used. Thank you all.

SUBCOMMITTEE RECESS

The subcommittee will be in recess until 10 o'clock tomorrow. [Whereupon, at 2:20 p.m., Tuesday, March 20, the subcommittee was recessed, to reconvene at 10 a.m., Wednesday, March 21.]