Sept. 13, 2007 — As the Virgin Islands Education Department wrangles with years’ worth of federal grant compliance problems in hopes of not having to pay back millions, news came late Wednesday that the U.S. Department of Education has approved $22.9 million for the territory for fiscal year 2006. A 2007 application is pending in Washington, and is expected to be approved soon.
The money comes from the U.S.D.O.E.’s Consolidated Grants Program, the lion’s share of federal funding the territory receives annually. It will be used to fund English language acquisition programs, reading, drug education, adult and vocational education programs.
“This is good news, particularly for the territory’s children,” said acting Education Commissioner Lynn Spampinato, whose month-long tenure has been mired with fiscal complexities and deadlines stemming from years of mismanagement of the territory’s education budget.
In 2002, the territory was declared a “high risk” by the federal government and had three years to come into compliance with federal guidelines. The deadline passed without compliance, prompting a freeze of federal funding and a requirement that the territory hire a third-party fiduciary, or trustee, to oversee handling of federal monies. The fiduciary, Alvarez & Marsal LLC, based in New York City, began work in August 2006 and is also contracted to help Education establish sound fiscal management systems.
“The critical piece is how do we lay out a plan now to spend as we go forward and not wait until the last minute for the ‘06 year,” said Spampinato. The territory has until September of 2008 to spend the $22.9 million on programs and expenditures that meet federal guidelines.
According to Daisy Millin, director of federal grants and audit division of the Department of Education, federal funding comes with strict guidelines on how, and by what timetable, money can be spent. As long as the spending patterns conform to the plan originally approved by the federal government, the funding is secure. Millin said the department will, in April, “take a hard look” at those patterns for the ’06 grant to make sure they are in compliance. “If not,” she said, “we will come together and submit a request for a revision to the U.S. Department of Education to ensure that we have the programs that will best facilitate the expenditure of all the resources by September.”
In years past, federal funds often arrived late due, in part, to application or compliance errors, rendering the original funding timetable upon which the grant was approved, moot. Education officials would find themselves scrambling to try to make revisions to their original plans before the grant deadlines, and have repeatedly been unable to comply.
Currently, Education is hoping to salvage what, at last report, is $4 million from the ’05 federal grant which needs to be tied to an appropriate use by the end of the month, or returned to Washington. Spampinato said that figure was closer to $15 million a short time ago, but thanks to constant work with Alvarez & Marsal, the department has whittled it down.
“If you asked me, could I spend $4 million today – absolutely!” said Spampinato. “But it’s not just spending; it has to be within the plan. So, for ’06 we need to say, ‘is this plan exactly where we want to go?”
The department is also grappling with salvaging funding from the 2004 grant cycle. After the department fell into non-compliance in 2005, all money awarded the territory was frozen by the feds, sending the department into a fiscal crisis. Some $27-million was borrowed from the territory’s General Fund, said Millin, to shore up the department in fiscal year 2004 (the federal and the territory’s fiscal years differ).
Washington is presently considering reimbursement requests totaling $18-million submitted by the fiduciary and the territory for the 2004 fiscal year; and Millin said additional requisitions are in the works and will be submitted soon, in hopes of receiving reimbursement from the feds to pay down the General Fund loan. Word on the $18-million is expected before October.
Spampinato recently returned from a trip to Washington, accompanied by top members of her administration, to meet with federal officials, in part, she said, to give her staff the opportunity to ask questions of the key officials in charge of programs that are critical to the territory’s curriculum. In addition, she wanted to assure Washington that progress was being made with the fiduciary.
“What we wanted to show is we can work with the third-party fiduciary,” said Spampinato. “We’ll move to a point where our people will be trained on a day-to-day basis so when we leave the third-party fiduciary, we don’t slip back.
“This didn’t happen overnight,” she continued. “This was many years of frustration on the part of (Education) and many employees. It’s not where we went wrong, but how can we make sure this doesn’t happen again.”
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