[House Report 112-600]
[From the U.S. Government Publishing Office]


112th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     112-600

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 TO CREATE THE OFFICE OF CHIEF FINANCIAL OFFICER OF THE GOVERNMENT OF 
               THE VIRGIN ISLANDS, AND FOR OTHER PURPOSES

                                _______
                                

 July 17, 2012.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Hastings of Washington, from the Committee on Natural Resources, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 3706]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Natural Resources, to whom was referred 
the bill (H.R. 3706) to create the Office of Chief Financial 
Officer of the Government of the Virgin Islands, and for other 
purposes, having considered the same, report favorably thereon 
with an amendment and recommend that the bill as amended do 
pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. CHIEF FINANCIAL OFFICER OF THE VIRGIN ISLANDS.

  (a) Appointment of Chief Financial Officer.--
          (1) In general.--The Governor of the Virgin Islands shall 
        appoint a Chief Financial Officer, with the advice and consent 
        of the Legislature of the Virgin Islands, from the names on the 
        list required under section 2(d). If the Governor has nominated 
        a person for Chief Financial Officer but the Legislature of the 
        Virgin Islands has not confirmed a nominee within 90 days after 
        receiving the list pursuant to section 2(d), the Governor shall 
        appoint from such list a Chief Financial Officer on an acting 
        basis until the Legislature consents to a Chief Financial 
        Officer.
          (2) Acting chief financial officer.--If a Chief Financial 
        Officer has not been appointed under paragraph (1) within 180 
        days after the date of the enactment of this Act, the Virgin 
        Islands Chief Financial Officer Search Commission, by majority 
        vote, shall appoint from the names on the list submitted under 
        section 2(d), an Acting Chief Financial Officer to serve in 
        that capacity until a Chief Financial Officer is appointed 
        under the first sentence of paragraph (1). In either case, if 
        the Acting Chief Financial Officer serves in an acting capacity 
        for 180 consecutive days, without further action the Acting 
        Chief Financial Officer shall become the Chief Financial 
        Officer.
  (b) Duties of Chief Financial Officer.--The duties of the Chief 
Financial Officer shall include the following:
          (1) Develop and report on the financial status of the 
        Government of the Virgin Islands not later than 6 months after 
        appointment and quarterly thereafter. Such reports shall be 
        available to the public.
          (2) Each year prepare and certify spending limits of the 
        annual budget, including annual estimates of all revenues of 
        the territory without regard to sources, and whether or not the 
        annual budget is balanced.
          (3) Revise and update standards for financial management, 
        including inventory and contracting, for the Government of the 
        Virgin Islands in general and for each agency in conjunction 
        with the agency head.
  (c) Documents Provided.--The heads of each department of the 
Government of the Virgin Islands, in particular the head of the 
Department of Finance of the Virgin Islands and the head of the 
Internal Revenue Bureau of the Virgin Islands shall provide all 
documents and information under the jurisdiction of that head that the 
Chief Financial Officer considers required to carry out his or her 
functions to the Chief Financial Officer.
  (d) Conditions Related to Chief Financial Officer.--
          (1) Term.--The Chief Financial Officer shall be appointed for 
        a term of 5 years.
          (2) Removal.--The Chief Financial Officer shall not be 
        removed except for cause. An Acting Chief Financial Officer may 
        be removed for cause or by a Chief Financial Officer appointed 
        with the advice and consent of the Legislature of the Virgin 
        Islands.
          (3) Replacement.--If the Chief Financial Officer is unable to 
        continue acting in that capacity due to removal, illness, 
        death, or otherwise, another Chief Financial Officer shall be 
        selected in accordance with subsection (a).
          (4) Salary.--The Chief Financial Officer shall be paid at a 
        salary to be determined by the Governor of the Virgin Islands, 
        except such rate may not be less than the highest rate of pay 
        for a cabinet officer of the Government of the Virgin Islands 
        or a Chief Financial Officer serving in any government or 
        semiautonomous agency.
  (e) Referendum.--As part of the closest regularly scheduled, islands-
wide election in the Virgin Islands to the expiration of the fourth 
year of the five-year term of the Chief Financial Officer, the Board of 
Elections of the Virgin Islands shall hold a referendum to seek the 
approval of the people of the Virgin Islands regarding whether the 
position of Chief Financial Officer of the Government of the Virgin 
Islands shall be made a permanent part of the executive branch of the 
Government of the Virgin Islands. The referendum shall be binding and 
conducted according to the laws of the Virgin Islands, except that the 
results shall be determined by a majority of the ballots cast.

SEC. 2. ESTABLISHMENT OF COMMISSION.

  (a) Establishment.--There is established a commission to be known as 
the ``Virgin Islands Chief Financial Officer Search Commission''.
  (b) Duty of Commission.--The Commission shall recommend to the 
Governor not less than 3 candidates for nomination as Chief Financial 
Officer of the Virgin Islands. Each candidate must have demonstrated 
ability in general management of, knowledge of, and extensive practical 
experience at the highest levels of financial management in 
governmental or business entities and must have experience in the 
development, implementation, and operation of financial management 
systems.
  (c) Membership.--
          (1) Number and appointment.--The Commission shall be composed 
        of 8 members appointed not later than 30 days after the date of 
        the enactment of this Act. Persons appointed as members must 
        have recognized business, government, or financial expertise 
        and experience and shall be appointed as follows:
                  (A) 1 individual appointed by the Governor of the 
                Virgin Islands.
                  (B) 1 individual appointed by the President of the 
                Legislature of the Virgin Islands.
                  (C) 1 individual, who is an employee of the 
                Government of the Virgin Islands, appointed by the 
                Central Labor Council of the Virgin Islands.
                  (D) 1 individual appointed by the Chamber of Commerce 
                of St. Thomas-St. John.
                  (E) 1 individual appointed by the Chamber of Commerce 
                of St. Croix.
                  (F) 1 individual appointed by the President of the 
                University of the Virgin Islands.
                  (G) 1 individual, who is a resident of St. John, 
                appointed by the At-Large Member of the Legislature of 
                the Virgin Islands.
                  (H) 1 individual appointed by the President of AARP 
                Virgin Islands.
          (2) Terms.--
                  (A) In general.--Each member shall be appointed for 
                the life of the Commission.
                  (B) Vacancies.--A vacancy in the Commission shall be 
                filled in the manner in which the original appointment 
                was made. Any member appointed to fill a vacancy shall 
                be appointed for the remainder of that term.
          (3) Basic pay.--Members shall serve without pay.
          (4) Quorum.--Five members of the Commission shall constitute 
        a quorum.
          (5) Chairperson.--The Chairperson of the Commission shall be 
        the Chief Justice of the Supreme Court of the United States 
        Virgin Islands or the designee of the Chief Justice. The 
        Chairperson shall serve as an ex officio member of the 
        Commission and shall vote only in the case of a tie.
          (6) Meetings.--The Commission shall meet at the call of the 
        Chairperson. The Commission shall meet for the first time not 
        later than 15 days after all members have been appointed under 
        this subsection.
          (7) Government employment.--Members may not be current 
        government employees, except for the member appointed under 
        paragraph (1)(C).
  (d) Report; Recommendations.--The Commission shall transmit a report 
to the Governor, the Committee on Natural Resources of the House of 
Representatives and the Committee on Energy and Natural Resources of 
the Senate not later than 60 days after its first meeting. The report 
shall name the Commission's recommendations for candidates for 
nomination as Chief Financial Officer of the Virgin Islands.
  (e) Termination.--The Commission shall terminate upon the nomination 
and confirmation of the Chief Financial Officer.

SEC. 3. DEFINITIONS.

  For the purposes of this Act, the following definitions apply:
          (1) Chief financial officer.--In sections 1 and 2, the term 
        ``Chief Financial Officer'' means a Chief Financial Officer or 
        Acting Chief Financial Officer, as the case may be, appointed 
        under section 1(a).
          (2) Commission.--The term ``Commission'' means the Virgin 
        Islands Chief Financial Officer Search Commission established 
        pursuant to section 2.
          (3) Governor.--The term ``Governor'' means the Governor of 
        the Virgin Islands.
          (4) Removal for cause.--The term ``removal for cause'' means 
        removal based upon misconduct, failure to meet job 
        requirements, or any grounds that a reasonable person would 
        find grounds for discharge.

                          PURPOSE OF THE BILL

    The purpose of H.R. 3706, as ordered reported, is to create 
the Office of Chief Financial Officer of the Government of the 
Virgin Islands.

                  BACKGROUND AND NEED FOR LEGISLATION

    The U.S. Virgin Islands (USVI) is an organized, 
unincorporated territory of the U.S. It is an unincorporated 
territory because Congress has selected only certain provisions 
of the U.S. Constitution to apply to the territory. The USVI is 
an organized territory due to federal legislation--an Organic 
Act. The first USVI Organic Act was enacted in 1936 and a 
revised Organic Act was approved in 1954. The Organic Act is 
analogous to a state constitution and is intended to serve as a 
basic charter of government for the territory until the USVI 
adopts its own constitution. The Organic Act made comprehensive 
and complete provisions for the legislative, executive and 
judicial branches of the USVI government, including imposing 
limitations. Only Congress can make changes to the Organic Act, 
whereas, if the USVI adopts its own constitution, changes could 
be made locally without Congressional action. To date, the USVI 
has held five constitutional conventions, the latest held in 
2004. However, none of these efforts have resulted in the 
adoption of a constitution.
    The Organic Act did not authorize or establish a chief 
financial officer for the Virgin Island Government. It does 
require the Governor to present, at the opening of each regular 
legislature session, a message on the state of the Virgin 
Islands and a budget of estimated revenues and expenditures. 
The Governor is also required to establish and maintain 
accounting and internal control systems to allow for the full 
disclosure of financial actions, and provide for the 
accountability and accounting of all funds, property and other 
government assets. The USVI created an Office of Management and 
Budget to perform these functions.
    The USVI has outstanding debts totaling over $1.2 billion. 
The Assistant Secretary for Insular Affairs of the U.S. 
Department of the Interior testified at a Subcommittee hearing 
that this type of deficit situation arises due to disputes 
between the executive and legislative branches over revenue 
projections. This ``estimation discrepancy'' leads to revenue 
management issues, resulting in the accumulation of harmful 
debt over a period of years. The charges on such debt 
interferes with the territory's ability to solve current fiscal 
issues.
    H.R. 3706 would require the Governor of the Virgin Islands 
to appoint a Chief Financial Officer (CFO), with advice and 
consent of the USVI legislature, picked from a list created by 
a USVI Chief Financial Officer Search Commission. If the 
legislature does not confirm the Governor's choice within 90 
days, the Governor can appoint an acting CFO. If a CFO has not 
been appointed within 180 days the Commission, by majority 
vote, is required to select an acting CFO. If the acting CFO 
then serves 180 days without further action, the acting CFO 
becomes the CFO. The CFO could be removed for cause, or if the 
legislature confirms an individual through advice and consent.
    The duties of the CFO would be: to develop and report on 
the financial status of the USVI government; to certify each 
year spending limits for the annual budget and whether the 
budget is balanced; and to revise and update standards for 
financial management, including inventory and contracting for 
the USVI government and its agencies. To do this, USVI 
department heads are required to provide all documents and 
information requested by the CFO.
    The CFO would be appointed for a five year term and would 
be paid at a rate determined by the Governor, but not less than 
the highest rate of pay for a cabinet officer or any CFO 
serving in a government or semi-autonomous agency. The bill 
would require a referendum to be held closest to the fourth 
year of the fifth year term, to allow the voters to determine 
if the CFO position should be permanent.
    The USVI Chief Financial Officer Search Commission would be 
made up of eight members appointed no later than 30 days after 
enactment of this Act. Its charge would be to recommend 
candidates for nomination for USVI CFO. The Commission members 
are required to have business, government or financial 
expertise. One individual would be appointed by each of the 
following--the Governor; the President of the legislature; St. 
John St. Thomas Chamber of Commerce; St. Croix Chamber of 
Commerce; President of the USVI University; Central Labor 
Council of the USVI; St. John at-large Member; and the 
President of the American Association of Retired Persons Virgin 
Islands. The Chairperson of the Commission would be the Chief 
Justice of the USVI Supreme Court or his designee. Current 
government employees could not be appointed, except in the case 
of the Central Labor Council appointment. The Commission would 
be required to meet 15 days after all the members are appointed 
and report its recommendations no later than 60 days after its 
first meeting. The Commission would terminate on the 
confirmation of the CFO.
    During Full Committee consideration of the bill, the 
Committee adopted an amendment offered by Congressman John 
Fleming (R-LA) to clarify that the CFO would be required to 
prepare and certify annual budget spending limits and include 
estimates of all revenues brought in by the USVI, without 
regard to source.

                            COMMITTEE ACTION

    H.R. 3706 was introduced on December 16, 2011, by Delegate 
Donna Christensen (D-VI). The bill was referred to the 
Committee on Natural Resources, and within the Committee to the 
Subcommittee on Fisheries, Wildlife, Oceans, and Insular 
Affairs. On May 17, 2012, the Subcommittee held a hearing on 
the bill. On June 7, 2012, the Full Resources Committee met to 
consider the bill. The Subcommittee on Fisheries, Wildlife, 
Oceans, and Insular Affairs was discharged by unanimous 
consent. Congressman John Fleming (R-LA) offered amendment 
designated .028 to the bill; the amendment was adopted by 
unanimous consent. The bill, as amended, was then adopted and 
ordered favorably reported to the House of Representatives by 
unanimous consent.

            COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

    Regarding clause 2(b)(1) of rule X and clause 3(c)(1) of 
rule XIII of the Rules of the House of Representatives, the 
Committee on Natural Resources' oversight findings and 
recommendations are reflected in the body of this report.

                    COMPLIANCE WITH HOUSE RULE XIII

    1. Cost of Legislation. Clause 3(d)(1) of rule XIII of the 
Rules of the House of Representatives requires an estimate and 
a comparison by the Committee of the costs which would be 
incurred in carrying out this bill. However, clause 3(d)(2)(B) 
of that rule provides that this requirement does not apply when 
the Committee has included in its report a timely submitted 
cost estimate of the bill prepared by the Director of the 
Congressional Budget Office under section 402 of the 
Congressional Budget Act of 1974. Under clause 3(c)(3) of rule 
XIII of the Rules of the House of Representatives and section 
403 of the Congressional Budget Act of 1974, the Committee has 
received the following cost estimate for this bill from the 
Director of the Congressional Budget Office:

H.R. 3706--A bill to create the Office of Chief Financial Officer of 
        the Government of the Virgin Islands, and for other purposes

    CBO estimates that enacting H.R. 3706 would have no 
significant effect on the federal budget. H.R. 3706 would 
require the Governor of the Virgin Islands to appoint a Chief 
Financial Officer (CFO) to serve for a five-year period, with 
the advice and consent of the legislature of the Virgin 
Islands. The legislation also would require the territory to 
hold a referendum on adding the CFO position as a permanent 
part of the Virgin Islands executive branch during a scheduled 
election. Finally, H.R. 3706 would establish a Virgin Islands 
Chief Financial Officer Search Commission to recommend 
candidates for the CFO position.
    H.R. 3706 contains intergovernmental mandates as defined in 
the Unfunded Mandates Reform Act (UMRA). It would require the 
governor of the Virgin Islands to appoint a Chief Financial 
Officer (CFO) who would be responsible for reporting on the 
financial status of the government, preparing and certifying 
spending limits, and revising standards for financial 
management. In addition, the bill would require the Board of 
Elections of the Virgin Islands to hold a referendum on whether 
the CFO would be a permanent position. Based on information 
from representatives of the Virgin Islands, CBO estimates that 
the costs would be small and well below the annual threshold 
established in UMRA ($73 million in 2012, adjusted annually for 
inflation). The legislation contains no private-sector mandates 
as defined in UMRA.
    The CBO staff contacts for this estimate are Matthew 
Pickford (for federal costs) and Melissa Merrell (for the 
impact on state and local governments). The estimate was 
approved by Peter H. Fontaine, Assistant Director for Budget 
Analysis.
    2. Section 308(a) of Congressional Budget Act. As required 
by clause 3(c)(2) of rule XIII of the Rules of the House of 
Representatives and section 308(a) of the Congressional Budget 
Act of 1974, this bill does not contain any new budget 
authority, spending authority, credit authority, or an increase 
or decrease in revenues or tax expenditures. CBO estimates that 
enacting H.R. 3706 would have no significant effect on the 
federal budget.
    3. General Performance Goals and Objectives. As required by 
clause 3(c)(4) of rule XIII, the general performance goal or 
objective of this bill, as ordered reported, is to create the 
Office of Chief Financial Officer of the Government of the 
Virgin Islands.

                           EARMARK STATEMENT

    This bill does not contain any Congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined 
under clause 9(e), 9(f), and 9(g) of rule XXI of the Rules of 
the House of Representatives.

                    COMPLIANCE WITH PUBLIC LAW 104-4

    This bill contains no unfunded mandates.

                PREEMPTION OF STATE, LOCAL OR TRIBAL LAW

    This bill is not intended to preempt any State, local or 
tribal law.

                        CHANGES IN EXISTING LAW

    If enacted, this bill would make no changes in existing 
law.

                                  
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