GUAM AT RISK OF LOSING $90 MILLION FOR EDUCATION

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Delays in procurement process blamed

HAGATNA, Guam (Pacific Daily News, Jan. 10, 2011) – In Guam, federal education officials are concerned that a delay in the government’s procurement process may jeopardize nearly US$90 million worth of federal funds that are supposed to bring building and technological improvements to Guam schools.

Christine Jackson, senior consultant with U.S. Department of Education's Risk Management Service, Management Improvement Team, said U.S. Department of Education (DOE) is concerned with Guam DOE's ability to use the money provided through American Recovery and Reinvestment Act (ARRA) in a timely fashion.

Failure to meet the deadline could mean Guam loses the money.

"At this time, U.S. DOE's only concern is related to the current review and approval process for federally funded procurements, which is adversely impacting the rate at which Guam DOE procures services, and ultimately obligates its ARRA funds to meet the Sept. 30, 2011 deadline," she said in a written statement.

Guam Department of Education Superintendent Nerissa Bretania Underwood explained that by deadline, her department has to have contracts signed and in place, basically assuring the federal government that the money is "encumbered."

However, there's been a bottleneck within Guam DOE and at the Office of the Attorney General.

Underwood said they had asked U.S. DOE if they could receive an extension on the September deadline.

"Districts in the mainland received their money a year sooner than we did, and it's my understanding that even they're coming up with some challenges in encumbering their ARRA funding," she said.

Underwood said Guam DOE hoped for an extension that would have provided local education officials with the same window of opportunity as their national counterparts.

However, Jackson said the American Recovery and Reinvestment Act funds aren't subject to any extension requests for either states or other government entities that have received grants.

"The guidance provided by the Office of Public Management does not include such a waiver or extension provision, Jackson said. There is a limited ability to submit a late liquidation request to U.S. DOE for review; however, approval of such requests must meet the requirements of the Education Department General Administrative Regulations. Jackson added that, despite receiving funds later than the states, the Insular Area governments must still adhere to the Sept. 30, 2011 deadline for ARRA obligations."

Underwood said the deadline to use funds for capital improvement projects about US$41 million that deals with renovating and improving school facilities could be extended.

"It's not automatic, though," she said, noting that Guam Department of Education has to send in an application. She added that even if they're granted the extension, local officials will continue to expedite schedules with engineers and project plans to ensure they're ready.

However, the September deadline cannot be changed for the remaining money. That's about US$26.2 million for school technology upgrades, financial management information system, and science, technology, and engineering and math program equipment.

About US$8.3 million of American Recovery Reinvestment Act funding has been encumbered to pay for Guam DOE's contract with Alvarez & Marsal as its third-party fiduciary agent.

Jackson said that the contract "is progressing well at this early stage. The process of drawing down federal funds that were previously restricted to Guam DOE access began last month, and continues with Alvarez & Marsal's careful fiscal oversight, Jackson said. We anticipate receiving regular reports from Alvarez & Marsal within the month along with a framework for revising Guam DOE's Corrective Action Plan, which will be used to gauge its progress toward addressing identified fiscal management and internal control weaknesses."

Alvarez & Marsal is the U.S. DOE-approved financial company hired in Oct. 2010 to help Guam DOE officials improve their federal financial management.

U.S. DOE officials required Guam DOE to hire a third-party fiduciary agent because of concerns with the school system's federal financial records dating back to the 1990s.

Guam receives millions of dollars in federal funding each year to support programs such as special education, summer school, the school lunch program and the after-school Department of Education Extended Day program.

Underwood said knowing that the procurement process can take months; her staff had worked with Alvarez & Marsal to create a template that would be used for contracts.

"There are 93 points on the checklist that each contract has to meet," Underwood said. So we created and submitted to the Attorney General's (AG) office a template that ensures each of the contracts we create will help expedite the approval process for our contracts."

Underwood said the template was submitted in November, but has yet to be approved.

"We know the Attorney General's office is doing their best but they have the responsibility for reviewing contracts for the entire government aside from their other responsibilities," Underwood said.

The superintendent said they're moving ahead with five invitations for bid.

"Even without the approval of the template, I've told my staff to move forward with the invitations for bid," she said.

Underwood said the bottleneck within the department is partly caused by the loss of an attorney and the chief procurement officer last year.

"We had one attorney who was handling our personnel issues, our procurement protests, Guam Education Board and other issues we had, so it's been a challenge, Underwood said. We're hopeful because on Monday (today) our new attorney is joining us."

Underwood said the new attorney; Rebecca Santo Tomas has experience and extensive background in procurement. In addition, Guam DOE has hired a chief procurement officer, Marcus Pido. With the two new additions, she's hopeful they'll be able to help expedite the procurement process.

Underwood said she also has reached out to Speaker Judith Won Pat who introduced a bill in the 30th Legislature. Bill 30-497 died in committee without a public hearing and a new set of senators has since been sworn in.

The superintendent said Won Pat has re-introduced the bill in the 31st Legislature.

"I'm hoping this time we can get enough support to get a public hearing and be passed into law, Underwood said. That would really, really be helpful."

The bill would allow Alvarez & Marsal in place of the AG's office to approve ARRA-related invitation for bids and contracts for Guam DOE.

Underwood said the two points she would like to reiterate are that Alvarez & Marsal has already been approved by federal education officials to oversee Guam DOE's federal spending, and the bill would only give them authority over the American Recovery and Reinvestment Act projects specifically.

Local procurement laws require the Attorney General's office and the governor's office sign off on contracts exceeding US$500,000.

Attorney general's office spokesman Bryan Cruz said the AG's office is in support of "DOE's effort to draft legislation that will utilize the third-party fiduciary agent to streamline ARRA-related projects."

He added that when DOE first described the "bottleneck," then-acting Attorney General John Wiesenberger identified special assistant attorneys general to somewhat alleviate the congestion of proposed Guam Department of Education contracts.

Vince Leon Guerrero, the newly appointed education liaison for Gov. Eddie Calvo, said he's discussed the issue briefly with Underwood but is trying to get more information so he can better understand the situation.

Leon Guerrero pointed to Guam Community College (GCC) saying GCC has been able to use ARRA funds at a much faster pace despite the procurement process being difficult.

"So is it the system necessarily, or is it how the system is being used?" he said, noting that GCC had shovel-ready projects which were how ARRA funds were supposed to be handled.

Leon Guerrero said he's expecting to meet with Underwood on Tuesday and will discuss the situation more thoroughly with her.

"We need to check the landscape and what are the issues about turning over procurement to an external party and if the AG's office says from a legal point of view there’s no issue there, then that raises the discussion to a separate arena," he said.

Other issues he said he'll work with other administration members to address are the bottleneck at the Attorney General's office, which may be caused by a shortage in staff, as well as the possibility of updating procurement laws to allow for faster review process.

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