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The report accompanying these procedures was issued by BDO USA, P.C., a Virginia professional corporation and the U.S. member of BDO International Limited, a UK company limited by guarantee. Government of the United States Virgin Islands Management’s Discussion and Analysis, Financial Statements (with Independent Auditor’s Report Thereon) and Required Supplementary Information Year Ended September 30, 2022 Government of the United States Virgin Islands Management’s Discussion and Analysis, Financial Statements (with Independent Auditor’s Report Thereon) and Required Supplementary Information Year Ended September 30, 2022 Government of the United States Virgin Islands Contents 2 Independent Auditor’s Report 3-10 Management’s Discussion and Analysis 11-23 Basic Financial Statements Government-wide Financial Statements Statement of Net Position 24-25 Statement of Activities 26-27 Fund Financial Statements Balance Sheet – Governmental Funds 28 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds 29 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities – Governmental Funds 30 Statement of Net Position – Proprietary Funds 31 Statement of Revenues, Expenses, and Changes in Net Position - Proprietary Funds 32 Statement of Cash Flows – Proprietary Funds 33-34 Statement of Fiduciary Net Position 35 Statement of Changes in Fiduciary Net Position 36 Notes to Basic Financial Statements 37-144 Required Supplementary Information Schedule of Changes in Total OPEB Liability and Related Ratios 145 Schedule of Net Pension Liability 146 Schedule of Pension Contributions and Related Notes 147-148 Schedule of Revenues and Expenditures – Budget and Actual Budgetary Basis – General Fund 149 Notes to Schedule of Revenues and Expenditures – Budget and Actual Budgetary Basis – General Fund 150-151 12505 Park Potomac Ave, Suite 700 Potomac, MD 20854 Tel: 301-354-2500 Fax: 301-354-2501 www.bdo.com 3 BDO USA, P.C., a Virginia professional corporation, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. Independent Auditor’s Report To the Honorable Governor Government of the United States Virgin Islands Report on the Audit of the Financial Statements Disclaimer and Unmodified Opinions We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Government of the United States Virgin Islands (the Government), as of and for the year ended September 30, 2022, and the related notes to the financial statements, which collectively comprise the Government’s basic financial statements as listed in the table of contents. Summary of Opinions Opinion Unit Type of Opinion Governmental Activities Disclaimer Business-Type Activities Disclaimer General Fund Disclaimer Debt Service Fund Unmodified Capital Projects Fund Unmodified Matching Fund Special Purpose Securitization Corporation Debt Service Fund Unmodified Federal Grants Fund Disclaimer The West Indian Company Limited-Enterprise Fund Unmodified Unemployment Insurance-Enterprise Fund Disclaimer viNGN, INC.-Enterprise Fund Unmodified Aggregate Remaining Fund Information Disclaimer Aggregate Discretely Presented Component Units Disclaimer Disclaimer of Opinions Based on our audit and the reports of other auditors, because of the significance of the matters discussed in the Basis for Disclaimer Opinion paragraphs below, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the financial statements of the Governmental Activities, Business-Type Activities, the General Fund, the Federal Grants Fund, the Unemployment Insurance-Enterprise Fund, the Aggregate Remaining Fund Information, and the Aggregate Discretely Presented Component Units of the Government of the United States Virgin Islands. Accordingly, we do not express an opinion on these financial statements. 4 Unmodified Opinions In our opinion, based on our audit and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of each major fund, other than the General Fund, Federal Grants Fund and Unemployment Insurance- Enterprise Fund of the Government of the United States Virgin Islands as of September 30, 2022, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. We did not audit the financial statements of the following funds and/or component units: • The Virgin Islands Housing Authority (VIHA), Virgin Islands Economic Development Authority (VIEDA), Virgin Islands Waste Management Authority (VIWMA), Virgin Islands Public Broadcasting System (VIPBS), and Virgin Islands Housing Finance Authority (VIHFA), discretely presented component units, which collectively represent 17.1%, 8.2%, and 18.7%, respectively, of the assets, net position (deficit), and revenues of the Aggregate Discretely Presented Component Units. • Government Employees’ Retirement System of the U.S. Virgin Islands (GERS), a fiduciary component unit (pension trust fund), which represents 59.4%, 72.1%, and 60.5%, respectively, of the assets, net position/fund balance, and revenues/additions of the Aggregate Remaining Fund Information. Those financial statements were audited by other auditors whose reports have been furnished to us, and our opinions, insofar as they relate to the amounts included for the activities, funds, and component units indicated above, are based solely on the reports of other auditors. Basis for Disclaimer of Opinion on Business-Type Activities, and Aggregate Remaining Fund Information The basic financial statements do not include a liability for medical malpractice claims in the reciprocal insurance fund (a non-major enterprise fund). Accordingly, the Government has not recorded an expense for the current period change in that liability. The Government’s records do not permit, nor is it practical to extend our auditing procedures sufficiently to determine the extent to which the Business-Type Activities and Aggregate Remaining Fund Information as of and for the year ended September 30, 2022, may have been affected by this condition. The Virgin Islands Lottery, a nonmajor enterprise fund, has not been audited, and we were not engaged to audit the fund’s financial statements, nor was the information available as part of our audit of the Government’s basic financial statements. As such, the Government’s records do not permit, nor is it practical to extend our auditing procedures sufficiently to determine the extent to which the Business-Type Activities and Aggregate Remaining Fund Information as of and for the year ended September 30, 2022, may have been affected by this condition. 5 The Government did not maintain the requisite documentation to substantiate its reported interest and other and charges for services revenues in the amount of $4.5 and $1.9 million, respectively, for the Aggregate Remaining Fund Information as of and for the year ended September 30, 2022. As such, we are unable to determine whether adjustments are required to the Aggregate Remaining Fund information and Business-Type Activities. The Government did not maintain the requisite documentation to substantiate its reported general expenses in the amount of $24.0 million for the Aggregate Remaining Fund Information as of and for the year ended September 30, 2022. As such, we are unable to determine whether adjustments are required in the Aggregate Remaining Fund Information and Business-Type Activities. Basis for Disclaimer of Opinion on Unemployment Insurance-Enterprise Fund and Business- Type Activities The Government’s records were either not available or contained incomplete information. As such, the records do not permit it, nor is it practical to extend, our auditing procedures sufficiently to determine the extent by which the Unemployment Insurance-Enterprise Fund and Business-Type Activities as of and for the year ended September 30, 2022, may have been affected by this condition. Basis for Disclaimer of Opinion on Governmental Activities The Government did not maintain the requisite documentation to support its accrued retroactive union arbitration liability as of and for the year ended September 30, 2022. As such, we are unable to determine whether adjustments were required in the Governmental Activities. The Government’s notes to the basic financial statements do not include the necessary information under Governmental Accounting Standards Board Statement No. 77, Tax Abatement. In our opinion, disclosure of this information is required by accounting principles generally accepted in the United States of America. The Government did not maintain the requisite documentation to support capital asset activity related to capital asset additions in the amount of $23.1 million, construction in process in the amount of $366.7 million, or depreciation expense in the amount of $56.6 million as of and for the year ended September 30, 2022. As such, we are unable to determine whether adjustments were required to the Governmental Activities. The Government did not obtain the requisite valuation for the Other Post-employment Employment Benefits (OPEB) as required by generally accepted accounting standards for the liability of $976.6 million, the related deferred outflows of $135.9 million, deferred inflows of $75.9 million, related expenses of $35.0 million, and the required supplementary information as of and for the year ended September 30, 2022. As such, we are unable to determine whether adjustments are required to the recorded balances and disclosures for Government Activities and the required supplementary information. 6 Basis of Disclaimer of Opinion on Governmental Activities, Business-Type Activities and Aggregate Remaining Funds The Government’s basic financial statements do not include right to use assets, lease liabilities, lease expenses, and the related disclosure information required under the Governmental Accounting Standards Board Statement No. 87, Leases. As such, we are unable to determine whether adjustments are required to the Governmental Activities, Business Type Activities and Aggregate Remaining Funds. Basis for Disclaimer of Opinion on Governmental Activities, Business-Type Activities, General Fund, Federal Grants Fund and Aggregate Remaining Fund Information The Government did not maintain the requisite documentation to support its expenses in the amount of $766.6 million for the General Fund, $628.3 Million for the Federal Grants Fund, and $73.5 million for the Aggregate Remaining Fund information as of and for the year ended September 30, 2022. As a result, we were unable to obtain sufficient audit evidence to determine whether adjustments are required to the General Fund, Federal Grants Fund, Aggregate Remaining Fund Information, Governmental Activities and Business-Type Activities. Basis for Disclaimer of Opinion on Governmental Activities, General Fund and Federal Grants Fund The Government did not maintain the requisite documentation to support its determination regarding the sufficiency of the design and operation of key controls surrounding the environment in which Medicaid claims are processed. As such, we were unable to determine whether adjustments are required to the General Fund, Federal Grants Fund, and Governmental Activities. Basis for Disclaimer of Opinion on the Governmental Activities and Federal Grants Fund The Government did not maintain the requisite documentation to support its due from federal government and federal grants and contributions revenues in the amount of $51.0 million as of the year ended September 30, 2022. As a result, we were unable to obtain sufficient audit evidence to determine whether adjustments are required to the Federal Grants Fund and Governmental Activities. The Government did not maintain the requisite documentation to support its federal grants and contributions revenues in the amount of $700.1 million as of and for the year ended September 30, 2022. As a result, we were unable to obtain sufficient audit evidence to determine whether adjustments are required to the Federal Grants Fund and Governmental Activities. The Government did not maintain the requisite documentation to support its interest and other revenues in the amount of $18.7 million as of and for the year ended September 30, 2022. As a result, we were unable to obtain sufficient audit evidence to determine whether adjustments are required to the Federal Grants Fund and Governmental Activities. 7 Basis for Disclaimer of Opinion on the Governmental Activities and Aggregate Remaining Fund Information The Government did not maintain the requisite documentation to support its capital outlay expenses in the amount of $21.3 million as of and for the year ended September 30, 2022. As a result, we were unable to obtain sufficient audit evidence to determine whether adjustments are required to the Aggregate Remaining Fund Information and Governmental Activities. Basis for Disclaimer of Opinion on the Governmental Activities, General Fund, and Aggregate Remaining Fund Information The Government did not maintain the requisite documentation to support its interest and other and charges for services revenues in the amount of $30.4 and $6.2 million, respectively, as of and for the year ended September 30, 2022. As a result, we were unable to obtain sufficient audit evidence to determine whether adjustments are required to the General Fund, Aggregate Remaining Fund Information, and Governmental Activities. Basis for Disclaimer of Opinion on the Governmental Activities and General Fund The Government did not maintain the requisite documentation to support its health insurance accrual in the amount of $24.8 million as of the year ended September 30, 2022. As a result, we were unable to obtain sufficient audit evidence to determine whether adjustments are required to the General Fund and Governmental Activities. Basis for Disclaimer of Opinion on Aggregate Discretely Presented Component Units The financial statements of the University of the Virgin Islands Research and Technology Park Corporation (RTPark), University of the Virgin Islands (UVI), Virgin Islands Government Hospital and Health Facilities Corporation (Roy L. Schneider Hospital and Governor Juan F. Luis Hospital and Medical Center), Virgin Islands Water and Power Authority (VIWAPA), Magens Bay Authority (MBA), and Virgin Islands Port Authority (VIPA), have not been audited, and we were not engaged to audit the financial statements of RTPark, UVI, Virgin Islands Government Hospital and Health Facilities Corporation (Roy L. Schneider Hospital and Governor Juan F. Luis Hospital and Medical Center), VIWAPA, MBA, and VIPA, nor was the information available as part of our audit of the Government’s basic financial statements. RTPark’s financial activities for the year ended September 30, 2022, are not included in the Government’s basic financial statements. The financial activities of UVI, Virgin Islands Government Hospital and Health Facilities Corporation (Roy L. Schneider Hospital and Governor Juan F. Luis Hospital and Medical Center), VIWAPA, MBA, and VIPA are included in the Government’s basic financial statements and represent 89.8%, 100.0%, and 48.8% of the assets, net position, and revenues, respectively, of the Aggregate Discretely Presented Component Units. The Government’s notes to the basic financial statements do not present complete note disclosures for RTPark, UVI, Roy L. Schneider Hospital and Governor Juan F. Luis Hospital and Medical Center, VIWAPA, MBA, and VIPA. In our opinion, the disclosure of this information is required by accounting principles generally accepted in the United States of America. 8 The report of other auditors on the 2022 financial statements of VIWMA, a discretely presented component unit, was qualified because the auditors were unable to obtain sufficient audit evidence to determine whether capital assets and accounts payable were properly classified. Accordingly, the auditors were unable to determine whether adjustments were required. The report of other auditors on the 2022 financial statements of VIHFA, a discretely presented component unit, was qualified because the VIHFA’s notes to the financial statements do not include the necessary information under Governmental Accounting Standards Board Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, as required by accounting principles generally accepted in the United States of America. The report of other auditors on the 2021 financial statements of VIHA, a discretely presented component unit, was qualified because the auditors were unable to obtain sufficient audit evidence for the balances of the net pension liability, deferred outflows of resources, and deferred inflows of resources related to the VIHA pension plan. Accordingly, the auditors were unable to determine wither adjustments were required. Basis for Unmodified Opinions We conducted our audit of the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Government, and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our unmodified audit opinions. Emphasis of Matter The accompanying financial statements have been prepared assuming the Government will continue as a going concern. As discussed in Note 17 to the financial statements, the Government reported an unrestricted net deficit in Governmental Activities and in the General Fund that raise substantial doubt about its ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding those matters are also described in Note 17. These financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. 9 In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Government’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with GAAS and Government Auditing Standards, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Government’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Government’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. 10 Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and the schedules of changes in total OPEB liability and related ratios, net pension liability, pension contributions and related notes, and revenue and expenditures – budget and actual budgetary basis – General Fund be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. The schedules of changes in total OPEB liability and related ratio were not updated based on the required actuarial valuation for the year ended September 30, 2022, as required by accounting principles generally accepted in the United States of America. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 30, 2025, on our consideration of the Government’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Government’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Government’s internal control over financial reporting and compliance. September 30, 2025 Management’s Discussion and Analysis Government of the United States Virgin Islands Management’s Discussion and Analysis 11 Introduction The following management’s discussion and analysis presents an overview of the financial position and activities of the Government of the United States Virgin Islands (the Government) as of and for the fiscal years ended September 30, 2022 and 2021. Government-wide Financial Statements The government-wide financial statements are designed to present an overall picture of the financial position of the Government. These statements consist of the statement of net position and the statement of activities, which are prepared using the economic resources measurement focus and the accrual basis of accounting. This means that the current year’s revenues and expenses are included regardless of when cash is received or paid, producing a view of financial position and changes in financial position like that presented by most private-sector companies. The statement of net position combines and consolidates the Government’s current financial resources with capital assets and long-term obligations. Both above-mentioned financial statements have separate sections for three different types of the Government’s programs or activities. These three types of activities are as follows: Governmental Activities – The activities in this section are mostly supported by taxes and intergovernmental revenues (federal grants). Most services normally associated with the primary government fall into this category, including general government, public safety, health, public housing and welfare, education, transportation and communication, and culture and recreation. Business-Type Activities – These functions normally are intended to recover all or a significant portion of their costs through user fees and charges to external users of goods and services. These business-type activities of the Government include the operations of the: (i) the West Indian Company (WICO); (ii) the unemployment insurance program; and (iii) viNGN, Inc. dba Virgin Islands Next Generation Network (viNGN). These programs operate with minimal assistance from the governmental activities of the Government. Discretely Presented Component Units – These are operations for which the Government has financial accountability even though they have certain independent qualities as well. For the most part, these entities operate like private-sector businesses and the business-type activities described above. The Government’s discretely presented component units are presented in two categories, major and nonmajor. This separation is determined by the relative size of the entities’ assets, liabilities, revenue, and expenses in relation to the total of all component units. Fund Financial Statements Fund financial statements focus on the most significant (or major) funds of the Government. A fund is a separate accounting entity with a self-balancing set of accounts. The Government uses funds to keep track of sources of funding and spending related to specific activities. The Government uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Government of the United States Virgin Islands Management’s Discussion and Analysis 12 A major fund is a fund whose revenues, expenditures or expenses, assets, or liabilities (excluding extraordinary items) are at least 10.0% of the corresponding totals for all governmental or enterprise funds and at least 5.0% of the aggregate amount for all governmental and enterprise funds for the same item. The general fund is always considered a major fund. In addition to funds that meet the major fund criteria, any other governmental or enterprise fund that the Government believes is particularly important to the financial statements may be reported as a major fund. The funds of the Government are divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental Funds Governmental funds are accounted for using the modified accrual basis of accounting, which measures cash and other assets that can be readily converted to cash. The governmental funds’ statements provide a detailed short-term view of the general governmental operations and the basic services provided. The reconciliation following the fund financial statements explains the differences between the governmental activities, reported in the government-wide financial statements and the governmental funds’ financial statements. The General Fund, the PFA Debt Service Fund, the PFA Capital Projects Fund, Matching Fund Special Purpose Securitization Corporation (MFSPSC) Debt Service Fund and the Federal Grants Fund are reported as major governmental funds. The General Fund is the Government’s primary operating fund. It accounts for all financial resources of the Government, except those required to be accounted for in another fund. The PFA Debt Service Fund accounts for the resources accumulated, and payments made, for principal and interest on long-term general obligation debt issued by the Virgin Islands Public Finance Authority (PFA) on behalf of the Government. The PFA Capital Projects Fund accounts for bond proceeds of debt issued by PFA on behalf of the Government. The bond proceeds have been designated for certain necessary public safety and capital development projects that are accounted for in this fund. The MFSPSC Debt Service Fund accounts for the resources accumulated, and payments made, for principal and interest on long-term general obligation debt issued by MFSPSC on behalf of the Government. The Federal Grants Fund accounts for proceeds and federal payments that are legally restricted for expenditures for federally specified purposes. The governmental fund activities are reported in a separate balance sheet and statement of revenues, expenditures, and changes in fund balances. Additionally, the Government presents a reconciliation of the statement of revenues, expenditures, and change in fund balances to the statement of activities. Government of the United States Virgin Islands Management’s Discussion and Analysis 13 Proprietary Funds Services provided to outside (nongovernmental) customers are reported in enterprise funds. Enterprise funds are accounted for using the economic resources measurement focus and the accrual basis of accounting. These are the same business-type activities reported in the government-wide financial statements. The West Indian Company (WICO), the Unemployment Insurance Fund, and viNGN are major proprietary funds. The WICO fund accounts for the activities of WICO, which owns a port facility including a cruise ship pier and manages a shopping mall complex on the island of St. Thomas. The Unemployment Insurance Fund is a federally mandated program to manage unemployment insurance. The viNGN fund accounts for the activities of viNGN, which designs, develops and manages a middle-mile wholesale fiber optic network in order to make available reliable high-speed internet connections to retail internet service providers. The proprietary fund activities are reported in a separate statement of net position, statement of revenues, expenses, and changes in net position, and statement of cash flows. Fiduciary Funds The fiduciary activities are reported in a separate statement of fiduciary net position and a statement of changes in fiduciary net position. Financial Analysis of the Government as a Whole The Government faces the challenge of maintaining fiscal sustainability and promoting economic growth while rebuilding from the two Category 5 hurricanes of September 2017. To promote fiscal sustainability, the Government retained an international firm to develop short- and long-range cash management strategies, identify federal recovery grants, implement a recovery website, and assist with federal reporting of recovery grants. The Government has also retained the services of a national engineering firm to lead the reconstruction effort in the U.S. Virgin Islands and provide oversight of FEMA Hazard Mitigation and HUD Community Disaster grants. The Government anticipates receiving $10.0 billion through various federal disaster programs over the next 5-8 years. In February 2024, the federal government reduced the 10.0% matching requirement to receive this funding to 2.0%. The Government has also been challenged by the COVID-19 pandemic. All cruise ship ports in the Territory were closed due to “No Sail Orders” (NSOs) issued by the Centers of Disease Control and Prevention through August 2021. The tourism industry began a recovery in 2022 and the Virgin Islands Bureau of Economic Research reported an increase of 274 cruise ship calls in 2022, and an increase of 767,000 cruise passenger arrivals. During 2022, tourism visitor arrivals increased to 1.8 million from 1.1 million in 2021. Government of the United States Virgin Islands Management’s Discussion and Analysis 14 The Government regained access to capital markets in April 2022 with the issuance of the Matching Fund Securitization Bonds, Series 2022 A and Series 2022 B Securitization Bonds in the amount of $952.8 million, issued by the Matching Fund Special Purpose Securitization Corporation, and the issuance in June 2022 of the Port Facilities Bonds in the amount of $52.6 million, issued by WICO. The Series 2022 bonds were rated “BBB” by Kroll Bond Rating Agency and the WICO bonds were placed with private investors and not rated. Financial Analysis of the Primary Government Total assets and deferred outflows of resources of the Government as of September 30, 2022 and 2021 were approximately $3.8 billion and $4.3 billion, respectively. Total liabilities and deferred inflows were approximately $9.2 billion and $9.7 billion, respectively, over the same period. Liabilities exceed assets mainly due to unfunded pension and postemployment benefits such as health insurance due to retired Government employees amounting to $5.1 billion and $5.5 billion at September 30, 2022 and 2021. As of September 30, 2022, the Government’s net deficit of $5.5 billion consisted of a $798.4 million net investment in capital assets; $447.3 million restricted by statute or other legal requirements that were not available to finance day-to-day operations; and an unrestricted net deficit of $6.7 billion. As of September 30, 2021, the Government’s net deficit of $5.3 billion consisted of a $584.2 million net investment in capital assets; $300.5 million restricted by statute or other legal requirements that were not available to finance day-to-day operations; and an unrestricted net deficit of $6.2 billion. For the fiscal year ended September 30, 2022, the primary government earned program and general revenue amounting to $2.5 billion and reported expenses of $2.6 billion, resulting in an increase in net deficit of approximately $101.9 million. For the fiscal year ended September 30, 2021, the primary government earned program and general revenue amounting to $2.6 billion and reported expenses of $2.9 billion, resulting in an increase in net deficit of approximately $178.8 million. Overall, revenue decreased in fiscal 2022 by approximately $152.0 million, when compared to fiscal, 2021, mainly due to a decrease in operating and capital grants and contributions of $112.7 million, a decrease in COVID-19 pandemic relief assistance of $141.7 million, a decrease in charges for services of $12.9 million, offset by an increase in taxes of $67.2 million, an increase of $40.0 million in interest and other revenue, and an increase in payments in lieu of taxes of $8.2 million. Overall expenses decreased in fiscal 2022 by $379.7 million when compared to fiscal 2021, mainly due to a decrease in general government expense of $140.4 million, a decrease in public safety of $30.2 million, a decrease in health expense of $4.2 million, a decrease in education expense of $73.7 million, a decrease in transportation and communication of $18.6 million, a decrease in culture and recreation expense of $3.6 million, a decrease in unemployment insurance expense of $99.5 million, a decrease in other business program expense of $19.5 million and a decrease in interest expense on long-term debt of $1.7 million. These decreases were offset by an increase in public housing and welfare expense of $6.9 million and an increase in WICO and viNGN expense of $4.8 million. Government of the United States Virgin Islands Management’s Discussion and Analysis 15 A summary of net position and changes in net position for the primary government follows (expressed in thousands): Governmental Activities Business-Type Activities Total September 30, 2022* 2021* 2022 2021* 2022 2021 Assets and Deferred Outflows Current assets $ 1,512,898 $ 1,949,248 $ 63,824 $ 38,495 $ 1,576,722 $ 1,987,743 Internal balances 49,662 49,015 (49,662) (49,015) - - Capital assets 1,041,331 979,087 98,806 106,142 1,140,137 1,085,229 Leases receivable - - 6,663 - 6,663 - Other assets 5,187 5,282 1,602 1,272 6,789 6,554 Deferred outflows of resources 1,036,403 1,244,521 - - 1,036,403 1,244,521 Total assets and deferred outflows 3,645,481 4,227,153 121,233 96,894 3,766,714 4,324,047 Liabilities and Deferred Inflows Long-term liabilities 7,011,835 7,425,898 97,375 49,009 7,109,210 7,474,907 Other liabilities 1,261,974 1,689,646 123,901 165,395 1,385,875 1,855,041 Deferred inflows of resources 725,424 352,831 2,729 - 728,153 352,831 Total liabilities and deferred inflows 8,999,233 9,468,375 224,005 214,404 9,223,238 9,682,779 Net Position Net investment in capital assets 779,374 556,530 19,036 27,657 798,410 584,187 Restricted 437,074 292,702 10,228 7,748 447,302 300,450 Unrestricted deficit (6,570,200) (6,090,454) (132,036) (152,915) (6,702,236) (6,243,369) Total net deficit $ (5,353,752) $ (5,241,222) $ (102,772) $ (117,510) $ (5,456,524) $ (5,358,732) *Figures do not reflect implementation of GASB Statement No.87, Leases. Government of the United States Virgin Islands Management’s Discussion and Analysis 16 Governmental Activities Business-Type Activities Total September 30, 2022* 2021* 2022 2021* 2022 2021 Revenues Program revenue: Charges for services $ 34,068 $ 31,657 $ 46,862 $ 62,219 $ 80,930 $ 93,876 Operating grants and contributions 995,122 1,006,537 21,983 100,605 1,017,105 1,107,142 Capital grants and contributions 16,344 39,207 906 679 17,250 39,886 General revenue: Taxes 1,172,506 1,105,323 - - 1,172,506 1,105,323 Interest and other 130,824 102,901 23,054 10,964 153,878 113,865 COVID-19 pandemic relief assistance 1,932 143,678 - - 1,932 143,678 Payment in lieu of taxes 21,821 13,660 - - 21,821 13,660 Tobacco settlement rights 1,193 1,224 - - 1,193 1,224 Total revenues 2,373,810 2,444,187 92,805 174,467 2,466,615 2,618,654 Expenses General government 1,548,620 1,689,055 - - 1,548,620 1,689,055 Public safety 90,713 120,947 - - 90,713 120,947 Health 75,404 79,618 - - 75,404 79,618 Public housing and welfare 333,613 326,665 - - 333,613 326,665 Education 284,798 358,470 - - 284,798 358,470 Transportation and communication 49,376 67,999 - - 49,376 67,999 Culture and recreation 9,796 13,370 - - 9,796 13,370 Interest on long-term debt 84,020 85,705 - - 84,020 85,705 West Indian Company - - 15,112 10,634 15,112 10,634 Unemployment insurance - - 42,208 141,694 42,208 141,694 viNGN - - 9,532 9,195 9,532 9,195 Other - - 25,336 44,852 25,336 44,852 Total expenses 2,476,340 2,741,829 92,188 206,375 2,568,528 2,948,204 Changes in net position (deficit) before transfers and special item (102,530) (297,642) 617 (31,908) (101,913) (329,550) Transfers (10,000) 135 10,000 (135) - - Special item – insurance recoveries on capital assets - 555 - - - 555 Special item – Community Disaster Loan forgiveness - 150,186 - - - 150,186 Changes in net deficit (112,530) (146,766) 10,617 (32,043) (101,913) (178,809) Net deficit, beginning of year, as restated (5,241,222) (5,094,456) (113,389) (85,467) (5,354,611) (5,179,923) Net deficit, end of year $ (5,353,752) $ (5,241,222) $ (102,772) $ (117,510) $ (5,456,524) $ (5,358,732) *Figures do not reflect implementation of GASB Statement No. 87, Leases. Government of the United States Virgin Islands Management’s Discussion and Analysis 17 Financial Analysis of the Government’s Funds Governmental Funds The focus of governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Government’s financing requirements. In particular, the unassigned fund balance/deficit may serve as a useful measure of a government’s net resources available, or not available, for discretionary use as they represent the portion of the fund balances which has not yet been limited to use for a particular purpose by either an external party of the primary Government. As of September 30, 2022, the Government’s governmental funds reported a combined fund balance of $273.0 million, a decrease of $58.9 million when compared to the prior-year combined fund balance of $331.9 million. Approximately $538.9 million of this amount consists of unassigned fund deficits representing expenditures in governmental funds that exceeded discretionary funds available. The remaining fund balances are either restricted, committed, or assigned to indicate that the fund balance is: i) restricted for particular purposes ($549.2 million), ii) committed for particular purposes ($86.0 million), or iii) assigned for particular purposes ($176.5 million). The General Fund is the chief operating fund of the primary Government. As of September 30, 2022, the unassigned fund deficit of the General Fund was $419.3 million while the total fund deficit of the General Fund was $376.5 million. The fund deficit balance of the General Fund increased by $267.1 million when compared to the prior-year fund deficit of $109.4 million. This increase was mainly due to an increase in General Fund expenditures of $270.8 million and an increase in General Fund transfers of 201.3 million, offset by an increase in revenues of $336.1 million. The PFA Debt Service Fund accounts for the resource accumulated, and payments made, for principal and interest on long-term general obligation debt issued by PFA on behalf of the Government. As of September 30, 2022, the restricted fund balance of the PFA Debt Service Fund was $303.7 million, an increase of $11.3 million from the prior fiscal year fund balance of $292.4 million. This increase is mainly due to an increase in transfers from other funds of $158.5 million offset by net payments on the bond refunding of $42.9 million, a contribution to GERS of $89.2 million, a decrease in tax revenue of $8.3 million and a decrease in investment income of $2.7 million. The PFA Capital Projects Fund accounts for bond proceeds issued by PFA that have been designated for certain necessary public safety and capital development projects. As of September 30, 2022, the restricted fund balance of the PFA Capital Projects Fund was $113.1 million, an increase of $10.0 million from the prior fiscal year fund balance of $103.1 million. This was mainly due to transfers from other funds of $15.3 million offset by capital outlays and other expenditures of $4.6 million. The MFSPSC Debt Service Fund accounts for the long-term general obligation debt issued by MFSPSC on behalf of the Government. As of September 30, 2022, the restricted fund balance of the MFSPSC Debt Service Fund and the PFA Capital Projects Fund was $112.2 million, resulting from the issuance of the Series 2022A and Series 2022B Securitization Bonds, net of debt refunding. The Federal Grants Fund accounts for payments that are restricted to expenditures for specified purposes. As of September 30, 2022, the fund deficit of $52.8 million was $38.7 million less than the prior year fund deficit of $91.5 million. The decrease in the fund deficit was due to federal grant revenues exceeding federal grant expenditures. Government of the United States Virgin Islands Management’s Discussion and Analysis 18 Proprietary Funds The focus of proprietary funds is to report the same functions presented as business-type activities in the government-wide financial statements. Proprietary fund financial statements provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the West Indian Company, Ltd (WICO), Unemployment Insurance, and viNGN as these funds are considered to be major funds. As of September 30, 2022, the primary Government’s proprietary funds reported a combined net deficit of $102.8 million, a decrease in deficit of $14.7 million when compared to the prior-year combined net deficit of $117.5 million. The deficit is the result of an unrestricted deficit in the proprietary funds of $132.0 million, offset by net investment in capital assets of $19.0 million and restricted net position of $10.2 million. WICO owns a port facility including a cruise ship pier and manages certain parcels of land and warehouses on the island of St. Thomas. As of September 30, 2022, the net deficit of WICO was $15.6 million, an increase in fund deficit of $7.6 million from the prior fiscal year. This increase was mainly due to an operating loss of $6.3 million, interest expense of $2.7 million and bond issuance cost of $2.2 million offset by grant revenue of $4.0 million. WICO was required to close its port during part of the fiscal year due to the COVID-19 pandemic. The Unemployment Insurance Fund is a federally mandated program to manage unemployment insurance. As of September 30, 2022, the net deficit of the fund was $84.4 million, a decrease in deficit of $6.0 million from the prior fiscal year. The decrease is mainly due to a increase in unemployment grant revenue after the COVID-19 pandemic. viNGN designs, develops, and manages a middle-mile wholesale fiber optic network in order to make available reliable high-speed interest connections to retail internet service providers. As of September 30, 2022, viNGN, reported net position of $15.4 million, a decrease of $4.0 million from the prior fiscal year. This decrease was mainly due to an operating loss of $4.8 million offset by grant revenues of $906,000. General Fund Budgetary Highlights The Virgin Islands Office of Management and Budget prepares an annual executive budget subject to approval by the Governor and the Legislature of the Virgin Islands. The executive budget is prepared on a budgetary basis that is like the cash basis of accounting. The executive budget includes only those funds that are subject to appropriation by law. More information regarding budgetary procedures is provided in the required supplementary information accompanying the basic financial statements. Government of the United States Virgin Islands Management’s Discussion and Analysis 19 A summary of the budgetary report for the General Fund of the Government, for the fiscal year ended September 30, 2022, follows (expressed in thousands): Year ended September 30, 2022 Original Budget Amended Budget Actual Variance Total revenues $ 912,290 $ 912,290 $ 1,040,377 $ 128,087 Total expenditures 984,839 1,052,323 1,015,432 36,891 (Deficiency) excess of revenues over expenditures (72,549) (140,033) 24,945 164,978 Other financing sources (uses), net (136,407) (136,407) (239,056) (102,649) Excess (deficiency) of revenues and net other financing sources over expenditures $ (208,956) $ (276,440) $ (214,111) $ 62,329 For fiscal year 2022, the General Fund realized a favorable budgetary variance of $62.3 million mainly due to a favorable revenue variance of $128.1 million and a favorable expenditure variance of $36.9 million. The General Fund realized a favorable revenue variance of $128.1 million mainly due to tax revenues exceeding budgeted amounts by $81.8 million, federal grant revenue received of $7.7 million, charges for services revenues being under budget by $37.2 million and interest and other revenues exceeding the budget by $75.7 million during the fiscal year. The General Fund realized a favorable expenditures variance of $36.9 million due to spending efficiencies when compared to budgeted amounts. Capital Assets Capital assets additions during fiscal year 2022 amounted to $120.4 million for governmental activities and $7.7 million for business-type activities, net of adjustments. Capital assets additions during fiscal year 2021 amounted to $73.6 million for governmental activities and $1.8 million for business-type activities, net of adjustments. Government of the United States Virgin Islands Management’s Discussion and Analysis 20 The Government’s capital assets include land, land improvements, buildings, building improvements, machinery and equipment, infrastructure, right-to-use building and improvement, construction in progress, and intangibles, as follows (expressed in thousands): Governmental Activities Business-Type Activities Total September 30, 2022* 2021* 2022 2021* 2022 2021 Land and land improvements $ 230,610 $ 228,790 $ 5,883 $ 5,854 $ 236,493 $ 234,644 Building and improvements 654,013 651,998 80,864 90,546 734,877 742,544 Machinery and equipment 285,138 260,643 83,108 81,982 368,246 342,625 Infrastructure 284,641 241,947 - - 284,641 241,947 Right-to-use building and improvement - - 2,139 - 2,139 - Intangible assets - - 30,774 30,774 30,774 30,774 Construction in progress 220,218 172,311 6,936 6,127 227,154 178,438 Total capital assets 1,674,620 1,555,689 209,704 215,283 1,884,324 1,770,972 Less depreciation and amortization (633,289) (576,602) (110,898) (109,141) (744,187) (685,743) Total capital assets, net $ 1,041,331 $ 979,087 $ 98,806 $ 106,142 $ 1,140,137 $ 1,085,229 *Figures do not reflect implementation of GASB Statement No. 87, Leases. Note 9 provides detailed information regarding the capital assets of the primary government and the component units of the Government. Debt Administration (General Obligation and Revenue Bonds) The Government issues both general obligation bonds and revenue bonds. The Revised Organic Act [48 U.S.C. Section 1574 (b)(ii)] restricts the principal amount of general obligation debt that the Government may issue to no greater than 10.0% of the aggregate assessed valuation of taxable real property in the U.S. Virgin Islands. Following is a summary of bonds outstanding as of September 30, 2022 (expressed in thousands): Bond Issue Maturity Rates (%) Balance Series 2022 A Securitization Bonds 2039 4.05 - 4.73 $ 930,315 Series 2022 B Securitization Bonds 2025 6.00 22,510 Series 2019 A TIF Revenue and Refunding Bonds 2029 6.88 9,573 Series 2015 Federal-Aid Highway Bonds 2016 - 2033 3.00 – 5.00 62,905 Series 2014 D Revenue Bonds 2015 - 2033 6.03 4,355 Series 2014 C Revenue and Refunding Bonds 2015 - 2044 4.50-5.00 208,510 Series 2014 A Revenue Bonds 2015 - 2034 5.00 37,535 Series 2012 C Revenue Bonds 2017 - 2042 3.00 – 5.00 21,215 Series 2012 A and B Revenue & Refunding Bonds 2017 - 2032 2.25 – 5.25 134,335 Series 2006 A Revenue Bonds 2007 - 2029 3 50 – 5.00 153,970 Series 2006 A, B, C & D Tobacco Turbo and Capital Appreciation Bonds 2035 6.00 – 8.00 7,290 Series 2001 A Tobacco Bonds 2031 4.62 – 5.13 1,215 Total bonds outstanding 1,593,728 Plus (less): Bonds premium 47,773 Bonds discount (234) Bonds accretion 13,876 Net bonds outstanding $ 1,655,143 Note 10 provides detailed information regarding all bonds of the primary government. Government of the United States Virgin Islands Management’s Discussion and Analysis 21 The Government made bond principal payments on outstanding general and special revenue bonds amounting to $95.0 million during fiscal year 2022 and $90.7 million during fiscal year 2021. In October 2021 and February 2022, Moody’s Investors Service affirmed a “stable” Caa3 rating of the PFA’s bonds. In April 2022, KBRA assigned a long-term rating of BBB for the Matching Fund Securitization Bonds Series 2022A and Matching Fund Securitization Bonds Taxable Series 2022. In March 2023, Moody’s Investor Services withdrew the Government’s issuer rating. Moody’s withdrew the rating as debt obligations for which it served as a reference rating no longer had outstanding ratings. Most recently, Moody’s had served as a reference rating for the Virgin Islands Water and Power Authority (VIWAPA). The ratings for VIWAPA were withdrawn on March 1, 2023 because of insufficient information to support the maintenance of bond ratings. Other Liabilities of the Primary Government Other liabilities of the Government include the following (expressed in thousands): September 30, 2022 2021* Governmental activities:* Accrued compensated absences $ 38,944 $ 43,695 Retroactive union arbitration 151,064 188,300 Accrued 8.0% salary reduction 1,583 49,837 Litigation 7,873 12,538 Landfill closure and post closure 129,542 118,815 Business-type activities: Workers’ compensation claims 46,387 53,189 Lease liability - viNGN 559 - Compensated absences – WICO 1,338 1,255 Loan payable – U.S. Treasury 95,744 96,143 Loans payable - WICO 717 42,397 Bonds payable - WICO 51,586 - Total other liabilities $ 585,975 $ 606,169 *Figures do not reflect implementation of GASB Statement No. 87, Leases. Net Pension Liabilities The Government has implemented the provisions of Governmental Accounting Standards Board Statement (GASB) No. 68, Accounting and Financial Reporting for Pensions—an amendment of GASB Statement No. 27, as amended by GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date—an amendment of GASB Statement No. 68 and GASB Statement No. 82, Pension Issues—an amendment of GASB Statements No. 67, No. 68, and No. 73. Following is a description of the pension plan and accounting for pension expense, liabilities, and deferred outflows/inflows of resources. Government of the United States Virgin Islands Management’s Discussion and Analysis 22 Following is the net pension liability reported in fiscal years 2022 and 2021 (expressed in thousands): September 30, 2022 2021 Net pension liability $ 4,091,016 $ 4,527,445 Net Other Postemployment Benefit (OPEB) Liabilities During fiscal year 2018, the Government implemented the provisions of GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. This standard requires the reporting and disclosure of costs and liabilities associated with postemployment benefits provided to retirees of the Government and ten (10) of the Government’s component units under a special funding arrangement. Following is the net OPEB liability reported in fiscal years 2022 and 2021 (expressed in thousands): September 30, 2022 2021 OPEB liability $ 976,613 $ 992,301 Significant Currently Known Facts The Government promotes fiscal sustainability through economic development, compliance initiatives, and budgetary restraints on expenditures. The Government is also working with non-governmental organizations and federal partners as part of its recovery efforts following the 2017 hurricanes and the COVID-19 pandemic. Revenue and Compliance Initiatives The Government has implemented several initiatives to create jobs, stimulate economic growth, and promote fiscal sustainability including promotion of airline travel tourism through national advertising, introducing legislation for the legal sale of cannabis for medical purposes, compliance initiatives to ensure voluntary tax filing requirements are met, and outreach to national and foreign investors. The Government continues to promote its high-tech broadband capabilities, educated workforce, and tax incentive programs available in the U.S. Virgin Islands to management, technology, and tourism-related industries. The Government continues to work with federal recovery partners including Federal Emergency Management Agency (FEMA), U.S. Department of Housing and Urban Development (HUD), Federal Highway Administration (FHWA), and other agencies to establish a multi-year, multi-billion recovery plan building resiliency in managing climate change and fiscal sustainability. Budgetary Control of Expenditures The Government has experienced an increase in carry-forward liabilities from prior fiscal years mainly due to landfill closure costs, postemployment benefits for retirees, and net pension liabilities in connection with the Government’s defined benefit pension plan. The Government also has carry-forward liabilities due to unpaid retroactive salary increases that accumulated following Hurricanes Hugo, Marilyn, and Bertha in the years of 1990 through 1998. At September 30, 2022 and 2021, long-term liabilities for pension and other postemployment benefits to retired government employees amounted to $5.1 billion and $5.5 billion, respectively. Government of the United States Virgin Islands Management’s Discussion and Analysis 23 The Government’s defined benefit pension plan was 8.2% and 9.2% funded as of the measurement dates of September 30, 2022, and 2021, respectively. Based on actuarial projections as of September 30, 2022, absent additional contributions from the Government, the plan may not be able to meet its responsibilities by March 2025. A Pension Reform Joint Task Force has provided recommendations to the Legislature of the Virgin Islands to (i) increase the retirement age of Government workers; (ii) restructure plan benefits; and (iii) to no longer allow retirees to both work and collect benefits from the Government. The retirement system increased the contribution rates of participating employers by 1.0% per year over the three fiscal years 2015, 2016 and 2017 and, at September 30, 2018, the employer contribution rate was 20.5%. In December 2019, the employer rate was increased by 3.0% bringing the contribution rate to 23.5% effective January 1, 2020, and in September 2024, the rate increased by another 3.0% bringing the contribution rate to 26.5%, effective January 1, 2025, which has been postponed to October 1, 2025. In February 2022, the Legislature of the Virgin Islands passed Act 8540, authorizing the creation of the Matching Fund Special Purpose Securitization Corporation to purchase the Matching Fund Receipts from the Government, restructure the existing matching fund bond debt, and free up resources to provide annual funding for the Government Employees’ Retirement System of the U.S. Virgin Islands (GERS) through the GERS Funding Note established with the PFA. The Matching Fund Securitization Bonds Series 2022A and Series 2022B were issued in April 2022, and an initial payment of $89.2 million was made to GERS. In October 2022 and 2023, a second and third payment were made to GERS in the amounts of $158.0 million and $124.0 million, respectively. Contacting the Government’s Financial Management This financial report is designed to provide the Government’s citizens, taxpayers, customers, and creditors with a general overview of the Government’s finances. If you have questions about this report, or need additional financial information, contact the Government of the United States Virgin Islands, Department of Finance, No. 2314 Kronprindsens Gade, St. Thomas, VI 00802. Basic Financial Statements Governmental Business-type Component September 30, 2022 Activities Activities Total Units Assets Cash and cash equivalents 640,682 $ 39,245 $ 679,927 $ 158,257 $ Investments, at fair value 553,150 1,679 554,829 9,645 Receivables, net 220,022 3,245 223,267 216,847 Internal balances 49,662 (49,662) - - Due from federal government 51,039 698 51,737 36,037 Due from component units 33,822 - 33,822 111 Due from primary government - - - 27,629 Inventories - - - 17,716 Prepayments and other assets - - - 33,996 Restricted: Cash and cash equivalents - 18,957 18,957 54,247 Investments - - - 86,495 Other - - - 15,873 Capital assets, net 1,041,331 98,806 1,140,137 2,426,463 Leases receivable – 6,663 6,663 72 Notes receivable 14,183 - 14,183 10,147 Other assets 5,187 1,602 6,789 123,301 Total assets 2,609,078 121,233 2,730,311 3,216,836 Deferred Outflows of Resources Deferred amounts related to pension 892,699 - 892,699 291,177 Deferred charges on bond refunding 7,852 - 7,852 7,378 Deferred amounts related to OPEB 135,852 - 135,852 15,073 Total deferred outflows of resources 1,036,403 – 1,036,403 313,628 Total assets and deferred outflows of resources 3,645,481 $ 121,233 $ 3,766,714 $ 3,530,464 $ See accompanying notes to financial statements. Primary Government Government of the United States Virgin Islands Statement of Net Position (in thousands) 24 Governmental Business-type Component September 30, 2022 Activities Activities Total Units Liabilities Accounts payable and accrued liabilities 365,323 $ 8,730 $ 374,053 $ 680,681 $ Unemployment insurance benefits – 3,257 3,257 - Customer deposits – - – 30,545 Due to primary government – - – 33,072 Due to component units 27,629 - 27,629 - Due to federal government – - – 5,042 Refundable advance 449,336 - 449,336 - Interest payable 37,657 992 38,649 10,470 Other current liabilities: Unearned revenues 226,165 11,304 237,469 36,903 Tax refunds payable 85,167 - 85,167 - Line of credit – - - 33,262 Loans and notes payable 15 96,461 96,476 9,306 Bonds payable 50,502 - 50,502 57,799 Other liabilities 20,180 3,157 23,337 11,417 Noncurrent liabilities: Line of credit – – - 2,740 Tax refunds payable 29,203 – 29,203 - Loans and notes payable 1,536 1,536 6,195 Bonds payable 1,604,641 51,586 1,656,227 207,415 Net pension liability 4,091,016 - 4,091,016 1,104,135 Other postemployment benefits liability (OPEB) 976,613 - 976,613 139,071 Unearned revenues – 662 662 13,735 Other liabilities 308,826 45,127 353,953 128,988 Total liabilities 8,273,809 221,276 8,495,085 2,510,776 Deferred Inflows of Resources Deferred amounts related to OPEB 75,883 - 75,883 16,067 Deferred amounts related to pension 649,541 - 649,541 202,390 Deferred amounts related to leases - 2,729 2,729 3,491 Total liabilities and deferred inflows of resources 8,999,233 $ 224,005 $ 9,223,238 $ 2,732,724 $ Net Position (Deficit) Net investment in capital assets 779,374 $ 19,036 $ 798,410 $ 2,073,269 $ Restricted: Unemployment insurance – 9,930 9,930 – Debt service 415,960 188 416,148 – Capital projects 21,114 110 21,224 – Other purposes – - – 196,486 Unrestricted deficit (6,570,200) (132,036) (6,702,236) (1,472,015) Total net deficit (5,353,752) $ (102,772) $ (5,456,524) $ 797,740 $ See accompanying notes to financial statements. Primary Government Government of the United States Virgin Islands Statement of Net Position (in thousands) 25 Operating Capital Charges for Grants and Grants and Governmental Business-type Component Year Ended September 30, 2022 Expenses Services Contributions Contributions Activities Activities Total Units Functions: Primary government: Governmental activities: General government 1,548,620 $ 32,696 $ 782,776 $ 8,306 $ (724,842) $ - $ (724,842) $ - $ Public safety 90,713 374 4,314 - (86,025) - (86,025) - Health 75,404 129 26,546 - (48,729) - (48,729) - Public housing and welfare 333,613 266 149,702 - (183,645) - (183,645) - Education 284,798 - 24,567 - (260,231) - (260,231) - Transportation and communication 49,376 476 6,922 8,038 (33,940) - (33,940) - Culture and recreation 9,796 127 295 - (9,374) - (9,374) - Actuarial pension expense - - - - - - - - Interest on long-term debt 84,020 - - - (84,020) - (84,020) - Total governmental activities 2,476,340 34,068 995,122 16,344 (1,430,806) - (1,430,806) Business-type activities: WICO 15,112 3,081 4,000 - - (8,031) (8,031) - Unemployment insurance 42,208 21,969 17,953 - - (2,286) (2,286) - viNGN 9,532 4,644 - 906 - (3,982) (3,982) - Other 25,336 17,168 30 - - (8,138) (8,138) - Total business-type activities 92,188 46,862 21,983 906 - (22,437) (22,437) Total primary government 2,568,528 $ 80,930 $ 1,017,105 $ 17,250 $ (1,430,806) $ (22,437) $ (1,453,243) $ – $ Component units: Virgin Islands Housing Authority 73,701 $ 11,224 $ 53,921 $ 8,945 $ - $ - $ - $ 389 $ Virgin Islands Port Authority* 70,447 61,557 - 35,678 - - - 26,788 Virgin Islands Water and Power Authority: Electric System* 338,470 317,383 - 289,676 - - - 268,589 Water System* 33,058 35,375 - 2,786 - - - 5,103 Virgin Islands Government Hospital and Health Facilities Corporation: Roy L. Schneider Hospital* 98,347 73,513 35,772 4,656 - - - 15,594 Juan F. Luis Hospital* 69,681 36,620 26,771 10,878 - - - 4,588 University of the Virgin Islands* 99,786 14,062 89,728 4,607 - - - 8,611 Virgin Islands Housing Finance Authority 94,106 5,311 88,118 - - - - (677) Other component units** 60,316 21,343 56,093 110 - - - 17,230 Total component units 937,912 $ 576,388 $ 350,403 $ 357,336 $ - $ - $ - $ 346,215 $ Total primary government and component units 346,215 $ *Unaudited See accompanying notes to financial statements. **University of the Virgin Islands Research and Technology Park Corporation and Magens Bay Authority (unaudited) Statement of Activities (in thousands) Program Revenues Government of the United States Virgin Islands 26 Governmental Business-type Component Year Ended September 30, 2022 Activities Activities Total Units General revenue: Taxes 1,172,506 $ - $ 1,172,506 $ - $ Payment in lieu of taxes 21,821 - 21,821 - Interest and other 130,824 23,054 153,878 31,726 Tobacco settlement rights 1,193 - 1,193 - COVID-19 pandemic relief assistance 1,932 - 1,932 - Special item - insurance recoveries on capital assets, net - - - 118 Transfers – internal activities of primary government (10,000) 10,000 - - Total general revenue and other items 1,318,276 33,054 1,351,330 31,844 Changes in net position (deficit) (112,530) 10,617 (101,913) 378,059 Net position (deficit), beginning of year, as restated (5,241,222) (113,389) (5,354,611) 419,681 Net position (deficit), end of year (5,353,752) $ (102,772) $ (5,456,524) $ 797,740 $ See accompanying notes to financial statements. Primary Government Net Revenue (Expense) and Changes in Net Position Government of the United States Virgin Islands Statement of Activities (in thousands) 27 PFA PFA MFSPSC Debt Capital Debt Federal Other Total September 30, 2022 General Service Projects Service Grants Governmental Governmental Assets Cash and cash equivalents 127,816 $ 230,731 $ 42,434 $ 30,550 $ - $ 209,151 $ 640,682 $ Investments, at fair value 362,615 57,733 36,044 91,826 - 4,932 553,150 Receivables: Taxes, net 191,449 27,457 - - - - 218,906 Other 115 - - - - 116 231 Due from federal government - - - - 51,039 - 51,039 Due from: Other funds 55,788 - 37,128 - - 27,160 120,076 Component units, net 26,447 - - - - 7,375 33,822 Total assets 764,230 315,921 115,606 122,376 51,039 248,734 1,617,906 Liabilities Accounts payable and accrued liabilities 237,817 - 958 4 103,794 22,750 365,323 Tax refunds payable 53,732 - - - - - 53,732 Refundable advance 442,018 - - - - 7,318 449,336 Unearned revenues 216,027 - - 10,138 - - 226,165 Due to: Other funds 25,041 - - - - 45,373 70,414 Component units 26,072 - 1,557 - - - 27,629 Total liabilities 1,000,707 – 2,515 10,142 103,794 75,441 1,192,599 Deferred Inflows of Resources Unavailable revenues 140,072 12,195 - - - - 152,267 Total liabilities and deferred Inflows of resources 1,140,779 12,195 2,515 10,142 103,794 75,441 1,344,866 Fund balances (deficit) Restricted - 303,726 113,091 112,234 4,213 15,951 549,215 Committed 42,325 - - - - 43,658 85,983 Assigned 452 - - - - 176,377 176,829 Unassigned (419,326) - - - (56,968) (62,693) (538,987) Total fund balances (deficit) (376,549) 303,726 113,091 112,234 (52,755) 173,293 273,040 Total liabilities, deferred inflows of resources and fund balances (deficit) 764,230 $ 315,921 $ 115,606 $ 122,376 $ 51,039 $ 248,734 $ 1,041,331 5,187 14,183 7,852 153,152 303,127 (37,657) (4,091,016) (976,613) (2,046,338) Net deficit of governmental activities (5,353,752) $ See accompanying notes to financial statements. current financial resources and therefore, are not included in the funds. Interest on long-term debt is not accrued in the funds, but rather is recognized as an expenditure when due. in the current period and therefore, are not reported in the funds. Long-term pension liabilities are not due and payable in the current period and therefore, are not reported in the funds. Long-term postemployment benefit liabilities are not due and payable in the current period and therefore, are not reported in the funds. Long-term liabilities, including bonds and tax refunds payable, are not due and payable Deferred costs of refunding bonds are not financial resources and are therefore, not reported in the funds. Other long-term assets, primarily taxes receivable, will not be available to pay for current-period expenditures and therefore, are deferred in the funds. Deferred outflows and inflows of resources of pension and postemployment benefit liabilities are not therefore, are not reported in the funds. Expenditures identified as related to a future period are recognized as a prepaid asset in the statement of net position. Note receivable related to the sale of capital assets therefore, not reported in the funds. Government of the United States Virgin Islands Balance Sheet - Governmental Funds (in thousands) Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and 28 PFA PFA MFSPSC Debt Capital Debt Federal Other Total Year Ended September 30, 2022 General Service Projects Service Grants Governmental Governmental Revenues Taxes 908,801 $ 335,193 $ - $ - $ - $ 17,635 $ 1,261,629 $ Payment in lieu of taxes 21,821 - - - - - 21,821 Federal grants and contributions 144,554 7,576 - - 832,971 26,365 1,011,466 COVID-19 pandemic relief assistance - - - - - 1,932 1,932 Charges for services 18,577 - - - - 15,491 34,068 Tobacco settlement rights - - - - - 1,231 1,231 Interest and other 61,716 66 143 (522) 17,823 50,279 129,505 Total revenues 1,155,469 342,835 143 (522) 850,794 112,933 2,461,652 Expenditures Current: General government 968,392 527 1,119 - 420,975 45,730 1,436,743 Public safety 73,084 - - - 3,954 454 77,492 Health 33,547 - - - 33,720 661 67,928 Public housing and welfare 62,797 - - - 262,081 854 325,732 Education 179,114 - - - 54,081 1,559 234,754 Transportation and communication 18,912 - - - 4,675 14,071 37,658 Culture and recreation 7,787 - - - 295 99 8,181 Capital outlays 33,309 - 3,519 - 32,280 51,261 120,369 Debt service: Principal - bond refunding - 890,685 - - - - 890,685 Principal - 93,825 - - - 1,150 94,975 Interest 1,708 85,448 - - - 118 87,274 Total expenditures 1,378,650 1,070,485 4,638 - 812,061 115,957 3,381,791 Excess (deficiency) of revenue over expenditures (223,181) (727,650) (4,495) (522) 38,733 (3,024) (920,139) Other financing sources (uses) Bonds issued - - - 952,825 - - 952,825 Premium on issuance of bonds - - - 28,061 - - 28,061 Cost of issuance of debt - (1,618) - (14,304) - - (15,922) Loss on refunding of bonds - (4,461) - - - - (4,461) GERS Funding Note payment - (89,198) - - - - (89,198) Transfers - bond refunding - 853,826 - (853,826) - - - Transfers from other funds 166,554 158,598 15,273 - - 44,054 384,479 Transfers to other funds (210,526) (178,214) (739) - - (5,000) (394,479) Total other financing sources (uses), net (43,972) 738,933 14,534 112,756 - 39,054 861,305 Net change in fund balances (267,153) 11,283 10,039 112,234 38,733 36,030 (58,834) Fund balances (deficit), beginning of year (109,396) 292,443 103,052 - (91,488) 137,263 331,874 Fund balances (deficit), end of year (376,549) $ 303,726 $ 113,091 $ 112,234 $ (52,755) $ 173,293 $ 273,040 $ See accompanying notes to financial statements. (in thousands) Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances − Government of the United States Virgin Islands 29 Year Ended September 30, 2022 Net change in fund balances – total governmental funds (58,834) $ Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation, impairment loss, and disposals in the current year. 62,244 Income from note receivable interest income not producing current resources. 1,319 Tax revenues in the statement of activities, which provide current financial resources, are reported as revenue in the funds. (28,523) The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of the governmental funds. This is the amount of debt repayments as no bonds or loans were issued. 32,835 Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. This is the amount by which the increase in certain liabilities reported in the statement of net position of the previous year increased expenses reported in the statement of activities that do not require the use of current financial resources. 23,540 Some expenses reported as prepaid assets in the statement of net position in the current year are recognized as expenses in the following year in the statement of activities. (94) Bond premiums and discounts are reported as other financing sources and uses in the governmental funds when the bonds are issued, and are capitalized and amortized in the government-wide financial statements. This amount represents additional net interest expense reported in the statement of activities related to the amortization of premiums, discounts, deferred refunding, and accreted interest on capital appreciation bonds during the current year. (16,021) Certain interest reported in the statement of activities does not require the use of current financial resources and therefore is not reported as expenditures in the governmental funds. This amount represents the decrease in interest payable reported in the statement of net position. 3,254 Certain OPEB expense reported in the statement of activities does not require the use of current financial resources and therefore is not reported as expenditures in the governmental funds. This amount represents the increase in OPEB liabilities for the allocable share of OPEB expense reported in statement of net position. (35,046) Certain pension expense reported in the statement of activities does not require the use of current financial resources and therefore is not reported as expenditures in the governmental funds. This amount represents the increase in pension liabilities for the allocable share of pension expense reported in statement of net position. (97,204) Change in net deficit of governmental activities (112,530) $ See accompanying notes to financial statements. Government of the United States Virgin Islands Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities – Governmental Funds (in thousands) 30 Unemployment Other September 30, 2022 WICO Insurance viNGN Enterprise Total Assets Current assets: Cash and cash equivalents 1,373 $ 3,360 $ 3,287 $ 31,225 $ 39,245 $ Investments, at fair value - - - 1,679 1,679 Receivables, net: Grants receivable 152 - 546 - 698 Leases receivable 271 - - - 271 Premiums receivable - 1,277 - - 1,277 Other receivables 233 - 371 1,093 1,697 Due from other funds - - - 300 300 Other assets 1,089 - 378 135 1,602 Total current assets 3,118 4,637 4,582 34,432 46,769 Noncurrent assets: Restricted cash and cash equivalents 9,027 9,930 - - 18,957 Leases receivable 6,663 - - - 6,663 Capital assets 34,061 - 52,259 12,486 98,806 Total noncurrent assets 49,751 9,930 52,259 12,486 124,426 Total assets 52,869 $ 14,567 $ 56,841 $ 46,918 $ 171,195 $ Liabilities Current liabilities: Accounts payable and accrued liabilities 1,111 $ - $ 672 $ 6,947 $ 8,730 $ Lease liability - - 180 - 180 Due to other funds 9,956 - 36,804 3,202 49,962 Unemployment insurance benefits - 3,257 - - 3,257 Workers compensation - - - 2,913 2,913 Loan payable to U.S. Treasury - 95,744 - - 95,744 Loans payable 717 - - - 717 Interest payable 992 - - - 992 Unearned revenue - - 2,695 8,609 11,304 Compensated absences payable 64 - - - 64 Total current liabilities 12,840 99,001 40,351 21,671 173,863 Noncurrent liabilities: Bonds payable 51,586 - - - 51,586 Workers compensation - - - 43,474 43,474 Compensated absences payable 1,274 - - - 1,274 Lease liability - - 379 - 379 Deferred revenue - - 662 - 662 Total noncurrent liabilities 52,860 - 1,041 43,474 97,375 Total liabilities 65,700 $ 99,001 $ 41,392 $ 65,145 $ 271,238 $ Deferred Inflows of Resources Deferred amounts related to leases 2,729 - - - 2,729 Total liabilities and deferred inflows of resources 68,429 $ 99,001 $ 41,392 $ 65,145 $ 273,967 $ Net Position (Deficit) Net investment in capital assets (8,346) $ - $ 14,896 $ 12,486 $ 19,036 $ Restricted: Unemployment insurance - 9,930 - - 9,930 Debt service 188 - - - 188 Capital projects 110 - - - 110 Unrestricted (deficit) (7,512) (94,364) 553 (30,713) (132,036) Total net position (deficit) (15,560) $ (84,434) $ 15,449 $ (18,227) $ (102,772) $ See accompanying notes to financial statements. Business-type Activities Government of the United States Virgin Islands Statement of Net Position – Proprietary Funds (in thousands) 31 Unemployment Other Year Ended September 30, 2022 WICO Insurance viNGN Enterprise Total Operating revenues Charges for services 3,081 $ 21,969 $ 4,644 $ 17,168 $ 46,862 $ Operating expenses Cost of services 6,350 42,208 4,978 24,455 77,991 Depreciation and amortization 3,076 - 4,512 881 8,469 Total operating expenses 9,426 42,208 9,490 25,336 86,460 Operating loss (6,345) (20,239) (4,846) (8,168) (39,598) Non-operating revenues (expenses) Grants revenue 4,000 17,953 906 30 22,889 Interest and other income 459 8,312 3 14,280 23,054 Bond issuance costs (2,228) - - - (2,228) Payment in lieu of taxes (700) - - - (700) Interest expense (2,758) - (42) - (2,800) Total non-operating (expenses) revenues, net (1,227) 26,265 867 14,310 40,215 (Loss) income before operating transfers (7,572) 6,026 (3,979) 6,142 617 Transfers from other funds - - - 10,000 10,000 Transfers to other funds - - - - - Change in net position (7,572) 6,026 (3,979) 16,142 10,617 Net position (deficit), beginning of year, as restated (Note 2) (7,988) (90,460) 19,428 (34,369) (113,389) Net position (deficit), end of year (15,560) $ (84,434) $ 15,449 $ (18,227) $ (102,772) $ See accompanying notes to financial statements. Government of the United States Virgin Islands Statement of Revenues, Expenses, and Changes in Net Position − Proprietary Funds (in thousands) Business-type Activities 32 Unemployment Other Year Ended September 30, 2022 WICO Insurance viNGN Enterprise Total Cash flows from operating activities Cash received from customers and users 3,245 $ 21,969 $ 5,457 $ 16,813 $ 47,484 $ Cash paid to beneficiaries and suppliers (3,577) (42,208) (2,483) (32,124) (80,392) Cash paid to employees (2,775) - (2,329) - (5,104) Net cash provided by (used in) operating activities (3,107) (20,239) 645 (15,311) (38,012) Cash flows from noncapital financing activities Other income - 8,312 - 14,280 22,592 Transfer from other funds - - - 10,000 10,000 Federal grants 4,000 17,953 3,380 30 25,363 Contribution to the Government (53) - - - (53) Issuance of debt - 8,045 - - 8,045 Principal paid on debt issuances, including interest - (8,444) - - (8,444) Net cash provided by noncapital financing activities 3,947 25,866 3,380 24,310 57,503 Cash flows from capital and related financing activities Acquisition and construction of capital assets (63) - (987) (1,390) (2,440) Proceeds from sale of capital assets - - - 2,083 2,083 Proceeds of bond issuance 51,573 - - - 51,573 Bond issuance costs (2,228) - - - (2,228) Principal payments on lease liabilities - - (264) - (264) Repayment of loan payable (41,680) - - - (41,680) Interest paid (1,752) - (42) - (1,794) Net cash provided by (used in) capital and related financing activities 5,850 - (1,293) 693 5,250 Cash flows from investing activities Interest income 33 - 3 - 36 Purchase of investments - - - (1) (1) Net cash provided by (used in) investing activities 33 - 3 (1) 35 Net increase in cash and cash equivalents 6,723 5,627 2,735 9,691 24,776 Cash and cash equivalents, beginning of year 3,677 7,663 552 21,534 33,426 Cash and cash equivalents, end of year 10,400 $ 13,290 $ 3,287 $ 31,225 $ 58,202 $ Reconciliation of operating loss to net cash used in operating activities Operating loss (6,345) $ (20,239) $ (4,846) $ (8,168) $ (39,598) $ Adjustments to reconcile operating loss to net cash provided by (used in) operating activities: Depreciation and amortization 3,076 - 4,512 881 8,469 Provision for doubtful accounts 49 - - - 49 Other income 91 - - - 91 Change in operating assets and liabilities: Receivables, net 67 - 151 (29) 189 Unearned revenue - - 662 (326) 336 Other assets (205) - (101) (24) (330) Accounts payable and accrued liabilities 77 - 267 (843) (499) Compensated absences payable 83 - - - 83 Workers compensation - - - (6,802) (6,802) Due to other funds - - - - - Net cash provided by (used in) operating activities (3,107) $ (20,239) $ 645 $ (15,311) $ (38,012) $ Noncash capital and related financing activities Initial recognition of lease liabilities - $ - $ 823 $ - $ 823 $ Initial recognition of right-to-use assets - $ - $ 777 $ - $ 777 $ See accompanying notes to financial statements. Business-type Activities (in thousands) Statement of Cash Flows − Proprietary Funds Government of the United States Virgin Islands 33 Unemployment Other Year Ended September 30, 2022 WICO Insurance viNGN Enterprise Total Reconciliation of cash and cash equivalents to the statement of net position Cash and cash equivalents – current 1,373 $ 3,360 $ 3,287 $ 31,225 $ 39,245 $ Cash and cash equivalents – restricted 9,027 9,930 - - 18,957 Total cash and cash equivalents, end of year 10,400 $ 13,290 $ 3,287 $ 31,225 $ 58,202 $ See accompanying notes to financial statements. Government of the United States Virgin Islands Statement of Cash Flows − Proprietary Funds (in thousands) Business-type Activities 34 Pension September 30, 2022 Trust Assets Cash and cash equivalents: Unrestricted 120,282 $ Restricted 18 Investments, at fair value: U.S. Government and agency obligations 21,976 Corporate obligations 21,641 Common stock - U.S. Mortgage and asset-backed securities 26,277 Commingled and mutual funds 129,082 Unsettled securities sold Investment loans Real estate investment trust Limited partnerships 9,194 Real estate 62,142 Stock lending collateral 5,606 Receivables, net: Loans and advances 13,329 Accrued interest 610 Due from other agencies of the Government 16,199 Other assets 5,362 Total assets 431,718 $ Liabilities Retirement benefits in process of payment 3,084 $ Obligation for collateral received under securities lending transactions 5,606 Other liabilities 22,697 Total liabilities 31,387 Net position restricted for pensions 400,331 $ See accompanying notes to financial statements. Government of the United States Virgin Islands Statement of Fiduciary Net Position (in thousands) 35 Pension Year Ended September 30, 2022 Trust Additions Contributions: Employer 105,883 $ Plan members 54,173 Total contributions 160,056 Investment income: Net depreciation in fair value of investments (39,939) Interest, dividends, and other, net 4,251 GERS Funding Note 89,198 Rental income 756 Total investment income 54,266 Less management and custodian fees 341 Less borrowers' rebates and other agent fees on securities lending transactions 43 Investment income, net 53,882 Other income 7,696 Total additions 221,634 Deductions Benefits paid directly to members 272,154 Refunds of members' contributions 9,080 Administrative and operational expenses 15,197 Total deductions 296,431 Change in net position (74,797) Net position restricted for pensions, beginning of year 475,128 Net position restricted for pensions, end of year 400,331 $ See accompanying notes to financial statements. Government of the United States Virgin Islands Statement of Changes in Fiduciary Net Position (in thousands) 36 Government of the United States Virgin Islands Notes to Basic Financial Statements 37 1. Summary of Significant Accounting Policies The Government of the United States Virgin Islands (the Government) is an unincorporated organized territory of the United States of America. The powers of the Government are derived from and set forth in the Revised Organic Act of 1954, as amended. The Government assumes responsibility for public safety, health, public housing and welfare, education, transportation and communication, and culture and recreation. The accompanying basic financial statements of the Government have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as prescribed by the Governmental Accounting Standards Board (GASB). The accompanying basic financial statements have been prepared primarily from accounts maintained by the Department of Finance of the Government. Additional data has been derived from reports prepared by other departments, agencies, and public corporations based on independent or subsidiary accounting systems maintained by them. Financial Reporting Entity For financial reporting purposes, the Government is a primary government (PG). The PG includes all Government departments, agencies, boards, and organizations that are not legally separate. In addition to the PG, the financial reporting entity includes blended and discreetly presented component units. Component units include all legally separate organizations for which the Government’s elected officials are financially accountable and organizations for which the nature and significance of their relationship with the PG are such that exclusion would cause the reporting entity’s financial statements to be misleading. The criteria used to define financial accountability include: (i) if an organization is fiscally dependent on, and there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the PG, (ii) a government board appointed by a higher level of government, or (iii) a jointly appointed board. The financial statements of the following component units are included in the financial reporting entity either as blended or as discretely presented component units in accordance with GAAP: (a) Blended Component Units The following public benefit corporations, while legally separate from the Government, meet the criteria to be reported as part of the PG because they provide services entirely or almost entirely to the Government: Virgin Islands Public Finance Authority (PFA) PFA was created as a public corporation and autonomous governmental instrumentality by Act No. 5365, the Government Capital Improvement Act of 1988, with the purpose of aiding the Government in the performance of its fiscal duties and in effectively carrying out its governmental responsibility of raising capital for essential public projects. Under the enabling legislation, PFA has the power, among other matters, to borrow money and issue bonds and to lend the proceeds of its bonds to the Government or any governmental instrumentality. Government of the United States Virgin Islands Notes to Basic Financial Statements 38 The powers of PFA are exercised by a board of directors consisting of the Governor (Chairperson), the Commissioner of Finance, the Director of the Virgin Islands Office of Management and Budget, and two representatives of the private sector appointed by the Governor with the advice and consent of the Legislature (the Legislature). PFA activities are blended within the PG and are reported as major funds, except for PFA Special Revenue Fund. PFA’s blended component units, The West Indian Company Limited (WICO) and viNGN, INC. d/b/a Virgin Islands Next Generation Network (viNGN) are presented as major proprietary funds while King’s Alley Management, Inc. and Lonesome Dove Petroleum, Inc. are included in other nonmajor proprietary funds in the Government’s basic financial statements. Tobacco Settlement Financing Corporation (TSFC) TSFC was created in September 2001 under Act No. 6428 as a separate and independent corporation of the Government to purchase the rights, title, and interest in tobacco settlement litigation awards and to issue revenue bonds supported by the tobacco settlement rights. The responsibility for the operations of TSFC is vested in a board of directors composed of three members: the Governor and two independent members—one appointed by the Governor, and one appointed by the president of the Legislature. The activities of TSFC are limited to activities conducted on behalf of the Government. The TSFC is reported in the other governmental funds. Matching Fund Special Purpose Securitization Corporation (MFSPSC) MFSPSC was created in January 2022 under Act 8540 as a separate and independent corporation of the Government to purchase the rights, title, and interest in Matching Fund Receipts (MFRs) and to issue revenue bonds supported by the MFRs. The responsibility for the operations of MFSPSC is vested in a board of directors composed of five members: the Governor and four private citizens appointed by the Governor. The activities of the MFSPSC are limited to activities conducted on behalf of the Government. MFSPSC activities are blended within the PG, with debt service activities reported as a major governmental fund, and activities conducted on behalf of the Government, such as the transfer of residual matching fund receipts, reported as general fund activities. Complete audited financial statements of PFA, TSFC and MFSPSC’s blended component units can be obtained directly by contacting their respective administrative offices: Administrative Offices of Blended Component Units Virgin Islands Public Finance Authority 5033 Kongens Gade, Government Hill St. Thomas, VI 00802 Tobacco Settlement Financing Corporation 5033 Kongens Gade, Government Hill St. Thomas, VI 00802 Matching Fund Special Purpose Securitization Corporation P.O. Box 430 St. Thomas, VI 00804 Government of the United States Virgin Islands Notes to Basic Financial Statements 39 (b) Discretely Presented Component Units The following component units, as required by GAAP, are discretely presented in the basic financial statements because of the nature of the services they provide and the Government’s ability to impose its will. The component units are reported in a separate column to emphasize that they are legally separate from the PG and governed by separate boards. (c) Major Component Units Virgin Islands Housing Authority (VIHA) VIHA was created as a public corporation and autonomous governmental instrumentality by Act No. 903 on June 18, 1962, with the purpose of providing housing for low- and moderate-income families residing in the U.S. Virgin Islands. The majority of VIHA funding is through two contractual agreements with the U.S. Department of Housing and Urban Development (HUD). VIHA is required to make payments in lieu of taxes to the PG when residual receipts are available, and whereby the PG agrees to provide municipal services and continue the tax-exempt status of VIHA projects. VIHA is governed by a board of commissioners. The governing board is autonomous and responsible to HUD. An executive director is appointed by VIHA’s Board to manage the day-to-day operations. Virgin Islands Port Authority (VIPA) VIPA was created as a public corporation and autonomous government instrumentality by Act No. 2375 on December 23, 1968, with the purposes of owning, operating, and managing air and marine terminals of the U.S. Virgin Islands. The powers of VIPA are exercised by a board of governors consisting of the Commissioner of Economic Development and Agriculture (Chairperson), the Attorney General, the Commissioner of Public Works, the Director of the Small Business Development Agency, and five other persons appointed by the Governor with the advice and consent of the Legislature. Virgin Islands Water and Power Authority (VIWAPA) VIWAPA was created as a public corporation and autonomous governmental instrumentality by Act No. 1248 on August 13, 1964, with the purpose of operating the water production and electric generation plants in the U.S. Virgin Islands. The powers of VIWAPA are exercised by a governing board consisting of nine members, all appointed by the Governor with the advice and consent of the Legislature, from which three are heads of cabinet-level executive departments or agencies and six are other persons who are nominated by the Legislature. VIWAPA is required by its bond resolutions to maintain separate audited financial statements for each system (the Electric and Water Systems). Virgin Islands Government Hospital and Health Facilities Corporation (VIGHHFC) VIGHHFC was created by Act No. 6012 on August 23, 1994, and became active on May 1, 1999, with the purpose of providing healthcare services and hospital facilities to the people of the U. S. Virgin Islands. Government of the United States Virgin Islands Notes to Basic Financial Statements 40 The powers of VIGHHFC are exercised by a board of directors consisting of 15 members as follows: the Director of the Virgin Islands Office of Management and Budget, the Commissioner of Finance, and 13 other members appointed by the Governor with the advice and consent of the Legislature. The VIGHHFC is composed of the Schneider Regional Medical Center located in St. Thomas, the Governor Juan F. Luis Hospital and Medical Center located in St. Croix, and the Schneider Regional Medical Center Foundation (the Foundation). The hospitals issue separately audited financial statements. The Schneider Regional Medical Center’s financial statements include its component units: the Myra Keating Smith Community Health Center (Health Center) of St. John and the Charlotte Kimelman Cancer Institute (Cancer Institute) on St. Thomas. The Cancer Institute has remained closed following the 2017 hurricanes. The Health Center and Cancer Institute are legally separate organizations for which the Roy L. Schneider Hospital is financially accountable. The Foundation is a legally separate nonprofit corporation for which the Schneider Regional Medical Center is financially accountable. The Juan F. Luis Hospital and Medical Center’s financial statements include its component unit: Virgin Islands Cardiac Center at the Governor Juan F. Luis Hospital and Medical Center, Inc. (VICC Foundation). VICC Foundation is a legally separate nonprofit corporation for which the Juan F. Luis Hospital and Medical Center is financially accountable. University of the Virgin Islands (the University or UVI) The University was organized as an instrumentality of the Government under Act No. 852 on March 16, 1962, in accordance with Section 16(a) of the Revised Organic Act of 1954, as amended. The University is a higher education institution that offers four-year liberal arts degree and master’s degree programs and associate degrees, and occupational programs. The powers of the University are exercised by a board of trustees consisting of 17 members as follows: Chairman of the Board of Education, Commissioner of Education, and the President of the University, all serving as members ex-officio, 9 other members appointed by the Governor with the advice and consent of the Legislature, two other members elected by the board of trustees, one representative of the student body, one alumnus of the University, and another representative of the teaching faculty. The University was not organized as a self-sustaining entity and therefore receives financial and other support from the Government. The University’s financial statements include a blended and discretely presented component unit, the Foundation for the University of the Virgin Islands. This organization operates as a nonprofit corporation whose purpose is to assist and support the University in accomplishing its charitable and educational mission. The Foundation for the Reichhold Center for the Arts is also a discretely presented component unit of the University that supports the arts and provides financial assistance in operating an entertainment complex on the St. Thomas campus of the University. Virgin Islands Housing Finance Authority (VIHFA) VIHFA was created as a public corporation and autonomous governmental instrumentality by Act No. 4636 on October 20, 1981, with the purpose of stimulating low- and moderate-income housing construction and home ownership through the issuance of revenue bonds to provide low-interest mortgage loans to qualified purchasers of low and moderate-income housing. On October 31, 2008, VIHFA established the Virgin Islands Housing Management, Inc. (VIHM), a wholly owned nonprofit subsidiary that manages VIHFA’s rental properties. The financial statements of VIHM are separately issued, and not blended into the PG. Government of the United States Virgin Islands Notes to Basic Financial Statements 41 The powers of VIHFA are exercised by a board of directors consisting of the Commissioner of the Department of Housing, Parks, and Recreation (the Chairman), the Director of the Virgin Islands Office of Management and Budget, and three persons not employed by the Government appointed by the Governor with advice and consent of the Legislature. (d) Other Component Units (Nonmajor) Virgin Islands Economic Development Authority (VIEDA) VIEDA was created by Act No. 6390 on December 21, 2000, as a public corporation and semiautonomous instrumentality of the Government. VIEDA was created as an umbrella authority of the Economic Development Commission, the Small Business Development Agency, the Government Development Bank, and the Virgin Islands Industrial Development Park Corporation. The powers of VIEDA are exercised by a board of directors consisting of the members of the Virgin Islands Economic Development Commission, the Director of the Virgin Islands’ Bureau of Internal Revenue, and five members not employed by the Government, but appointed by the Governor with the advice and consent of the Legislature. Magens Bay Authority (MBA) MBA was created as a corporate instrumentality by Act No. 2085 on December 20, 1967, with the purpose of acquiring, improving, and operating parks and beaches. The powers of MBA are exercised by a board of directors consisting of the Governor and six members initially appointed by the Governor. The board of directors is responsible for the appointment and reappointment of subsequent board members except that the Governor, with the advice and consent of the Legislature may, by appointment, fill any vacancy on the board of directors remaining unfilled for sixty days. Virgin Islands Public Broadcasting System (VIPBS) VIPBS was created as a public corporation and autonomous instrumentality by Act No. 2364 on November 15, 1968, with the purpose of advancing the general welfare, education, cultural development, and awareness of public affairs of the population of the U.S. Virgin Islands as well as to provide an effective supplement to the in-school education of children. The powers of VIPBS are exercised by a board of directors consisting of the Commissioner of Education, the Chairman of the Board of Education, three members appointed by the President of the Legislature, and four members, not more than two of whom should be employed by the Government and appointed by the Governor with the advice and consent of the Legislature. In addition, the Director of the Virgin Islands Office of Management and Budget, the President of the University of the Virgin Islands, and the General Manager of VIPBS are ex-officio members of the board who are not entitled to vote. Virgin Islands Waste Management Authority (VIWMA) VIWMA was established as an autonomous instrumentality of the Government by Act No. 6638 and approved by the Governor of the Virgin Islands on January 23, 2004. VIWMA provides environmentally sound management for the collection and disposal of solid waste in the Territory, including operation and closure of landfills and wastewater collection, treatment, and disposal. VIWMA is governed by a Board of Directors consisting of seven members. Government of the United States Virgin Islands Notes to Basic Financial Statements 42 University of the Virgin Islands Research and Technology Park Corporation (RTPark) RTPark was established as an autonomous instrumentality of the Government by Act 6502 on February 21, 2002, as amended by Act 6725, the Protected Cell Amendments Act of 2005. RTPark was organized for internet commerce and technology, providing an enabling environment for research, development, business incubation and technology-driven businesses. RTPark is governed by a Board of Directors consisting of seven members, including the Chairman of the Board of Trustees of the University, the President of the University, two trustees selected from among the Board of Trustees of the University, and three members selected by the Governor. Complete audited financial statements of the discretely presented component units can be obtained directly by contacting their administrative offices: Administrative Offices Virgin Islands Housing Authority 9900 Estate Thomas St. Thomas, VI 00802 Virgin Islands Port Authority P.O. Box 301707 St. Thomas, VI 00803-1707 Virgin Islands Water and Power Authority P.O. Box 1450 St. Thomas, VI 00804-1450 Virgin Islands Government Hospital and Health Facilities Corporation 9048 Sugar Estate St. Thomas, VI 00802 University of the Virgin Islands #2 John Brewer’s Bay St. Thomas, VI 00802-9990 Virgin Islands Housing Finance Authority 3202 Demarara Frenchtown Plaza, Suite 200 St. Thomas, VI 00802 Virgin Islands Economic Development Authority 8000 Nisky Shopping Center, Suite 620 St. Thomas, VI 00802 Magens Bay Authority P.O. Box 10583 St. Thomas, VI 00801 Government of the United States Virgin Islands Notes to Basic Financial Statements 43 Virgin Islands Public Broadcasting System P.O. Box 7879 St. Thomas, VI 00801 Virgin Islands Waste Management Authority 1 A&B Demarara St. Thomas, VI, 00802 University of the Virgin Islands Research and Technology Park Corporation 64 West Palm Drive Kingshill, St. Croix, VI 00850-9781 All financial statements of the discretely presented component units included within this report have a fiscal year end of September 30, 2022, except for VIWAPA and VIHA, which have a fiscal year-end of June 30, 2022, and December 31, 2021, respectively. (e) Fiduciary Component Unit The following public benefit corporation is legally separate from the Government, meets the definition of a fiduciary component unit and is presented in the fund financial statements as a fiduciary fund of the Government. Fiduciary funds are not reported in government-wide financial statements. Government Employees’ Retirement System of the Virgin Islands (GERS) GERS was created as an independent and separate agency of the Government with the purpose of administering the Government’s and the component units’ cost-sharing, multi-employer defined benefit pension plan. GERS was established on October 1, 1959. The responsibility for the operation of GERS is vested in a board of trustees composed of seven members appointed by the Governor with the advice and consent of the Legislature. Employee and employer contributions to GERS are recognized as additions to net position held in trust for employees’ pension benefits in the period in which employee services are performed, except for contributions pursuant to the Early Retirement Act of 1994, which are recorded as the cash is received. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan, except for benefits pursuant to sections 8(a) and 8(b) of the Early Retirement Act of 1994, which are recorded when the subsidy provided by the Government is receivable and payable. Complete audited financial statements of this component unit can be obtained directly by contacting its administrative office: Government Employees’ Retirement System of the Virgin Islands 3438 Kronprindsens Gade St. Thomas, VI 00802 Government of the United States Virgin Islands Notes to Basic Financial Statements 44 Government-wide and Fund Financial Statements The government-wide financial statements (that is, the statement of net position and the statement of activities) report information on all the non-fiduciary activities of the PG and its component units. The effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenue, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the PG is reported separately from certain legally separate component units for which the PG is financially accountable. The statement of net position presents the reporting entities’ non-fiduciary assets, deferred outflows of resources, liabilities, and deferred inflows of resources, with the difference reported as net position. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenue. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include (i) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and (ii) grants and contributions that are restricted to meeting the operational or capital requirements of a function or segment. Taxes and other items are not included among program revenues and are appropriately reported instead, as general revenue. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (a) Government-wide Financial Statements The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting in conformity with GAAP as prescribed by the GASB. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenue in the year for which they are levied. Grants and similar items are recognized as revenue when eligibility requirements have been met. (b) Governmental Fund Financial Statements The governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenue is recognized when it is both measurable and available. Revenues are deemed available when they become susceptible to accrual and are collected within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Government considers most revenue to be available if collected within 90 days of the end of the current fiscal year-end. Specifically, gross receipts taxes, real property taxes, and income taxes are deemed available if collected within 30, 60, and 90 days, respectively, after the end of the current fiscal year-end. Government of the United States Virgin Islands Notes to Basic Financial Statements 45 Grant revenue is deemed available if collected within the 12 months after the end of the current fiscal year-end. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, compensated absences, debt service, other postemployment benefits and pension expenditures are recorded only when payment is due. Income taxes, gross receipts taxes, real property taxes, and grant funding are all considered to be susceptible to accrual and have been recognized as revenue of the current fiscal period to the extent they are considered available. All other revenue items are deemed measurable and available only when cash is received by the Government. (c) Proprietary Funds, Fiduciary Fund, and Discretely Presented Component Units Financial Statements The financial statements of the proprietary funds, fiduciary fund, and discretely presented component units are reported using the economic resources measurement focus and the accrual basis of accounting also used in the government-wide financial statements described above. Proprietary funds distinguish operating revenue and expenses from non-operating items. Operating revenue and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. Fund Accounting The Government reports its financial position and results of operations in funds, which are considered separate accounting entities. The operations of each fund are accounted for within a set of self-balancing accounts. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with legal, financial, and contractual provisions. Generally accepted governmental accounting principles establish criteria (percentage of the assets, liabilities, revenue, or expenditures/expenses of either fund category or the governmental and enterprise funds combined) for the determination of major funds. Indirect costs are automatically allocated and reported in the program expense for each fund. Non-major funds are combined in a single column in the fund financial statements. The Government reports the following major funds: (a) Governmental Funds The Government established the MFSPSC Debt Service Fund during the current fiscal year and reports the following major governmental funds: • General Fund – The general fund is the Government’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. • PFA Debt Service Fund – PFA debt service fund accounts for the resources accumulated, and payments made, for principal and interest on long-term general obligation debt issued by PFA on behalf of the Government. Government of the United States Virgin Islands Notes to Basic Financial Statements 46 • PFA Capital Projects Fund – PFA capital projects fund accounts for bond proceeds of debt issued by PFA on behalf of the Government. The bond proceeds have been designated for certain necessary public safety and capital development projects which are accounted for in this fund. • MFSPSC Debt Service Fund – MFSPSC debt service fund accounts for the resources accumulated, and payments made, for principal and interest on long-term general obligation debt issued by MFSPSC on behalf of the Government. • Federal Grants Fund - The federal grants fund accounts for proceeds and payments that are restricted to expenditures for specified purposes. (b) Proprietary Funds These funds account for those activities for which the intent of management is to recover, primarily through user charges, the cost of providing goods or services to the public. The Government reports the following major proprietary funds: • The West Indian Company Limited – WICO, a blended component unit of PFA, accounts for the activities of a cruise ship pier and shopping mall complex on the island of St. Thomas. • Unemployment Insurance Fund – The Unemployment Insurance Fund accounts for the collection of unemployment premiums from employers in the U.S. Virgin Islands, and the payment of unemployment benefits to eligible unemployed recipients. • viNGN, INC. d/b/a as Virgin Islands Next Generation Network (viNGN) – viNGN, a blended component unit of PFA, accounts for the management of a middle-mile wholesale fiber optic network providing reliable high-speed internet access to retail internet service providers and public infrastructure stewards. (c) Fiduciary Activities The Government reports the following fiduciary fund: • Pension Trust Fund – The pension trust fund accounts for the activities of GERS, an independent and separate agency of the Government, responsible for the proper operation of the Government’s defined benefit pension plan. Cash and Cash Equivalents The Government follows the practice of pooling cash. The balance in the pooled cash accounts is available to meet current operating requirements and any excess is invested in various interest-bearing accounts and time deposits with eligible depository institutions. Government of the United States Virgin Islands Notes to Basic Financial Statements 47 Cash equivalents of the proprietary funds and discretely presented component units consist of demand accounts, money market accounts, certificates of deposit with maturities of not more than 90 days from the date of acquisition, money market funds, short-term U.S. government and its agencies’ obligations, and repurchase agreements with a U.S. commercial bank maturing within three months. Cash and cash equivalents of the discretely presented component units are maintained in separate bank accounts from those of the PG, in their own names. By law, banks, or trust companies designated as depositories of public funds of the Government are to maintain corporate surety bonds or pledge collateral satisfactory to the Commissioner of Finance to secure all governmental funds deposited. As of September 30, 2022, the Government had $685.7 million in collateral with Banco Popular de Puerto Rico consisting of Municipal Letters of Credit (MULOC) issued by the Federal Home Loan Bank, and $632.1 million in collateral with First Bank consisting of mortgage-backed securities with the Government National Mortgage Association (GNMA), and deposits insured by FDIC insurance. For the purpose of the statement of cash flows – proprietary funds, cash and cash equivalents are defined to be cash on hand, demand deposits, restricted cash and investments, and highly liquid investments with a maturity of three months or less from the date of purchase. For financial statement presentation purposes, cash and cash equivalents are shown as cash and investments and restricted cash and investments. Investments The PG and its component units follow the provisions of GAAP, which establishes and modifies the following disclosure requirements related to investment risks: credit risk (including custodial credit risk and concentrations of credit risk), interest rate risk, and foreign currency risk. Investment policies of the PG, its blended component units, major funds, and major component units are as follows: • Primary Government Investment Policies – Title 33, Chapter 117 of the Virgin Islands Code (V.I. Code) authorizes the Government to invest in U.S. Government and its agencies’ obligations, mortgage-backed securities, repurchase agreements, commercial paper, local government obligations, and corporate debt and equity obligations. As of September 30, 2022, the General Fund and the Virgin Islands Lottery had invested in certificates of deposit with two local banks. Investments are reported at fair value as of September 30, 2022. • PFA Investment Policies – Investments of PFA are reported at fair value. Various bond resolutions of PFA restrict investments to direct obligations of the U.S. Government, territories, possessions and states, specific bank obligations, investment agreements or similar funding agreements, shares, or other interests in mutual funds, trusts or investment companies, corporate commercial paper, and money market portfolios consisting of any of the foregoing. PFA has retained investment managers and investments are held in trust by a commercial bank on behalf of PFA. PFA handles investments for two major governmental funds of the Government: PFA Debt Service Fund and PFA Capital Projects Fund. Government of the United States Virgin Islands Notes to Basic Financial Statements 48 • TSFC Investment Policies – Various bond resolutions of this blended component unit restrict investments to direct obligations of the U.S. Government, territories, possessions and states, specific bank obligations, investment agreements or similar funding agreements, shares or other interests in mutual funds, trusts or investment companies, corporate commercial paper, and money market portfolios consisting of any of the foregoing. TSFC has retained investment managers and investments are held in trust by a commercial bank on behalf of the TSFC. Investments are reported at fair value in the non-major governmental fund of the Government. • MFSPSC Investment Policies – The bylaws of MFSPSC allow for the investment of funds or other monies under the control of MFSPSC in eligible investments, pursuant to the terms of the Master Trust Indenture between MFSPSC and its trustee, the Bank of New York Mellon Trust Company. Eligible investments include direct obligations of the United States, or obligations guaranteed as to principal and interest by the United States; general obligations or pre-funded obligations of any state, territory, possession or commonwealth of the United States with a rating at the time of purchase in one of the two highest rating categories as designated by any rating service; obligations issued, or the principal of and interest on which are unconditionally guaranteed by any agency or instrumentality of or a corporation wholly owned by the United States with a rating at the time of purchase of one of the two highest rating categories by any rating service: repurchase agreements with banks, savings and loan associations or trust companies organized under the laws of the Virgin Islands, the United States, or any state, territory or possession of the United States, provided the combined capital and surplus is at least equal to $200.0 million and the obligations are secured by obligations that are not subject to claims and liens of third parties; investment agreements, guaranteed investment contracts or similar funding agreements provided the collateral for such agreements is at least equal to 102.0% of the amount invested; U.S. dollar denominated bankers acceptances with domestic commercial banks with the highest short-term rating category by a national rating agency; certificates of deposit with domestic commercial banks maturing no more than 360 days after the date of purchase, which have a rating in the two highest rating categories; investments in money market funds in the two highest rating categories; and commercial paper issued by U.S. corporations rated in the two highest rating categories that mature no more than 270 days after the date of purchase. • VIHA Investment Policies – This major component unit is required by the HUD to invest excess funds in obligations of the United States, certificates of deposit, or any other federally insured investment. HUD requires that deposits be fully collateralized and may be held by an unaffiliated bank or trust company for the account of the VIHA. • VIWAPA and VIPA Investment Policies – These major component units are authorized under bond resolutions and the V.I. Code to invest in open accounts, time deposits, non-negotiable certificates of deposit, repurchase agreements, obligations of the U.S. government, and obligations of any state within the United States, mutual funds, and corporate commercial paper. Investments are reported at fair value. • VIGHHFC Investment Policies – The board of trustees of this major component unit has not developed a formal investment policy. Government of the United States Virgin Islands Notes to Basic Financial Statements 49 • University Investment Policies – The board of trustees of this major component unit is responsible for the management of the University’s investments and establishes an investment policy, which is carried out by the Vice President for Administration and Finance. The University and its component unit, the Foundation for the Reichhold Center of the Arts, have a formal investment policy approved by their corresponding board of trustees, which contains a requisite section on addressing risks. The University’s investments are included in the Foundation for the University of the Virgin Islands’ investment portfolio for management and investment purposes. • Pension Trust Fund Investment Policies – The board of trustees of GERS has enacted policies that limit investments in certain investment categories and provide requirements for the institutions managing investments. Under those policies, GERS may invest in U.S. Government and agencies obligations, bonds or notes of any state, territory or possession of the United States, municipal bonds and obligations, foreign bonds, bonds of domestic railroad corporations, public utility bonds, industrial corporate bonds or trust certificates, common and preferred shares of foreign and domestic corporations, mutual funds, mortgage or personal loans to GERS members or retirees, and mortgage- and asset-backed securities. Investments in bonds are subject to rating restrictions of BBB and may not exceed 2.0% of the GERS investment portfolio. Investments in stock of a single corporation may not exceed 1.0% of the market value of the fund or exceed 1.0% of the outstanding stock of the corporation. The aggregate investments in stock may not exceed 60.0% of the market value of total investments of GERS. Investment in foreign stock should be limited to 10.0% of the market value of the total investments of GERS. Any investment of 20.0% or more of the aggregate value of the portfolio must be approved by two-thirds of the membership of the board of trustees. The investments are administered by several professional investment managers and are held in trust by a commercial bank on behalf of GERS. Investments in equity securities in the GERS pension trust fund are reported at quoted market values. Shares of mutual funds are reported at the net asset value of shares held by GERS at year-end. Purchases and sales are recorded on a trade-date basis. Realized gains and losses on securities are determined by the average cost method. GERS has invested in Havensight Mall, a shopping and pier complex on the island of St. Thomas, with an appraised value of $41.0 million as of September 30, 2022. GERS invested in two funds of the Mesirow limited partnership. The funds reported a fair market value of $9.2 million as of September 30, 2022. GERS owns administrative facilities on the islands of St. Thomas and St. Croix. Portions of the facilities are leased to government agencies and commercial tenants, and portions of the facilities are utilized for GERS operations. The investment in leased real estate is reported at its appraised value, and the portion used for GERS operations is reported at depreciated cost. The amount of $1.4 million was reported net of depreciation as of September 30, 2022. Receivables Taxes receivable represent amounts owed by taxpayers for individual and corporate income taxes, gross receipts taxes, excise taxes, hotel occupancy taxes, and real property taxes. Federal government receivables represent amounts owed to the Government for reimbursement of expenditures/expenses incurred pursuant to federally funded programs. Government of the United States Virgin Islands Notes to Basic Financial Statements 50 Accounts receivable are reported net of estimated allowances for uncollectible amounts, which are determined based upon past collection experience and current economic conditions. The accounts receivable from non-governmental customers of the discretely presented component units are net of estimated uncollectible amounts. These receivables arise primarily from service charges to users. Interfund and Intra-Entity Transactions The Government has the following types of transactions among funds: • Interfund Transfers – Legally required transfers are reported as interfund transfers in (out) when incurred. Transfers between the PG and its blended component units are reported as interfund transfers, except for transfers within the same fund type. • Intra-entity Transactions – These are transactions between the PG and its discretely presented component units, and among the component units. Similarly, receivables and payables between the PG and its blended component units are reported as amounts due from (to) other funds. Transfers between the PG and discretely presented component units (and among those component units) are reported separately as revenue and expenses or expenditures. Amounts owed to and from discretely presented component units by the PG are reported separately from interfund payables and receivables as due from (to) component units, net of allowance for estimated uncollectible amounts. Restricted Assets Restricted assets in the PG and discretely presented component units are set aside primarily for the payment of bonds, notes, construction funds, unemployment benefits, and other specific purposes. Capital Assets Capital assets, which include land, land improvements, buildings, building improvements, machinery and equipment, construction in progress, intangibles and infrastructure assets, are reported in the applicable governmental, business-type activities, and component unit columns in the government-wide financial statements as well as in the applicable proprietary funds reported in the fund financial statements. The PG defines capital assets as assets that have an initial, individual cost and useful lives of: (i) $5,000 for personal property with a useful life of five years; (ii) $50,000 for buildings and building improvements with estimated useful lives of 40 and 20 years, respectively; (iii) $100,000 for land improvements with an estimated useful life of 20 years; (iv) $200,000 for intangibles with estimated useful lives between 2 and 15 years; and (v) $200,000 for infrastructure with an estimated useful life of 30 years. All costs of acquiring land are capitalized. Government of the United States Virgin Islands Notes to Basic Financial Statements 51 Capital assets purchased or acquired are carried at historical cost or normal cost. The normal costing method to estimate cost based on replacement cost indexed by a reciprocal factor of the price increase from the appraisal date to the actual or estimated acquisition date was used to estimate the historical cost of certain land, buildings, and building improvements because invoices and similar documentation was no longer available in certain instances. Donated capital assets are recorded at acquisition value at the time of donation. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest costs are capitalized during the construction period only for business-type activities and proprietary component units. The costs of routine maintenance and repairs that do not add value to the assets or materially extend asset lives are expensed as incurred. Capital assets utilized in the governmental funds are recorded as expenditures in the governmental fund financial statements. Depreciation expense is recorded in the government-wide financial statements, as well as the proprietary funds and component units’ financial statements. Capital assets of the PG, excluding land and construction in progress, are depreciated on the straight-line method over the assets’ estimated useful lives. The estimated useful lives of capital assets reported by the component units are (i) 4 to 50 years for buildings and building improvements; (ii) 20 to 40 years for airports and marine terminals; (iii) 40 to 100 years for water transmission and distribution mains; (iv) 2 to 75 years for intangible assets; and (v) 3 to 25 years for vehicles and equipment. The PG and its component units review the carrying value of their capital assets to determine if circumstances exist indicating impairment. If facts or circumstances support the possibility of impairment, management follows the guidance in GASB Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries. If impairment is indicated, an adjustment is made to the carrying value of the capital assets. The PG and its component units have entered certain leasing arrangements that are now reported as intangible right-to-use assets following the guidance found in GASB Statement No. 87, Leases. This Statement requires recognition of certain lease assets and liabilities for leases that were previously reported by the PG and its component units as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the lease contract. Statement No. 87 establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Deferred Outflows/Inflows of Resources In addition to assets, the statement of net position reports a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents consumption of the net position that applies to future period(s) and is not recognized as an outflow of resources (expense/expenditure) until the future date occurs. Government of the United States Virgin Islands Notes to Basic Financial Statements 52 The Government has three items for financial reporting in these categories, as follows: • Deferred amounts related to pension represent unamortized portion of the difference between expected and actual experience, changes in assumptions, changes in proportion and differences between contributions and proportional share of contributions, and contributions made after measurement date. • Deferred amounts related to other postemployment benefits consisting of net differences between expected and actual experience and changes in assumptions. • Deferred charges on refunding reported in the government-wide statement of net position. A deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. In addition to liabilities, the statement of net position reports a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and will not be recognized as an inflow of resources (revenue) until that time. The Government has three items for financial reporting in this category, as follows: • Deferred amounts related to pension consist of the unamortized portion of the difference between expected and actual experience, net difference between projected and actual earnings on pension plan investments, changes in assumptions, and changes in proportion and differences between contributions and proportional share of contributions. • Deferred amounts related to other postemployment benefits consisting of the unamortized portion of the changes in assumptions and other inputs. • In accordance with GASB Statement No. 87, Leases, deferred inflows of resources are recognized for the right to receive lease payments over the lease term. These amounts are recognized as lease revenue on a straight-line basis over the term of the lease. This policy has been adopted as a result of WICO and viNGN’s implementation of GASB Statement No. 87 during the year. • Modified accrual basis of accounting - Unavailable revenues qualify for reporting in this category. The item, unavailable revenues, is reported only in the governmental funds’ balance sheet. The governmental funds report unavailable revenues from three sources: property taxes, gross receipts taxes, and income taxes. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. Tax Refunds Payable During the calendar year, the Government collects individual income taxes through withholdings and payments from taxpayers. On September 30th, the Government estimates the amount owed to taxpayers for overpayments during the first nine months of the calendar year. These estimated amounts and the actual tax refunds claimed for current and prior years but not paid at year-end are recorded as tax refunds payable and as a reduction of tax revenue. Government of the United States Virgin Islands Notes to Basic Financial Statements 53 Compensated Absences The vacation policy of the Government provides for the accumulation of four, six, or eight hours for each full biweekly pay period depending on the time of entry into government service. At the beginning of each calendar year, vacation leave is limited to 480 hours (60 days). However, the excess of 480 hours is considered by GERS for service credit towards the employees’ retirement. This vacation policy does not apply to professional educational personnel of the Virgin Islands Department of Education, who receive compensation during the school breaks. Upon retirement, an employee receives compensation for unused vacation leave at the employee’s base pay rate. Employees accumulate sick leave at a rate of four hours for each full biweekly pay period up to a maximum of 180 days. Separated employees do not receive payment for unused sick leave; therefore, a provision for accumulated sick leave is not required. Compensated absences accumulation policies for the blended component units and discretely presented component units vary from entity to entity, depending upon negotiated bargaining agreements and other factors agreed upon between the management of these entities and its employees. Long-term Liabilities The liabilities reported in the government-wide financial statements include the Government’s bonds, direct borrowings and placements, pension liabilities and other long-term liabilities including accrued compensated absences, retroactive union arbitration, litigation, landfill closure and post closure costs, postemployment benefits, and workers compensation claims. Bond premiums, discounts, and amounts deferred on capital appreciation bonds are amortized over the life of the bonds using the effective interest method. Bonds are reported net of the applicable bond premiums and discounts. Issuance costs are reported as expenses in the year incurred. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, as deferred inflows of resources and deferred outflows of resources during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs are reported as debt service expenditures. Net Position Net position is reported in three categories: • Net Investment in Capital Assets – This consists of capital assets, net of accumulated depreciation and amortization, and reduced by outstanding balances for bonds, notes, and other debt that are attributed to the acquisition, construction, or improvement of those assets. Debt pertaining to significant unspent debt proceeds are not included in the calculation of invested in capital assets, net of related debt. The unspent portion of the debt is presented, net of the related debt, as restricted for capital projects. Government of the United States Virgin Islands Notes to Basic Financial Statements 54 • Restricted Net Position – Constraints placed on the use of assets are either externally imposed by creditors, grantors, contributors, and the like, or imposed by law through constitutional provisions or enabling legislation. • Unrestricted Net Position – These consist of assets which do not meet the definition of the two preceding categories. When both restricted and unrestricted resources are available for use, generally it is the Government’s policy to use restricted resources first, then the unrestricted resources, as needed. Fund Balance GAAP provides a hierarchy of classifications based primarily on the extent to which the Government is bound to honor constraints on the specific purposes for which amounts in funds may be spent. Following are the fund classifications: • Restricted Fund Balance – Fund balances constrained by externally imposed constraints such as constitutional provisions, laws and regulations, debt covenants, and grantors. The Government’s policy is to consider restricted amounts to have been spent first when expenditures are incurred for which both restricted and unassigned fund balances are available. • Committed Fund Balance – Fund balances subject to constraints imposed by the Government’s highest level of decision-making authority including legislation enacted by the Legislature of the Virgin Islands and resolutions or ordinances enacted by Government elected regulatory boards and authorities. Committed fund balances may be modified or rescinded by enacted legislation, or amendment of resolutions or ordinances. • Assigned Fund Balance – Fund balances subject to budgetary constraints of the Legislature, the Office of Management and Budget, or authorizing boards of the Government, which are not restricted or committed. Budgetary authority of the Office of Management and Budget is provided by Title 2, Sections 22, 23, 26 and 27 VIC, and Executive Order No. 371-1997. The Government’s policy is to expend assigned or committed amounts, before unassigned amounts, when an expenditure is incurred. • Unassigned Fund Balance – Unassigned fund balance is the residual classification for the General Fund. This classification represents a fund balance that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the General Fund. The residual deficit of the Federal Grants Fund and other governmental funds are also reported as unassigned fund balance. Government of the United States Virgin Islands Notes to Basic Financial Statements 55 Risk Management With some exceptions, the Government does not carry general liability insurance coverage on its properties or the acts of its employees, relying instead on self-insurance and/or statutory liability limitations. The Government purchases commercial insurance for physical losses or damages to its property. The limit of liability for all risks, excluding earthquake, windstorm, and flood, is $1.0 million for each occurrence except for windstorm and flood losses, which has a $45.0 million limit. For physical losses arising from earthquake, the insurance policy has a limit of $100.0 million for each occurrence and in the annual aggregate. Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, deferred outflows of resources, liabilities, and deferred inflows of resources and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. Adoption of Accounting Pronouncements In June 2017, GASB issued GASB Statement No. 87, Leases. The objective of this Statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. The PG and most of its component units are in the process of gathering the required information to implement this Statement. WICO and viNGN adopted this Statement as of October 1, 2021. The following details the restatement to net position as a result of the adoption of GASB Statement No. 87. WICO Net (deficit), October 1, 2021 $ (12,156) Adoption of GASB Statement No. 87 4,168 Net (deficit), October 1, 2021, as restated $ (7,988) viNGN Net position, October 1 $ 19,475 Adoption of GASB Statement No. 87 (47) Net position, October 1, as restated $ 19,428 In June 2018, GASB issued Statement No. 89, Accounting for Interest Cost Incurred Before the End of a Construction Period. This Statement enhances the relevance and comparability of information about capital assets and the cost of borrowing for a reporting period and simplifies accounting for interest costs incurred before the end of a construction period. The requirements of this Statement are effective for the Government’s financial statements for the year ended September 30, 2022. Government of the United States Virgin Islands Notes to Basic Financial Statements 56 The Government has evaluated this Statement and has determined there is no impact on the financial statements as the Government did not incur interest costs before the end of a construction period. In January 2020, GASB issued Statement No. 92, Omnibus 2020. This Statement provides additional guidance on: (i) Statement 87 for reinsurance recoveries, (ii) Statements 73 and 74 for intra-entity transfers of assets, (iii) Statement 84 and postemployment benefit arrangements, and (iv) requirements related to the measurement of liabilities associated with asset retirement obligations in a government acquisition. The requirements of this Statement are effective for the Authority’s financial statements for periods beginning after June 15, 2021. The Government has evaluated this Statement and has determined there is no impact on the financial statements. In March 2020, GASB issued Statement No. 93, Replacement of Interbank Offered Rates. This Statement provides additional guidance for governments that have entered into agreements in which variable payments made or received depend on an interbank offered rate (IBOR), most notably, the London Interbank Offered Rate (LIBOR). The requirements of this Statement are effective for the Government’s financial statements for periods ending after December 31, 2021. The Government has evaluated this Statement and has determined there is no impact on the financial statements as the Government did not have any outstanding debt subject to an IBOR. In June 2020, GASB issued Statement No. 97, Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Code Section 457 Deferred Compensation Plans – an amendment of GASB Statements No. 14 and No. 84, and a supersession of GASB Statement No. 32. The objectives of this Statement are to (i) increase consistency and comparability related to the reporting of fiduciary component units in circumstances in which a potential component unit does not have a governing board; (ii) mitigate costs associated with the reporting of certain defined contribution pension plans or other postemployment benefit plans (OPEB) in fiduciary financial statements, and (iii) to enhance the relevance, consistency, and comparability of the accounting and financial reporting of Internal Revenue Code (IRC) Section 457 deferred compensation plans that meet the definition of a pension plan and for benefits provided through those plans. The requirements of this Statement are effective immediately except those for Section 457 deferred compensation plans which are effective for reporting periods beginning after June 15, 2021. The Government has evaluated this Statement and has determined there is no impact on the financial statements as the Government did not have a defined contribution plan and did not have a deferred compensation plan subject to IRC Section 457. In October 2021, GASB issued GASB Statement No. 98, The Annual Comprehensive Financial Report. This Statement establishes the term annual comprehensive financial report and its acronym ACFR. The requirements of this Statement are effective for the Authority’s financial statements for periods ending after December 15, 2021. The Government has evaluated this Statement and has determined there is no impact as the Government does not issue an ACFR. Government of the United States Virgin Islands Notes to Basic Financial Statements 57 Following are statements issued by GASB that are effective in future years as based on the original effective dates: GASB Statement No. Adoption in Fiscal Year (as Revised) 91 Conduit Debt Obligations 2023 94 Public-Private and Public-Public Partnerships and Availability Payment Arrangements 2023 96 Subscription-Based Information Technology Arrangements 2023 99 Omnibus 2022 2023 and 2024 100 Accounting Changes and Error Corrections – an amendment of GASB Statement 62 2024 101 Compensated Absences 2025 102 Certain Risk Disclosures 2025 103 Financial Reporting Model Improvements 2026 104 Disclosure of Certain Capital Assets 2026 Earlier application of all standards is permitted to the extent specified in each pronouncement as originally issued. The Government is currently evaluating the impact of these statements. 2. Component Units The basic financial statements include the financial statements of the following discretely presented component units: Major Component Units • Virgin Islands Housing Authority • Virgin Islands Port Authority (unaudited) • Virgin Islands Water and Power Authority (unaudited) • Virgin Islands Government Hospital and Health Facilities Corporation (unaudited) • University of the Virgin Islands (unaudited) • Virgin Islands Housing Finance Authority Other Component Units (Nonmajor) • Virgin Islands Economic Development Authority • Magens Bay Authority (unaudited) • Virgin Islands Public Broadcasting System • Virgin Islands Waste Management Authority • University of the Virgin Islands Research and Technology Park Corporation (unaudited) Condensed financial information as of September 30, 2022 of all discretely presented component units (expressed in thousands) is presented on the following page. Government of the United States Virgin Islands Notes to Basic Financial Statements 58 Virgin Islands Water and Power Authority* Hospital and Health Facilities Corporation* September 30, 2022 Virgin Islands Housing Authority Virgin Islands Port Authority* Electric System Water System Schneider Regional Medical Juan F. Luis Hospital University of the Virgin Islands* Virgin Islands Housing Finance Authority Other Component Units** Total Component Units Assets and deferred outflows Current assets $ 32,226 $ 56,965 $ 59,592 $ 13,053 $ 19,595 $ 9,218 $ 36,019 $ 164,592 $ 45,312 $ 436,572 Due from primary government - - 21,923 3,645 1,555 2 - 199 305 27,629 Due from federal government - 19,652 12,244 359 - - - - 3,782 36,037 Restricted assets 899 10,428 52,291 870 211 - 24,198 48,383 19,335 156,615 Capital assets, net 54,205 328,256 1,548,775 80,246 31,258 122,106 99,102 46,476 116,039 2,426,463 Other noncurrent assets 6,036 - 88,726 - - - - 38,687 71 133,520 Deferred outflows of resources 26,121 31,525 51,921 10,489 42,526 81,797 29,247 22,498 17,504 313,628 Total assets and deferred outflows of resources 119,487 446,826 1,835,472 108,662 95,145 213,123 188,566 320,835 202,348 3,530,464 Liabilities and deferred inflows Current liabilities 5,083 39,661 493,668 1,088 44,170 77,809 4,553 151,216 53,135 870,383 Due to primary government 183 - 20,322 - 5,077 377 - 6,386 727 33,072 Due to Federal government - - 4,142 - 375 525 - - - 5,042 Bonds payable - long-term - 26,239 181,176 - - - - - - 207,415 Notes payable - long-term - - - - - - 2,295 525 3,375 6,195 Line of credit – long-term - - - 2,740 - - - - - 2,740 Net pension liability 84,334 156,226 243,071 49,786 153,062 197,173 87,799 43,426 89,258 1,104,135 Other postemployment benefits 36,408 32,647 48,281 9,724 - - 12,011 - - 139,071 Other noncurrent liabilities 621 1,171 109,200 - - - 5,701 9,351 2,944 128,988 Unearned revenue - long-term - - - - - - - 3,490 10,245 13,735 Deferred inflows of resources 15,643 23,786 72,050 14,757 33,114 16,868 17,808 6,491 21,431 221,948 Total liabilities and deferred inflows of resources 142,272 279,730 1,171,910 78,095 235,798 292,752 130,167 220,885 181,115 2,732,724 Net assets (deficit): Net investment in capital assets 54,205 357,560 1,310,947 102,313 35,550 90,490 (17,628) 23,962 115,870 2,073,269 Restricted 584 16,348 60,991 (126) 920 - 41,562 58,063 18,144 196,486 Unrestricted (77,574) (206,812) (708,376) (71,620) (177,123) (170,119) 34,465 17,925 (112,781) (1,472,015) Total net position (deficit) $ (22,785) $ 167,096 $ 663,562 $ 30,567 $ (140,653) $ (79,629) $ 58,399 $ 99,950 $ 21,233 $ 797,740 *Unaudited; **University of the Virgin Islands Research and Technology Park Corporation and Magens Bay Authority (unaudited) Government of the United States Virgin Islands Notes to Basic Financial Statements 59 Program Revenue Year Ended September 30, 2022 Information on Statement of Activities Expenses Charges for Services Operating Grants and Contributions Capital Grants and Contributions Total Component Units Virgin Islands Port Authority* $ 70,447 $ 61,557 $ - $ 35,678 $ 26,788 Virgin Islands Housing Authority 73,701 11,224 53,921 8,945 389 Virgin Islands Water and Power Authority: Electric System* 338,470 317,383 - 289,676 268,589 Water System* 33,058 35,375 - 2,786 5,103 Virgin Islands Government Hospital and Health Facilities Corporation: Roy L. Schneider Hospital* 98,347 73,513 35,772 4,656 15,594 Juan F. Luis Hospital* 69,681 36,620 26,771 10,878 4,588 University of the Virgin Islands* 99,786 14,062 89,728 4,607 8,611 Virgin Islands Housing Finance Authority 94,106 5,311 88,118 - (677) Other component units** 60,316 21,343 56,093 110 17,230 Total activities $ 937,912 $ 576,388 $ 350,403 $ 357,336 $ 346,215 General revenue: Interest and other $ 31,726 Special item - insurance recoveries on capital assets - net 118 Changes in net position 378,059 Net position, beginning of year, as restated 419,681 Net position, end of year $ 797,740 *Unaudited; **University of the Virgin Islands Research and Technology Park Corporation and Magens Bay Authority (unaudited) The summary of due to/due from primary government and component units as of September 30, 2022 is as follows (expressed in thousands): Due from PG/ Due to PG/ Component Units Component Units Governmental funds: General fund $ 26,447 $ 26,072 PFA capital projects - 1,557 Other governmental funds 7,375 - Discretely presented component units: VIWAPA – Electric System* 21,923 20,322 VIWAPA – Water System* 3,645 - Hospital and Health Facilities Corporation* 1,557 5,454 Virgin Islands Housing Finance Authority 199 6,386 Virgin Islands Housing Authority - 183 Other component units** 305 727 $ 61,451 $ 60,701 *Unaudited **University of the Virgin Islands Research and Technology Park Corporation and Magens Bay Authority (unaudited) Government of the United States Virgin Islands Notes to Basic Financial Statements 60 The amounts reported as due to/due from the Government and the discretely presented component units may not agree due to reporting on different fiscal year-ends. 3. Cash and Cash Equivalents Primary Government As of September 30, 2022, the PG reported $679.9 million in unrestricted cash and cash equivalents and $19.0 million in restricted cash and cash equivalents. All bank balances were fully collateralized, except for $8.6 million held in various bank accounts for WICO that exceeded FDIC coverage or were not insured. Pension Trust Fund GERS considers all highly liquid investments purchased with an initial maturity of three months or less to be cash equivalents. As of September 30, 2022, GERS held $120.3 million in cash and cash equivalents consisting of: $80.6 million in money market accounts and $39.7 million in operational accounts. Component Units As of September 30, 2022, discretely presented component units reported $158.3 million in unrestricted cash and cash equivalents and $54.2 million in restricted cash and cash equivalents. Bank balances reported that were not insured or collateralized amounted to $61.2 million. 4. Investments Fair Value Measurements The Government categorizes the fair market measurements of its investments within the fair value hierarchy established by GAAP. GASB Statement No. 72, Fair Value Measurement and Application, provides the framework for measuring fair value by establishing a three-level fair value hierarchy that describes inputs that are used to measure assets and liabilities as follows: Level 1: Inputs are quoted prices (unadjusted) for identical assets or liabilities in active markets that a government can access at the measurement date. Level 2: Inputs are other than quotes prices included within Level 1 that are observable for an asset or liability, which are either directly or indirectly observable. Level 3: Inputs are significant unobservable inputs. The fair value hierarchy gives the highest priority to Level 1 and the lowest priority to Level 3 inputs. If a price for an identical asset is not observable, a government may evaluate fair market value using another valuation technique that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs. If the fair value of an asset is measured using inputs from more than one level of the fair market value hierarchy, the measurement is based on the lowest level input that is significant to the entire measurement. Government of the United States Virgin Islands Notes to Basic Financial Statements 61 The following section describes the valuation technique methodologies the Government is using to measure assets at fair value: Level 1: Investments classified within Level 1 are valued based on quotes obtained from active public exchanges or reported on the national market and are stated at the last reported sales price on the day of valuation. Fair value of exchange-traded contracts is based upon exchange settlement prices. Level 2: Investments classified within Level 2 are valued by pricing vendors using outside data. In determining the fair value of the investments, the pricing vendors use a market approach and pricing spreads based on the credit risk of the issuer, maturity, current yield, and other terms and conditions of each security. The commercial paper, certificates of deposit, U.S. government, agency and state obligations, U.S. Treasury notes, debt securities are classified as Level 2 instruments as their fair value is based on quoted values stated by the bank’s mark-to-market estimate using a stated fixed rate. The interest rate is observable at commonly quoted indexes for the full term of the instruments. Level 3: Investments in limited partnerships and private debt/direct lending are classified within Level 3 of the fair value hierarchy. Given the absence of market quotations, fair value is estimated using the information provided by the investment managers or general partners. The values are based on estimates that require varying degrees of judgment and, for the fund of funds investments, are primarily based on financial data supplied by the investment managers of the underlying funds. Individual holdings within alternative investments may include instruments in both nonmarketable and market-traded securities. Nonmarketable securities may include equity in private companies, real estate, thinly traded securities, and other investment vehicles. While these financial instruments contain varying degrees of risk, the Government’s exposure with respect to each such investment is limited to carrying amount (fair value as described above). Assets using net asset value per share as fair value are not required to be categorized using the fair value hierarchy levels. As of September 30, 2022, the Government’s investments included a non-negotiable certificate of deposit, money market investments, commercial papers and advances for securities, which are not subject to the fair value hierarchy. Government of the United States Virgin Islands Notes to Basic Financial Statements 62 Primary Government Following are the investments of the PG categorized within the three-level fair value hierarchy: (In thousands) September 30, 2022 Level 1 Level 2 Level 3 Investments with contractual maturities: Certificates of deposit $ 353,965 $ - $ 353,965 $ - U.S. government, agency, and state obligations 128,118 - 128,118 - U.S. treasury notes 2,395 - 2.395 - Subtotal 484,478 $ - $ 484,478 $ - Investments, at cost: Commercial paper 30,710 Money market funds 29,290 Non-negotiable certificate of deposit 10,329 Other 22 Total $ 554,829 Following is a summary of the investments of the PG categorized by investment type and weighted- average maturity, as of September 30, 2022 (expressed in thousands): Maturity (in years) Fair Value Less Than 1 Year 1 to 5 Years Over 5 Years Investments with contractual maturities Certificates of deposit $ 353,965 $ 353,965 $ - $ - U.S. government, agency, and state obligations 130,513 34,148 92,812 3,553 Portfolio investments Commercial paper 30,710 30,651 - 59 Other investments 22 22 - - Total investments with contractual maturities 515,210 $ 418,786 $ 92,812 $ 3,612 Investments without contractual maturities Money market funds 29,290 Non-negotiable certificate of deposit 10,329 Total $ 554,829 Interest Rate Risk – Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The PG does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. As a means of keeping the interest-rate risk low, majority of investments held by the PG are short-term in nature. Government of the United States Virgin Islands Notes to Basic Financial Statements 63 Credit Risk – The authorizing legislation of the PG does not limit investments by credit rating categories. Authorizing legislation does limit the investment choices of the PG to direct obligations or obligations guaranteed by the United States, obligations of states, territories, possessions and commonwealths of the United States, obligations of international banking institutions, repurchase agreements, investment contracts, certificates of deposit, guaranteed investment contracts, shares in mutual funds, investment companies, corporate commercial paper, money market portfolio investments, and investment pools. As of September 30, 2022, the PG’s investments in money market funds were rated AAAm by Standard & Poor’s, and Aaa-mf by Moody’s Investors Service. The PG’s investments in commercial paper were rated A-1 by Standard & Poor’s and P-1 by Moody’s Investors Service. The PG’s investments in government, agency and state obligations were rated AAA to AA- by Standard & Poor’s and Aaa to Aa3 by Moody’s Investors Service. The PG’s investments in certificates of deposit in the amount of $364.3 million were not rated by Moody’s Investor Services or by Standard & Poor’s. Concentration of Credit Risk – The PG places no limit on the amount that may be invested in one issuer. As of September 30, 2022, more than 5.0% of the PG’s investments were invested in: Federal Home Loan Mortgage Corporation (11.9%), certificates of deposit issued by Banco Popular de Puerto Rico (47.4%) and certificates of deposit issued by First Bank (18.3%). Custodial Credit Risk – The PG does not have a custodial risk policy. The custodial credit risk for investments is the risk that, in the event of the failure of a depository financial institution or other counterparty, the PG will not be able to recover the value of an investment or collateral securities that are in the possession of an outside party. As of September 30, 2022, $190.5 million of investments were held in the name of the Bank of New York Trust Company, N.A., as trustee for the Government, $262.9 million of certificates of deposit were issued by Banco Popular de Puerto Rico and $101.4 million of certificates of deposit were issued by First Bank. Government of the United States Virgin Islands Notes to Basic Financial Statements 64 Pension Trust Fund Following are the investments of the Pension Trust Fund categorized within the three-level fair value hierarchy: (In thousands) September 30, 2022 Level 1 Level 2 Level 3 Debt securities: Government agency obligations $ 21,727 $ - $ 21,727 $ - Municipal obligations 249 - 249 - Corporate bond 21,641 - 21,641 - Asset-backed securities 3,655 - 3,655 - Collateralized mortgage obligations 3,293 - 3,293 - Commercial mortgaged-backed securities 2,996 - 2,996 - Residential mortgaged-backed securities 16,333 - 16,333 - Limited partnerships: Private equity fund of fund 9,194 - - 9,194 Private lending 13,329 - - 13,329 Real estate/other real assets 66,924 - - 66,924 Subtotal 159,341 $ - $ 69,894 $ 89,447 Investment, as cost: Money market funds 80,611 System cash 21,566 Havensight cash Other cash equivalents 8,914 9,191 Subtotal 120,282 Investments measured at net asset value (NAV): Commingled bond funds 129,082 Securities lending collateral fund 5,606 Total $ 414,311 Pension trust funds investments that are measured at NAV per share, or equivalent, are presented in the table below (expressed in thousands): Fair Value Unfunded Commitments Redemption Frequency Redemption Notice Period Investments measured at NAV: Commingled bond funds $ 129,082 $ - Daily 2 – 10 days Securities lending collateral fund 5,606 - Daily None Total $ 134,688 $ - Commingled equity and bond funds - This type includes seven commingled funds that invest in publicly traded domestic and global stocks, and domestic and global fixed income securities. The fair values of the investments in this type have been determined using the NAV per share (or its equivalent) of the investments. The total commingled funds can be liquidated daily. The underlying securities within the commingled funds carry a recurring fair value measurement Level of 2. There are no unfunded commitments to commingled funds as of September 30, 2022. Government of the United States Virgin Islands Notes to Basic Financial Statements 65 Securities lending collateral - GERS’ custodian is the agent in lending GERS’ securities for collateral and investments that are in a commingled fund. Following is a summary of the investments of the pension trust fund, categorized by investment type and weighted-average maturity, as of September 30, 2022 (expressed in thousands): Maturity (in years) Fair Value Less Than 1 Year 1 to 5 Years 6 to 10 Years More than 10 Years No Stated Maturity Investments with contractual maturities Commingled and mutual funds $ 129,082 $ - $ - $ - $ - $ 129,082 Corporate obligations 21,641 202 10,656 3,790 6,993 - Mortgage and asset backed securities 26,277 153 2,601 2,315 21,208 - Municipal obligations 249 - - - 249 - Limited partnerships 9,194 - - - - 9,194 U.S. Treasury bonds 5,519 - - - 5,519 - U.S. Treasury notes 16,208 - 11,553 4,655 - - Total investments with contractual maturities 208,170 $ 355 $ 24,810 $ 10,760 $ 33,969 $ 138,276 Investments without contractual maturities Money market funds 80,611 System cash 21,566 Havensight cash Other cash equivalents 8,914 9,191 Subtotal 120,282 Real estate investments: Havensight Mall - U.S. Virgin Islands 41,000 GERS Complex - U.S. Virgin Islands and other real estate 21,142 Debt lending - member loans 13,329 Securities lending short-term collateral investment pool 5,606 Other real assets 4,782 Total $ 414,311 Interest Rate Risk – Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. GERS does not have a specific policy to manage interest rate risk, but requires investment managers to diversify by issue, maturity, sector, coupon, and geography. Investment managers retained by GERS follow specific investment guidelines and are evaluated against specific market benchmarks that represent their investment style. Any exemption from general guidelines requires approval from GERS’ board of trustees. Credit Risk – GERS investment policy is designed to minimize credit risk by restricting authorized investments to only those investments permitted by statute, subject to certain additional limitations. These additional limitations consist of prohibitions against investments in derivative securities, options, futures, or short positions. GERS investment policy allows investments in mortgage pass-through securities. Government of the United States Virgin Islands Notes to Basic Financial Statements 66 The credit ratings of GERS’ debt securities as of September 30, 2022 include (expressed in thousands): Standard & Poor’s Credit Ratings Moody’s Investors Service Credit Ratings Fair Value Credit Ratings Fair Value Credit Ratings Corporate obligations $ 317 AAA $ - - Corporate obligations 698 AA+ - - Corporate obligations 574 A - - Corporate obligations 2,722 A- - - Corporate obligations 88 AA+ - - Corporate obligations 395 AA- - - Corporate obligations 4,888 BBB+ - - Corporate obligations 8,138 BBB - - Corporate obligations 3,638 BBB- - - Corporate obligations 181 Not Rated - - Corporate obligations - - 405 Aaa Corporate obligations - - 668 A1 Corporate obligations - - 1,030 A2 Corporate obligations - - 2,918 A3 Corporate obligations - - 5,640 Baa1 Corporate obligations - - 5,928 Baa2 Corporate obligations - - 4,669 Baa3 Corporate obligations - - 381 Not Available Mortgage and asset backed securities 1,816 AAA - - Mortgage and asset backed securities 456 AA - - Mortgage and asset backed securities 125 A - Mortgage and asset backed securities 23,881 Not Available 21,853 Not Available Mortgage and asset backed securities - - 3,597 Aaa Mortgage and asset backed securities - - 828 Aa1 Commingled and mutual funds 129,082 Not Rated 129,082 Not Available Total $ 176,999 $ 176,999 Concentration of Credit Risk – Concentration of credit risk is the risk of loss attributed to the magnitude of GERS’ investments in a single issuer of securities. GERS’ investment policy establishes limitations on portfolio composition by investment type to limit its exposure to concentration of credit risk. Custodial Credit Risk – The custodial credit risk for investments is the risk that, in the event of the failure of a depository financial institution or other counterparty, GERS will not be able to recover the value of an investment or collateral securities that are in the possession of an outside party. Other than underlying securities on loans secured by noncash collateral, the GERS’ entire investment portfolio was held with a single third-party custodian in the GERS’ name as of September 30, 2022. As of September 30, 2022, the GERS had no underlying securities on loan secured by noncash collateral. Cash collateral held for securities lending transactions is invested in a collective investment pool maintained by the securities lending agent. Foreign Currency Risk – Foreign currency risk is the risk of holding investments in foreign currencies and the risk that those foreign currencies may devalue. GERS has no general investment policy with respect to foreign currency risk. Government of the United States Virgin Islands Notes to Basic Financial Statements 67 Risks associated with foreign exchange contracts include the movement in the value of foreign currency relative to the U.S. dollar and the ability of the counterparty to perform in accordance with the terms of the contract. Changes in the market value of open and closed forward contracts are recorded with interest, dividends, and other income or losses reported at fair value. During the fiscal year ended September 30, 2022, GERS did not engage in any foreign currency exchange contracts. Securities Lending Transactions – The Government’s statutes permit GERS to participate in securities lending transactions, and GERS has, via a securities lending authorization agreement (the Agreement), authorized State Street Bank and Trust Company (the Custodian) to lend its securities to broker-dealers and banks pursuant to a form of a loan agreement. Lent securities are collateralized with cash, securities issued or guaranteed by the U.S. government, or irrevocable bank letters of credit. GERS does not have the ability to pledge or sell collateral securities delivered absent a borrower default. No restrictions were imposed during 2022 as to the amount of loans the Custodian can make on behalf of GERS. Under the terms of the Agreement, the Custodian must indemnify the Government for losses attributable to violations by the Custodian under the “standard of care” clause described in the Agreement. There were no such violations during fiscal year 2022, or losses resulting from the default of the borrowers or the Custodian. Loans are generally terminable on demand. The collateral received shall, (i) in the case of loaned securities denominated in U.S. dollars or whose primary trading market is located in the U.S. or sovereign debt issued by foreign governments, have a market value of 102.0% of the market value of the loaned securities; (ii) in the case of loaned securities which are not denominated in U.S. dollars or whose primary trading market is not located in the United States, have a market value of 105.0% of the market value of the loaned securities; or (iii) have a higher value as may be applicable in the jurisdiction in which the loaned securities are customarily traded. Such collateral should be kept, at a minimum, at 100.0% of the market value of the security for all borrowers throughout the outstanding period of the loans. As of September 30, 2022, GERS had no risk exposure to borrowers because the amounts GERS owed the borrowers exceeded the amounts the borrower’s owed GERS. Loans through securities lending transactions were insignificant, and the difference between the fair value of the securities on loan and collateral held was insignificant. Government of the United States Virgin Islands Notes to Basic Financial Statements 68 Component Units Following are the investments of the discretely presented component units categorized within the fair value hierarchy, including prior-year data provided by certain component units: (In thousands) September 30, 2022 Level 1 Level 2 Level 3 Investments, at fair value: U.S. Government agencies and notes $ 46,275 $ 46,275 $ - $ - Mutual funds 116 116 - - Subtotal 46,391 $ 46,391 $ - $ - Investments, at cost: Certificate of deposits 26,269 Investments measured at net asset value (NAV): Alternative investments 23,480 Total* $ 96,140 *Include balances of unaudited component units – see Note 2 Following is a summary of the investments of the discretely presented component units, categorized by investment type, and weighted-average maturity, as of September 30, 2022 (expressed in thousands), including prior-year data provided by certain component units: Maturity (in years) Fair Value Less Than 1 Year 1 to 5 Years 6 to 10 Years More than 10 Years Investments with contractual maturities Certificates of deposit $ 26,269 $ 20,073 $ 6,196 $ - $ - U.S. Government agencies and notes 46,275 46,275 - - - Total investments with contractual maturities 72,544 $ 66,348 $ 6,196 $ - $ - Investments without contractual maturities Mutual funds 116 Other investments 23,480 Total* $ 96,140 *Include balances of unaudited component units – see Note 2 Interest Rate Risk – Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The component units of the Government have not established formal policies that limit investment maturities as a means of managing such exposure and have some exposure to interest rate risk. Credit Risk and Concentration of Credit Risk – The authorizing legislation of the component units does not limit investments by credit rating categories. Authorizing legislation limits the investments choices of the component units, as described in Note 1. Government of the United States Virgin Islands Notes to Basic Financial Statements 69 Custodial Credit Risk – The custodial credit risk for investments is the risk that, in the event of the failure of a depository financial institution or other counterparty, the component units will not be able to recover the value of an investment or collateral securities that are in the possession of an outside party. The component units of the Government do not have custodial credit risk policies. 5. Receivables Primary Government Receivables for governmental funds as of September 30, 2022, consist of the following (expressed in thousands): General PFA Debt Service Other Governmental Total Income taxes $ 286,101 $ - $ - $ 286,101 Real property taxes 125,070 - - 125,070 Hotel occupancy taxes 3,706 - - 3,706 Gross receipts taxes - 280,679 - 280,679 Subtotal taxes receivables 414,877 280,679 - 695,556 Less allowance for doubtful accounts (223,428) (253,222) - (476,650) Taxes receivables, net 191,449 27,457 - 218,906 Other $ 115 $ - $ 116 231 Tobacco settlement rights 885 Total $ 220,022 (a) Tax Receivables The Naval Appropriations Act created a separate tax structure for the U.S. Virgin Islands that mirrors the IRC of 1986, as amended. Income taxes are due from every corporation, partnership, individual, association, estate, or trust that meets the filing requirements of the U.S. Internal Revenue Code. A U.S. taxpayer who is a permanent resident of the U.S. Virgin Islands satisfies his/her Virgin Islands income tax obligations by filing his/her return with and paying income taxes to the Government. Bona fide residents of the Virgin Islands are taxed by the Virgin Islands on their world-wide income. A nonresident of the U.S. Virgin Islands pays income taxes on his/her U.S. Virgin Islands source income to the Government. The revenue is recognized in the general fund in the fiscal period for which the income tax return was filed. The revenue from income tax withholding and estimated payments are recognized in the general fund as collected, net of estimated tax refunds. Subchapter S and C corporate income tax returns are due by the 15th day of the fourth month following the close of the calendar year and become delinquent if not paid on or before the due date. Partnership income taxes are due by April 15 of the following year and trust income taxes are due by April 15 of the following year for which the income tax was levied. Trust income taxes must be paid by the tax filing date. Property taxes are assessed each calendar year on all taxable real property located in the U.S. Virgin Islands. The receivable is recognized, net of estimated uncollectable amounts, in the general fund in the fiscal period for which the tax is assessed. Government of the United States Virgin Islands Notes to Basic Financial Statements 70 The revenue is recognized in the general fund in the fiscal period for which the property tax is levied, provided the tax is collected within 60 days after fiscal year-end, unless the facts justify a period greater than 60 days. Receivables collected after that period, are recorded as unavailable property tax revenue. The Office of the Tax Assessor is responsible for the assessment of all taxable real property. Noncommercial real property subject to taxation is reassessed once every five years and commercial real property subject to taxation is reassessed biannually. The Tax Assessor prepares an annual assessment roll and schedule of collections for each parcel of real property that is used by The Office of the Tax Collector as the basis for issuing tax bills to all taxpayers in the U.S. Virgin Islands. Property taxes are to be levied by May 15 of each year in the name of the record owner on January 15 of the same year. The taxes are due on June 30 and become delinquent if not paid by August 31. For businesses with gross receipts of $225,000 per annum or less, gross receipts taxes are levied on an annual basis based on the amount by which gross receipts exceed $9,000 per month. Businesses with annual gross receipts of more than $225,000 are levied monthly with no $9,000 per month exemption. The gross receipts tax rate is 5.0% of sales and service revenue. Monthly gross receipts tax filings are due within 30 calendar days following the last day of the calendar month collected. Annual gross receipts tax filings are due within 30 calendar days following the last day of the calendar year. (b) Other Receivables In addition to tax receivables, the PG receives tobacco settlement right payments in connection with a Master Settlement Agreement with certain participating cigarette manufacturers. Under the terms of the agreement, the U.S. Virgin Islands receives .0173593% of annual payments made under the agreement. As of September 30, 2022, the PG reported a receivable of $885,000 for tobacco settlement right payments as included in the accompanying statement of net position. Component Units Receivables for the discretely presented component units as of September 30, 2022, consist of the following (expressed in thousands), including prior-year data for certain component units: Utility service charges $ 23,415 Patients 7,275 Students 18,453 Port fees 7,470 Other 160,234 Total* $ 216,847 *Include balances of unaudited component units – see Note 2 Government of the United States Virgin Islands Notes to Basic Financial Statements 71 Pension Trust Fund Loans and advances to members of GERS as of September 30, 2022, consist of the following (expressed in thousands): Personal loans $ 10,657 Mortgage loans 3,681 Less allowance for losses (1,009) Total $ 13,329 (c) Notes Receivable On July 30, 2018, the Government under an amended Terminal agreement entered a 10-year nontransferable promissory note receivable with Limetree Bay Terminals, LLC (Limetree) for $10.0 million secured by a purchase money lien on land, buildings, and other properties at the terminal in St. Croix. The note maturity is November 30, 2028, with an interest rate of 10.0% due on June 30 and December 31 of each year, beginning June 30, 2019. Prior to the restart of the refinery, the interest to be added to the principal amount due. At. September 30, 2022, principal, and interest amounted to $14.2 million. Component Units Receivables for the discretely presented component units as of September 30, 2022, consist of the following (expressed in thousands): Land and mortgage $ 1,632 Moderate income 2,479 Loan made to homeowners 9 Loan with Louis E. Brown I Ltd. 3,780 Loan with Louis E. Brown II Ltd. 2,250 Less: current portion 3 Total $ 10,147 6. Unavailable Revenues The components of unavailable revenues of the general fund and PFA debt service fund as of September 30, 2022, consist of the following (expressed in thousands): General PFA Debt Service Total Property taxes $ 22,047 $ - $ 22,047 Income taxes 118,025 - 118,025 Gross receipts taxes - 12,195 12,195 Total $ 140,072 $ 12,195 $ 152,267 Government of the United States Virgin Islands Notes to Basic Financial Statements 72 7. Interfund Transfers Interfund transfers (from/to) for the year ended September 30, 2022, consist of the following (expressed in thousands): Transfer from/to General PFA Debt Service PFA Capital Projects MFSPSC Debt Service Other Governmental Total General $ - $ 166,554 $ - $ - $ - $ 166,554 PFA Debt Service 158,537 - 61 853,826 - 1,012,424 PFA Capital Projects 15,273 - - - - 15,273 Other Governmental 31,716 11,660 678 - - 44,054 Other Business-Type 5,000 - - - 5,000 10,000 Total $ 210,526 $ 178,214 $ 739 $ 853,826 $ 5,000 $ 1,248,305 Interfund transfers constitute the transfer of resources from the fund that receives the resources to the fund that utilizes them. The most significant transfer to the general fund from other governmental funds included a $166.6 million transfer from PFA debt service fund (a major governmental fund) representing gross receipt tax revenues available after bond debt service requirements. Significant transfers made from the general fund include a transfer of $158.5 million to PFA Debt Service Fund (a major governmental fund); a transfer of $15.3 million to PFA Capital Projects (a major governmental fund); a transfer of $16.0 million to Budget Stabilization Fund (a non-major governmental fund); a transfer of $6.9 million to PFA Operating Fund (a non-major governmental fund); a transfer of $4.0 million to the Homestead & Home Loan fund (a non-major business-type fund); a transfer of $3.0 million to the St. Thomas Capital Improvement Fund (a non-major governmental fund); and a transfer of $2.0 million to the St. Croix Capital Improvement Fund (a non-major governmental fund). The PFA debt service fund (a major governmental fund) made a transfer of $11.7 million to the PFA Operating Fund (a non-major governmental fund). The MFSPSC debt service fund (a major governmental fund) made a transfer of $853.8 million to PFA debt service fund (a major governmental fund) in connection with the refunding of the PFA matching fund bonds. The PFA Operating Fund (a non-major governmental fund) made a transfer of $5.0 million to the VI Catalyst Revolving Loan Fund (a non-major business-type fund). Government of the United States Virgin Islands Notes to Basic Financial Statements 73 Due from/to Other Funds Due from/to other funds General PFA Capital Projects Other Governmental Other Business- Type Total General $ - $ - $ 24,741 $ 300 $ 25,041 Other governmental funds 45,373 - - - 45,373 Total Governmental 45,373 - 24,741 300 70,414 WICO 9,956 - - - 9,956 viNGN - 36,804 - - 36,804 Other enterprise 459 324 2,419 - 3,202 Total Proprietary Funds 10,415 37,128 2,419 - 49,962 Total $ 55,788 $ 37,128 $ 27,160 $ 300 $ 120,376 The due from/to other funds includes the following amounts the general fund owes to other funds: $16.0 million to St. Croix Capital Improvement Fund for capital improvement projects, $4.9 million due to the Emergency Molasses Fund (a non-major governmental fund) for unpaid appropriations, $1.9 million due to the Elected Governor Retirement Fund, and $500,000 due to PFA operating fund (a non-major governmental fund) for unpaid transfers from gross receipts collections. The amount due from other funds by the general fund is mainly composed of $42.2 million due from the District Street Lighting Fund (a non-major governmental fund); and $2.7 million from the Bond Proceeds Fund (a non-major governmental fund). The due to PFA Capital Projects funds includes $36.8 million due from viNGN, a major business-type fund in connection with start-up costs of the broadband project. The amount due to other governmental funds by the other enterprise includes $1.0 million due from the Virgin Islands Lottery to the Pharmaceutical Assistance to the Aged Fund; and $1.1 million due from the Virgin Islands Lottery to the Virgin Islands Educational Initiative Fund consisting primarily of 15.0% of revenue derived from lottery games under contract between the Virgin Islands Lottery and private contractors be transferred to these funds. 8. Restricted Assets Primary Government Restricted assets of proprietary funds and business-type activities as of September 30, 2022, include cash and cash equivalents as follows (expressed in thousands): Unemployment insurance funds $ 9,930 WICO debt service funds 9,027 Total $ 18,957 These funds were restricted to repay loans payable to the U.S. Treasury and WICO debt service accounts restricted by loan covenants. Government of the United States Virgin Islands Notes to Basic Financial Statements 74 Component Units Restricted assets of discretely presented component units as of September 30, 2022, include cash and cash equivalents, investments, and receivables as follows (expressed in thousands): Cash and cash equivalents: Debt service and sinking fund requirements $ 6,886 Endowment funds 680 HUD project funds 899 Revolving loan funds 40,857 Other 4,925 Total restricted cash and cash equivalents: $ 54,247 Investments: Debt service and sinking fund requirements 56,703 Endowment funds 23,480 Revolving loan funds 6,312 Total restricted investments: 86,495 Other: Pledged funds 15,873 Total* $ 156,615 *Include balances of unaudited component units – see Note 2 Government of the United States Virgin Islands Notes to Basic Financial Statements 75 9. Capital Assets Primary Government Capital assets activity for governmental activities for the year ended September 30, 2022, is summarized as follows (expressed in thousands): Beginning Balance Additions Transfers/ Adjustment Impairment/ Disposals Ending Balance Capital assets not being depreciated: Land $ 215,997 $ 8 $ 19 $ - $ 216,024 Construction in progress 1 172,311 97,259 (47,915) (1,437) 220,218 Total capital assets not being depreciated 388,308 97,267 (47,896) (1,437) 436,242 Capital assets being depreciated and amortized: Land improvements 12,793 131 1,662 - 14,586 Infrastructure 241,947 6,632 36,062 - 284,641 Buildings and improvements 651,998 130 1,886 (1) 654,013 Machinery and equipment 260,643 16,209 8,286 - 285,138 Total capital assets being depreciated and amortized 1,167,381 23,102 47,896 (1) 1,238,378 Land improvements (6,525) (505) - - (7,030) Infrastructure (61,391) (8,511) - - (69,902) Buildings and improvements (290,912) (30,271) - - (321,183) Machinery and equipment (217,774) (17,400) - - (235,174) Total accumulated depreciation and amortization (576,602) (56,687) - - (633,289) Total capital assets being depreciated and amortized, net 590,779 (33,585) 47,896 (1) 605,089 Total Governmental activities capital assets, net $ 979,087 $ 63,682 $ - $ (1,438) $ 1,041,331 Depreciation and amortization expense are charged to functions of the PG’s governmental activities for the year ended September 30, 2022 as follows (expressed in thousands): Governmental Activities: General government $ 15,307 Public safety 3,205 Health 3,034 Education 24,391 Public housing and welfare 851 Culture and recreation 591 Transportation and communication 9,308 Total $ 56,687 Government of the United States Virgin Islands Notes to Basic Financial Statements 76 Capital assets activity for business-type activities for the year ended September 30, 2022, is summarized as follows (expressed in thousands): Beginning Balance (as restated) Additions Transfers/ Adjustment Impairment/ Disposals Ending Balance Capital assets not being depreciated: Land $ 5,178 $ - $ - $ - $ 5,178 Construction in progress 6,127 1,928 (1,023) (96) 6,936 Total capital assets not being depreciated 11,305 1,928 (1,023) (96) 12,114 Capital assets being depreciated and amortized: Land improvements 676 - 29 - 705 Buildings and improvements 90,546 1 196 (9,879) 80,864 Machinery and equipment 81,982 510 798 (182) 83,108 Right-to-use building and improvements 2,139 - - - 2,139 Intangible assets 30,774 - - - 30,774 Total capital assets being depreciated and amortized 206,117 511 1,023 (10,061) 197,590 Less accumulated depreciation and amortization for: Land improvements (408) (34) - - (442) Buildings and improvements (58,443) (3,147) - 7,899 (53,691) Machinery and equipment (40,135) (4,018) - 175 (43,978) Right-to-use building and improvements (1,362) (258) - - (1,620) Intangible assets (10,155) (1,012) - - (11,167) Total accumulated depreciation and amortization (110,503) (8,469) - 8,074 (110,898) Total capital assets being depreciated and amortized, net 95,614 (7,958) 1,023 (1,987) 86,692 Total Business-type activities capital assets, net $ 106,919 $ (6,030) $ - $ (2,083) $ 98,806 Depreciation and amortization expense are charged for the year ended September 30, 2022 as follows (expressed in thousands) Business-type Activities: WICO $ 3,076 viNGN 4,512 Other enterprise funds 881 Total $ 8,469 Government of the United States Virgin Islands Notes to Basic Financial Statements 77 Component Units Capital assets activity for discretely presented component units for the year ended September 30, 2022 is summarized as follows (expressed in thousands): Adjusted Beginning Balance Additions Transfers Impairment/ Disposals Ending Balance Capital assets not being depreciated: Land $ 126,699 $ 3,212 $ - $ - $ 129,911 Construction in progress 542,200 42,253 - - 584,453 Total capital assets not being depreciated 668,899 45,465 - - 714,364 Capital assets being depreciated and amortized: Buildings and improvements 2,649,793 191,045 - (25) 2,840,813 Airport and marine terminal facilities 193,286 163 - - 193,449 Personal property and equipment 152,064 12,004 - (85) 163,983 Right-to-use lease asset - 226 - - 226 Intangible assets 2,919 - - - 2,919 Total capital assets being depreciated and amortized 2,998,062 203,438 - (110) 3,201,390 Less accumulated depreciation and amortization for: Buildings and improvements (1,151,577) (50,413) - 25 (1,201,965) Airport and marine terminal facilities (162,994) (5,375) - - (168,369) Personal property and equipment (111,069) (5,533) - 307 (116,295) Right-to-use lease asset - (57) - - (57) Intangible assets (2,605) - - - (2,605) Total accumulated depreciation and amortization (1,428,245) (61,378) - 332 (1,489,291) Total capital assets being depreciated and amortized, net 1,569,817 142,060 - 222 1,712,099 Total component units’ capital assets, net* $ 2,238,716 $ 187,525 $ - $ 222 $ 2,426,463 *Include balances of unaudited component units – see Note 2 Government of the United States Virgin Islands Notes to Basic Financial Statements 78 Depreciation and amortization expense charged by each component unit for the year ended September 30, 2022 is as follows (expressed in thousands): Virgin Islands Housing Authority $ 7,928 Virgin Islands Port Authority* 17,260 Virgin Islands Water and Power Authority: Electric System* 17,141 Water System* 2,046 Virgin Islands Government Hospital and Health Facilities Corporation: Schneider Regional Medical Center* 3,979 Governor Juan F. Luis Hospital* 1,203 University of the Virgin Islands* 2,359 Virgin Islands Housing Finance Authority 1,485 Other component units** 7,977 Total $ 61,378 *Unaudited **University of the Virgin Islands Research and Technology Park Corporation and Magens Bay Authority (unaudited) 10. Long-Term Liabilities Primary Government The change in long-term bonds and loans for governmental activities is as follows for the year ended September 30, 2022 (expressed in thousands): Beginning Balance Additions Reductions Ending Balance Due Within One Year Due Thereafter Matching Funds Revenue Bonds Series 2013 B Revenue and Refunding Bonds $ 28,675 $ - $ 28,675 $ - $ - $ - Series 2013 A Revenue and Refunding Bonds 11,215 - 11,215 - - - Series 2012 A Revenue Bonds 136,215 - 136,215 - - - Series 2010 A and B Revenue Bonds 376,190 - 376,190 - - - Series 2009 A Revenue Bonds (Cruzan) 31,665 - 31,665 - - - Series 2009 A1, A2, B and C Revenue - and Refunding Bonds 156,540 - 156,540 - - - Series 2009 A Revenue Bonds (Diageo) 208,975 - 208,975 - - - Total 949,475 - 949,475 - - - Gross Receipts Revenue Bonds Series 2014 D Revenue Bonds 4,595 - 240 4,355 255 4,100 Series 2014 C Revenue and Refunding Bonds 214,895 - 6,385 208,510 6,705 201,805 Series 2014 A Revenue Bonds 39,535 - 2,000 37,535 2,100 35,435 Series 2012 A and B Revenue and Refunding Bonds 137,650 - 3,315 134,335 3,720 130,615 Series 2012 C Revenue Bonds 23,075 - 1,860 21,215 1,955 19,260 Series 2006 A Revenue Bonds 170,265 - 16,295 153,970 16,895 137,075 Total 590,015 - 30,095 559,920 31,630 528,290 Government of the United States Virgin Islands Notes to Basic Financial Statements 79 Beginning Balance Additions Reductions Ending Balance Due Within One Year Due Thereafter Tobacco Settlement Bonds Series 2006 A, B, C and D Tobacco Turbo and Capital Appreciation Bonds $ 7,290 $ - $ $ 7,290 $ - $ 7,290 Series 2001 A Tobacco Bonds 2,365 - 1,150 1,215 - 1,215 Total 9,655 - 1,150 8,505 - 8,505 Matching Fund Special Purpose Securitization Corporation Series 2022 A Securitization Bonds - 930,315 - 930,315 - 930,315 Series 2022 B Securitization Bonds - 22,510 - 22,510 - 22,510 Total - 952,825 - 952,825 - 952,825 Federal-Aid Highway Bonds Series 2015 Bonds 67,125 - 4,220 62,905 4,430 58,475 Other Direct-Placement Bonds or Borrowings Series 2019 A TIF Revenue and Refunding Bonds 10,101 - 528 9,573 566 9,007 Total bonds payable 1,626,371 952,825 985,468 1,593,728 36,626 1,557,102 Plus (less): Bond premium 30,837 28,061 11,125 47,773 - 47,773 Bond discount (1,645) - (1,411) (234) - (234) Bond accretion 12,546 1,330 - 13,876 13,876 - Total bonds payable, net 1,668,109 982,216 995,182 1,655,143 50,502 1,604,641 Notes Payable 2019 A TIF Project Developer Note 1,565 - 14 1,551 15 1,536 2016 A Note 178 - 178 - - - Total notes payable 1,743 - 192 1,551 15 1,536 Total governmental activities bonds and notes payable $ 1,669,852 $ 982,216 $ 995,374 $ 1,656,694 $ 50,517 $ 1,606,177 Government of the United States Virgin Islands Notes to Basic Financial Statements 80 The change in other long-term liabilities for governmental activities is as follows for the year ended September 30, 2022 (expressed in thousands): Beginning Balance Additions Reductions Ending Balance Due Within One Year Due Thereafter Accrued compensated absences $ 43,695 $ - $ 4,751 $ 38,944 $ 16,503 $ 22,441 Retroactive union arbitration 188,300 - 37,236 151,064 905 150,159 Accrued 8.0% salary reduction 49,837 4,277 52,531 1,583 1,583 - Litigation 12,538 - 4,665 7,873 1,189 6,684 Landfill closure and post closure 118,815 10,727 - 129,542 - 129,542 Total $ 413,185 $ 15,004 $ 99,183 $ 329,006 $ 20,180 $ 308,826 Accrued compensated absences, retroactive union arbitration, accrued 8.0% salary reduction, litigation, landfill closure, and post-closure costs are generally expected to be liquidated with resources derived from the General Fund. The change in tax refunds payable for governmental activities is as follows for the year ended September 30, 2022 (expressed in thousands): Beginning Balance Additions Reductions Ending Balance Due Within One Year Due Thereafter Tax refunds payable $ 133,009 $ 60,638 $ 79,277 $ 114,370 $ 85,167 $ 29,203 As of September 30, 2022, the PG reported other post-employment benefits (OPEB) to retirees such as health insurance liability of $976.6 million. The OPEB liability is valued by an actuarial valuation as of October 1, 2019, with a roll forward through October 1, 2021. Beginning Balance Additions Reductions Ending Balance Due Within One Year Due Thereafter OPEB liability $ 992,301 $ - $ 15,688 $ 976,613 $ - $ 976,613 As of September 30, 2022, the PG reported a net pension liability of $4.1 billion for its proportionate share of the net defined benefit pension liability administered by GERS. The net pension liability is valued as of September 30, 2021, determined by an actuarial valuation as of that date. The change in pension liability for governmental activities is as follows for the year ended September 30, 2022 (expressed in thousands): Beginning Balance Additions Reductions Ending Balance Due Within One Year Due Thereafter Net pension liability $ 4,527,445 $ - $ 436,429 $ 4,091,016 $ - $ 4,091,016 Government of the United States Virgin Islands Notes to Basic Financial Statements 81 The changes in long-term liabilities for business-type activities are as follows for the year ended September 30, 2022, (expressed in thousands): Beginning Balance Additions Reductions Ending Balance Due Within One Year Due Thereafter Workers’ compensation claims $ 53,189 $ 2,913 $ 9,715 $ 46,387 $ 2,913 $ 43,474 Lease liability – viNGN 823* - 264 559 180 379 Loan payable – U.S. Treasury 96,143 8,046 8,445 95,744 95,744 - Compensated absences - WICO 1,255 234 151 1,338 64 1,274 Loans payable - WICO 42,397 - 41,680 717 717 - WICO Port Facilities Revenue Bonds - 51,586 - 51,586 - 51,586 Total $ 193,807 $ 62,779 $ 60,255 $ 196,331 $ 99,618 $ 96,713 *Restated to reflect implementation of GASB Statement No. 87. Debt Margin Pursuant to 48 U.S.C. Section 1574(b)(i) of the Revised Organic Act, the Government may issue revenue bonds for public improvements or undertakings authorized by an act of the Legislature of Virgin Islands, without limitation as to principal amount. Such revenue bonds are payable solely from the revenue directly derived from and attributable to such public improvements or undertakings. Pursuant to 48 U.S.C. Section 1574(b)(ii), the Government is authorized to issue general obligation bonds for any public purpose provided that no such indebtedness is more than 10.0% of the aggregate assessed valuation of the taxable real property in the U.S. Virgin Islands. In addition, pursuant to 48 U.S.C. Section 1574(a) (Public Law 94-932), the U.S. Virgin Islands is authorized to issue bonds or other obligations in anticipation of the matching funds to be received from the federal government pursuant to 26 U.S.C. Section 7652(b)(3). There is no legal limit on the value of bonds that the Government may issue pursuant to 48 U.S.C. Section 1574(a). The Legislature of the U.S. Virgin Islands must authorize all bond issuances. PFA is authorized to issue bonds for financing any project or for the purpose authorized by the Legislature of V.I. Given that PFA’s powers to issue bonds are derived from 48 U.S.C. Section 1574(b), the bonds issued by PFA are subject to the limitations of said 48 U.S.C. Section 1574(b). On August 23, 1999, the Legislature of the Virgin Islands amended the V.I. Code to add a Mandatory Balanced Budget Provision. Such provisions, specifically Title 2 of the V.I. Code Section 256, provides that the amount of debt of the Government existing on October 1, 2000 shall be the debt limit of the Government, exclusive of bond principal and interest that may become due. The debt limit specified under Title 2 of the V.I. Code Section 256 does not include bonds authorized by law for which a specific source of revenue is identified and committed to retiring those bonds. As used in Title 2 of the V.I. Code Section 256, the term “debt” means the total accumulated unpaid obligations that are due and payable, including unpaid income tax refunds, amounts owed to vendors, and current-year unpaid debt service obligations, if any. As used in the statute, the term “debt” does not include that portion of principal or interest on bonds that is not yet due and payable. Government of the United States Virgin Islands Notes to Basic Financial Statements 82 (a) Bonds Payable Bonds payable outstanding as of September 30, 2022 are comprised of the following (expressed in thousands): Maturity Interest Rate (%) Balance Gross Receipts Revenue Bonds Series 2014 D Revenue Bonds 2015 - 2033 6.03 $ 4,355 Series 2014 C Revenue and Refunding Bonds 2015 - 2044 4.50 – 5.00 208,510 Series 2014 A Revenue Bonds 2015 - 2034 5.00 37,535 Series 2012 A and B Revenue and Refunding Bonds 2017 - 2032 2.25 - 5.25 134,335 Series 2012 C Revenue Bonds 2017 - 2042 3.00 - 5.00 21,215 Series 2006 A Revenue Bonds 2007 - 2029 3.50 - 5.00 153,970 Total 559,920 Tobacco Settlement Bonds 2006 Series A, B, C & D Tobacco Turbo Capital Appreciation Bonds 2035 6.00 – 8.00 7,290 2001 Series A Tobacco Bonds 2031 4.62 – 5.13 1,215 Total 8,505 Matching Fund Special Purpose Securitization Bonds Series 2022 A Securitization Bonds 2039 4.05 – 4.73 930,315 Series 2022 B Securitization Bonds 2025 6.00 22,510 Total 952,825 Federal-Aid Highway Bonds Series 2015 Bonds 2016 - 2033 3.00 – 5.00 62,905 Other Direct-Placement Bonds or Borrowings Series 2019 A TIF Revenue and Refunding Bonds 2029 6.88 9,573 Total bonds payable 1,593,728 Plus (Less): Bonds premium 47,773 Bonds discount (234) Bonds accretion 13,876 Total bonds payable, net $ 1,655,143 Government of the United States Virgin Islands Notes to Basic Financial Statements 83 Matching Funds Revenue Bonds Series 2013 B Revenue and Refunding Bonds On October 17, 2013, PFA issued the Series 2013 B Revenue and Refunding Bonds, the proceeds of which amounted to $51,365,000. These bonds are secured by a pledge of Matching Fund Revenues, which includes certain funds established under the original indenture, the Eighth Supplemental Indenture, and the Series 2013B Loan Notes issued by the Government. The proceeds were loaned to the Government under the same terms as the bonds. The bonds are limited special obligations of PFA. The Series 2013 B Bonds were issued to: (i) refund a portion of the Series 2004 A Bonds, (ii) fund the Series 2013 B Subordinate Lien Debt Service Reserve Account, and (iii) finance certain costs of issuance of the Series 2013 B Bonds. The Series 2013 B Bonds mature in 2024 at an interest rate of 3.0% to 5.0%. The proceeds of the Series 2013 B Revenue and Refunding Bonds were placed in an irrevocable trust to provide for future debt service payments on the Series 2004 A. On October 1, 2014, the outstanding principal of the Series 2004 A Bonds was defeased through a call redemption amounting to $58,835,000. Interest on the Series 2013 B Revenue and Refunding Bonds is payable semi-annually on April 1 and October 1, and principal is payable annually on October 1. The Government is responsible for all principal and interest payments on the Series 2013 B Revenue and Refunding Bonds. The principal and interest payments on October 1 are funded by the Matching Fund Revenues, and the required investment to meet the April 1 interest payment is determined and deposited into the debt service reserve accounts, which is also funded by the Matching Fund Revenues. The Series 2013 B Revenue and Refunding Bonds are not redeemable at the option of PFA. On February 25, 2022, PFA issued an “Offer to Tender Bonds,” as subsequently amended on March 11, 2022 and March 21, 2022, inviting beneficial owners of the outstanding non-callable Series 2013B Revenue Bonds to tender such bonds for purchase (Tender Offer). The purpose of the Tender Offer was to provide the PFA with the opportunity to retire the Invited Bonds to be refunded with the proceeds of the Series 2022 Matching Fund Securitization Bonds on their date of issuance of April 6, 2022. On March 28, 2022, PFA accepted $6.7 million for the outstanding Series 2012A Bonds. Assets held by the irrevocable trusts for the Invited Bonds and the corresponding liabilities are not included in the PFA’s financial statements. Series 2013 A Revenue and Refunding Bonds On September 19, 2013, PFA issued the Series 2013 A Revenue and Refunding Bonds, the proceeds of which amounted to $36,000,000. These bonds are secured by a pledge of Matching Fund Revenues, which includes certain funds established under the original indenture, the Eighth Supplemental Indenture and the Series 2013 A Loan Notes issued by the Government. The proceeds were loaned to the Government under the same terms as the bonds. The bonds are limited special obligations of PFA. The Series 2013 A Bonds were issued to: (i) refund a portion of the Series 2004 A Bonds, Series 2009 A1 Bonds, and Series 2009 B Bonds, (ii) fund the Series 2013 A Subordinate Lien Debt Service Reserve Account, and (iii) finance certain costs of issuance of the Series 2013 A Bonds. The Series 2013 A Bonds mature from 2018 to 2025 at an interest rate of 5.00% to 5.25%. The proceeds of the Series 2013 A Revenue and Refunding Bonds were placed in an irrevocable trust to provide for future debt service payments on the Series 2004 A, Series 2009 A1, and Series 2009 B Bonds. Government of the United States Virgin Islands Notes to Basic Financial Statements 84 The economic gain obtained by this advance refunding is the difference between the present value of old debt service requirements and the new debt service. This refunding resulted in a deferred loss of approximately $10.9 million and an economic loss of approximately $1.5 million. Interest on the Series 2013 A Revenue and Refunding Bonds is payable semi-annually on April 1 and October 1, and principal is payable annually on October 1. The Government is responsible for all principal and interest payments on the Series 2013 A Revenue and Refunding Bonds. The principal and interest payments on October 1 are funded by the Matching Fund Revenues, and the required investment to meet the April 1 interest payment is determined and deposited into the debt service reserve accounts, which is also funded by the Matching Fund Revenues. The Series 2013 A Revenue and Refunding Bonds are not redeemable at the option of PFA. On February 25, 2022, PFA issued an “Offer to Tender Bonds,” as subsequently amended on March 11, 2022 and March 21, 2022, inviting beneficial owners of the outstanding non-callable Series 2013A Revenue Bonds to tender such bonds for purchase (Tender Offer). The purpose of the Tender Offer was to provide the PFA with the opportunity to retire the Invited Bonds to be refunded with the proceeds of the Series 2022 Matching Fund Securitization Bonds on their date of issuance of April 6, 2022. On March 28, 2022, PFA accepted $3.9 million for the outstanding Series 2012A Bonds. Assets held by the irrevocable trusts for the Invited Bonds and the corresponding liabilities are not included in the PFA’s financial statements. Series 2012 A Revenue Bonds On September 7, 2012, PFA issued the Series 2012 A Revenue Bonds, the proceeds of which amounted to $142,640,000. These bonds are secured by a pledge of Matching Fund Revenues, which includes certain funds established under the original indenture, the Seventh Supplemental Indenture and the Series 2012 Loan Notes issued by the Government. The proceeds were loaned to the Government under the same terms as the bonds. The bonds are limited special obligations of PFA. The Series 2012 A Bonds were issued to: (i) finance various operating expenses and other obligations of the Government, (ii) fund the Series 2012 A Subordinate Lien Debt Service Reserve Account, and (iii) finance certain costs of issuance of the Series 2012 A Bonds. The Series 2012 A Bonds mature from 2022 to 2032 at an interest rate of 4.0% to 5.0%. Interest on the Series 2012 A Revenue Bonds is payable semi-annually on April 1 and October 1, and principal is payable annually on October 1. The Government is responsible for all principal and interest payments on the Series 2012 A Revenue Bonds. The principal and interest payments on October 1 are funded by the Matching Fund Revenues, and the required investment to meet the April 1 interest payment is determined and deposited into the debt service reserve accounts, which is also funded by the Matching Fund Revenues. The Series 2012 A Revenue Bonds maturing after the dates below are redeemable at the option of PFA, at prescribed redemption prices expressed as a percentage of the principal amount, as follows: Series 2012 A Revenue Bonds Price October 1, 2023, and thereafter 100% Government of the United States Virgin Islands Notes to Basic Financial Statements 85 On February 25, 2022, PFA issued an “Offer to Tender Bonds,” as subsequently amended on March 11, 2022 and March 21, 2022, inviting beneficial owners of the outstanding non-callable Series 2012A Revenue Bonds to tender such bonds for purchase (Tender Offer). The purpose of the Tender Offer was to provide the PFA with the opportunity to retire the Invited Bonds to be refunded with the proceeds of the Series 2022 Matching Fund Securitization Bonds on their date of issuance of April 6, 2022. On March 28, 2022, PFA accepted $31.8 million for the outstanding Series 2012A Bonds. Assets held by the irrevocable trusts for the Invited Bonds and the corresponding liabilities are not included in the PFA’s financial statements Series 2010 A and B Revenue Bonds On July 8, 2010, PFA issued the Series 2010 A and B Revenue Bonds, the proceeds of which amounted to $399,050,000. These bonds are secured by a pledge of Matching Fund Revenues, which includes certain funds established under the original indenture, the Sixth Supplemental Indenture and the Series 2010 Loan Notes issued by the Government. The proceeds were loaned to the Government under the same terms as the bonds. The bonds are limited special obligations of PFA. The Series 2010 A Bonds were issued to: (i) finance various operating expenses of the Government, (ii) refinance a portion of the outstanding Series 2009 B1 and B2 Notes, (iii) fund the Series 2010 A Subordinate Lien Debt Service Reserve Account, and (iv) finance certain costs of issuance of the Series 2010 A Bonds. The Series 2010 B Bonds were issued to: (i) refinance a portion of the outstanding Series 2009 B1 and B2 Notes, (ii) fund the Series 2010 B Subordinate Lien Debt Service Reserve Account, and (iii) finance certain costs of issuance of the Series 2010 B Bonds. The Series 2010 A Bonds amount to $305,000,000 and mature from 2012 to 2029 at an interest rate of 4.0% to 5.0%. The Series 2010 B Bonds amount to $94,050,000 and mature from 2022 to 2029 at an interest rate of 4.25% to 5.25%. Interest on the Series 2010 A and B Revenue Bonds is payable semi-annually on April 1 and October 1, and principal is payable annually on October 1. The Government is responsible for all principal and interest payments on the Series 2010 A and B Revenue Bonds. The principal and interest payments on October 1 are funded by the Matching Fund Revenues, and the required investment to meet the April 1 interest payment is determined and deposited into the debt service reserve accounts, which is also funded by the Matching Fund Revenues. The Series 2010 A and B Revenue Bonds maturing after the dates below are redeemable at the option of PFA, at prescribed redemption prices expressed as a percentage of the principal amount, as follows: Series 2010 A and B Revenue Bonds Price October 1, 2022, and thereafter 100% On April 25, 2022, the Series 2010 A and B Revenue Bonds were redeemed through the issuance of the Matching Fund Special Purpose Securitization Corporation Series 2022 A and 2022 B Matching Fund Securitization Bonds. Government of the United States Virgin Islands Notes to Basic Financial Statements 86 Series 2009 A Revenue Bonds (Cruzan) On December 17, 2009, PFA issued the Series 2009 A Revenue Bonds (Cruzan), amounting to $39,190,000, to finance the costs of the development, acquisition, construction, and installation of a wastewater treatment facility and to fund certain preliminary costs of the alteration, upgrade, expansion, and renovation of the Cruzan distillery on St. Croix, to establish debt service reserves, and to finance costs of issuance of the 2009 A Bonds. These bonds are special limited obligations of PFA payable from and secured by a pledge of the Cruzan Trust estate, which includes certain funds established under the Subordinated Indenture and the First Supplemental Subordinate Indenture of Trust. The bonds bear interest at 3.0% to 6.0% and mature from 2010 to 2039 and are subject to an optional redemption price equal to 100% of the principal amount thereof, plus interest accrued to the date fixed for redemption. In association with the Series 2009 A Revenue Bonds, PFA entered into an agreement with Cruzan VIRIL, Ltd. (Cruzan) on October 6, 2009. Provisions of the agreement call for payments of excess matching funds, after debt service, debt service reserve, and sinking fund redemption payments, to the Government and Cruzan of 60.0% - 80.0% and 54.0% - 60.0%, respectively. Interest on the Series 2009 A Revenue Bonds (Cruzan) is payable semi-annually on April 1 and October 1, and principal is payable annually on October 1. The Government is responsible for all principal and interest payments on the Series 2009 A Revenue Bonds. The principal and interest payments on October 1 are funded by the Matching Fund Revenues, and the required investment to meet the April 1 interest payment is determined and deposited into the debt service reserve accounts, which is also funded by the Matching Fund Revenues. The Series 2009 A Revenue Bonds (Cruzan) maturing after the dates below are redeemable at the option of PFA, at prescribed redemption prices expressed as a percentage of the principal amount, as follows: Series 2009 A Revenue Bonds (Cruzan) Price October 1, 2019, and thereafter 100% On April 25, 2022, the Series 2009 A Revenue Bonds (Cruzan) were redeemed through the issuance of the Matching Fund Special Purpose Securitization Corporation Series 2022 A and 2022 B Matching Fund Securitization Bonds. Series 2009 A1, A2, B and C Revenue and Refunding Bonds On October 1, 2009, PFA issued the Series 2009 A1, A2, B, and C Revenue and Refunding Bonds, the proceeds of which amounted to $458,840,000. These bonds are secured by a pledge of Matching Fund Revenues, which includes certain funds established under the original indenture, the Fourth Supplemental Indenture and the Series 2009 Loan Notes issued by the Government. The proceeds were loaned to the Government under the same terms as the bonds. The bonds are limited special obligations of PFA. Government of the United States Virgin Islands Notes to Basic Financial Statements 87 The Series 2009 A1 and A2 Revenue and Refunding Bonds were issued to: (i) finance various capital projects of the Government, (ii) fund the Series 2009 A Senior Lien Debt Service Reserve Account, and (iii) finance certain costs of issuance of the Series 2009 A1 and A2 Revenue and Refunding Bonds. The Series 2009 A1 Revenue and Refunding Bonds amounted to $86,350,000 and mature from 2010 to 2039 at interest rates from 3.0% to 5.0%. The Series 2009 A2 Revenue and Refunding Bonds amount to $8,650,000 and mature from 2010 to 2011 at an interest rate of 3.0%. The Series 2009 B Revenue and Refunding Bonds were issued to: (i) refund the Series 1998 A Revenue and Refunding Bonds (Senior Lien/Refunding Bonds), (ii) fund the Series 2009 B Senior Lien Debt Service Reserve Account, and (iii) finance certain costs of issuance of the Series 2009 B Revenue and Refunding Bonds. The Series 2009 B Revenue and Refunding Bonds amount to $266,330,000 and mature from 2010 to 2025 at an interest rate of 5.0%. The Series 2009 C Revenue and Refunding Bonds were issued to: (i) refund the Series 1998 E Revenue and Refunding Bonds (Subordinate Lien/Capital Program Bonds), (ii) fund the Series 2009 C Subordinate Lien Debt Service Reserve Account, and (iii) finance certain costs of issuance of the Series 2009 C Revenue and Refunding Bonds. The Series 2009 C Revenue and Refunding Bonds amounted to $97,510,000 and mature from 2010 to 2022 at an interest rate of 5.0%. The Series 2009 C Revenue and Refunding Bonds are subject to optional redemption by PFA on or after October 1, 2018, at redemption price of 100% of the principal amount thereof, plus interest accrued to the date fixed for redemption. Interest on the Series 2009 A1, A2, B and C Revenue and Refunding Bonds is payable semi-annually on April 1 and October 1, and principal is payable annually on October 1. The Government is responsible for all principal and interest payments on the Series 2009 A1, A2, B and C Revenue and Refunding Bonds. The principal and interest payments on October 1 are funded by the Matching Fund Revenues, and the required investment to meet the April 1 interest payment is determined and deposited into the debt service reserve accounts, which is also funded by the Matching Fund Revenues. The Series 2009 A1, A2, B and C Revenue and Refunding Bonds maturing after the dates below are redeemable at the option of PFA, at prescribed redemption prices expressed as a percentage of the principal amount, as follows: Series 2009 A1, A2, B and C Revenue and Refunding Bonds Price October 1, 2019, and thereafter 100% On April 25, 2022, the Series 2009 A1, B and C Revenue and Refunding Bonds were redeemed through the issuance of the Matching Fund Special Purpose Securitization Corporation Series 2022 A and 2022 B Matching Fund Securitization Bonds. Government of the United States Virgin Islands Notes to Basic Financial Statements 88 Series 2009 A Revenue Bonds (Diageo) On July 9, 2009, PFA issued the Series 2009 A Revenue Bonds (Diageo), the proceeds of which amounted to $250,000,000. These bonds are secured by a pledge of Diageo Matching Fund Revenues (Matching Funds generated from the sale of Captain Morgan rum products), which includes certain funds established under the original indenture, the Third Supplemental Indenture, and the 2009 Matching Fund Loan Note – Diageo Project, Series A issued by the Government. The bonds bear interest at 6.00% to 6.75% and mature from 2014 to 2037. The proceeds were loaned to the Government under the same terms as the bonds. The bonds were limited special obligations of PFA. The bonds were issued to: (i) provide a grant to Diageo USVI, Inc. (Diageo USVI) to finance the costs of the acquisition, design, development, construction, and equipping of a rum production and maturation warehouse facility to be located on St. Croix (the Diageo Project) (ii) redeem the Subordinated Revenue Bond Anticipation Notes (Virgin Islands Matching Fund Loan Notes – Diageo Project) Series 2009 A issued to finance preliminary costs of the Diageo Project (iii) fund the Series 2009 A Senior Lien Debt Service Reserve Account, (iv) pay capitalized interest on the Series 2009 A Revenue Bonds, and (v) finance certain costs of issuance of the Series 2009 A Revenue Bonds. The Series 2009 A Bonds maturing on or after October 1, 2020 shall be subject to optional redemption on or after October 1, 2020 at a redemption price equal to 100% of the principal amount thereof, plus interest accrued to the date fixed for redemption. In association with the Series 2009 A Revenue Bonds, PFA entered into an agreement with Diageo USVI, Inc. (Diageo) on June 17, 2008. Provisions of the agreement call for payments of excess matching funds, after-debt service, debt service reserve, and sinking fund redemption payments to Diageo of 49.5% - 57.0%. Interest on the Series 2009 A Revenue Bonds (Diageo) is payable semi-annually on April 1 and October 1, and principal is payable annually on October 1. The Government is responsible for all principal and interest payments on the Series 2009 A Revenue Bonds. The principal and interest payments on October 1 are funded by the Matching Fund Revenues, and the required investment to meet the April 1 interest payment is determined and deposited into the debt service reserve accounts, which is also funded by the Matching Fund Revenues. The Series 2009 A Revenue Bonds (Diageo) maturing after the dates below are redeemable at the option of PFA, at prescribed redemption prices expressed as a percentage of the principal amount, as follows: Series 2009 A Revenue Bonds (Diageo) Price October 1, 2020, and thereafter 100% On April 25, 2022, the Series 2009 A Revenue Bonds (Diageo) were redeemed through the issuance of the Matching Fund Special Purpose Securitization Corporation Series 2022 A and 2022 B Matching Fund Securitization Bonds. Government of the United States Virgin Islands Notes to Basic Financial Statements 89 Pledged Funds, Covenants and Collateral – PFA Matching Fund Bonds The Government has pledged the Matching Funds Revenues, as described below, to the timely payment of principal and interest on the Series 2013 B Revenue and Refunding Bonds, Series 2013 A Revenue and Refunding Bonds, Series 2012 A Revenue Bonds, Series 2010 A and B Revenue Bonds, Series 2009 A Revenue Bonds (Cruzan), the Series 2009 A1, A2, B and C Revenue and Refunding Bonds, and the Series 2009 A Revenue Bonds (Diageo). Thus, while the PFA matching fund bonds were outstanding, all amounts to be received by the Government from federal rum excise tax were deposited directly in a trust account from which the Bonds are paid in accordance with the Indenture of Trust between Bank of New York Mellon and PFA. The Secretary of the United States Department of Treasury makes annually certain transfers to the Government of substantially all excise taxes imposed and collected under the internal revenue laws of the United States in any fiscal year on certain products produced in the Virgin Islands (primarily rum) and exported to the United States from the Virgin Islands. The amount required to be remitted to the Government by the Secretary of the Treasury is an amount no greater than the total amount of local revenues (primarily taxes) collected by the Government in each fiscal year. The term “matching fund revenues” is used to denote these payments. Estimated prepayments of matching fund revenues are made to the Government prior to the beginning of each fiscal year, subject to adjustment for local revenue collected by the United States Department of Treasury during such year. Such adjustments are made to the estimated prepayments for a subsequent fiscal year. In fiscal year 2022, pledged matching rum excise tax revenues represented 37.0% of total rum excise revenues. Payments of Matching Fund Revenue Bonds principal and interest from matching rum excise tax revenues, before the bonds were defeased in April 2022, amounted to $58.8 million and $49.9 million, respectively. Gross Receipts Revenue Bonds 2014 Series D Revenue Bonds On December 3, 2014, PFA issued the Series 2014 D Revenue Bonds, the proceeds of which amounted to $5,765,000. These bonds are secured by the pledge of gross receipts tax revenues, subject to the annual moderate-income housing fund deposit as well as any prior liens or pledges. The Series 2014 D Revenue Bonds were issued to (i) finance certain costs associated with the broadband expansion program, (ii) fund the debt service reserve of the Series 2014 D Bonds in an amount necessary to meet debt service requirements, and (iii) pay the costs of issuance related to the Series 2014 D Bonds accounts. The Series 2014 D Bonds mature in 2033 at an interest rate of 6.03%. Interest on the Series 2014 D Revenue Bonds is payable semi-annually on April 1 and October 1, and the principal is payable in total on October 1, 2033. The Government is responsible for all principal and interest payments on the Series 2014 D Revenue Bonds. The principal and interest payments on October 1 are funded by the Gross Receipts Taxes, and the required investment to meet the April 1 interest payment is determined and deposited into the debt service reserve accounts, which is also funded by Gross Receipts Taxes. Government of the United States Virgin Islands Notes to Basic Financial Statements 90 The Series 2014 D Revenue Bonds maturing after the dates below are redeemable at the option of PFA, at prescribed redemption prices expressed as a percentage of the principal amount, as follows: Series 2014 D Revenue Bonds Price Any time prior to maturity 100% Make-Whole Redemption Price Series 2014 C Revenue and Refunding Bonds On November 14, 2014, PFA issued the Series 2014 C Revenue and Refunding Bonds, the proceeds of which amounted to $247,050,000. These bonds are secured by the pledge of gross receipts tax revenues, subject to the annual moderate-income housing fund deposit as well as any prior liens or pledges. The Series 2014 C Revenue and Refunding Bonds were issued to (i) refund the outstanding Series 2003 A Bonds, (ii) finance all or a portion of the costs of certain capital projects, and (iii) pay the costs of issuance related to the Series 2014 C Bonds. The Series 2014 C Bonds mature from 2015 to 2044 at an interest rate of 4.5% to 5.0%. The proceeds of the Series 2014 C Bonds related to the refunding were placed in a trust account to provide for all future debt service payments on the 2016 to 2034 maturities of the Series 2003 A Bonds. Approximately $235,249,196 of bond proceeds were deposited into the Escrow Fund accounts. On December 1, 2014, the Series 2003 A bonds were defeased through the exercise of call redemptions. Interest on the Series 2014 C Revenue and Refunding Bonds is payable semi-annually on April 1 and October 1, and the principal is payable annually on October 1. The Government is responsible for all principal and interest payments on the Series 2014 C Revenue and Refunding Bonds. The principal and interest payments on October 1 are funded by the Gross Receipts Taxes, and the required investment to meet the April 1 interest payment is determined and deposited into the debt service reserve accounts, which is also funded by Gross Receipts Taxes. The Series 2014 C Revenue and Refunding Bonds maturing after the dates below are redeemable at the option of PFA, at prescribed redemption prices expressed as a percentage of the principal amount, as follows: Series 2014 C Revenue and Refunding Bonds Price October 1, 2024, and thereafter 100% Series 2014 A Revenue Bonds On September 5, 2014, PFA issued the Series 2014 A Revenue Bonds, the proceeds of which amounted to $49,640,000. These bonds are secured by the pledge of gross receipts tax revenues and are subject to the annual moderate-income housing fund deposit as well as any prior liens or pledges. Government of the United States Virgin Islands Notes to Basic Financial Statements 91 The bonds were issued to (i) finance all or a portion of the costs of certain capital projects, as authorized by the Virgin Islands Legislature in 2013 V.I. Act 7499, as amended by 2014 V.I. Act 7631, as further amended by 2014 V.I. Act 7637 and approved by PFA by resolution, (ii) fund the Debt Service Reserve account in an amount necessary to meet the Debt Service Reserve Requirement, and (iii) pay the costs and expenses of issuing and delivering the Series 2014 A Bonds. The Series 2014 A Revenue Bonds mature from 2015 to 2034 at an interest rate of 5.0%. Interest on the Series 2014 A Revenue Bonds is payable semi-annually on April 1 and October 1, and the principal is payable annually on October 1. The Government is responsible for all principal and interest payments on the Series 2014 A Revenue Bonds. The principal and interest payments on October 1 are funded by the Gross Receipts Taxes, and the required investment to meet the April 1 interest payment is determined and deposited into the debt service reserve accounts, which is also funded by Gross Receipts Taxes. The Series 2014 A Revenue Bonds maturing after the dates below are redeemable at the option of PFA, at prescribed redemption prices expressed as a percentage of the principal amount, as follows: Series 2014 A Revenue Bonds Price October 1, 2024, and thereafter 100% Series 2012 A and B Revenue and Refunding Bonds On November 20, 2012, PFA issued the Series 2012 A and B Revenue and Refunding Bonds, the proceeds of which amounted to $228,805,000. These bonds are secured by the pledge of gross receipts tax revenues, subject to the annual moderate-income housing fund deposit as well as any prior liens or pledges. The Series 2012 A Revenue and Refunding Bonds were issued to (i) refund the outstanding Series 1999 A Bonds, (ii) refund the outstanding 2010 A1 and A2 Notes, (iii) pay the costs and expenses of issuing and delivering the Series 2012 A Revenue and Refunding Bonds, and (iv) fund the Debt Service Reserve account in an amount necessary to meet the Debt Service Reserve requirement related to the Series 2012 A Revenue and Refunding Bonds. The Series 2012 A Bonds mature from 2017 to 2032 at an interest rate of 2.3% to 5.0%. The Series 2012 B Revenue and Refunding Bonds were issued to (i) refinance the outstanding 2011 A Notes, which initially financed the Broadband Project, (ii) pay the costs and expenses of issuing and delivering the Series 2012 B Revenue and Refunding Bonds, and (iii) fund the Debt Service Reserve account in an amount necessary to meet the Debt Service Reserve requirement related to the Series 2012 B Revenue and Refunding Bonds. The Series 2012 B Revenue and Refunding Bonds mature in 2027 at an interest rate of 5.3%. The refunding of the Series 1999 A Bonds, on November 20, 2012, was made to obtain lower interest rates. The economic gain obtained by this current refunding is the difference between the present value of old debt service requirements and the new debt service. This refunding resulted in a debt service saving of approximately $11.9 million and an economic gain of approximately $7.7 million. Government of the United States Virgin Islands Notes to Basic Financial Statements 92 Interest on the Series 2012 A and B Revenue and Refunding Bonds is payable semi-annually on April 1 and October 1, and the principal is payable annually on October 1. The Government is responsible for all principal and interest payments on the Series 2012 A and B Revenue and Refunding Bonds. The principal and interest payments on October 1 are funded by the Gross Receipts Taxes, and the required investment to meet the April 1 interest payment is determined and deposited into the debt service reserve accounts, which is also funded by Gross Receipts Taxes. The 2012 Series A and B Revenue and Refunding Bonds maturing after the dates below are redeemable at the option of PFA, at prescribed redemption prices expressed as a percentage of the principal amount, as follows: Series 2012 A and B Revenue and Refunding Bonds Price October 1, 2032 (Series 2012 A) 100% October 1, 2027 (Series 2012 B) Make-Whole Redemption Price Series 2012 C Revenue Bonds On December 19, 2012, PFA issued the Series 2012 C Revenue Bonds, the proceeds of which amounted to $35,115,000. These bonds are secured by the pledge of gross receipts tax revenues and are subject to the annual moderate-income housing fund deposit as well as any prior liens or pledges. The bonds were issued to (i) provide a loan to the Government to be used to finance certain operating expenses and other obligations of the Government, (ii) fund capitalized interest on a portion of the Series 2012 C Bonds, and (iii) pay the costs and expenses of issuing and delivering the Series 2012 C Bonds. The Series 2012 C Revenue Bonds mature from 2017 to 2042 at an interest rate of 3.0% to 5.0%. Interest on the Series 2012 C Revenue Bonds is payable semi-annually on April 1 and October 1, and the principal is payable annually on October 1. The Government is responsible for all principal and interest payments on the Series 2012 C Revenue Bonds. The principal and interest payments on October 1 are funded by the Gross Receipts Taxes, and the required investment to meet the April 1 interest payment is determined and deposited into the debt service reserve accounts, which is also funded by Gross Receipts Taxes. The Series 2012 C Revenue Bonds maturing after the dates below are redeemable at the option of PFA, at prescribed redemption prices expressed as a percentage of the principal amount, as follows: Series 2012 C Revenue Bonds Price October 1, 2030 and thereafter 100% Series 2006 A Revenue Bonds On September 28, 2006, PFA issued the Series 2006 A Revenue Bonds, the proceeds of which amounted to $219,490,000. These bonds are secured by a pledge of the Trust estate, which includes certain funds established under the original Indenture, the Seventh Supplemental Indenture and the 2006 Gross Receipts Taxes Loan Note, Series issued by the Government. The proceeds were loaned to the Government under the same terms as the Bonds. The bonds are limited special obligations of PFA. The bonds bear interest at 3.5% to 5.0% and mature from 2007 to 2029. Government of the United States Virgin Islands Notes to Basic Financial Statements 93 The proceeds of the bonds were issued to: (i) refund a portion of PFA’s Revenue Bonds, Series 1999 A, (ii) pay the cost of a termination fee in connection with an outstanding swap option agreement, (iii) fund certain capital projects, (iv) fund the Debt Service Reserve Account, (v) pay certain costs of issuing the Series 2006 A Revenue Bonds and (vi) fund a net payment reserve account for a new swap agreement. The Series 2006 A Revenue Bonds maturing on or before October 1, 2016 are not subject to optional redemption. The advance refunding of the 2024 and 2029 maturities of the Series 1999 A Bonds was made to obtain lower interest rates. The economic gain obtained by this advance refunding is the difference between the present value of old debt service requirements and the new debt service. This refunding resulted in a debt service saving of approximately $40.8 million and an economic gain of approximately $25.6 million. The proceeds of the Series 2006 A Revenue Bonds related to the refunding were placed in a trust account to provide for all future debt service payments on the 2024 to 2029 maturities of the Series 1999 A Revenue Bonds. Approximately $175,125,168 of funds was deposited into the Escrow Fund accounts. The Series 1999 A Revenue Bonds are fully defeased. Interest on the Series 2006 A Revenue Bonds is payable semi-annually on April 1 and October 1, and principal is payable annually on October 1. The Government is responsible for all principal and interest payments on the Series 2006 A Revenue Bonds. The principal and interest payments on October 1 are funded by Gross Receipts taxes, and the required investment to meet the April 1 interest payment is determined and deposited into the debt service reserve accounts, which is also funded by Gross Receipts taxes. The Series 2006 A Revenue Bonds maturing after the dates below are redeemable at the option of PFA, at prescribed redemption prices expressed as a percentage of the principal amount, as follows: Series 2006 A Revenue Bonds Price October 1, 2016 and thereafter 100% Pledged Funds, Covenants and Collateral The Government has pledged Gross Receipts Taxes subject to the annual moderate-income housing fund deposit, and the TIF special escrow agreement, as well as any prior lien or pledge, to the timely payment of the principal and interest on the Series 2014 D Revenue Bonds, Series 2014 C Revenue and Refunding Bonds, Series 2014 A Revenue Notes, Series 2012 A and B Revenue and Refunding Bonds, Series 2012 C Revenue Bonds, and the Series 2006 A Revenue Bonds. The Government’s auditor provides quarterly verification of gross receipts deposits made to the collecting agent, in accordance with bond covenants. In fiscal year 2022, pledged gross receipts tax revenues represented 25.91% of total gross receipt tax revenues. Payment of Gross Receipts Revenue Bonds and Notes principal and interest from pledged gross receipts taxes amounted to $58.7 million for bonds and $1.6 million for notes, respectively. Government of the United States Virgin Islands Notes to Basic Financial Statements 94 Tobacco Settlement Bonds 2006 Series A, B, C & D Tobacco Turbo Capital Appreciation Bonds On March 15, 2006, TSFC issued the 2006 Tobacco Settlement Financing Corporation Asset-Backed Bonds, Subordinated Series 2006 (Turbo Capital Appreciation Bonds) amounting to $48,145,000, with an issue value of $7,290,009 net of accretion of $40,854,991. The bonds are secured and payable from collections including all Tobacco Settlement Revenues to be received by TSFC, reserves, amounts held in other accounts established by the indenture and TSFC’s rights under the purchase agreement. The proceeds have been used for the purpose of (i) to finance several capital, hospital, and health development projects for the benefit of the Virgin Islands and its residents, (ii) to pay certain costs of issuing the Series 2006 Bonds, and (iii) to fund operating costs associated with the Series 2006 Bonds. Interest on the Series 2006 Bonds is not paid currently but accretes from the date of delivery, compounded every May 15 and November 15, commencing May 15, 2006, and is paid at maturity or upon prior redemption, provided however that the 2001 Series Bonds have been paid in full. 2001 Series A Tobacco Bonds On November 20, 2001, TSFC issued the 2001 Tobacco Settlement Financing Corporation Asset- Backed Bonds (Term and Capital Appreciation Bonds) amounting to $23,685,000, with an issue value of $21,709,862 net of accretion of $1,975,138. The bonds are secured and payable from collections including all Tobacco Settlement Revenues to be received by TSFC, reserves, amounts held in other accounts established by the indenture, and TSFC’s rights under the purchase agreement. The proceeds have been used for the purpose of (i) purchasing all rights, title, and interest in certain litigation awards under the MSA entered into by participating cigarette manufacturers, (ii) issuing Tobacco Settlement Asset-Backed Bonds to pay the purchase price for the rights, and (iii) providing funds for hospital and healthcare projects in the United States Virgin Islands. Interest on the Series 2001 Bonds is payable semi-annually on each May and November 15, beginning with May 2002 for the Term Bonds. The Corporation is responsible for all principal and interest payments on the bonds. The convertible Capital Appreciation Bonds will accrete interest prior to November 15, 2007, and will accrue interest after that date. Interest will compound on May 15 and November 15. Matching Fund Special Purpose Securitization Bonds On April 6, 2022, MFSPSC issued the Series 2022 A Securitization Bonds and the Series 2022 B Taxable Securitization Bonds (Series 2022 A and Series 2022 B Bonds), the proceeds of which amounted to $952,825,000. The bonds are secured by a pledge of matching fund receipts. Matching fund receipts are received from the Department of Interior as an advance of distilled spirits excise tax on rum products shipped by Virgin Islands rum producers to the United States. Government of the United States Virgin Islands Notes to Basic Financial Statements 95 The Series 2022 A and B Bonds were issued to: (i) purchase from the Government all of its right, title and interest in and to the MFRs, (ii) pay capitalized interest on the Series 2022 Bonds, (iii) pay the costs of issuance of the bonds, and (iv) transfer to the GERS Funding Note Trustee an amount sufficient to fund the annual GERS Funding Note payment obligations. The Series 2022A Bonds were issued with an original issue premium of $28,061,333. Interest on the Series 2022 A and Series 2022 B bonds is payable semi-annually on April 1 and October 1, beginning October 1, 2022, with principal payments due October 1, beginning October 1, 2025. Capitalized interest was funded as part of the issuance of the bonds in the amount of $112.2 million. Capitalized interest is applied to semi-annual interest payments with an initial payment of $18.3 million on October 1, 2022, and subsequent payments of $18.8 million through April 1, 2025. Interest for the year ended September 30, 2022 (paid October 1, 2022) amounted to $23.3 million and amortization of bond premium amounted to $1.3 million. The Series 2022 A bonds maturing after the dates below are redeemable at the option of MFSPSC, at prescribed redemption prices expressed as a percentage of the principal amount, as follows: Series 2022 A Securitization Bonds Price October 1, 2032, and thereafter 100% The Series 2022 B bonds are subject to redemption prior to maturity, at the election of MFSPSC, on any date at a redemption price equal to the greater of (i) the principal amount of the Series 2022 B bonds to be redeemed, or (ii) the “make-whole option redemption” amount. The make-whole optional redemption is the sum of the present values of the remaining scheduled payments of principal, interest, not including any portion of interest accrued and unpaid as of the date redeemed, discounted to the date of redemption at the U.S. Treasury rate plus 50 basis points plus accrued interest. The make-whole optional redemption amount is to be calculated by an independent accounting firm or advisor retained by MFSPSC. Federal-Aid Highway Bonds On December 15, 2015, PFA issued the Series 2015 Federal-Aid Highway Bonds (Series 2015 Bonds), the proceeds of which amounted to $89,880,000. These bonds are secured by a lien on a security interest in, the Trust Estate, which includes all rights and interests in (i) the Federal Highway Grant Revenues, (ii) subject to the limitations set forth in the Indenture, the Transportation Trust Fund, and the Pledged Transportation Trust Fund Revenues, (iii) the amounts on deposit in certain funds and accounts created under the Indenture, including Debt Service Reserve Fund, and (iv) the Loan Agreement and the Loan Note. The bonds are limited special obligations of PFA. The Series 2015 Bonds were issued to (i) finance costs of certain highway capital projects, (ii) establish debt service reserves, and (iii) pay the costs of issuance related to the Series 2015 Bonds. The Series 2015 Bonds mature from 2016 to 2033 at an interest rate of 3.0% to 5.0%. Interest on the Series 2015 Bonds is payable semi-annually on March 1 and September 1, and principal is payable annually on September 1. The Government is responsible for all principal and interest payments on the Series 2015 Bonds. The principal and interest payments on September 1 are funded by the Federal Highway Grant Revenues, and the required investment to meet the March 1 interest payment is determined and deposited into the debt service reserve accounts, which is also funded by the Federal Highway Grant Revenues. Government of the United States Virgin Islands Notes to Basic Financial Statements 96 The Series 2015 Bonds maturing after the dates below are redeemable at the option of PFA, at prescribed redemption prices expressed as a percentage of the principal amount, as follows: Series 2015 Bonds Price September 1, 2025, and thereafter 100% Pledged Funds, Covenants and Collateral The Government has pledged the Federal Highway Grant Revenues to the timely payment of principal and interest on the Series 2015 Bonds. The Federal Highway Administration’s Puerto Rico Division and the Government’s Department of Public Works and PFA have entered into a Memorandum of Understanding (MOU), dated December 9, 2015, documenting the procedures, roles, and responsibilities for (i) programming and authorizing the Approved Projects, (ii) supervising the construction of the Approved Projects, (iii) paying debt service on the Bonds and other Bond-related charges, and (iv) establishing the funding, transfer, and disbursement process for the proceeds of the Bonds. Other Direct-Placement Bonds or Borrowings – Series 2019 A TIF Revenue and Refunding Bonds On November 14, 2019, PFA issued the Series 2019 A TIF Revenue and Refunding bonds with a local bank in the amount of $12.0 million. The proceeds of the bonds were used to: (i) defease the Series 2012 A TIF Notes with outstanding principal of approximately $11.0 million and accrued interest of $104,000, (ii) make a settlement payment to the developer of the Island Crossings Shopping Center, (iii) fund certain debt service reserves and (iv) pay the costs of the issuance. The Series 2019 A Bonds bear an interest rate of 6.9% over a term of 10 years. Interest on the Series 2019 A TIF Revenue and Refunding Bonds is payable monthly, and the principal is payable commencing December 1, 2019. The Government is responsible for all principal and interest payments on the Series 2019 A Bonds. The monthly principal and interest payments are funded by pledged Gross Receipts Taxes. The Series 2019 A TIF Revenue and Refunding Bonds maturing after the dates below are redeemable at the option of the PFA, at prescribed redemption prices expressed as a percentage of the principal amount as follows: Series 2019 A TIF Revenue and Refunding Bonds Price December 1, 2019 and thereafter 100% Pledged Funds, Covenants and Collateral The Government has pledged the Gross Receipts Taxes of the TIF Developer Project subject to the annual moderate-income housing fund deposit, as well as any prior lien or pledge, to the timely payment of the principal and interest on the Series 2019 A TIF Revenue and Refunding Bonds. The Government has contracted with its auditor to provide quarterly verification of gross receipts deposits made to the collecting agent, in accordance with bond covenants. Government of the United States Virgin Islands Notes to Basic Financial Statements 97 The Tax Increment Revenue Loan Agreement entered into with the Government and Trustee in connection with the issuance of the Series 2019 A TIF Revenue and Refunding Bonds requires a Debt Service Coverage Ratio (DSCR) of 1.25 determined on an annual basis (before October 31st of each fiscal year). The ratio is the Islands Crossings Incremental Revenues together with any ground lease payments divided by the total amount of annual principal and interest payments on the Series 2019 A TIF Revenue and Refunding Bonds. PFA is required to maintain a Loan to Value Ratio (LTV) of no more than 65.0%. In any fiscal year in which the LTV shall exceed 65.0%, the DSCR shall be 1.35, and, upon certification thereof by the TIF Calculation Agent, any amounts then available in the Surplus Account may be made first to interest and then to principal due on the 2019A TIF Project Developer Note. No payments may be made on the 2019 A TIF Project Developer Note until the DSCR and LTV requirements have been met. For the year ended September 30, 2022, the DSCR amounted to 2.22 and the LTV was 36.0%, meeting the requirements of the Tax Increment Revenue Loan Agreement. To provide additional security for the payment of the principal and interest due on the Series 2019 A Bonds, the TIF Project Developer has entered into the Purchaser Collateral Documents for the benefit of the lender, to further secure the payment of the Bonds. During the time that the Series 2019 A Bonds are outstanding, the Economic Development Authority shall obtain an independent report on the financial statements of the Islands Crossings Project, determining if the incremental pledged funds are equal to estimates, and if the Island Crossings Project is economically viable for the repayment of the Series 2019 A TIF Revenue and Refunding Bonds. The bonds contain a provision that in an event of default, the lender may at any time declare the entire balance of the Series 2019 A Bond and any indebtedness of PFA to the lender to be due and payable, whereupon the same shall become immediately due and payable without presentment, demand, protest, or notice. Government of the United States Virgin Islands Notes to Basic Financial Statements 98 Future debt service requirements for bonds for which gross receipts taxes have been pledged are as follows (expressed in thousands): Governmental Activities – Gross Receipts Revenue Bonds Series 2006 A Revenue Bonds Series 2012 A Revenue Bonds Series 2012 B Revenue Bonds Series 2012 C Revenue Bonds Series 2014 A Revenue Bonds Series 2014 C Revenue Bonds Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Maturity Year: 2023 $ 16,895 $ 7,113 $ 1,430 $ 5,887 $ 2,290 $ 766 $ 1,955 $ 1,012 $ 2,100 $ 1,824 $ 6,705 $ 10,199 2024 17,515 6,253 6,780 5,689 2,415 642 430 952 2,210 1,717 7,045 9,855 2025 18,165 5,361 7,395 5,335 2,545 512 455 930 2,325 1,603 7,385 9,494 2026 18,840 4,435 8,040 4,949 2,680 375 475 907 2,440 1,484 6,595 9,145 2027 19,530 3,476 8,735 4,529 2,825 231 500 883 2,565 1,359 6,920 8,807 2028-2032 63,025 4,395 69,005 13,722 2,980 78 3,215 3,993 14,955 4,679 85,995 36,082 2033-2037 - - 17,215 430 - - 5,490 2,887 10,940 838 71,955 7,687 2038-2042 - - - - - - 7,060 1,326 - - 7,205 2,832 2043-2047 - - - - - - 1,635 41 - - 8,705 675 Total $ 153,970 $ 31,033 $ 118,600 $ 40,541 $ 15,735 $ 2,604 $ 21,215 $ 12,931 $ 37,535 $ 13,504 $ 208,510 $ 94,776 Series 2014 D Revenue Bonds Total Gross Receipts Tax Bonds Principal Interest Principal Interest Maturity Year: 2023 $ 255 $ 255 $ 31,630 $ 27,056 2024 270 239 36,665 25,347 2025 290 222 38,560 23,457 2026 305 204 39,375 21,499 2027 325 185 41,400 19,470 2028-2032 1,955 597 241,130 63,546 2033-2037 955 59 106,555 11,901 2038-2042 - - 14,265 4,158 2043-2047 - - 10,340 716 Total $ 4,355 $ 1,761 $ 559,920 $ 197,150 Government of the United States Virgin Islands Notes to Basic Financial Statements 99 Future debt service requirements for bonds for which tobacco settlement revenues have been pledged are as follows (expressed in thousands): Maturity Year Principal Interest 2023 $ - $ 61 2024 - 61 2025 - 61 2026 - 61 2027 - 60 2028-2032 1,215 243 2033-2037 48,145 - Less future accretion: (26,979) - Total $ 22,381 $ 547 Future debt service requirements for bonds for which matching fund receipts have been pledged are as follows (expressed in thousands): Maturity Year Principal Interest 2023 $ - $ 47,202 2024 - 47,866 2025 - 47,866 2026 39,985 46,754 2027 54,710 44,274 2028-2032 318,600 176,299 2033-2037 409,055 85,793 2038-2040 130,475 5,817 Total $ 952,825 $ 501,871 Future debt service requirements for bonds for which federal-aid highway grant revenues have been pledged are as follows (expressed in thousands): Maturity Year Principal Interest 2023 $ 4,430 $ 3,146 2024 4,650 2,924 2025 4,880 2,691 2026 5,125 2,447 2027 5,380 2,191 2028-2032 31,225 6,639 2033-2037 7,215 361 Total $ 62,905 $ 20,399 Government of the United States Virgin Islands Notes to Basic Financial Statements 100 Future debt service requirements for other direct-placement bonds or borrowings for which gross receipts taxes have been pledged are as follows (expressed in thousands): Maturity Year Principal Interest 2023 $ 565 $ 719 2024 604 680 2025 650 634 2026 697 588 2027 747 537 2028-2032 6,310 977 Total $ 9,573 $ 4,135 (b) Loans and Notes Payable 2022 GERS Funding Note, Taxable On April 6, 2022, PFA issued the GERS Funding Notes Taxable, (GERS Funding Note) to GERS in the amount of $3.8 billion. The GERS Funding Note was issued to provide additional financial resources for the stability and liquidity of the Government’s retirement system. The issuance of the GERS Funding Note was authorized by Act 8540 enacted by the Legislature in February 2022. This Act also authorized the formation of the MFSPSC. The Indenture of Trust pledges the residual matching fund receipts deposited into the Residual Fund Escrow by the MFSPSC for the payment of the note. The non-interest-bearing GERS Funding Note was issued for a thirty-year term with annual principal payments ranging from $73.6 million to $158.0 million, due on October 1st of each year. An initial payment of $89.2 million was made to GERS on April 7, 2022 from proceeds of the issuance of the Series 2022 A and Series 2022 B Securitization Bonds. The GERS Funding Note may not be sold or transferred without registration under the Securities Act of 1933, or an exemption obtained therefrom. The GERS Funding Note does not constitute a general obligation of the PFA or of the Government and may not be called for redemption by the PFA. Principal payments made under the GERS Funding Note are deemed in-kind contributions by the Government to the retirement system. Future contributions for the 2022 GERS Funding Note are as follows (expressed in thousands): Maturity Year Principal 2023 $ 157,997 2024 157,997 2025 157,996 2026 81,537 2027 73,616 2028-2032 412,139 2033-2037 412,170 2038-2042 682,679 2043-2047 789,982 2048-2052 789,983 Total $ 3,716,096 Government of the United States Virgin Islands Notes to Basic Financial Statements 101 2019 A TIF Project Developer Note On November 14, 2019, PFA issued the Series 2019 A TIF Project Developer Note. As part of the Tax Increment Financing Agreement entered into in 2009, the TIF Project Developer was entitled to a fee in the amount of $3.4 million to be paid through a non-transferable special limited obligation of PFA secured by a subordinate pledge of the Island Crossings incremental revenues collected under a special escrow agreement. The TIF Project Developer Note was issued in the amount of $1.6 million, with a maturity date of November 1, 2049, to pay the remaining balance of the Project Developer fee. Interest on the Project Developer bonds is 8.5% with payments made annually on October 1 over a thirty (30) year term. The first payment will be due on October 1, 2020. The 2019 A TIF Project Developer Note was issued under the Tax Increment Revenue Loan Agreement dated November 1, 2019, between the Government, PFA, and Trustee. Under the Tax Increment Revenue Loan Agreement, the Note may not be transferred to secure payment of the Series 2019 A TIF Revenue and Refunding Bonds (Series 2019 A Bonds). In the event the Series 2019 A Bonds are prepaid, the 2019 A TIF Project Developer Note shall be prepaid in the same proportion as the Series 2019 A Bonds. Future debt service requirements for the 2019 A TIF Project Developer Loan Note are as follows (expressed in thousands): Maturity Year Principal Interest 2023 $ 15 $ 132 2024 16 131 2025 18 129 2026 19 128 2027 21 126 2028-2032 133 601 2033-2037 200 534 2038-2042 301 433 2043-2047 453 281 2048-2050 375 65 Total $ 1,551 $ 2,560 2016 A Notes On October 1, 2016, PFA issued two Subordinate Lien Revenue Notes, Series 2016 A (Virgin Islands Gross Receipts Taxes Loan Notes-Emergency First Responder Project), collectively the Series 2016 A Notes, in an aggregate amount of up to $10,000,000 to: (i) finance the acquisition of public safety vehicles and related equipment (the Series 2016 A-1 Project), (ii) to finance certain consulting services for the improvement of public safety and security in the Virgin Islands, (the Series 2016 A-2 Project), and (iii) to pay certain costs incidental to the issuance of the Series 2016 A Notes. The Series 2016 A Notes matures in 2022 with variable interest rates based on the 90-day London Inter-bank Offered Rate (LIBOR) plus 375 basis points. The Series 2016 A Notes are subject to prepayment by PFA in whole or in part at any time upon 100% payment of the outstanding principal plus interest accrued to the prepayment date. As of September 30, 2022, the Series 2016 A Notes had been repaid. Government of the United States Virgin Islands Notes to Basic Financial Statements 102 As security for the payment of principal and interest on the Series 2016 A Notes, the PG pledged and assigned the gross receipts taxes collected by the PG subject and subordinate to the lien on such taxes and revenues in favor of the holder of outstanding bonds and to the Required Annual Moderate Income Housing Deposit. The PG covenants to provide to the PFA within 180 days of the end of each fiscal year a financial report summarizing annual receipts and transfers of gross receipts taxes and substitute revenues. (c) Loan Payable – U.S. Treasury In August 2009, the Territory reserve balance of the Unemployment Trust Fund (UTF) became inadequate to cover expenditures for unemployment compensation (UC) benefits. UC benefits are an entitlement program administered through the U.S. Treasury and the PG is legally liable to pay benefits even if the UTF becomes insolvent. As of September 30, 2022, the PG owed $95.7 million to the U.S. Treasury. States and territories with outstanding loans from the UTF must repay them fully by the November 10 following the second consecutive January 1 on which the state or territory has an outstanding loan. If a state or territory does not repay a UTF loan by November 10 of the second year, it becomes subject to a reduction in the amount of state unemployment tax credit applied against the federal unemployment tax beginning with the preceding January 1 until the state repays the loan fully. For calendar year 2022, the credit reduction rate increased from 3.3% to 3.6%. During the year ended September 30, 2022, the PG borrowed $8.0 million from the UTF and paid $1.7 million in interest on the loan. The interest rate charged on the loan was 2.3% from October 1, 2021 through December 31, 2021, and 1.6% from January 1, 2022 through September 30, 2022. (d) Loans and Bonds Payable – The West Indian Company Limited Consolidated Bank Loan In July 2017, WICO consolidated various loans with Banco Popular de Puerto Rico (Banco Popular) in the amount of $42,697,836 at a fixed interest rate of 5.3% per annum, amortized on a 25-year term with a final maturity date of July 2022. Upon maturity, should WICO stay in compliance with the current terms of the loan, it may refinance the loan for a term not to exceed twenty (20) years, subject to new terms and conditions. In June 2022, WICO prepaid the consolidated loan from the Banco Popular including outstanding moratorium payments, in the amount of $41,396,188. WICO also paid accrued interest of $265,626 and a prepayment penalty of $122,335. WICO entered into loan termination, pledge termination and guaranty termination agreements with the Bank, documenting the close of the loan. Paycheck Protection Program (PPP) Loans In April 2021, WICO received a Paycheck Protection Program loan in the amount of $717,000, subject to a fixed interest rate of 1.0%. In October 2022, the loan was forgiven by the Small Business Administration (SBA) and the bank was paid the principal amount of $717,000 plus interest of $10,000. Under the terms of the loan forgiveness, WICO must retain all records relating to the loan for six years from the date the loan is forgiven. Government of the United States Virgin Islands Notes to Basic Financial Statements 103 WICO Port Facilities Revenue Bonds In June 2022, WICO issued the Port Facilities Revenue Bonds, Series 2022A Bonds and Series 2022 Bonds (the Series 2022 Bonds). The Series 2022 Bonds were issued at a nominal value of $52.6 million and a discounted value of $51.6 million. The Series 2022A and 2022B Bonds are privately placed and were offered exclusively to qualified institutional buyers and were not registered under the Securities Act, or any state securities laws. The bonds are limited obligations of the Company and are not the debts of PFA or the Government. The Series 2022 Bonds were issued to: (i) prepay the WICO’s loan with a local bank in the amount of $41.7 million, (ii) fund a capitalized interest fund in an amount equal to interest accrued through December 31, 2022, (iii) fund the debt service reserve fund, (iv) finance certain capital improvements to docks, wharves, and ancillary facilities, (v) acquire a twenty-foot skiff for port operations, and (vi) pay certain costs of issuing the bonds. The Series 2022A Bonds are due from October 1, 2033 to October 1, 2052, with interest rates of 6.1% to 6.4%. Interest is payable annually on October 1st commencing October 1, 2022. The Series 2022B Bonds are due from April 1, 2026 to April 1, 2052, with interest rates of 5.9% to 6.5%. Interest is payable annually on April 1st commencing April 1, 2023. The Series 2022A and Series 2022 B Bonds maturing after the dates below are redeemable at the option of WICO, at the prescribed redemption prices expressed as a percentage of the principal amount, as follows: Series 2022 Bonds Price October 29, 2029, to September 30, 2032 104% - 102% October 1, 2033, and thereafter 100% Pledged Funds, Covenants, and Collateral WICO has pledged port revenues, including debt issuances and insurance proceeds, for the payment of the bonds. The bonds are secured by a first priority mortgage on the property of WICO (excluding the Estate Catherineberg property), a security collateral agreement, assignment of leases and rents, and the pledge of all funds and accounts established through an Indenture of Trust Agreement with UMB Bank, N.A. WICO entered into a continuing disclosure agreement with the Trustee requiring audited financial statements to be provided within 120 days of the fiscal year-end and unaudited financial information, and operating data, to be provided within 45 days of the close of each fiscal quarter beginning June 30, 2022. Government of the United States Virgin Islands Notes to Basic Financial Statements 104 Future debt service requirements for the WICO Port Facilities Revenue Bonds are as follows (expressed in thousands): Maturity Year Principal Interest 2023 $ - $ 992 2024 - 3,338 2025 - 3,337 2026 185 3,338 2027 360 3,327 2028-2032 3,125 16,236 2033-2037 4,930 15,046 2038-2042 6,655 13,316 2043-2047 9,025 10,947 2048-2052 12,345 7,631 2053 16,000 513 Total $ 52,625 $ 78,021 Less: Bond discount (1,039) Total bonds payable, net $ 51,586 (e) Insurance Guaranty Fund Minimum Balance Requirement Under Title 22, Chapter 10 of the VIC, the Virgin Islands Insurance Guaranty Fund is required to maintain a minimum balance of $50.0 million for claimant payments in the event of a failure of an insurance carrier. On February 10, 2012, legislation was enacted authorizing a reduction in the minimum balance to be held by the Virgin Islands Insurance Guaranty Fund from $50.0 million to $10.0 million. In October 2019, the Legislature increased the minimum balance to $20.0 million through September 30, 2020, and was subsequently increased to $40.0 million. On September 22, 2022, Act 8642 increased the minimum balance to $50.0 million effective September 30, 2022. Government of the United States Virgin Islands Notes to Basic Financial Statements 105 Component Units Bonds payable of discretely presented component units are those liabilities that are paid out of resources pledged by such entities. Bonds payable, outstanding as of September 30, 2022 (expressed in thousands): Maturity Interest Rate (%) Balance* Bonds Payable Virgin Islands Water and Power Authority (Electric System)*: Bonds and Bond Anticipation Notes 2025-2035 1.62 – 6.85 $ 235,910 Virgin Islands Port Authority*: Series A Revenue Bonds of 2014 2033 4.00 – 5.00 14,400 Series B Revenue Bonds of 2014 2044 3.00 – 5.00 10,370 Series C Revenue Bonds of 2014 2025 2.00 – 5.00 3,920 Subtotal 264,600 Plus unamortized premium 614 Bonds payable, net 265,214 Less amount due within one year (57,799) Bonds payable, due in more than one year $ 207,415 *Unaudited The changes in bonds payable for discretely presented component units are as follows for the year ended September 30, 2022 (expressed in thousands): September 30, 2022 Beginning Balance Additions Reductions Ending Balance Due Within One Year Due Thereafter Virgin Islands Water and Power Authority: Electric System* $ 233,953 $ 1,957 $ - $ 235,910 $ 54,734 $ 181,176 Water System* 75,000 - 75,000 - - - Virgin Islands Port Authority* 32,674 - 3,370 29,304 3,065 26,239 Total $ 341,627 $ 1,957 $ 78,370 $ 265,214 $ 57,799 $ 207,415 *Unaudited Government of the United States Virgin Islands Notes to Basic Financial Statements 106 The changes in notes payable, line of credit payable, and other long-term liabilities for discretely presented component units are as follows (expressed in thousands): September 30, 2022 Beginning Balance Additions Reductions Ending Balance Due Within One Year Due Thereafter Notes payable Virgin Islands Port Authority* $ 7,381 $ 1,228 $ - $ 8,609 $ 8,609 $ - University of the Virgin Islands* 21,686 - 19,391 2,295 - 2,295 Virgin Islands Housing Finance Authority 694 - 84 610 85 525 Other component units** 4,012 - 25 3,987 612 3,375 Total notes payable: $ 33,773 $ 1,228 $ 19,500 $ 15,501 $ 9,306 $ 6,195 Line of credit payable Virgin Islands Water and Power Authority: Electric System* $ 33,262 $ - $ - $ 33,262 $ 33,262 $ - Water System* 2,740 - - 2,740 - 2,740 Virgin Islands Waste Management Authority 3,750 - 3,750 - - - Total line of credit payable $ 39,752 $ - $ 3,750 $ 36,002 $ 33,262 $ 2,740 Beginning Balance Additions Reductions Ending Balance Due Within One Year Due Thereafter Other long-term liabilities: Virgin Islands Housing Authority $ 2,172 $ 1,948 $ 650 $ 3,470 $ 2,849 $ 621 Virgin Islands Port Authority* 2,538 - - 2,538 1,367 1,171 Virgin Islands Water and Power Authority: Electric System* 122,582 - 13,382 109,200 - 109,200 Hospital and Health Facilities Corporation: Schneider Regional Medical* 4,400 253 - 4,653 4,653 - University of the Virgin Islands* 5,840 22 161 5,701 - 5,701 Virgin Islands Housing Finance Authority 9,918 435 - 10,353 1,002 9,351 Other component units** 4,394 186 90 4,490 1,546 2,944 Total $ 151,844 $ 2,844 $ 14,283 $ 140,405 $ 11,417 $ 128,988 *Unaudited; **University of the Virgin Islands Research and Technology Park Corporation (unaudited) (a) Bonds Payable Virgin Islands Water and Power Authority – Electric System Bond Anticipation Note of 2018C & 2020A (unaudited) On November 28, 2018, the Electric System’s Board authorized the issuance of Bond Anticipation Notes (BAN) in a principal amount not to exceed $30.0 million, the Series 2018 C Bond Anticipation Notes. The 2018 C BANs were being issued to evidence the debt in respect of a Community Disaster Loan made by United States of America, acting through FEMA. The form of the Series 2018 C BANs allows for multiple draws by the Electric System. During the year ended June 30, 2019, the Electric System drew down $17.5 million to provide additional working capital for fuel invoices, payroll, and other critical operating expenses. No additional draws were made in fiscal year 2021. The rate on the BANs was 2.4% to 2.9%, maturing July 1, 2033. Government of the United States Virgin Islands Notes to Basic Financial Statements 107 The Community Disaster Loans made through FEMA were subsequently canceled on September 30, 2021, with the passage of H.R. 5305, the “Extending Government Funding and Delivering Emergency Assistance Act.” On October 22, 2020, the Electric System’s Board authorized the issuance of Bond Anticipation Notes in a principal amount of $38.4 million, the Series 2020 A Bond Anticipation Notes. The proceeds of the Series 2020 A Bond Anticipation Notes were used to (i) refund the Electric System’s Series 2018 B Bond Anticipation Notes, (ii) make deposits into reserve accounts to satisfy the Series 2020 A Note Reserve Requirement, and (iii) pay certain costs in connection with the issuance of the Series 2020 A Bond Anticipation Notes. Virgin Islands Water and Power Authority – Electric System Revenue Bonds of 2012 (unaudited) In May 2012, the Electric System issued $69.1 million in bonds made up as $17.4 million in 2012 A Electric System Revenue Refunding Bonds, $19.7 million in 2012 B Electric System Subordinated Revenue Bonds, and $32.0 million in 2012 C Electric System Subordinated Revenue Bonds. The proceeds of the Series 2012 A Bonds were used to (1) refund the Electric System’s Electric System Revenue Refunding Bonds, Series 1998 and (2) pay certain costs of issuance of the Series 2012 A Bonds. The proceeds of the Series 2012 B Bonds were used to (1) refinance a portion of the Electric System’s Electric System Term Loan, (2) make a deposit into the Subordinated Debt Service Reserve Fund sufficient to satisfy the Series 2012 B Subordinated Debt Service Reserve Fund Requirement, and (3) pay certain costs of issuance of the Series 2012 B Bonds. The proceeds of the Series 2012 C Bonds were used to (1) refinance all or a portion of the Electric System Working Capital Lines of Credit and Overdraft Credit Facility, (2) make a deposit into the Series 2012 C Subordinated Debt Service Reserve Fund sufficient to satisfy the Subordinated Debt Service Reserve Fund Requirement, and (3) pay certain costs of issuance of the Series 2012 C Bonds. Virgin Islands Water and Power Authority – Electric System Revenue Bonds of 2010 (unaudited) In March 2010, the Electric System issued $85.3 million in bonds made up as $39.1 million in 2010 A Electric System Revenue Refunding Bonds, $8.9 million in 2010 B Electric System Revenue Bonds, and $37.3 million in 2010 C Electric System Revenue Bonds. The proceeds of the Series 2010 A Bonds were used to refund a portion of the Electric System Revenue Refunding Bonds, Series 1998. The proceeds of the Series 2010 B Bonds were used to finance certain capital expenditures temporarily funded through draws on a line of credit ($9.0 million) and to make certain deposits into the Debt Service Revenue Fund sufficient to satisfy the Debt Service Reserve Fund requirement. The proceeds of the Series 2010 C Bonds were used to fund a portion of the costs of certain capital improvements to the Electric System and to make certain deposits into the Debt Service Revenue Fund sufficient to satisfy the Debt Service Revenue Fund Requirement. The proceeds of the three series were also used to pay certain costs of issuance of the 2010 A, 2010 B, and 2010 C Bonds. Virgin Islands Water and Power Authority – Electric System Revenue Bonds of 2007 A (unaudited) In June 2007, the Electric System issued $57.6 million in 2007 A Electric System Subordinated Revenue Bonds. The proceeds of the Series 2007 A Bonds were used to (1) finance costs of certain capital improvements, (2) refinance certain costs of capital improvements funded through draws on a Line of Credit and reinstallation of $10.0 million to the line of credit allocable to the Electric System, (3) make certain required deposits to the subordinated Debt Service Reserve Fund, and (4) pay certain costs of issuance of the Series 2007 A Bonds. Government of the United States Virgin Islands Notes to Basic Financial Statements 108 Virgin Islands Water and Power Authority – Electric System Revenue Bonds of 2003 (unaudited) In June 2003, the Electric System issued $69.9 million in Electric System Revenue Bonds, Series 2003. The proceeds from the bonds were used to finance capital improvements, repay $18.0 million of then outstanding lines of credit, cover underwriters’ costs, and establish a debt service fund. The Series 2003 Bonds maturing on or after July 1, 2013 shall be subject to redemption prior to their stated maturity date, at the option of the Electric System, on or after July 1, 2013, as a whole or in part at any time, at a redemption price equal to the principal amount thereof plus accrued interest thereon to the date fixed for redemption. Virgin Islands Water and Power Authority – Electric System Utilities Service (RUS) Note (unaudited) In November 2015, the Electric System obtained a term loan with the RUS in the principal amount of $13.0 million. The proceeds of the loan were used to finance the acquisition and installation of an automated metering system and other costs related thereto. Under the terms of the Bond Resolution relating to the Electric System Revenue and Refunding Bonds, payment of the principal and interest is secured by an irrevocable lien on VIWAPA’s net revenues (exclusive of any funds which may be established pursuant to the Bond Resolution for certain other specified purposes), including the investments and income, if any, thereof. Under the General Resolution, VIWAPA is required to maintain a Debt Service Coverage ratio of at least equal to 1.25 times the principal interest on all Outstanding Senior Bonds for the current and each future fiscal year (the Senior Coverage). Under the Electric System Subordinated Revenue Resolution, adopted by VIWAPA on May 17, 2007, as amended and supplemented (the Subordinated Bond Resolution), VIWAPA must satisfy the Debt Service coverage ratio of the General Resolution for the Senior Bonds, must maintain a Subordinated Debt Service coverage ratio at least equal to 1.15 times the principal of and interest on all Outstanding Bonds (the Senior and Subordinate Coverage) and all Outstanding Subordinated Bonds for the current and each future fiscal year, and must maintain at least 1.00 times the Maximum Aggregate Debt Service for each such fiscal year (total debt coverage). The Electric System Revenue Bonds are subject to mandatory redemption if (i) any significant part of the Electric System shall be damaged, destroyed, taken, or condemned or (ii) any for-profit, nongovernmental investor shall acquire an ownership interest in some or all the assets of the Electric System. Virgin Islands Water and Power Authority – Water System Revenue Bonds of 2018 (unaudited) In November 2017, to fund its working capital needs in the aftermath of Hurricanes Irma and Maria, the Water System obtained $31.0 million under the Community Disaster Loan program administered by FEMA. In March 2018, the Water System entered another loan for $44.0 million and refinanced the existing $31.0 million for a combined loan of $75.0 million, secured as a first lien of the Water System’s revenues. The proceeds of these loans were used to provide working capital mostly for fuel invoices, payroll, and other critical operating expenses. While the loan is reflected under the Water System, the payment of principal and interest is subject to an intercompany agreement whereby 17.0% will be allocated to the Water System and 83.0% to the Electric System. The interest rate varies with each drawdown, ranging from 2.3% to 2.9%. The first interest payment was due July 1, 2021, with subsequent payments due semiannually. The first principal payment was due July 1, 2022, with subsequent payments due semiannually. Government of the United States Virgin Islands Notes to Basic Financial Statements 109 On September 30, 2021, the Community Disaster Loan was cancelled with the passage of H.R. 5305, the “Extending Government Funding and Delivering Emergency Assistance Act.” Virgin Islands Port Authority – Series A, B, and C Revenue Bonds of 2014 (unaudited) In October 2014, VIPA issued the 2014 Series Revenue Bonds A, B and C amounting to $48.6 million, with an average interest rate of 4.7%. A portion of the proceeds was used to refund the outstanding bond Series 2003 A and C amounting to $24.5 million, which included accrued interest as of the redemption date for October 27, 2014. The proceeds from the issuance of the 2014 Series used in the refunding were deposited in an escrow account, held by the Trustee on behalf of the holders of the refunded bonds, and applied to such redemption contemporaneously with the issuance of the Series 2014 Bonds. As a result, the Series 2003 A and C Bonds were paid off. The 2003 Series B Marine Revenue Bonds were also paid off. VIPA reduced its total debt service requirement by $1.7 million, which resulted in an economic gain (difference between the present value of the debt service payments on the old and new debt) of $2.4 million. In addition, VIPA recognized a deferred charge on debt refunding amounting to $0.4 million. The proceeds of the 2014 Bonds, together with certain other available funds of VIPA, were used for: (i) refunding $24.5 million in 2003 Series A Marine Revenue bonds and pay off the 2003 Series bonds; (ii) for the financing of various capital projects; (iii) to fund a deposit to the debt service fund; (iv) to fund a deposit to the operation, maintenance, renewal, and replacement reserve account; and (v) to pay the cost of issuance of the 2014 Bonds. The 2014 bonds issued by VIPA contain certain bond indentures. The bonds’ indentures contain certain account restrictions and funding covenants to cover interest, debt service, maintenance and other costs specified in the corresponding indentures. The bonds’ indentures also specify certain debt service coverage requirements determined from Net Available Revenues (as defined) of the Marine Division. Future debt service requirements for discretely presented component units’ bonds payable were as follows as of September 30, 2022 (expressed in thousands): Maturity Year: Principal Interest 2023 $ 57,799 $ 14,662 2024 19,456 11,903 2025 20,374 9,228 2026 18,737 8,295 2027 12,929 7,518 2028-2032 87,091 21,020 2033-2037 44,214 8,952 2038-2041 3,500 857 2042-2044 500 38 Total 264,600 $ 82,473 Plus unamortized premium 614 Bonds payable, net $ 265,214* *Unaudited Government of the United States Virgin Islands Notes to Basic Financial Statements 110 (b) Notes Payable Virgin Islands Port Authority (unaudited) In September 2020, VIPA closed on a loan with Banco Popular with an available drawdown limit of $7.0 million to be used for operations due to a shortfall in its marine revenues. During the fiscal year ended September 30, 2022, an additional $1.2 million was drawn on the loan. University of the Virgin Islands (unaudited) In 1994, the University was advanced a mortgage note payable by the U.S. Department of Education with a maximum principal of $2.2 million. The note is payable in semi-annual installments of $75,000, including interest, over a term of 30 years and bears interest at an annual rate of 5.5%. The note is secured by a general obligation of the Government. In September 2018, the University extended its loan agreement with First Bank for $30.0 million to assist in establishing a School of Medicine. Initially, the loan was a non-revolving line of credit and converted into a general obligation note, Series 2018. The note bears interest at the JP Morgan Chase Prime Rate plus 70 basis points, subject to a minimum interest rate of 4.0% each month thereafter until payment of the principal. In November 2021, the University repaid the outstanding note balance. UVI Research and Technology Park Corporation (unaudited) In February 2013, RTPark obtained a $3.0 million loan from a member. A portion of the loan proceeds was used to repay a previous loan from the University to complete construction on 64 West Center. This loan has a 6.8% interest rate and is payable over 15 years. The loan is secured by RTPark’s tangible and intangible property. In March 2015, RTPark settled an ongoing dispute with a member through arbitration for $1.5 million. RTPark obtained a $1.5 million loan from the Foundation of the University to pay the settlement amount. The loan is payable over 7 years at a 5.0% interest rate. As of March 2022, the loan was fully repaid. In June 2016, RTPark entered a $1.2 million note payable arrangement with the University for repayment of administrative expenses incurred prior to 2014. The note payable has a 2.4% interest rate and is payable over six years. Interest is deferred on the note until May 31, 2023. (c) Line of Credit Payable Virgin Islands Water and Power Authority (unaudited) As of June 30, 2022, the Electric System of VIWAPA reported $33.3 million outstanding under bank lines of credit for working capital purposes. Interest on amounts borrowed is payable quarterly at a variable interest rate of prime plus 0.5%, or 90-day London Inter-bank Offered Rate (LIBOR) plus 3.5-4.5%. After the financial reporting date, the lines were extended to have a maturity of April 2024. There are certain financial reporting covenants that the Electric System must comply with in connection with the lines of credit. The agreements require the Electric System to deliver audited financial statements within 180 days after the end of the fiscal year. Government of the United States Virgin Islands Notes to Basic Financial Statements 111 As of June 30, 2022, the Water System of VIWAPA has available bank lines of credit of $2.0 million for capital projects and $300,000 for working capital purposes. Interest on amounts borrowed is payable quarterly at a variable interest rate of prime plus 0.5%, or the 90-day LIBOR plus 4.5%. The Water System has the option to select the variable interest rate to utilize for any borrowings on these notes. As of June 30, 2022, there was $2.7 million outstanding under the lines of credit. The lines were extended to have a maturity of April 2024. Furthermore, there are certain financial reporting covenants that the Water System must comply with. The agreements require the Water System to deliver audited financial statements within 180 days after the end of its fiscal year. Virgin Islands Waste Management Authority On December 31, 2018, VIWMA entered into a secured credit agreement (Agreement) consisting of a $4.0 million revolving credit facility. The maturity date of the Agreement is every 12 months. The Agreement was established to supplement any delays in receiving monthly and quarterly allotments from the Government and reimbursements for allowable expenses related to federal programs. The Agreement is secured by certificates of deposit in the amount of $4.0 million, which have been assigned to the bank and are available to be held as collateral for the repayment of outstanding loan balances and related costs. The credit facility bears an interest rate of 2.5% per annum. The Agreement contains various customary representations, warranties, and covenants by VIWMA. The secured credit agreement was repaid during the fiscal year ended September 30, 2022. 11. Refundable Advance The PG received allotments from the U.S. Department of Treasury as part of “The Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020,” the “Consolidated Appropriations Act of 2021,” and “The American Rescue Plan Act (ARPA) of 2021.” During fiscal year 2022, the PG incurred expenditures of $148.6 million for eligible program activities, including subawards and payroll disbursements, and has reflected the unspent balance of $449.3 million as a refundable advance. 12. General Tax Revenue For the year ended September 30, 2022, general tax revenue of the PG consisted of the following (expressed in thousands): General PFA Debt Service Other Governmental Total Income taxes $ 545,900 $ - $ - $ 545,900 Real property taxes 46,249 - 6,237 52,486 Gross receipts taxes 5,000 226,471 250 231,721 Excise taxes 214,611 108,722 5,409 328,742 Other taxes 97,041 - 5,739 102,780 $ 908,801 $ 335,193 $ 17,635 Tax revenue not recognized on the full accrual basis (89,123) Total tax revenue – government-wide $ 1,172,506 Government of the United States Virgin Islands Notes to Basic Financial Statements 112 13. Governmental Fund Balances Following is a detail of the aggregated fund balances presented in the Balance Sheet – Governmental Funds as of September 30, 2022 (expressed in thousands): September 30, General PFA Debt Service PFA Capital Projects MFSPSC Debt Service Federal Grants Other Governmental Total Restricted for: Debt services $ - $ 303,726 $ - $ 112,234 $ - $ - $ 415,960 Capital projects - - 113,091 - - - 113,091 Health - - - - - 3,328 3,328 Public housing and welfare - - - - - 5,986 5,986 Transportation and communication - - - - 4,213 6,617 10,830 Culture and recreation - - - - - 20 20 Total $ - $ 303,726 $ 113,091 $ 112,234 $ 4,213 $ 15,951 $ 549,215 Committed to: General government $ 42,325 $ - $ - $ - $ - $ 32,712 $ 75,037 Public safety - - - - - 17 17 Public housing and welfare - - - - - 177 177 Transportation and communication - - - - - 10,425 10,425 Culture and recreation - - - - - 327 327 Total $ 42,325 $ - $ - $ - $ - $ 43,658 $ 85,983 Assigned to: General government $ 452 $ - $ - $ - $ - $ 148,685 $ 149,137 Public safety - - - - - 1,031 1,031 Health - - - - - 5,159 5,159 Public housing and welfare - - - - - 8,738 8,738 Transportation and communication - - - - - 11,196 11,196 Culture and recreation - - - - - 1,568 1,568 Total $ 452 $ - $ - $ - $ - $ 176,377 $ 176,829 Unassigned $ (419,326) $ - $ - $ - $ (56,968) $ (62,693) $ (538,987) Total Fund Balances $ (376,549) $ 303,726 $ 113,091 $ 112,234 $ (52,755) $ 173,293 $ 273,040 The committed and assigned fund balances include approximately $262.8 million in unexpended encumbrances. Encumbrances are utilized to determine commitments related to unperformed (executor) contracts for goods and services and to prevent the over-spending of an appropriation. Government of the United States Virgin Islands Notes to Basic Financial Statements 113 14. Commitments and Contingencies Primary Government (a) Collective Bargaining Agreements Currently, the Government has union contracts with thirteen (13) distinct labor organizations representing government employees in various bargaining units. Collectively, these bargaining units have approximately thirty-six (36) collective bargaining agreements in existence. Nine (9) bargaining units have not negotiated a collective bargaining agreement with the Government. Employees in the various bargaining units are not under a single pay plan. Consequently, it is common to have employees performing the same classification of work in different departments and agencies. Of the approximately 6,500 government workers, approximately 4,300 are union members. U.S. Virgin Islands statutes governing bargaining with unions requires arbitration in the event an impasse is reached in negotiations. Under this process, each side chooses an arbitrator, and a third impartial arbitrator is selected by the chosen arbitrators. The arbitration panel investigates and reviews the issues in dispute and renders a final and binding decision. Under Title 24, Section 374(h) of the V.I. Code, the PG may not make any payments of retroactive salaries until there is an appropriation of funds by the Legislature. As of September 30, 2022, contractual liability for retroactive union arbitration salary payments amounted to $151.1 million, accruing from fiscal years 1993 through 2010, as established by the Virgin Islands Retroactive Wage Commission. (b) Federal Assistance Programs The Government receives financial assistance from the federal government in the form of loans, grants, and entitlements. Monetary and nonmonetary federal financial assistance to governmental funds amounted to approximately $738.1 million and $73.9 million, respectively, for the year ended September 30, 2022. Receipt of grants and loss reimbursements is generally conditioned upon compliance with terms and conditions of the grant agreements and applicable federal regulations, including the expenditure of resources for eligible purposes. Substantially all grants are subject to audit under U.S. Office of Management and Budget’s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Disallowances because of these audits may become liabilities of the Government. The Government is also a recipient of disaster recovery funds due to the September 2017 hurricanes. Audits of disaster recovery funds may continue for decades, and federal reimbursements may be required to be repaid because of federal audits. During the year ended September 30, 2022, the Government received unrestricted federal grants due to the COVID-19 pandemic in the amount of $1.9 million. In accordance with federal guidelines, these grants are reported as an “other financing source” of COVID-19 pandemic relief assistance. Management of the Government believes that the future outcome of any changes in federal financial assistance programs will not have a material adverse effect on the basic financial statements. Government of the United States Virgin Islands Notes to Basic Financial Statements 114 (c) U.S. Department of Education Special Conditions Since 2006, in accordance with special conditions imposed by the U.S. Department of Education (USED), the Government has contracted with a third-party fiduciary agent to ensure that the Government manages and administers USED grants in accordance with applicable federal and financial management requirements. The special conditions also require the Government to submit quarterly reports on progress in improving all aspects of the fiscal management of federal education grants. The U.S. Virgin Islands has implemented a Self-Contained Model known as the Federal Grants Specialized Processing Unit to address the special conditions and as the approach for reassuming management of the grant funds. (d) U.S. Department of Labor Designation On February 3, 2017, the Virgin Islands Department of Labor was placed on high-risk grantee status by the U.S. Department of Labor. High-risk grantee status is an administrative designation used by federal agencies to indicate unsatisfactory performance in the management of federal grants. Management is currently working with the U.S. Department of Labor to implement corrective action. (e) Legal Proceedings and Litigation Claims The Government is a defendant in numerous legal proceedings pertaining to matters incidental to the performance of routine governmental operations. Under Title 33, Section 3411(c) of the V.I. Code, no judgment shall be awarded against the Government that exceeds $25,000 for tort claims filed under Government statutes. In cases involving several survivors, each award must be construed separately for the purpose of applying the limitation upon recovery imposed by the Tort Claims Act. Under Title 27, Section 166(e) of the V.I. Code, the Government’s waiver of immunity is expanded to $250,000 for medical malpractice actions, including actions for wrongful death based on malpractice. Under certain circumstances, as provided in Title 33, Section 3414 of the V.I. Code, the Government may assume the payment of a judgment entered against an officer or employee who acted reasonably and within the scope of his employment. The Government may pay up to a maximum amount of $100,000 for the settlement. With respect to pending and threatened litigation, the Government has accrued a provision for legal claims and judgments of approximately $7.9 million for awarded and anticipated unfavorable judgments as of September 30, 2022. Changes in the reported provision for legal claims during September 30, 2022 resulted from the following activity (expressed in thousands): Beginning Balance at October 1, 2021 New Claims Claims Payments and Changes in Estimates Ending Balance as of September 30, 2022 Provision for legal claims $ 12,538 $ - $ (4,665) $ 7,873 Government of the United States Virgin Islands Notes to Basic Financial Statements 115 The breakdown of the provision for legal claims as of September 30, 2022, as reflected in governmental activities, is as follows (expressed in thousands): Current portion $ 1,189 Long-term portion 6,684 $ 7,873 (f) 8.0% Salary Reduction On August 21, 2021, the Legislature of the Virgin Islands enacted 8469, allowing the restoration of Government wages reduced by 8.0% during the years 2011-2013. Wage reductions were a cost-cutting measure due to the economic downturn following the 2008 recession. Repayments to restore the wage reductions began in November 2021 with a payout of $52.5 million (including related taxes) to the affected workers. As of September 30, 2022, the balance of unpaid salary wage reductions scheduled to be paid in the following fiscal year amounted to $1.6 million. (g) Landfill Closure and Post-Closure Costs Federal laws and regulations, including the Clean Air Act, 42 U.S.C. § 7401 et seq. (CAA), and regulations promulgated thereunder, including the federal standards set forth in 40 C.F.R. Part 62, Subpart GGG (Federal Plan), and the National Emission Standards for Hazardous Air Pollutants for Municipal Landfill Maximum Achievable Control Technology, set forth in 40 C.F.R. Part 63, Subpart AAAA (Landfill MACT), and the Solid Waste Disposal Act, 42 U.S.C. § 6901 et seq. (RCRA), and regulations promulgated thereunder, including federal municipal solid waste landfill operating, closure, and post-closure criteria set forth in 40 C.F.R. Part 258, and three EPA administrative orders issued pursuant to RCRA § 7003(a), 42 U.S.C. § 6973(a), and Territorial laws and regulations, including V.I. Code Title 19, Chapter 56 (Solid and Hazardous Waste Management), Title 12, Chapter 9 (Air Pollution Control), and Title 12, Chapter 21 (Virgin Islands Coastal Zone Management), and regulations promulgated thereunder, require the Government to construct and operate certain environmental control systems and otherwise comply with certain requirements during operation of each of its landfill sites, properly close the site (including placement of a final landfill cover) when the landfill (or portion thereof) stops accepting waste, and perform certain post-closure maintenance and monitoring functions at the site for 30 years following closure. Compliance costs during the operational phase will be paid prior to closure. Although closure and post-closure costs will be paid only near or after the date that the landfill stops accepting waste, the Government reports a portion of these closure and post-closure care costs as an operating expense in each period based on landfill capacity used as of each statement of net position date. The $129.5 million reported as landfill compliance, closure, and post-closure care liability as of September 30, 2022 represents the cumulative amount reported to date based on the use of the estimated capacity of each landfill. The Government will recognize the remaining estimated cost of closure and post-closure care as the remaining estimated capacities are filled. These amounts are based on what it would cost to perform all closure and post-closure care as of September 30, 2022. Government of the United States Virgin Islands Notes to Basic Financial Statements 116 The estimated used capacity and expected closure of each of the Government landfills is as follows: Landfill Estimated Used capacity Estimated Closure date Bovoni 98.5% 2025 Anguilla 96.5% 2025 Susannaberg 100% Closed The actual cost to perform closure and post-closure may be higher due to inflation, changes in technology, or changes in regulations. The Government is required by state and federal laws and regulations to make annual contributions to a trust to finance closure and post-closure care. The Government began making annual contributions to a trust in fiscal year 2007 to finance closure and post-closure costs. The Government expects that future inflation costs will be paid from interest earnings on these annual contributions and other financing measures. However, if interest earnings and financing measures should prove to be inadequate, or additional post-closure care requirements are determined due to changes in technology or applicable laws or regulations, these costs may need to be recovered through charges to future landfill users. (h) Wastewater Treatment Plant Consent Decree Since 1985, the Government has been subject to a consent decree issued by the Virgin Islands District Court, governing the operation of its wastewater treatment plants. The consent decree was amended in 1996 and further modified with the 2002 Stipulation to the Amended Consent Decree (the Stipulation) to establish deadlines for the construction of new secondary treatment facilities, including the replacement of the existing St. Croix and Airport Lagoon (Charlotte Amalie) wastewater treatment plants. The Stipulation required that the new St. Croix wastewater treatment plants be completed by the end of 2006 and the new Charlotte Amalie wastewater treatment plants be completed by the end of 2007. The cost of both facilities was estimated at approximately $50.0 million. In January 2004, the Government’s Legislature authorized the creation of the VIWMA for the purpose of meeting environmental requirements of wastewater treatment in the U.S. Virgin Islands. On December 2004, PFA issued revenue bonds amounting to $94.0 million for the purpose of constructing and rehabilitating wastewater treatment plants. The treatment facilities were completed in July 2007 and January 2008 at a cost of approximately $27.0 million and $29.0 million for the St. Croix and the St. Thomas treatment facilities, respectfully. The Stipulation also establishes certain interim penalties for violation of any of the deadlines or performance standards set forth therein. As of the date of the basic financial statements, the Government is current on all its outstanding obligations pursuant to the stipulation. Government of the United States Virgin Islands Notes to Basic Financial Statements 117 (i) Memorandum of Understanding – EPA On August 21, 2002, the Government and the United States Environmental Protection Agency (EPA) entered into an MOU documenting the EPA’s agreement to support the renewal of the Territorial Pollutant Discharge Elimination System (TPDES) permit for its St. Croix distillery operations provided that the Government make certain funding available to (i) conduct treatability studies regarding the Virgin Islands Rum Industries, Ltd. (Cruzan Rum) effluent and the means to mitigate its potential environmental effects in the vicinity of the discharge; (ii) identify practicable, available, reliable, and cost-effective potential mitigation measures; and (iii) implement (or assist in the implementation of) such mitigation measures in the event such measures are determined by the Virgin Islands Department of Planning and Natural Resources after consultation with EPA to be necessary and appropriate. Pursuant to the MOU, the Government’s obligation to fund such activities is limited to $6.0 million in the aggregate, commencing on October 13, 2003. Subsequently, the Government entered into a three-year contract with a locally licensed environmental consulting firm to facilitate its commitments under the MOU with the EPA. At the conclusion of the MOU treatability study period, the PG agreed to reissue the TPDES permit to Cruzan Rum in 2008 with the requirement that the rum distillery design and construct a treatment facility for the rum distillery effluent within three years. PFA issued the Series 2009 Cruzan Bonds to fund the treatment facility, which is currently operating under a 2013 TPDES permit. (j) Workers’ Compensation Liability The Government is exposed to the risk of loss related to workers’ compensation claims. The Government is self-insured for this risk. Self-insured risk liabilities are reported when it is probable that a loss has occurred, and the amount of the loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported. Because actual claims liabilities depend upon such complex factors as inflation, changes in legal doctrines, and damage awards, the process used in computing claims liabilities does not necessarily result in an exact amount. Claims liabilities are evaluated periodically to take into consideration recently settled claims, the frequency of claims, and other economic and social factors. Changes in the worker’s compensation liability amount in fiscal year 2022, as recorded in the Government Insurance Fund, are as follows (expressed in thousands): September 30, 2022 Claims payable, beginning of year $ 53,189 Incurred claims and changes in estimates 2,913 Payments for claims and adjustments expenses (9,715) Claims payable, end of year $ 46,387 (k) Bond Credit Ratings In December 2019, Standard & Poor’s Global Ratings raised the Government’s outlook from “negative” to “stable” and affirmed its “A” rating on the Series 2015A Bonds. Government of the United States Virgin Islands Notes to Basic Financial Statements 118 In February 2022, Moody’s Investor Services updated its review of the Government’s bonds, with a continued rating of “Caa3.” In April 2022, KBRA assigned a long-term rating of BBB for the Matching Fund Securitization Bonds Series 2022A and Matching Fund Securitization Bonds Taxable Series 2022B issued in April 2022. In August 2022, Moody’s Investor Services upgraded the rating for the Series 2001 Term Bonds from A1 to Aa3. In March 2023, Moody’s Investor Services withdrew the Government of the U.S. Virgin Islands issuer rating. Moody’s withdrew the rating as debt obligations for which it served as a reference rating no longer had outstanding ratings. Moody’s had served as a reference rating for VIWAPA. The ratings of VIWAPA were withdrawn on March 1, 2023 because of insufficient information to support the maintenance of bond ratings. (l) Operating Agreement – Limetree Bay Terminals, LLC In January 2012, Hess Oil Virgin Islands Corporation (Hess Oil) announced that it would close its oil refinery on the island of St. Croix and the facility would serve as a storage terminal. The company amended tax returns for the three years before the closing, and a legal dispute arose with the Government over amounts due to, or from, the company in connection with the amended returns and other requirements of Hess Oil’s agreement with the Government. On December 1, 2015, the Government settled its dispute with Hess Oil. The company agreed to transfer to the Government 330 acres of land near the oil terminal (estimated value $21.0 million), 130 housing units at the oil terminal (estimated value $27.0 million), and a vocational school and a community center (both estimated at a value of $1.0 million) for a payment in lieu of taxes (PILOT) valued at $50.0 million. On December 1, 2015, the Government entered into an operating agreement with the new operator of the oil terminal, Limetree Bay Terminals, LLC (Limetree). Limetree agreed to investigate refurbishing and reopening the terminal, with an investment of $125.0 million. In December 2015, Limetree paid $220.0 million as a payment in lieu of taxes, paid $9.0 million as a reimbursement for contingent claims, and agreed to invest $6.0 million in the construction of a bitumen tank at the facility. During the fiscal year ended September 30, 2022, Limetree made a payment of $6.0 million to the Government in lieu of constructing the bitumen tank. As part of the operating agreement, Limetree receives exemption from property taxes, income taxes, and local taxes. Limetree is subject to quarterly concession payments in lieu of taxes (PILOT) of 10.0% of terminal revenues. During the fiscal year ended September 30, 2022, Limetree paid $15.1 million in PILOT. Should the oil refinery reopen, Limetree will be required to pay concession fees of 17.5% of refinery income to the Government on a quarterly basis. If there is a change in the control of Limetree, the Government is to receive 10.0% of the transaction value of the exchange, not to be less than $25.5 million. Government of the United States Virgin Islands Notes to Basic Financial Statements 119 In December 2018, Limetree obtained $1.3 billion in financing to reopen the oil refinery operation. Upon closing, the Government received $40.0 million in short-term financing and $30.0 million in payment for the 130 housing units, vocational school, and community center at the oil refinery. In February 2021, the oil refinery reopened and experienced several flaring events. Flaring events are caused by machinery operating under high pressure and the release of oil droplets into the atmosphere. In April 2021, the Environmental Protection Agency (EPA) issued a Notice of Violation and in May 2021 ordered a 90-day plant closing. In June 2021, Limetree announced the indefinite closing of its oil refining facility and the layoff of 271 plant employees. In July 2021, Limetree subsequently declared bankruptcy, and was sold at auction in December 2021 for $62.0 million. In October 2022, EPA regulators raised concern about hazardous substances stored at the facility, and on December 5, 2022, ordered the removal of thousands of pounds of chemicals from the facility. In July 2023, the Third Circuit Court of Appeals issued a ruling that EPA had exceeded its authority under Clean Air Act in its permitting processing and the oil refinery may reopen without the special permitting process. The plant closing and subsequent bankruptcy are not expected to impact the operations of Limetree Bay Terminals, LLC, the terminal storage facility. (m) Professional Services for Recovery Efforts In November 2017, on behalf of the Government, PFA entered into a professional services contract to coordinate recovery efforts with FEMA and other federal agencies following the two Category 5 hurricanes in September 2017. The initial contract provided for annual compensation not to exceed $5.0 million, a term of five years from November 30, 2017, and provisions for the parties to extend the contract in two-year increments by mutual agreement. In February 2018, the contract was amended to revise the scope of work and increase the compensation of the contract to $10.0 million annually, retroactive to November 2017. In August 2018, a second amendment was added containing provisions required by federal regulations for the Community Development Block Grants – Disaster Relief Program. In December 2018, a third amendment was added to retroactively increase the annual compensation to $16.0 million through November 30, 2018. The temporary increase of $6.0 million was due to the Government’s aggressive campaign to identify, assess, secure, and manage a larger percentage of the available resources and funding from FEMA and other federal agencies, through November 30, 2018. Effective December 1, 2018, the contract amount was returned to $10.0 million. Also, in November 2017 and on behalf of the Government, PFA entered into a second professional services contract to coordinate recovery efforts. The competitive bid contract was for a term of five (5) years following the effective date of the contract and may be extended in two (2) two-year increments for a maximum term of nine (9) years. Compensation under the agreement was capped at $15.0 million annually including out-of-pocket expenses. Government of the United States Virgin Islands Notes to Basic Financial Statements 120 In April 2018, the contract was amended to increase the compensation amount to $50.0 million annually, retroactive to November 2017. The increase is described in the amendment as due to an increase in the demands of the Government’s aggressive campaign to identify, access, secure and manage a larger percentage of the available federal resources and funding from FEMA and other federal agencies. In September 2018, the contract was amended a second time to increase the compensation amount to $80.0 million annually, retroactive to November 30, 2017. The increase is described in the amendment as due to the exhaustion of the $50.0 million, and the continuing aggressive campaign to obtain federal funding following the hurricanes. Also, in December 2018, the second professional services contract was amended a third time to increase the contract amount temporarily to $85.0 million through November 30, 2018. Effective December 1, 2018, the contract amount returned to the $80.0 million as specified in the second amendment. As of September 30, 2022, the amount due to the disaster recovery consultants related to these contracts was $67.2 million. On May 4, 2018, PFA entered into a MOU with VIWAPA and VIHFA, autonomous instrumentalities of the Government for disaster recovery consulting. The MOUs terminate at the expiration of the contract between PFA and the disaster recovery consultants. Invoices from the disaster recovery consultants are received by PFA, provided to VIWAPA and VIHFA for approval, and remitted back to PFA for submittal to federal grantors and payment. (n) Molasses Subsidy Fund The Government maintains a program, established pursuant to law, in which it provides a subsidy to stabilize the cost of molasses to the Virgin Islands rum producers to ensure the competitive pricing of rum produced in the Virgin Islands. The effect of the molasses payments is to maintain the competitive position of the Virgin Islands rum producers relative to the rum producers in other countries in which local molasses supplies are readily available. The molasses subsidy is administered by the Commissioner of Finance through the establishment of a legislatively mandated Molasses Subsidy Fund. In the event of a deficiency in the Molasses Subsidy Fund, the Commissioner of Finance could seek legislative appropriation of additional funds, as required, from the Legislature of the Virgin Islands. The Legislature, however, is not obligated to appropriate such amounts. Notwithstanding the Government’s past financial difficulties, the Legislature of the United States Virgin Islands has not yet waived or reduced the Molasses subsidy. If such an event should occur, the rum producers could experience a decrease in their operations, and therefore result in a reduction of the federal excise taxes returned to the Government by the United States Government. The collectability of the loans receivable from the Government is highly dependent on the ability of the Government in collecting these taxes. Government of the United States Virgin Islands Notes to Basic Financial Statements 121 Pension Trust Fund (a) Pension Reform In 2011, in response to an audit report issued by the Office of the Inspector General, the PG formed a Pension Reform Joint Task Force (the Task Force) to address the declining fiscal condition of GERS. The Task Force submitted recommendations to the Legislature to: (i) increase government and employee contributions towards pension benefits; (ii) raise contribution rates for senators and judges; (iii) reduce retiree current benefits by 10 percent; (iv) increase the early retirement age from fifty (50) to fifty-five (55) and the regular retirement age from sixty (60) to sixty-five (65); (v) limit the cost-of-living increase; and (vi) change the formula used to calculate benefits. On February 5, 2015, GERS increased employee contribution rates by 1.0% to be implemented over a three-year period, with employer rates increasing from 17.5% to 20.5%. On January 1, 2020, GERS again increased employer contributions to the pension plan by 3.0%, from 20.5% to 23.5%. In March 2016, the Office of the Virgin Islands Inspector General issued a report on the alternative investment program administered by GERS. The report concluded that the non-traditional investments of the retirement system were subject to higher risks than other GERS assets. In March 2022, the MFSPSC was created as a separate, independent instrumentality of the PG. One purpose of MFSPSC is to free up funds of the PG through the issuance of Securitization Bonds to provide financial stability and liquidity to GERS. In April 2022, a payment was made to GERS in the amount of $89.2 million as part of the Securitization Bonds issuance. In October 2022, the first full payment to GERS of $158.0 million was made in accordance with a Funding Note entered into between PFA and the primary Government as part of the GERS Solvency Plan of Act 8540. In September 2023, a partial payment of $124.0 million was made on the Funding Note. The GERS actuarial valuation and review as of September 30, 2021, issued in April 2023, projects GERS will temporarily run out of assets by March 2025 absent Funding Note payments. However, if Funding Note payments are received as scheduled, and GERS earns a 4.0% return on investment during future years, the retirement system is projected to remain solvent through 2038. Component Units (a) Virgin Islands Waste Management Authority On October 26, 2016, the VIWMA entered a MOU, to comply with a September 28, 2016, order by the District Court to establish a Landfill/Solid Waste Remediate Fund (the Fund) to pay for urgent projects at the landfills required under Consent Decrees entered into with the Environmental Protection Agency. The order by the District Court stipulates that the Fund be managed by the VIWMA through a separately established escrow account in the amount of $3.1 million, and that all landfill projects be completed on or before September 30, 2018. As of September 30, 2022, the amount remaining in the escrow account was $418,000. Government of the United States Virgin Islands Notes to Basic Financial Statements 122 (b) Virgin Islands Water and Power Authority – Electric System (unaudited) In connection with certain FEMA overpayments related to the 1989 Hurricane Hugo, the Electric System recorded a liability of $4.1 million. Currently FEMA and its subrecipient, the PG, do not have a mechanism for recovering overpayment of disaster-related funds. FEMA has not made a request for repayment of the funds and in the Electric System’s management’s opinion, the matter will not have a material effect on the Electric System’s changes in financial position or cash flows. In the aftermath of Hurricanes Irma and Maria in September 2017, catastrophic damage to the Electric System rendered 90.0% of the system destroyed. The Electric System had purchased commercial insurance to cover the risk of loss from destruction of assets. The commercial insurance carried a $5.0 million deductible per event. The transmission and distribution system which sustained the most damage is not covered under this policy. Initially, the Electric System did not file a claim as the estimated damage to insurable assets was less than the $5.0 million deductible. However, in September 6, 2019, the Electric System filed suit against the insurers for damages related to the storms, including compensatory and punitive damages. As of the date of the basic financial statements, the resolution of the suit remains pending. In 2012, the Electric System leased a temporary 22-megawatt mobile power plant for $14.6 million for eighteen (18) months through October 2013. The lease has since been reevaluated and extended for short-term periods (between 2 to 12 months) with the final extension through December 31, 2022. Also, in May 2019, another temporary unit was leased from a different vendor for an initial period of 104 weeks and, starting in June 2020, an additional unit was leased for a period of two (2) years. Total lease payments for the fiscal year ended June 30, 2021 was $12.9 million. VIWAPA has signed purchase power agreements with several companies to integrate a combined 18-megawatt of solar electricity into the Electric System’s electrical grid system. The agreements expire between 2022 and 2027. VIWAPA will not own the solar assets but will be able to purchase solar generated electricity at contracted rates. In April 2020, the Electric System amended its Memorandum of Agreement (MOA) with viNGN, another instrumentality of the PG. As part of the original agreement, exclusive use of certain underground fiber and infrastructure owned by the Electric System was provided for use by viNGN. Following Hurricanes Irma and Maria, the Electric System obtained federal funding for the hardening of its infrastructure. The MOA was amended to provide viNGN a continuous and exclusive right to use of future telecommunications fiber and spare underground or subsea conduit owned by Electric System. (c) Virgin Islands Water and Power Authority – Water System (unaudited) In 2011, the Water System of VIWAPA entered into two agreements with Seven Seas Corporation to build, operate and maintain two reverse osmosis facilities, one on St. Croix and one on St. Thomas, and sell the water from the facilities to VIWAPA. The agreements both have twenty- (20) year terms expiring through 2032. Government of the United States Virgin Islands Notes to Basic Financial Statements 123 (d) Virgin Islands Port Authority (unaudited) The Federal Aviation Administration (FAA) conducted an onsite wildlife evaluation of the landfill, nearby airport, and surrounding area of the Anguilla Landfill of St. Croix. Flocks of birds nesting at the landfill had created environmental and navigational concerns at the Henry E. Rohlsen airport. The FAA threatened to force VIPA to repay federal grants amounting to $9.3 million if remediation steps were not taken. The landfill is under the jurisdiction of the VIWMA. VIPA and VIWMA proposed a compliance and mitigation plan in 2013 which was accepted by FAA and VIPA is eligible for FAA grants. (e) Other Various discretely presented component units are presently defendants or codefendants in various lawsuits. The financial managers of the component units have advised the PG that any adverse outcome involving a material claim is expected to be substantially covered by insurance. Government property is exempt from lien, levy, or sale due to court judgments under the V.I. Code. 15. Retirement Systems Primary Government Following is a description of the pension plan and accounting for pension expense, liabilities, and deferred outflows/inflows of resources. As required, the Government follows the provisions of GASB Statement No. 68, Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27, as amended by GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date – an amendment of GASB Statement No. 68, and GASB Statement No. 82, Pension Issues – an amendment of GASB Statements No. 67, No. 68, and No. 73. (a) Plan Description and Benefits Full time employees of the Government are members of Government Employees’ Retirement System of the U.S. Virgin Islands (GERS), a cost-sharing, multiple-employer, defined benefit pension plan (the plan) established as of October 1, 1959, Title 3, Chapter 27 of the V.I. Code to provide retirement, death, and disability benefits. Benefits may be extended to beneficiaries of plan members. The plan covers all employees of the Government except employees compensated on a contract-fee basis, or casual, per-diem or provisional and part-time employees who work less than twenty (20) hours per week. Persons over the age of fifty-five (55) may opt out of the plan by providing formal notification to the plan. Vesting of benefits occurs after ten (10) years of service. Benefits may be extended to beneficiaries of plan members. There are two tiers within the plan: Tier 1: Employees hired prior to September 30, 2005 Tier 2: Employees hired on or after October 1, 2005 Government of the United States Virgin Islands Notes to Basic Financial Statements 124 Regular Tier 1 employees who have completed thirty (30) years of credited service or have attained age sixty (60) with at least ten (10) years of credited service are eligible for a full-service retirement annuity. Regular Tier II employees who have reached age sixty-five (65) with at least ten (10) years of service are eligible for a full-service retirement annuity. Members who are considered “safety employees” as defined in the Code are eligible for full-service retirement benefits under Tier I when they have earned at least twenty (20) years of government service or have reached the age of fifty-five (55) with at least ten (10) years of credited service. Under Tier 2, safety employees are eligible for full retirement when they have earned at least twenty-five (25) years of government service and have reached age fifty-eight (58) or have reached age (60) with at least ten (10) years of service. Members of the Legislature and Judges may receive a retirement annuity when they have attained age fifty (50) and upon completion of six (6) years of credited service as a member of the legislature or at any age with at least twenty (20) years of service. Judges are eligible for full retirement benefits when they have attained age fifty (50) and have completed six (6) years of service. The monthly annuity benefit payment is determined by applying a stipulated benefit ratio to the member’s average compensation. Average compensation for regular and safety Tier I members is determined by averaging the five highest years of credited service within the last ten years of service, subject to the maximum salary limitations in effect during such service. Average compensation for regular and safety Tier II members is based on career average salary, subject to the maximum salary limitations in effect during the service. The maximum annual salary that can be used in this computation for regular and safety employees is $65,000. For members of the legislature and judges, the average compensation varies based on the year of service. In 1995, the Early Retirement Incentive Training and Promotion Act was amended by the Legislature to allow a member with a combined aggregate number of years of service and age of at least seventy-five (75) years to retire without a reduction in their annuity. Early retirement benefits provided under the Act vary depending upon age of retirement, type of employment, and credited years of service. GERS is a separate and independent agency that is included for financial reporting purposes as a blended pension trust fund of the PG. GERS issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to the Employees’ Retirement System of the Government of the Virgin Islands, 3438 Kronprindsens Gade, St. Thomas, Virgin Islands 00802. (b) Funding and Contribution Policy Contributions to GERS are established by the Board of Trustees of GERS. The Government’s required contribution for Tier 1 and Tier 2 members effective January 1, 2015, was 20.5% of the member’s annual salary. On January 1, 2020, the Government’s required contribution Tier 1 and Tier 2 members was increased to 23.5%. Government of the United States Virgin Islands Notes to Basic Financial Statements 125 Employee contribution rates (as a percentage of payroll) were as follows during fiscal year 2022: Tier 1 Tier 2 Regular Employees 11.0% 11.5% Public Safety Employees 13.0% 13.625% Members of the Legislature 12.0% 14.0% Judges 15.0% 15.0% Prior to June 29, 2000, member contributions were refundable without interest upon withdrawal from employment before retirement. Before July 1, 2009, GERS’ Board of Trustees approved an effective annual interest rate on refunded contributions of 2.00% per annum. The defined benefit pension plan administered by GERS, and the PG have a fiscal year that ends on September 30th. The following time frames are used to measure and report the PG’s pension liability: Valuation Date: October 1, 2021 Measurement Date: September 30, 2021 Measurement Period: October 1, 2020 – September 30, 2021 The PG is considered an employer of the plan with a proportionate share of 77.25% as of September 30, 2021, a decrease of 1.13% from its proportionate share measured as of September 30, 2020. The PG’s percentage was estimated by management based on the average of each employer’s contributions during the period October 1, 2016, through September 30, 2021. The PG’s proportionate share of employer contributions recognized by GERS was $164.0 million for the plan’s fiscal year ended September 30, 2022. (c) Pension Liabilities, Expense, and Deferred Outflows/Inflows of Resources As of September 30, 2022, the actuarially calculated net pension liability of the PG was $4.1 billion. The net pension liability is measured as of September 30, 2021, and the total pension liability is actuarially computed as of October 1, 2021. For the year ended September 30, 2022, the Government recognized $97.2 million in pension expense, inclusive of amortization of deferred outflows of pension related items. Following is a schedule of deferred outflows and deferred inflows allocated to the Government in the computation of the net pension liability for the year ended September 30, 2022 (expressed in thousands): Governmental Activities Deferred Outflows Deferred Inflows Difference between expected and actual experience $ 24,632 $ 246,445 Net difference between projected and actual investment earnings on pension plan investments - 3,129 Changes in assumptions 645,164 322,346 Changes in proportion and differences between contributions and proportional share of contributions 58,943 77,621 Contributions made after measurement date 163,960 - Total $ 892,699 $ 649,541 Government of the United States Virgin Islands Notes to Basic Financial Statements 126 Amounts reported as deferred outflows and inflows, exclusive of contributions made after the measurement date, will be recognized in pension expense as follows (expressed in thousands): Year Ending September 30, 2023 $ 77,264 2024 31,824 2025 60,748 2026 (19,200) 2027 (19,262) Thereafter (52,176) Total $ 79,198 (d) Actuarial Assumptions A summary of the actuarial assumptions and methods used to calculate the total pension liability as of the measurement date as of September 30, 2021 is provided below. Refer to the October 1, 2021 actuarial valuation report for a complete description of all other assumptions, which can be found on GERS’ website. September 30, 2021 Inflation Rate 2.10% Salary Increases 3.25% including inflation Actuarial Cost Method Entry age normal Expected Rate of Return 4.00% Municipal Bond Yield 2.26% Discount Rate 2.52% Mortality Table RP-2014 Blue Collar The demographic assumptions for the 2021 actuarial valuation are based on the results of an actuarial experience study for the period October 1, 2011 through September 30, 2015. (e) Investment Rate of Return The long-term expected rate of return of 4.00% for the year ended September 30, 2021, on pension plan investments was determined using the building-block method in which best-estimate ranges of expected future real rates of returns (expected returns, net of pension plan investment expense, and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Government of the United States Virgin Islands Notes to Basic Financial Statements 127 Best estimates of arithmetic real rates of return for each major asset class included in the pension plan’s target asset allocation as of the measurement date of September 30, 2021 are summarized in the following table: Asset Class Target Allocation Long-Term Expected Real Rate of Return Domestic equity 9% 7.04% Fixed income 60% .89% Real Estate 10% 4.14% Cash 12% 0.29% Private Equities (Alternatives) 9% 11.04% Total 100% (f) Discount Rate The discount rate used to measure total pension liability was 2.52% as of September 30, 2021, which was an increase of 0.29% from the discount rate of 2.23% as of September 30, 2020. The projection of cash flows used to determine the discount rate assumed plan member contributions will be made at the current contribution rate, including the future increases in the employee contribution rates legislated. Based on those assumptions, the plan’s fiduciary net position was not projected to be available to make all projected future benefit payments to current plan members. Therefore, the plan’s long-term expected rate of return on pension plan investments of 4.0% was applied to all periods of projected benefit payments that are covered by projected assets. For periods where projected future benefit payments are not covered by projected assets, the yield on a twenty (20) year AA Municipal Bond Index was applied, which was 2.26% as of September 30, 2021. (g) Sensitivity of Proportionate Share of the Net Pension Liability to Changes in the Discount Rate Following is a schedule of net pension liability for the Government calculated using the discount rate of 2.52%, as well as what the net pension liability would be if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate for the year ended September 30, 2021, (expressed in thousands): 1.0% Decrease – Share of NPL @ 1.52% Current Discount - Share of NPL @2.52% 1.0% Increase - Share of NPL @3.52% Net pension liability $ 4,702,669 $ 4,091,016 $ 3,586,360 Government of the United States Virgin Islands Notes to Basic Financial Statements 128 (h) Early Retirement Incentive Program In August 1994, legislation providing an early retirement incentive was passed. The legislation was subsequently amended on October 13, 1994, December 30, 1994, and December 5, 1995. Among other matters, the legislation allows a member of GERS who has a combined aggregate number of years of credited service plus number of years of age, equal to at least seventy-five (75) years as of the date of the legislation, to retire without reduction of annuity. Members who have attained the age of fifty (50) with at least ten (10) but less than thirty (30) years of credited service may add an additional three (3) years to their age for this computation. Members with thirty (30) years of service or who can retire without penalty under the V.I. Code shall have their average compensation increased by 4 percentage points. For each employee electing to retire pursuant to Section 8(a) of the Early Retirement Act of 1994 (the Act), the Government contributes to GERS, on a quarterly basis, an amount equal to the employer and employee contributions that would have been made until the employee reached the age of 62 had the employee not elected to retire under this provision. For employees electing to retire under Section 8(b) of the Act, the Government contributes to GERS a sum equal to the additional contribution the employer and employee would have made had the employee received a salary 4.0% higher during the three years used to compute the employee’s average compensation figure, plus a sum of $5,000. Based on this calculation, the amount due to GERS was $26.9 million and has been remitted to GERS. The actuaries of GERS have determined that the specific funding provided under the Act is inadequate to cover the costs of the program. GERS is seeking to recover any unfunded costs of the program under a newly enacted provision of the retirement law, which provides that the Government will compensate GERS for the costs of any special early retirement program. (i) Additional Information Regarding the Pension Plan To obtain additional information regarding the pension plan, requests for information may be submitted to GERS at www.usvigers.com. Actuarial reports of GERS are available at http://www.usvigers.com/Benefits/ActuarialReport.aspx. Detailed information about the pension plan’s fiduciary net position is available in the separately issued GERS audited financial statements available at www.usvigers.com/Reports/Audited FinancialReports.aspx. WICO Employee Retirement Plan WICO sponsors a defined contribution retirement and savings plan (the Plan) for its employees. Under the provisions of the Plan, employees must contribute at least 3.0% of their gross compensation but may also contribute up to 7.0%. WICO matches 3.0% of the employees’ contribution plus a non-elective distribution at the discretion of WICO, which is divided among eligible employees, proportionate to compensation. Required contributions to the pension and savings plan made and charged to operations were approximately $67,000 for the year ended September 30, 2022. No assets are accumulated in a trust that meets the criteria of paragraph 4 in GASB Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not Within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. WICO does not offer other post-retirement benefits to its employees. Government of the United States Virgin Islands Notes to Basic Financial Statements 129 viNGN Employee Retirement Plan viNGN sponsors a defined contribution retirement plan for its employees. Employees who receive a salary of at least $5,000 are eligible to participate in the plan. viNGN matches the employee’s contribution up to a maximum of 2.0% of the eligible employee’s compensation. viNGN contributed approximately $35,000 in matching employer contributions for the year ended September 30, 2022. viNGN does not offer other post-retirement benefits to its employees. University TIAA-CREF Defined-Contribution Plan (unaudited) The University has two retirement plans in which all eligible employees are required to participate, the Teachers Insurance and Annuity Association-College Retirement Equities Fund (TIAA-CREF) and GERS. The TIAA-CREF is a defined-contribution pension plan covering participating, full-time faculty members and other exempt employees, under which the contributions, including employees’ contributions, are used to purchase annuities. There are no unfunded past service costs, and vested benefits are equal to the annuities purchased under TIAA-CREF. The University’s Board of Trustees administers, establishes, and amends benefit provisions of TIAA-CREF. The University is required to contribute 14.5% of the annual covered payroll. 16. Other Postemployment Benefits Primary Government In addition to the pension benefits described above, the Government provides other postemployment benefits (OPEB) of healthcare, prescription, dental and life insurance coverage. These benefits are provided in accordance with Title 3, Chapter 25, Subchapter VIII of the V.I. Code as part of a multiple employer defined benefit OPEB plan, in which most component units of the PG participate and contribute. All employees who retire from government service after attaining age fifty-five (55) with at least thirty (30) years of service, except for policemen and firemen who can retire with at least twenty (20) years of service, are eligible for these benefits. As required, the PG follows the provisions of GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. (a) Plan Description and Benefits The Health Insurance Board of Trustees of the PG (the Board) administers the defined benefit health and life insurance plan for eligible active and retired employees of the PG, the component units of the Government, and certain nonpublic corporations that receive allotments from the PG. The Board determines the eligibility criteria of the plan and recommends insurance contracts to the Legislature of the Virgin Islands. The Group Health Insurance Office of the Department of Personnel maintains the accounting and personnel records for the health and life insurance plan. Eligible retired employees visit the Group Health Insurance Office within 30 days following retirement and complete a new insurance enrollment form. An eligible retiree is one that retires through GERS or who is placed on disability and is eligible for retirement benefits. Government of the United States Virgin Islands Notes to Basic Financial Statements 130 The Government’s OPEB plan is a multiple employer defined benefit plan created in accordance with Title 3, Ch. 25, Subchapter VIII of the Virgin Islands Code. The plan is a pay as-you-go, no assets have been accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75, and expenses are paid as they come due. There are five participating employers in the plan: the primary Government, UVI, VIPA, East End Medical Center and Frederiksted Health Care, Inc. The primary Government has a special funding arrangement with the following component units: Virgin Islands Lottery, MBA, VIEDA, VIWMA, VIHFA, Juan Luis Hospital and Medical Center, Roy L. Schneider Medical Center, PFA and the VIPBS. Under the special funding arrangement, the primary Government pays 100.0% of the employer costs. Retirees participate in the same health benefit programs as active employees until reaching Medicare eligibility. After attaining Medicare eligibility, retirees participate in a Medicare Advantage prescription drug plan and an AARP Supplemental Plan. Four types of health plans were offered to eligible participants during the fiscal year: • Group health and life insurance coverage through the Cigna Health and Life Insurance Company • Group life and accidental death and dismemberment through ALIC Life Insurance Company • Medicare Advantage and AARP Medicare Supplement through United Healthcare Insurance • Vision care through Standard Insurance Company (b) Contributions Contribution percentages are enacted by the Legislature of the Virgin Islands based on recommendations of the Board. Changes in percentages are implemented by the Department of Personnel. Active and retired employees are responsible for 35.0% of the cost of group insurance costs. The employee share is withheld from salaries or pension benefits. Retirees receive a noncontributory life insurance benefit of $5,000 and may elect to increase this coverage to $75,000 at their own expense. (c) Employees Covered by the Plan As of September 30, 2022, the following employees were covered by the Government’s postemployment benefits plan: Valuation Date of October 1, 2019 Primary Government Component Units Total Active employees 7,945 $ 750 $ 8,695 Retired employees 7,755 147 7,902 Deferred vested retirees 102 6 108 Disability retirees 301 9 310 Total 16,103 $ 912 $ 17,015 Primary Government 14,632 Component units included in primary Government’s OPEB expense under special funding arrangement 1,471 Total 16,103 Government of the United States Virgin Islands Notes to Basic Financial Statements 131 (d) OPEB Liability The PG’s proportionate share of the total liability was 95.006% as of October 1, 2021, which was a decrease of 0.11% from its proportionate share measured as of October 1, 2020. The PG’s percentage was determined based on its respective census information provided to the actuary. The PG’s total OPEB liability amounted to $976.6 million, which includes the PG’s share of the component unit liabilities under the special funding arrangement of $81.9 million. Following is the total OPEB liability at September 30,2022 (expressed in thousands): September 30, 2022 Primary Government $ 976,613 Component units 48,953 Total OPEB Liability $ 1,025,566 (e) Actuarial Assumptions The postemployment benefit plan is an unfunded plan. The total OPEB liability reported as of September 30, 2022 was determined by an actuarial valuation as of October 1, 2019 rolled forward to the measurement date of September 30, 2022. The roll-forward process incorporates various actuarial assumptions and methodologies to ensure the liability reflect the most current information available. Actuarial assumptions used in the computation of the September 30, 2022 total OPEB liability are as follows: Valuation date: October 1, 2019 Measurement date: October 1, 2021 Report date: September 30, 2022 Actuarial cost method: Entry Age Normal Cost Method Amortization method: Recognition Period of 6 Years Salary increases: Payroll Growth of 3.25% per year Discount rate: Beginning of Year Rate of 2.14% End of Year Rate of 2.43% S&P Municipal Bond 20-Year High Grade Rate Index as of September 30, 2021 Healthcare cost trend rates: Pre-Medicare Increases of 5.00% in 2022 to 4.50% in 2023 Medicare Increases of 4.50% in 2022 to 4.50% in 2023 Dental Increases of 4.50% in 2022 to 4.50% in 2023 Inflation: 2.25% Implicit Rate in Healthcare Trend Analysis Government of the United States Virgin Islands Notes to Basic Financial Statements 132 Retirees share of costs: 35% of Medical and Dental Premiums and Noncontributory Life Insurance Coverage. Retirees of UVI 403(b) plan pay 100% coverage Mortality: RP-2014 Blue Collar Mortality Generational Table Adjusted 110% with Scale MP-2015 for Healthy Lives. For Disability Retirees, RP-2014 Disabled Mortality Generational Table Adjusted 125% with Scale MP-2015 Marital status: Assumed 50% of Future Male Retirees and 25% of Future Female Retirees Cover Spouses in Retirement Husbands Assumed to be 3 Years Older Than Spouse Subsidized Coverage of Spouses and Dependents Ceases Upon Death Actuarial Experience Study The actuarial assumptions used in the October 1, 2019, valuation were based on the results of an actuarial data experience study for the period October 1, 2011 – September 30, 2015 (f) Changes in Assumptions The discount rate changed from 2.14% in the prior valuation to 2.43% as of September 30, 2021. (g) Changes in Total OPEB Liability Following are the components of change in the proportionate OPEB liability for the year ended September 30, 2022 (expressed in thousands): Primary Government Component Units Total Beginning balances $ 992,301 $ 48,554 $ 1,040,855 Changes for the year: Service cost 39,683 2,621 42,304 Interest 21,723 1,085 22,808 Changes in assumptions or other input (43,099) (2,331) (45,430) Expected benefit payments (33,995) (976) (34,971) Net changes (15,688) 399 (15,289) Ending balances $ 976,613 $ 48,953 $ 1,025,566 Primary Government $ 894,658 Component Units Included in Primary Government’s OPEB liability under special funding arrangement 81,955 Total OPEB Liability as of September 30, 2022 $ 976,613 Government of the United States Virgin Islands Notes to Basic Financial Statements 133 (h) OPEB Expense For the fiscal year ended September 30, 2022, the OPEB expense of the PG amounted to $69.0 million as follows (expressed in thousands): Primary Government Component Units Total Service cost $ 39,683 $ 2,621 $ 42,304 Interest on the total OPEB liability and net cash flow 21,723 1,085 22,808 Current-period effect in change in assumptions 7,633 529 8,162 Total OPEB Expense $ 69,039 $ 4,235 $ 73,274 Primary Government $ 60,193 Component Units Included in Primary Government’s OPEB expense under special funding arrangement 8,846 Total OPEB Expense $ 69,039 (i) OPEB Deferred Inflow of Resources As of September 30, 2022, the PG reported deferred inflows of resources related to OPEB (expressed in thousands) as follows: Primary Government Component Units Total Changes in assumptions, expected results or other inputs $ 75,883 $ 3,655 $ 79,538 Primary Government $ 67,449 Component Units Included in Primary Government’s deferred inflows of resources under special funding arrangement 8,434 Total $ 75,883 Amounts reported as deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows (expressed in thousands): Fiscal Year Ended September 30 Primary Government Component Units Total 2023 $ 25,105 $ 1,186 $ 26,291 2024 20,187 949 21,136 2025 13,846 640 14,486 2026 8,125 414 8,539 2027 6,896 373 7,269 2028 and after 1,724 93 1,817 Total OPEB Deferred Inflows $ 75,883 $ 3,655 $ 79,538 Government of the United States Virgin Islands Notes to Basic Financial Statements 134 (j) OPEB Deferred Outflow of Resources As of September 30, 2022, the PG reported deferred outflows of resources related to OPEB (expressed in thousands) as follows: Primary Government Component Units Total Changes in assumptions, expected results or other inputs $ 135,852 $ 7,129 $ 142,981 Primary Government $ 121,875 Component Units Included in Primary Government’s deferred inflows of resources under special funding arrangement 13,977 Total $ 135,852 Amounts reported as deferred outflows of resources related to OPEB will be recognized in OPEB expense as follows (expressed in thousands): Fiscal Year Ending September 30 Primary Government Component Units Total 2023 $ 32,738 $ 1,715 $ 34,453 2024 32,738 1,715 34,453 2025 32,738 1,714 34,452 2026 30,275 1,596 31,871 2027 7,363 389 7,752 2028 and after - - - Total OPEB Deferred Outflows $ 135,852 $ 7,129 $ 142,981 (k) Sensitivity of OPEB Liability to Changes in the Discount Rate The following sensitivity analysis shows the impact to the total OPEB liability if the discount rate was 1.00% higher or 1.00% lower than the current discount rate (expressed in thousands): 1.0% Decrease - Discount Rate 1.43% Current Discount Rate 2.43% 1.0% Increase – Discount Rate 3.43% Primary Government $ 1, 138,239 $ 976,613 $ 847,615 Component Units 57,708 48,953 41,997 Total OPEB Liability $ 1,195,947 $ 1,025,566 $ 889,612 Government of the United States Virgin Islands Notes to Basic Financial Statements 135 (l) Sensitivity of OPEB Liability to Changes in the Healthcare Cost Trend Rates The following sensitivity analysis shows the impact of the total OPEB liability if the healthcare cost trend rates were 1.0% higher or 1.0% lower than the current healthcare cost trend rate: 1.0% Decrease - Health Cost Trend Rate 4.0% Current Health Cost Trend Rate 5.0% 1.0% Increase - Health Cost Trend rate 6.0% Primary Government $ 821,222 $ 976,613 $ 1,179,503 Component Units 40,364 48,953 60,283 Total OPEB Liability $ 861,586 $ 1,025,566 $ 1,239,786 Component Units VIWAPA OPEB Plan (unaudited) VIWAPA offers a medical, dental, and vision benefit plan, and reported a net OPEB liability of $58.0 million, deferred outflows of resources of $0.5 million, and deferred inflows of resources of $9.6 million as of June 30, 2022. VIHA OPEB Plan VIHA offers certain healthcare benefits including healthcare and prescription drug, dental, vision and life insurance to qualified retired employees and their dependents. VIHFA reported a net OPEB obligation of $36.4 million as of December 31, 2021. 17. Going Concern/Liquidity and Management’s Plan Primary Government As of September 30, 2022, the Government reported a net deficit of $5.4 billion in governmental activities. This deficit primarily reflects the recognition of significant pension and other post- employment benefit liabilities under revised accounting standards. Recurring operating losses and the accumulation of long-term obligations have further contributed to the Government’s weakened financial position. Following is a summary of the Government’s unrestricted net deficit for governmental activities for fiscal years 2020 through 2022: Fiscal Year Governmental Unrestricted Net Deficit (Increase)/ Decrease 2020 $ (5,889,273) $ (137,642) 2021 (6,090,454) (201,181) 2022 (6,570,200) (479,746) Government of the United States Virgin Islands Notes to Basic Financial Statements 136 As of September 30, 2022, the Government reported a fund deficit in the general fund of $376.6 million. This fund deficit represents an increase of $267.2 million from the preceding fiscal year. Fiscal Year Committed Assigned Unassigned Total 2020 $ 31,374 $ 1,425 $ (11,032) $ 21,767 2021 34,669 1,442 (145,507) (109,396) 2022 42,325 452 (419,326) (376,549) Non-major Funds Deficit Primary Government The following non-major funds have a net fund deficit as of September 30, 2022 (expressed in thousands): Governmental Funds Rural Library Extension $ 572 Water & Electric System Projects $ 1,698 Employment Security Administration 2,143 Sewer System Fund 175 Federally Aided Education Program 9,599 District Potable Water Fund 4,962 Air & Water Pollution Control 7,046 Paternity and Child Support 11,415 Virgin Islands Planning Board Projects 3,000 District Street Light Fund 53,247 Highway Safety 4,600 Virgin Islands Law Enforcement 3,701 Virgin Islands Energy Office 3,655 Forensic Science 74 Virgin Islands National Guard Federal Vocational Rehabilitation 1,848 and State Agreement 2,760 Hurricane Hugo Insurance Claims 3,908 Food Stamp Welfare 2,434 Virgin Islands Army National Guard 2,266 Federal Programs/Department Emergency Drought Relief 135 Conservation 3,729 Outdoor Recreation Program 32 Federal Aided Community Action Agency 187 Section 12 Bond Proceeds 24,547 Commission on Aging 50 Road Fund 6,330 Elementary/Secondary Education 19 Major Repair and Improvement 58 Job Training Partnership Technical Assistance 8 Act Of 1983-1984 8,614 Juvenile Detention Center Fund Civil Defense Protection 849 Non-Lapsing 14 Health Information Council Assistance 18 Natural Resource Reclamation 2,205 Drug Education Training Program 123 Boating Safety Program 584 Federal Health Program Not on Federal Fishery and Wildlife Projects 27 Letter of Credit System 489 The Motorcycle Safety Ed. Prog. 6 Taxi Revolving Fund 35 Net fund deficit $ 167,162 Government of the United States Virgin Islands Notes to Basic Financial Statements 137 Proprietary Funds Frederiksted Small Business Fund $ 164 Altona Community Development Fund 3 Housing Construction Revolving 7,653 Emergency Housing Fund 82 Virgin Islands ID Registration Fund 19 Virgin Islands Elections Fund 180 Consumer Protection Fund 200 Virgin Islands Housing Finance Authority 2,898 Business & Commercial Property Revenue Fund 220 Homestead and Home Revolving Fund 344 Net fund deficit $ 11,763 These financial statements have been prepared under the assumption that the Government will continue to operate as a going concern. However, the matters noted above raise significant doubt about its ability to do so. Management’s plans to address these concerns are detailed below. Management has been working to stabilize and solidify its financial position through the implementation of an aggressive multi-pronged plan which includes facets such as legislative acts addressing revenue initiatives and cost-cutting measures and securing adequate funding for pension obligations. The Government is also a recipient of significant federal assistance in connection with the 2017 hurricanes and the global coronavirus pandemic. Business-Type Activities WICO WICO is a component unit of PFA. WICO is in a negative working capital position as of September 30, 2022, mainly due to legislation requiring WICO to remit $700,000 annually to the primary Government as a payment in lieu of taxes (PILOT). As of September 30, 2022, WICO owed the primary Government $9.9 million in PILOT payments. Also, WICO’s revenues were negatively impacted due to “No Sail Orders” issued by the Centers of Disease Control (CDC) in March 2020 that continued through September 2021. viNGN viNGN is also a component unit of PFA. The start-up of viNGN was funded by a loan advance from PFA amounting to $36.8 million. As of September 30, 2022, no repayments of the loan advance have been made by viNGN. Component Units (a) Virgin Islands Water and Power Authority – Electric System (unaudited) Management of the Electric System (the System) has been attempting to stabilize and solidify its financial condition following significant structural damage related to the September 2017 hurricanes. Management of the Electric System has developed a twelve-month plan to focus on key initiatives as outlined below: Government of the United States Virgin Islands Notes to Basic Financial Statements 138 i. Despite its financial challenges, the Electric System is benefitting from significant investment of federal funds in infrastructure projects. For example, federal funding is modernizing the Transmission & Distribution (T&D) infrastructure as it is migrating the system to underground infrastructure where feasible. ii. In areas when undergrounding is not viable, the T&D system is being hardened by the installation of composite poles that can withstand higher winds. iii. Placing new, more efficient generation in service on St. Thomas and St. Croix. iv. The installation of additional solar capacity on St. Croix. v. The acquisition of generation that is currently leased to avoid ongoing monthly lease expenses. vi. Focus on improving processes and procedures with the objective of improving customer service, billing, and collections. Improving customer service and increasing collections is expected to reduce operating costs and improve cash flow. (b) University of the Virgin Islands (unaudited) The University has been financially challenged and its situation was exacerbated by global events. Further, the University is not organized as a self-sustaining entity and is highly dependent on funding from the Government to repay and fund its obligations. Approximately 35.0% of the University’s total revenues are derived from the Government’s appropriations. To date, local appropriations for funding the University’s programs have not been significantly impacted by the Government’s financial condition and it is unknown what impact, if any, the Government’s financial condition will have on the University. The management team is focused on its plan for the immediate future, which includes exploration of alternative revenue sources, reduction of operating expenses, and investment of federal funds. (c) Virgin Islands Government Hospital and Health Facilities Corporation (unaudited) The Schneider Regional Medical Center on St. Thomas and the Juan F. Luis Hospital and Medical Center (unaudited) incurred significant structural damages related to the September 2017 hurricanes. The full impact of the hurricanes continues to be evaluated as the hospitals seek grants and federal assistance to continue operations. As of September 30, 2022, the Schneider Regional Medical Center’s current liabilities exceeded current assets by $24.6 million. The hospital is economically dependent on the continued financial support of the Government. In fiscal year 2022, tax appropriations from the PG amounted to $35.8 million and other contributions, FEMA grants and COVID-19 assistance amounted to $4.7 million. Management at the Schneider Regional Medical Center is implementing efforts to improve financial stability by closely monitoring cash flow. This includes multiple internal initiatives and development of external partnerships with industry expertise to improve operational efficiencies, evaluate charge capture and pricing improvements, reduce accounts receivable collection time, and evaluate Medicare reimbursement options and opportunities, while improving the patient experience. As of September 30, 2022, the Juan F. Luis Hospital and Medical Center’s current liabilities exceeded current assets by $68.6 million. The hospital reported an unrestricted net deficit of $170.1 million. The hospital is economically dependent on the continued financial support of the Government. Government of the United States Virgin Islands Notes to Basic Financial Statements 139 Management of Juan F. Luis Hospital and Medical Center is considering several alternatives for mitigating liquidity conditions. These include an infusion of capital through several options including internal hospital operations, patient accounts receivable leveraging, affiliation or management agreements with larger hospital systems, and negotiations with vendors on past due accounts. The hospital is also developing plans for cost containment, seeking concessions for vendors, and seeking an increase in financial support from the Government. 18. Adjustments to Component-Unit Financial Statements The September 30, 2021 stand-alone financial statements of a number of unaudited component units have been adjusted in the accompanying aggregate discretely presented component units as follows (expressed in thousands): Net Position (Deficit) Component Unit As Previously Reported Adjustments As Adjusted Virgin Islands Port Authority* $ 145,842 $ (8,984) $ 136,858 Virgin Islands Water and Power Authority Electric System* 395,189 (255) 394,934 Virgin Islands Government Hospital and Health Facilities Corporation Roy L. Schneider Hospital* (135,307) (20,960) (156,267) Juan F. Luis Hospital* (127,461) 28,647 (98,814) University of the Virgin Islands* 55,262 (14,583) 40,679 *Unaudited 19. Subsequent Events Primary Government (a) Hurricane Recovery The Government is making significant progress towards restoring its facilities which were damaged by Hurricanes Irma and Maria in September 2017. The Government continues the process of tabulating the associated costs and expenses with respect to remediation, clean-up, mitigation, and the restoration of services. To close potential shortfalls and to serve returning citizens, the Government continues to work closely with federal agencies, such as FEMA, HUD, SBA, etc. to maximize its recovery from all available sources, subject to any sub-limits and retentions. Through August 2025, federal assistance awarded to the Territory included $21.5 billion in FEMA Public Assistance grants, $77.0 million in Federal Highway grants, $199.5 million in FEMA Hazard Mitigation grants, $1.1 billion in Community Development Block Grants, and $215.0 million in other grants for a total of $23.0 billion dollars. The Government has received notices from FEMA of potential debt as a result of audits related to the Public Assistance Grant Program awards for fiscal years 2018 and 2019. In response to the notices, both in February 2021 and January 2023, the Government exercised its option to appeal and provided additional clarification and documentation. As of March 2023, FEMA has questioned costs of $42.1 million. Government of the United States Virgin Islands Notes to Basic Financial Statements 140 The questioned costs are in the process of being reviewed by FEMA and until the appeal review is completed, questioned costs identified do not represent final monies owed to FEMA. Management believes that any such claims or actions by FEMA will be resolved and will not have a material impact to the awards or the financial position of the Government. In February 2024, President Biden agreed to raise the cost share of all FEMA assistance grants for hurricane recovery in the Territory from 90.0 to 95.0 percent, including retroactively. In addition, President Biden agreed to raise the federal cost share to 98.0 percent in the case of larger critical infrastructure rebuilding projects approved before September 30, 2024, and completed before 2026. (b) Global Pandemic and Economic Relief Legislation Through September 2025, federal grants and assistance received by the PG related to COVID-19 amounted to $729.4 million. Federal grants and assistance received by component units of the Government amounted to $84.8 million. (c) Bankruptcy and Auction of St. Croix Oil Refinery Following several flaring events, the release of oil particles into the atmosphere, Limetree Bay Refinery, LLC (Refinery), the owner of an oil refinery on the island of St. Croix, ceased operations. The Refinery subsequently declared bankruptcy and in December 2021, a bid of $62.0 million was accepted at auction from a new owner, Port Hamilton Refining and Transportation. In October 2022, the Environmental Protection Agency (EPA) raised concerns regarding hazardous substances stored at the facility. On December 5, 2022, EPA ordered the removal of thousands of pounds of chemicals from the oil refinery before the refinery may recommence operations. In July 2023, the Third Circuit Court of Appeals issued a ruling that EPA had exceeded its authority under the Clean Air Act in its permitting process and the oil refinery may reopen without the special permitting process. (d) Settlement of Sex Trafficking Case Against Estate of Jeffrey Epstein and Co-Defendants In December 2022, the Attorney General for the U.S. Virgin Islands announced a settlement with Jeffrey E. Epstein’s estate, co-defendants Darren K. Indyke, and Richard D. Kahn (co-executors of the estate) and ten Epstein-created entities. The settlement resolved a law enforcement action filed in 2020 under the anti-criminal enterprise, sex trafficking, child exploitation and fraud laws of the Virgin Islands. Under the terms of the settlement, the defendants will pay the PG $105.0 million in cash plus one-half of the proceeds of the sale of the island Little St. James on which many of the crimes occurred. The estate also agreed to pay approximately $0.5 million to remediate environmental damage around Great St. James, another island owned by the Epstein estate. The settlement also returned to the Virgin Islands more than $80.0 million in economic development tax benefits that Epstein and his co-defendants fraudulently obtained to fuel his criminal enterprise. In September 2023, the Government reached a settlement with JP Morgan Chase in the amount of $75.0 million, in a lawsuit brought against the bank alleging the bank had enabled Epstein’s criminal activities. Government of the United States Virgin Islands Notes to Basic Financial Statements 141 (e) Improper Procurement Activities and Irregularities In 2024, an inquiry was conducted by the United States Department of Justice into potential criminal activities associated with three members of the management team of the Government and formal indictments followed. Management has evaluated the matter based on the scope in the indictments and has concluded that the financial statements as of September 30, 2022, are fairly presented. This evaluation of the matter is subject to adjustment as facts and circumstances change or develop. Component Units (a) Virgin Island Public Finance Authority (PFA) In March 2023, PFA acquired 69 acres of beachfront property in Frederiksted, St. Croix, known as the HNS Hesselberg property, for $1.2 million. The land was acquired to preserve environmentally significant wetlands and cultural resources. The property will be vested in the Virgin Islands Park System, an organization created in 2022 to ensure that lands held by the local government will be preserved and protected for current and future generations. Funds for the acquisition were part of the $3.7 million received from the sale of the King’s Alley Hotel. Those funds are designated for reinvestment in the island of St. Croix. In April 2023, the Legislature of the Virgin Islands passed Act 8701, authorizing the PFA to enter into a line of credit in the maximum amount of $100.0 million to provide for the disbursement of funds needed to advance disaster related recovery projects that are reimbursable through federal funding, and to provide $45.0 million for the buyout of LPG facilities at VIWAPA. On June 15, 2023, PFA and Government entered into the Revenue Anticipation Note Purchase Agreement (Series 2023 Note) with FirstBank Puerto Rico. The Series 2023 Note is in the amount of $100.0 million and is secured by a pledge of a certificate of deposit in the amount of $134.0 million held by FirstBank Puerto Rico. Additional payment sources for the Series 2023 Note include: (i) the General Fund of the Government, and (ii) federal stimulus appropriations that are legally available to be used for debt servicing purposes. Interest on the Series 2023 Note is 200 basis points above the certificate of deposit rate, provided that the interest rate shall not be less than 2.0% or exceed 9.0% per annum. At the date of the Revenue Anticipation Note Purchase Agreement, the certificate of deposit rate was 4.5% and the interest on the loan is 6.5%. Interest will be computed by applying a daily periodic interest rate divided by actual days divided by 365. Interest earned on the certificate of deposit will be deposited into a debt service reserve account. Interest accrues and is paid quarterly on or before the fifteenth day of the next succeeding month, with a final payment due at the maturity of the note. The maturity date of the Series 2023 Note is the earlier of forty-two (42) months from the date of the Note Purchase Agreement, or September 30, 2026, whichever is the first to occur. Advances on the Series 2023 Note may be taken in any amount, but not less than $5.0 million. The first advance on the Series 2023 Note was dated June 15, 2023 in the amount of $47.1 million. The proceeds of the Series 2023 Note will be loaned to the Government in accordance with a loan agreement dated June 15, 2023. Government of the United States Virgin Islands Notes to Basic Financial Statements 142 On November 20, 2024, PFA issued the Series 2024 A Hotel Occupancy Revenue Bonds in the amount of $64.9 million, and the Series 2024 B Economic Recovery Fee Revenue Bonds (federally taxable) in the amount of $18.3 million. The bonds were a private and limited offering only to “qualified buyers” as defined under Rule 144A of the Securities Act of 1933. The bonds were issued to provide a grant to a hotel developer for reimbursement of costs associated with the reconstruction and renovation of a hotel project formerly known as the Frenchman’s Reef Resort located on St. Thomas. The Government has pledged Hotel Occupancy Tax Revenues and Economic Recovery Fee Revenues generated by the hotel project for the repayment of the bonds. The Series 2024 A Bonds will mature on April 1, 2053 with a yield of 6.0%. The Series 2024 B Bonds will also mature on April 1, 2053 with a yield of 9.0%. Purchase and Refunding of the Federal Highway Bonds In November 2024, the Legislature of the Virgin Islands enacted Act No. 8949, the Federal Highway Grant Anticipation Bond Act, authorizing the establishment of the Virgin Islands Transportation & Infrastructure Corporation (VITIC), an independent instrumentality of the Government. On June 5, 2025, VITIC issued the Grant Anticipation Revenue Bonds (Federal Highway Grant Anticipation Revenue Loan Note), Series 2025 in the principal amount of $150.2 million. Proceeds are being used to finance costs of certain projects of the Government and to refund all of the PFA’s Series 2015 Federal-Aid Highway Bonds. The Bonds are special limited obligations of VITIC, payable solely from Federal Highway Grant Revenues. The Bonds received a rating of “A” with a stable outlook from S&P Global Ratings. The Bonds bear interest at a rate of 5.0% per annum, payable semiannually on March 1 and September 1, commencing September 1, 2025. The Bonds are subject to annual redemption prior to maturity, with a final maturity date of September 1, 2044. Line of credit In October 2024, legislation enacted under Act 8701 authorized an increase in the territory’s line of credit from $100 million to $150 million. The revised credit facility allocates $100 million for disaster-related projects and $50 million for vendor payments, retroactive wage obligations, and other critical needs of the territory. As of August 30, 2025, $42.5 million remained available for disaster-related projects and $16.4 million for other designated purposes. Guaranty of VIWAPA Indebtedness On August 29, 2024, the Board of Directors (Board) of the PFA ratified a prior authorization granted by poll vote on July 30, 2024, to negotiate, prepare, execute, and deliver a guaranty of the indebtedness of VIWAPA to FirstBank Puerto Rico and Banco Popular de Puerto Rico (collectively, the Banks). As of the date of the resolution, VIWAPA had outstanding indebtedness totaling approximately $52.1 million, comprised of $30.8 million owed to FirstBank Puerto Rico and $21.3 million owed to Banco Popular de Puerto Rico. The guarantee was issued pursuant to the PFA’s enabling legislation, which authorizes such financial support for component units, and is not subject to any statutory or contractual limits. PFA agreed to unconditionally guarantee the payment of this indebtedness, including principal, interest, fees, and charges, in order to facilitate the extension of the maturity dates of VIWAPA’s credit facilities to July 31, 2025, and August 31, 2025, respectively. Government of the United States Virgin Islands Notes to Basic Financial Statements 143 Subsequently, on July 29, 2025, the Board approved, a further extension of the maturity dates of the guaranty to January 31, 2026. As of the date of this report, there has been no default by VIWAPA on the guaranteed obligations. In addition to the guaranty, PFA acknowledged and continued the pledge of debt service reserve funds totaling $6 million, previously deposited into interest-bearing accounts with the Banks ($3.75 million with FirstBank and $2.25 million with Banco Popular), as enhanced security for VIWAPA’s credit facilities. (b) Virgin Islands Water and Power Authority (unaudited) The HUD, through its Community Development Block Grant-Disaster Recovery (CDBG-DR) program, has obligated $84.2 million to VIWAPA for the Harley Expansion Project. The project will add 36-megawatts of generation, plus additional battery storage, to the Randolph Harley Power Plant on St. Thomas. Additionally, as of April 2023, VIWAPA has been approved for approximately $104.3 million in ARPA grant funding. In April 2023, the Legislature of the Virgin Islands approved Bill 35-0070 authorizing the Governor to establish a line of credit in the maximum amount of $100.0 million to provide for the disbursement of funds needed to advance disaster related recovery projects that are reimbursable through federal funding and other disaster-related projects and provide funding to advance payment of $45.0 million towards the buyout of the infrastructure agreement between VIWAPA and a major vendor, and the acquisition of Liquefied Petroleum Gas facilities. Effective April 22, 2024, the Governor of the Territory issued Executive Order No. 537-2024 declaring a state of emergency due to the VIWAPA’s inability to provide continuous power generation, due to the rising price of fuel and the inability of independent government agencies to timely pa for electrical services. (c) University of the Virgin Islands (unaudited) In March 2023, the University received an alert notification from the U.S. Department of Education for lack of submission of various annual reports which may result in, among other things, provisional decertification, and placement on a heightened cash monitoring payment method. The University continues to diligently monitor such requirements as it continues to recover from the disruption to its operations from Hurricanes Irma and Maria along with the impact of the COVID-19 global pandemic. In April 2023, the Legislature of the U.S. Virgin Islands approved the conveyance of a tract of land on St. Thomas to the University by the Virgin Islands Port Authority, in exchange for the University’s conveyance to the Virgin Islands Port Authority of a similar sized parcel of land, also on St. Thomas. The land swap is deemed more applicable to the intended use of the parcels by both entities. (d) The West Indian Company Limited In October 2022, as authorized by the CARES Act, SBA remitted to Banco Popular $717,200 in principal and $10,579 in interest in forgiveness of the Paycheck Protection Program loan of the Company. Under the terms of the loan forgiveness, WICO must retain all records relating to the loan for six years from the date the loan is forgiven. Government of the United States Virgin Islands Notes to Basic Financial Statements 144 In May 2023, WICO entered into a Limited Release and Settlement Agreement with GERS to settle claims each entity had made against the other in connection with a management agreement that terminated March 1, 2020. Under the terms of the Limited Release and Settlement Agreement, WICO released claims against GERS in the amount of $370,532, and GERS released claims against WICO in the amount of $706,357. In May 2023, WICO and GERS entered into a Shared Cost Agreement to split equally the shared utility, maintenance, water, and certain other costs at Havensight Mall. As part of the agreement, GERS paid the WICO a catch-up payment of $249,541 for costs incurred from March 2020 through December 2022. (e) Virgin Islands Next Generation Network In September 2023, viNGN purchased office space in St. Croix. The building was purchased at a cost of $625,000, with a commercial loan secured by a mortgage of $450,000 from Merchant’s Commercial Bank. The loan has a floating interest rate equal to the prime rate plus the prime spread to be repaid in monthly installments for a term of 15 years beginning November 5, 2023. Management’s Evaluation Management has evaluated events and transactions occurring after September 30, 2022, the statement of net position date, and through September 30, 2025, the date the financial statements were available to be issued and noted that there have been no additional events or transactions that would require adjustments to or disclosure in the Government’s financial statements for the year ended September 30, 2022. Required Supplementary Information Government of the United States Virgin Islands Schedule of Changes in Total OPEB Liability and Related Ratios 145 Postemployment Benefits Other Than Pensions Measurement year ending September 30, 2022 2021 2020 2019 2018 Primary Government Primary Government Primary Government Primary Government Primary Government Total OPEB Liability: Service cost $ 39,683 $ 25,885 $ 25,358 $ 26,147 $ 28,216 Interest 21,723 28,508 28,548 26,623 23,904 Difference between expected/actual experience - - (27,043) - - Changes in assumptions or other inputs (43,099) 184,091 16,827 (31,772) (53,422) Expected benefit payments (33,995) (32,939) (31,441) (29,864) (28,280) Net Change in Total OPEB Liability $ (15,688) $ 205,545 $ 12,249 $ (8,866) $ (29,582) Total OPEB Liability – Beginning of Fiscal Year 992,301 786,756 774,507 783,373 812,955 Total OPEB Liability – End of Fiscal Year $ 976,613 $ 992,301 $ 786,756 $ 774,507 $ 783,373 Covered-Employee Payroll $ 380,466 $ 364,038 $ 350,528 $ 350,409 $ 323,158 Total OPEB Liability as a Percentage of Covered- Employee Payroll 256.69% 272.58% 224.45% 221.03% 242.41% This schedule is intended to show a 10-year trend. Additional years will be reported as they become available. Notes to Schedule: 1. The Government does not have assets accumulated in a trust that meets the criteria in GASB Statement No. 75, to pay related benefits. 2. The Primary Government, by statute, pays 100.0% of the employer cost-share of the postemployment health, dental, and life insurance of the retirees of the following semi-autonomous agencies: 1) Employee's Retirement System of the Government of the Virgin Islands, 2) Virgin Islands Economic Development Authority, 3) Virgin Islands Housing Finance Authority, 4) Juan F. Luis Hospital & Medical Center, 5) Magens Bay Authority, 6) Virgin Islands Public Broadcasting System, 7) Roy L. Schneider Hospital, and 8) Virgin Islands Waste Management Authority. The Primary Government also reports the OPEB liabilities associated with these benefits. 3. Change in the Discount Rate: Measurement date, September 30 Discount Rate 2017 3.35% 2018 3.64% 2019 3.58% 2020 2.14% 2021 2.43% 4. The base mortality tables and mortality improvement sales were updated to RP-2014 Blue Collar Mortality table (110.0% adjustment) projected forward using the M-2015 scale. 5. Future participation in the retiree health plan is projected to be 85.0%. Government of the United States Virgin Islands Schedule of Net Pension Liability 146 September 30, (in thousands) 2022 2021 2020 2019 2018 2017 2016 2015 Primary Government’s proportion of the Net Pension Liability (NPL) 77.2500% 78.3800% 78.9300% 77.8087% 76.5852% 76.4171% 75.2916% 75.2803% Primary Government’s proportionate share of the NPL $ 4,091,016 $ 4,527,445 $ 4,194,852 $ 3,246,786 $ 3,354,768 $ 3,535,517 $ 3,065,617 $ 2,323,163 Primary Government’s covered-employee payroll $ 336,625 $ 325,000 $ 310,758 $ 309,998 $ 307,132 $ 300,909 $ 277,091 $ 267,698 Primary Government’s proportionate share of the NPL as a percentage of its covered payroll 1,215% 1,393% 1,350% 1,047% 1,092% 1,175% 1,106% 868% Plan fiduciary net position as a percentage of the total pension liability 8.23% 9.16% 11.32% 15.56% 16.18% 16.54% 19.58% 27.26% This schedule is intended to show a 10-year trend. Additional years will be reported as they become available. The amounts presented for each fiscal year are as of the measurement date (September 30 of the previous year). Notes to Schedule: (1) Changes in benefit terms: In the year ended September 30, 2016, there were changes to the eligibility and benefit amounts for Tier 2 Regular and Public Safety Employees for service and Early pensions reflected in this valuation. (2) Change in Assumptions: Amounts reported as changes in assumptions resulted from changes in the discount rates as follows: Year ended September 30, Discount Rate 2014 4.42% 2015 3.84% 2016 3.20% 2017 3.74% 2018 4.25% 2019 4.25% 2020 2.67% 2021 2.23% 2022 2.52% Government of the United States Virgin Islands Schedule of Pension Contributions 147 September 30 (in thousands) 2022 2021 2020 2019 2018 2017 2016 2015 Actuarially required contributions of the Primary Government $ 279,469 $ 292,944 $ 289,507 $ 215,937 $ 205,052 $ 191,481 $ 186,089 $ 150,628 Contributions in relation to the statutorily required contributions $ 163,960 $ 74,817 $ 72,301 $ 84,005 $ 77,840 $ 61,759 $ 68,291 $ 64,357 Contribution deficiency $ 115,509 $ 218,127 $ 217,206 $ 131,932 $ 127,212 $ 129,722 $ 117,798 $ 86,271 Primary Government covered payroll $ 334,650 $ 336,625 $ 325,000 $ 310,758 $ 309,998 $ 307,132 $ 300,909 $ 277,091 Contributions as a percentage of covered payroll 48.99% 22.23% 22.25% 27.03% 25.11% 20.11% 22.69% 23.23% This schedule is intended to show a 10-year trend. Additional years will be reported as they become available. The amounts presented for each fiscal year are as of the latest fiscal year. Government of the United States Virgin Islands Notes to Schedule of Pension Contributions 148 Methods and Assumptions Used Valuation date: Actuarially determined contributions are calculated as of October 1, 2021 Contribution rates: Actuarial cost method: Entry Age Normal Cost Method determined as a percentage of salary Amortization method: Level dollar, closed group Amortization period: 20 years open amortization Asset valuation method: Market value Inflation: 2.1% Salary increases: 3.25% per year Investment rate of return: 2.52% net of pension plan investment expense, including inflation Mortality: Non-annuitant: 110% of the RP-2014 Blue Collar Employee Mortality Table With generational projection from 2015 using Scale MP-2015. Healthy annuitant: 110% of the RP-2014 Blue Collar Healthy Annuitant Mortality Table with generational projection from 2015 using Scale MP-2015. Disabled annuitant: 125% of the RP-2014 Disabled Annuitant Mortality Table with generational projection from 2015 using Scale MP-2015. Original Amended Year Ended September 30, 2022 Budget Budget Actual Variance Revenues Taxes 821,244 $ 821,244 $ 903,083 $ 81,839 $ Federal grants and contributions - - 7,732 7,732 Charges for services 54,726 54,726 17,576 (37,150) Interest and other 36,320 36,320 111,986 75,666 Total revenues 912,290 912,290 1,040,377 128,087 Expenditures Current: General government 584,828 645,949 630,422 15,527 Public safety 76,887 76,887 75,441 1,446 Health, public housing and welfare 101,523 101,728 98,683 3,045 Education 179,261 181,306 182,177 (871) Transportation and communication 30,053 30,053 20,647 9,406 Culture and recreation 12,287 16,400 8,062 8,338 Total expenditures 984,839 1,052,323 1,015,432 36,891 Excess (deficiency) of revenues over expenditures (72,549) (140,033) 24,945 164,978 Other financing sources (uses) Transfers from other funds 65,339 65,339 48,320 (17,019) Transfer to other funds (34,847) (34,847) (126,549) (91,702) Transfers to component units (166,899) (166,899) (160,827) 6,072 Total other financing sources, net (136,407) (136,407) (239,056) (102,649) Excess (deficiency) of revenues and net other financing sources over expenditures (208,956) $ (276,440) $ (214,111) $ 62,329 $ See accompanying notes to the Schedule. Government of the United States Virgin Islands Schedule of Revenues and Expenditures – Budget and Actual Budgetary Basis − General Fund (in thousands) 149 Government of the United States Virgin Islands Notes to Schedule of Revenues and Expenditures - Budget and Actual Budgetary Basis – General Fund 150 1. Budgetary Process and Control The V.I. Code requires the Governor to submit an annual balanced executive budget to be adopted by the Legislature for the ensuing fiscal year. The Governor is required by law to submit to the Legislature the annual balanced executive budget no later than May 30. The annual balanced executive budget is prepared on a budgetary basis. If the annual executive budget has not been approved before the commencement of any fiscal year, then the appropriations for the preceding fiscal year, insofar as they may be applicable, are automatically deemed re-appropriated item by item. The annual balanced executive budget, which includes those funds of the Government subject to appropriation pursuant to law, is composed of all proposed expenditures and estimated revenue for the Government. The Legislature enacts the annual executive budget through passage of lump- sum appropriations for each department. The Legislature may add, change, or delete any items in the annual executive budget proposed by the Governor. Upon passage by the Legislature, the annual executive budget is submitted to the Governor, who may veto the budget partially or in its entirety and return it to the Legislature with his objections. A veto by the Governor can be overridden only by a two-thirds majority of all members of the Legislature. The Legislature is obligated by law to pass a final annual executive budget no later than September 30, the last day of the fiscal year. Supplemental budgetary appropriations bills that are signed into law may be created during the year without the identification of a specific revenue source to finance them. In August 1999, the Legislature enacted the Financial Accountability Act (Act No. 6289). The purpose of the Financial Accountability Act is to require by law that the budget of the Government be balanced each year, and the appropriations in each fiscal year not exceed a verifiable revenue source. Once the budget has been enacted, fiscal control over expenditures made pursuant thereto is exercised by the Governor through the Director of OMB. During any fiscal year in which the resources available to the Government are not sufficient to cover the appropriations approved for such year, the Governor, through the Director of OMB, may take administrative measures to reduce expenditures. The Governor may also make recommendations to the Legislature for new taxes or any other necessary action to meet the estimated deficiency. Budgetary control is exercised at the department level through an allotment process. Encumbrances and expenditures cannot exceed total allotment amounts. The Government’s department heads may make transfers of appropriations within the department. Appropriation transfers between departments and supplemental appropriations require executive and legislative branch approval. Unencumbered and unexpended appropriations, not designated, lapse at fiscal year-end. Also, encumbrances are established at fiscal year-end to pay certain expenditures for travel and utility costs payable against current-year appropriation authority, but to be expended in the subsequent year. Government of the United States Virgin Islands Notes to Schedule of Revenues and Expenditures - Budget and Actual Budgetary Basis – General Fund 151 2. Budget/GAAP Reconciliation The following schedule presents a comparison of the general fund legally adopted budget with actual data on a budgetary basis. Because accounting principles applied for purposes of developing data on a budgetary basis differ significantly from those used to present financial statements in conformity with GAAP, a reconciliation of timing and entity difference of the excess (deficiency) of revenue and net other financing sources over expenditures for the year ended September 30, 2022 is presented below (expressed in thousands): Excess of revenues and net other financing sources over expenditures $ 62,329 Entity difference – deficiency of revenues and net other financing sources over expenditures – activities with budgets not legally adopted (438,878) Deficiency of revenues and net other financing sources over expenditures – GAAP basis (net change in fund balance) $ (376,549) Controls over spending in special revenue funds and non-appropriated funds are maintained at the Department of Finance by use of budgets and available resources (revenues). The Government makes appropriations to authorize expenditures for various capital projects. Budgets for capital projects normally remain available until completion of the project unless modified or rescinded.