The Office of the Virgin Islands Inspector General has issued the inspection of the use of loan proceeds of select projects in the GERS Alternative Investment Program: VI Finest Foods. The objectives of the inspection were to determine: (1) the total amount of the GERS loan proceeds that were disbursed to VI Finest Foods for the construction of the supermarket; (2) whether policies and procedures were followed in the management of the loan; (3) whether the proceeds were utilized in accordance with loan terms and conditions; and, (4) whether VI Finest Foods made loan payments as required in the loan agreement.
We found that GERS did not effectively manage the loan issued to VI Finest Foods under the Alternative Investment Program. Specifically, GERS: (i) did not adequately review services performed and examine expenses incurred for $2.7 million of loan proceeds issued; (ii) did not ensure that all phases of the supermarket project (the project) were monitored; (iii) failed to ensure that inspectors monitored all phases of the project while continuing to issue funds for the project; (iv) failed to follow established procedures to perform periodic analysis of project expenditures; and (v) provided an additional $2.8 million beyond the initial loan amount although VI Finest Foods never demonstrated the ability to make consistent payments per the loan requirements.
As a result: (i) the lack of oversight led to questionable contract costs, cost overruns, and incomplete contract services; (ii) at least $480,850 in loan proceeds was diverted for unauthorized purposes;(iii) VI Finest Food defaulted on the loan; and (iv) the collectability of the remaining loan balance owed to GERS remains uncertain.
We made several recommendations to address the conditions and causes cited in the report. Our recommendations addressed the following areas: (i) monitoring and (ii) due diligence. To view the report, click here.