The Office of the Virgin Islands Inspector General released its Fiscal Year 2023 Audit Plan. There are various audits and inspections planned for 2023. To view the report, click here.
The Office of the Virgin Islands Inspector General has issued the audit report of contract administration at the Juan F. Luis Hospital. The objective of the audit was to determine if the Hospital solicited, awarded, and monitored contracts per its policies, applicable laws, and regulations.
We found that Hospital officials did not always follow the internal controls put in place to safeguard the procurement of goods and services. Specifically, officials did not always follow: (i) procurement procedures for competitive bidding and the approval process for purchases; and, (ii) the Board’s requirement that all expenses and contracts exceeding $100,000 be approved by the Board and any corresponding changes or amendments have the Board’s approval. In addition, the Hospital’s management between 2017 and 2019 made questionable decisions that resulted in the Hospital paying $1.4 million on a temporary operating room never utilized; a two-year delay, and lost revenue related to the temporary hospital (known as JFL North); and, paying $1.3 million for services obtained under an emergency contract that has lasted more than three years. Furthermore, the Hospital experienced a high management turnover among key positions and lacked a continuity plan to ensure limited disruption of its operations. Over five years, the Hospital saw 5 CEOs, 3 CFOs, and 3 Chief Legal Counsels, and did not have full-time staffers in the administrative/middle management positions to maintain the continuity of the Hospital’s daily operations when those key employees left.
We attribute these conditions to the Hospital management team’s (i) not following its procurement policies and regulations consistently, (ii) not fully understanding its procurement needs, and; (iii) not effectively planning and executing its scope of work and contracting needs, and (iv) not ensuring that proprietary information held by former key employees were turned over to the hospital to ensure its smooth operations, and not having adequate middle-management staff to maintain the Hospital’s operation.
As a result, officials procured goods and services outside of the normal procurement process, purchased goods, and amended contracts without proper approvals. Also, officials made decisions that significantly delayed the temporary hospital’s opening, resulting in lost revenue due to patients being sent off-island for services usually performed by the hospital.
Finally, the Hospital lost valuable time when new staff did not have access to files and electronic records established by a previous management team.
We made several recommendations to address the conditions and causes cited in the report. Our recommendations addressed the following areas: (i) following procurement procedures, (ii) payment reporting, (iii) maintaining files, (iv) obtaining professional Capital Project services, (v) adequate staffing, and (vi) continuity plan for critical management functions. To view the report, click here.
The Office of the Virgin Islands Inspector General has issued the audit report of contract administration at the Virgin Islands Waste Management Authority. The objectives of the audit were to determine if Waste Management officials: (1) followed their procurement guidelines in awarding contracts and (2) ensured that contracted services were performed in accordance with contract terms and conditions.
We found that Waste Management did not always follow its procurement policy requiring competitive bidding. Specifically, in some cases, Waste Management operated its solid waste collection services with expired contracts and verbal/informal agreements. At least ten contracts expired, and services continued on a month-to-month basis for up to six years. Also, at least two vendors provided services to Waste Management based on verbal/informal agreements. In addition, Waste Management did not adequately maintain its procurement files.
Furthermore, Waste Management officials did not (i) ensure that some of its Solid Waste contracted services were adequately monitored for compliance per contract terms; (ii) always document the results of their worksite visits; and (iii) establish uniform policies and procedures in both island districts to monitor its contractor’s work performance. In addition, Waste Management paid some contractors for billed services that were questionable and unsupported. Finally, from 2017-2019, Waste Management paid its contractors an average of 10 to 38 months late.
Waste Management’s officials did not (i) prioritize the solicitations of bids to ensure that its operations were done at the most economical cost and benefit; (ii) establish an adequate record maintenance system; (iii) establish written procedures to monitor contract services; (iv) require its responsible personnel to document when they performed worksite inspections; and (v) ensure that that contractor claimed work was reviewed and inspected for reasonableness.
Moreover, Waste Management officials did not document changes made to contract terms. In addition, they did not adequately review contractors’ bills before approval and payment. Also, Waste Management did not receive anticipated revenues from some of its funding sources, nor did they have valid contracts in place to allow the agency to anticipate its contract cost adequately.
As a result, Waste Management expended at least $15,593,860 without ensuring that it obtained the best price for its services. In addition, Waste Management could not ensure that its bin sites were adequately maintained and billed services were correct, reasonable and for work done. Also, Waste Management: (i) paid $452,762 for services that were based on a verbal agreement; (ii) paid unsubstantiated charges of at least $95,304; (iii) paid at least $23,539 for services that were not adequately supported; and (iv) could not ensure that payments to some contractors were for services that were rendered. Also, as of March 2018, Waste Management had incurred an outstanding debt of $14,193,145. This led the VI Legislature to increase its 2019 budget by $7,000,000 to pay its vendors.
We made several recommendations to address the conditions and causes cited in the report. Our recommendations addressed the following areas: (i) prioritizing soliciting bids for expired contracts, (ii) maintaining files, (iii) monitoring procedures, (iv) contractor billings, (v) utilizing scale house, and (vi) outstanding debt. To view the report, click here.
The Office of the Virgin Islands Inspector General in collaboration with WAPA’s Internal Audit Division has issued the inspection report of the Virgin Islands Water and Power Authority’s (WAPA) contract with Vitol Virgin Islands Corporation (Vitol) for the Liquefied Petroleum Gas (LPG) Conversion Project. The objectives of the inspection were to determine if: (i) the WAPA Board and management exercised due diligence in undertaking the project; (ii) the Board approved the increased project cost; (iii) WAPA officials verified the increased project cost; (iv) WAPA officials followed WAPA’s contract procurement and administration policies; and, (v) WAPA converted the power generation units they needed to burn LPG.
We found that WAPA’s Board and management, in choosing to expedite the Project to mitigate the high cost of energy in the Virgin Islands, prioritized time over the Project’s cost. Specifically, they agreed to forgo detailed engineering plans, which would have delayed the Project by two years. Instead, they allowed Vitol to perform a FEED Study, design the storage terminals, procure equipment, and construct the Project facilities simultaneously. Knowing that such a project implementation method came with an inherent increase in cost, WAPA officials had no added controls to mitigate the Project’s cost and monitor its cost for necessity, reasonableness, and affordability. Also, untimely payments for the infrastructure fees, and a truck rack system unknown to the Board contributed to increased infrastructure cost.
WAPA’s management did not follow WAPA’s established procedures for contracts and change orders. In addition, WAPA’s contract negotiations lacked transparency. Furthermore, WAPA officials created an apparent conflict of interest when they engaged the professional services of a firm that also worked for Vitol during a similar time period. Finally, WAPA did not achieve its goal to convert the number of power-generating units it needed to burn LPG and did not ensure that its rented units could burn LPG as stipulated in rental agreements.
As a result, the Project’s total cost has exceeded $200 million, including the Board’s construction cost limit of $160 million, $10,228,191 in other professional services rendered to bring the project to substantial completion, $31,613,305 in operation and maintenance fees, $138,500 in accounting fees, and $2.2 million for a truck rack system. Not included in this cost are added fees that may have resulted from late payments that led to a third contract amendment.
Additionally, $92 million in change orders were not approved, and over $2 million was paid for professional services without the Board’s approval. Further, WAPA was left with three of five converted units to burn LPG; WAPA invested $10 million to convert two units that were removed from service; and, WAPA incurred over $43 million in rental cost for units that could not burn LPG.
We made several recommendations to address the conditions and causes cited in the report. Our recommendations addressed the following areas: (i) Project planning, management oversight, and reporting; (ii) Project cost monitoring, and Board inaction; (iii) WAPA’s procurement policies and guidelines; and, (iv) the conversion of power-generating units.
To view the report, click here.
The Office of the Virgin Islands Inspector General has issued the inspection report of procedures to control the re-employment of retired Virgin Islands Government (Government) employees. The objectives of the inspection were to determine: (1) what controls were in place to timely identify when a Government retiree was re-employed by the Government, (2) what procedures were followed by the Government to comply with laws and regulations governing retiree re-employment and, (3) what steps the Government Employees Retirement System (GERS) took to identify retirees who return to work and its impact on the retirement system.
We found that Government officials did not always follow its return-to-work law and Executive Order. Also, Government officials did not implement adequate internal controls to identify and report to GERS when they hired a retiree. Additionally, we found that the GERS’ measures taken were not sufficient to determine when retirees returned to work or to deter violations of the law. Specifically, Government officials did not always notify GERS when it hired a member retiree. Also, Government officials failed to implement checks and balances policies and procedures to ensure compliance with the return-to-work law.
GERS has identified and is analyzing the status of 65 re-employed retirees for possible violations of the return-to-work law. As of May 28, 2020, GERS had completed the review of 37 of the 65 re-employed retirees. Consequently, GERS determined, and its report shows, that GERS paid $2,068,736 in annuities to 22 retirees who violated the return-to-work law. In addition, GERS did not collect $1,172,676 in contributions from retirees and the Government that was due to GERS when the employees exceeded the allowable period for which they could return to work without forfeiting their retirement benefit. The report shows that GERS collected $335,541 in repayment, leaving $2,905,871 owed.
As a result, when the agencies’ human resources representatives do not convey re-employed retirees’ information to GERS, the System runs the risk of overpaying the retirees’ annuity, not timely effectuating the collection of contributions from the employee and the Government, and subjecting the retirement system to lost investment income.
These issues will continue to exist if the Government, through its departments and agencies, and instrumentalities, continues to sidestep the requirements of the return-to-work law.
We made several recommendations to address the conditions and causes cited in the report. Our recommendations addressed the following areas: (i) policy and procedures (ii) adhering to the law (iii) collaboration and communication between agencies and GERS and, (iv) Legislative Revisions to the Virgin Islands Code. To view the report, click here.
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.
The Office of the Virgin Islands Inspector General released its Fiscal Year 2021 Audit Plan. Among the various audits planned for 2021, the V. I. Inspector General’s Office hopes to complete six projects still in progress during Fiscal Year 2020, to include: Audit of Contract Administration at the VI Waste Management Authority, Audit of Contract Administration at the Governor Juan F. Luis Hospital, Audit of Specific Accounts for the Department of Agriculture, Inspection of Procedures to Control Reemployment of Retired Government Employees, Inspection of the Use of Loan Proceeds from the Government Employees Retirement System, and Inspection of the Costs Associated with Converting WAPA’s Fuel Usage to Propane Gas. To view the 2021 Audit Plan, Click here.
The Office of the Virgin Islands Inspector General has issued the audit of the specific administrative function of the Virgin Islands Board of Education. Our audit objective was to determine whether the Board carried out selected administrative functions related to retirement matters, financial controls, and contract administration, in accordance with established laws, policies and procedures, and rules and regulations. Our objective did not include the examination or review of the Board’s administrative functions regarding its loan and scholarship, and teacher certification programs.
Our audit found that the Board was not in compliance with various statutes of the Code and Executive Orders, in regards to retirement matters, financial controls, and contract administration. Specifically, the Board: (i) made unauthorized payments to an employee for a personal retirement account outside of the Government Employees’ Retirement System (GERS); (ii) violated the Code regarding the employment of a retired employee; (iii) did not clearly define the official duties for Board members to receive stipends; (iv) paid stipends in excess of the amount required by the Code; (v) paid Board members stipends while they were already being paid for regular working hours at their Government jobs; (vi) lacked effective controls over stipend payments; (vii) did not maintain sufficient meeting transcripts and committee reports; (viii) paid a higher travel per diem than what is allowed by the Government’s Travel Regulations; (ix) did not properly account for travel cash advances; (x) established two checking accounts without the knowledge and authorization of the Department of Finance (Finance); (xi) did not use one of the two checking accounts in accordance with its intended purpose; (xii) entered into contractual agreements without the approval and legal sufficiency of the Department of Property and Procurement (Property and Procurement) and the Department of Justice (Justice); and, (xiii) did not effectively monitor its contracts.
We attributed these conditions to: (i) the Board’s failure to follow the Code relative to the employee’s required membership in GERS; (ii) the Division of Personnel’s (Personnel) failure to question the deviation from the norm in the processing of the employee’s appointment documents; (iii) Finance’s failure to question payments to the employee from funds specifically intended for the Government’s retirement contributions to GERS; (iv) the Board’s failure to not properly monitor employment contracts with a contracted retiree; (v) the Board not considering stipend policies to be a priority; (vi) the Board allocating a $75 stipend instead of the $50 amount stipulated by the Code; (vii) the Board neglecting to monitor stipend payments; (viii) the Board not implementing adequate policies and procedures regarding stipends; (ix) the Board failing to implement adequate policies and procedures regarding its meeting transcripts and committee reports; (x) the Board allocating $125 instead of the $75 travel per diem rate required by the Government’s Travel Regulations; (xi) the Board not following the Government’s Travel Regulations; (xii) the Board not complying with Finance Memorandum No. 027-2010 regarding Government entities’ checking accounts; (xiii) the Board not following procurement laws of the Code; and, (ivx) the Board neglecting its management responsibilities over contract monitoring.
As a result, the Board: (i) expended a total of $141,853 over a ten-year period to an employee for a personal retirement account; (ii) allowed a contracted retiree to work more than the 600-hour limit, and to receive more than the $55,000 salary limit mandated by the Code; (iii) gave Board members free reign to claim stipends for various activities that could not be verified as official duties; (iv) overpaid stipends by as much as $9,925 in Fiscal Year 2016; (v) paid an extra $2,700 in stipends to Board members who were already being paid by their Government jobs; (vi) overpaid travel per diems by at least $34,800; (vii) did not ensure the repayment of a $1,992 cash advance payment to one of its members; (viii) expended over $2 million dollars from the checking accounts outside the purview of Finance in violation of Finance Memorandum No. 027-2010, thus placing these funds at risk; (ix) disbursed over $569,558 in contracts without the involvement of Property and Procurement; and, (x) paid $588,164 to a non-licensed contractor.
We made several recommendations to address the conditions and causes cited in the report. Our recommendations addressed the following areas: (i) retirement issues; (ii) financial controls; and, (iii) contract administration. To view the report, click here.
The Office of the Virgin Islands Inspector General has issued the audit of Executive Branch credit cards and lines of credit practices and procedures. The audit objective was to determine if standard policies and procedures, practices and financial controls, exercised by Executive Branch agencies over the use of, and payment on, Government credit instruments are sufficient and adequate to safeguard Government funds.
We found that standard policies and procedures, practices and financial controls exercised by Executive Branch agencies over the use of, and payment on, Government credit instruments were not sufficient and adequate to safeguard Government funds. Specifically: (i) Department of Finance and Department of Property and Procurement officials did not establish standard regulations to govern how Executive Branch agencies entered into and managed credit card/lines of credit agreements; (ii) Executive Branch agencies used the credit card/lines of credit to make purchases without first obtaining purchase orders, or to travel without proper authorization; (iii) agency officials (a) submitted $17,428 in credit card expenses that were not supported by documentation to identify the items purchased, or their purpose; (b) charged $10,642 in unauthorized personal expenses; and (c) submitted $3,797 in duplicate expenses when cash advances and credit card charges covered the same costs; (iv) agency officials did not process payments totaling $881,167 in the timeframe required by law; and, (v) agency officials who were responsible for directly making payments to the credit card company on behalf of the Government did not always remit the full amount the Government provided, but instead made partial payments.
We attribute these conditions to: (i) Property and Procurement and Finance officials not being aware of the extent to which credit instruments were used in the Executive Branch; (ii) agency officials not establishing effective internal controls to manage the use of the credit instruments to protect against the financial risk of fraud, waste, and abuse; (iii) agency officials not requiring supporting documents to justify cash advances and credit account expenses; (iv) agency officials not adhering to the procurement policies of the Government; (v) agencies not following the Government-wide travel regulations; and, (vi) agency officials not adhering to payment regulations, as well as not ensuring that cardholders, responsible for paying on assigned credit accounts, remit payments timely.
As a result: (i) at least $1.1 million in credit transactions were not adequately protected, and thus placed at risk for fraud, waste, and abuse; (ii) credit purchases totaling at least $199,199 were made that did not conform to the Government’s procurement policies; (iii) travel and travel-related expenses totalling at least $17,295 did not conform to Government-wide travel regulations; (iv) Executive Branch agency officials could not ensure that credit account expenditures were legal, appropriate, and consistent with their operations; and, (v) $881,167 in credit account charges was paid late, causing $23,288 in finance charges and late fees.
We have made several recommendations to address the conditions and causes cited in this report. Our recommendations address the following areas: (i) management oversight; (ii) procurement; (iii) internal controls; and, (iv) payment process. To view the report, click here.
The Office of the Virgin Islands Inspector General released its Fiscal Year 2020 Audit Plan. Among the various audits planned for 2020, the V. I. Inspector General’s Office hopes to complete seven projects still in progress during Fiscal Year 2019, to include: the Audit of the Administrative Functions of the Board of Education, Audit of Contract Administration at the VI Waste Management Authority, Audit of Contract Administration at the Governor Juan F. Luis Hospital, Audit of Specific Accounts for the Department of Agriculture, Inspection of Procedures to Control Reemployment of Retired Government Employees, Inspection of the Use of Loan Proceeds from the Government Employees Retirement System, and Audit of the Contract Converting WAPA’s Fuel Usage to Propane Gas. To view the 2020 Audit Plan, Click here.