The Office of the Virgin Islands Inspector General and the Office of Inspector General of the Department of the Interior have issued a joint management advisory report on the use of bond proceeds. During our audit of the VI Public Finance Authority, we uncovered poor procurement practices and major deficiencies in the management of projects paid for with bond proceeds; because of the magnitude of these deficiencies, which involved several Government of the Virgin Islands (GVI) agencies. To view the report, click here.
The Office of the Virgin Islands Inspector General and the Office of Inspector General of the Department of the Interior have issued a joint report on the operations of the VI Public Finance Authority. We determined that PFA did not maintain sufficient internal controls to safeguard assets and did not provide reasonable assurance that financial transactions and related reports were accurate, as evidenced by the $50 million in financial reporting discrepancies, conflicts of interest, and the $101.1 million in questionable expenditures we found during our fieldwork. To view the report, click here.
The Office of the Virgin Islands Inspector General has issued the audit of the Department of Education’s (Education) claims and reimbursement procedures for the School Lunch Program. The audit objectives were to: (i) determine whether the School Food Authorities (Authorities) have effective internal controls in place to ensure that districts’ meals offered and served comply with USDA nutrition and pattern requirements; (ii) assess whether the Authorities had sufficient internal controls to ensure that meal claims for reimbursement were completely and accurately reported; (iii) determine whether performance measures were established to ensure that decreases in claims were promptly assessed and corrective actions were taken; and, (iv) determine whether the Authorities have pursued opportunities for the districts to receive additional federal funds to help support the School Lunch Program. We found that within Education, there was a pervasive culture of non-compliance with federal regulations that govern the reimbursement of meals served in the Virgin Islands school system. Specifically, our audit found that: (i) federal reimbursement and entitlement food decreased during 2013 to 2015 school years; (ii) internal controls were not established to ensure that meal reimbursement claims were accurate and met federal guidelines; (iii) Education officials did not effectively maximize opportunities to obtain additional federal funds to sustain the School Lunch Program; and, (iv) Education officials did not ensure that meals offered and served complied with USDA nutrition and pattern requirements. We attributed these conditions to the reduction in student participation in the school meal program. As well as, Education officials: (i) not implementing recommended strategies to boost student participation; (ii) not establishing policies and procedures; (iii) not addressing the problem of poorly trained employees and understaffing; (iv) turning a blind eye to obvious non-reimbursable meal claims; (v) being placed in a position of a conflict of interest; (vi) continued non-compliance with federal regulations; and, (vii) not ensuring the availability and correct serving of menu items. As result: (i) over the three academic school years of our audit scope, there has been a funding loss of $1.7 million dollars; (ii) over 95,000 meals were improperly claimed, with anywhere from $32,000 to $259,000 in funds being placed in jeopardy of repayment to the USDA; (iii) unnecessary pressure may be placed on the territory’s local funds budgeted for the School Lunch Program; (iv) the territory lost certification that resulted in the loss of $206,000 in additional reimbursements; and, (v) students did not always receive the recommended daily nutritional supplement to aid in their academic performance and maintain good health. To view the report, click here.
The Office of the Virgin Islands Inspector General has issued the audit of the Department of Education’s (Education) inventory controls over the School Lunch Program. The audit objectives were to determine if Education: (i) administered its inventory systems for the School Lunch Program in accordance with established criteria; and, (ii) had controls in place to effectively safeguard and monitor School Lunch Program inventories. We found that Education officials did not adequately administer and manage the School Lunch Program inventory systems in accordance with established criteria and best practices. In addition, they did not adequately implement proper internal controls and safeguards to protect the inventory from the risk of loss due to fraud, theft, or negligence. Although there were some recent changes in the administration and management of the School Lunch Program, significant deficiencies still exist. Specifically, the audit found that Education officials: (i) did not maintain complete, accurate, consistent and current records of the receipt, distribution, and warehousing of inventory; (ii) modified or adjusted inventory records without proper or written justification; (iii) were negligent in securing and accounting for inventory received, delivered, stored, and/or used at district warehouses and schools; (iv) did not always conduct monthly and annual inventory reconciliations as required; (v) did not properly segregate warehouse duties; (vi) did not ensure that schools’ inventory management practices in the districts were uniform and consistent with federal and state requirements; (vii) used a system for ordering food items and planning cycle menus that was ineffective and inefficient; (viii) did not implement key recommendations made by a management and consulting firm; (ix) did not ensure the timely and complete installation and implementation of food service management software; (x) did not ensure that warehouse and school personnel had been given sufficient training to use the software; and, (xi) have failed at all levels of the department in their responsibility to ensure that the School Lunch Program was functioning in an efficient and effective manner. As a result: (i) Education officials did not accurately know the actual total values and quantities of inventory on hand as of specific times; (ii) School Lunch Program inventory was susceptible to the risk of loss due to negligence or unauthorized use; (iii) Education officials could not properly forecast and plan the ordering of food items to meet monthly cycle menu requirements; (iv) students participating in the School Lunch Program may not have been receiving meals with the nutritional value and requirements specified by the federal government; (v) Education officials expended more than $920,000 for consulting services and food management software and have not aggressively resolved issues to improve School Lunch Program operations; and, (vi) an inefficient and ineffective School Lunch Program has continued for decades, and unless significant improvements are made, the School Lunch Program will continue to be susceptible to fraud, waste and abuse. To view the report, click here.
The Office of the Virgin Islands Inspector General released its Fiscal Year 2017 Audit Plan. Among the various audits planned for 2017, the V. I. Inspector General’s Office hopes to complete seven projects still in progress during Fiscal Year 2016, to include: the Audit of the Controls over the Department of Education’s School Lunch Program, the Audit of the Child Nutrition Programs Claims and Reimbursement Controls, the Audit of the Public Finance Authority (Joint Project OVIIG/OIG-DOI), the Follow-up on the Handling of Funds Received During the Property Tax Auctions, the Audit of the Administrative Functions of the Casino Control Commission, the Audit of the Administrative Functions of the Board of Education, and the Audit of the Executive Branch’s Use of Credit Instruments. To view the 2017 Audit Plan, Click here.
The Office of the Virgin Islands Inspector General has issued the inspection report of the Alternative Investment Program administered by the Government Employees Retirement System (GERS). We found that the Alternative Investment Program as administered by GERS is not meeting the intended purpose of safely increasing the return on investments. Specifically, (i) viatical senior and/or life settlements (viatical) and some real estate investments considered by the industry as alternative investments are not included in the alternative investments section of the Code; (ii) GERS’ current non-traditional investments limit is higher than the industry standards; (iii) in the 2005 revisions to the Code, there are two sections dealing with alternative investments and one section dealing with viatical; (iv) a 2015 revision to the Code added five additional categories of alternative investments; (v) GERS entered into loan agreements that were not authorized under the Alternative Investment Program or any other authority as defined by the Code; (vi) the interest rate charged for four of the loans was below the rate charged to GERS members and the industry desired investment rate of return; (vii) GERS entered into an extremely risky and questionable viatical investment; (viii) GERS also granted a $10 million line of credit to the same Partnership that is handling the viatical investment; (ix) GERS entered into numerous agreements and investments without performing the necessary due diligence evaluation to ensure limited risk and a reasonable rate of return on the funds used; (x) GERS did not conduct efficient monitoring and oversight activities of investments under the Alternative Investment Program to protect GERS’ interest; and, (xi) GERS did not establish any procedures, policies, or benchmarks to ensure that funds were being utilized for the requested purpose of the investments. To view the report, click here.
The Office of the Virgin Islands Inspector General released its Fiscal Year 2016 Audit Plan. Among the various audits planned for 2016, the V. I. Inspector General’s Office hopes to complete six projects still in progress during Fiscal Year 2015, to include: the Inspection of the Alternative Investment Program of the Government Employees Retirement System, the Audit of the Controls over the Department of Education’s School Lunch Program, the Inspection of Contract for Claim of Environmental Damages to St, Croix’s South Shore, the Follow-up on the Handling of Funds Received During the Property Tax Auctions, the Audit of the Public Finance Authority (Joint Project OVIIG/OIG-DOI) and the Audit of the Child Nutrition Programs Claims and Reimbursement Controls. In addition three other projects should be started during the 2016 Fiscal Year to include: the Audit of the Administrative Functions of the Casino Control Commission, the Audit of the Administrative Functions of the Government Employees Retirement System and the Audit of Government-wide Travel. To view the 2016 Audit Plan, Click here.
The Office of the Virgin Islands Inspector General has issued the audit report on the Economic Development Program Administered by the Economic Development Authority. Although the Authority had a positive impact in promoting the growth, development, and diversification of the Territory’s economy, there was need for improvements in its administration of the Economic Development Program. Specifically, we found that the EDA (i) does not have a mechanism in place to require the timely measurement, assessment and reporting of the overall economic and fiscal impact of the Economic Development Program on the Territory’s economy, (ii) does not promote higher levels of participation by certain business types found to have a relatively low economic and fiscal impact on the Territory, (iii) recommended recent changes to the tax benefits law that have created a potential “business welfare” program by providing beneficiaries with 100% benefits for 40 to 50 years, (iv) used rules and regulations that contradicted the Code regarding extension of benefits, (v) in extending benefits, granted full benefits to beneficiaries not eligible to receive them at that level under the law, (vi) granted extension of benefits in numbers and durations in excess of what was allowed under the law, (vii) performed infrequent compliance reviews, (viii) did not effectively ensure that beneficiaries complied with reporting requirements, (ix) did not always promptly inform regulatory agencies of changes in the certificate statuses of beneficiaries, (x) did not consistently adhere to the time requirements for the various phases of the application process, (xi) did not adequately monitor the collection of information needed to process applications for economic development benefits, and (xii) did not always process applications in an organized and systematic manner. To view the report, click here.
The Office of the Virgin Islands Inspector General released its Fiscal Year 2015 Audit Plan. Among the various audits planned for 2015, the V. I. Inspector General’s Office hopes to complete four projects still in progress during Fiscal Year 2014, to include: the Audit of the Economic Development Commission at the VI Economic Development Authority, the Inspection of the Alternative Investment Program of the Government Employees Retirement System, the Audit of the Controls over the Department of Education’s School Lunch Program, and the Audit of the Public Finance Authority (Joint Project OVIIG/OIG-DOI). In addition four other projects should be started during the 2015 Fiscal Year to include: the Audit of the Child Nutrition Programs Claims and Reimbursement Controls, the Audit of the Administrative Functions of the Government Employees Retirement System, the Audit of the Construction of the Charles W. Turnbull Library, and the Audit of Government-wide Travel Practices. To view the 2015 Audit Plan, click here.
The Office of the Virgin Islands Inspector General has issued the inspection report of Real Property Auctions Held by the Office of the Lieutenant Governor. We found validity to the allegations of questionable bidding practices and a lack of compliance with statutory regulations governing real property auctions conducted by the Lieutenant Governor’s Office. Specifically, we found that as a result of procedural changes made in real property auctions by officials at the Lieutenant Governor’s Office; (a) individuals were allowed to manipulate the bidding process, to fraudulently restrict other potential individuals from making legitimate bids on properties offered for auction, (b) questionable and inaccurate bid recording and recordkeeping brought into question several of the reported highest bids for several properties that were sold, (c) properties were not properly researched to ensure that they were eligible for sale, (d) payment time frames established by the Code were not properly adhered to, (e) adequate documentation of the Notice of Attachment process, as required by the Code, was not always maintained to ensure that taxpayers’ constitutional right of due process was followed, and (f) auction costs and fees were not assessed and collected once properties were sold or redeemed. To view the report, click here.