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.