The Office of the Virgin Islands Inspector General released its Fiscal Year 2019 Audit Plan. Among the various audits planned for 2019, the V. I. Inspector General’s Office hopes to complete three projects still in progress during Fiscal Year 2018, to include: the Follow-up on Property Tax Auctions., 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 2019 Audit Plan, Click here.
Audit of the Administrative Functions of the Virgin Islands Casino Control Commission
The Office of the Virgin Islands Inspector General has issued the audit of the administrative functions of the Virgin Islands Casino Control Commission (Casino Commission). The audit objective was to determine whether the Casino Commission effectively utilized its resources and carried out its administrative functions in accordance with established laws, rules and regulations, policies and procedures, and best practices for government agencies.
Our audit found that the Casino Commission was not effectively utilizing its resources to carry out its administrative functions in accordance with established laws, rules and regulations, policies and procedures and best practices. Specifically, the Casino Commission: (i) did not have formal procedures for authorizing, processing, recording, reviewing, and reconciling financial transactions; (ii) allowed members to incur $851,534 in credit card transactions and made $808,229 in payments to the credit card issuer without any formal review or approval process in place; (iii) allowed the Chairperson to process $1,062,860 in electronic fund transfers without another employee or Casino Commission member reviewing or authorizing the payments; (iv) allowed the Chairperson to process, $2,660,163 in check payments, reconcile bank statements and maintain sole custody of financial records; (v) did not submit required financial reports timely to the Department of Finance and the Virgin Islands Legislature; (vi) incurred operating expenditures totalling more than $3,772,803, of which, $1,315,635 was not supported with proper documentation; (vii) expended $680,172 in travel and travel-related expenses without having established formal travel policies and procedures; (viii) ignored the Government-wide travel policy while it did not implement a formal travel policy of its own; (ix) did not provide supporting documentation for $488,674 of travel and travel-related expenses; (x) did not implement internal procedures to ensure that travel expenses were properly controlled and accounted for; and, (xi) did not follow the procurement laws of the Government in obtaining professional services.
We attribute these conditions to the failure of the Casino Commission to: (i) develop internal policies and procedures; (ii) establish an internal control system to ensure, at a minimum, the separation of duties and adequate reviews; (iii) follow the requirements of the Code that requires the Casino Commission to submit financial reports and accompanying receipts to Finance and the Legislature; (iv) establish a system of checks and balances by the Casino Commission members, rather than allowing the Chairperson to assume sole responsibility for processing payments and maintaining supporting documents; (v) follow the Government-wide travel regulations; (vi) require supporting documentation to justify travel expenses; and, (vii) adhere to the procurement policies of the Government, or to implement policies and procedures of its own.
As a result: (i) in accordance with professional standards, whereas the Casino Commission’s oversight body and/or management should have developed internal controls, one person performed all critical financial management functions without input from the other Casino Commission members; (ii) numerous expenses are questionable due to the lack of documentation needed to verify the legitimacy of the expenses relative to the daily operations of the Casino Commission; (iii) numerous travel and travel-related expenses did not conform to the Government-wide travel policy; (iv) many of the travel and travel-related expenses were unsupported and are considered questionable in terms of their relation to the daily operations of the Casino Commission; and (v) professional services were obtained and contracts were executed by the Casino Commission that did not conform to the Government procurement policies or other best practices guidelines.
We made several recommendations to address the conditions and causes cited in the report. Our recommendations addressed the following areas: (i) internal controls; (ii) operating expenses; (iii) travel expenses; and, (iv) contracting. To view the report, click here.
Former Virgin Islands Senator Convicted of Wire Fraud and Theft of Federal Program Funds
The United States Attorney announced that a Federal jury has convicted a former Virgin Islands senator of two counts of wire fraud and one count of theft of federal program funds from the Virgin Islands Legislature. To see the United States Attorney’s Press Release, click here.
VI Inspector General Presents Proposed Fiscal Year 2019 Budget to the Committee on Finance
Virgin Islands Inspector General Steven van Beverhoudt presented to the Committee on Finance the proposed Fiscal Year 2019 Budget for the operations of the Office of the Virgin Islands Inspector General. V. I. Inspector General van Beverhoudt is proposing a funding level of $2.468 million, which is almost 10% more than the level provided in Fiscal Year 2018. The proposed 2019 Budget includes the hiring of six additional auditors. To see the Virgin Islands Inspector General’s Testimony, click here.
Investigation into Alleged Removal of Generator from Ivanna Eudora Kean High School
The Office of the Virgin Islands Inspector General investigated an allegation that a generator located at the Ivannna Eudora Kean High School was moved to the home of the Commissioner of Education. The investigation has confirmed that in fact the generator was moved to the Commissioner’s home shortly after the passage of Hurricane Irma. It has since been relocated to a storage area at the Adelita Canryn Junior High School. The Commissioner stated it was moved for security reasons and that her home was used at times as a base of operations and thus felt that her utilization of the generator was justified. We have concluded that: (i) the generator should not have been moved to the Commissioner’s home, and more importantly it should not have been connected; (ii) the administration of Ivanna Eurdora Kean High School should have been notified of the move; and, (iii) it probably could have been used in some other capacity for the Department of Education or the Government. To view the report, click here.
VI Inspector General Reports to the Governor of the Virgin Islands on the Status of Agency Operations after the Passage of Hurricanes Irma and Maria
The VI Inspector submitted, to the Governor of the Virgin Islands, a status report on the operations of the VI Inspector General’s Office after the passage of Hurricanes Irma and Maria. To see a copy of the report, click here.
Fiscal Year 2018 Audit Plan
The Office of the Virgin Islands Inspector General released its Fiscal Year 2018 Audit Plan. Among the various audits planned for 2018, the V. I. Inspector General’s Office hopes to complete four projects still in progress during Fiscal Year 2017, to include: 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 2018 Audit Plan, Click here.
Major Procurement and Management Issues Concerning Bond Proceed Use in the U. S. Virgin Islands
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.
Significant Flaws Revealed in the Financial Management and Procurement Practices of the U. S. Virgin Islands’ Public Finance Authority
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.
Audit of the Department of Education’s Claims and Reimbursement Procedures for the School Lunch Program
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.
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