With the more treacherous weeks of hurricane season approaching, financial control problems identified by a batch of federal audits on disaster relief, assistance loans and government contracting, remain neglected by the V.I. government.
The audits, which date back to 1996 and all done during the Schneider administration, cover claims against Federal Emergency Management Agency loans, hurricane contracting, the V.I. Department of Education, the V.I. Police Department, debris removal and the V.I. Water and Power Authority.
These, and other unresolved audits, were included in the Department of Interior Inspector General's Semiannual Report which was delivered to Congress this April.
A hurricane-related economic recovery initiative touted by both the Schneider and Turnbull administrations is forgiveness of the FEMA Community Disaster Loan given to the territory after Hurricane Marilyn. During meetings in Washington, D.C., last month, Gov. Charles Turnbull reported FEMA was considering forgiveness.
A November 1997 audit, despite finding the territory used loan funds appropriately, may actually be making the federal government hesitant to forgive the loan.
"We found that the Government of the Virgin Islands used Disaster Loan for the purposes for which the loan was requested," Inspector General Wilma Lewis wrote in the audit. "However, the government's Department of Finance did not establish and use separate accounting records within its financial management system to provide an audit trail.
"As a result, adequate accounting records were not maintained to show how the Disaster Loan funds of $15.5 million were used. Accordingly, there was little assurance the that $15.5 million would be eligible for cancellation under the provisions of FEMA regulations," Lewis wrote.
The $15.5 million was given to the University of the Virgin Islands and the Department of Tourism, but auditors found officials at those agencies were not notified of the source of the funds or the attached accounting and disbursement requirements.
"The (Tourism) Department did not segregate the receipt of the Disaster Loan funds ($6.6 million) from funds collected for hotel occupancy taxes ($8.1 million for fiscal years 1996 and through March 1997), of which both funds were deposited into the Tourism Advertising Revolving Fund," Lewis wrote.
The only recommendation in the audit considered to be resolved is a request that the V.I. government keep disaster loan funds in a separate account until they are spent.
The audit's other recommendations include notifying departments when they receive disaster loan funds, having those departments submit quarterly budgets to FEMA, and establishing proper accounting procedures to create an audit trail.
The audit also recommended the departments accumulate expenditure vouchers and other documentation so FEMA has sufficient records to review if the V.I. government files for cancellation of the loan.
The V.I. government concurred with these recommendations, but the Inspector General considers them unresolved and unimplemented.
Another audit, done in April 1998, found several problems with construction contracts awarded for Department of Education hurricane repairs.
"The government and the hurricane managers did maintain an adequate level of construction management oversight," Acting Inspector General Robert Williams wrote.
The V.I. Department of Public Works allowed contractors to work without formal contracts and competition was not guaranteed because the Department of Property and Procurement was excluded.
As a result, auditors found there was "little assurance" the government received the most favorable terms for $21 million in contracts, or that contractors performed the required work. Auditors also could not determine if building codes were followed to adequately protect occupants of school facilities.
"We believe the substandard construction work and the resultant potential for unsafe public schools existed because the government and its representatives did not ensure that architectural plans were prepared and approved, building permits were issued, and building code requirements were met," Williams wrote.
One contractor was overpaid by $5,418, the audit also found.
The audit recommended the Schneider administration ensure proper procurement procedures are used and that those procedures are adequately documented. The Schneider administration concurred with these findings, thus the Inspector General's Office considers these recommendations resolved but unimplemented.
The audit further recommended developing better contract oversight procedures, ensuring building permits are approved, and inspecting all work done on schools. The Inspector General's Office considers these recommendations unresolved.
A 1996 storm-related audit found the VIPD did not adequately account for disaster assistance funds it received from FEMA after Hurricane Marilyn. The department's Assistant Business Manager apparently told auditors the only controls in place were those used for other federal programs; according to the audit, however, FEMA has more specific record-keeping standards.
"The assistant business manager also told us that his office has no accounting staff, since those staff positions were vacant," Assistant Inspector General Judy Harris wrote in the audit. "As a result, there was no assurance that disaster assistance funds would be accounted for in accordance with applicable federal and local laws and regulations."
Auditors also found the VIPD had not implemented special record keeping procedures to determine how much of the $954,000 officers were paid for hurricane-related overtime was eligible for FEMA reimbursement.
In recent years, the Police Benevolent Association has threatened job slowdowns over the government's inability to pay officers all the overtime money they are owed.
The audit recommended the VIPD establish record-keeping procedures, particularly those that pertain to payroll and overtime. It also recommended the department develop more competitive procurement procedures.
In a response to the audit, then Police Commissioner Ramon Davila wrote, "accounting procedures will be followed to meet FEMA requirements," but did not provide further details. The audit's recommendations are still considered unresolved.
Another 1996 audit, covering debris removal, found although the Department of Public Works made efforts to obtain competitive prices for debris removal services, it did so without processing contracts through the Department of Property and Procurement, and allowed businesses to do work without formal contracts.
"As a result, the government's interests were not safeguarded through formal contracts for debris removal services acquired at a total cost of approximately $1.8 million," Inspector General Wilma Lewis wrote in the audit.
According to the Semiannual report, there has never been a response to this audit.
An 1998 audit of WAPA's use of $32 million worth of disaster assistance funds found the utility had developed adequate financial controls. Auditors, however, could not determine whether the funds were safeguarded because WAPA personnel did not always comply with the controls and in two cases, used improper contracts.
The audit recommended WAPA make better efforts to prevent duplicate payments though it found the utility had rectified about $500,000 worth of such payments.
"Because duplicate payments did occur, we believe that the actions we recommend are valid," Acting Inspector General Robert Williams wrote. The audit also urged WAPA officials to ensure all appropriate supporting documentation is submitted for hurricane-related expenditures.
The Department of the Interior Inspector General's Office considers these two recommendations unresolved.
Gov. Charles Turnbull has not responded directly to a request for a comment on the report, which liste
d over 30 audits that have not been fully addressed by the territory. A Government House spokesperson said, however, Turnbull has been instructing his cabinet members to use audits as guides in operating and restructuring their departments and agencies.