Sept. 17, 2003 – An audit of the Education Initiative Fund for Fiscal Years 2000-2001 by the V.I. Inspector General's Office has determined that the V.I. Code was not followed properly by the Education Department and the Office of Management and Budget in the allotment to schools of money appropriated to the fund.
The V.I. Code specifically:
– Provides the formula for the derivation of a school's Initiative Fund allotment.
– Spells out the time frame for distributing the allotment to the school.
– Lays out guidelines for the types of acquisitions allowable from the fund.
– Outlines the manner of reporting on the disbursement of the Initiative Fund allotments.
In some instances, the audit found, none of these stipulations were met.
"The amount and timing of the OMB's initial release of the Initiative Fund allotments for FY 2000 and 2001 did not allow for schools to receive one-half of their year's total allotment within the 15 days of the beginning of the fiscal year," according to the audit report.
As a result, the audit report stated, several schools received lump-sum payments, contrary to the code requirements. In some cases, it said, funds were not received by a school until seven months after being released by OMB.
According to the report, Education Commissioner Noreen Michael stated on Aug. 4 in her response to the draft audit report submitted for her review that the Education Department would continue to dialog with OMB in an effort to comply with the law.
"We applaud Education for working with OMB in getting the allotments released," the final audit report stated. It said that "for at least three years, funds have not been allotted as prescribed by the code, nor have they been getting to the schools on a timely basis."
The fund was created by the Legislature in 1995 to enable the public schools and public adult education facilities in the territory to acquire goods and services essential for their routine functioning. However, because of the code violations, these facilities were denied their fair share of funds, the audit report said.
"This was because Education officials employed methods other than the full and fair application of the code's formula to budget the Initiative Fund for the schools," it stated.
By law, each public school was to receive base funding of $10,000 during the period covered by the audit. For each enrolled student over 500, each facility was to receive an additional $15. (In June 2002, the base figure was increased to $50,000.)
In some cases, the audit found, schools with higher enrollments received the same amount of funding as was specified for schools with lower enrollments. In other cases, the report said, just the opposite was true.
From "the very nature of the amounts of the allotments awarded to the St. Croix schools," the report stated, it was evident "that Education did not apply the code's formula in deriving the amounts, and the allotments were arbitrarily awarded without regard to the schools' enrollment numbers."
For FY 2000 and 2001, $300,000 was appropriated for schools in each district. Allotments were prepared for 20 schools in the St. Thomas-St. John district with a total school population of 10,452 in the first fiscal year and 9,645 in the second, and for 18 schools on St. Croix with enrollments of 11,077 and 10,571, respectively.
Looking beyond the audit time frame, the report also noted that the Education Department was allotted $600,000 for the fund for FY 2003. However, it said that with 34 eligible schools in the territory and the mandated increase to $50,000 in base funding, a minimum of $1.7 million would be needed to meet the first level of requirement.
"It is our opinion that if funds are not going to be allocated to fully implement the formula as now required by the code, then Education should be given the flexibility to adjust the distribution of funds based on amounts received," Inspector General Steven van Beverhoudt said in the audit report.
The audit found that custodians of the funds at most schools used the money in accordance with the code, but that breaches occurred in two cases. At Bertha C. Boschulte Middle School, the report said, the custodian of funds expended $825 on travel and entertainment. And at New Horizons Alternative School, the custodian of the funds opened a bank debit account from which cash withdrawals were made. The money was reportedly for school supplies, the report said, but there were inconsistencies in the withdrawals.
The Office of Inspector General recommended that an assistant to the custodian of funds be implemented and that the BCB custodian reimburse the fund in the amount of $825. Michael in her response to the draft report concurred with the recommendation and has instituted a memorandum of agreement regarding the fund, the report stated.

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