GOVERNMENT OF THE UNITED STATES VIRGIN ISLANDS OFFICE OF THE V. I. INSPECTOR GENERAL 2315 Kronprindsens Gade #75, Charlotte Amalie, St. Thomas, V. I. 00802-6468 No 1. Commercial Building, Lagoon Street Complex, Frederiksted, St. Croix, V. I. 00840 Tel: (340) 774-3388 STT STEVEN VAN BEVERHOUDT (340) 778-9012 STX V.I. INSPECTOR GENERAL Fax: (340) 774-6431 STT (340) 719-8051 STX OFFICE OF THE VIRGIN ISLANDS INSPECTOR GENERAL Fiscal Year 2020 Budget Proposal INTRODUCTION Good morning Senator Kurt Vialet, Chairman of the Committee on Finance, members of the Committee, other members of the 33rd Legislature, staff of the Legislature, ladies and gentlemen in the viewing and listening audience. I am Steven van Beverhoudt, the Virgin Islands Inspector General. With me this morning is Ms. Delia Thomas, Deputy Virgin Islands Inspector General. We are here today to provide an overview of the proposed Fiscal Year 2020 Budget for the operations of the Office of the Virgin Islands Inspector General (V. I. Inspector General’s Office) and to answer any questions that you might have. STATE OF THE V. I. INSPECTOR GENERAL’S OFFICE Title 3, Chapter 40 of the Virgin Islands Code, establishes the V. I. Inspector General’s Office as the independent auditing arm of the Government of the Virgin Islands (Government). The Code gives the V. I. Inspector General’s Office the responsibility of auditing and investigating all three branches of the Government, including the autonomous and semi-autonomous instrumentalities. We are the only 2 Government, local or Federal, auditing arm permanently situated in the Virgin Islands. Our mission is “to promote economy, efficiency and effectiveness, and to further the prevention of fraud, waste and abuse in the administration of the programs and operations of the Government of the Virgin Islands.” Fiscal Year 2018 was a re-grouping and re-building year for the Virgin Islands, and this mode was no different for the V. I. Inspector General’s Office. The re-grouping and re-building has continued into Fiscal Year 2019. I am pleased to report that structurally, the repairs to our building on St. Thomas is 99.9% completed and our office on St. Croix has been completely refurnished. Below are some recent photos of our improvements. St. Croix Office 3 St. Thomas Office 4 Currently there are 18 filled positions within the organization, and all employees are at their correct salary level. We are in the process of filling our six vacant auditor positions. In fact, we have selected two candidates so far, one has started to work on Tuesday and the second is scheduled to report on September 16th. We will continue our scrutiny of prospective applicants in order to make the 5 best choices possible to join our organization. In Fiscal Year 2020 we are requesting authorization to fill the position of General Counsel, as we have no attorney within the V. I. Inspector General’s Office at this time. Our organizational chart can be found on page 14 of this document. We have eight Certified Fraud Examiners and six members with Master’s Degrees. An additional employee is working on her Master’s Degree, as well as one of our newly hired employees. We continue to encourage the continued education and professional development of our staff. Regarding the audit and inspection aspect of our operations, our 2019 Annual Audit Plan Summary can be found on page 15. There are four new projects that were started in Fiscal Year 2019. They are: (i) audit of contract administration at the Virgin Islands Waste Management Authority; (ii) audit of contract administration at the Governor Juan Luis Hospital; (iii) inspection of the use of GERS loan proceeds to the V. I. Finest Foods/West Bay Supermarket project; and, (iv) inspection of the Government procedures used to notify GERS of retirees providing services to the Government. Also, as can be seen in our 2019 Audit Plan, we hope to, at some point, do some audits involving some complex issues that will require specialized auditors, thus our request for funding for contract services in Fiscal Year 2020. 6 We continue to make ourselves available to provide assistance to Federal auditors regarding activities they plan on conducting in the Virgin Islands. In Fiscal Year 2019 to date, the following audits and inspections have either been completed or are progressing through various phases of the audit and inspection process:  Follow-up Review on the Disposition of Funds Collected During the Real Property Auctions Held in 2012 and 2013  As a result of our September 2014 inspection of real property auctions, we found the need to review the dispositions of funds collected, deposited and returned to the various bidders and original property owners.  The objective of the inspection was to determine: (i) if the Lieutenant Governor’s Office correctly paid property owners the net proceeds generated from sold properties; and, (ii) if the Lieutenant Governor’s Office deducted and accounted for the taxes and public sewer system user fees, penalties and costs as prescribed by the Title 33, Section 2547 (c) of the Code.  A final report was issued on October 5, 2018, and can be seen on our website, viig.org. 7  Audit of Executive Branch Credit Cards and Lines of Credit Practices and Procedures  The objective was to review the policies and procedures, and evaluate the internal controls relative to credit instruments utilized by the Executive Branch.  The official draft report was sent to the Commissioners of Finance and Property and Procurement. Their responses were due by last Friday, however, extensions have been granted to Monday, September 9th. The final report will be issued shortly after the receipt of the responses.  Audit of the Selected Administrative Functions of the Virgin Islands Board of Education  The objective was to determine whether the V. I. Board of Education carried out selected administrative functions over retirement matters, financial controls and contract administration in accordance with established laws, policies and procedures, rules and regulations.  The initial scope of the audit covered fiscal years 2013 through 2016.  A draft report is being reviewed and revised by me, and we hope to have our exit conference in next few weeks, with a final report issued before the end of the year. 8  Audit of Contract Administration at the Virgin Islands Waste Management Authority  The objective of the audit is to determine whether the Virgin Islands Waste Management Authority is complying with laws, rules and regulations, and sound procurement practices in its contract administration.  The scope covers fiscal years 2017 through 2019.  We are currently completing our risk assessment to determine the areas with greatest risk in order to focus our audit work.  Audit of Contract Administration at the Governor Juan F. Luis Hospital  The objective of the audit is to determine whether the Governor Juan F. Luis Hospital is complying with laws, rules and regulations, and sound procurement practices in its contract administration.  The scope covers fiscal years 2017 through 2019.  We are completing the risk assessment to determine the areas with greatest risk in order to focus our audit work. 9  Inspection of Government Controls on the Re-employment of Government Employees  The objective of the inspection is to determine the controls in place by the Government to identify when a retiree returns to active service.  We have completed significant analysis of Executive Branch procedures and are currently assessing procedures for the other branches and the autonomous and semiautonomous agencies.  Inspection of the Use of GERS Loan Proceeds for the VI Finest Foods/West Bay Supermarket Project  The objective of the inspection is to determine whether the loan proceeds were used for the intended purposes in accordance with the loan agreement.  We have recently received numerous documents related to the project and are currently reviewing them.  Audit of Revolving Fund Accounts Administered by the Department of Agriculture  The audit has been initiated based on a request submitted by the current Commissioner of the Department of Agriculture. 10  This project is in the preliminary stage and objectives are being developed based on the requests of the Commissioner. The required Quality Control Peer Review, which is an assessment of our compliance with the required Government Accountability Office standards, was completed in this fiscal year. There were some minor areas where improvements were needed, and they are being addressed. In particular, we are updating our auditor’s manual and finalizing our investigator’s manual in accordance with professional standards. A copy of the Quality Control Peer Review report is attached beginning on page 16. In the area of investigations, to date in Fiscal Year 2019, our investigative report confirmed the allegation that an Office Manager of the Virgin Islands Bureau of Motor Vehicles violated procedures by inappropriately processing and approving several vehicle registrations. Again, the report can be viewed on our website, viig.org. In addition, there are several ongoing investigations that are at various levels of completion. Based on our audit of the operations of the Virgin Islands Casino Control Commission we participated extensively with our Federal partners in conducting a criminal investigation on the apparent misappropriation of Government funds. As a result, a Federal Grand Jury handed down a 30-count indictment of the former 11 Chairperson and a contractor. As with all allegations of wrongdoing, those charged are considered innocent as the case moves through the judicial process. Once again, the local prosecution of the former executives of the Schneider Regional Medical Center has been delayed until October 2019. In the meantime, a considerable amount of time is being used to prepare for the case. To date, in Fiscal Year 2019, we have received 22 complaints alleging wrong doing by Government officials. Of the total, there were 19 allegations of wrong doings on St. Thomas, and 3 allegations of wrong doing on St. Croix. Many of the complaints lacked sufficient information, were resolved administratively, or were matters for other departments and agencies. Regarding training, the USDA Graduate School provided us with a two-day course in quick response auditing. In addition, in June 2019, the professional staff attended the Association of Certified Fraud Examiner’s 30th Annual Global Conference in Austin, Texas. 2020 BUDGET We support the Administration’s 2020 Fiscal Year Budget recommendation of $3,003,576. This amount is $61,098, or about 2% less than the Fiscal Year 2019 revised appropriation. Fiscal Year 2019 actual expenditures through July 31, 2019 totaled $1,726,756. 12 The following are our comments relating to each prime account of the Fiscal Year 2020 proposed spending plan. Our Fiscal Year 2020 proposal by sub- accounts is shown on page 19. Personnel Services and Fringe Benefits. The budget proposal provides for 17 filled positions and 6 vacant positions, for which we are currently filling and recruiting, and 1 new position, that of a General Counsel. The total proposed funding level for personnel and related services is $2,431,285, or 80.9% of the overall budget request. This amount consists of $1,793,599 and $637,686 for Personnel Services and Fringe Benefits respectively. Personnel Services $1,793,599 Fringe Benefits 637,686 $2,431,285 Supplies. Budgeted supplies costs for Fiscal Year 2020 are estimated at $50,000 or 1.7% of the overall request. Supplies $50,000 Other Services. Budgeted other services costs for Fiscal Year 2020 are estimated at $422,291, or 14% of the budget request. The majority of the increase relates to professional services. As was previously discussed, we hope to start some audits involving complex issues in 2020. Other Services $422,291 13 Utility Services. Our utilities costs are estimated at $50,000, or 1.7% of the Fiscal Year 2020 budget request. Utility Services $50,000 Capital Outlays. Finally, the budget requests $50,000 in capital outlays for computers for the new staff that we are in the process of hiring. This amounts to 1.7% of the budget request. Capital Outlay $50,000 SUMMARY In summary, with a new administration, new agency heads will continue to request audit services. As the only permanent Government audit presence in the Virgin Islands, the need for oversight of Government funds will always be there. We therefore ask for your full support of the recommended Fiscal Year 2020 Budget of $3,003,576. We thank you for the opportunity to be here today, and we are available to answer any questions that you might have. 14 Governor of the Virgin Islands Virgin Islands Inspector General General Counsel Chief of Audits Chief of Investigations Deputy Virgin Islands Inspector General Assistant Chief of Audits and Investigations Supervisory Auditor Senior Special Investigator Audit Coordinating Assistant Special Investigator Audit Coordinating Officer Investigative Support Specialist Auditor Custodial/ Messenger Writer-Editor OFFICE OF THE VIRGIN ISLANDS INSPECTOR GENERAL ORGANIZATIONAL STRUCTURE 15 16 17 18 19