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U.S. Department of the Interior
Office of Inspector General
Audit Report
Virgin Islands Fire Service
Government of the Virgin Islands
Report No. 2002-I-0001
October 2001


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V-IN-VIS-004-01-M
United States Department of the Interior
OFFICE OF INSPECTOR GENERAL
Insular Area Audits
Federal Building, Room 207
St. Thomas, Virgin Islands 00802
October 30, 2001
Honorable Charles W. Turnbull
Governor of the Virgin Islands
No. 21 Kongens Gade
Charlotte Amalie, Virgin Islands 00802
Subject: Audit Report on the Virgin Islands Fire Service, Government of the Virgin Islands 
(No. 2002-I-0001)
Dear Governor Turnbull:
This report presents the results of our audit of the administrative operations of the Virgin
Islands Fire Service.
Section 5(a) of the Inspector General Act (5 U.S.C. app. 3) requires the Office of Inspector
General to list this report in its semiannual report to the U.S. Congress.  In addition, the Office of
Inspector General provides audit reports to the Congress.
Please provide a response to this report by November 30, 2001.  The response should provide
the information requested in Appendix 4 and should be addressed to our Caribbean Regional Office,
Federal Building - Room 207, Charlotte Amalie, Virgin Islands 00802.
Sincerely,
Arnold E. van Beverhoudt, Jr.
Audit Manager for Insular Areas
cc:
Director, Virgin Islands Fire Service
Commissioner of Licensing and Consumer Affairs
Commissioner of Public Works
Commissioner of Property and Procurement
Commissioner of Finance
Virgin Islands Attorney General


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EXECUTIVE SUMMARY
BACKGROUND
The Virgin Islands Fire Service was established  in 1979, and
is administered by a Director, who is appointed by the
Governor with the advice and consent of the Legislature.  For
administrative purposes, the Fire Service is divided into the
District of St. Thomas/St. John and the District of St. Croix,
with administrative offices in both districts.  Each district has
a Suppression Unit that is responsible for extinguishing fires
and an Arson Prevention and Investigation Unit that is
responsible for investigating the causes of fires and conducting
fire prevention activities.  As of April 2001, there were two
active fire stations on St. Thomas, two on St. John, and four on
St. Croix.  The Fire Service received appropriations of
$10.9 million in fiscal year 1999 and $10.4 million in fiscal
year 2000.
OBJECTIVE
The objective of the audit was to determine whether the Fire
Service effectively carried out its administrative functions of
personnel and property management, collection of fire
inspection fees, and documentation of fire emergencies and fire
prevention activities.  We expanded the objective of the audit
to include an analysis of lump sum payments made to eight
former Fire Service employees.  
RESULTS IN BRIEF
The Fire Service adequately documented fire emergencies to
which it responded and adequately conducted fire safety
education programs, but other controls needed improvement.
Specifically, the Fire Service should:
‘
Conduct required biennial fire safety inspections at
commercial establishments and collect the appropriate
fees for this service as authorized by the Virgin Islands
Code.
‘
Deposit collections on a daily basis and ensure that
collections are adequately safeguarded.
‘
Analyze and document its staffing needs to reduce the
excessive use of overtime.
‘
Ensure that a high-ranking official submits time sheets
to support the hours worked.


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2
‘
Fully use the $2 million allotted to renovate the fire
stations and upgrade fire fighting equipment.
‘
Prepare and maintain complete  property management
records for all Fire Service property and equipment
and conduct a physical inventory of the property at
least once every two years.
‘
Obtain price quotations from at least three sources
when purchasing fire fighting equipment and supplies
on the open market.
‘
Request that the Virgin Islands Water and Power
Authority disconnect electric service at the two closed
fire stations on St. Thomas to avoid monthly electric
charges at unmanned fire stations.
‘
Implement a formal records retention policy.
We concluded that, as a result of the administrative control
weaknesses noted, the Fire Service (1) did not generate fire
inspection fees of at least $1.1 million during fiscal years 1999
and 2000; (2) exceeded its overtime budgets by a total of
$798,909 during fiscal years 1999 and 2000; (3) paid a
high-ranking official about $94,035 in salary costs without
documentation of the hours worked; (4) did not use about
$1.2 million that was available to renovate and improve living
conditions at the fire stations and purchase upgraded fire
fighting equipment; and (5) incurred electricity charges of
about $3,060 at unmanned fire stations.  In addition, we
concluded that lump sum payments to former Fire Service
employees totaling $274,285 should be reviewed by the
Attorney General for legal sufficiency.
RECOMMENDATIONS
We made 11 recommendations to the Governor of the Virgin
Islands to address the internal control weaknesses related to
administrative functions of the Fire Service and to lump sum
payments made to eight former Fire Service employees.


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AUDITEE COMMENTS
AND OFFICE OF
INSPECTOR
GENERAL
EVALUATION
The Governor and the Fire Service concurred with the
11 recommendations and indicated that corrective actions had
been or would be taken on 9 of the recommendations.
Corrective actions on two recommendations were not addressed
in the response.  Based on the response, we considered six
recommendations resolved and implemented, three
recommendations resolved but not implemented, and requested
additional information for two recommendations.


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CONTENTS
EXECUTIVE
SUMMARY
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   1
INTRODUCTION
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   7
Objective and Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . .   8
Prior Audit Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . .   8
RESULTS OF AUDIT
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   9
Administrative Functions . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Lump Sum Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
RECOMMENDATIONS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
APPENDICES
1.  Monetary Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.  Prior Audit Report . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.  Responses to Draft Report . . . . . . . . . . . . . . . . . . . . . 29
4.  Status of Recommendations . . . . . . . . . . . . . . . . . . . . . 33


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7
INTRODUCTION
BACKGROUND
In 1979, the Virgin Islands Fire Service was established  within
the Office of the Governor by Act No. 4206.  The Fire Service
is administered by a Director, who is appointed by the Governor
with the advice and consent of the Legislature.  For administrative
purposes, the Fire Service is divided into the District of St.
Thomas/St. John and the District of St. Croix, with administrative
offices in both districts.  Each district has a Suppression Unit that
is responsible for extinguishing fires and an Arson Prevention and
Investigation Unit that is responsible for investigating the causes of
fires and conducting fire prevention activities.  There are four fire
stations on St. Thomas,1 two on St. John, and four on St. Croix.
The Fire Service had 250 filled positions and 27 vacant positions
during fiscal year 1999, and 254 filled positions and 11 vacant
positions during fiscal year 2000.  In March 2001, the
Government hired 15 additional fire fighters.
In October 1998, the Legislature passed Act No. 6269, the
Revenue Enhancement Act of 1998, which was incorporated into
the Virgin Islands Code (23 V.I.C. §605(d), (e), and (f)). With
respect to the Fire Service, the Act authorized the Director of the
Fire Service to impose a fee on commercial establishments for
inspectors from the Arson Prevention and Investigation Unit to
inspect the buildings and premises of the commercial
establishments for conditions liable to cause fires. Collections
totaled $8,285 in fiscal year 1999 and $148,465 in fiscal year
2000.
The Fire Service received appropriations of $10.9 million in fiscal
year 1999 and $10.4 million in fiscal year 2000.  Based on
information contained in the Government’s financial management
system, the Fire Service expended $12.6 million in fiscal year
1999 and $10.8 million in fiscal year 2000, thus overspending its
appropriations by $1.7 million in 1999 and $0.4 million in 2000.
__________
1The fire station at Estate Fortuna was closed in November 1998 and the fire station at Estate Dorothea was closed in
November 1999, both due to a shortage of fire fighting personnel.  As of April 30, 2001, the two fire stations had not been
reopened.


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OBJECTIVE AND
SCOPE 
The objective of the audit was to determine whether the Fire
Service effectively carried out its administrative functions of
personnel and property management, collection of fire prevention
fees, and documentation of fire emergencies and fire prevention
activities.  We expanded the objective of the audit to include an
analysis of lump sum payments made to eight former Fire Service
employees.  The scope of the audit included a review of
transactions that occurred and the policies and procedures that
were in effect during fiscal years 1999 and 2000 and other
periods as appropriate.  
The audit was conducted from December 2000 through April
2001 at the Fire Service’s St. Thomas, St. John, and St. Croix
locations; the Departments of Finance, Labor, and Licensing and
Consumer Affairs; and the Division of Personnel.  
Our audit was conducted in accordance with the "Government
Auditing Standards," issued by the Comptroller General of the
United States.  Accordingly, we included such tests of records
and other auditing procedures that were considered necessary
under the circumstances.  The "Standards" requires that we obtain
sufficient, competent, and relevant evidence to afford a reasonable
basis for our findings and conclusions.
As part of our audit, we evaluated the internal controls at the Fire
Service to the extent we considered necessary to accomplish the
audit objective.  Internal control weaknesses were identified in the
areas of conducting inspections at commercial establishments,
safeguarding collections, controlling overtime charges,  maintaining
property control records, establishing a records retention policy,
and processing lump sum payments to employees. These
weaknesses are discussed in the Results of Audit section of this
report.  The recommendations, if implemented, should improve
the internal controls in these areas.
PRIOR AUDIT
COVERAGE 
The Office of Inspector General has not issued any reports on 
the Fire Service during the past five years.  However, in March
1994, the Office of Inspector General issued a report on the
administration of the Fire Service (see Appendix 2).


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RESULTS OF AUDIT
OVERVIEW
The Fire Service adequately documented fire emergencies to
which it responded and adequately conducted fire safety
education programs, but other controls needed improvement.
Specifically, the Fire Service should:
‘
Conduct required biennial fire safety inspections at
commercial establishments and collect the appropriate
fees for this service as authorized by the Virgin Islands
Code.
‘
Deposit collections on a daily basis and ensure that
collections are adequately safeguarded.
‘
Analyze and document its staffing needs to reduce the
excessive use of overtime.
‘
Ensure that a high-ranking official submits time sheets
to support the hours worked.
‘
Fully use the $2 million allotted to renovate and
improve living conditions at the fire stations and
upgrade fire fighting equipment.
‘
Prepare and maintain complete  property management
records for all Fire Service property and equipment;
ensure that each piece of equipment has a Government
property identification tag; and conduct a physical
inventory of the property at least once every two years
and reconcile the results with the inventory records.
‘
Obtain price quotations from at least three sources
when purchasing fire fighting equipment and supplies
on the open market to ensure that the Government
receives the most favorable prices, terms, and
conditions.
‘
Request that the Virgin Islands Water and Power
Authority disconnect electric service at the two closed
fire stations on St. Thomas to avoid monthly electric
charges at unmanned fire stations.
‘
Implement a formal records retention policy.


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We concluded that, as a result of the administrative control
weaknesses noted, the Fire Service (1) did not generate fire
inspection fees of at least $1.1 million during fiscal years 1999
and 2000; (2) exceeded its overtime budgets by a total of
$798,909 during fiscal years 1999 and 2000; (3) paid a high-
ranking official about $94,035 in salary costs without
documentation of the hours worked; (4) did not use about
$1.2 million that was available to renovate and improve living
conditions at the fire stations and to purchase upgraded fire
fighting equipment; and (5) incurred electricity charges of
about $3,060 at unmanned fire stations.  In addition, we
concluded that lump sum payments to former Fire Service
employees totaling $274,285 should be reviewed by the
Attorney General for legal sufficiency.
ADMINISTRATIVE
FUNCTIONS
The Fire Service needed to increase the extent to which it
performed fire inspections of commercial establishments and
improve internal controls over administrative functions related
to collections, payroll expenses, facilities and equipment,
non-payroll expenses, and records.
Potential Fire Inspection
Fees of $1.1 Million Were 
Not Realized
The Revenue Enhancement Act of 1998, which was codified
in Title 23, Section 605 of the Virgin Islands Code established
a fire inspection fee.  The Code (23 V.I.C. §605(d)) states that
the Director of the Fire Service "shall inspect or cause to be
inspected . . . every commercial establishment in the Virgin
Islands not less than once each two years."  The Code
(23 V.I.C. §605(e)) authorizes the Director of the Fire Service
to impose a fee of $200 for each inspection performed on
commercial establishments with annual gross receipts of over
$150,000 and $100 for all other commercial establishments.
The Code (23 V.I.C. §605(f)) also states that 50 percent of the
monies collected for inspection activities shall be deposited
into the Fire Service Emergency Fund.  Finally, the Code
(33 V.I.C. §3032(b)) states, "Monies shall be disbursed from
the [Fire Service Emergency] Fund . . . for the purpose of
making payments for extraordinary expenses incurred in
fighting fires and other emergencies involving the Virgin
Islands Fire Service.  Monies in the Fund may also be utilized
for the hiring of fire inspectors and for the purchase of fire
fighting equipment and supplies."
To determine whether the Fire Service was complying with
requirements of the Virgin Islands Code, we obtained a list of


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commercial establishments from the Department of Licensing
and Consumer Affairs.  The list included 12,788 commercial
establishments that were issued business licenses in fiscal year
2000.  Utilizing a conservative estimate of $100  per
inspection, we determined that the Fire Service could have
collected at least $1,278,800 over a 2-year period.
However, we found that, during fiscal year 2000, the Fire
Service inspected only 1,293 commercial establishments and
collected only $148,465 and, during fiscal year 1999, the Fire
Service inspected only 937 commercial establishments and
collected only $8,285.  Therefore, total collections for fiscal
years 1999 and 2000 were $156,750.  Based on our
conservative estimate of potential collections totaling
$1,278,800 during fiscal years 1999 and 2000, we concluded
that the Fire Service did not collect at least $1,122,050 that
could have been used to hire fire inspectors and purchase fire
fighting equipment and supplies.
Regarding the fiscal year 1999 collection activity of only
$8,285, we found that although the Revenue Enhancement Act
was passed in October 1998, the Fire Service’s Arson
Investigation and Prevention Unit did not begin charging a fee
for the inspection service until August 1999, or 1 month before
the end of the fiscal year. 
In order to improve internal controls in this area and to
increase revenues for the purchase of fire fighting equipment
and supplies, we believe that the Department of Licensing and
Consumer affairs should coordinate its efforts with the Fire
Service by providing the Fire Service with up-to-date lists of
commercial establishments.  The Fire Service, in turn, should
develop a methodology to conduct inspections at a
representative share of commercial establishments each year.
We found, however, that the Fire Service requested lists of
commercial establishments from Licensing and Consumer
Affairs in July 1999 and January 2001, but that Licensing and
Consumer Affairs did not provide the information to the Fire
Service.  Because the Fire Service did not have a current list
of commercial establishments, we provided the Fire Service
with the list of commercial establishments that we obtained
from Licensing and Consumer Affairs.


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Deposits Were Not
Always Made Daily And
Collections Were Not
Safeguarded
The Department of Finance Accounting Manual
(Section 310.4) states, "Except as otherwise authorized by the
Commissioner [of Finance], Collectors must deposit daily,
through the use of the night depository, all collections made by
them during the day."  However, Fire Service officials told us
that they usually made deposits on a weekly basis even though
they had not sought the approval of the Commissioner of
Finance.
We compared the collection date with the deposit date for
231 transactions and found that the average elapsed time
between date of collection and date of deposit was 9 working
days in fiscal year 1999 and 6 working days in fiscal
year 2000.  For example, we found that $660 collected during
the period of August 8 to September 8, 2000, at the Cruz Bay,
St. John Fire Station was not deposited until September 8,
2000, or as much as 22 working days after the date of
collection.  Included in this amount was a cash collection of
$100 that was collected on August 11, 2000, and held for
deposit until September 8, 2000.
We also found that undeposited collections were not
adequately safeguarded. For example, on St. John undeposited
collections were kept in the office of the Deputy Chief of
Operations, but fire fighters had spare keys to this office. On
St. Croix, the administrative office was burglarized four times
in a 12-month period.  In addition, we witnessed a non-Fire
Service employee bring prior days’ collections to the
administrative office because the employee responsible for the
collections was on leave.
In order to improve internal controls in this area, we believe
that the Fire Service should (1) make deposits on a daily basis
as required by the Department of Finance Accounting Manual
and (2) adequately safeguard funds collected during the day by
keeping funds in a secure, limited-access area.  We believe
that this matter is of particular importance because daily
collections should increase significantly due to the fees
collected for inspections of commercial establishments.
Overtime Amounts
Exceeded Budgeted
Amounts by $654,010 
in 1999 and by $144,899 
in 2000
In order to maintain a safe level of staffing at fire stations, Fire
Service officials allowed existing fire fighters to work extra
shifts at overtime pay rates.  During fiscal year 1999, overtime
costs totaled $754,010, or $654,010 (654 percent) more than
the overtime budget of $100,000.  Total overtime costs in
fiscal year 2000 decreased to $335,399, but were still


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$144,899 (76 percent) more than the overtime budget of
$190,500. 
Our analysis of the overtime hours for the St. Croix District for
fiscal year 1999 showed that of the 15,397 overtime hours
claimed, 14,175 hours (92 percent) were required because of
manpower shortages.  For fiscal year 2000, of the 5,015
overtime hours claimed, 4,671 hours (93 percent) were
required because of manpower shortages.
We were unable to conduct a similar comparison for the
St. Thomas/St. John District because neither the Fire Service
nor the Department of Finance was able to provide us with the
overtime authorization forms for the period of March to
September 1999 (the last 7 months of fiscal year 1999).
Therefore, for fiscal year 1999, although the payroll registers
recorded 17,158 overtime hours for Fire Services personnel,
there were no overtime authorization forms for 13,746 of those
hours.  For fiscal year 2000, although the payroll registers
recorded 12,115 overtime hours for Fire Services personnel,
there were no overtime authorization forms for 4,442 of those
hours.
In March 2001, the Government hired 15 additional fire
fighters.  Fire Services officials told us that these
15 employees would help reduce overtime costs but would not
be sufficient to reopen the two closed fire stations on
St. Thomas.
Payroll Costs of $94,035
Were Not Supported
by Time Sheets
During the period of January 1999 to February 2001, a
high-ranking Fire Service official did not submit time sheets to
support hours worked.  We reviewed the payroll registers for
the pay periods ending January 30, 1999 to February 10, 2001
(54 pay periods) and determined that the official’s earnings
during this period totaled $94,035.  Because there were no
time sheets to validate the hours worked by the official, we
classified the $94,035 as unsupported costs.  Although the Fire
Service always required that time sheets be submitted, the
official did not begin submitting time sheets until the second
pay period in February 2001 (February 11, 2001).  We concur
with the policy of requiring time sheets for all Fire Services
personnel.


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$1.2 Million Available 
for Capital Improvements
and Equipment Was Not
Used
In October 2000, the Governor authorized the use of $2 million
($1.5 million appropriated from the Asset Recovery Fund and
$500,000 appropriated from the Fire Maintenance Fund2) for
the purchase of fire fighting equipment and supplies and for the
renovation of fire stations in the Virgin Islands.  As of March
20, 2001, $276,791 of the $1.5 million was expended from the
Asset Recovery Fund and $83,910 of the $500,000 was
expended from the Fire Maintenance Fund.  In addition, the
Fire Service provided us with a list of expenditures totaling
about $400,000 that had been incurred against the Asset
Recovery and Fire Maintenance Funds but were not yet
processed for payment by the Department of Finance.
Therefore, total expenditures were $760,701, leaving
available balances totaling $1,239,299.
Our analysis of the expenditures incurred against the two funds
showed that the renovation work was primarily being
conducted on St. Croix. We found that renovation work had not
started on St. Thomas primarily because contractor bids were
higher than the amounts allotted for renovation at the fire
stations.  Accordingly, in April 2001, the Department of Public
Works revised the scope of work for renovation repairs and
was coordinating with the Department of Property and
Procurement to obtain new contractor bids.
The renovations were required because of deteriorating
conditions at the fire stations, which had been documented by
the Department of Labor’s Division of Occupational Safety
and Health (OSHA) during the period  of September 1991 to
December 1999.  OSHA cited the fire stations for a myriad of
health and safety concerns including: (1) lack of respiratory
equipment, (2) exposed electrical wiring, (3) infestation by
rodents and poisonous insects, (4) leaking roofs, (5)
non-operational lavatory facilities, and (6) cluttered storage
areas with obsolete items that created a fire hazard.
In January, March, and April 2001, we conducted site
inspections at all of the Fire Services’ fire stations and
administrative offices in the Virgin Islands and found that
many of the conditions cited  by OSHA as far back as 1991
__________
2Act No. 6351 appropriated $500,000 from the Virgin Islands Board of Public Accounting Special Funds.  However,
the Government’s financial management system recorded the expenditures against the Fire Maintenance Fund.
Officials at the Department of Finance told us that the two funds have the same "fund number" but different "cost center
codes" in the financial management system.  For purposes of this report, we have referred to the fund as the Fire
Maintenance Fund.


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still existed.  We believe that the effective use of the
$2 million appropriated to the Fire Service for fire fighting
equipment and supplies and for the renovation of fire stations
would correct the deficiencies cited by OSHA.  Accordingly,
we believe that the Department of Public Works should
expedite the revision of the scope of work for the St. Thomas
fire stations and coordinate with the Department of Property
and Procurement to promptly seek bids from responsible
bidders.
Non-Expendable
Equipment Was Not
Properly Accounted For
Fire Service officials were not familiar with Federal and local
regulations related to the safeguarding of non-expendable
equipment.  The "Common Rules" issued pursuant to U.S.
Office of Management and Budget Circular A-102 contain
procedures for managing equipment acquired in whole or in
part with Federal grant funds.3  In addition, the Department of
Property and Procurement promulgates regulations to manage
all non-expendable Government property.
The Fire Service provided us with an inventory list  for the
St. Thomas/St. John District that was prepared in September
2000 and a vehicle list that was prepared in January 2001.
The inventory list contained only a description and the quantity
of each equipment item, and the vehicle list contained the year,
make, model and condition of each vehicle.  The Fire Service
did not provide us with inventory or vehicle lists for the St.
Croix District, but instead provided us with a list of equipment
items that were damaged or destroyed as a result of Hurricane
Marilyn in September 1995.
To determine whether purchased equipment could be
physically located, we selected for review a sample of
20 equipment items valued at $30,717 that were purchased
during fiscal years 1998, 1999, and 2000.  We were able to
__________
3The Circular A-102 Common Rules state that procedures for managing equipment acquired in whole or in part with
Federal grant funds will, as a minimum, meet the following requirements:
(1) Property records must be maintained that include a description of the property; a serial number or other
identification number; the source of the property; who holds title; the acquisition date; the cost of the property; the
percentage of Federal participation in the cost of the property; the location, use and condition of the property; and any
ultimate disposition data including the date of disposal and the sale price of the property.
(2) A physical inventory of the property must be taken and the results reconciled with the property records
at least once every two years.
(3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of
the property.  Any loss, damage, or theft shall be investigated.
(4) Adequate maintenance procedures must be developed to keep the property in good condition.


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locate 13 of the items but were unable to locate 6 items valued
at $6,708.  One additional item valued at $569 was only traced
to the inventory list.
Neither the inventory list nor the vehicle list provided by the
St. Thomas/St. John District contained sufficient information
to adequately identify the value and property numbers of the
inventory items.  Accordingly, in order to strengthen internal
controls in this area, we believe that both the
St. Thomas/St. John and St. Croix districts should prepare
inventory lists that contain the information required by Circular
A-102 Common Rules and the Department of Property and
Procurement’s Property Manual.  The lists should be
periodically updated to reflect the purchase of new equipment
and the disposition of old equipment, and a physical inventory
should be conducted at least once every 2 years and the results
reconciled to the inventory lists.
Price Quotations Were
Not Always Obtained For
Open Market Purchases
We found that the Fire Service did not always obtain price
quotations for goods purchased on the open market.  Although
the Virgin Islands Code (31 V.I.C. §239(a))  states that
supplies, material, and equipment costing less than $5,000 may
be purchased without observing competitive bidding
requirements, we believe it is prudent business practice to
obtain telephonic quotations from at least three sources when
purchasing goods on  the open market.  We found, particularly
for tire purchases made on the open market, that price
quotations were not obtained by the Fire Service.
Our analysis of tire purchases showed that prices for the same
brand and size tire differed by a range of $18 to $105.  For
example, in August 2000, the Fire Service purchased an
1100-20/16 ply highway tire from a St. Croix vendor for $365
and, in July 2000, purchased the same tire on St. Thomas for
$260, or a difference of $105.  Similarly, in February 2000,
the Fire Service purchased an 1100-20/16 ply track tire for
$520 from a St. Croix vendor and, in August 2000, purchased
the same tire from a different St. Croix vendor for  $450, or a
difference of $70.
We also contacted four tire vendors that were used by the Fire
Service to request tire price quotations for various size tires.
We found, for example, a 385/65 R22-5/18 ply highway tire
was sold by a St. Thomas vendor for $648 and by a St. Croix
vendor for $485, for a difference of $168.  A third vendor did


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not sell this particular tire and the fourth vendor did not
respond to our request for a price quotation.  Although we did
not classify these tire price differences as material exceptions,
we do believe that price quotations should be obtained from at
least three vendors for purchases made on the open market so
that the Government can obtain the best prices, terms, and
conditions when expending limited financial resources.
Electricity Charges of
$3,060 Were Incurred for
Unmanned Fire Stations
The fire station at Estate Fortuna, St. Thomas was closed in
November 1998 and the fire station at Estate Dorothea,
St. Thomas was closed in November 1999.  However, we
noted  during our review of operating expenditures that the
Fire Service was billed on a monthly basis for electricity
charges at these two fire stations even after they were closed.
The monthly charges were about $60 at the Fortuna fire station
(which as of April 30, 2001 had been closed for 30 months)
and $70 at the Dorothea fire station (which as of April 30,
2001 had been closed for 18 months).  Therefore, as of April
30, 2001, we estimated that the Fire Service incurred
electricity charges of about $3,060 at the two unmanned fire
stations.
We discussed this matter with officials at the Water and Power
Authority, who informed us that there were consistent monthly
meter readings at the two fire stations.  Therefore, electricity
was being used at the stations.  The Water and Power
Authority officials suggested the Fire Service should request
that the meters at the two fire stations be disconnected to avoid
further charges. We concur with the recommendation of the
Water and Power Authority officials.
The Fire Service Did Not
Have a Records Retention
Policy
During the conduct of our audit, Fire Service personnel
attempted to provide us with all of the  information we
requested.  However, there were instances where specific
records could not be located.  We believe this condition
occurred because the Fire Service did not have a formal
records retention policy.  Specifically, the Fire Service was
unable to provide us with the following documents: 
- Daily Summaries of Collections and Deposits and
Certificate of Deposits (deposit slips) for deposit numbers
0001-99 through 0026-99 for the St. Croix District.
- Receipt books for September 1998 to December
1999 for the St. Croix District.


=== page 22 ===
18
- Daily Summaries of Collections and Deposits and
Certificate of Deposits (deposit slips) for deposit numbers
0001-99 through 0015-99 for St. John.
- Request and Authorization To Pay For Overtime
Assignment forms for March through September 1999 for the
St. Thomas/St. John District.
We believe that if the Fire Service had implemented a  records
retention policy, these records might have been safeguarded
and readily retrievable.
LUMP SUM 
PAYMENTS
Eight former Fire Service employees who held exempt
(unclassified) positions received lump sum settlement
payments totaling $274,285 for the period of March 3, 1991,
to each employee’s resignation or retirement date (with the
latest date being May 7, 1999).  The lump sum payments were
based on a February 23, 2000, Public Employees Relations
Board (PERB) settlement agreement pursuant to provisions of
a series of Executive Orders of the Governor related to
executive salary levels.  However, based on our review, we
question whether the Government representatives at the PERB
hearing acted correctly in agreeing to award the lump sum
payments to the eight employees.  Additionally, significant
breaches of internal controls related to the Government’s
payroll system occurred during the processing of the lump sum
payments.
Executive Salary Levels
Were Established by
Executive Order
In a series of Executive Orders beginning in December 1980,
the Governors of the Virgin Islands have periodically adjusted
the salaries of Government employees holding executive-level
positions.  For purposes of this report, four of these Executive
Orders are of special significance, as follows:
- Executive Order 301-1987 was issued in August
1987.  It established four executive levels and set the salary
ranges for these levels at $55,000 for Executive I, $40,000 to
$47,500 for Executive II, $27,500 to $40,000 for Executive III,
and $25,000 to $37,500 for Executive IV.  The Executive
Order stated that for Executive II to IV positions, the
appropriate salary levels for specific positions would be
determined by the Governor in consultation with the Director
of Personnel and the head of the agency in which each
executive position was located, and taking into consideration
a series of 10 factors.  These factors included previous


=== page 23 ===
19
managerial experience, number of persons supervised and their
salaries, the employee’s own previous salary, nature of work,
years of service, and level of training, among others.  The
Executive Order also required that each agency head and the
Director of Management and Budget certify, on the Notice of
Personnel Action (NOPA), that the designated salary level for
each executive employee does not exceed the existing level of
appropriations for the agency.
- Executive Order 325-1990 was issued in September
1990.  It amended Executive Order 301-1987 by changing the
top level of the salary ranges for Executive II to IV positions.
The new salary ranges were $40,000 to $54,500 for Executive
II, $27,500 to $51,500 for Executive III, and $25,000 to
$48,000 for Executive IV.  The Executive Order further
provided:
Nothing in this Order shall be construed as
vesting in any employee of the Exempt Service
of the Executive Branch of the Government of
the Virgin Islands, a right to have his or her
salary adjusted.  Salary adjustments shall be
recommended by a Commissioner or other
[agency] head after evaluation of any employee
in the Exempt Service using all the criteria
enumerated in Section 1 of Executive Order
No. 301-1987, and . . . certification by the
Commissioner or other [agency] head and the
Director of Management and Budget that the
salary or salaries recommended do not exceed
the existing level of appropriations for the
[agency].
- Executive Order 347-1994 was issued in December
1994.  It amended Executive Order 325-1990 by again
changing the top level of the salary ranges for Executive III and
IV (but not Executive II) positions.  The new salary ranges
were: $27,500 to $57,680 for Executive III and $25,000 to
$53,760 for Executive IV.  The Executive Order again stated,
"Nothing in this Order shall be construed as vesting in any
employee of the Exempt Service of the Executive Branch of the
Government of the Virgin Islands, a right to have his or her
salary adjusted."  The Executive Order further stated, "Salary
adjustments shall be recommended by the Head of the
Department/Agency and certified by the Department/Agency
Head and approved by the Governor."


=== page 24 ===
20
- Lastly, Executive Order 350-1995 was issued in
January 1995.  It repealed the executive salary levels
implemented by Executive Order 347-1994 (and salary
increases implemented by Executive Orders 348-1994 and
349-1994 for other classes of Government employees).
Therefore, Executive Order 350-1995 had the effect of
reinstating the executive salary levels established by Executive
Order 325-1990.
Our review of the official Executive Orders on file at the
Office of the Lieutenant Governor did not disclose any
further Executive Orders reinstating the executive salary levels
established by Executive Order 347-1994.  The only related
Executive Order on file was Executive Order 383-1999, which
was issued in May 1999 and replaced "all language pertaining
to Executive Level I" in prior Executive Orders with new
language establishing a base salary of $65,000 for "all
Commissioners, Department and Agency Heads."
Lump Sum Payments
Totaling $274,285 May Not
Have Been Warranted
Based on our reading of the pertinent Executive Orders, it
appears that Government representatives at the PERB hearing
may have been in error in agreeing to award retroactive salary
increases totaling $274,285 to eight former Fire Service
employees for the period of March 3, 1991, to each
employee’s resignation or retirement date (with the latest date
being May 7, 1999).  Our conclusion is based on two factors:
- The executive salary levels established by Executive
Order 347-1994 in December 1994 were repealed by
Executive Order 350-1995 in January 1995, and we found no
subsequent Executive Order that reinstated the December 1994
executive salary levels.  At most, the eight former Fire Service
employees would have been entitled to about 1 month’s worth
of increased salaries.
- Even if Executive Order 347-1994 had been
reinstated by the Governor at some time subsequent to January
1995 by some means other than Executive Order, Executive
Order 347-1994 clearly intended that executive salary
increases would not be "automatic" but would have to be
based on the specific recommendation of the department or
agency head and be approved by the Governor.  Our review of
the official personnel files at the Division of Personnel for the
eight former Fire Service employees did not reveal the
existence of  any Notices of Personnel Action that were fully


=== page 25 ===
21
executed by the appropriate Fire Service Director and
approved by the Governor.  The files at the Fire Service
contained copies of Notices of Personnel Action that were
prepared in July 1995 for two of the eight employees by the
then-Fire Service Director (who was himself one of the
recipients of lump sum payments).  But neither of these Notices
of Personnel Action had been certified by the Director of
Personnel or approved by the Governor.
Because the final resolution of this issue is dependent on a
legal reading of the pertinent Executive Orders and a legal
interpretation as to the effect of those Executive Orders, we
believe that this issue should be officially referred to the
Attorney General for legal review.  If the Attorney General
determines that the lump sum payments were improperly made,
consideration should be given to requiring the former Fire
Service employees to reimburse the appropriate amounts to the
Government.
Payroll System Internal
Controls Were Bypassed
Our review of the lump sum payments disclosed that in the
processing of the payments, there was a significant breach of
basic internal controls related to the Government’s payroll
system.  According to Division of Personnel officials, in order
to process a lump sum payment resulting from a salary
increase, a fully executed Notice of Personnel Action must be
forwarded to the Division along with documents supporting the
payment and identifying the source of funding for the payment.
The Notice of Personnel Action would then be reviewed and
certified by the Director of Personnel and, in the case of
unclassified employees (which the eight former Fire Service
employees were), approved by the Governor.  Once this
process was completed, the fully executed Notice of Personnel
Action would be forwarded to the Department of Finance for
processing of the payment.
However, in the case of the lump sum payments for the former
Fire Service employees, Notices of Personnel Action were
never fully executed for certification by the Director of
Personnel or approval of the Governor.  Instead the lump sum
payments were processed by the Department of Finance’s
Payroll Division using Miscellaneous Payroll Record forms,
which are normally used to process retroactive, back pay, and
supplemental payrolls.  In addition, at the time that the lump
sum payments were processed, the former employees’ records
in the Financial Management System were changed from
"inactive" to "active" status by payroll clerks and, in one case,


=== page 26 ===
22
by the Director of Payroll.  Normally such employee status
changes should be made only by the Division of Personnel, not
the Department of Finance.  Further, lump sum payments in
amounts of more than $5,000 are supposed to be forwarded to
the Commissioner of Finance for review and approval before
being issued.  However, in this case, the Commissioner of
Finance did not know that the lump sum payments had been
processed until after the checks had already been distributed,
and was surprised to learn that payroll clerks were able to
change the former employees’ record status from "inactive" to
"active."  Therefore, there appears to be a security flaw in the
Financial Management System’s programming that allowed the
payroll clerks to bypass the normal process.  We were unable
to determine who directed the payroll clerks to process the
lump sum payments without the knowledge of the
Commissioner of Finance or the Division of Personnel.
Because of the significance of the breakdown in internal
controls in the Financial Management System’s payroll
process, we believe that the Commissioner of Finance should
take immediate action to have the system software modified to
prevent future unauthorized access by payroll clerks.  In
addition, the Attorney General’s anti-corruption task force
should be requested to further investigate the manner in which
the lump sum payments were processed to determine if
criminal charges should be brought against any Government
employees for improper manipulation of the payroll system.


=== page 27 ===
23
RECOMMENDATIONS
TO THE GOVERNOR
OF THE VIRGIN
ISLANDS
We recommend that the Governor of the Virgin Islands direct
the Director of the Fire Service to:
1. Conduct required biennial fire safety inspections at
commercial establishments and collect the appropriate fees for
this service as authorized by the Virgin Islands Code
(23 V.I.C. §605).
2. Deposit collections on a daily basis as required by
the Department of Finance Accounting Manual and ensure that
undeposited collections are adequately safeguarded.
3. Conduct an analysis of and document the staffing
requirements of the Fire Service to reduce the need for
overtime and to adequately staff all fire stations in the Virgin
Islands.  Appropriate requests for increased staffing should be
made through the Office of Management and Budget.
4. Prepare and maintain accurate, current, and
complete property control records for all Fire Service
property and equipment; ensure that each piece of equipment
has a Government property identification tag; and conduct a
physical inventory of the property at least once every two
years and reconcile the results to the property records.
5. Obtain and document price quotations from at least
three sources when purchasing fire fighting equipment and
supplies on the open market to ensure that the Government
receives the most favorable prices, terms, and conditions.
6. Request that the Virgin Islands Water and Power
Authority disconnect electric service at the two closed fire
stations on St. Thomas if they will remain unmanned for
extended periods of time.
7. Implement a formal records retention policy for the
Fire Service.
We recommend that the Governor of the Virgin Islands direct
the Commissioner of Licensing and Consumer Affairs to:
8. Provide the Fire Service, on an annual basis, with
lists of commercial establishments licensed to conduct
business in the Virgin Islands.


=== page 28 ===
24
We recommend that the Governor of the Virgin Islands direct
the Commissioners of Public Works and Property and
Procurement to:
9. Expedite revisions to the scope of work for
renovations at the St. Thomas fire stations and the solicitation
of bids from responsible bidders.
We recommend that the Governor of the Virgin Islands direct
the Commissioner of Finance to:
10. Revise the access authority of the payroll clerks so
that these employees do not have the ability to change the status
of employees and former employees in the payroll system from
"inactive" to "active" status.  Also implement procedures to
ensure that such employee status changes can be made only
with appropriate supervisory authorization.
We recommend that the Governor of the Virgin Islands direct
the Attorney General to:
11. Review the legal appropriateness of and
methodology used to process lump sum payments to eight
former Fire Service employees, determine why the Division of
Personnel was bypassed during the payment process, and
determine who authorized the payroll clerks at the Department
of Finance to alter information in the Government’s financial
management system and to use Miscellaneous Payroll Record
forms to process the lump sum payments.
GOVERNOR OF THE
VIRGIN ISLANDS AND
FIRE SERVICE
RESPONSES
The September 27, 2001 response (Appendix 3) to the draft
report from the Governor of the Virgin Islands, which
transmitted a response from the Fire Service, expressed
concurrence with the 11 recommendations and indicated that
corrective actions had been or were being taken on
9 recommendations.  Corrective actions for Recommendations
10 and 11, were not addressed in the responses.
OFFICE OF 
INSPECTOR GENERAL
REPLY
Based on the responses, we consider Recommendations 2, 4,
5, 6, 7, and 8 resolved and implemented; Recommendations 1,
3, and 9 resolved but not implemented; and requested
additional information for Recommendations 10 and 11 (see
Appendix 4).


=== page 29 ===
25


=== page 30 ===
26
APPENDIX 1 - MONETARY IMPACT
FINDING AREAS
     Fire Inspection Fees
     Excess Overtime Expenses
     Unsupported Payroll Charges
     Unused Capital Improvement
Funds
     Electricity Charges at Closed
Fire Stations
     Lump Sum Payments
Totals
   Questioned
   Funds
       Costs*
Unrealized
      To Be Put
(Unsupported) Revenues*
  To Better Use*
$1,122,050
   $798,909
    $94,035
  1,239,299
         3,060
    274,285
                  
                  
  $368,320
$1,122,050
$2,041,268
__________
* Amounts represent local funds.


=== page 31 ===
27
APPENDIX 2 - PRIOR AUDIT REPORT
OFFICE OF
INSPECTOR
GENERAL REPORT
The March 1994 report "Virgin Islands Fire Service,
Government of the Virgin Islands" (No. 94-I-477) stated that
(1) because the Fire Service did not have a sufficient number
of fire fighters, overtime costs of about $800,000 were being
incurred annually and fire stations were understaffed; (2)
during a 16-month period, 4 fire fighters were paid $141,000
in overtime and $49,000 in regular wages under questionable
circumstances; (3) the Fire Service did not have a sufficient
quantity of self-contained breathing apparatuses or any
resuscitators to protect fire fighters; (4) the Fire Service did
not ensure that working and living conditions at fire stations
were safe and healthy; and (5) the Fire Service did not have
effective fire safety inspection and fire education programs.
The report also stated, that as a result of these conditions, the
ability of the Fire Service to effectively carry out its primary
fire fighting responsibilities was compromised, and the safety
of fire fighters and residents of the Virgin Islands was at
additional risk in the event of fires.


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32
APPENDIX 4 - STATUS OF RECOMMENDATIONS
Finding/Recommendation
            Reference             
1, 3, and 9
2, 4, 5, 6, 7, and 8
10 and 11
      Status       
Resolved; not 
implemented.
Implemented.
Management
concurs;
additional
information
requested.
                          Action Required                          
Provide this office with supporting
documentation upon completion of corrective
actions.
No further action is required.
Provide a plan of action to implement the
recommendations, including the target dates and
titles of the officials responsible for
implementation.
             


=== page 37 ===


=== page 38 ===
Mission Statement
The Office of Inspector General conducts and supervises audits
and investigations of Department of the Interior and insular area
government programs and operations to:
! Promote the economy, efficiency, and effectiveness of
programs and operations and
! Prevent and detect fraud, waste, and abuse in programs and
operations.
How to Report Fraud, Waste, and Abuse
Fraud, waste, and abuse in Government are the concern of
everyone – Office of Inspector General staff, Departmental
employees, and the general public.  We actively solicit allegations
of any inefficient and wasteful practices, fraud, and abuse related
to Departmental or insular area programs and operations.  You can
report allegations to us by:
Mail:
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Office of Inspector General
Mail Stop 5341-MIB
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Washington, DC 20240
Phone:
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