[Federal Register Volume 72, Number 204 (Tuesday, October 23, 2007)]
[Notices]
[Pages 60202-60219]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-20847]



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Part VI





Department of Education





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Compliance Agreement; Notice

  Federal Register / Vol. 72, No. 204 / Tuesday, October 23, 2007 / 
Notices  

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DEPARTMENT OF EDUCATION


Compliance Agreement

AGENCY: Department of Education.

ACTION: Notice of written findings, compliance agreement with the 
Virgin Islands, and subsequent actions.

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SUMMARY: This notice is being published in the Federal Register 
consistent with sections 457(b)(2) and (d) of the General Education 
Provisions Act (GEPA). Section 457 of GEPA authorizes the U.S. 
Department of Education (the Department) to enter into a compliance 
agreement with a recipient that is failing to comply substantially with 
Federal program requirements and for whom the Department determines 
that full compliance is not feasible until a future date. Section 
457(b)(2) requires the Department to publish written findings leading 
to a compliance agreement, with a copy of the compliance agreement, in 
the Federal Register. If a recipient fails to comply with the terms and 
conditions of a compliance agreement, the Secretary may take any action 
authorized by law with respect to the recipient.
    On September 23, 2002, the Department entered into a compliance 
agreement (Agreement) with the U.S. Virgin Islands (VI) because the 
Department determined from all available information that the VI would 
not be able to come into full compliance with applicable Federal 
regulations for the administration of Department programs until a 
future date. Notwithstanding the Agreement, and intensive and frequent 
technical assistance by the Department, when the term of the Agreement 
ended on September 23, 2005, the VI was substantially in non-compliance 
with Federal requirements. Therefore, the Department has imposed 
special conditions and has taken a number of other important measures 
in its continuing effort to bring the VI into full compliance with all 
Federal requirements pertaining to the administration of Department 
programs. Most notably, the special conditions currently in effect 
require the VI to procure, and maintain, the services of a third-party 
fiduciary agent to perform the financial management duties required 
under Federal regulations for all Department grants, which the VI 
accomplished beginning in August 2006.

FOR FURTHER INFORMATION CONTACT: Mr. Phil Maestri, U.S. Department of 
Education, Office of the Secretary, 400 Maryland Avenue, SW., room 
7E206, Washington, DC 20202-6132. Telephone: (202) 205-3511.
    If you use a telecommunications device for the deaf (TDD), you may 
call the Federal Relay Service (FRS) at 1-800-877-8339.
    Individuals with disabilities may obtain this document in an 
alternative format (e.g., Braille, large print, audiotape, or computer 
diskette) on request to the contact person listed under FOR FURTHER 
INFORMATION CONTACT.

SUPPLEMENTARY INFORMATION: The VI is an insular area that is authorized 
under 48 U.S.C. 1469a to consolidate formula grant funds allocated to 
it under various Federal education programs and use those funds for the 
purposes of one or more programs included in the consolidated grant. 
See also 34 CFR 76.125-76.137. Under that authority, the Virgin Islands 
Department of Education (VIDE) has historically consolidated formula 
grant funds allocated to it under the Elementary and Secondary 
Education Act of 1965, as amended (ESEA), the Carl D. Perkins Career 
and Technical Education Act of 2006 (CTE) (formerly the Carl D. Perkins 
Vocational and Technical Education Act), and the Adult Education and 
Family Literacy Act (Adult Education) and used those funds to implement 
three programs: Title V, Part A (formerly Title VI) of the ESEA, CTE, 
and Adult Education. The VIDE also receives additional funding under 
the authority of a number of other Department programs. Additionally, 
VIDE and the Virgin Islands Department of Health (VIDH) carry out 
programs under Parts B and C of the Individuals with Disabilities 
Education Act (IDEA); IDEA funds are not subject to the consolidation 
authority under 48 U.S.C. 1469a and 34 CFR 76.125-76.137. VIDH's IDEA 
Part C grant funds for fiscal years 2002 through 2007 are subject to 
special conditions to ensure fiscal accountability. Finally, the Virgin 
Islands Department of Human Services (VIDHS) also receives Department 
funds.
    Because of longstanding and recurring findings of fiscal and 
programmatic accountability deficiencies in the administration of 
Department programs by the VI and several of its departments (as 
discussed in detail in the following paragraphs), the Department has 
imposed special conditions, on a Department-wide basis, on all 
Department grants awarded to the VI. These Department-wide special 
conditions are different from the fiscal special conditions imposed 
separately on the IDEA Part C grant and from the programmatic special 
conditions imposed separately by various Department program offices 
upon individual grant awards. The need for these Department-wide 
special conditions stems from the VI's failure to meet the terms of the 
Agreement, which was executed on September 23, 2002, and expired on 
September 23, 2005, with the VI still in substantial non-compliance.
    The Department entered into the Agreement in 2002 because it had 
found serious and recurring fiscal and programmatic accountability 
deficiencies in the administration of Department programs by the VI, 
VIDE, and other agencies of the government of the VI dating back 
several years. Specifically, the Department had found deficiencies in 
key aspects of the VI's procurement process; program planning and 
implementation; and financial and property management, including, but 
not limited to, the VI's lack of appropriate record keeping to account 
for the use of Federal funds and its failure to obligate and draw down 
funds and liquidate obligations on a timely basis. The VI also had 
failed to submit timely and sufficient audits. As a result of these 
major problems, in September 1999, the Department designated the VI as 
a ``high-risk grantee'' under 34 CFR 80.12(a) and, consistent with that 
designation, imposed special conditions on a number of grant awards to 
the VI and its agencies. But, even after the imposition of these 
special conditions, the VI continued to have significant problems in 
administering Department grant programs, resulting in continued 
noncompliance with various programmatic and fiscal requirements 
applicable to those programs.
    In May 2001, officials from the Department met with VI officials to 
discuss the continuing deficiencies in the administration and 
implementation by the VI of the Department's programs. The parties 
reached an agreement on the wide-scale and significant corrective 
actions that the VI would have to make in order for the Department to 
continue to provide funds to VI agencies. It was at this time that the 
Department suggested that the VI and the Department enter into a 
compliance agreement, pursuant to section 454 of GEPA, to apply to all 
Department grants awarded to the VI. The purpose of the compliance 
agreement would be to bring the VI ``into full compliance with the 
applicable requirements of the law as soon as feasible and not to 
excuse or remedy past violations of such requirements.'' \1\ 20 U.S.C. 
1234f(a). In

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order to enter into a compliance agreement with the VI, the Department 
had to determine, in written findings, that the VI would not be able to 
comply until a future date with the applicable program requirements and 
that a compliance agreement would be a viable means for bringing about 
such compliance.
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    \1\ Section 454 of GEPA, 20 U.S.C. 1234c, sets out the remedies 
available to the Department when it determines that a recipient ``is 
failing to comply substantially with any requirement of law 
applicable'' to the Federal program funds administered by this 
agency. Specifically, the Department is authorized to--
    (1) Withhold funds;
    (2) Obtain compliance through a cease and desist order;
    (3) Enter into a compliance agreement with the recipient; or
    (4) Take any other action authorized by law.
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    In accordance with the requirements of section 457(b) of GEPA, 20 
U.S.C 1234f(b), Department officials conducted public hearings in the 
VI in February 2002. Witnesses representing VIDE, students and parents, 
and other concerned organizations and individuals testified at these 
hearings on the question of whether the Department should grant VIDE's 
request to enter into a compliance agreement. The Department reviewed 
this testimony and all other relevant materials and concluded that, 
while the Department had been working closely with VIDE and with other 
VI agencies to address the major issues that the VI had been facing in 
administering Department grant programs, it was clear that the problems 
could not be corrected by the VI immediately and that the VI would need 
more than one year to correct them. Therefore, in order to remedy that 
condition, the Department and the VI entered into the Agreement, a 
comprehensive compliance agreement with a three-year term. The purpose 
of the Agreement, which incorporated the Department's written findings, 
was to allow the VI to develop integrated and systemic solutions to 
problems in managing its Department funds and programs. Under the terms 
of the Agreement, by the end of the three-year term, the VI was 
supposed to be in full compliance with the requirements of all programs 
funded by the Department. The Agreement became effective on September 
23, 2002.
    In November 2003, officials from the Department conducted a site 
visit to provide intensive technical assistance and review the VI's 
progress during the first year of the Agreement. While VIDE had made 
significant progress in some issue areas identified in the Agreement, 
the VI had not made progress in many key areas, particularly that of 
financial management, which significantly affected its ability to 
manage Department funds and administer Department programs. The 
Department continued to monitor the VI's compliance with the terms of 
the Agreement and provided frequent, intensive technical assistance to 
the VI during the course of its three-year term. In March 2005, the 
Department notified the VI of its concerns regarding the VI's limited 
progress in meeting the goals of the Agreement. The Department required 
the VI to demonstrate why the Department should not begin to take 
immediate remedial action under the terms of the Agreement. After 
considering the VI's response, the Department concluded that the VI had 
failed to meet on a timely basis key terms and conditions of the 
Agreement that are critical to successful compliance with applicable 
requirements and that the VI would not be able to meet all of the terms 
and conditions of the Agreement by its expiration on September 23, 
2005. In particular, the Department noted that there was a significant 
lack of progress on the part of the VI in developing and implementing a 
credible central financial management system--the cornerstone of the 
VI's financial management improvements that are critical to its ability 
to manage Department funds consistent with applicable Federal 
regulations concerning fiscal accountability and funds management.
    Therefore, in accordance with section II.A. of the Agreement, and 
section 457(d) of GEPA, the Department imposed special conditions on 
grant awards to the VI, including a requirement that the VI procure, 
and maintain, the services of a third-party fiduciary agent, acceptable 
to the Department, to perform the financial management duties required 
under Federal regulations for all Department grant awards made to the 
VI. The VI subsequently published a Request for Proposal and selected a 
third-party fiduciary agent acceptable to the Department. The 
Department is currently monitoring the work of this third-party 
fiduciary agent and the VI's compliance with these special conditions 
and continues to provide technical assistance and oversight in a 
continuing effort to bring the VI into full compliance with applicable 
Federal regulations.
    As required by section 457(b)(2) of GEPA, 20 U.S.C. 1234f(b)(2), 
the Agreement (which incorporates the Department's written findings in 
the section entitled ``Overview of Issues'', and in each ``Issue 
Description'' section of the Agreement) is included as appendix A of 
this notice.

Electronic Access to This Document

    You may view this document, as well as all other Department of 
Education documents published in the Federal Register, in text or Adobe 
Portable Document Format (PDF) on the Internet at the following site: 
http://www.ed.gov/news/fedregister.
    To use PDF you must have the Adobe Acrobat Reader Program with 
Search, which is available free at this site. If you have questions 
about using PDF, call the U.S. Government Printing Office (GPO), toll 
free, at 1-888-293-6498; or in the Washington, DC area at (202) 512-
1530.

    Note: The official version of a document is the document 
published in the Federal Register. Free Internet access to the 
official edition of the Federal Register and the Code of Federal 
Regulations is available on GPO Access at: http://www.gpoaccess.gov/nara/index.html.


    Authority: 20 U.S.C. 1234c, 1234f.

    Dated: October 18, 2007.
Hudson La Force III,
Senior Counselor to the Secretary of Education.

Appendix A--Compliance Agreement Between The U.S. Virgin Islands and 
the U.S. Department of Education

September 23, 2002.

U.S. Virgin Islands Compliance Agreement

I. Overview of Issues
II. Consequences for Not Meeting the Terms and Conditions of the 
Agreement
    A. Mutual Agreements and Understandings Regarding the Terms, 
Conditions and Enforcement of This Compliance Agreement
    Severability
    Additional Terms and Conditions Under 34 CFR Sec.  80.12
    Judicial Enforcement
    1. Cease and Desist Order Under 20 U.S.C. Sec. Sec.  1234c(a)(2) 
and 1234e
    2. Referral to Department of Justice for Appropriate 
Enforcement--20 U.S.C. Sec.  1416
    Withholding of Grant Funds--20 U.S.C. Sec. Sec.  1234c(a)(1), 
1234d and Sec.  1416
    Escrow Account to Fund Third-Party
    Recovery of Funds--20 U.S.C. Sec.  1234a
    B. Criteria for Determining Consequences
III. Reporting Requirements
IV. Updated Plans, Action Steps, and Timelines From December 2001 
Meeting
V. Issues
    Issue 1.0: Program Planning, Design, and Evaluation
    Issue Description
    Identification of Long-Term Goals
    Assessment of Current Status of Programs in Terms of Goals
    Identification of Educational Program Needs To Meet Goals

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    Development of Program Design and State Plans or Applications 
That Address Identified Needs
    Sub-Issue 1.1: Separation of State and Local Educational 
Agencies
    Sub-Issue Description
    Performance Measures for Issue 1.0 and 1.1
    Action Steps Required
    Issue 2.0: Financial Management
    Issue Description
    Sub-Issue 2.1: Credible Financial Management System
    Sub-Issue Description
    Performance Measures for Issue 2.0 and 2.1
    Action Steps Required
    Sub-Issue 2.2: Indirect Costs
    Sub-Issue Description
    Performance Measures for Issue 2.2
    Action Steps Required
    Sub-Issue 2.3: Obligation of Funds/Disbursement of Obligation
    Sub-Issue Description
    Performance Measures for Issue 2.3
    Action Steps Required
    Issue 3.0: Human Capital
    Issue Description
    Sub-Issue 3.1: Recruiting and Hiring
    Sub-Issue Description
    Performance Measures for Issue 3.0 and 3.1
    Action Steps Required
    Sub-Issue 3.2: Inadequate Time Accounting and Supplanting
    Sub-Issue Description
    Performance Measures for Issue 3.2
    Action Steps Required
    Issue 4.0: Property Management and Procurement
    Issue Description
    Sub-Issue 4.1: Property Management
    Sub-Issue Description
    Performance Measures for Issue 4.0 and 4.1
    Action Steps Required
    Sub-Issue 4.2: Competitive Procurement (Improved Process)
    Sub-Issue Description
    Performance Measures for Issue 4.2
    Action Steps Required

I. Overview of Issues

    As a result of serious and recurring deficiencies in the 
administration of various Federally funded programs by the government 
of the U.S. Virgin Islands (VI), the U.S. Department of Education (the 
Department) has designated VI a ``high-risk grantee'' under 34 CFR 
Sec.  80.12. The Department has been working closely with the Virgin 
Islands Department of Education (VIDE) and with other Virgin Islands 
agencies in recent months to address these major issues, but it is 
clear that the problems cannot be corrected by the Virgin Islands 
immediately, and that the Virgin Islands will need more than one year 
to correct them. Therefore, in order to remedy this condition, the 
Department has consented to enter into this comprehensive, three-year 
compliance agreement with VI.
    Through this Compliance Agreement, the VI, with assistance from the 
Department, agrees to develop integrated and systemic solutions to 
problems in managing Federal education funds and programs. The issues 
are being carefully examined and addressed from the perspective of 
every VI agency and local entity with management responsibility for 
resources or programs that have an impact on education. Solutions may 
involve re-engineering systems and processes or implementing 
technology. In addition, solutions must address communication and 
cooperation among VI Departments, and developing a culture of ``getting 
the work done right.'' Whatever the solutions the VI chooses to 
implement, they must ensure the best educational systems possible for 
the people of the Virgin Islands. It is also understood that by the end 
of the term of this Agreement, VI must be in full compliance with the 
requirements of all programs funded by the Department.
    The Compliance Agreement is also intended to ensure an effective 
planning and evaluation process throughout VI programs and initiatives. 
Planning and evaluation processes are the basis for determining program 
goals, current status, improvement needs, budgets, resources, 
effectiveness of results, and other important aspects of effective 
program management. Through this Agreement, the VI will improve its 
program planning and evaluation for education programs and use the 
plans and evaluation results to drive management and resource 
decisions.
    This Compliance Agreement addresses four areas of crosscutting 
issues: (1) Program Planning, Design and Evaluation, (2) Financial 
Management, (3) Human Capital, and (4) Property Management and 
Procurement. The issues are presented as crosscutting because of the 
impact of other VI agencies on VIDE. Thus, it is critical that these 
issues be addressed not just in VIDE but across virtually the entire 
Virgin Islands government. In addition, the issues cannot be addressed 
in a piecemeal fashion and they must encompass an effective planning 
and evaluation process.
    The Compliance Agreement lists specific action items for each 
crosscutting issue. However, the Department will not determine the VI's 
progress in meeting the terms of the Agreement only by assessing 
completion of listed action steps. Rather, the Department will judge 
progress by the systemic approaches and degree of integration that the 
VI brings in designing and implementing solutions to complex problems 
in each of the crosscutting areas, and by the demonstrated 
communication, cooperation, and organizational culture change toward 
``getting the work done right.'' These approaches should include 
effective planning and evaluation of resource and management decisions 
that are designed to produce better educational results.
    In making the critical systemic and organizational culture changes 
required to meet the terms of the Compliance Agreement, it is important 
to understand that the Agreement is not designed to benefit the 
Department, VIDE, or the Virgin Islands government. All of the 
requirements of the Compliance Agreement are directed toward one end: 
improving education for the students of the Virgin Islands. In the end, 
the Department and the VI will judge success by determining how well 
the VI has improved educational programs and met the terms of the 
Compliance Agreement.

II. Consequences for Not Meeting the Terms and Conditions of the 
Agreement

A. Mutual Agreements and Understandings Regarding the Terms, Conditions 
and Enforcement of This Compliance Agreement

Severability
    The parties agree that this Compliance Agreement includes terms and 
conditions that apply to the various Federal programs included in the 
Agreement (hereafter ``covered Federal programs'') and also terms and 
conditions that are program specific. To that end, the parties agree 
that each such term and condition for each covered Federal program may 
constitute a separate agreement between the Virgin Islands and the 
Department. For purposes of 20 U.S.C. Sec.  1234f, each such term or 
condition as to each covered Federal program shall be severable from 
each other term or condition for each of the covered Federal programs. 
Unless set out otherwise, a determination by the Department under 20 
U.S.C. Sec.  1234f(d) that the Virgin Islands is not meeting the terms 
and conditions may be specific to such term, condition or program 
without impacting the continuing obligations under the Agreement. That 
is, all other terms and conditions for all covered Federal programs or 
the specific term or condition for other covered Federal programs would 
remain in place for the duration of the Agreement or until such time as 
the Department determines failure by the Virgin Islands to meet those 
terms and conditions.
    Alternatively, the parties understand and agree that a 
determination by the Department under 20 U.S.C. Sec.  1234f(d) that the 
Virgin Islands has failed to meet any of the terms and conditions 
shall, at

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the Department's discretion, be grounds for finding the Agreement, as 
to such terms and conditions, no longer in effect and that the 
Department may take any and all additional actions authorized by law. 
Some examples of such actions are set out below.
Additional Terms and Conditions Under 34 CFR Sec.  80.12
    Under this provision, the Department may apply additional 
conditions to one or more of the Virgin Islands' grants, having 
determined that the Virgin Islands is a ``high risk'' grantee (because 
it has a history of unsatisfactory performance and has not conformed to 
terms and conditions of previous awards).
    Special conditions or restrictions may include, but are not limited 
to: (1) Payment on a reimbursement basis; (2) withholding authority to 
proceed to next phase until receipt of evidence of acceptable 
performance within a given funding period; (3) requiring additional, 
more detailed financial reports; (4) additional project monitoring; (5) 
requiring the Territory to obtain technical or management assistance, 
including the designation of a third-party fiduciary to administer all 
or part of the Virgin Islands' grants from the Department; or (6) 
establishing additional prior approvals. The use of a condition for one 
covered Federal program does not require or preclude its use for a 
different covered Federal program.
    Under such circumstances the Department would notify the Virgin 
Islands as early as possible, in writing, of the: (1) Nature of special 
conditions/restrictions; (2) reason(s) for imposing them; (3) 
corrective actions which must be taken before they will be removed and 
time allowed for completing corrective actions; and (4) method of 
requesting reconsideration of conditions/restrictions imposed.
Judicial Enforcement
1. Cease and Desist Order Under 20 U.S.C. Sec. Sec.  1234c(a)(2) and 
1234e
    The Department may seek injunctive relief to compel specific 
actions or to stop specific actions. Under this process, the Department 
issues a complaint to the Virgin Islands, describing the factual and 
legal basis for the Department's belief that the Virgin Islands is 
failing to comply substantially with a requirement of law including 
this agreement, and containing a notice of hearing. A hearing before an 
Administrative Law Judge (ALJ) must occur. The ALJ's report and order, 
requiring the Virgin Islands to stop specific actions or compelling 
specific actions, becomes the final agency decision. The Department may 
enforce the final order by withholding any portion of the Virgin 
Islands' grant award or certifying the facts to the Attorney General 
who may bring an appropriate action for enforcement of the order.
2. Referral to Department of Justice for Appropriate Enforcement--20 
U.S.C. Sec.  1416
    If the Department finds, after reasonable notice and opportunity 
for hearing to the Virgin Islands, that: (1) There has been a failure 
by the Virgin Islands to comply substantially with any provision of 
applicable Federal laws; or (2) there is a failure to comply with any 
condition of a Local Educational Agency's or the Virgin Islands' 
eligibility (including terms of Compliance Agreement within timelines 
specified in Agreement), the Department may, after notifying the Virgin 
Islands, refer the matter for an appropriate enforcement action, which 
may include referral to the Department of Justice.
Withholding of Grant Funds--20 U.S.C. Sec. Sec.  1234c(a)(1), 1234d and 
Sec.  1416
    If the Department finds, after reasonable notice and opportunity 
for hearing to the recipient, that there has been a failure to comply 
substantially with a requirement of law, including with this Agreement, 
the Department may withhold, in whole or in part, future payments to 
the recipient.
    If the Department finds, after reasonable notice and opportunity 
for hearing to the Virgin Islands, that: (1) there has been a failure 
by the Virgin Islands to comply substantially with any provision of 
applicable Federal laws; or (2) there is a failure to comply with any 
condition of a Local Educational Agency's or the Virgin Islands' 
eligibility (including terms of Compliance Agreement within timelines 
specified in Agreement), the Department may, after notifying the Virgin 
Islands, withhold, in whole or in part, any further payments to the 
Territory. Department may limit withholding to a particular Local 
Educational Agency or State agency.
Escrow Account To Fund Third Party
    If the Virgin Islands fails to meet a term deemed significant by 
the Department in the Compliance Agreement, the Department may place an 
appropriate amount of the Virgin Islands grants into an interest 
bearing escrow account to fund the duties of a third party fiduciary 
agent. VI may request a reconsideration of this action.
Recovery of Funds--20 U.S.C. Sec.  1234a
    Any funds improperly expended or not properly accounted for are 
subject to recovery by the Department according to 20 U.S.C. Sec.  
1234a.

B. Criteria for Determining Consequences

    The Virgin Islands will provide the Department with quarterly 
progress reports for all of the action steps and performance measures 
set forth in the Agreement. The Virgin Islands and the Department agree 
that failure to (1) provide all required reports in a timely manner, 
(2) show substantial progress in completing all action steps as 
required, (3) complete critical action steps within the timeframe 
designated in the Agreement, or (4) achieve critical performance 
measures as specified in the Agreement, will be considered a failure to 
meet the terms and conditions of the Agreement.

III. Reporting Requirements

    This Compliance Agreement requires regular progress reporting for 
all issues. VI must provide the Department (1) a description of 
activities and progress for the issue and its related sub-issues during 
the reporting period, (2) the status of each action step required to be 
taken during the reporting period, (3) documentation of action step 
completion for those steps required to be completed during the 
reporting period (including explanation of delays for all steps not 
completed that were scheduled to be completed, and expected completion 
dates for all unimplemented steps), (4) documentation of measures of 
performance and results, and (5) other data or documentation as 
specified within the action steps for each issue or related sub-issue 
in this Agreement. This information should be transmitted to the 
Department by updating (at least quarterly) an internet web site 
developed and maintained by the Virgin Islands Government. The Virgin 
Islands Office of Management and Budget (VIOMB) will be responsible for 
tracking, monitoring and reporting progress on all requirements and 
milestones in this Agreement in a manner that is fully accessible to 
the Department and the public. Information in the progress tracking web 
site should be updated continuously, but in any event, no later than 30 
days from the last day of each quarter. The first quarterly period will 
encompass the time from which all parties sign this Agreement through 
December 31, 2002.
    The VI and the Department agree that the following performance 
measures

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apply for each issue and sub-issue, in addition to other performance 
measures specified throughout this Agreement.
    1. All plans, other documents, and reports are timely, complete, 
accurate, and address the requirements set forth in this Agreement.
    2. All action steps are implemented within the timeframes set forth 
in this Agreement.
    3. Implementation of action steps demonstrates progress towards 
achieving the outcomes or performance measures set forth in this 
Agreement.

IV. Updated Plans, Action Steps, and Timelines From December 2001 
Meeting

    Action steps and timelines that the VI developed in December 2001 
are included in the issue descriptions throughout this document. The VI 
will need to assess the action steps and timelines developed in 
December and determine if (1) the action steps fully meet the 
requirements of this Agreement, (2) the action steps will move the VI 
toward achieving the required performance measures, and (3) the 
timelines need to be modified within the time boundaries set forth in 
this Agreement. Updating the December action steps and timelines into 
plans for which the VI will be accountable is a critical action step 
for each issue and sub-issue. Once the VI develops a plan for each 
issue or sub-issue, as specified in this Agreement, and the Department 
agrees to the plan, the action steps and timelines in the plan will 
become additional requirements of this Agreement and be subject to the 
reporting requirements and consequences for not meeting terms and 
conditions as set forth in this Agreement. The Department will assist 
by consulting with VI to develop reports or reporting formats that 
shall satisfy the reporting requirements as set forth in this 
Agreement. The Department will also assist, to the extent that 
resources are available, the VI with the orientation and training of 
personnel.
    The remainder of this document provides issue descriptions, action 
steps, and performance measures for (1) Program Planning, Design and 
Evaluation, (2) Financial Management, (3) Human Capital, and (4) 
Property Management and Procurement.

V. Issues

Issue 1.0: Program Planning, Design, and Evaluation

Issue Description
    Because the stated purpose of this Agreement is to improve 
education for the students of the VI, it is critical to successfully 
meeting the terms of this Agreement that the VI use the first year of 
the next three year period to develop long-term goals, assess the 
current status of each program receiving Federal assistance, and design 
coherent programs to bridge the gap between the current status of 
education in the VI and its educational goals and applicable 
requirements.
    An issue of significant importance to program planning, design, and 
evaluation is the legal and administrative impact of the organizational 
structure and legal classification of the various educational agencies 
in the Virgin Islands. This Compliance Agreement has been drafted in 
reliance upon the mutual understanding that the Virgin Islands has 
established and maintains a State educational agency (SEA) and two 
local educational agencies (LEA), as defined under Federal law. Thus, 
for purposes of administering its Federal grants, VIDE, as the SEA, 
must make steady progress towards meeting all Federal requirements that 
are related to that designation, including where specified, providing 
LEAs, the St. Thomas/St. John school district and St. Croix school 
district, the appropriate levels of Federal funding and autonomy 
required under each Federal program's requirements. Therefore, by 
entering into this Agreement, the VI acknowledges the Department's 
reliance upon this designation, agrees to comply with the specific 
Federal requirements that apply through this designation and agrees not 
to change this designation during the period of this Agreement without 
the prior approval of the Department.
    Effective planning and design includes the following elements: (1) 
program goals stated in measurable terms (outcome measures), (2) 
baseline assessments of current status (baseline measures), (3) 
comparison of current status to program goals (baseline measures to 
outcome measures), (4) a report of areas where current programs do not 
meet goals, (5) a plan to improve current programs to meet goals, (6) a 
schedule for implementing the plan, (7) measures to determine if the 
plan implementation is having the intended effect, and (8) options for 
further modification if implementing the plan is not having the 
intended effect. Any planning and design process will take into account 
Federal and State requirements for each program, as well as other 
applicable professional standards. In addition, the planning process 
should include citizen and/or customer input and feedback; input is a 
vital part of the process to set goals, and feedback is equally 
significant in assessing results. A critically important aspect of the 
planning and design process is that it is fully integrated as the 
foundation for other program-related decisions about budgets, financial 
management, personnel requirements, and other resource needs.
    In order to fully implement this process, a comprehensive, school-
based, statewide plan will be developed. The Department will provide 
model comprehensive plans, if appropriate, and referrals to successful 
jurisdictions for guidance. VI will seek the assistance of expert 
consultants and other grantees to provide hands-on guidance in 
completing the comprehensive planning process. Reasonable and necessary 
expenses for this assistance will be considered allowable costs 
chargeable to a Department grant to be awarded by September 30, 2002, 
provided an approvable application is received in a timely manner. The 
expected outcomes identified in this plan, among other federally and 
locally identified outcomes, will include:
     Schools gain greater site-based authority to determine 
needs and apply funding to those needs.
     School site-based management will be enhanced through 
greater school community involvement and increased awareness of 
accountability.
     Programs can be implemented that best fit the needs of the 
individual school population rather than one district approach for all.
     Activities conducted under this plan bring VI into 
compliance with statutory and regulatory requirements for Department 
programs.
    In general, the comprehensive statewide plan should be based on 
information derived from individual school plans. These school plans 
should include, at a minimum, the components listed below.
     A comprehensive needs assessment of the entire school, 
based on information about student academic achievement.
     Strategies that provide opportunities for all children to 
meet proficient and advanced levels of academic achievement, use 
effective methods of instruction that are based on scientific research 
and address the needs of all children in the school.
     Instruction by highly qualified teachers as defined by the 
Elementary and Secondary Education Act.
     High quality and ongoing professional development for 
teachers, principals, and other staff.
     Strategies to attract high-quality teachers in all 
schools, but with special emphasis on high-need schools.

[[Page 60207]]

     Strategies to increase parental involvement.
     Plans for assisting preschool children in the transition 
from early childhood programs to local elementary school programs.
     Measures to include teachers in decisions about academic 
assessment.
     Assistance for children who experience difficulty 
mastering the proficient or advanced levels of academic achievement 
standards.
     Coordination and integration of Federal, State and local 
services and programs.
     Annual report cards for the performance of each school as 
defined by the Elementary and Secondary Education Act.
     All expenditures are allowable under the requirements of 
each grant and applicable program.
    This comprehensive plan for reforming the total instructional 
program in the school should be developed during the first year period, 
with the involvement of staff, parents, administrators, and others. The 
plan must:
     Describe how the school will implement the components 
summarized above.
     Describe how the school will use resources to implement 
the components.
     Include a description of Federal, SEA, and LEA programs 
that will be available in the individual school.
     Describe how the school will provide parents with 
individual student academic assessment results and other information 
about the individual schools, including interpretation of the results, 
in understandable language.
Identification of Long-Term Goals
    For each Federal program it is important to identify the desired or 
required outcomes, so VI can measure improvement for that program by 
how close it is to achieving these goals as well as maintaining 
improvement on a continuous basis. Examples of this are:
     For the Title V, Part A program, the law requires states 
to aim for increased student academic achievement or improved quality 
of education for all students.
     For the Vocational Education and Adult Education programs, 
the desired outcomes are defined by the program statutes in terms of 
the core indicators of performance or additional VI-identified 
indicators that measure student performance.
Assessment of Current Status of Programs in Terms of Goals
    This sub-issue involves an assessment at the VI-wide and school 
level of each Federal program in terms of the goals identified. It also 
requires VI to identify a measurement approach (a method for measuring) 
for each goal or core indicator. Once the measurement approach is 
identified, VI must establish a baseline that reflects the current 
status for each goal or indicator. Examples of this include:
     For the Title V, Part A program, VI must identify the 
current academic levels for the students benefiting from the program, 
which is the baseline, and establish incremental targets for 
improvement to reach the goals identified in sub-issue 1.2.
     For the Vocational Education and Adult Education programs, 
the VI must establish a baseline and levels of performance (incremental 
targets) for each required core indicator and any VI-identified 
indicators for each of the subsequent years of this Agreement.
Identification of Educational Program Needs to Meet Goals
    Once the VI has identified its baselines in comparison to its 
goals, it must identify the needs that have to be met to bridge the gap 
between the baseline (current status) and the goals. The needs must be 
consistent with the purposes and allowable activities under each 
program. In developing program activities, VIDE will have as a goal 
that by the end of the three year period of this agreement, 95% of the 
Federal education funds will be spent on instructional activities and 
directly related expenditures.
Development of Program Design and State Plans or Applications That 
Address Identified Needs
    The VI must develop, prepare, and submit to the Department a State 
application in conformance with the requirements of each program for 
which funds are being expended and any other requirements set forth in 
this Agreement. These applications should be based on information 
gathered from the school-based comprehensive plans developed under this 
section.

Sub-Issue 1.1: Separation of State and Local Educational Agencies

Sub-Issue Description
    In a letter dated August 1, 2001, at the request of the Department 
and VIDE, the Attorney General of the Virgin Islands provided the legal 
opinion that under local law, the structure and functions of the 
various educational agencies in the Virgin Islands were divided into, 
VIDE, as the SEA, and the St. Thomas/St. John school district and the 
St. Croix school district, as the two LEAs. This has significant 
implications for the administration of Federal education programs. For 
example, under Part B of the Individuals with Disabilities Education 
Act, the SEA must ensure that eligible LEAs receive subgrants under the 
formula specified at 34 CFR Sec.  300.712. Additionally, under Title V 
of ESEA, an LEA is to have complete discretion in deciding how to 
allocate funds among the allowable Title V program areas, and must 
ensure that its Title V expenditures carry out the purposes of the 
program and are used to meet the educational needs in schools within 
the LEA. The specific terms of this Compliance Agreement contemplate 
the administrative structure of one SEA and two LEAs.
Performance Measures for Issue 1.0 and 1.1
    1. By the end of the three-year period of the Compliance Agreement, 
VI will be in full compliance with the program requirements of all 
Department grants for which VI expends funds and any other requirements 
set forth in this Agreement.
    2. VI's implementation of the action steps described below brings 
it into full compliance with the standards and assessment requirements 
of Title I, ESEA that all States were required to meet by the end of 
the 2000-2001 school year, no later than the end of the three-year 
period of the Compliance Agreement.
    3. By the end of the three-year period of the Compliance Agreement, 
VI must have developed a detailed plan for how it will comply with the 
requirements of the Elementary and Secondary Education Act, including 
Title I, Part A of the ESEA as reauthorized by the No Child Left Behind 
Act. We expect that at the end of the three-year period, VIDE will 
apply for most or all of the individual programs authorized under the 
Elementary and Secondary Education Act, the Adult Education and Family 
Literacy Act rather than consolidating them.
    4. By the end of the three-year period of the Compliance Agreement, 
VI's implementation of the action steps described below must bring its 
programs into full compliance, with respect to Federal law and with the 
obligations and responsibilities of a single SEA and two LEAs.
Action Steps Required

[[Page 60208]]



------------------------------------------------------------------------
           Year 1                    Year 2                Year 3
------------------------------------------------------------------------
1. The VI must submit to the  1. In the second      1. In the third year
 Department within 120 days    year of the           of the Compliance
 from the date of the          Compliance            Agreement, the VI
 compliance agreement, an      Agreement, the VI     will implement the
 approvable action plan that   will implement the    comprehensive,
 can demonstrate steady        comprehensive,        statewide plan and
 progress toward developing    statewide plan and    demonstrate that it
 a comprehensive statewide     demonstrate that it   is achieving the
 plan and fiscal year 2003     is achieving the      program goals that
 consolidated grant            program goals that    are required.
 application described in      are required.
 items two and three below.
2. Within the first year of   2. In the second      2. In the third year
 the Compliance Agreement      year of the           of the Compliance
 the VI must develop a         Compliance            Agreement, the VI
 comprehensive, school-        Agreement, the VI     will meet all
 based, statewide action       will demonstrate      Federal
 plan for complying with the   steady progress       requirements
 requirements of various       towards meeting all   related to the
 programs funded by the        Federal               designation of a
 Department including, but     requirements          single SEA and two
 not limited to: Title I,      related to the        LEAs and is ready
 Part A of ESEA standards      designation of a      to meet all
 and assessment                single SEA and two    requirements.
 requirements, Vocational      LEAs and is ready
 Education State Plan,         to meet all
 Occupational and Employment   requirements.
 continuation grant, Adult
 Education, and Title V-A.
 The plan must include, at a
 minimum, the following
 elements: (1) Goals stated
 in measurable terms
 (outcome measures) based on
 program requirements; (2)
 baseline assessments of the
 VI's current status
 (baseline measures); (3)
 comparison of the VI's
 current status to the goals
 including an appropriate
 needs assessment; (4) a
 report of areas where
 current programs do not
 meet goals; (5) action
 steps to improve current
 programs to meet goals; (6)
 a schedule with clear,
 reasonable completion dates
 for implementing the action
 steps; (7) measures to
 determine if the plan
 implementation is having
 the intended effect; (8)
 options for further
 modification if
 implementing the plan is
 not having the intended
 effect; (9) demonstration
 of citizen and customer
 input and feedback; and
 (10) demonstration of its
 foundation for decisions
 about budgets, personnel
 requirements, and other
 resource needs. Other
 requirements of the plan
 are included in section 1.0
 above and applicable laws
 and regulations.
3. Within the first year of   3. The VI will        3. By the end of the
 the Compliance Agreement      prepare and make      three-year period
 the VI must include in the    public annual         of the Compliance
 development of a              report cards for      Agreement, VI will
 comprehensive, school-        the performance of    have submitted a
 based, statewide action       each school as        detailed plan for
 plan such action steps that   defined by the No     how it will comply
 will show steady progress     Child Left Behind     with the
 in meeting the requirements   Act.                  requirements of the
 of Department grants with                           No Child Left
 respect to separate SEA/LEA                         Behind Act,
 issues described in sub-                            including Title I,
 issue 1.1 above.                                    Part A of the ESEA
                                                     as reauthorized by
                                                     the No Child Left
                                                     Behind Act.
4. Prepare and submit semi-   4. The VI will        4. The VI will
 annual expenditure report     prepare and submit    prepare and make
 that includes certification   semi-annual           public annual
 that all expenditures are     expenditure report    report cards for
 for allowable purposes (the   that includes         the performance of
 reports will include the      certification that    each school as
 detail required in the FY     all expenditures      defined by the No
 2000 special conditions).     are for allowable     Child Left Behind
                               purposes (the         Act.
                               reports will
                               include the detail
                               required in the FY
                               2000 special
                               conditions).
                                                    5. The VI will
                                                     prepare and submit
                                                     semi-annual
                                                     expenditure report
                                                     that includes
                                                     certification that
                                                     all expenditures
                                                     are for allowable
                                                     purposes (the
                                                     reports will
                                                     include the detail
                                                     required in the FY
                                                     2000 special
                                                     conditions).
------------------------------------------------------------------------

Issue 2.0: Financial Management

Issue Description
    It is critical to successfully meeting the terms of this Agreement 
that the VI use the next three years to develop a credible central 
financial management system (FMS). In brief, such a system would 
provide the correct amount of funds, in the correct accounts, in a 
timely manner, all the time. Credible financial management includes 
systems, policies, and procedures that (1) provide access to accurate 
information when needed, (2) account appropriately for funds, (3) 
ensure timely deposits or draw down of funds, (4) ensure timely and 
accurate payments, and (5) otherwise enable and support generally 
accepted government financial management and accounting standards and 
requirements. In addition, VIDE, VIDF and other VI Departments must 
demonstrate improved communication and cooperation to develop an FMS 
that meets needs across the VI.
    Through the terms of this Agreement, financial management systems 
will be integrated with one another (i.e., across departments) and with 
other management systems (including budget, human resource management, 
property and procurement, and planning and

[[Page 60209]]

evaluation). One example of the integration required includes 
connecting financial management policies and systems with time and 
attendance systems to ensure appropriate payment and accounting for 
staff time. It is especially important for the purposes of this 
Agreement that the VI financial management system is effectively 
integrated with all management systems and procedures in VIDE.
    All of the action steps to address the financial management issue 
are important, but it is a critical factor for success that the VI 
improve its cash management function immediately. The cash management 
function must be able to provide timely and accurate information about 
each draw down of funds from the Department. Inability to track drawn 
down funds will be considered a failure to meet the terms and 
conditions of this Agreement.
    In addition to the overall requirement to develop a credible 
central FMS, this Compliance Agreement also addresses issues related to 
(1) indirect costs, and (2) obligation of funds and disbursement of 
obligations. Both issues are closely tied to a credible FMS and the 
Department will assess progress in meeting the terms of this Agreement 
by the systemic approaches and degree of integration that the VI brings 
in designing and implementing solutions to all of its longstanding 
problems in the financial management area.

Sub-Issue 2.1: Credible Financial Management System

Issue Description
    This sub-issue involves many areas that must be systemically 
addressed. In December 2001, VI staff identified a series of action 
items related to addressing the FMS issues, including information flow, 
adjustments, system improvements, training, payroll, reporting systems, 
draw downs, and other areas. Department staff have further supplemented 
VI's list. One example of the FMS issue was illustrated in the 2000 
single audit findings: the auditors are still using different 
Department (e.g., VIDE) accounting records to compare with Department 
of Finance records. Invariably, the cash accounts show shortages in 
terms of amounts drawn from Federal agencies as compared to VI 
Departments' records.
    To satisfy the requirements of this Agreement, the VI will develop 
a credible central FMS in which records account for all draws and 
expenditures of Federal education funds. VI agencies and single 
auditors will be able to rely on the central FMS as an accurate system 
of record. In the short term, any differences between the Department of 
Finance and VIDE will be reconciled concurrently, but at the end of 
three years, VI agencies should no longer need separate accounting 
systems.
Performance Measures for Issue 2.0 and 2.1
    1. Within one month of the inception of this Agreement, appropriate 
VIDE, VIDH, VIOMB and VIDF staff members will be provided with access 
to the Department's GAPS system to monitor draw downs.
    2. By December 31, 2002, the VIDF will complete a vision document 
for the implementation of a credible central FMS.
    3. By March 31, 2003, the VIDF will complete a plan for developing 
and implementing a credible central FMS.
    4. From the inception of this Compliance Agreement, all 
transactions for draws and disbursements, as well as any required 
adjustments for Federal education programs' funds will be timely and 
accurately recorded in the VIDF accounting system as they occur 
according to generally accepted accounting standards. Inability to 
track drawn down funds will be considered a failure to meet the terms 
and conditions of this Agreement.
    5. By the conclusion of the third year of the Compliance Agreement, 
VI will conduct monthly reconciliation of draws and expenditures, 
resolve any differences, and record appropriate adjustments.
    6. By the conclusion of the second year of the Compliance 
Agreement, the VI will institute an independent internal audit function 
within VIDE that will abide by the standards for internal audit 
prescribed by the Institute of Internal Auditors (IIA).
    7. By the conclusion of the Compliance Agreement, VI agencies will 
no longer need separate accounting systems.
    8. By the conclusion of the Compliance Agreement, single auditors 
will be able to rely on the FMS as the accurate system of record for 
the financial statement audit.
Action Steps Required

------------------------------------------------------------------------
           Year 1                    Year 2                Year 3
------------------------------------------------------------------------
1. Within one month of the    1. Twice during the   1. VI will conduct
 inception of this             2003-2004 school      quarterly
 Agreement, appropriate VIDE   year, the VI will     reconciliation
 and VIDF staff members will   publicize the U.S.    between GAPS, VIDE,
 be provided access to the     Department of         and VIDF draws and
 Department's GAPS system to   Education Office of   expenditures,
 monitor draw downs.           Inspector General     resolve any
                               Hotline telephone     differences, and
                               number 1-800-         record appropriate
                               MISUSED and the       adjustments within
                               Department of         30 days.
                               Interior OIG
                               Hotline (1-800-424-
                               5081) to all
                               schools, teachers,
                               parents of students
                               in schools,
                               participants in
                               adult education and
                               vocational
                               education programs,
                               VIDE employees, and
                               the public and
                               encourage anyone
                               with any knowledge
                               of misuse of
                               Federal education
                               program dollars to
                               call the Hotlines.

[[Page 60210]]

 
2. By December 31, 2002 the   2. By the conclusion  2. Twice during the
 VIDF will create a vision     of the second year    2004-2005 school
 document of a credible        of the Compliance     year, the VI will
 central FMS. The vision       Agreement, the VI     publicize the
 document will specifically    will institute an     Federal Education
 describe how the system       independent           Office of Inspector
 would (1) provide access to   internal audit        General Hotline
 accurate information when     function within       telephone number 1-
 needed, (2) account           VIDE that will        800-MISUSED and the
 appropriately for funds,      abide by the          Department of
 (3) ensure timely deposits    standards for         Interior OIG
 or draw down of funds, (4)    internal audit        Hotline (1-800-424-
 ensure timely and accurate    prescribed by the     5081) to all
 payments, (5) ensure, prior   Institute of          schools, teachers,
 to archiving any financial    Internal Auditors     parents of students
 data, the capacity to         (IIA). In this        in schools,
 retrieve that data in the     regard, VIDE will     participants in
 future, and (6) otherwise     create an             adult education and
 enable and support            independent Audit     vocational
 generally accepted            Committee that will   education programs,
 government financial          make all audit        VIDE employees, and
 management and accounting     resolution            the public and
 standards and requirements.   decisions for the     encourage anyone
 The vision document will      VIDE and to whom      with any knowledge
 also describe how the         the internal          of misuse of
 central FMS would serve as    auditor will report.  Federal education
 an accurate system of                               program dollars to
 record that would no longer                         call the Hotlines.
 require separate accounting
 systems in different
 agencies. The document will
 also provide a detailed
 diagram of each function of
 the system and how it would
 integrate with other
 related systems or
 processes, (including, but
 not limited to, program
 planning, grant
 administration, budget,
 property and procurement
 management, time and
 attendance, human resource
 management, and payroll).
 The vision document and
 plan (see 3 below)
 will be based on an
 independent party
 performing a needs
 assessment for the
 financial management system.
3. By March 31, 2003, the     3. VI will conduct
 VIDF will create a plan for   quarterly
 how it will develop and       reconciliation
 implement the credible        between GAPS, VIDE,
 central FMS described in      and VIDF draws and
 the vision document. The      expenditures,
 plan will also include        resolve any
 resource requirements for     differences, and
 implementing the plan, with   record appropriate
 action steps and timelines,   adjustments within
 and identify how the          30 days.
 resources will be obtained.
 The vision document (see
 2 above) and plan
 will be based on an
 independent party
 performing a needs
 assessment for the
 financial management system.
4. During the first year of
 the compliance agreement,
 VI will conduct semi-annual
 reconciliation between
 GAPS, VIDE, and VIDF draws
 and expenditures, resolve
 any differences, and record
 appropriate adjustments
 within 30 days. These
 reconciliations will be
 provided on a semi-annual
 basis to the Department for
 review with evidence that
 all adjustments have been
 made.
5. Twice during the 2002-
 2003 school year, the VI
 will publicize the Federal
 education Office of
 Inspector General (OIG)
 Hotline telephone number 1-
 800-MISUSED, and the
 Department of Interior OIG
 Hotline (1-800-424-5081) to
 all schools, teachers,
 parents of students in
 schools, participants in
 adult education and
 vocational education
 programs, VIDE employees,
 and the public and
 encourage anyone with any
 knowledge of misuse of
 Federal education program
 dollars to call the Hotline.
------------------------------------------------------------------------

Sub-Issue 2.2: Indirect Costs

Sub-Issue Description
    The indirect cost issue relates to the manner in which the indirect 
costs associated with Federal funds are distributed within VI. OMB 
Circular A-87 specifies indirect cost requirements. In December 2001, 
officials from ED, VI and other Federal agencies developed and agreed 
on a three-phase process to address the indirect cost issue. Phase I of 
the process outlines steps for indirect cost determination and 
distribution; Phase II outlines steps for making rate application 
corrections, and Phase III outlines steps for preparing a new rate 
proposal. The VI will implement the agreed upon steps of the process in 
a timely manner and report progress to ED.
Performance Measures for Issue 2.2
    1. As described below, steps to determine indirect costs and 
distribute indirect cost reimbursement between the VIDE and the VI will 
be fully

[[Page 60211]]

implemented by OCTOBER 1, 2002 in accordance with VIOMB's new policy. 
The new OMB policy will provide for a pro rata allocation that 
segregates central service indirect costs from agency level or 
departmental indirect costs.
    2. By the beginning of Fiscal Year (FY) 2003, the VI and the 
Department must have agreed on an indirect cost rate to use for FY 
2003.
    3. Starting April 1, 2003, unused leave for separating employees 
will not be charged directly to Federal programs, but allocated only as 
indirect costs.
    4. All of the underlying problems having to do with indirect costs 
will be eliminated by FY 2004, so that audits and other monitoring 
procedures will have minimal findings related to indirect rates in FY 
2003, and no findings related to indirect rates in FY 2004 and 2005.
    5. By the conclusion of the Compliance Agreement, there will be 100 
percent application of the correct, current indirect cost rate in 
education programs.
Action Steps Required
    Officials from VI, the Department and other Federal agencies agreed 
in December 2001 about three phases of action steps to address the 
indirect cost issue. The phases, related steps, and agreed upon time 
lines are listed in the table below. (Steps listed in bold were added 
by the Department staff members after the December 2001 meeting.)

----------------------------------------------------------------------------------------------------------------
                        Year 1                                    Year 2                        Year 3
----------------------------------------------------------------------------------------------------------------
1. If the steps or timelines listed in this table are
 no longer valid, the VI will ask the Department to
 consider a revised plan of action steps and timeline
 by October 1, 2002.
2. In addition to other requirements set forth in the
 Reporting Requirements section of this document, the
 quarterly reports for this sub-issue will include a
 copy of the products developed for each step of the
 process.
Phase I: Indirect Cost Determination and Distribution
     DOI IG will submit letter to the
     Legislature and Governor outlining the indirect
     cost fund sharing issue.
     Develop cost policy statement regarding
     Indirect Cost Fund Sharing.
     OMB will submit policy change
     recommendation and potential changes to the
     existing legislation on the indirect cost fund,
     if necessary, to the Legislature with copies to
     the U.S. Department of Interior (DOI) and the
     Department.
     ED indirect cost staff transmit cost
     policy template to VI OMB.
     VIDE will provide cost policy statements
     to the Department and DOI by September 30, 2002.
     Cost policy statements will be amended
     as appropriate to account for the LEA/SEA
     relationship.
     OMB will provide agencies with account
     codes for receipt and expenditure of indirect
     cost funds. Any shortfalls will be absorbed by
     VIDE, not VIDE programs.
     VIDF will propose accounting changes to
     implement new indirect cost policy for review by
     the Department and DOI by September 30, 2002.
     The policy must address unused leave for
     separating employees.
     Training needs will be identified.......
     Training will be planned and scheduled..
     Training will be implemented............
Phase II: Rate Application Corrections
     Determine and correct current rates, as
     necessary.
     As needed, correct the rate table and
     apply correct rates to current grant programs.
     Review FY 2002 indirect cost rates on
     FMS versus current rates on indirect rate plan.
     Review the prior year indirect costs
     applied to grants and prepare necessary
     adjustments.
     Develop a procedure to report indirect
     cost rate application errors to VIDF.
Phase III: New Rate
     Obtain three-year rate proposal with the
     following steps:.
     Issue RFP for 2003-2005.................
     P& P issue invitations for bids.........
     P& P review bid packages................
     Contract sent to Justice................
     Justice reviews contract and forwards to
     Governor's legal counsel.
     Contract executed.......................
     Contract work performed.................
     Submit rate proposal to IG..............
     Submit draft agreements to agencies for
     review and approval/signature.
     Agencies implement new rates............
----------------------------------------------------------------------------------------------------------------

Sub-Issue 2.3: Obligation of Funds/Disbursement of Obligation

Sub-Issue Description
    Federal education funds in the VI must be obligated and disbursed 
in a manner that ensures that programs are appropriately managed. 
Specifically, application for funds should be based on program plans, 
and funds disbursement should occur as the program plans dictate and be 
tied to specific activities. In addition, funds should be spent in a 
timely manner based on resource requirements for activities specified 
in the program plans. Under the terms of this Agreement, the VI will 
develop a grant application process and subsequent spending process 
that ensures that grant awards are based on specified program plans and 
spent on the programs in a timely manner. The grants systems will be 
integrated with the central FMS.
    The outcome measures for this issue are that (1) program plans are 
the basis for application and disbursement, (2) disbursements are tied 
to actions specified in program plans, (3) all funds are spent for 
allowable purposes under

[[Page 60212]]

the statutes, and (4) no funds are lost due to lapsing obligation 
periods.
Performance Measures for Issue 2.3
    1. The VI will complete an analysis of past problems with program 
planning, obligation, and disbursement by September 30, 2002.
    2. The VI will develop a plan to re-engineer its grants 
application, planning, and disbursement by March 31, 2003.
    3. The VI will fully implement the plan to re-engineer its grants 
application, planning, and disbursement by March 31, 2004.
    4. Within one month after the Compliance Agreement is signed, the 
VI will put in place a system of safeguards to assure that lapses of 
funds will be minimized.
    5. No lapses of funds will occur after March 31, 2003. Funds lapse 
when the deadline allowed by law to obligate Federal grant awards has 
passed and funds remain that have not been properly obligated. These 
funds are no longer available to VI for use.
    6. In the final year of the Compliance Agreement, (1) program plans 
will be the basis for application and disbursement, (2) all 
disbursements will be tied to actions specified on program plans, (3) 
all funds are spent for allowable purposes under the statutes, and (4) 
no funds will be lost due to lapsing obligations periods.
    7. The grant application, planning, obligation, and disbursement 
functions will be fully integrated with the FMS by the conclusion of 
this Compliance Agreement.
    8. At the end of the three-year period, VI will liquidate 
obligations on a timely basis and not need extensions in the 
liquidation period.
Action Steps Required
    In December 2001, VI staff members developed the action items 
listed below to address the obligation of funds/disbursement of funds 
issue. Although the action items are an important first step, they do 
not go far enough in ensuring a grant application, award, and spending 
system that ensures that needed funds are received and fully spent to 
support programs. The table below provides further required action 
steps.
Receipt of Grant Award
     All DOE grant awards and extension approvals should go to 
the VIDE Commissioner with a copy to VIDE Federal Grants Office who 
will distribute copies to the Board of Education, VIOMB and VIDF.
     Access to GAPS system to review all grant awards as an 
extra check on grants.
Grant Periods
     Extensions should be requested by program managers in 
writing 60 days prior to the expiration date of the grant to justify 
the reason for the extension. For all grants to the VI government, 
extensions apply ONLY to liquidation of expenses that were obligated 
during the Federal funding period specified in the grant award.
     Quarterly performance meetings to evaluate reported 
expenditures against the spending plan.
     Develop a grant tracking system.
     Quarterly prepare lists of expiring grants to be provided 
to the Commissioner, which include the percent of funds expended.
     Document the rules about obligation and extension dates.

------------------------------------------------------------------------
           Year 1                    Year 2                Year 3
------------------------------------------------------------------------
1. Within one month after     1. The plan to re-    1. The grant
 the Compliance Agreement is   engineer the grant    application,
 signed, the VIDE will         application,          planning,
 implement a policy            planning,             obligation, and
 statement delineating the     obligation, and       disbursement
 procedure for reviewing and   disbursement          functions will be
 processing sub grantee        functions will be     fully integrated
 awards to expedite            fully implemented     with the FMS by the
 allocations and               by March 31, 2004.    conclusion of this
 disbursement of Federal                             Compliance
 funds to eligible                                   Agreement.
 applicants within five days
 of receipt from the LEA
 program office.
 Applications not approved
 for funding will be
 returned to the Program
 Office originating the
 proposal within the five
 working day period. If the
 timeline requirement is not
 met, the Commissioner will
 submit a letter of
 explanation to the funding
 agency within ED, with a
 copy to the affected
 program.
2. Within 45 days after the
 Compliance Agreement is
 signed, the VI will put in
 place a system of
 safeguards to assure that
 lapses of funds will be
 minimized.
3. By September 30, 2002,
 the VI will provide the
 Department with (1) a list
 of Federal requirements for
 program planning,
 obligation, and
 disbursement of funds, and
 (2) an analysis of the VI's
 education grants for the
 past fiscal year that
 specifies where problems in
 meeting requirements
 occurred in program
 planning, obligation and
 disbursement, and why the
 problems occurred.

[[Page 60213]]

 
4. Based on the analysis of
 requirements and past
 problems, the VI will
 develop and provide the
 Department with a plan, by
 March 31, 2003, to re-
 engineer its grant
 application, planning,
 obligation, and
 disbursement functions. The
 plan will include policies,
 procedures, and systems to
 ensure that (1) program
 plans are the basis for
 application and
 disbursement, (2)
 disbursements are tied to
 actions specified in
 program plans, and (3) no
 funds are lost due to
 lapsing obligation periods.
5. By March 31, 2003, the VI
 will create a common
 template and timetable for
 all program plans. Such a
 template and timetable will
 structure planning
 information and provide a
 structure for activity-
 based disbursement plans
 and decisions.
------------------------------------------------------------------------

Issue 3.0: Human Capital

Issue Description
    The human capital issue area encompasses two significant sub-
issues: (1) Recruiting and hiring, and (2) time and attendance 
accounting and supplanting. The recruiting and hiring issue involves 
ensuring that qualified teachers and related service personnel are 
available for students in every classroom. The time and attendance 
accounting and supplanting issue deals with ensuring that personnel 
paid by Federal education funds are in fact performing the appropriate 
jobs in the programs they were funded to work in.
    Timelines or action items under this Compliance Agreement do not 
replace and/or exclude any requirements of previous Compliance 
Agreements. For example, the VIDE IDEA--Part B Compliance Agreement 
states: ``By 12/01 VIDE is to have hired qualified personnel to fill 
85% of any vacancies (related to special education vacancies) that 
occurred after 10/99.'' That requirement, and all others under the 
previous Compliance Agreement will remain in force.

Sub-Issue 3.1: Recruiting and Hiring

Sub-Issue Description
    Ensuring that there is a highly qualified teacher in every 
classroom is critical to improving education in the VI and to complying 
with Federal education requirements. Through this Agreement, the VI 
will address the human capital issue in the immediate, short, and long 
terms. In the immediate term, the VI will develop a policy for class 
coverage that ensures that adults are supervising every classroom at 
all times that students are present. In the short term, the VI needs to 
determine how many highly qualified teachers they currently have in the 
schools and how many they need, and develop a plan to hire or otherwise 
engage the services of the teachers or other qualified personnel that 
they need over each of the next three school years and beyond. In the 
longer term (although these actions are not covered under this 
Compliance Agreement), the VI will create initiatives to encourage 
young people to take up teaching as a career and to prepare them for 
such careers.
    The VI will re-engineer its hiring process so that teachers and 
related personnel can be moved into the schools quickly, and receive 
their first paycheck on a reasonable time schedule.
    In December 2001, VI staff members identified action steps to 
address recruiting and hiring concerns. However, the VI needs to 
consider a much fuller range of options for getting qualified teachers 
and related personnel into classrooms, and it must do so quickly. 
Students cannot easily regain educational opportunities lost to them 
for each year that they do not have a qualified teacher.
Performance Measures for Issue 3.0 and 3.1
    1. VIDE will immediately implement its expedited hiring authority 
and use the authority in hiring qualified teaching staff.
    2. VI will develop hiring goals and priorities for five years by 
March 31, 2003.
    3. VI will meet its hiring goals for the 2003-2004 school year.
    4. VI will meet its hiring goals for the 2004-2005 school year.
    5. In the 2002-2003 school year and beyond, there will be no 
instances of classes or students without adult supervision.
    6. By the beginning of the 2003-2004 school year, all newly 
recruited staff will be deployed within one month of acceptance of an 
employment offer and will receive their first paycheck within one month 
of starting work (with respect to Special Education, the terms of the 
MOA shall apply.)
Action Steps Required

[[Page 60214]]



------------------------------------------------------------------------
           Year 1                    Year 2                Year 3
------------------------------------------------------------------------
1. By OCTOBER 31, 2002, the   1. VI will meet its   1. VI will meet its
 VI will develop policies      hiring goals for      hiring goals for
 and procedures for class      the 2003-2004         the 2004-2005
 coverage (i.e., by using      school year. In       school year. In
 substitute teachers,          addition to the       addition to the
 administrators,               items set forth in    items set forth in
 supervisors, principals,      the ``Reporting       the ``Reporting
 etc.), in the event that a    Requirements''        Requirements''
 teacher is unable to be in    section of this       section of this
 the classroom when students   Agreement,            Agreement,
 are present.                  quarterly reports     quarterly reports
                               will also include     will also include
                               each person's date    each person's date
                               of hire, date of      of hire, date of
                               entry into the        entry into the
                               personnel system,     personnel system,
                               date of arrival on    date of arrival on
                               the job, and the      the job, and the
                               date of receipt of    date of receipt of
                               first paycheck. The   first paycheck. The
                               report should         report should
                               include contact       include contact
                               information for       information for
                               each new hire so      each new hire so
                               that the Department   that the Department
                               staff can confirm     staff can confirm
                               the personnel data    the personnel data
                               reports with staff    reports with staff
                               members.              members.
2. By DECEMBER 31, 2002, the  2. By the beginning
 VI will determine the         of the 2003-2004
 percentage of classes         school year, the VI
 conducted by highly           will have
 qualified teachers as         implemented a
 defined in The No Child       process to re-
 Left Behind Act of 2001.      engineer its
                               personnel system
                               and related payroll
                               process so that all
                               new staff hired for
                               education programs
                               can be deployed to
                               classrooms within
                               one month of being
                               hired and receive
                               their first
                               paycheck within one
                               month of starting
                               work.
3. By DECEMBER 31, 2002,
 VIDE will establish a plan
 to increase recruitment of
 specialized personnel, such
 as speech pathologists,
 physical therapists,
 occupational therapists,
 etc. VIDE will prepare and
 work with VIDH to establish
 a memorandum of agreement
 between VIDH and VIDE to
 jointly recruit and share
 needed specialized
 personnel, such as speech
 pathologists, physical
 therapists, occupational
 therapists, etc. The terms
 of such agreement need not
 require that either agency
 share personnel during any
 periods of time when either
 of the agencies is fully
 utilizing all of its
 personnel in order to meet
 the needs of the infants,
 toddlers, or children with
 disabilities as required
 under Federal law and the
 sharing of personnel would
 cause one of the agencies
 to be out of compliance.
4. By DECEMBER 31, 2002, the
 VI will determine how many
 highly qualified teachers
 it needs per program to
 employ to achieve the goal
 of having a qualified
 teacher in every classroom
 within 5 school years. In
 determining the number of
 teachers it needs, the VI
 will ensure ratios
 comparable to similar sized
 school districts for the
 (1) average number of
 students per teacher, (2)
 average number of
 administrators per student,
 and (3) percentage of
 Federal dollars spent
 directly for classroom
 instruction and related
 expenses. In addition, the
 VI will assign priorities
 to the types of teachers
 needed. For example, based
 on the previous Compliance
 Agreement, special
 education programs are
 currently an immediate
 priority for filling
 vacancies. As another
 example, high school
 teachers are also an
 immediate priority so that
 the VI high schools can
 regain accreditation.
5. By MARCH 31, 2003, and
 based on the total number
 of qualified teachers
 needed over five years and
 the priorities for types of
 vacancies to fill first,
 the VI will set specific
 goals for employing
 qualified teachers in
 specific classrooms each
 year. The yearly goal
 should equal 20% of the
 total number of qualified
 teachers needed within 5
 years (i.e., yearly goal =
 total  qualified
 teachers needed over 5
 years/5).

[[Page 60215]]

 
6. By APRIL 30, 2003, VI
 will develop an action plan
 to revise as necessary the
 action steps to improve the
 hiring process, including
 the use of current
 legislative authority for
 VIDE to bypass the
 personnel office, and
 expedite the hiring process.
7. The VI will work with the
 Board of Education to
 expedite the teacher
 certification process,
 including alternative
 certification approaches.
8. The VI will work with the
 Board of Vocational
 Education to expedite
 setting standards for
 teacher certifications,
 including alternative
 certification approaches.
------------------------------------------------------------------------

Sub-Issue 3.2: Inadequate Time Accounting and Supplanting

Sub-Issue Description
    VIDE currently cannot adequately demonstrate that employees paid 
out of Federal education funds are performing work in the programs they 
are paid to support. This is especially an issue where employees split 
their time between Federal and other programs, or between more than one 
Federal program. Supplanting is also an issue, which involves, simply 
stated, using Federal funds to pay for personnel that the State should 
pay. The time and attendance accounting issue is one that will be 
integrated across all management systems. Planning will determine which 
employees will work in which programs and for how much time. Budgeting 
will ensure that funds are appropriately available, and financial 
management and accounting systems will ensure that funds are 
appropriately spent and accounted for. Human resource information 
systems will be able to accurately reflect and report how employees 
spent their time. Although this issue is covered here, with other human 
capital issues, it is important that plans and actions to address the 
problem be developed and implemented at a systemic level and integrated 
with other management systems.
    The objectives of addressing this issue are to ensure that (1) the 
salaries of employees who work under more than one Federal program are 
properly allocated among those programs, in accordance with accurate 
time distribution records, and (2) that Federal funds are not paying 
for personnel that the State should pay.
Performance Measures for Issue 3.2
    1. By March 30, 2003, all payroll registers will reflect the 
appropriate percentage split of time for staff funded by Federal 
programs.
    2. By the final year of the Compliance Agreement, all time and 
attendance records will be computer-based and accurate.
    3. By the final year of the Compliance Agreement, audits will find 
no instances of supplanting.
Action Steps Required
    The following items were developed by VI staff at the December 2001 
planning session and are presented here as action steps for inclusion 
in the plan to be developed under Action Step 1, Year 1 below.
Time Distribution
     Develop a policy & procedure in the assignment of time 
distribution percentage utilizing OMB Circular A-87. Make systematic 
adjustments as required.
     Establish process to manage Quarterly Fluctuations to 
ensure adequate allocation of time distribution and employee 
certifications.
     Conduct Job Analysis to determine allocations.
     Policy and procedures created.
     Policy approved and distributed.
     Pre-audit test to determine compliance and adjustments 
needed.
     Training and implementation of time distribution policy 
and procedure.
     Ensure that the Department and Department of Interior 
(DOI) approve the system and all related forms.
     Accounting system will be changed to permit quarterly 
adjustment between budgeted and actual effort.
     The Department and DOI will approve PAR and semi-annual 
certification forms.
     Target an area selected for a pilot.
     Train employees and supervisors in the target area.
     Implement the program in the pilot area piloted and 
evaluate it.
     Revise training and forms and accounting program based on 
the pilot evaluation.
     Phase in other areas.
Time and Attendance
     Review and record current procedures relative to the 
documentation of time and attendance within VIDE to identify 
inconsistent applications of procedures.
     Analyze result of review and recommend changes and/or 
improvements to current process to ensure the proper retrieval of time 
and attendance documents.
     Activate system enhancement program to scan source 
document and payroll records to minimize record bulk and to facilitate 
the location of time and attendance documents and make recommendations 
regarding system upgrade for VI government.
     Implement conversion to enhance system that will guarantee 
adequate documentation over employee time and attendance. (VIDE--Pilot 
Programs)
Supplanting
     Meeting/training between OMB, VIDE, the Department and 
auditors on specific program issues to identify maintenance of effort 
requirements and funding levels. Identify which positions are paid from 
which fund. Define basic service levels and optional programs in order 
to prevent supplanting issues.
     Develop policy and procedures in accordance with OMB 
Circulars that would ensure that positions paid out of Federal funds 
would not reveal instances of supplanting.
     Provide training regarding the implementation of 
procedures.
     Implement policy.

[[Page 60216]]



------------------------------------------------------------------------
           Year 1                    Year 2                Year 3
------------------------------------------------------------------------
1. By March 30, 2003, the VI  1. The time and       1. Management
 will submit a revised plan    attendance            reports showing all
 to address issues related     accounting plan       staff members paid
 to time and attendance        will be implemented   with Federal funds
 accounting and supplanting.   by March 30, 2004.    and the
 The plan will specifically                          distribution of
 state how the time and                              their time by
 attendance accounting                               funding source will
 procedures will be                                  be submitted to the
 integrated with program                             Department
 related budgeting,                                  quarterly.
 financial management,
 planning, and personnel
 processes. At a minimum,
 the system will (1) be
 computer-based and
 territory-wide, (2)
 allocate time and
 attendance to specific
 programs, (3) ensure that
 maintenance of effort and
 supplanting prohibitions in
 each statute are met and
 (4) personnel records are
 properly archived and
 readily accessible. As part
 of the plan, the VI will
 benchmark other States'
 (such as Florida) systems
 and develop a time and
 attendance system that can
 accurately reflect time
 distribution across various
 programs.
2. By September 30, 2002,     2. Management
 the VI will develop an        reports showing all
 accurate list of employees    staff members paid
 whose time is paid in any     with Federal funds
 part with Federal education   and the
 funds. The list will          distribution of
 identify each employee and    their time by
 the percentage of his/her     funding source will
 time that is paid for by      be submitted to the
 each Federal program. The     Department
 list will be provided to      quarterly for the
 the Department and to each    duration of the
 supervisor of staff whose     Compliance
 time is so paid.              Agreement beginning
                               for the quarter
                               ending June 30,
                               2004.
3. By September 30, 2002,
 each supervisor of staff
 whose time is paid with
 Federal funds will inform
 the staff member about how
 his/her time is to be
 allocated and accounted
 for. The supervisor and the
 staff member will both sign
 a document that clearly
 states the time allocation
 for the staff member. A
 copy of each document will
 be provided to the
 Department as part of the
 first Compliance Agreement
 quarterly report.
------------------------------------------------------------------------

Issue 4.0: Property Management and Procurement

Issue Description
    Procurement and property management are related issues that result 
in students, and teachers not having the supplies and equipment that 
they need. Procurement is a problem because the process takes 
significant time and vendors have not been paid in a timely manner. As 
a result, vendors have been unwilling to do business with the VI, 
resulting in an inability to obtain needed supplies and equipment for 
students and teachers. Property management is a concern because 
purchased items do not get to classrooms in a timely manner, if at all. 
Property cannot be effectively tracked and may remain in warehouses, be 
delivered to incorrect locations, or be stolen rather than benefiting 
students and teachers in classrooms. The VI will develop and implement 
effective procurement and property management policies and systems that 
ensure (1) delivery of ordered inventory within specified timeframes 
for type of supply and location of vendor, (2) payment to vendors 
within 30 days of invoice receipt, (3) delivery of supplies and 
equipment, that have been tagged and entered into a tracking system, to 
classrooms within 3 days of inventory receipt, and (4) security of 
property and supplies.

Sub-Issue 4.1: Property Management

Sub-Issue Description
    The VI needs to improve its property inventory and repair/
maintenance system. This is a major reason that classrooms are under 
equipped. Also, better security measures are needed to prevent the 
theft of vehicles, supplies and equipment. Through this Compliance 
Agreement, VI's manner of managing inventory will be such that items 
purchased with Federal program funds can be tracked, are distributed 
timely, and are used for the benefit of students. This system will 
comply with Federal regulations, to include tagging and tracking of 
inventory and prompt delivery of property purchased with Federal funds 
to the appropriate location, so that items may be used for the purposes 
of the program under which they were purchased. The inventory policy 
will include an established procedure for replacement or payback of any 
items in the inventory that cannot be located, consistent with Federal 
regulations. In addition, the inventory policy and system will ensure 
that the Property and Procurement, Finance, and Education Departments 
act as an integrated team on procurement issues. They will delineate 
between responsibilities of individual Departments (including at the 
local and State levels), ensure efficiency and eliminate duplication of 
effort, and make provisions for emergency needs to ensure students' 
health and safety. At a minimum, the inventory management system will 
reflect when items are ordered, when ordered items arrive, when items 
are logged into the system, and when they are delivered to the intended 
location. In addition, the VI will ensure that inappropriate use of 
equipment (for example, vehicles or computers) is penalized and that 
the Department is reimbursed when equipment damage results from such 
use.

[[Page 60217]]

Performance Measures for Issue 4.0 and 4.1
    1. The VI will provide the Department with an inventory policy and 
implementation plan of the inventory management system by June 30, 
2003.
    2. The VI will take immediate action to the extent possible to 
secure all property, in warehouses, schools, and other locations from 
larcenous behavior or inappropriate or unauthorized use. By June 30, 
2003, the VI will complete all reasonable steps to secure all property, 
in warehouses, schools, and other locations from larcenous behavior or 
inappropriate or unauthorized use.
    3. An inventory policy and system will be fully implemented by 
December 30, 2004. The policy and system will include that all property 
purchased with Federal program funds will be tagged, entered into a 
tracking system, and delivered to the appropriate location within 3 
calendar days of receipt.
    4. By March 31, 2005, all unaccounted-for items will either be 
returned to their intended locations, or their full value will be 
reimbursed to the Department.
    5. By the end of the second year of the Compliance Agreement, the 
inventory management system will reflect minimal losses due to theft.
    6. By the end of the Compliance Agreement, audits will show minimal 
unaccounted-for property.
Action Steps Required
    In December 2001, VI staff members identified the action steps and 
timelines listed below to address inventory management issues. The 
table below provides further required action steps.
     Issue memorandum from the Governor setting deadline and 
priority for all Departments to comply with WIN ASSETS Personal 
Property Inventory System.
     VIDPP to issue supplemental guidance memorandum setting 
default values.
     VIDPP to provide technical support for WIN ASSET SYSTEM.
     Determine and seek funding for human and other resources 
needed to establish, maintain, inspect, test and reconcile data in WIN 
ASSETS System.
     Determine individual departmental compliance with WIN 
ASSETS Personal Property Inventory System implementation deadline. By
     Convert individual Department inventories to WIN ASSETS 
format (where necessary) and upload departmental data to VIDPP system. 
By
     VIDPP to conduct meetings with individual Departments 
about the process for maintaining government-wide inventories on the 
WIN ASSETS system.
     VIDPP to issue Inventory Management Procedures Manual. 
(Establishes ongoing procedures and timing for reporting acquisitions 
and dispositions--point at which assets are added to inventory, 
mandatory minimum fields for data entry, tagging and tracking assets, 
reconciling physical inventories to departmental purchase orders.) 
Ongoing.
     Department of Finance to provide quarterly record of 25600 
capital outlay expenditure reports.
     VIDPP to reconcile FMS expenditures to WIN ASSETS 
inventory acquisitions quarterly.
     VIDPP to conduct on site tests and tagging of personal 
property inventories submitted by individual Departments. Ongoing.
     VIDPP MIS to periodically upload departmental inventories, 
analytically review data base for various governmental purposes and to 
test accuracy, modify program for departmental and program needs, 
maintain codes and data classification for changes in legislation and 
governmental reorganizations. Ongoing and quarterly.
     VIDPP to conduct training on WIN ASSETS and inventory 
procedures for designated individuals from all Departments.

------------------------------------------------------------------------
           Year 1                    Year 2                Year 3
------------------------------------------------------------------------
1. The VI will revise the     1. By December 31,
 steps and timelines of the    2003, the VI will
 plan above as they deem       begin collecting
 necessary and provide the     data on items
 Department with an            purchased with
 inventory policy and          Federal funds from
 implementation plan of the    ED. On March 30,
 inventory management system   2004 and every six
 by June 30, 2003. The VI      months thereafter
 will benchmark other          until the
 States' inventory             conclusion of the
 management policies and       Compliance
 systems, or engage a          Agreement, the VI
 consultant, to ensure that    will provide the
 their planned policy and      Department with
 system will deliver           management reports
 intended results and that     that show, at a
 their implementation time     minimum, all items
 lines are reasonable.         ordered, when the
                               items were ordered,
                               when ordered items
                               arrive, when the
                               items were logged
                               into the system,
                               and when the items
                               were delivered to
                               the intended
                               locations.
                               Documents to verify
                               the management
                               reports, including
                               copies of equipment
                               and supply orders,
                               vendor delivery
                               statements,
                               tracking data, and
                               signed receipts
                               showing delivery to
                               schools, will
                               accompany the
                               management reports
                               until the
                               Department deems
                               that such
                               verification data
                               are no longer
                               necessary..
2. By June 30, 2003, the VI   2. Within three
 will secure all property,     months after full
 in warehouses, schools, and   deployment of the
 other locations from          new inventory
 larcenous behavior or         management system
 inappropriate or              (and no later than
 unauthorized use. Such        December 31, 2004),
 steps will include            the VI will provide
 controlling access to         the Department with
 school buildings, property    a list of items
 supply houses, and official   paid for with
 vehicle parking lots, and     Federal funds that
 controlling and tracking      are not in service
 access to specific            in classrooms
 equipment. The VI may wish    (i.e., lost,
 to benchmark inventory        stolen, or
 security procedures with      improperly deployed
 other States, or to engage    items).
 a contractor to supply or
 consult on security issues.

[[Page 60218]]

 
                              3. Within 6 months
                               after full
                               deployment of the
                               new inventory
                               management system
                               (and no later than
                               March 31, 2005),
                               the VI will (1)
                               return improperly
                               deployed, lost, or
                               stolen items to
                               their intended
                               locations as
                               possible, (2)
                               provide the
                               Department with a
                               report of items and
                               their values that
                               are still not
                               properly in service
                               in intended
                               locations, and (3)
                               reimburse the
                               Department for the
                               items that have not
                               been returned
                               properly to
                               service. The VI may
                               wish to post a lost
                               property notice in
                               media outlets, and/
                               or offer rewards
                               for information
                               leading to return
                               of property.
                              4. The inventory
                               management system
                               will be fully
                               implemented by
                               December 30, 2004.
------------------------------------------------------------------------

Sub-Issue 4.2: Competitive Procurement (Improved Process)

Sub-Issue Description
    The current competitive procurement and contract process takes too 
long and does not ensure that vendors (contractors) for school services 
are hired and are paid on time. The VI will develop a new competitive 
procurement policy and process that ensures that school services, 
supplies, equipment and other necessary resources are provided and in 
classrooms when they are needed. The policy and process will also 
ensure that vendors are paid within 30 days of invoice receipt. In 
addition to the items noted above, the procurement management process 
will include procedures for flexible, timely contractual arrangements, 
sole source contracts, contract closeout activity, including receipt of 
goods certification, contracts release, and review of final payment.
    In December 2001, VI staff developed the time lines listed in the 
table below for procurement, vendor payments, and delivery of supplies 
or equipment to end users. The procurement policy and process will 
ensure that the time lines are met in all instances by the conclusion 
of the Compliance Agreement
Procurements
     Department of Education from central supply sources in 2 
days--1 week.
     On island purchases < $5,000 in 2 weeks.
     On island purchases > $5,000 in 3 weeks after receipt by 
the Department of Property and Procurement.
     Off island purchases < 3-4 weeks after receipt by the 
Department of Property and Procurement.
     Off island delivery of purchased items < 2 months.
Payment of Invoices
     Payment of invoices after receipt of acceptable goods or 
services in 20--30 days.
Delivery of Supplies or Equipment
     Delivery of received items to school, activity center, or 
school district in 3 days from receipt.
Performance Measures for Issue 4.2
    1. The VI will provide the Department with a procurement policy and 
implementation plan of the procurement management process by June 30, 
2003.
    2. A procurement policy and process will be fully implemented by 
September 30, 2004.
    3. By September 30, 2003, the VI will revise the system of 
requiring 3 bids for each and every item submitted on a requisition to 
reduce the time needed to obtain required items to meet the procurement 
time lines noted above.
    4. By September 30, 2003, the VI will develop and maintain a short-
term emergency by-pass authority/option for items that cost less than 
$10,000.
    5. By the conclusion of the Compliance Agreement, the VI will 
receive all procurements purchased with Federal education program funds 
within the timeframes listed in the table above.
    6. By the conclusion of the Compliance Agreement, the VI will pay 
vendors for all procurements related to education program within 30 
days of receipt of the vendor's invoice.
Action Steps Required
    In December 2001, VI staff members identified the following action 
steps and timelines to address competitive procurement issues and to 
meet the timelines listed in the table above.
     Flow chart new process.
     List key players and produce directory.
     Convene working committee meetings (all stakeholders). 
Monthly and ongoing.
     Develop effective document transmittal process, 
standardized forms, system changes specified, record retention policy, 
competition requirements, vendor certification and representations 
including eligibility, responsibilities redefined, personnel analysis, 
and reallocation recommendation.
     Prepare new government policies, procedures, and 
regulations.
     Review and approval of new policies, procedures and 
regulations.
     Distribute and provide orientation to stakeholders on new 
policies, procedures, and regulations.
     Establish improved interagency communication and 
commitment.
     Hire needed personnel.
     Train all stakeholders and responsible personnel.
     Build accountability and timelines into personnel system.
     Pilot implementation of new policies, procedures, & 
regulations.
     Full implementation of new policies, procedures & 
regulations.
     Fully automate requisition, purchase order, and contract 
writing process.
     Conduct periodic process review, identifying deficiencies 
and implementing continuous improvement actions. Ongoing.
     Full and effective implementation of new process. Ongoing.
     Establish review protocol for contracts such that VIOG and 
VIDJ review only selected contracts.

[[Page 60219]]



------------------------------------------------------------------------
           Year 1                    Year 2                Year 3
------------------------------------------------------------------------
1. The VI will revise the     1. The procurement    1. VI's procurement
 steps and timelines of the    management process    policy and process
 December 2001 plan as they    will be fully         will meet the time
 deem necessary and provide    implemented by        lines for
 the Department with a         September 30, 2004.   procurement, vendor
 procurement policy and                              payments, and
 implementation plan of the                          delivery of
 procurement management                              supplies or
 process by September 30,                            equipment to end
 2003.                                               users by the
                                                     conclusion of the
                                                     Compliance
                                                     Agreement.
2. At the start of the        2. By June 30, 2003,
 Compliance Agreement, the     the VI will revise
 VI will begin collecting      the system of
 data on items procured for    requiring 3 bids
 education programs to         for each and every
 develop baseline measures     item submitted on a
 of the procurement process.   requisition to
                               reduce the time
                               needed to obtain
                               required items to
                               meet the
                               procurement time
                               lines noted above.
                              3. By June 30, 2003,
                               the VI will develop
                               and maintain a
                               short-term
                               emergency by-pass
                               authority/option
                               for items that cost
                               less than $10,000.
------------------------------------------------------------------------

    The parties agree to faithfully carry out the terms of this 
compliance agreement as set forth above.

For the U.S. Virgin Islands:

Dated: September 5, 2002.
--------------/s/--------------
Noreen Michael, PhD
Commissioner, Department of Education

Dated: September 6, 2002.
--------------/s/--------------
Mavis L. Matthew, MD, MPH
Commissioner, Department of Health

Dated: September 5, 2002.
--------------/s/--------------
Bernice A. Turnbull
Commissioner, Department of Finance

Dated: September 4, 2002.
--------------/s/--------------
Ira Mills
Director, Office of Management and Budget

Dated: September 6, 2002.
--------------/s/--------------
Marc A. Biggs
Commissioner, Department of Property and Procurement

Dated: September 4, 2002.
--------------/s/--------------
Joanne U. Barry
Director, Division of Personnel

Dated: September 6, 2002.
--------------/s/--------------
Jorge A. Galiber, M.D.
Virgin Islands Board of Education

Dated: September 6, 2002.
--------------/s/--------------
Eddie Williams
Virgin Islands Board of Vocational Education

Dated: September 6, 2002.
--------------/s/--------------
Charles W. Turnbull
Governor of the Virgin Islands

Approved as to legal sufficiency at the V.I. Department of Justice:

Dated: September 3, 2002.
--------------/s/--------------
Iver A. Stridiron
Attorney General
For the U.S. Department of Education:

Dated: September 23, 2002.

Office of the Chief Financial Officer
--------------/s/--------------
Jack Martin,
Chief Financial Officer

Office of Special Education and Rehabilitative Services
--------------/s/--------------
Robert H. Pasternack, PhD
Assistant Secretary

Office of Vocational and Adult Education
--------------/s/--------------
Carol D'Amico,
Assistant Secretary

Office of Elementary and Secondary Education
--------------/s/--------------
Susan B. Neuman, EdD
Assistant Secretary

Office of English Language Acquisition, Language Enhancement, and 
Academic Achievement for Limited English Proficient Students
--------------/s/--------------
Maria Hernandez Ferrier, EdD
Director
[FR Doc. E7-20847 Filed 10-22-07; 8:45 am]
BILLING CODE 4000-01-P