[Survey Report on Expenditures Claimed Against the Federal Emergency Management Agency's Community Disaster Loan to the Government of the Virgin Islands]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 98-E-98

Title: Survey Report on Expenditures Claimed Against the Federal
       Emergency Management Agency's Community Disaster Loan to
       the Government of the Virgin Islands

Date: November 12, 1997

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V-GR-NDI-002-97

United States Department of the Interior

OFFICE OF INSPECTOR GENERAL
 Washington, D.C. 20240
             

SURVEY REPORT

Honorable Roy L. Schneider
Governor of the Virgin Islands
No. 21 Kongens Gade
Charlotte Amalie, Virgin Islands 00802

Subject:  Survey Report on Expenditures Claimed Against the Federal Emergency
Management Agency's Community Disaster Loan to the Government of the
Virgin Islands (No. 98-E-98)

Dear Governor Schneider:

This report represents the results of our survey of expenditures claimed against the
Community Disaster Loan that was issued by the Federal Emergency Management Agency
(FEMA) as a result of Hurricane Marilyn. The objective of the review was to determine
whether the Government: (1) was using Disaster Loan funds in accordance with FEMA laws
and regulations and (2) was maintaining adequate supporting documentation for claims made
against the Disaster Loan.

BACKGROUND

On September 15, 1995, Hurricane Marilyn struck the Virgin Islands, causing extensive
damage to public and private facilities. As a result, the President of the United States issued
a major disaster declaration, which allowed FEMA to provide disaster assistance in
accordance with the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Public
Law 100-707). Under the Act, the Government of the Virgin Islands was eligible to apply
for a Disaster Loan.

According to the Code of Federal Regulations (44 CFR 206), which contains the policies and
procedures to be followed in implementing the Stafford Act, a Disaster Loan may be made
to "any local government which has suffered a substantial loss of tax and other revenues as
a result of a major disaster and which demonstrates a need for Federal financial assistance in
order to perform its governmental functions." The Code further states that the amount of the

Disaster Loan is "based on need, not to exceed 25 percent of the operating budget of the local
government for the fiscal year in which the disaster occurs." The Code also states that
repayment of all or any part of a Disaster Loan may be canceled to the extent "that revenues
of the local government during the 3 fiscal years following the disaster are insufficient to meet
the operating budget of that local government because of disaster-related revenue losses and

 
additional unreimbursed disaster-related municipal operating expenses. "I The Code requires
that Disaster Loan funds disbursed to the local government which have not been canceled be
repaid, including accrued interest against the outstanding principal.

In October 1995, the Government of the Virgin Islands initially applied for Disaster Loan
funds of $119 million and, in February 1996, based on a revised annual operating budget,
amended its application to $140 million. In June 1996, FEMA approved a maximum loan
amount of $127 million. As of December 1996, FEMA had obligated $85.6 million, and the
Government of the Virgin Islands had drawn down $85 million of the obligated amount. The
Government said that it used the funds for payroll expenditures ($69.5 million), allotments
to the University of the Virgin Islands ($8.9 million), and expenditures of the Department of
Tourism ($6.6 million).

SCOPE OF SURVEY

The survey was conducted under a cooperative agreement between the Department of the
Interior's Office of Inspector General and FEMA's Office of Inspector General and included
a review of Disaster Loan receipts and disbursements that occurred from July to December
1996. The survey was conducted, from February through April 1997, by auditors from the
Department of the Interior and FEMA at the Virgin Islands Office of Management and
Budget, the Departments of Finance and Tourism, and the University of the Virgin Islands,
all on St. Thomas.

Our review was conducted in accordance with the "Government Auditing Standards," issued
by the Comptroller General of the United States. Accordingly, we included such tests of
records and other auditing procedures that were considered necessary under the
circumstances.

As part of our review, we evaluated the Government's ability to comply with FEW laws and
regulations and to provide adequate supporting documentation to FEMA for expenditures
claimed against the Disaster Loan. The weaknesses identified during the review are discussed
in the Results of Survey section of this report. Our recommendations, if implemented, should
improve the internal controls in these areas.

PRIOR AUDIT COVERAGE

In April 1996, an independent public accounting firm, on behalf of FEMA, issued the report
"Review of the U. S. Virgin Islands' Application for Cancellation of Community Disaster Loan
84 1 23. " The report contained findings related to the Government's request for cancellation
of the $50.1 million Community Disaster Loan awarded in September 1990 as a result of
Hurricane Hugo. The report concluded that the Government was eligible for a loan

"incurred for general government purposes, such as police and fire protection, trash collection,
collection of
revenues, maintenance of public facilities, flood and other hazard insurance, and other expenses
normally budgeted
for the general fund."

2

 
cancellation in the amount of $18.2 million. In January 1997, FEMA increased the loan
cancellation amount to $21 million.  Therefore, the Government was responsible for
repayment to FEMA for the uncanceled principal amount of $29.1 million plus related
interest.

In June 1996, the Department of the Interior's Office of Inspector General issued the survey
report "Financial Reporting System for the Federal Emergency Management Agency's
Community Disaster Loan to the Government of the Virgin Islands" (No. 96-E-966). The
report concluded that the Government's financial management system did not adequately
track receipts and disbursements made against the Community Disaster Loan issued to the
Government as a result of Hurricane Hugo. Therefore, according to the report, supporting
documentation had to be obtained from individual departments and agencies of the
Government. The report recommended that: (1) specific cost centers be established within
the Government's financial management system for each category of cost to be charged to
any future Disaster Loan and (2) agencies separately accumulate expenditure vouchers and
other documentation in support of costs charged to the cost centers.  Although the
Government's Director of Management and Budget concurred with the report's two
recommendations and provided sufficient information to have the recommendations
considered resolved and implemented, our current review disclosed that the corrective actions
were not fully implemented.

RESULTS OF SURVEY

We found that the Government of the Virgin Islands used Disaster Loan funds for the
purposes for which the Loan was requested, specifically for operating expenses of the
University of the Virgin Islands (an independent instrumentality of the Government) and the
Department of Tourism (a cabinet-level agency of the Government), and for general
government payroll expenses. However, the Government's Department of Finance did not
establish and use separate accounting records within its financial management system to
provide an audit trail for Disaster Loan funds received and disbursed. In addition, the
University of the Virgin Islands and the Department of Tourism received a total of
$15.5 million in Disaster Loan funds but were not notified by the Government's Office of
Management and Budget or the Department of Finance of the specific source of the funds or
of the requirement to account for and use the Disaster Loan funds in accordance with
established requirements. The requirements to account for and use Disaster Loan funds are
contained in Title 44, Part 206, of the Code of Federal Regulations; U.S. Office of
Management and Budget Circular A- 102, "Uniform Administrative Requirements for Grants
and Cooperative Agreements With State and Local Governments"; the promissory note
executed in June 1996 between FElLlIA and the Government; and the Government's own
"Procedural Guidelines. " As a result, adequate accounting records were not maintained to
show how Disaster Loan funding of $15.5 million paid to the University of the Virgin Islands
and the Department of Tourism was used. Accordingly, there was little assurance that the
$15.5 million would be eligible for cancellation under the provisions of FEMA regulations.
In addition, the Government earned about $21,700 in interest on Disaster Loan funds but did
not remit this interest to FEMA.

 
Loan Criteria

Title 44, Part 206, of the Code of Federal Regulations states that Disaster Loan funds may
be used to carry on existing local government functions of a municipal operating character
or to expand such functions to meet disaster-related needs. The Code also states that Disaster
Loan funds are not to be used to finance capital improvements or to repair or restore
damaged public facilities. Further, according to the Code, neither the Disaster Loan nor any
canceled portion of the Disaster Loan is to be used as the non-Federal share of any Federal
program, and each local government with an approved Disaster Loan is responsible for
establishing the necessary accounting records, consistent with its financial management
system, to account for Disaster Loan funds received and disbursed and to provide an audit
trail.

Based on the Government's "Procedural Guidelines," which were established in accordance
with the promissory note to track Disaster Loan funds, the Government's Department of
Finance was responsible for the following: (1) establishing a "separate non-interest bearing

bank account for all deposits, disbursements, and transfers" associated with the Disaster
Loan; (2) posting Disaster Loan revenue and expenditure accounts on the financial
management system; (3) transferring funds from the Disaster Loan expenditure accounts to
the various operating accounts of the Government; and (4) generating a report for each
"check run2 to summarize the disbursements, by fund and expenditure type, made against the
Disaster Loan. In addition, according to the "Procedural Guidelines," the Government's
Office of Management and Budget was required to submit a quarterly budget report to FEMA
based on a projected "cash needs assessment."

Based on the promissory note with FEMA, the Government was eligible to receive funds and
to claim unreimbursed disaster-related expenses during fiscal years 1996, 1997, and 1998.

Expenditure Issues

From July to December 1996, the Government used the Disaster Loan funds for payroll
($69.5 million), allotments to the University of the Virgin Islands ($8.9 million), and
expenditures of the Department of Tourism ($6.6 million). We concluded that, on an overall
basis, these funds were used for the purposes for which the Loan was requested. However,
the Government's Office of Management and Budget and the Department of Finance did not
provide detailed instructions to recipients of Disaster Loan funds regarding record-keeping
requirements and uses of the funds.

   Payroll.  The Government used Disaster Loan funds from each of the five
drawdowns, totaling $69.5 million, for payroll expenditures. Although the Department of

2As part of the Government's "Procedural Guidelines," the Department of Finance's Accounting
Division was
responsible for generating a report of checks issued. The report would have provided check detail
information to
FEMA and would have summarized disbursements by fund (Federal versus local) and by
expenditure type (capital
outlay versus operating expense). This report is generally referred to as a "check run."
                                        -

4

 
Finance's Acting Director of the Treasury was able to provide us with summary computer
printouts to justify the need for the $69.5 million to cover payroll expenditures of the
Government, a complete accounting, including all documents and records to support the
payroll expenditures, had not been compiled. Therefore, we conducted a payroll analysis in
order to verify that amounts transferred from the "separate non-interest bearing bank account"
to the General Fund Statement Savings Account were reasonable for amounts used for
payroll. To perform this analysis, we reviewed the payroll account, the Payroll Warrant
Registers, the Check Register of Deductions, the Direct Deposit Register, and the social
security and health insurance payments. Based on these records, we concluded that the
amounts of Disaster Loan funds which were transferred to the General Fund Statement
Savings Account and then to the payroll account were reasonable for the amounts claimed
for payroll.

We believe that the Acting Director of the Treasury should separately document all payroll
records in support of amounts claimed against the Disaster Loan and separately maintain
those records for FEMA review in the event that the Government applies for cancellation of
the Disaster Loan.

   University of the Virgin Islands. The University received a total of $8.9 million in
Disaster Loan funds. However, University officials said that they were not notified by Office
of Management and Budget or Department of Finance officials that the funds received were
proceeds from the Disaster Loan. Accordingly, University officials said that they were
unaware of the requirements for the accounting and use of the Disaster Loan funds, as
contained in the Code of Federal Regulations, the promissory note, and the Government's
"Procedural Guidelines." University officials said that they accounted for the Disaster Loan
funds as a normal allotment from the Government and therefore deposited the funds into the
University's operating account. The University did not make any effort to segregate the
Disaster Loan funds or to maintain adequate supporting documentation for the use of the
funds.

University officials were able to provide documents which showed that the Government had
not paid allotments to the University in a consistent and sufficient manner and that, as of
March 1997, the Government owed the University $11.6 million in unpaid allotments.
University officials said that, as a result, they borrowed about $6.5 million from January to
October 1996 from a "restricted" account to carry on the University's normal operations and
therefore considered the $8.9 million in Disaster Loan funds as a reimbursement to their
"restricted" account. In lieu of a specific account for the use of the Disaster Loan funds, the
University provided us with payroll records for fiscal year 1996, which totaled $16.2 million,
to justify the need for $8.9 million in payroll costs.

In an April 1997 letter to the Acting Commissioner of the Department of Finance, the
University's Vice President for Business and Financial Affairs requested that the University
be advised, in writing, when the Government uses Disaster Loan fknds for the operations of
the University.

 
  Department of Tourism. The Department received a total of $6.6 million in Disaster
Loan funds. Departmental officials said that the Government's Office of Management and
Budget and Department of Finance officials did not notify them of the source of the funds or
the requirements for the accounting and use of the Disaster Loan funds. Therefore, according
to the officials, the Department did not segregate the receipt of the Disaster Loan funds ($6.6
million) from funds collected for hotel occupancy taxes ($8.1 million for fiscal years 1996 and
1997 through March), of which both funds were deposited into the Tourism Advertising
Revolving Fund. The Department also did not segregate expenditures and accompanying
supporting documentation for claims made against the Disaster Loan funds. Accordingly,
there was little assurance that the expenditures shown in supporting documents provided to
us by the Department were paid exclusively from proceeds of the Disaster Loan.

However, we did review Miscellaneous Disbursement Vouchers, invoices, and copies of
canceled checks provided by the Department in support of the $6.6 million in Disaster Loan
funds. Based on this review, we determined that the Department did not always immediately
use the funds in accordance with the cash management requirements of Circular A-102 and
the intent of the FEMA program. Specifically, Circular A-102 states that in order to apply

proper "cash management," the "grantee must make drawdowns as close as possible to the
time of making disbursements" in order to minimize the "time elapsing between the transfer
of funds from the U. S. Treasury and disbursement by grantees. " In addition, FEMA program

personnel told us that the intent of Disaster Loans was to provide immediate cash to local
governments in order for them to carry on their normal operations and that drawdowns
should represent the governments' immediate needs for cash. Instead, the Department spent

loan funds for invoices dated up to 4 months before and after the receipt of the funds. For
example, the Department received $4.1 million in January 1997 and claimed expenditures
incurred against invoices that were dated from September 1996 to May 1997. Based on
Circular A-l 02 and FEMA's stated intent, we believe that the Government should have
provided the Department of Tourism with funds on a periodic (such as monthly) basis
sufficient to meet immediate cash needs.

The Deputy Director and Associate Director of the Government's Office of Management and
Budget stated that, while departments and agencies of the Government were briefed on
documentation requirements for the Public Assistance Program,3 there were no formal
briefings for agencies (such as the Department of Tourism) and independent instrumentalities
(such as the University) that received Disaster Loan funds. Accordingly, we believe that both

the University of the Virgin Islands and the Department of Tourism should compile
documents in support of amounts received from the Disaster Loan and separately maintain
those documents for FEMA's review in the event that the Government applies for
cancellation of the Disaster Loan.

the Stafford Act to State and local governments or certain private, nonprofit organizations other than
assistance for
the direct benefit of individuals and families."

6

 
Drawdown Issues

From July to December 1996, FEMA obligated $85.6 million of the $127 million approved
Disaster Loan. During that same time period, the Government made five drawdowns, totaling
$85 million, from the obligated amount. We concluded that, except for the Department of
Tourism transactions discussed previously and Drawdowns Nos. 2 and 5, as discussed below,
the Government properly performed the drawdown process and requested funds that were
commensurate with cash needs.

   Drawdown No. 2. On July 17, 1996, the Government drew down $21 million. On
July 22, 1996, the $21 million was transferred to the General Fund Statement Savings
Account. On July 18, 1996, the Government issued a check to the University of the Virgin
Islands for $5.5 million from the General Fund. On July 23, 1996, the Government
transferred $13 million from the General Fund Statement Savings Account to its payroll
account to cover payroll expenditures that were paid on July 18, 1996. Government officials
said that the Government used the remaining $2.5 million for the Department of Tourism:
$2 million issued to the Department in a check dated August 6, 1996, and the remaining
$500,000 by August 16, 1996. Therefore, we conservatively estimated that from July 22,
1996, until the $2 million and $500,000 transfers were made to the Department of Tourism
on August 6 and August 16, respectively, the Government earned approximately $2,700 while
the Disaster Loan funds remained in the General Fund Statement Savings Account (an
interest-bearing account). In accordance with Circular A-102, interest earned on Federal
grants is to be remitted to the grantor agency.

   Draw-down No. 5. On December 23, 1996, the Government drew down $27 million
and, on December 27, transferred the $27 million to the General Fund Statement Savings
Account. On January 2, 1997, the Government transferred $12.3 million from the General
Fund Statement Savings Account to its payroll account to cover payroll expenditures that
were paid on that date. On the same date, the Government issued a check to the University
of the Virgin Islands for $3.4 million. In addition, by separate transactions on January 16
and 17, 1997, the Government transferred a total of $12.4 million ($7.2 million of which
apparently represented Disaster Loan funds4) from the General Fund Statement Savings
Account to its payroll account to cover payroll expenditures that were paid on January 16,
1997. Finally, on January 22, 1997, the Government transferred $4.1 million from the
General Fund Statement Savings Account to the Tourism Advertising Revolving Fund.

Based on our analysis, we concluded that, of the $27 million, the Government used
$3.4 million for the University of the Virgin Islands, $4.1 million for the Department of
Tourism, and the remaining $19.5 million for payroll. We believe that the entire $27 million

"A total of $19.8 million ($12.3 million for payroll expenditures on January 2, 1997; $3.4 million
for the University
of the Virgin Islands on January 2, 1997; and $4.1 million for the Department of Tourism on January
22, 1997)
was specifically charged against the Disaster Loan funds of $27 million that were transferred to the
General Fund
Statement Savings Account on December 27, 1996. Therefore, we believe that the $12.4 million
transferred
to the payroll account on January 16 and 17, 1997, consisted of the $7.2 million remaining balance
of the Disaster
Loan funds and $5.2 million from other funds in the savings account.

7

 
should not have been drawn down at one time or transferred in total to the General Fund
Statement Savings Account because those actions violated the cash management requirements
of Circular A-102. The Circular states, "Agency methods and procedures for transferring
funds shall minimize the time elapsing between the transfer to recipients of grants and
cooperative agreements and the recipient's need for the funds." The Circular also states that
grantees are to "promptly, but at least quarterly, remit interest earned on advances to the
Federal agency. " As a result of placing the $27 million in the General Fund Statement
Savings Account (an interest-bearing account), we conservatively estimated that the
Government earned interest of approximately $19,000 for the periods of time that the
Disaster Loan funds remained in the interest-bearing account.

The Acting Director of the Treasury Division confirmed that Drawdown No. 5 was not
handled in the same manner as the other drawdowns and agreed that the Government
improperly drew down cash in excess of its immediate needs. Therefore, the Government
should remit to FEMA the $21,700 in interest earned on the Disaster Loan funds.

Compliance Issues

Although the Government appropriately established a "separate non-interest bearing bank
account" for the receipt of drawdowns, as specified in both the promissory note and the
Government's "Procedural Guidelines," it did not comply with other requirements contained
in the promissory note and the "Procedural Guidelines." Specifically, the Department of
Finance did not post transactions to Disaster Loan revenue and expenditure accounts and post
transfers from the Disaster Loan expenditure accounts to the operating accounts because
separate cost centers were not set up on the Government's financial management system for
all of the cost categories to be charged to the Disaster Loan (see Prior Audit Coverage) and
the cost centers that were set up were not always used by the Government officials initiating
the transactions. In addition, the Department of Finance did not generate a report for each
"check run," which would have summarized the disbursements, by fund and expenditure type,
made against the Disaster Loan. Furthermore, the Government's Office of Management and
Budget did not submit quarterly budget reports, which would have included detailed revenue
and expenditure information pertaining to the Disaster Loan, to FEMA.

Recommendations

We recommend that the Governor of the Virgin Islands instruct the Director of Management
and Budget, in his capacity as the Governor's Authorized Representative, to ensure that:

   1. Departments and agencies of the Government, in accounting for Disaster Loan
funds, comply with Title 44, Part 206, of the Code of Federal Regulations; U. S. Office of
Management and Budget Circular A-l 02; the promissory note; and the Government's own
"Procedural Guidelines." In that regard, departments and agencies should take the following
actions:

      -  Establish the necessary accounting records to account for Disaster Loan funds
received and disbursed and to provide an audit trail.

8

 
      -  Minimize the time elapsing between the transfer of funds from the U. S. Treasury
and the disbursement of funds by the grantee.

Submit required quarterly budget reports to FEMA.

      -  Account for the receipt, transfer, and expenditure of Disaster Loan funds through
the Government's financial management system.

  2. Government agencies and independent instrumentalities separately accumulate
expenditure vouchers and other documentation in support of costs paid from Disaster Loan
funds and maintain those records for FEMA review in the event the Government elects to file
for cancellation of the Disaster Loan.

    3. Disaster Loan funds are kept in a "separate non-interest bearing bank account"
until they are spent.

4. The $21,700 in interest earned on Disaster Loan funds is remitted to FEMA.

    5. Departments and agencies of the Government are notified when they receive
Disaster Loan funds and that they are cognizant of the laws and regulations governing the
record-keeping requirements and uses of Loan funds.

Governor of the Virgin Islands Response and Office of Inspector General
Reply

The September 25, 1997, response (Appendix 2) to the draft report from the Governor of the
Virgin Islands concurred with the five recommendations and indicated that corrective actions
had been or would be taken. Based on the response, we consider Recommendation 3
resolved and implemented and request additional information for Recommendations 1, 2, 4,
and 5 (see Appendix 3).

Additional Comments on Report

The response to the draft report from the Governor of the Virgin Islands stated that the
Government concurred with our findings and recommendations with the following exception:

"In addition, the University of the Virgin Islands and the Department of
Tourism received a total of $15.5 million in Disaster Loan funds but were not
notified by the Governments' Office of Management and Budget or the
Department of Finance of the source of the funds or of the requirements to
account for and use the Disaster Loan funds in accordance with established
requirements. As a result, adequate accounting records were not maintained
to show how Disaster Loan Funding of $15.5 million paid to the University
of the Virgin Islands and the Department of Tourism was used. Accordingly,
there was little assurance that the $15.5 million would be eligible for

9

 
cancellation under the provision of FEMA [Federal Emergency Management
Agency] Regulation. "

To support its exception to this statement, copies of memoranda that the Office of
Management and Budget sent to the University and the Department of Tourism regarding this
issue were provided with the response (Attachment to Appendix 2).

The December 3 1, 1996, memorandum to the University's Vice-President of Business and
Financial AfjZairs states, "The Governor instructed [the Commissioner] of the Department of
Finance to release $4.0 million to the University of the Virgin Islands by Thursday afternoon,
January 2, 1997. " The memorandum further states:

The Chief Executive will review the resources, after FEMA's response in
January, and determine amounts to be transferred to the V.I. Government.
Should resources permit, another $4.0 million would be transferred to [the
University].

However, although the memorandum cites FEMA funding, it does not specifically state that
the $4.0 million to be transferred to the University by January 2, 1997, was from Disaster
Loan funds and does not provide the University with any instructions as to how the funds
should be accounted for to comply with FEMA requirements..

The January 8, 1997, memorandum to the Commissioner of Finance (with a copy to the
Commissioner of Tourism) states, "This confirms my discussion on December 30, 1996 with
the Governor and his authorization to release $4.1 million, of recently received FEMA
funding of $27.1 million, to the Tourism Revolving Fund to help defray obligations of that
fund." Although the memorandum to the Commissioner cites FEMA funding, it also does not
specifically state that the $4.1 million to be transferred to the Department of Tourism was
from Disaster Loan funds, and it does not provide the Department with any instructions as
to how the funds should be accounted for to comply with FEMA requirements.

Further, during our audit, we specifically asked key officials at the University of the Virgin
Islands and the Department of Tourism whether they knew that the amounts which were
transferred to their respective agencies were Disaster Loan funds and whether they received
special instructions on how to account for these funds.  In all instances, these officials
responded that they did not know that the amounts were from Disaster Loan funds and were
not instructed on how to account for these funds. Therefore, we believe that the statement
in our Results of Survey section accurately presents the facts.

The Inspector General Act, Public Law 95-452, Section 5(a)(3), as amended, requires
semiannual reporting to the U.S. Congress on all audit reports issued, the monetary impact
of audit findings (Appendix l), actions taken to implement audit recommendations, and
identification of each significant recommendation on which corrective action has not been
taken.

10

 
In view of the above, please provide a response, as required by Public Law 97-357, to this
report by December 12, 1997. The response should be addressed to our Caribbean Regional
Office, Federal Building - Room 207, Charlotte Amalie, Virgin Islands 00802. The response
should include the information requested in Appendix 3.

We appreciate the assistance of personnel of the the Virgin Islands Office of Management and
Budget, the Departments of Finance and Tourism, and the University of the Virgin Islands
in the conduct of our audit.

- _   ilma A. Lewis s'
Inspector General
Department of the Interior

Inspector General
Federal Emergency Management Agency

11

 
APPENDIX 1

CLASSIFICATION OF MONETARY AMOUNTS

Finding Area

Funds To Be Put
To Better Use

Drawdown Issues:

Interest Earned                    $21,700*

* This amount represents Federal funds.

12

 
APPEEIlIX 2
Page 1 of 5

THE UNITED STATES VIRGIN ISLANDS

OFFICE OF THE GOVERNOR
   GOVERNMENT HOUSE
Charlotte Amalie, V.I.00802
    809-774-0001

September 25, 1997

Mr. Arnold van Beverhoudt, Jr.
Director of Insular Area Audits
Department of Interior
Ofike of the Inspector General
Caribbean Region
Room #207 Federal Building
St. Thomas, U.S.V.I. 00802

Re: Draft Survey Report V-GR NDI-002-97 Expenditures Claimed
against the Federal Emergency Management Agencies' Community
Disaster Loan to the Government of the Virgin Islands.

The Government of the Virgin Islands, after a review of Draft Survey Report Agreement
WGRNDI -002-97, concurs with stated findings and recommendation's except as outlined
below: page 3, second paragraph - Result of Survey

"In addition, the University of the Virgin Islands and the Department of Tourism received a
total of $15.5 million in Disaster Loan Funds but were not notified by the Governments'
Office of Management and Budget or the Department of Finance of the source of the funds
or of the requirements to account for and use of the Disaster Loan Funds in accordance
with established requirements.  As a result, adequate accounting records were not
maintained to show how Disaster Loan Funding of $15.5 million paid to the University of
the Virgin Islands and the Department of Tourism was used. Accordingly, there was little
assurance that the $15.5 million would be eligible for cancellation under the provision of
FEMA Regulation."

Attached copies of letter to the Commissioner of Tourism and to the Vice-President of the
University of the Virgin Islands show that each agency was advised of the source of
funding.   Additionally,  the following responses  apply to similarly numbered
recommendations.

1. The Office of Management and Budget, through its Federal Grants Management Unit,
will develop standard language to be incorporated in any document awarding Federal
Funds to government and non-government agencies, in order to ensure compliance with
federal regulations and government procedural guidelines.

The Office of Management and Budget will advise the Department of Tourism and the
University of the Virgin Islands to accumulate and/or reconstruct records justifjring the use
of all finds provided them from the Community Disaster Loan.

13

 
APPENDIX 2
Page 2 of 5

Mr. Arnold van Beverhoudt, Jr.
September 25, 1997
Page two

2.  The Office of Management will direct all government agencies and instrumentalities to
separately accumulate expenditures and other documentation of costs paid from disaster
loan knds.

3.  The Territory has already established a separate non-interest bearing acco
FEMA Funds will be deposited.

4.  The Virgin Islands Department of Finance will issue a check to the Federa
Management Agency in the amount of $21,700 for interest earned on funds.

5.  See Item no. 1.

Sincerely,

unt in which

1 Emergency

Govern?-

fgo243
attachments

14

 
  .e+                         .-
      GOVERNMENT OF      .
THE V;RGIN ISLANDS OF THE UNITED STATES   APPENDIX 2
                    Page 3 of 5

OFFICE OF MANA6iMENT AND BUD6ET

# 41 NORRE GADE

EMANCIPATION GARDEN STATION, 2ND FLOOR          (eos) 7744750
CHARLOTTE AMALIE, ST. THOMAS, V.I. oo802        FAX: (809) n&o069

January 8, 1997

MEMORANDUM

To . .
From:

Acting Commissioner, Department of Finance

Director, Office of Management and Budget

Subject:   Authorization to Release $4.1 Million to Tourism Revolving Fund

This confirms my discussion on December 30, 1996 with the Governor and his
authorization to release $4.1 million, of recently received FEMA funding of $27.1
million, to the Tourism Revolving Fund to help defray obligations of that fund.

Your Assistant Director of Accounting attended this meeting and was so advised.

Th&
Nellon L. Bowry
Director

NLB/IRM/urb

PC . .

Commissioner Designate Whisonant, Department of Tourism
Deputy Director, OMB
Assistant Director of Accounting, Department of Finance
Director of Administration and Management, Department of Tourism
               ,

15

 
.   APPENDIX 2

GOVERNMENT OF

Page 4 of 5

THE VIRGIN ISLANDS OF THE UNITED STATES

A

OFFICE OF MANACEMENT AND BUDGET

          # 41 NORRE GADE
EMANCIPATION GARDEN STATION, 2ND FLObR
CHARLOTTE AMALlE, ST. THOMAS, V.I. 00802

   (809) 774-0750
FAX: (809) 776-0069

December 3 1, 1996

MEMORANDUM:

To .
  .

Mr. Malcolm Kirwan,
Vice-President of Business & Financial Affairs, UVI

From:

Mr. Ira Mills, Deputy Director

,

Subject:

Meeting with Governor on December 31,1996

This memo is to confirm a common understanding of the results of a meeting between the
Governor and ourselves regarding funding for the University of the Virgin Islands.

1. The Governor instructed Mr. Centeno of the Department of Finance to release $4.0
million to the University of the Virgin Islands by Thursday afternoon, January 2,
  1997.

The Chief Executive will review the resources, after FEMA's response in January,
and determine amounts to be transferred to the V.I. Government. Should resources
                                 4                         w
permit, another $4.0 million would be transferred to UVI. Additionally, should
Casino related revenues be available then some consideration will be given to funding
the opening of the new St. Croix Facility.

The Governor committed to making available at least $1.7 million per month to
enable UVI to cover its payroll.         _. - i.

16

 
APPENDIX 2
Page 5 of 5

Memo to Vice-President, Bus. & Financial Affairs, UVI
January 16,1997
Page -2.

4. OMB will coordinate with the Department of Finance on the quarterly allotments to
UVI so that UVI will be informed as the likely month in the quarter that payment will
be made to the university.

Ira R. Mills
Deputy Director

IRM/urb
BA5645

pc: Director, OMB

Acting Commissioner, Department of Finance
Assistant Director of Accounting, Department of Finance

17

 
APPENDIX 3

STATUS OF AUDIT REPORT RECOMMENDATIONS

Finding/Recommendation
  Reference

Status

1

Management
concurs;
additional
information
needed.

2 and 5

Management
concurs;
additional
information
needed.

Implemented.

Management
concurs;
additional
information
needed.

Action Required

Provide a target date for developing
standard language to be incorporated into
documents awarding Federal funds to
Governmental  and  non-Governmental
agencies. When completed, a copy of the
standard language should be provided to our
Caribbean Region Office.

Provide a target date for advising the
Department of Tourism and the University
of the Virgin Islands to accumulate records
justifying the use of Disaster Loan funds
and for advising all Governmental agencies
to separately accumulate expenditure and
other documents of costs paid from Disaster
Loan funds. When completed, copies of the
communications with the agencies should be
provided to our Caribbean Region Office.

No further action is required.

Provide a target date for issuing a check in
the amount of $21,700 to FEMA for
interest earned on Disaster Loan funds.
When completed, copies of documents
supporting such issuance should be provided
to our Caribbean Region Office.

18

 
ILLEGAL OR WASTEFUL ACTIVITIES
    SHOULD BE REPORTED TO
THE OFFICE OF INSPECTOR GENERAL BY:

Sending written documents to:              Calling:

Within the Continental United States

U.S. Department of the Interior
Office of Inspector General
1849 C Street, N.W.
Mail Stop 5341
Washington, D.C. 20240

Our 24.hour
Telephone HOTLINE
l-800-424-508 1 or
(202) 208-5300

TDD for hearing impaired
(202) 208-2420 or
l-800-354-0996

Outside the Continental United States

Caribbean Region

U.S. Department of the Interior
Office of Inspector General
Eastern Division - Investigations
1550 Wilson Boulevard
Suite 410
Arlington, Virginia 22209

(703) 235-9221

North Pacific Region

U.S. Department of the Interior
Office of Inspector General
North Pacific Region
238 Archbishop F.C. Flores Street
Suite 807, PDN Building
Agana, Guam 96910

(700) 550-7428 or
COMM 9-011-671-472-7279

 
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