[Audit Report on Administrative Functions, Territorial Court of the Virgin Islands]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 98-I-669

Title: Audit Report on Administrative Functions, Territorial Court
       of the Virgin Islands

Date:  September 9, 1998




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U.S. Department of the Interior
Office of Inspector General






AUDIT REPORT


ADMINISTRATIVE FUNCTIONS,
TERRITORIAL COURT
OF THE VIRGIN ISLANDS

REPORT NO. 98-I-669
SEPTEMBER 1998






MEMORANDUM


TO:               The Secretary

FROM:             Richard N. Reback
                  Acting Inspector General

                  SUBJECT SUMMARY:Final Audit Report for
                  Your Information - "Administrative
                  Functions, Territorial Court of the Virgin
                  Islands" (No. 98-I-669)


Attached for your information is a copy of the subject final
audit  report.  The objective of the review was to determine
whether  the  Territorial  Court  of  the Virgin Islands (1)
effectively assessed, collected, and controlled revenues for
which  it  was  responsible  and  (2)  expended   funds   in
accordance with applicable laws, rules, and regulations.

We  found  that  the Territorial Court had made improvements
since  our  1990  audit   report   in   carrying   out   its
administrative   functions,   primarily   with   regard   to
controlling overtime.  However, additional improvements were
needed  in  the  areas  of revenue collections, procurement,
expenditure control, and property management.  Specifically,
differences  between  collections   and  deposits  were  not
reconciled,  funds  held in trust for bail  bonds  were  not
disbursed in a timely  manner,  expenditures  from  internal
checking accounts were not controlled, procurements were not
made  competitively,   employees  did not account for travel
advances, personal long-distance telephone  calls  were made
but   not   paid  for,  and  equipment  was  not  adequately
controlled.   These  deficiencies occurred because the Court
did not provide sufficient  oversight  of its employees, did
not  implement  adequate  procedures,  or  did  not  enforce
existing  procedures.  As a result, bail bonds  of  $130,000
had not been disbursed to the appropriate third parties, and
funds of $70,752  in  internal checking accounts and regular
operating funds of $8,590  were  used for improper purposes.
In  addition,  there  was little assurance  that  the  Court
received the best prices  for  goods and services purchased;
the Court was not reimbursed for  an undetermined amount for
personal telephone calls and for travel advances of $13,100;
and the potential existed for property  to  be lost, stolen,
or otherwise unaccounted for.

The report contained eight recommendations to  address these
conditions.   Based  on  the  response,  we  considered  one
recommendation    resolved    and    implemented   and   six
recommendations unresolved.  Also based  on the response, we
requested additional information for one recommendation.

If  you  have any questions concerning this  matter,  please
contact me  at   (202)  208-5745  or Mr. Robert J. Williams,
Assistant Inspector General for Audits, at (202) 208-4252.

Attachment






AUDIT REPORT                                 V-IN-VIS-001-98



Honorable Verne A. Hodge
Presiding Judge
Territorial Court of the Virgin Islands
Post Office Box 70
St. Thomas, Virgin Islands  00804


Subject:  Audit Report on Administrative Functions,
          Territorial Court of the Virgin Islands (No. 98-I-669)

Dear Judge Hodge:


This   report   presents   the  results  of  our  review  of
administrative    functions,    primarily    revenues    and
expenditures, of the Territorial Court of the Virgin Islands
during fiscal years 1996 and 1997.   The  objective  of  our
audit  was  to  determine  whether the Territorial Court (1)
effectively assessed, collected, and controlled revenues for
which  it  was  responsible  and   (2)   expended  funds  in
accordance with applicable laws, rules, and regulations.

BACKGROUND

The judicial power of the U.S. Virgin Islands is vested in a
court  of local jurisdiction known as the Territorial  Court
of the Virgin  Islands,  which  was established in September
1976 by Act No. 3876.  The Court was given full jurisdiction
over local civil cases in 1991 and  full  jurisdiction  over
local  criminal cases in 1994.  The Court has two divisions:
one for  operations on St. Thomas and St. John and the other
for operations  on St. Croix.  The Court has six judges, who
are appointed by  the  Governor, with the advice and consent
of  the  Legislature,  for   6-year  terms.   One  judge  is
designated by the Governor as  the  Presiding  Judge  of the
Court.  The Court Administrator has oversight authority  for
the  formulation  and  implementation  of  all  policies and
procedures for the conduct of the Court's business and deals
directly with budget, accounting, and court security issues.
The Clerk of the Court is responsible for oversight  of  the
day-to-day  operations  of  the Court's Civil, Small Claims,
Family,  Juvenile,  Probate,  Conciliation,   Criminal,  and
Traffic  Divisions,  including  the cashiers, marshals,  and
court reporters.

As of October 1997, the Court had  261  employees.  However,
at the exit conference on May 28, 1998, the  Presiding Judge
stated  that  the  Court  had  57  vacancies, including  key
financial management, procurement, and  personnel management
positions,  which affected the Court's operations  in  these
administrative areas.  The Court's operating budgets totaled
$11.7 million  in  fiscal  year  1996  and  $15.7 million in
fiscal year 1997.  Actual expenditures totaled $11.6 million
in fiscal year 1996 and $14.6 million in fiscal  year  1997.
The  Court  collects  traffic  fines  assessed by the Police
Department and various fees and fines assessed  directly  by
the  Court  and deposits those collections into the Treasury
of the Government  of the Virgin Islands.  These collections
totaled $1.1 million in fiscal year 1996 and $1.3 million in
fiscal year 1997.  The Court is exempt from the requirements
of Title 31, Chapter  23,  of the Virgin Islands Code, which
relates to procurements.  However,  its internal procurement
rules  and  regulations  require  the  use   of  competition
whenever "feasible and warranted."

SCOPE OF AUDIT

The  scope of the audit, which was performed from  September
1997 to  January  1998,   included  a  review of revenue and
expenditure transactions that occurred during  fiscal  years
1996 and 1997.  We also reviewed the controls over equipment
purchased during those fiscal years.

Our  review  was made, as applicable, 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 internal controls
over the assessment,  collection,  and  deposit of revenues;
the   expenditure   of   budget   allotments;  and   related
administrative  functions.   The  review  did  not  disclose
significant   weaknesses  related  to  payroll   processing.
However, we found  internal  control  weaknesses  related to
revenue  collections,  procurement  and  property management
functions,  and  other administrative functions,  which  are
addressed in the Results  of  Audit  section of this report.
Our recommendations, if implemented, should improve controls
in these areas.

PRIOR AUDIT COVERAGE

In August 1990, the Office of Inspector  General  issued the
audit  report  "Administrative Operations of the Territorial
Court of the Virgin  Islands"  (No.  90-93), which concluded
that actions were needed to improve controls  over  (1)  the
approval  of overtime; (2) the recording and safeguarding of
personal property;  (3)  the  collection  and  recording  of
fines,   penalties,   and   other   receipts;  and  (4)  the
disbursement  of trust account funds.   Our  current  review
disclosed that  deficiencies  in  the  areas of collections,
property management, and disbursement of  trust  funds still
existed.

RESULTS OF AUDIT

The Territorial Court has made improvements since  our  1990
audit  report  in carrying out its administrative functions,
primarily with regard  to  controlling  overtime.   However,
additional  improvements were needed in the areas of revenue
collections,  procurement, expenditure control, and property
management.  Specifically,  we  found  that  (1) differences
between  collections  and deposits were not reconciled,  (2)
funds held in trust for  bail  bonds were not disbursed in a
timely  manner,  (3)  expenditures  from  internal  checking
accounts were not controlled, (4) procurements were not made
competitively, (5) employees  did  not  account  for  travel
advances,  (6)  personal  long-distance telephone calls were
made but not paid for, and  (7) equipment was not adequately
controlled.    Governmentwide  procedures   for   processing
collections  are  contained  in  the  Government  Accounting
Manual issued by the Department of Finance, and policies and
procedures for  controlling  bail bonds and for procurement,
travel,  property  management,  and   other   administrative
functions  are contained in the Court's internal  procedures
manuals.  The  deficiencies  occurred  because the Court did
not provide sufficient oversight of its  employees,  did not
implement  adequate  procedures,  or  did  not enforce these
procedures.  Also, duties were not segregated,  and physical
inventories  of  property were not conducted.  As a  result,
bail bonds of $130,000,  some  held for as long as 35 years,
had not been disbursed to the appropriate third parties, and
funds of $70,752 in internal checking  accounts  and regular
operating  funds  of $8,590 were used for improper purposes.
In addition, there  was  little  assurance  that  the  Court
received  the  best prices for goods and services purchased;
the Court was not  reimbursed for an undetermined amount for
personal telephone calls and for travel advances of $13,100;
and the potential existed  for  property to be lost, stolen,
or otherwise unaccounted for.

Revenue Collection

The Court has five cashiers (including  a head cashier), who
are responsible for the daily collections  of  traffic fines
(which are deposited into the Road Fund); Court fees, fines,
and  penalties  (which  are  deposited into the Government's
General   Fund  or  various  special   funds);   and   funds
representing  small  claims,  bail  bonds,  civil judgments,
executions, garnishments, trusts, and miscellaneous  actions
(which are deposited into the Court's internal Miscellaneous
Account).  The Court uses its own computer-generated cashier
receipts  and  daily  summaries to record daily collections.
The bank deposit slip forms  (formally  titled "Certificates
of  Deposit")  used  by  the  Court  are  provided   by  the
Department  of  Finance,  and  daily  deposit information is
typed onto the forms by the Court's head cashier.

Although  the  Government  Accounting Manual  requires  that
Government cashiers deposit all collections on a daily basis
and reconcile daily collections  to daily deposits, we found
two instances, totaling $1,125, in  which  the amounts shown
on  the  daily deposit slips and on the daily  summaries  of
cash  receipts   and  the  official  cashier  receipts  were
different.   For  example,   we   found  that  although  the
St. Thomas cashier's daily summary of collections for August
6, 1997, showed that $25 was collected,  $475  was deposited
on that date.  We were unable to determine the source of the
additional $450 that was deposited.  We also noted  that the
word  "VOID"  was  not  written  across  the face of cashier
receipts that were listed as "voided" on the  daily  summary
of  collections.   Further, the file copies of seven cashier
receipts  for  April  30,   1997,  representing  collections
totaling $200, were missing and  could  not  be  located  by
officials  at  either the Court or the Revenue Audit Section
of the Department  of  Finance.  Although the responsibility
for reconciling collections  and  deposits  was delegated to
the head cashier, we believe that verification  of  the head
cashier's work by the Clerk of the Court would minimize  the
types of discrepancies disclosed by our review.

Regarding  the  physical  security  of collections, we found
that  the  collection  area at the Court's  offices  on  St.
Thomas was properly safeguarded.   However,  at  the Court's
offices  on  St. Croix, the door to the collection area  was
not kept locked,  allowing unrestricted entry into the area.
For example, we observed noncashier employees and employees'
family members entering  and  leaving  the  collection area.
When we told Court officials about the inadequate  security,
the  Assistant  Court  Administrator issued a memorandum  to
collection  personnel directing  them  to  ensure  that  the
collection  area  was  kept  locked  and  that  unauthorized
personnel were not permitted access.  At the Court's offices
on St. John,  we  found that daily deposits ranging from $25
to $600 were not properly  protected because a night deposit
bag and a security escort were  not  always available to the
cashier at the time of the evening deposits.

The  Court  should  establish  procedures  to  require  that
reconciliations  of collections and  deposits  are  prepared
daily by the head  cashier  and periodically reviewed by the
head  cashier's  supervisor,  voided  receipts  are  clearly
marked, and all receipts (including  those  that are voided)
are accounted for in numerical sequence.  Additionally,  the
Court  should attempt to reconcile the $1,125 in differences
that we  identified between collections and deposits, locate
the missing receipts for collections made on April 30, 1997,
and provide  adequate  security  to  the cashier on St. John
when making the daily evening deposits.

Internal Checking Accounts

The Court maintains four internal checking  accounts,  which
are referred to as the Miscellaneous, Utility, Jury Fees and
Expense,  and  Petty  Cash Accounts.  The Utility, Jury Fees
and Expense, and Petty  Cash  accounts  are  funded  through
quarterly allotments from the Government and are used to pay
specific operating expenses of the Court.  The Miscellaneous
Account  is  a  revolving account in which monies from small
claims, bail bonds,  civil  judgments,  execution  of  court
orders, garnishments, trusts, and miscellaneous actions  are
deposited  for  subsequent distribution based on the outcome
of court cases.

      Miscellaneous  Account.   We  found that the Court did
not  reimburse  payers  of  cash bail bonds  that  were  not
forfeited, even though the Court's  Procedures Manual states
that cash bail bonds should be disbursed  to  the  bondee or
bondsman upon ascertaining the status of the related  cases.
Based  on  our  review  of  the  Miscellaneous  Account,  we
determined  that  cash  bail  bonds totaling $130,000, which
were received by the Court during  the  periods  of  1963 to
1975  and  1980  to  1987 (as long as 35 years ago), had not
been appropriately disbursed.   This  occurred  because  the
Court  did  not  have adequate procedures to ensure that the
appropriate Court officials were informed of the disposition
of   cases   so  that  bail   bonds   could   be   disbursed
appropriately.   A  Court  official  also  told  us that the
existing  process  for  determining the status of cases  was
"too time consuming."

We also found that the Court  improperly  used  $47,000 from
the Miscellaneous Account for operating expenses  that  were
not  related  to  court cases.   In March and August 1997, a
total of $24,500 was paid from the Miscellaneous Account for
the  purchase  of  airline  tickets  to  be  used  by  Court
employees for official  travel.   In  June  1997, $2,500 was
used  to  pay  for  the  college  tuition  of a Presidential
Scholar who was sponsored by the Court as part  of  a  youth
crime  prevention  program.  Additionally, in February 1997,
$20,000 was transferred  from  the  Miscellaneous Account to
pay  for the Court's utility expenses.   These  expenditures
were not  detected  because  the  same  Court  official  who
maintains the Miscellaneous Account was also responsible for
certifying,  authorizing, and approving all payment vouchers
and for signing  the  checks.  A key element of an effective
system of internal controls  is  the  segregation of duties,
such  as  approving  expenditures  and  making   the  actual
disbursements,  among  different employees.  The segregation
of duties reduces the risk  of  errors,  waste,  or wrongful
acts and increases the potential for detecting such  acts if
they occur.

The  expenditures  of $47,000 from the Miscellaneous Account
should be reimbursed  to that  account because funds in that
account  are  held  in trust  for  parties  in  cases  being
processed  by the Court.   Additionally,  the  Court  should
establish procedures  to  ensure  that  bail bonds and other
trust funds held in the Miscellaneous Account  are disbursed
in a timely manner and attempt to locate the individuals  to
whom  the  $130,000  in pending amounts should be disbursed.
Further, the Court should  establish  procedures  to  ensure
that  there  is  proper  segregation  of  duties between the
individuals responsible for approving expenditures  and  the
individuals  responsible for issuing checks from the Court's
internal accounts.

      Utility  Account.   The  Court  used  funds of $23,000
allocated  for payment of its regular utility  expenses  for
other obligations.   Specifically,  the $23,000 was used for
rental  of  equipment; supplies for cleaning,  photocopiers,
the  jury deliberation  room,  and  hurricane  preparedness;
professional  membership  and  conference registration fees;
hotel  expenses;  printing;  postage,   freight,  and  other
delivery charges; laundry services; and other  miscellaneous
goods   and   services   needed   for  the  Court's  regular
operations.  As with the Miscellaneous Account, expenditures
from the Utility Account were approved  and disbursed by the
same Court official.  The $23,000 disbursed  for  nonutility
purposes should be reimbursed to the Utility Account.

        Petty  Cash  Account.  During fiscal years 1996  and
1997, the Court used a  total  of  $752  from the Petty Cash
Account  to  (1) purchase personal items (such  as  birthday
cards, floral  arrangements, wreaths, and savings bonds) for
employees and their  family  members;  (2) purchase food for
office   functions;   and   (3)   make   various  charitable
contributions. The Petty Cash Vouchers used  to  record  the
payments  from  the  Petty Cash Account contain the notation
that "goods and/or services  were  purchased  in  accordance
with  applicable  rules  and  regulations."   However, Court
officials said that there were no specific criteria  for the
use  of  money  in  the  Petty  Cash  Account.  In generally
accepted business practices, petty cash  funds  are  used to
pay  for  small  business-related  expenses  for  which  the
preparation  of  a  formal  voucher  and issuance of a check
would  be too expensive and time-consuming.   Therefore,  we
believe  that  these  expenses should have been paid through
voluntary  donations by  the  Court's  employees   (see  the
section "Procurement"  in  this  report).   The Court should
establish  procedures  to  define  the types of expenditures
that can be made from the Petty Cash Account.

At the exit conference on May 28, 1998, Court officials said
that disbursements for general operating  expenses were made
from  the  Court's  internal  checking accounts  because  of
delays  by  the  Department  of  Finance  in  paying  vendor
invoices  from  the  Court's  General   Fund   appropriation
accounts.   Court  officials  also  stated that $27,000  had
already  been  reimbursed to the Miscellaneous  Account  and
that the other amounts  discussed  in  the  report  would be
reimbursed  to  the  Miscellaneous,  Utility, and Petty Cash
Accounts.

Procurement

The  Court  is exempt by Title 31, Section  232(1),  of  the
Virgin  Islands   Code  from  the  procurement  requirements
contained in Title  31,  Chapter  23, of the Code.  However,
the  Court's  Property and Procurement  Manual  states  that
"purchases shall  be  made  on  a competitive basis whenever
feasible and warranted, including  competitive negotiation."
The  Manual  also  requires that a record  be  kept  of  all
written   submissions    and   telephone   negotiations   or
discussions with competitive  suppliers.  However, the Court
did  not  always  keep  such  records  to  document  whether
competitive proposals or price quotations were obtained.

We selected for review a random  sample  of  63 requisitions
and  284  miscellaneous disbursement vouchers for  purchases
made by the  Court's  St.  Thomas/St.  John  and  St.  Croix
Divisions  during  fiscal  years  1996 and 1997.  Of the 347
procurement  documents  reviewed,  we   found  that  for  60
purchases,  totaling  $238,000,  the Court used  "confirming
orders," which  means that the orders  were  placed with the
vendors  before  the formal requisitions or purchase  orders
were prepared and approved.  For example, on August 8, 1996,
the Court purchased  printing  services at a cost of $2,320.
However, the appropriate purchase  document was not prepared
until  October  1,  1996.   In generally  accepted  business
practices, a formal purchase  order is used to establish the
specifics of the goods or services  being acquired, the cost
and method of payment, and other provisions  to  protect the
interests  of  the  purchaser and the vendor.  However,  the
Court's practice of acquiring  goods  and services without a
purchase order and preparing "confirming orders" to document
the purchases after-the-fact weakens internal  controls over
expenditures  by  allowing Court employees to acquire  goods
and  services  without  proper  authorization.   Unlike  the
procurement  regulations   applicable  to  the  Government's
Executive  Branch (Title 31,  Section  234,  of  the  Virgin
Islands Code),  the  Court's Property and Procurement Manual
does require that purchases be made "by written order."

We  also  found  four  instances,   totaling  $8,590,  where
miscellaneous disbursement vouchers were used to acquire and
pay for personal items, such as savings bonds, photo albums,
and floral arrangements, to be presented to Court employees.
In our opinion, except for items presented  to  employees as
part of an established employee incentive awards program, it
is inappropriate to use Government funds for gifts  or other
presentations  to  employees  or  members of their families.
Such   presentations   should   be   funded   by   voluntary
contributions from the Court's employees.

The Court should establish procedures to require the use and
documentation of competitive procurement  practices, control
the  use of "confirming orders," and  restrict  the  use  of
Government  funds  for  employee-related  gifts that are not
part of a formal employee incentive awards program.

Travel Advances

The  Court's  Personnel  Manual requires that  all  official
travel   be   authorized   in  writing   on   a   Government
Transportation Request form and that, upon completion of the
authorized travel, the traveler  submit  a summary of travel
expenses.   However, we reviewed documents  related  to  354
trips (both within  and outside the Virgin Islands) taken by
Court employees during  fiscal  years  1996  and  1997.   We
found,  for  280  of  the  354  trips  reviewed, that travel
expense  forms had not been prepared and  submitted  by  the
travelers.    Additionally,  10  travel  advances,  totaling
$13,100, remained outstanding and had not been accounted for
by the travelers.   These  conditions  occurred  because the
Court did not adequately monitor travel expenses and the use
of   travel  advances  to  ensure  that  travelers  promptly
accounted for advances upon completion of travel.

Further,   in   35  instances  where  travel  vouchers  were
submitted to account for travel expenses, the travelers took
an average of 3 1/2 months  after  completion  of  travel to
submit   the   vouchers.    Although   the   Court's  travel
regulations  stipulate  that  employees  must submit  travel
documents within 60 days (2 months) of completion of travel,
Executive  Order 310-1989  requires  that  Executive  Branch
employees submit travel vouchers within 5 days of completion
of travel.

The Court should revise its existing procedures  to  require
that  employees submit travel vouchers and account for  cash
advances   within   a   shorter   time   period   than   the
currently-allowed  60  days after completion of travel.  The
Court  should  also  take action  to  require  employees  to
account  for  the $13,100  in  outstanding  travel  advances
disclosed by our review.

Long-Distance Calls

The  Court's  Personnel   Manual  states  that  the  Court's
telephones may not be used  for personal long-distance calls
except when the employee obtains  permission  and  agrees to
pay  the long-distance charges promptly.  However, we  found
that individuals were making personal long-distance calls at
the Court's  offices  on  St. Croix without going through an
operator and without the calls  being  recorded, authorized,
and paid for.  We found that it was difficult  to  reconcile
calls  recorded  on  call  slips  to  calls  included on the
telephone bills and that, for May and June 1996, 97 personal
long-distance   calls  (cost  not  determinable)  were   not
reimbursed by the  employees.   Court officials told us that
it was difficult to collect the amounts  due  from employees
for personal long-distance calls, especially in  cases where
employees   disputed   that  they  had  made  the  calls  or
questioned the costs of the calls.

At the Court's offices on  St.  Thomas, one employee's calls
totaled  $1,600, and the Court had  to  obtain  a  power  of
attorney to  garnish  the  funds from a lump-sum payment due
the employee.  During fiscal  years 1996 and 1997, employees
in both offices generated more than $8,000 in personal long-
distance  calls  that  were reimbursed  to  the  Government.
However, we could not determine the costs of calls that were
not reimbursed because we  could not reconcile call slips to
the  telephone  bills.  In our  opinion,  the  Court  should
discontinue  the  practice  of  allowing  employees  to  use
official telephones  for personal long-distance calls except
in  the  event  of  an  emergency.    Employees   should  be
encouraged  to  obtain  telephone  calling  cards from long-
distance carriers to pay the cost of personal  long-distance
calls.

Property Management

Although   the   Court's  Property  and  Procurement  Manual
requires  that  a  complete   physical   inventory   of  all
capitalized equipment be performed at least once biennially,
such  inventories  were not performed.  To test the accuracy
of the Court's property  records,  we  randomly selected 209
items  of  equipment  listed  in  the property  records  and
attempted to locate them.  We were  unable to locate 5 items
and could not specifically identify 18 other  items  because
they  did  not  have property identification numbers affixed
that would have allowed  us  to  match  them to the property
records.    We also noted that property identification  tags
were not always  placed  on property in locations where they
were  visible  and  easily  accessible.   Additionally,  the
property records needed to be updated to show items that had
been relocated, were damaged,  or  were  disposed of because
they were obsolete.  We found that these conditions occurred
because   responsibility  for  conducting  inventories   and
updating the  property records had not been delegated by the
Court's Administrator to staff.

We  believe that  the  Court  should  enforce  its  property
management  procedures  by  assigning  to specific staff the
responsibility   to   maintain  accurate  property   control
records, conduct physical  inventories  at least biennially,
and  affix property identification tags to  all  Government-
owned property.

Recommendations

We recommend  that  the  Presiding  Judge of the Territorial
Court:

     1. Enforce  existing  policies  and   procedures  which
require  that  collections and deposits be reconciled  on  a
daily  basis; that  such  reconciliations  be  subjected  to
periodic independent review to test their accuracy; and that
the Court's  cashiers  clearly  stamp  or mark receipts that
have  errors  with  the  word  "VOID"  and account  for  all
receipts,  including  those  that are voided,  in  numerical
sequence.  Additionally, Court  officials  should attempt to
reconcile the $1,125 in differences between  collections and
deposits;  locate  the  file  copies  of  the seven  missing
receipts for collections made on April 30,1997;  and provide
the  cashier on St. John with a security escort when  making
the daily evening deposits.

     2. Establish internal policies and procedures to ensure
that bail bonds and other funds held in trust in the Court's
Miscellaneous  Account  are  disbursed  to  the  appropriate
parties  in  a  timely  manner upon resolution of the  court
cases to which the funds  pertain.   Also,  special  efforts
should  be  made  to locate the related parties and disburse
that portion of the  $130,000  held  in  the  account  as of
January  1998 which pertains to cases that have already been
finalized.   For  any portion of the $130,000 that cannot be
disbursed because the  related  parties cannot be identified
or located, the procedures described  in  Title  28, Chapter
29, of the Virgin Islands Code concerning unclaimed property
should be used to record the forfeiture of such property  to
the Government of the Virgin Islands.

     3. Establish internal policies and procedures to ensure
that  proper  segregation  of duties is provided between the
individuals responsible for  approving expenditures from the
Court's internal checking accounts and those responsible for
issuing checks based on such approvals and that the internal
accounts are used only for the  specific  purposes for which
each    account   was   established.    Additionally,    the
Miscellaneous,  Utility,  and  Petty Cash Accounts should be
reimbursed for the Court operating  and  other expenses that
were improperly paid from those accounts,  but  had not been
reimbursed.

     4. Enforce  the existing policies and procedures  which
require the use of  competitive  procurements  and establish
policies  and  procedures to prohibit the use of "confirming
orders"  except in  unusual  circumstances  and  with  prior
written approval by the Court's Procurement Officer.

     5. Establish policies and procedures with regard to the
authorized purposes for which the Court's Petty Cash Account
and other  available  funds  can be used.  Such policies and
procedures should restrict the  use  of Government funds for
employee-related gifts except where such gifts are a part of
an established employee incentive awards program.

     6. Revise existing policies and procedures  to  require
that   Court  employees  submit  travel  vouchers  within  a
reasonable  time  (such as 10 working days) after completion
of travel and to establish  a  system  for ensuring that all
travel  advances are properly accounted for,  including  the
requirement  that  employees  should reimburse the Court for
any unused balances of travel advances.   In  addition,  the
employees  who  have  outstanding  travel advances among the
$13,100 disclosed by the audit should  be required to submit
a full accounting of the use of those advances.

     7. Discontinue  the practice of allowing  employees  to
use the Court's telephones  for personal long-distance calls
except in the case of emergency  and  with prior supervisory
approval.

     8. Enforce the existing property management  procedures
to  ensure  that  complete  and  accurate  property  control
records  are  maintained,  physical inventories of equipment
and  other  personal  property   are   conducted   at  least
biennially, and property identification tags are affixed  to
an   easily  accessible  location  on  all  Government-owned
property.

Territorial Court of the Virgin Islands Response and
Office of Inspector General Reply

The July 31, 1998, response (Appendix 2) to the draft report
from the  Presiding Judge of the Territorial Court expressed
partial concurrence  with Recommendations 1, 2, 6, and 8 and
nonconcurrence with Recommendations  3,  4, 5, and 7.  Based
on the response, we have revised Recommendations 1 and 2 and
consider  Recommendation  1  resolved  and  implemented  and
Recommendation 2 unresolved.  Also based on the response, we
consider  Recommendations  3, 4, 5, 7, and 8 unresolved  and
request additional information  for  Recommendation  6  (see
Appendix 2).

Recommendation 1.  Partial concurrence.

     Territorial  Court Response.  The Court "only partially
agree[d]" with the  recommendation,  stating  that "existing
court   policies   and   procedures  already  require  daily
reconciliation  of  collections  and  deposits,  subject  to
periodic review by our  Internal  Auditor."   The Court also
stated  that "the fact that a few voided receipts  were  not
stamped `VOID'  was an oversight, which may recur so long as
human beings serve  as  cashiers."  Further, the Court noted
that the seven missing receipts identified in the report had
been located and that a night depository and security escort
were provided for the St. John cashier.

In discussing the finding related to the recommendation, the
Court explained the record- keeping error that resulted in a
reported difference of $450 between collections and deposits
and then stated that the two examples cited in the report of
differences  between  recorded   collections   and  deposits
"cannot   justify   .   .  .  a  sweeping  conclusion"  that
"differences  between  collections  and  deposits  were  not
reconciled."  The Court  also stated that the seven receipts
for  April  30,  1997, that could  not  be  located  by  the
auditors "are on file."   The  Court  also  stated  that "in
keeping   with  the  [Government]  Auditing  Standards,  the
properly safeguarded  collection  area  in St. Thomas should
have been credited by the auditor."

     Office  of  Inspector  General  Reply.   Based  on  the
response from the Court, we have revised  the recommendation
to  state  that the Court should "enforce existing  policies
and  procedures"  concerning  the  reconciliation  of  daily
collections and deposits and periodic supervisory reviews of
the reconciliations.   Further,  we  consider  resolved  and
implemented  the  portions  of the recommendation concerning
the need to locate the seven missing receipts and to provide
a security escort for the St.  John  cashier.   However,  we
disagree  that  the  finding  made  an unjustified "sweeping
conclusion"   concerning   differences   between    recorded
collections  and deposits.  The finding clearly states  that
"we  found two  instances"  that  had  differences  totaling
$1,125.   Although  $1,125  was  a  relatively  small amount
compared with the more than $1 million collected annually by
the  Court,  we  do  not  believe  that  this  was  a  small
discrepancy.   Additionally,  even though the Court was able
to reconcile the $450 difference  related to one deposit and
to locate the seven cashier receipts  that  were  missing at
the  time of the audit, these discrepancies existed  at  the
time of  the audit.  Further, based on the Court's statement
that the Court could not identify the transaction related to
the  additional  $675  difference  between  collections  and
deposits, we will provide details of that transaction to the
Court.   Lastly, although the discrepancies discussed in the
section of  the report "Revenue Collections" were relatively
minor, they pointed  out  weaknesses in the Court's internal
control procedures that could  provide  the  opportunity for
more significant errors in the future.  However, because the
Court  has  essentially  taken  the recommended actions,  we
consider   the   revised   recommendation    resolved    and
implemented.   With regard to the Court's statement that the
draft report did not comment on the adequate safeguarding of
the  collection  area   on   St.  Thomas,  we  revised  that
information in the section "Revenue Collection."

Recommendation 2.  Partial concurrence.

     Territorial Court Response.   The Court "only agree[d],
in part" with the recommendation, stating  that "there is no
lawful  basis  for  the alleged $130,000 in returnable  bail
bonds."  The Court also  stated  that the finding "is a case
of unnecessary sensationalism . .  .  which clearly violates
the  unclaimed property laws."  Further,  the  Court  stated
that "refund  applications  which  follow the [court] orders
result  in the prompt return of cash  bail  bonds;  however,
where no applications are filed, refunds are delayed pending
review of the record."

     Office  of  Inspector  General Reply.  We disagree with
the  Court  for  the  following reasons:  (1)  we  found  no
evidence  that  the  Court   had   followed  the  procedures
contained  in Title 28, Chapter 29, of  the  Virgin  Islands
Code  to  have   unclaimed   bail  bonds  forfeited  to  the
Government,  and (2) Court officials  told  us,  during  the
audit, that the  disposition  of  bail  bonds was not always
cleared  in  a  timely manner because of the  time-consuming
work necessary to review the applicable Court records.  With
regard  to  the  procedure   for   forfeiture  of  unclaimed
property, Title 28, Section 664, of the Code states:

     Intangible property [defined as including "monies"
     and "checks"] held for the owner  by  a court, the
     Government of the Virgin Islands, its agencies and
     instrumentalities, a public corporation, or public
     authority which remains unclaimed by the owner for
     more  than one (1) year after becoming payable  or
     distributable is presumed abandoned.

     However, Section 668 states:

     (a)  A  person   holding   property,  tangible  or
     intangible,  presumed  abandoned  and  subject  to
     custody as unclaimed property  under  this chapter
     shall report to the Administrator [defined  as the
     Lieutenant Governor] concerning the property . . .
     .

     (b)  The report must be verified and must include:
     (1) except  with  respect  to travelers checks and
     money orders, the name, if known,  and  last known
     address, if any, of each person appearing from the
     records of the holder to be the owner of  property
     of  the  value  of  $25 or more presumed abandoned
     under this chapter; . . .

     Additionally, Section 669 states:

     (a) The Administrator  [the  Lieutenant  Governor]
     shall  cause  a  notice  to be published not later
     than  March  1  .  .  .  of the  year  immediately
     following the report required  by  section  668 of
     this  chapter  at  least  once  a week for two (2)
     consecutive  weeks  in  a  newspaper   of  general
     circulation in the United States Virgin Islands.

During the audit, we were not provided any documentation  to
indicate  that the Court had complied with these procedures.
In fact, at  the  May  28,  1998,  exit  conference  on  the
preliminary  draft  of  this  report,  the  Presiding  Judge
suggested that the Court, as an intermediary step, publish a
list   of   unclaimed  bail  bonds  in  a  local  newspaper.
Therefore, we  believe  that the finding is accurate and the
recommendation  valid.   However,   we   have   revised  the
recommendation  to  incorporate  reference to the procedures
contained in Title 28, Chapter 29,  of  the  Virgin  Islands
with  regard  to unclaimed property to clarify the necessary
corrective actions, and the Court is requested to reconsider
its response to the recommendation, which is unresolved.

Recommendation 3.  Nonconcurrence.

     Territorial Court Response.  In its response, the Court
said  that it "reject[ed]  this  recommendation  as  clearly
erroneous  and  inappropriate,"  stating  elsewhere  in  the
response that "the court is authorized by law to utilize any
suitable  means  to  effectuate  its  jurisdiction,  and  to
transfer  funds  between accounts to maximize the quality of
judicial services  rendered  to  the  public, so long as the
limits of the court's appropriations are not exceeded."  The
Court further stated that questioned expenditures of $47,000
from the Court's Miscellaneous Account  were  for legitimate
Court  purposes  and  were  not  in  excess  of  the Court's
appropriations but were made because of the "failure  of the
[Government's] executive branch to release the court's funds
to pay its vendors" and that "it was essential for the  work
of  the court to continue . . . and the entire $47,000 [was]
reimbursed  to  the  Miscellaneous  Account after the crisis
abated."  The Court also stated that  it  used  the  $23,000
from  the  Court's Utility Account on the same basis as  the
$47,000 borrowed from the Miscellaneous Account and that the
$23,000 had already been reimbursed.

     Office   of   Inspector  General  Reply.   Although  we
acknowledge the Court's  use of the Miscellaneous Account to
pay legitimate Court expenditures during a time of financial
crisis, we do not believe  that  this action was appropriate
because the Miscellaneous Account  is  the  primary  account
used  by  the  Court to deposit bail bonds and other amounts
that are held in  trust  for  participants  in  Court  cases
pending  final  disposition  of those cases.  Therefore, the
funds in the Miscellaneous Account  are  essentially not the
Court's  or  the  Government's  funds  to be used  for  such
purposes.  In addition, although the Court  stated  that the
entire  $47,000  had  been  reimbursed  to the Miscellaneous
Account, we believe that the finding and  recommendation are
accurate  for  the  following reasons: (1) the  $47,000  was
outstanding at the time of the audit (which was completed in
January 1998), and (2)  the  Court Administrator, during the
May 28, 1998, exit meeting on  the preliminary draft of this
report,  stated  that  as  of that date,  $27,000  had  been
reimbursed to the Miscellaneous  Account while the remaining
$20,000 would be reimbursed within  a  week.   As  such, the
full reimbursement occurred almost 6 months after completion
of  the  fieldwork.   Regarding  the  $23,000  used from the
Utility Account for nonutility expenses, this amount had not
been  reimbursed to the Utility Account at the time  of  the
audit and at the time of the May 28, 1998, exit meeting.

     Recommendation 4.  Nonconcurrence.

     Territorial  Court Response.  The Court stated, "At the
     exit conference,  we  made  it  clear  that  the use of
     `confirming orders' is not illegal, and that they  will
     be   used  whenever  it  is  necessary  to  insure  the
     continuation  of  judicial services to the public."  In
     discussing the finding  on  which the recommendation is
     based,  the Court also stated,  "The  financial  crisis
     created by the central government resulted in an almost
     complete  refusal  of  vendors  to do business with any
     local   government   agency,  including   the   court."
     Therefore,  according  to  the  Court,"invitations  for
     bids,  competitive negotiations,  and  purchase  orders
     were being  rejected."   The  Court  also  stated, "The
     supplying of goods and services were denied  unless and
     until  payment  was  received  in  full  and,  in  many
     instances,  in  advance,  thereby triggering the use of
     confirming orders to prevent disruption of our judicial
     services."  Further, the Court  stated that "not one of
     the   347  procurement  documents  [reviewed   by   the
     auditors]  was  without  proper  authorization, and the
     auditor  has  shown  none.   The  mere   reference   to
     `generally  accepted business practice' cannot and does
     not vitiate the  authorization  granted  by the Court's
     manual."

     Office   of   Inspector  General  Reply.   The  Court's
     statement that  Court  officials stated during the exit
     conference that "confirming  orders are not illegal" is
     not accurate because no specific mention of "confirming
     orders"  was  made  during  the  May   28,  1998,  exit
     conference.   More importantly, the response  does  not
     address the fact  that  the  use of "confirming orders"
     makes  ineffective one of the most  important  internal
     controls over any organization's procurement process --
     the  written   authorization   of   purchases   by   an
     appropriate  official.   A  "confirming  order" is used
     when an employee of an organization, in this  case  the
     Court, goes to a vendor and purchases goods or services
     without  a  written purchase order or other authorizing
     document.  The  purchase  order  is  prepared after the
     fact to confirm the verbal purchase commitment that was
     previously made.  By allowing this practice  the  Court
     significantly  increases  the risk that an employee may
     improperly acquire goods or  services  for personal use
     without  the knowledge of appropriate Court  officials.
     This internal  control  weakness  is  recognized in the
     procurement regulations (Title 31, Chapter  23,  of the
     Virgin Islands Code) that apply to the Executive Branch
     of the Government, which require that all purchases  be
     made  by  written  order.   We believe that the Court's
     internal procurement regulations  should  have the same
     requirement.    Regarding   the   use   of  competitive
     procurement procedures, we acknowledge that  the  Court
     may  have  experienced  difficulties in finding vendors
     that   were  willing  to  conduct   business   with   a
     Governmental  agency.   However,  the  Court,  in those
     instances,  should  have  followed  generally  accepted
     business practice (as required for the Executive Branch
     by   the  Virgin  Islands  Code)  of  documenting  such
     instances  in  the  appropriate  procurement  files  as
     justification  for  not  using competitive procurement.
     Therefore, the recommendation  remains  valid.  Lastly,
     the  Court's  statement  that  "not  one  of  the   347
     procurement documents was without proper authorization"
     does  not  address the audit finding.  Specifically, in
     the finding,  we  state  that 60 of the 347 procurement
     actions reviewed were made using confirming orders, not
     that  they  were made "without  proper  authorization."
     The purpose of  the  confirming  orders  was to provide
     authorization after the fact.

     Recommendation 5.  Nonconcurrence.

     Territorial Court Response.  In its response, the Court
     "reject[ed]"  this  recommendation, stating  that  "the
     record substantiates  the  fact  that  the court has an
     established `employee-incentive awards program.'"  With
     regard  to the finding on which the recommendation  was
     based, the  Court  stated that $752 from the Petty Cash
     Account was used for  "employee  incentive  awards  and
     family   bereavement  wreaths"  and  that  "this  court
     intends to  continue  to utilize the Petty Cash Account
     for such minor expenses."   The  Court also stated that
     the expenditure of $8,590 through  purchase  orders for
     savings  bonds, photo albums, floral arrangements,  and
     other similar  items was part of an "employee-incentive
     awards program."

     Office  of  Inspector   General  Reply.   Although  the
     Presiding Judge stated, during  the  May 28, 1998, exit
     meeting,  that such items were  given to  employees  as
     "incentives"  to  make up for the low salaries and lack
     of advancement opportunities,  we were not provided any
     documentation   during  the  audit  and   nothing   was
     mentioned by Court  officials  during the May 28, 1998,
     exit meeting to support the statement  in  the response
     that  the  Court  had an established employee incentive
     awards program.  Additionally,  the  Court's  Personnel
     Manual  does  not  contain any reference to an employee
     incentive awards program.  Regardless of whether or not
     such   a   program  exists,   we   believe   that   the
     recommendation  to establish formal policies as to what
     types of expenditures  are  legitimate items to be paid
     from the Court's Petty Cash Account and to restrict the
     use of Government funds for gifts  to  employees except
     where   such  gifts  are  part  of  a  formal  employee
     incentive  awards program is valid.  In our opinion, an
     employee incentive  awards  program  should be based on
     written  criteria that define the employee  actions  or
     occasions  which would warrant the receipt of an award,
     the types and  value of awards that can be presented to
     employees,  the  procedures  to  be  used  to  nominate
     employees for awards, and the bases upon which nominees
     would be judged and selected for awards.

     Recommendation 6.  Partial concurrence.

     Territorial Court  Response.   The  Court  said that it
     "agree[d]  with  the  portion  of  this  recommendation
     regarding  the  reduction  of  the  time  allowed   for
     submission  of travel vouchers" but that "it is already
     the policy of  the  court  that  all travel advances be
     properly  accounted for," including  reimbursement  for
     unused amounts.  In discussing the finding on which the
     recommendation  was  based,  the Court stated that "the
     initial finding by the auditor  regarding the filing of
     `travel  expense  forms'  is  very misleading"  because
     "where no travel expenses are incurred there is no need
     to file an expense form."  The  Court  also stated that
     in  1  of  the 10 cases of outstanding travel  advances
     cited  in  the   finding,  the  Department  of  Finance
     canceled the travel  advance  check  because it was not
     prepared prior to the date of travel and that the other
     nine travelers "have now filed their travel  vouchers."
     The Court further stated that it agreed to "review  our
     60-day  period  for the submission of travel documents,
     and to consider its reduction."

     Office of Inspector  General  Reply.   Section 10(b) of
     the Court's Travel Regulations (which are  contained in
     the  Court's  Personnel  Manual),  states, "The  Travel
     Expense Claim Form shall be used for  the reporting and
     record-keeping  of  necessary  travel  information  and
     expenditures  and  for  claiming  refunds or  returning
     excess   funds."    This   provision   of  the   Travel
     Regulations  suggests  to  us  that the Travel  Expense
     Claim Form, which includes sections  for  recording the
     dates and route of travel, actual expenses  and/or  per
     diem  allowances  and  for the reconciliation of travel
     advances, is intended to  provide a permanent record of
     official  travel.  The Form  also  provides  space  for
     indicating  the corresponding Government Transportation
     Request number,  which  would allow the Form to be used
     to  verify  that  airline  tickets   purchased  through
     Government  Transportation  Requests  were   used   for
     official  purposes.  Therefore, the statement "where no
     travel expenses  are  incurred there is no need to file
     an expense form" is not  accurate.   With regard to the
     10  outstanding travel advances cited in  the  finding,
     Court   officials  did  not  tell  us  or  provide  any
     supporting documentation during the audit that 1 of the
     travel  advances   had   subsequently   been  canceled.
     Additionally,  even  though  the  other nine  travelers
     filed their travel vouchers subsequent  to  our  audit,
     the  finding  and  the  recommendation  were  based  on
     conditions that existed at the time of the audit.

     Recommendation 7.  Nonconcurrence.

     Territorial  Court  Response.   The  Court stated, "The
     existing policy of the court already limits  the use of
     the Court's telephone for personal long distance calls,
     except  in  emergencies of staff employees, and  except
     for supervisory  employees."   The  Court  also stated,
     "Non-supervisory employees are authorized such  use  in
     emergency  cases only, and in that even permission must
     be  obtained  in  advance  and  payment  must  be  made
     promptly."    The  Court  also  acknowledges  that  the
     practice used at  the  Court's  office on St. Croix did
     not adhere to established policy  and  that  "the costs
     for all personal calls are being collected."   However,
     the  Court  further  stated  that the "`personal-calls'
     privilege is a convenience and  a  morale  booster" and
     that   it   "will   not  discontinue  the  practice  as
     recommended by the auditor."  The Court further stated,
     "Instead, we will more  closely  monitor [the practice]
     to minimize errors or abuse."

     Office  of  Inspector General Reply.   Because  of  the
     added supervisory  oversight  and  work load related to
     tracking personal long distance calls  and  the cost of
     processing and collecting the appropriate charges  from
     employees, as well as the availability of long distance
     calling cards, we believe that the Court's position  on
     this matter results in an unwarranted use of Government
     resources.   We  continue  to  believe  that  the Court
     should  prohibit  the  use  of official telephones  for
     personal long distance calls except for emergencies and
     those with prior supervisory approval.

     Recommendation 8.  Partial concurrence.

     Territorial Court Response.   The  Court  said  that it
     disagreed   with  the  portion  of  the  recommendation
     concerning the  placement  of  property  identification
     tags   in   an   easily   accessible  location  on  all
     Government-owned property.   In discussing the finding,
     the Court stated that it "consider[s] these findings to
     be  substantially without merit."   Specifically,   the
     Court  stated  that Court officials were able to locate
     five items of equipment  that  the  auditors  could not
     locate,  that  "the  description  in  the inventory  is
     sufficient for the auditor to identify  such  property"
     without access to a property identification number, and
     that "generally accepted security policies require  the
     placement  of ID [identification] tags in inconspicuous
     places on the property."

     Office of Inspector  General Reply.  Although the Court
     was subsequently able to locate five items of equipment
     which could not be located  by  the auditors, the items
     could  not  be  located  at  the  time  of  the  audit.
     Additionally,   without   verification    of   property
     identification  numbers,  the  auditors  could  not  be
     assured  which, of similar items (for example,  similar
     chairs, desks,  or  filing  cabinets) were the specific
     items  included  in the audit sample.   Therefore,  the
     Court's  statement   that   "the   description  in  the
     inventory  is  sufficient for the auditor  to  identify
     such property" is  not  valid,  and  the  Court has not
     satisfactorily  identified the items of equipment  that
     are cited in the finding.  Lastly, the Court's Property
     and Procurement Manual does not address the location of
     property identification  tags,  and  the  Court did not
     provide  any documentation for the "generally  accepted
     security policies"  cited  in  the  response.  However,
     even if "security policies" exist that require property
     identification  tags  to  be  placed  in  inconspicuous
     places, such locations can still be easily  accessible,
     such as on the bottom of chair seats and table  tops or
     inside  desk  and filing cabinet drawers, to facilitate
     the annual physical  inventories and reconciliations to
     property records.

     General Comments on Audit Report

     The Territorial Court  provided  additional comments on
     the report.  The Court's comments  and our reply are as
     follows:

     Territorial  Court  Response.   The  response   stated,
     "While we agree that the preliminary draft of the audit
     report  was  fully  and  amicably discussed at the exit
     conference on May 28, 1998,  we did not concur with the
     findings and recommendations."   Based  on the specific
     disagreements    with    the    audit    findings   and
     recommendations,  the  Court  also disagreed  with  the
     monetary  amounts shown in Appendix 1  of  the  report.
     Additionally,  the response states that since the audit
     was  conducted  in   accordance  with  the  "Government
     Auditing Standards,"issued  by  the Comptroller General
     of  the  United  States,  "both positive  and  negative
     findings should have been reported."

     Office of Inspector General  Reply.   We found that the
     Court's July 28, 1998, response to the draft report was
     completely     different    in    its    receptiveness,
     responsiveness,  and  overall tone than the comments of
     Court officials at the  exit  conference,  who included
     the  Presiding  Judge,  the  Court  Administrator,  the
     Court's General Counsel, and the Clerk  of  the  Court.
     Office   of   Inspector   General   representatives  in
     attendance were the Audit Director, the Senior Auditor,
     and two of the three auditors who conducted the on-site
     audit  work.   The  Presiding  Judge,  in  opening  the
     meeting,  stated  that the audit had been  a  "pleasant
     situation" for Court officials and employees and that a
     "very good rapport"  had  been maintained between Court
     and Office of Inspector General  staff  throughout  the
     audit.   He  also  stated  that  the  preliminary draft
     report  was  "fair"  and that he was overall  "pleased"
     with  the  report.   In response,  the  Audit  Director
     stated that the entire  audit team was likewise pleased
     with  the cooperation that  they  received  during  the
     audit.  He also commented that the audit was one of the
     "cleanest"  he  had  been involved with in recent years
     and  that the findings  discussed  in  the  preliminary
     draft report were relatively minor issues.

     Throughout  the discussion that followed, which focused
     on a page-by-page  review  of  the  report's  contents,
     Court  officials  expressed general agreement with  the
     details in the findings  and  brought  to the auditors'
     attention any circumstances that required  the Court to
     take  actions.   In  specifically discussing the  audit
     recommendations,  the  Presiding  Judge  expressed  the
     sentiment that the recommendations  were  fair and were
     actions that the Court could accomplish.  However,  the
     Court's July 28, 1998, response to the draft report was
     contrary  to  what was discussed at the exit conference
     and  essentially   disagreed   with   the  deficiencies
     identified in the audit report.

     With regard to the Court's reference to the "Government
     Auditing Standards," paragraphs 7.43 and  7.44  of  the
     "Standards" state:

     Auditors should report noteworthy accomplishments,
     particularly  when  management improvements in one
     area may be applicable elsewhere.

     Noteworthy management  accomplishments  identified
     during  the audit, which were within the scope  of
     the audit,  should be included in the audit report
     along   with   deficiencies.    Such   information
     provides a more fair presentation of the situation
     by providing appropriate  balance  to  the report.
     In addition, inclusion of such accomplishments may
     lead  to  improved performance by other government
     organizations  that  read  the  report.  [Emphasis
     added.]

The first sentence of the "Results of Audit" section  of the
report  states, "The Territorial Court has made improvements
since  our   1990   audit   report   in   carrying  out  its
administrative   functions,   primarily   with   regard   to
controlling overtime."  Although the Court may have produced
significant  accomplishments in its judicial activities  and
programs, those  areas  were  not  within  the  scope of our
audit,  which covered the administrative activities  of  the
Court.  Therefore,  we  were  not  in  a position to comment
positively or negatively on the Court's  judicial  or  other
nonadministrative activities.  We believe that on an overall
basis,  the  report  accurately  presents the results of our
audit,  which,  as  the  Auditor Director  stated  to  Court
officials at the exit meeting,  reflected  relatively  minor
deficiencies  that  could  be  corrected by the Court with a
minimum of effort.

Lastly,  although  the  Court disagreed  with  the  monetary
amounts presented in Appendix  1  of  the report, it did not
provide  information  regarding  what the  monetary  amounts
should be.

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  1),  actions  taken  to
implement  audit recommendations, and identification of each
significant  recommendation  on  which corrective action has
not been taken.

In view of the above, please provide a response, as required
by Public Law 97-357, to this report  by  October  9,  1998.
The  response  should  be addressed to our Caribbean Office,
Federal  Building  -  Room  207,  Charlotte  Amalie,  Virgin
Islands 00804.  The response  should provide the information
requested in Appendix 3.

We appreciate the assistance of the staff of the Territorial
Court in the conduct of our audit.

                                    Sincerely,



                                    Robert J. Williams
                                    Assistant Inspector General
                                    for Audits

                                                  APPENDIX 1


CLASSIFICATION OF MONETARY AMOUNTS


 ------------------------------------------------------------
                                 Funds To
                                 Be Put To       Questioned
                   Finding      Better Use*        Costs*
 Areas
 ------------------------------------------------------------
 Administrative Functions

      Internal Accounts
           Undisbursed Bail          $130,000
 Bonds
           Questionable                              $47,000
 Expenditures                                         23,000
                                                         752
 Miscellaneous Account
                Utility
 Account                                               8,590
                Petty Cash
 Account
                                       13,100
      Procurement
           Questionable              $143,100        $79,342
 Expenditures

      Travel Advances
           Outstanding
 Travel Advances

           Total
 ------------------------------------------------------------

 ------------------------------------------------------------

        *Amounts represent local funds.
                                                  APPENDIX 2
                                                 Page 1 of 8

                 TERRITORIAL COURT RESPONSE

                   (Insert Response Here)

                                                  APPENDIX 3

           STATUS OF AUDIT REPORT RECOMMENDATIONS

 -----------------------------------------------------------
 Finding/Recommendation
            Reference                                Action
                        Status      Required
          1
                        Implemented.No further action is
 2, 3, 4, 5, 7, and 8              required.
                        Unresolved.
                                   Reconsider the
                                   recommendations, and
                                   provide a response to
                                   each recommendation
                                   indicating concurrence
                                   or nonconcurrence.  If
                                   concurrence is
                                   indicated, provide an
                                   action plan that
          6                        includes a target date
                        Management and title of the
                        concurs;   official responsible for
                        additional implementation.  If
                        informationnonconcurrence is
                        needed.    indicated, provide
                                   reasons for the
                                   nonconcurrence.

                                   Provide a target date
                                   and title of the
                                   official responsible for
                                   revising the travel
                                   policies and procedures
                                   to provide a shorter
                                   time frame in which
                                   travel vouchers should
                                   be filed.

 -----------------------------------------------------------






ILLEGAL OR WASTEFUL ACTIVITIES SHOULD BE REPORTED

TO THE OFFICE OF INSPECTOR GENERAL BY:

Sending written documents to:



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

Calling:

Our 24 hour
Telephone HOTLINE
1-800-424-5081 or
(202) 208-5300

TDD for hearing impaired
(202) 208-2420 or
1-800-354-0996



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

Calling:
(703) 235-9221


North Pacific Region

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


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