[Audit Report on Followup of Recommendations Relating to Personnel Management Practices, Division of Personnel, Government of the Virgin Islands]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 99-i-365

Title: Audit Report on Followup of Recommendations Relating to Personnel
       Management Practices, Division of Personnel, Government
       of the Virgin Islands

Date:  March 26, 1999



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



AUDIT REPORT


FOLLOWUP OF RECOMMENDATIONS RELATING TO
PERSONNEL MANAGEMENT PRACTICES, DIVISION OF PERSONNEL,
GOVERNMENT OF THE VIRGIN ISLANDS


REPORT NO. 99-I-365

MARCH 1999






MEMORANDUM

             TO:  The Secretary

           FROM:  Eljay B. Bowron
                  Inspector General

SUBJECT SUMMARY:  Final Audit Report - "Followup of
                  Recommendations Relating to Personnel
                  Management Practices,
                  Division of Personnel, Government of
                  the Virgin Islands" (No. 99-i-365)

Attached for your information is a copy of the subject final
audit report.  The objective of our audit was to determine
whether (1) the Government of the Virgin Islands satisfactorily
implemented recommendations made in our July 1992 survey report
"Personnel Management Practices, Division of Personnel,
Government of the Virgin Islands" (No. 92-I-1086) and any new
recommendations were warranted and (2) the Early Retirement
Incentive, Training and Promotion Act of 1994 was effective in
decreasing the number of Government employees.

We found that the Government had not implemented four of the six
recommendations included in the prior report and had not complied
with the work force reduction and financing requirements of the
Early Retirement Act.  Specifically, although the Division of
Personnel took action to develop and implement rules and
regulations for the maintenance and security of official
personnel files, the Government did not  (1) take action to amend
the Government Reorganization and Consolidation Act of 1987 to
remove a conflict that allowed the Governor to hire individuals
into unclassified (exempt) positions that did not meet the
requirements of the Personnel Merit System, (2) develop and
implement rules and regulations to restrict the use of
unclassified hiring and personal services contracts to fill
positions that should have been a part of the classified service
under the Personnel Merit System, and (3) review and update all
entrance examinations used to determine the qualifications of
applicants for positions in the classified service.  In addition,
although 567 employees in the Government's Executive Branch
elected to retire under the provisions of the Early Retirement
Act, the Government did not reduce the size of the Executive
branch work force by a commensurate number of permanent
positions, which would have generated potential savings in annual
payroll costs of at least $16 million, including fringe benefits.

To address the deficiencies, we made four recommendations to the
Governor and one recommendation to the Legislature.  The
Governor's response to the report specifically addressed the
recommendations contained in our July 1992 report which, in
effect, adequately addressed one recommendation in our current
report.  Therefore, the remaining three recommendations to the
Governor are unresolved.  Since the Legislature did not respond
to the recommendation addressed to it, that recommendation is
also unresolved.

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


Attachment




                                                  V-IN-VIS-004-98

Honorable Charles W. Turnbull
Governor of the Virgin Islands
No. 21 Kongens Gade
Charlotte Amalie, Virgin Islands 00802


Subject:  Audit Report on Followup of Recommendations Relating to
          Personnel Management Practices, Division of Personnel,
          Government of the Virgin Islands (No. 99-i-365)


Dear Governor Turnbull:

This report presents the results of our followup review of
recommendations contained in the July 1992 survey report entitled
"Personnel Management Practices, Division of Personnel,
Government of the Virgin Islands" (No. 92-I-1086) (see Prior
Audit Coverage).  The objective of this review was to determine
whether (1) the Virgin Islands Government satisfactorily
implemented recommendations made in the 1992 report and any new
recommendations were warranted and (2) the Early Retirement
Incentive, Training and Promotion Act of 1994 (the Early
Retirement Act) was effective in decreasing the number of
Government employees.

We found that the Government had not implemented four of the six
recommendations included in the prior report and had not complied
with the work force reduction and financing requirements of the
Early Retirement Act.  Specifically:

     -  Although the Division of Personnel took action to develop
     and implement rules and regulations for the maintenance and
     security of official personnel files, the Government did not
     (1) take action to amend the Government Reorganization and
     Consolidation Act of 1987 to remove a conflict that allowed
     the Governor to hire individuals into unclassified (exempt)
     positions that did not meet the requirements of the
     Personnel Merit System, (2) develop and implement rules and
     regulations to restrict the use of unclassified hiring and
     personal services contracts to fill positions that should
     have been a part of the classified service under the
     Personnel Merit System, and (3) review and update all
     entrance examinations used to determine the qualifications
     of applicants for positions in the classified service.

     -  Although 567 employees in the Government's Executive
     Branch elected to retire under the provisions of the Early
     Retirement Incentive, Training and Promotion Act of 1994,
     the Government did not reduce the size of the Executive
     Branch work force by a commensurate number of permanent
     positions, which would have generated potential savings in
     annual payroll costs of at least $16 million, including
     fringe benefits.  Additionally, the Government and its
     independent instrumentalities had not paid the Government
     Employees' Retirement System about $8.3 million in
     additional contributions needed to fund the early
     retirements.

To address these issues, we made two recommendations concerning
the prior survey report and two recommendations concerning the
Early Retirement Act to you, as the Governor of the Virgin
Islands, and one recommendation concerning the prior audit report
to the Legislature of the Virgin Islands.

In your February 26, 1999, response (Appendix 3) to the draft
report, you addressed in detail the recommendations contained in
our July 1992 report on the Division of Personnel, which are
summarized in Appendix 2.  In addressing the prior report's
recommendations, your response in effect adequately addressed
Recommendation A.2 in our current report.  However, the response
did not address Recommendations A.3, B.1, or B.2.  Based on the
response, we consider Recommendation A.2 resolved but not
implemented and Recommendations A.3, B.1, and B.2 unresolved.
Accordingly, Recommendation A.2 will be referred to the Assistant
Secretary for Policy, Management and Budget for tracking of
implementation, and we request that you provide responses for
Recommendations A.3, B.1, and B.2 (see Appendix 4).  Since we did
not receive a response from the Legislature of the Virgin Islands
regarding Recommendation A.1, that recommendation is also
unresolved.

The Inspector General Act, Public Law 94-452, 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 to this report by
April 30, 1999.  The response should provide the information
requested in Appendix 4 and be addressed to our Caribbean Field
Office, Federal Building - Room 207, Charlotte Amalie, Virgin
Islands 00802.

We appreciate the assistance of the management and staff of the
Division of Personnel in the conduct of our audit.



                                     Sincerely,



                                     Eljay B. Bowron
                                     Inspector General




                                                  V-IN-VIS-004-98

Honorable Vargrave Richards
President, Legislature of the Virgin Islands
Post Office Box 477
Charlotte Amalie, Virgin Islands 00804

Subject:  Audit Report on Followup of Recommendations Relating to
Personnel Management Practices, Division of Personnel, Government
of the Virgin Islands (No. 99-i-365)


Dear Mr. President:

This draft report presents the results of our followup review of
recommendations contained in the July 1992 survey report entitled
"Personnel Management Practices, Division of Personnel,
Government of the Virgin Islands" (No. 92-I-1086) (see Prior
Audit Coverage).  The objective of this review was to determine
whether (1) the Virgin Islands Government satisfactorily
implemented recommendations made in the 1992 report and any new
recommendations were warranted and (2) the Early Retirement
Incentive, Training and Promotion Act of 1994 (the Early
Retirement Act) was effective in decreasing the number of
Government employees.

We found that the Government had not implemented four of the six
recommendations included in the prior report and had not complied
with the work force reduction and financing requirements of the
Early Retirement Act.  Specifically:

     -  Although the Division of Personnel took action to develop
     and implement rules and regulations for the maintenance and
     security of official personnel files, the Government did not
     (1) take action to amend the Government Reorganization and
     Consolidation Act of 1987 to remove a conflict that allowed
     the Governor to hire individuals into unclassified (exempt)
     positions that did not meet the requirements of the
     Personnel Merit System, (2) develop and implement rules and
     regulations to restrict the use of unclassified hiring and
     personal services contracts to fill positions that should
     have been a part of the classified service under the
     Personnel Merit System, and (3) review and update all
     entrance examinations used to determine the qualifications
     of applicants for positions in the classified service.

     -  Although 567 employees in the Government's Executive
     Branch elected to retire under the provisions of the Early
     Retirement Incentive, Training and Promotion Act of 1994,
     the Government did not reduce the size of the Executive
     Branch work force by a commensurate number of permanent
     positions, which would have generated potential savings in
     annual payroll costs of at least $16 million, including
     fringe benefits.  Additionally, the Government and its
     independent instrumentalities had not paid the Government
     Employees' Retirement System about $8.3 million in
     additional contributions needed to fund the early
     retirements.

To address these issues, we made two recommendations concerning
the prior survey report and two recommendations concerning the
Early Retirement Act to the Governor of the Virgin Islands and
one recommendation concerning the prior audit report to the
President of the Legislature of the Virgin Islands.

The Governor's February 26, 1999, response (Appendix 3) to the
draft report addressed in detail the recommendations contained in
our July 1992 report on the Division of Personnel, which are
summarized in Appendix 2.  In addressing the prior report's
recommendations, the Governor's response in effect adequately
addressed Recommendation A.2 in our current report.  However, the
response did not address Recommendations A.3, B.1, or B.2.
Based on  the  response,  we  consider  Recommendation A. 2
resolved but not implemented and Recommendations A.3, B.1, and
B.2  unresolved.  Accordingly, Recommendation A.2 will be
referred to the Assistant Secretary for Policy, Management and
Budget for tracking of implementation, and the Governor is
requested to respond to Recommendations A.3, B.1, and B.2 (see
Appendix 4).

Although a January 29, 1999, response date was requested for
Recommendation A.1, which was addressed to the Legislature of the
Virgin Islands, we have not received a response to the
recommendation.  Therefore, the recommendation is unresolved, and
the Legislature is requested to respond to the recommendation
(see Appendix 4).

The Inspector General Act, Public Law 94-452, 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 to this report by
April 30, 1999.  The response should provide the information
requested in Appendix 4 and be addressed to our Caribbean Office,
Federal Building - Room 207, Charlotte Amalie, Virgin Islands
00802.

We appreciate the assistance of the management and staff of the
Division of Personnel in the conduct of our audit.

                                     Sincerely,



                                     Eljay B. Bowron
                                     Inspector General


                            CONTENTS


                                                        Page

INTRODUCTION.............................................  1

     BACKGROUND..........................................  1
     OBJECTIVE AND SCOPE.................................  2
     PRIOR AUDIT COVERAGE................................  3

FINDINGS AND RECOMMENDATIONS.............................  5

     A. PRIOR SURVEY REPORT RECOMMENDATIONS..............  5
     B. EARLY RETIREMENT ACT............................. 10

APPENDICES

     1. CLASSIFICATION OF MONETARY AMOUNTS............... 16
     2. STATUS OF RECOMMENDATIONS AND CORRECTIVE
        ACTIONS FOR SURVEY REPORT "PERSONNEL
        MANAGEMENT PRACTICES, DIVISION OF PERSONNEL,
        GOVERNMENT OF THE VIRGIN ISLANDS" (NO. 92-I-1086) 17
     3. GOVERNOR OF THE VIRGIN ISLANDS RESPONSE TO THE
        DRAFT REPORT .....................................20
     4. STATUS OF AUDIT REPORT RECOMMENDATIONS............23
                        INTRODUCTION


BACKGROUND

The Division of Personnel is responsible for administering the
Personnel Merit System of the Government of the Virgin Islands.
The Merit System (Title 3, Chapter 25, of the Virgin Islands
Code, as amended) ensures that applicants and career civil
servants are provided fair and equal opportunity for employment
and defines two types of Government employees: classified and
unclassified.  Classified employees are career civil servants and
are covered by the Merit System.  Unclassified employees, as
defined by Title 3, Section 451a, of the Virgin Islands Code, are
exempt from the Merit System.  They generally work for the head
of the branch of Government or independent instrumentality to
which they were appointed.

The Division of Personnel is required to determine the
qualifications of applicants to classified positions through
competitive examinations and other selection criteria.  Under
this procedure, department and agency heads are required to
submit employment requirements for vacant positions.  The
Division certifies eligible applicants for the positions and
submits a list of qualified applicants to the appointing
authority for selection.  The Division also determines position
classifications, salary levels, and other employee entitlements
and maintains employee personnel information.  During fiscal year
1998, the Division had a staff of 52 employees and a budget of
$1.9 million, primarily for personal services costs.

On August 26, 1994, the Governor signed into law Act No. 6007,
the Early Retirement Incentive, Training and Promotion Act of
1994 (the Early Retirement Act).  The purpose of the Early
Retirement Act, as amended, was "to reduce personnel expenditures
by the Government of the Virgin Islands through a reduction in
the size of the government work force while avoiding layoffs."
To accomplish this purpose, the Early Retirement Act stated that
there would be "for a limited time, a special early retirement
incentive program to members of the Government Employees'
Retirement System of the Government of the Virgin Islands who are
eligible for retirement or who are nearing eligibility for
retirement but who, without this legislation, could not, or would
not be in a position to retire under the current provision of
law."  The Early Retirement Act stated that applications for
early retirement should be submitted no later than October 25,
1994 (60 days after enactment of the Act).

On October 13, 1994, the Governor signed into law Act No. 6028,
which, among other provisions, changed the effective date of the
early retirements from December 24, 1994 (120 days after
enactment of the Early Retirement Act), to December 31, 1994.
Further, on December 30, 1994, the Governor signed into law Act
No. 6064, which, among other provisions, changed the deadline for
applying for early retirement from October 25, 1994, to January
15, 1995, and also changed the effective date of the early
retirements from December 31, 1994, to January 31, 1995.

In December 1995, the Legislature attempted, through passage of
Act No. 6088, to further amend Act No. 6007 to extend the
deadline for applying for early retirement under the Early
Retirement Act from January 15 to December 31, 1995.  Although
the Governor vetoed the section of Act No. 6088 that would have
granted this extension and the Board of Directors of the
Government Employees' Retirement System also voted not to
implement the revised application deadline, 86 Government
employees who would have been eligible for retirement under the
December 31, 1995, deadline filed a class-action suit in the U.S.
District Court to force implementation of the proposed
legislative amendment.  In July 1997, the District Court ruled in
favor of the employees.  However, the Administrator of the
Government Employees' Retirement System stated that the legal
counsel for the Retirement System's Board of Trustees filed an
appeal in November 1997 to the District Court decision.

Based on information compiled by the Government Employees'
Retirement System and provided to the Division of Personnel, we
found that 657 employees retired under the provisions of the
Early Retirement Act (excluding the 86 employees who were ruled
by the Court to be eligible under Act No. 6088).  That number
consisted of 567 employees of the Executive Branch, 9 employees
of the Legislative and Judicial Branches, and 81 employees of
independent instrumentalities of the Government.

OBJECTIVE AND SCOPE

The objective of this audit was to determine whether (1) the
Government satisfactorily implemented recommendations made in the
July 1992 report and any new recommendations were warranted and
(2) the Early Retirement Incentive, Training and Promotion Act of
1994 was effective in decreasing the number of Government
employees.

To accomplish our audit objective with respect to the followup
portion of our audit, we reviewed the Division of Personnel's
computerized database of Executive Branch employees and the
Division's Official Personnel Record for a sample of unclassified
(exempt) employees.  In addition, we conducted a limited review
of the personal services contracts on file at the Department of
Property and Procurement for fiscal years 1996 and 1997.  With
respect to the Early Retirement Act,  we reviewed personnel
listings provided by the Office of Management and Budget for
fiscal years 1995 through 1998 and payroll registers provided by
the Department of Finance for one pay period each in fiscal years
1995 through 1998.  We limited the scope of our review to the
Executive Branch employees who retired under Act No. 6007 (as
amended by Act Nos. 6028 and 6064) because the Division of
Personnel maintained Official Personnel Records only for
Executive Branch employees and because the Board of Directors of
the Government Employees' Retirement System was in the process of
appealing the U.S. District Court decision regarding the 86
employees who were ruled to be  eligible  to  retire  under  the
proposed  extended  application  deadline contained  in  Act No.
6088.

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.

Because of the limited objective and scope of our review, we
evaluated internal controls only to the extent that they related
to corrective actions taken on the prior audit recommendations
and the Early Retirement Incentive, Training and Promotion Act of
1994.  The internal control weaknesses we identified in these
areas are addressed in the Findings and Recommendations section
of this report.  Our recommendations, if implemented, should
improve the internal controls in these areas.

PRIOR AUDIT COVERAGE

During the past 5 years, the Office of Inspector General has not
issued any audit reports on the operations of the Division of
Personnel or on the personnel management practices of the
Government of the Virgin Islands.  However, reports have been
issued within the past 10 years as follows:

     -  In March 1989, the Office of Inspector General issued the
     report "Personnel Merit System Study, Government of the
     Virgin Islands" (No. 89-63), which stated that the
     Government did not apply sound business practices in
     contracting for a study of the Personnel Merit System or
     provide proper management and accounting controls over the
     conduct of the study.  As a result, according to the report,
     the Government (1) had no assurance that it would receive an
     acceptable work product, (2) initiated work without
     completing intergovernmental personnel agreements with the
     District of Columbia Government, (3) spent at least $33,621
     on activities that could have been performed by Virgin
     Islands staff, and (4) incurred $228,662 for activities that
     were of questionable eligibility for reimbursement.  The
     report contained eight recommendations to improve procedures
     and internal controls related to the acquisition of
     consulting services and the payment of invoices related to
     such services, seek reimbursement of questioned costs, and
     take actions to complete the Personnel Merit System study.
     Five of the eight recommendations were not implemented and
     are no longer relevant because of the time that has elapsed
     since the report was issued.  However, the Personnel Merit
     System study that was the subject of the report was never
     completed.

     -  In February 1990, the Virgin Islands Bureau of Audit and
     Control issued the report "Audit of Internal Control
     Procedures for Payroll, Department of Finance" (No.
     AC-01-30-90), which stated, with regard to the Division of
     Personnel, that effective and efficient administration of
     the personnel management system was "hindered" by heavy
     reliance on manual procedures, a "flawed file maintenance
     system," and the "limited integration of the Personnel Merit
     System with the payroll system."  The report recommended
     that the Governor require the Director of Personnel to
     develop a system that would allow for the accurate and
     immediate retrieval of employee files and the integration of
     the personnel management system to allow appointments,
     terminations, pay status changes, and other personnel
     actions to be automatically processed through the payroll
     system on their effective dates.  Although we did not
     specifically follow up on these recommendations,  we
     believe, based on the results of our current review, that
     the recommendations were not fully implemented.

     - In July 1992, the Office of Inspector General issued the
     report "Personnel Management Practices, Division of
     Personnel, Government of the Virgin Islands" (No.
     92-I-1086), which stated that a conflict existed between the
     law establishing the Personnel Merit System and the 1987 law
     that allowed the Governor to reorganize the Government's
     Executive Branch.  According to the report, the Governor,
     because of this conflict, was able to appoint individuals to
     unclassified positions that would normally be filled by
     career civil servants.  These unclassified positions
     included a secretary, a cashier, a sales representative, a
     data entry clerk, a housekeeper, a maintenance worker, a
     security guard, a clerk typist, and a food service worker.
     The report further stated that (1) the number of
     unclassified employees increased, from 1987 to 1990, by 925
     (315 percent of the 1987 level), at a total additional
     salary cost of $19.5 million; (2) the Government used
     personal services contracts to fill additional positions,
     such as carpenter, mason, draftsman, and psychologist, that
     would normally be part of the career civil service; (3) the
     Government had not made any progress in correcting
     significant problems that existed in its Personnel Merit
     System; and (4) the Division of Personnel had not updated
     certain entrance examinations or adequately maintained and
     secured personnel files.  The report contained six
     recommendations, which were the primary focus of this
     followup audit.  As detailed in the Findings and
     Recommendations section of this report (see Finding A and
     Appendix 2), we considered, based on our followup audit, one
     recommendation implemented, one recommendation closed
     because it was no longer feasible, and four recommendations
     not implemented.  Subsequently, based on the Governor's
     February 26, 1999, response (Appendix 3) to the draft of
     this report, we considered three of the four outstanding
     recommendations resolved but not implemented.


FINDINGS AND RECOMMENDATIONS


A.  PRIOR SURVEY REPORT RECOMMENDATIONS

Of the six recommendations made in our July 1992 survey report
"Personnel Management Practices, Division of Personnel,
Government of the Virgin Islands" (No. 92-I-1086), we found that
one recommendation was implemented, one recommendation was
considered closed because it was no longer feasible, and four
recommendations were not implemented.  (The status of the
recommendations and the corrective actions taken for each
recommendation are in Appendix 2.)  Specifically, the Division of
Personnel took action to develop and implement rules and
regulations for the maintenance and security of official
personnel files, including limiting access to authorized
individuals.  However, the Government did not (1) take action to
amend the Government Reorganization and Consolidation Act of 1987
to remove a conflict which allowed the Governor to hire
individuals into unclassified positions that did not meet the
requirements of the Personnel Merit System (Title 3, Section
451a, of the Virgin Islands Code); (2) develop and implement
rules and regulations to restrict the use of unclassified hiring
and personal services contracts to fill positions that should
have been a part of the classified service under the Personnel
Merit System; and (3) review and update all entrance examinations
used to determine the qualifications of applicants for positions
in the classified service.  In addition, the collection of the
$3,942 overpayment was not considered feasible because of the
lack of documentation to bill the personal services contractor.
The then-Governor disagreed with the findings and recommendations
in the prior report and did not take actions to implement the
recommendations.  As a result, positions that should have been
part of the classified service were filled through unclassified
appointments and personal services contracts--actions that were
not in compliance with the intent of the Personnel Merit System.
At least 76 unclassified positions, with annual salary costs
totaling more than $2 million, should have been filled as
classified positions under the Personnel Merit System.  In
addition, the Division of Personnel was unable to provide an
accurate, current, and complete list of all Government employees.

Personnel Management Practices

Title 3, Section 451a, of the Virgin Islands Code defines the
categories of employees in the Government Service as follows:

       (a) The Government Service includes the career service and
       the positions exempted from the career service.

       (b) The exempt positions are those of -
             (1) department heads, assistant Commissioners and
             Deputy Commissioners and members of boards,
             commissions or other bodies appointed by the
             Governor;
             (2) members and staff of the Legislature, officers
             elected by popular vote, and persons appointed to
             fill vacancies in elective offices;
             (3) Judges of the Municipal [now-Territorial] Courts
             and employees of the Judicial Branch;
             (4) patients and inmates employed in government
             institutions;
             (5) casual labor hired on a hourly basis for not
             more than 40 hours in any one quarter and as
             specifically authorized by law; part-time labor for
             less than 20 hours per week for not more than
             six-months; trainees for not more than one six-month
             period; and persons employed for less than six
             months in professional, scientific or other similar
             capacity on temporary projects, inquiries,
             investigations, or examinations;
             (6) employees located outside the Virgin Islands;
             (7) employees of the -
                (I)    University of the Virgin Islands;
                (ii)   Virgin Islands Water and Power Authority;
                       and
                (iii)  Virgin Islands Port Authority; and
             (8) an officer or employee in a position of a
             policy-determining nature; employee who is a special
             assistant, or who is on special assignment to, or
             whose position requires a confidential relationship
             to a policy-making official when the position is so
             designated by the Governor and approved by the
             Legislature.

       (c) All positions in the Executive Branch of the Virgin
       Islands Government not exempted under subsection (b) of
       this section shall be in the career service.

Additionally, a U.S. Court of Appeals decision explained that
Section 451a "reflects a clear legislative policy that all
employees in the executive branch must, unless they fit within
the exceptions in this section, be considered members of the
career service if they work twenty or more hours per week."
(Richardson v. Felix, 856 F.2d 505, 511 (3d Cir 1988))

However, as stated in our 1992 report, when the Legislature of
the Virgin Islands passed Act No. 5225 in December 1986 and Act
No. 5265 (the Government Reorganization and Consolidation Act of
1987) in June 1987, the Acts allowed the Governor to classify and
reclassify any positions within the Government as part of a
reorganization plan in order to accomplish the intended
reorganization of the Executive Branch.  Because the Acts did not
establish a specific expiration date for the Governor's
unrestricted classification and reclassification authority, the
Governor, since that time, has not complied with the restrictions
on unclassified positions stated in Title 3, Section 451a, of the
Virgin Islands Code.

Specifically, based on computerized records maintained by the
Division of Personnel, we identified about 1,700 active
Government employees who were in unclassified (exempt) positions
as of April 1998.  We reviewed a sample of 151 of these
unclassified positions and found that 76 positions (50 percent),
with annual salaries totaling more than $2 million, should have
been filled as classified positions under the Personnel Merit
System.  For example, employees were hired to unclassified
positions as an office aide, a receptionist, a secretary, a
clerk, a general clerk, a driver, a domestic aide, and a
lifeguard.  This practice was not in compliance with Title 3,
Section 452(a)(1), of the Virgin Islands Code, which states that
the Director "shall . . . establish and maintain a system of
personnel administration based on merit principles and scientific
methods governing the appointment, promotion, transfer, layoff,
removal and discipline of the officers and employees of the
Government."  In our opinion, based on the specific requirements
of Title 3, Section 451a, of the Virgin Islands Code, these
positions should have been filled as classified positions under
the Personnel Merit System.

In addition, we found that the Government continued the practice
of using personal services contracts to fill positions similar to
those that existed under the Personnel Merit System.  We limited
the scope of our review of personal services contracts because
the Virgin Islands Bureau of Audit and Control was conducting a
detailed audit of such contracts on a Governmentwide basis.
However, based on our limited review of personal services
contracts on file at the Department of Property and Procurement
for fiscal years 1996 and 1997, we found that personal services
contracts were executed to hire individuals to such positions as
an office manager, a field inspector, and a clerk, all of which
would be under the career service classifications of the
Personnel Merit System.  Additionally, the Director of Personnel
said that he was not aware of an overpayment of $3,942 made to a
personal services contractor that was disclosed in the prior
survey report.  During our September 11, 1998, meeting on the
preliminary draft of this report, Division of Personnel officials
informed us that pertinent contract data were not available to
the Division for it to effectively take action to collect the
overpayment from the contractor.  Therefore, we considered
Recommendation 4 from our July 1992 report to be closed because
there are no pertinent documents available to initiate the
billing process.

The Legislature's legal counsel said that no efforts had been
made by the Legislature to amend the Reorganization Act of 1987
or Title 3, Chapter 25, of the Virgin Islands Code to limit the
Governor's authority to fill positions that should be filled
through the Personnel Merit System.  As a result, the Personnel
Merit System is unable to ensure that applicants and career civil
servants are provided fair and equal opportunities for employment
and advancement.

Entrance Examinations

The Division of Personnel administered entrance examinations for
such positions within the Government as a firefighter, an account
clerk, an internal revenue officer, a voucher examiner, a
cashier, and a medical records clerk.  In July 1996, the
Division's Supervisory Personnel Analyst on St. Thomas and a
Human Resources Specialist on St. Croix received introductory
training necessary to update entrance examinations to reflect the
current technology, standards, and other factors related to each
position to be tested.  Despite this training, the only
examination to be updated since the 1980s was the promotional
examination for Fire Service employees, and that examination was
updated by a consultant at a cost of about $2,000.  The Assistant
Director of Personnel told us that the Division did not update
other entrance examinations because of a lack of funding.

We reviewed the pass/fail rate for all examinations administered
by the Division during fiscal years 1995 through 1998 and found
that of the 685 examinations administered to individual
applicants during that period, 365 examinations (53 percent) had
failing scores.    In our June 1992 report, we stated that
because significant changes in accounting standards had "been
incorporated into accounting textbooks . . . obsolete and
unfamiliar material in the [accounting] examination may have
contributed to the high failure rate for recent accounting
graduates."  Similarly, the high failure rate identified by our
current review may be attributable to the additional changes that
have been made in accounting standards and in other technical
fields, such as data processing, since 1992, when the prior
report was issued.

Personnel Records

Based on our review, we concluded that, although the Division of
Personnel had improved the security and control of official
personnel records, it was unable to provide an accurate, current,
and complete list of Government employees.  Title 3, Section
452(a)(4), of the Virgin Islands Code states that the Director of
Personnel, under the general supervision of the Governor, "shall
. . . establish and maintain a roster of all employees in the
Government Service, in which there shall be set forth, as to each
employee, the class title of the position held; the compensation;
any change in class title, pay or status; and any other necessary
data."

As part of our review of unclassified employees, we requested a
list of all current Government employees from the Division.  The
Division was not able to provide this information and instead
provided us with a computerized list of all Government employees
who had a Notification of Personnel Action[1] processed through
the Division's computer system.  This list, which was provided
electronically as of April 6, 1998, contained 17,295 entries.
However, we found that the computerized list (1) included
employees who were deceased, were terminated, had resigned, or
had retired; (2) included employees of non-Executive Branch
agencies; and (3) did not contain all current Government
employees who had a Notification of Personnel Action.  In
addition, we found that in April 1998, the Director of Personnel
sent a memorandum to all department and agency heads which stated
that the "Division of Personnel is attempting to reconcile its
master personnel listing with each Government agency and/or
department which comprises the Executive Branch." (Emphasis in
original.)  The memorandum further stated that "it is critical
that the Division of Personnel maintain an accurate count of the
Government's work force."  Accordingly, we concluded that the
Division of Personnel recognized the limitations with respect to
its computerized list of Government employees and was taking
action to correct the deficiency.


**FOOTNOTES**

[1]:A Notification of Personnel Action (commonly referred to as a
NOPA) is a Government document used to authorize the hiring of an
individual to a Government position; approve salary increases,
promotions, and transfers; and document resignations,
terminations, and leaves of absences.  The notification contains
pertinent personal information including name, address, date of
birth, Social Security number, position classification, salary,
and original date of entry into Government service.
Recommendations

We recommend that the Legislature of the Virgin Islands:

     1.  Reconsider Recommendation 1 from our July 1992 report
     (see Appendix 2) and develop a plan that identifies the
     specific corrective actions to be taken to amend the
     Government Reorganization Act, including the title of the
     responsible official and the target date to fully implement
     the recommendation.

We recommend that the Governor of the Virgin Islands:

     2.  Reconsider Recommendations 2, 3, and 5 from our July
     1992 report (see Appendix 2) and develop a plan that
     identifies the specific corrective actions to be taken to
     develop and implement rules and regulations for hiring
     employees to unclassified positions and for using personal
     services contracts and to update all employee entrance
     examinations.  The titles of the responsible officials and
     the target dates to fully implement the recommendations
     should be provided as part of the plan.

     3.  Require the Division of Personnel to establish
     computerized databases for current and former Government
     employees which allow Government managers to obtain timely
     and accurate information on all current Government employees
     and on different categories of former employees, such as
     retirees.

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

We did not receive a response from the Legislature of the Virgin
Islands to Recommendation 1.  Therefore, the recommendation is
unresolved (see Appendix 4).

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

The February 26, 1999, response (Appendix 3) to the draft report
from the Governor of the Virgin Islands addressed in detail the
recommendations contained in our July 1992 report on the Division
of Personnel, which are summarized in Appendix 2.  In addressing
the prior report's recommendations, the response in effect
adequately addressed Recommendation 2 in our current report.
However, the response did not address Recommendation 3.  Based on
the response, we consider Recommendation 2 resolved but not
implemented and Recommendation 3 unresolved  (see Appendix 4).

B.  EARLY RETIREMENT ACT

Although 567 employees in the Government's Executive Branch
elected to retire under the provisions of the Early Retirement
Incentive, Training and Promotion Act of 1994, the Government did
not reduce the aggregate number of filled positions by one
permanent position for each employee who elected early
retirement, as required by the Act.  Therefore, neither the size
of the Government work force nor the amount of personal services
expenditures was reduced to meet the purpose and intent of the
Act.  In addition, we found that although the Government
Employees' Retirement System billed both the Government and its
independent instrumentalities on a quarterly basis for retirement
contributions due the Retirement System as a result of the Early
Retirement Act, the Government did not remit its portion of
contributions to the Retirement System.  This occurred because of
the Government's limited cash resources to pay all of its
obligations in a timely manner.  As a result, although the number
of Executive Branch employees should have been decreased by 567
employees after implementation of the Early Retirement Act, with
a potential savings of at least $16 million in annual payroll
costs, such a reduction in the Government work force did not take
place.  Additionally, the Government Employees' Retirement System
had not received contributions of about $8.3 million from the
Government and its independent instrumentalities that were
necessary to fund the additional costs of the Early Retirement
Act.

Retirement Act Requirements

The purpose of the Early Retirement Act (Act No. 6007, as amended
by Act Nos. 6028 and Act No. 6064) was intended to reduce the
deficit of the Government of the Virgin Islands through an early
retirement incentive program for Government employees.  Those
employees who elected to retire under the provisions of the Act
were required to file applications no later than January 15,
1995, with the retirements becoming effective on January 31,
1995.  In addition, the Act allowed the Government to designate
up to 33 percent of electing employees who were classified as
essential to continue to provide service to the Government under
an employment contract for up to 180 days.  Our review of
personnel files at both the Division of Personnel and the
Government Employees' Retirement System for 42 of the early
retirees showed that the files contained sufficient documentation
to verify that the employees elected early retirement in
accordance with the Act.  Similarly, based on our review of
employment contracts for the 149 "designated members,"[2] we
found that the total number of contracts did not exceed the
maximum number (189) allowed by the Act.  In addition, we did not
find any documentation or other information which indicated that
any "designated member" worked in excess of the 180-day maximum
allowed by the Act or that any "designated member" reentered
Government service without first canceling his or her annuity, as
required by the Act.  However, we found that the Government did
not comply with the provisions of the Early Retirement Act with
respect to (1) reducing the size of the Government's Executive
Branch work force and (2) financing the Act.  During our
September 11, 1998, meeting on the preliminary draft of this
report, the Director of Personnel noted that the Early Retirement
Act did not designate which Government agency was responsible for
monitoring the requirements of the Early Retirement Act.

Reduction in the Government's Work Force

Section 7 of Act No. 6007 (the Early Retirement Act), as amended
by Act No. 6064, states:

     (a) Commencing upon the effective date of this Act, the
     Governor shall reduce the aggregate number of filled
     positions in the Government of the Virgin Islands by one
     permanent position for each employee of the Government
     electing early retirement under this Act.

     (b) No later than 30 days following enactment of this Act,
     the Governor shall provide to the Legislature the total
     number of filled positions in the Government of the Virgin
     Islands as of the date of enactment of this Act.  The
     maximum number of persons employed by the Government of the
     Virgin Islands, at any time during the five years
     immediately following enactment of this Act, may not exceed
     the total number of filled positions in the Government, as
     [of] the date of enactment of this Act, reduced by the
     number of employees electing to retire under the provisions
     of this Act.

Despite the requirement of Subsection 7(b), the Legislature's
Post Audit Division could not confirm whether the required
information on the number of filled positions as of the date of
enactment of the Act was ever provided to the Legislature.
Because we were not able to obtain the number of employees within
the Executive Branch as of the date of enactment of the Act, we
expanded the scope of our review to include an analysis of the
personnel listings maintained by the Office of Management and
Budget and the payroll registers maintained by the Department of
Finance for early fiscal year 1995 (prior to the January 31,
1995, effective date of the Early Retirement Act) and fiscal
years 1996 through 1998 (after the effective date of the Act) to
determine whether there was a reduction in the Government's work
force.

In January of each year, the Office of Management and Budget sent
personnel listings to Executive Branch agencies of the Government
for verification of budgeted positions as part of the annual
budget process.  The personnel listings, which were subsequently
submitted to the Legislature, detailed, by agency, the following
information: employee name, position title, budget control
number, and annual salary.  Our analysis of the personnel listing
for fiscal year 1995 showed that, as of November 1994 (the
available listing closest to the effective date of the Early
Retirement Act), there were 10,389 budgeted (not necessarily
filled) positions within the Executive Branch.  Therefore, in
accordance with the Early Retirement Act, the number of budgeted
positions for the Executive Branch at any time during the 5 years
immediately following its enactment of the Act should not have
exceeded 9,822 (10,389 budgeted positions less 567 early
retirees).  However, our analysis of the personnel listing for
the 3 subsequent years showed that there were 10,483 budgeted
positions in fiscal year 1996, 9,901 budgeted positions in fiscal
year 1997, and 10,804 budgeted positions in fiscal year 1998.
Therefore, we concluded that the Government's budget process did
not take into consideration the reduction in the Government's
work force that was required by the Early Retirement Act for the
3 fiscal years following enactment of the Act.

In January 1998, the Office of Management and Budget prepared a
document for the Division of Personnel that summarized the total
number of filled positions and total salary costs for the
Executive Branch for fiscal years 1992 through 1997.  According
to the Deputy Director of Management and Budget, the information
was compiled from Management and Budget's analysis of the
personnel listings (discussed previously) that were submitted to
the Legislature as part of the budget process.  Our review of
Management and Budget's analysis showed that, in fiscal year 1995
(before the effective date of  the Early Retirement Act), there
were 10,315 filled positions within the Executive Branch.
Therefore, in accordance with the Early Retirement Act, the
number of filled positions for the Executive Branch at any time
during the 5 years immediately following enactment of the Act
should not have exceeded 9,748 (10,315 filled positions less 567
early retirees).  However, based on our review of Management and
Budget's analysis for the 2 subsequent years (fiscal year 1998
data were not available), we determined that there were 9,996
filled positions in fiscal year 1996 and 10,095 filled positions
in fiscal year 1997.  As such, we concluded that the Government's
actual work force was not reduced to the number required by the
Early Retirement Act for the 2 fiscal years following enactment
of the Act.

We also analyzed the payroll registers at the Department of
Finance for one pay period in each of fiscal years 1995 through
1998.  The payroll registers were generated on a biweekly basis
to reflect the gross pay and net pay for each employee of the
Government.  Our analysis showed that, as of November 1994
(before the effective date of the Early Retirement Act), there
were 9,901 paid employees within the Executive Branch.
Therefore, in accordance with the Early Retirement Act, the
number of paid employees at the Executive Branch at any time
during the 5 years immediately following its enactment of the Act
should not have exceeded 9,334 (9,901 paid employees less 567
early retirees).  However, our analysis of the payroll registers
for February of the 3 subsequent fiscal years showed that there
were 9,901 paid employees in fiscal year 1996, 9,931 paid
employees in fiscal year 1997, and 9,894 paid employees in fiscal
year 1998.  Therefore, we concluded that the Government's actual
payrolls were not reduced to the number required by the Early
Retirement Act for the 3 fiscal years following enactment of the
Act.

We conducted these three similar analyses because a definitive,
certified, accurate list of Government employees was not
available and the three primary sets of records that were
available had significant differences.  However, as shown in
Table 1, each of the records shows that the Early Retirement Act
did not achieve its primary objective of reducing the size of the
Government's work force, at least with regard to the Executive
Branch.

     Table 1: Executive Branch Employees by Fiscal Year


      Fiscal   Budgeted      Filled       Paid
      Year     Positions     Positions    Employees    Average

      1995     10,389        10,315       9,901        10,202
      1996     10,483         9,996       9,901        10,127
      1997      9,901        10,095       9,931         9,976
      1998     10,804          N/A        9,894        10,349

Base Target *   9,822         9,748       9,334         9,635
__________
* "Base Target" consists of the number of employees in fiscal
year 1995 less the 567 employees who retired under the Early
Retirement Act.

Sources:
- The "Budgeted Positions" are based on personnel listings
prepared by the Virgin Islands Office of Management and Budget as
part of the annual Executive Budget preparation process.
- The "Filled Positions" are based on an analysis prepared by the
Virgin Islands Office of Management and Budget in January 1998.
- The "Paid Employees" are based on payroll registers prepared by
the Virgin Islands Department of Finance for pay periods in
November 1994 and in February 1995, 1996, and 1997.

Assuming an average annual salary of $25,000, we determined that,
had the Government's work force been reduced in accordance with
the requirements of the Early Retirement Act, the Government
could have saved an estimated $16 million in annual salary costs
(including associated fringe benefit costs).

Financing of the Early Retirement Act

The Early Retirement Act requires that the Government make
regular contributions to the Government Employees' Retirement
System for each employee electing to retire under the provisions
of the Act.  For each employee who retired under the provisions
of Section 4, Subsections (a) and (b),[3] the Act requires that

. . . a sum equal to the employer and employee contribution that
would have been made had the employee not elected to retire under
the provisions of this Act, . . . be paid in three installments
during Fiscal Year 1995 and quarterly during each successive
fiscal year by each organization of Government, and continuing
for the period that would otherwise have been required for the
employee to reach the age of sixty-two (62).

In addition, for each employee who retired under the provisions
of Section 4, Subsection (c),[4] the Act requires that

. . . a sum [be paid] equal to the additional contribution the
employer and employee would have made had the employee received a
salary four percent higher during the three years used to compute
the employee's "average compensation" figure, plus a sum of
$5,000 representing the present value of the additional annuity
such employee will receive over the next ten years, such payment
to be made in a lump sum in the fiscal year in which withdrawal
from service by electing members becomes effective.

In order to implement these provisions, the Legislature, in
fiscal year 1995, appropriated $6.3 million from the Government's
General Fund to the Government Employees' Retirement System.

The Consulting Actuary of the Government Employees' Retirement
System estimated that additional contributions (for fiscal years
1994 through 2014) due the Retirement System for employees who
elected early retirement would total about $20 million.  Based on
information provided to us by the Government Employees'
Retirement System, the Retirement System, as of March 31, 1998,
billed the Executive, Legislative, and Judicial Branches of the
Government a total of $14.4 million for quarterly contributions.
However, except for the initial appropriation of $6.3 million,
the Government had not made any quarterly contributions to the
Retirement System.  Therefore, as of March 31, 1998, the
Government owed the Retirement System about $8.1 million for
outstanding quarterly contributions  for employees who elected
early retirement.  Additionally, the Retirement System, as of
March 31, 1998, billed the Government's independent
instrumentalities  a  total of $994,700, of which $788,200 had
been paid.  Therefore, the independent instrumentalities, as of
March 31, 1998, owed  $206,500.  The Retirement System's
Administrator stated that, because the Government has not made a
quarterly payment to the Retirement System for the early
retirees, contributions received by the Retirement System for
regular employees were being used to pay the retirement annuities
of the early retirees.


**FOOTNOTES**

[2]:As referred to in the Act, the term "designated member" means
an employee designated by the appropriate executive authority to
continue to provide service to the Government under an employment
contract notwithstanding the employee's early retirement.  An
"appropriate executive authority" would be the Governor, the
President of the Legislature, the Presiding Judge of the
Territorial Court, or the board of directors of the Government's
independent instrumentalities.

[3]:Section 4(a) of the Early Retirement Act states,
"Notwithstanding the provisions of subsection (d) of Section 705
[of the Virgin Islands Code], any member of the Government
Employees Retirement System who has or will have a combined
aggregate number of years of credited service completed, plus
number of years of age attained, equal to at least seventy-five
(75) years total as of December 31, 1994 may retire under the
provisions of this Act notwithstanding his age without reduction
of annuity."

Section 4(b) of the Early Retirement Act states, "For the
purposes of meeting the conditions for service retirement
pursuant to Section 705 [of the Virgin Islands Code], any member
of the Government Employee's Retirement System who is age fifty
(50) years with ten (10) but less than thirty (30) years of
credited service as of December 31, 1994 may add an additional
three years to their age for the purposes of that Section."

[4]:Section 4 (c) of the Early Retirement Act states, "For the
purpose of computing the service retirement annuity, under
Section 706 (a) [of the Virgin Islands Code], for an employee
electing to retire under the provisions of this Act who is
eligible to retire without penalty under the provisions of
Section 705 [of the Virgin Islands Code], or who has already
completed 30 years of service, as of December 31, 1994, and
without regard to the benefit provided under subsections (a) or
(b) of this section, the average compensation figure used shall
be increased by four (4) percentage points, subject to the
limitations of Section 706(a) and (d) [of the Virgin Islands
Code]."

Recommendations

We recommend that the Governor of the Virgin Islands:

1. Develop and implement a plan of action, which incorporates a
hiring freeze and an attrition program, that will reduce the size
of the Government work force in accordance with the requirements
of the Early Retirement Incentive, Training and Promotion Act of
1994 (Act No. 6007, as amended).

2.  Require the Department of Finance to establish a payment plan
to remit the outstanding balance of $8.1 million to the
Government Employees' Retirement System for employees who elected
early retirement and to make a commitment to remit retirement
contributions to the Government Employees' Retirement System in a
timely manner.  The independent instrumentalities should also be
required to pay the retirement contributions of $206,500 that
they owed the Retirement System.

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

The February 26, 1999, response (Appendix 3) to the draft report
from the Governor of the Virgin Islands addressed in detail the
recommendations from our July 1992 survey report on the Division
of Personnel, which are summarized in Appendix 2.  However, the
response did not address the new recommendations made as a result
of our current audit.  Therefore, Recommendations 1 and 2 are
unresolved (see Appendix 4).
                                                       APPENDIX 1


               CLASSIFICATION OF MONETARY AMOUNTS


                                                 Funds To Be Put
    Finding Area                                   To Better Use*

A.  Prior Audit Followup
     Personnel Management Practices            $2,000,000

B.  Early Retirement Act
     Reduction in the Government's Work Force  16,000,000
     Financing of the Early Retirement Act      8,300,000

     Total                                    $26,300,000


_______________________
*The amounts represent local funds.
                                                       APPENDIX 2
                                                      Page 1 of 3


                    STATUS OF RECOMMENDATIONS
                     AND CORRECTIVE ACTIONS
                        FOR SURVEY REPORT
                "PERSONNEL MANAGEMENT PRACTICES,
                     DIVISION OF PERSONNEL,
                GOVERNMENT OF THE VIRGIN ISLANDS"
                         (No. 92-I-1086)


Recommendations

To the Legislature of the Virgin Islands:

1.  Amend the Reorganization Act of 1987 to limit the Governor's
hiring authority to positions that meet the requirements of the
Personnel Merit System (Title 3, Section 451a, of the Virgin
Islands Code) for unclassified positions.

To the Governor of the Virgin Islands:

2.  Develop and implement rules and regulations for the hiring of
employees to unclassified positions.  Such rules and regulations
should restrict the use of unclassified positions to those
categories specifically provided for in Title 3, Section 451a, of
the Virgin Islands Code.

Status of Recommendations and Corrective Actions

Not implemented.  According to the Legislature's legal counsel,
the Legislature did not amend the Reorganization Act to limit the
Governor's hiring authority.

Not implemented.  We reviewed the Division of Personnel's
"Personnel and Procedures Manual" and found that there were no
provisions regarding the hiring of employees to unclassified
positions.  Based on our analysis of a sample of  151 of the
approximately 1,700 unclassified employees of the Executive
Branch of the Government, we found that 76 (50 percent)
positions, with more than $2 million in annual salaries, should
have been filled by individuals hired under the Personnel Merit
System, in accordance with Title 3, Section 451a, of the Virgin
Islands Code.

Recommendations

3.  Develop and implement rules and regulations for the use of
personal services contracts.  Such rules and regulations should:

-  Restrict the use of personal services contracts to fill
positions either which are similar to positions that already
exist under the Personnel Merit System or which should be added
to position classifications under the Personnel Merit System.

-  Establish controls to ensure that the Director of Personnel
reviews and authorizes such contract actions.

4.  Obtain reimbursement of $3,942 for the overpayment on a
personal services contract for a permits administrator.

5.  Require the Director of Personnel to review all entrance
examinations currently being used by the Division of Personnel
and update those examinations to reflect the current technology,
standards, and other factors related to each position to be
tested.


                                                       APPENDIX 2
                                                      Page 2 of 3

Status of Recommendations and Corrective Actions

Not implemented.  Based on our review of the Division of
Personnel's "Personnel and Procedures Manual," we found no
provisions regarding the use of personal services contracts.
Further, Personnel officials said that they were only in the
"loop" with respect to personal services contracts and that the
Director of Personnel conducted only a "cursory" review of the
contract, either signed or initialed the contract, and then
passed the contract along with actions they said were in
accordance with the Department of Property and Procurement's
routing schedule.  The Division of Personnel did not maintain
copies of the contracts.  Moreover, Personnel officials told us
that there was no assurance that all personal services contracts
were routed through the Division of Personnel for review.  Based
on our limited review of personal services contracts, we found
that the practice of using these contracts to fill positions
already existing under the Personnel Merit System continued, in
that there were contracts for positions such as office manager,
clerk, and field inspector.

Closed.  Contract data to effectively follow up on this
recommendation were not available.  Therefore, we consider
implementation of the recommendation no longer feasible.

Not implemented.  Although two employees of the Division of
Personnel received introductory training  needed to update
entrance examinations to reflect the current technology,
standards, and other factors related to each position to be
tested, the Division had updated only one examination since the
early 1980s.


                                                       APPENDIX 2
                                                      Page 3 of 3

Recommendations

6.  Develop and implement rules and regulations for the
maintenance and security of official personnel files, including
limiting access to official personnel files to authorized
individuals.  Chapter 293 of the Federal Personnel Manual should
be used as a guide for such rules and regulations.

Status of Recommendations and Corrective Actions

Implemented.  The Director of Personnel issued a memorandum in
November 1992 to the staff of the Division of Personnel entitled
"Official Personnel Records Access Procedure."  The memorandum
contained procedures for the maintenance of and access to the
Official Personnel Records maintained by the Division of
Personnel.  The procedures ensured that (1) all employee
personnel files were consistently maintained in accordance with
current personnel practices and applicable Virgin Islands and
Federal laws, (2) employee personnel files were properly
safeguarded and protected, and (3) there was a logical and
systematic method to restrict access to data maintained in the
employee personnel files.


                                                       APPENDIX 3
                                                      Page 1 of 3

GOVERNOR OF THE VIRGIN ISLANDS RESPONSE

                                                       APPENDIX 4

STATUS OF AUDIT REPORT RECOMMENDATIONS


Finding/Recommendation
Reference

A.1

A.2

A.3

B.1 and B.2

Status

Unresolved.

Resolved; not implemented.

Unresolved.

Unresolved.

Action Required

The Legislature of the Virgin Islands should provide a response
to the recommendation indicating concurrence or nonconcurrence.
If concurrence is indicated, an action plan should be provided
that identifies the target date and the title of the official
responsible for implementing the recommendation.  If
nonconcurrence is indicated, reasons for the nonconcurrence
should be provided.

No further response to the Office of Inspector General is
required.  The recommendation will be referred to the Assistant
Secretary for Policy, Management and Budget for tracking of
implementation.

The Governor of the Virgin Islands should provide a response to
the recommendation indicating concurrence or nonconcurrence.  If
concurrence is indicated, an action plan should be provided that
identifies the target date and the title of the official
responsible for implementing the recommendation.  If
nonconcurrence is indicated, reasons for the nonconcurrence
should be provided.

The Governor of the Virgin Islands should provide a response to
each recommendation indicating concurrence or nonconcurrence.  If
concurrence is indicated, action plans should be provided that
identify the target dates and the titles of the officials
responsible for implementing the recommendations.  If
nonconcurrence is indicated, reasons for the nonconcurrence
should be provided.




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
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Mail Stop 5341
Washington, D.C. 20240

Calling:

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

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1-800-354-0996



Outside the Continental United States


Caribbean Region

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Office of Inspector General
Eastern Division- Investigations
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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
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Suite 807, PDN Building
Agana, Guam 96910


Calling:
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COMM 9-011-671-472-7279