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1 GOVERNMENT OF THE UNITED STATES VIRGIN ISLANDS OFFICE OF THE V. I. INSPECTOR GENERAL 2315 Kronprindsens Gade #75, Charlotte Amalie, St. Thomas, V. I. 00802-6468 100 Lagoon Complex, Suite 8, Frederiksted, St. Croix, V. I. 00840-3912 Tel: (340) 774-3388 STT DELIA M THOMAS (340) 778-9012 STX V.I. INSPECTOR GENERAL Fax: (340) 774-6431 STT (340) 772-3677 STX OFFICE OF THE VIRGIN ISLANDS INSPECTOR GENERAL Fiscal Year 2025 Budget Proposal INTRODUCTION Good afternoon, Senator Donna Frett-Gregory, Chairperson of the Committee on Finance, esteemed members of the Committee, other distinguished members of the 35th Legislature, and all those in the viewing and listening audience. I am Delia Thomas, the Virgin Islands Inspector General and with me today is Mr. Lucas Pascal, Director of Budget Affairs. Today, I am here to present the proposed Fiscal Year 2025 Budget for the Office of the Virgin Islands Inspector General, a budget that is crucial for the effective operations of our office. STATE OF THE V.I. INSPECTOR GENERAL’S OFFICE The Office of the Virgin Islands Inspector General’s mission is “to promote economy, efficiency, and effectiveness, and to further the prevention of fraud, waste, and abuse in the administration of the programs and operations of the Government of the Virgin Islands.” We are an agency of 19 employees, comprising 11 auditors, one investigator, and seven administrative and support staff. The auditors and investigators are the core of our operations, as they are the ones on the field performing the assignments. 2 Currently, we have three vacant positions, including two Senior Special Investigators and the Deputy Virgin Islands Inspector General. As we continue to build our staff, we intend to hire more auditors, investigators, and other personnel as needed and as the budget permits. Our Organizational Chart can be found on page 9. Fiscal Year 2024 Highlights: During Fiscal Year 2024, we hired one entry-level auditor and a Director of Budget Affairs. However, at this point, we had hoped to have a Senior Special Investigator on staff. Despite this, I am optimistic about our hiring plans and believe we will have a Senior Special Investigator on staff by the end of the first quarter of Fiscal Year 2025. Peer Review: During the week of November 27, 2023, our office underwent a peer review for the period October 1, 2020, to September 30, 2023. This peer review was performed by the Association of Local Government Auditors. A peer review is essentially a review of auditors' work by their fellow auditors. It helps to monitor auditing practices and promote and enhance the quality of the services provided, ensuring compliance with Generally Accepted Auditing Standards. Peer reviews are required for quality control and must occur every three years. Our next peer review is scheduled for 2026. I am happy to report that we have successfully received a pass rating. A copy of this report was provided to the Governor and the President of this legislature, and it can also be found on our website. Because this is a reciprocal program, some of our auditors will participate in peer review training in Fiscal Year 2025. This will allow our auditors to participate in peer reviews of other state and local governments across the country, inevitably strengthening internal control processes over our audits and inspections. 3 Staff Training: During Fiscal Year 2024, our staff took advantage of several professional training opportunities. From December 11-15, 2023, through the Pacific and Virgin Islands Training Initiatives program, we received training on Planning Audit Assignments and Skills for Leading and Managing Audit Projects. From April 22-26, 2024, our newly-hired auditor traveled to attend a Basic Governmental Auditing Course in Washington, DC, offered by the Graduate School USA. Also, from May 5-8, 2024, auditors participated virtually in the Association of Local Government Auditors (ALGA) 2024 Annual Conference. In addition, from June 23-28, 2024, the audit and investigative staff participated, in-person or virtually, in the Annual Association of Certified Fraud Examiners (ACFE) Global Fraud Conference held in Las Vegas, Nevada. These training opportunities provided the annual training hours required by the Government Auditing Standards and to satisfy the Certified Fraud Examiners (CFE) credentials. AUDIT AND INSPECTION ASSIGNMENTS: Currently, our auditors are actively engaged in several ongoing audits and inspection assignments. The government sectors involved include the Virgin Islands Water and Power Authority, the Taxicab Commission, the East End Medical Center, the Government Employees Services Commission Board (GESC), the Department of Education, the Office of Management and Budget, and the Virgin Islands Police Department. Furthermore, in the next few weeks, we will be scheduling exit conferences with the Department of Education concerning the Education Initiative Fund, and the Department of Agriculture on the Inspection of the Management of the Agriculture Revolving Fund. We aim to have these reports issued by the end of this fiscal year. 4 Ongoing Assignments: The Virgin Islands Taxicab Commission. This audit has proven very labor intensive, as the Commission records are maintained manually, rather than electronically. In addition to the two auditors initially assigned, we added one more to this assignment. At this stage, we are mid-way through the fieldwork phase of this assignment. This audit aims to determine if the Commission, through fiscal years 2018-2022, properly issued taxi licenses and medallions, inspected taxicabs, and accounted for collections and expenses per the VI Code and other established rules and regulations. The Virgin Islands Water and Power Authority (WAPA). We are in the process of hiring a consultant to assist in the Water and Power Authority’s audits, which will address areas specific to Bill No. 35-0061, Act No. 8731. This consultant will assist us in addressing the Vitol propane contract and the 2-million-dollar offshore payment. In addition, the contractor will serve as a consultant to our lead auditors on other aspects of the assignment. We are working with the Department of Property and Procurement to implement this contract. In addition, we are working on the following WAPA assignments: 1. Audit of the Application of WAPA Employee's Loan Payments. This audit is near completion, and we expect to issue a letter report by the end of the first quarter of fiscal year 2025. The objective of this audit is to determine whether monies WAPA deducted from employees’ salaries for loan payments were transmitted to the respective financial institutions for calendar years 2021 and 2022. 2. WAPA’s Billing and Collections for calendar years 2021, 2022, and other appropriate periods. This audit is an extensive assignment and is currently in the fieldwork phase. The 5 objective of this audit is to determine whether (1) WAPA followed its policies and procedures for accurate and timely billing, (2) the Advanced Metering Infrastructure (AMI) improved the accuracy and timeliness of billing, and (3) WAPA did its due diligence in managing the collection of delinquent accounts. 3. WAPA’s Contracting Practices from October 2017 to December 2022. This recently started inspection aims to determine whether WAPA solicited, awarded, and monitored contracts following its policies and procedures and applicable laws and regulations. The East End Medical Center: At the request of the Board’s Chairperson, we have commenced an Inspection of the East End Medical Center’s leases and contracted agreements to determine whether they followed established laws, policies, and procedures from 2018 through 2023. The Government Employees Services Commission (GESC) Board: Our office has initiated an audit of its expenditures to determine if the Board expended funds per established laws, rules, and regulations and met its reporting requirements. The audit scope is Fiscal Years 2018 through 2022. We are in the early stage of this audit. The Office of Management and Budget, the Department of Education, and the Virgin Islands Police Department: At the request of the Honorable Governor Albert Bryan Jr., we have been asked to audit these departments' contracting practices. This assignment is in the planning stage. 6 It must be noted that these assignments are performed by teams of auditors. Of the 11 auditors on staff, six are assigned to WAPA's audits and three auditors to the Taxi-cab Commission audit. This means that all ongoing assignments require auditors to be assigned to more than one audit or inspection while ensuring the same quality of due diligence for each project. Also, in addition to our assignments, we continue to make ourselves available to assist Federal auditors regarding activities they plan on conducting in the Virgin Islands. As you can surmise, we have our hands full. However, we will continue to find ways to address any pressing issues that may arise. Our 2024 Annual Audit Plan Summary is found on page 10. INVESTIGATIONS: Regarding investigations, we currently have several open cases, some jointly with local and federal agencies. For confidentiality purposes, I cannot discuss the details of these matters. My goal is to increase the investigative unit's staffing to more closely resemble that of the audit staff. I want to thank those of you who have submitted complaints online or by contacting our office. Based on the latest research by the ACFE, as reported in its 2024 Report to the Nations on Occupational Fraud, 44% of frauds against government organizations were detected by tips. Email and web-based reports were the most common mechanisms used to report fraud tips. With the average fraud lasting 12 months before being detected, the sooner the detection, the sooner we can minimize the potential loss to the government. Therefore, I take this opportunity to encourage anyone aware of possible fraudulent activity against this government to contact the Office of the Virgin Islands Inspector General using the most convenient and comfortable mechanism available 7 to you. We are committed to addressing complaints made to our office and, if necessary, directing those complaints to the appropriate agency. The week of November 10 to 16, 2024, is International Fraud Awareness Week, and our office will use this week to start to raise awareness of this subject in our community. The Office of the Virgin Islands Inspector General’s 2024 Expenditures: While Fiscal Year 2024 started slowly in paying our vendors for services rendered, I am pleased to announce that our vendor payments are mostly current. I want to thank our vendors for the patience they exhibited during this time. The Office of the Virgin Islands Inspector General’s 2025 Proposed Budget: The Virgin Islands Inspector General Office’s 2025 budget recommendation is $2,898,392. Our Fiscal Year 2024 actual expenditures through July 12, 2024, totaled $1,818,197, or (64%). This budget is $ 75,765. more than the 2024 budget, an increase of 2.7%. The following are comments on each prime account of the Fiscal Year 2025 proposed spending plan. Our Fiscal Year 2025 proposal by sub-accounts is shown on page 11. Personnel Services and Fringe Benefits: The budget proposal allows the office to maintain the 19 filled and three vacant positions, one of which is budgeted at ½ its planned salary. The proposed funding level for personnel and related services is $2,384,225, or 82% of the budget request. This amount consists of $1,732,331 (60%) and $651,880 (22%) for Personnel Services and Fringe Benefits, respectively Supplies are estimated at $101,938, or 3.5% of the overall request. Other Services are estimated at $340,795 or 12% of the budget request. 8 Utility Services are estimated at $43,000, or 1.5% of the budget request. Capital Outlays are budgeted at $28,448 to cover investigative and computer-related equipment costs, which is 1% of the budget request. SUMMARY Senators, I want to thank this body in advance for supporting the Office of the Virgin Islands Inspector General's recommended Fiscal Year 2025 Budget of $2,898,392. This budget will allow us to fund 21.5 positions as we work to continue growing the agency to the desired 25 filled positions to better address audits and investigations. Thank you for the opportunity to be here today. I am available to answer any questions you might have. 9 10 ANNUAL AUDIT PLAN SUMMARY OFFICE OF THE VIRGIN ISLANDS INSPECTOR GENERAL FISCAL YEAR 2024 RESOURCED ASSIGNMENTS Staff Days Fiscal Year 2024 Carryover Assignments Audit of Specific Accounts for the Department of Agriculture 60 Inspection of the Education Initiative Fund 70 Audit of Application of WAPA Employees Loan Payments 70 Audit of the Administrative Functions of the Taxicab Commission 150 350 Fiscal Year 2024 New Starts Audit of Billing and Collection Processes at WAPA 400 Audit of the Contracting Practices at WAPA 400 Audit Follow-up on Waste Management Authority Audit Recommendations 90 Government Employees Services Commission (GESC) Board Expenditures 250 1140 Other Anticipated FY2024/2025 Assignments Government-wide Collectors Audit 400 Audit of Education Initiative Fund 150 550 Total Resourced Man-days 2040 UNRESOURCED ASSIGNMENTS Inspection of Unclaimed Properties 200 Government-wide Travel Advances 300 Non-Executive Branch Use of Credit Instruments 300 Contracting Practices of the UVI Research and Technology Park 300 Government-wide Imprest Funds and Petty Cash Accounts 300 DLCA Internal Controls over Customer Complaints 300 Total Un-resourced Man-days 1700 11 OFFICE OF THE VI INSPECTOR GENERAL FY 2025 BUDGET 1 PERSONNEL SERVICES 350001 511000 CLASSIFIED EMPLOYEE SALARIES $995,419 350001 511010 UNCLASSIFIED EMPLOYEE SALARIES 697,000 350001 514040 FEES & COMPENSATIONS NOC 39,912 TOTAL PERSONNEL SERVICES $1,732,331 2 FRINGE BENEFITS 350002 520010 EMPLOYER CONTRIBUTION RETIREMENT $294,299 350002 521000 SOCIAL SECURITY 107,405 350002 521100 MEDICARE 25,119 350002 522000 HEALTH INSURANCE PREMIUM 223,590 350002 522200 WORKERS COMP PREMIUMS 1,467 TOTAL FRINGE BENEFITS $651,880 3 SUPPLIES 350003 541000 OFFICE SUPPLIES $12,000 350003 541100 OPERATING SUPPLIES 11,000 350003 541200 VEHICLE SUPPLIES 1,500 350003 542000 REPAIR AND MAINTENANCE SUP 10,000 350003 542100 SMALL TOOLS AND MINOR EQUIP 9,438 350003 545200 PROF REF BOOKS & PERIODICALS 8,000 350003 546000 DATA PROCESSING SOFTWARE 50,000 TOTAL SUPPLIES $101,938 4 OTHER SERVICES 350004 532000 REPAIRS & MAINTENANCE $80,000 350004 532100 AUTOMOTIVE REPAIR & MAINTENANCE $9,000 350004 533000 RENTAL OF LAND/BUILDING 20,185 350004 534000 PROFESSIONAL SERVICES 23,680 350004 534100 SECURITY SERVICES $4,000 350004 534110 TRAINING 48,005 350004 535000 COMMUNICATION 58,000 350004 536000 TRANSPORTATION-NOT TRAVEL 10,000 350004 560000 TRAVEL 68,925 350004 560100 PURCHASE BULK AIRLINE TICKETS 5,000 350004 564100 OTHER SERVICES NOC 14,000 TOTAL OTHER SERVICES $340,795 5 UTILITY SERVICES 350005 530000 ELECTRICITY $39,000 350005 531010 WATER 4,000 TOTAL UTILITY SERVICES $43,000 7 CAPITAL PROJECTS 350007 575000 MACH EQUIP & MISC $28,448 TOTAL CAPITAL PROJECT TOTAL BUDGET $28,448 $2,898,392