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V-IN-VIS-0059-2002 U.S. Department of the Interior Office of Inspector General Audit Report Follow-up of Recommendation Relating to Internal Revenue Taxes, Bureau of Internal Revenue, Government of the Virgin Islands Report No. 2003-I-0059 August 2003 V-IN-VIS-0059-2002 United States Department of the Interior OFFICE OF INSPECTOR GENERAL Eastern Regional Office 381 Elden Street - Suite 1100 Herndon, Virginia 20170 August 29, 2003 Honorable Charles W. Turnbull Governor of the Virgin Islands No. 21 Kongens Gade Charlotte Amalie, Virgin Islands 00802 Subject: Audit Report “Follow-up of Recommendations Relating to Internal Revenue Taxes, Bureau of Internal Revenue, Government of the Virgin Islands” (No. 2003-I-0059) Dear Governor Turnbull: This report presents the results of our follow-up review of recommendations contained in the December 1997 audit report “Internal Revenue Taxes, Bureau of Internal Revenue, Government of the Virgin Islands” (No. 98-I-188). The Legislation, as amended, creating the Office of Inspector General, (5 U.S.C. app. 3) requires that we report to the Congress semiannually on all reports issued, actions taken to implement our recommendations and recommendations that have not been implemented. Therefore, this report will be added to the next semiannual report. In addition, the Office of Inspector General provides audit reports to the Congress. Please provide a response to this report by September 30, 2003. The response should provide the information requested in Appendix 4 and should be addressed to Mr. Roger La Rouche, Assistant Inspector General for Audits, Office of Inspector General, U.S. Department of the Interior, 1849 C Street, NW (MS-5341), Washington, DC 20240; with a copy to our Caribbean Field Office, Ron deLugo Federal Building, Room 207, St. Thomas, VI 00802. Sincerely, William J. Dolan, Jr. Regional Audit Manager cc: Director, Virgin Islands Bureau of Internal Revenue V-IN-VIS-0059-2002 [This page intentionally left blank.] i EXECUTIVE SUMMARY Despite Improvements, Some Deficiencies Still Exist in the Administration and Collection of Taxes The Bureau of Internal Revenue (the Bureau) administers and collects most types of taxes in the Virgin Islands, including individual and corporate income, gross receipts, trade and excise, hotel occupancy, highway user, production, gift, inheritance, and fuel taxes. In fiscal year 2001, the Bureau collected taxes totaling $484.1 million and in fiscal year 2002, a total of $476.2 million. More than 31,500 income tax refunds totaling $62.9 million were issued in fiscal year 2001. We found that of the 14 recommendations made in our December 1997 audit report "Internal Revenue Taxes, Bureau of Internal Revenue, Government of the Virgin Islands," six had been fully implemented, seven had been partially implemented, and one had not been implemented. While improvements were made in the Bureau’s operations, some problems still existed, particularly issues concerning prior period tax returns.