oversight

The Virgin Islands Department of Health's Administration of the Infants and Toddlers Program.

Published by the Department of Education, Office of Inspector General on 2005-09-28.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                The Virgin Islands Department of Health’s
             Administration of the Infants and Toddlers Program




                                 FINAL AUDIT REPORT




                                            ED-OIG/A02-E0020
                                             September 2005




                                                               U.S. Department of Education
Our mission is to promote the efficiency,                      Office of Inspector General
effectiveness, and integrity of the                            New York Audit Region
Department’s programs and operations.                          Boston Area Office
                                                               St. Thomas Area Office
                                     NOTICE

Statements that management practices need improvement, as well as other
conclusions and recommendations in this report, represent the opinions of the Office
of Inspector General. Determination of corrective action to be taken will be made
by the appropriate Department of Education officials.

In accordance with the Freedom of Information Act (5 U.S.C. § 552), reports issued
by the Office of Inspector General are available to members of the press and general
public to the extent information contained therein is not subject to exemptions in the
Act.
                            U.S. DEPARTMENT OF EDUCATION
                             OFFICE OF INSPECTOR GENERAL
                                     32 Old Slip, 26th Floor
                                        Financial Square
                                  New York, New York 10005
                         Telephone (646) 428-3860 Fax (646) 428-3868

                                                    September 28, 2005

Ms. Darlene Carty
Commissioner
Virgin Islands Department of Health
48 Sugar Estate
St. Thomas, VI 00802

Dear Ms. Carty:

Enclosed is our final audit report, Control Number ED-OIG/A02-E0020, entitled The
Virgin Islands Department of Health’s Administration of the Infants and Toddlers
Program. This report was issued without your comments since you did not provide a
written response to the draft report as we requested. If you have any additional comments
or information that you believe may have a bearing on the resolution of this audit, you
should send them directly to the following Education Department official, who will
consider them before taking final Departmental action on this audit:

                                   Mr. John Hager
                                   Assistant Secretary
                                   Office of Special Education and Rehabilitative Services
                                   U.S. Department of Education
                                   400 Maryland Avenue, SW
                                   Washington, DC 20202-7100

It is the policy of the U. S. Department of Education to expedite the resolution of audits
by initiating timely action on the findings and recommendations contained therein.
Therefore, receipt of your comments within 30 days would be appreciated.

In accordance with the Freedom of Information Act (5 U.S.C. § 552), reports issued by the
Office of Inspector General are available to members of the press and general public to the
extent information contained therein is not subject to exemptions in the Act.

                                                                     Sincerely,

                                                                     /s/
                                                                     Daniel P. Schultz
                                                                     Regional Inspector General
                                                                       for Audit
Enclosure
      Our mission is to promote the efficiency, effectiveness, and integrity of the Department’s programs and operations.
Virgin Islands Department of Health’s                                                                                 Final Report
Administration of the Infants and Toddlers Program                                                              ED/OIG A02-E0020



                                                  TABLE OF CONTENTS


                                                                                                                                    Page

EXECUTIVE SUMMARY ...........................................................................................................1

BACKGROUND ............................................................................................................................2

AUDIT RESULTS

     Finding 1 - The Third-Party Fiduciary Arrangement has been Effective .................................3

                      Recommendations..................................................................................................4

     Finding 2 - Reconciliations Needed for 1999-2002 Grants .......................................................5

                      Recommendations..................................................................................................7

      Finding 3 - Administrative Burdens have been Imposed on the Infants and Toddlers
                  Program..................................................................................................................9

                      Recommendations................................................................................................10

     Finding 4 - The 2001 Travel Expenses were not Always Accounted for Properly .................11

                      Recommendations................................................................................................12

OBJECTIVES, SCOPE, and METHODOGY ..........................................................................13

ATTACHMENT A: Mispostings in FMS ..................................................................................14

ATTACHMENT B: Analysis of Grant Funds Posted to FMS - 1999 ........................................15

ATTACHMENT C: Analysis of Grant Funds Posted to FMS - 2000........................................16

ATTACHMENT D: Analysis of Grant Funds Posted to FMS - 2001........................................17

ATTACHMENT E: Analysis of Grant Funds Posted to FMS - 2002 ........................................18




                                                                     i
Virgin Islands Department of Health                                                Final Report
Administration of the Infants and Toddlers Program                           ED/OIG A02-E0020

                                 ACRONYMS

                    ED         U.S. Department of Education

                    FMS        Virgin Islands Financial Management System

                    GAPS       Grant Administration and Payment System

                    IDEA       Individuals with Disabilities Education Act

                    LSS        Lutheran Social Services

                    NOPA       Notice of Personnel Action

                    OIG        Office of Inspector General

                    VI         U.S. Virgin Islands

                    VIDF       Virgin Islands Department of Finance

                    VIDH       Virgin Islands Department of Health




                                                 ii
Virgin Islands Department of Health’s                                                            Final Report
Administration of the Infants and Toddlers Program                                         ED/OIG A02-E0020


                                     EXECUTIVE SUMMARY
The purpose of our audit was to determine: (1) the effectiveness of the third-party fiduciary
contractual arrangement between the Virgin Islands Department of Health (VIDH) and a private
agent, Lutheran Social Services (LSS), to manage the Individuals with Disabilities Education Act
(IDEA), Part C grants; and (2) the status of grant funds for the 1999-2002 IDEA Part C grants.

The contractual arrangement between the VIDH and LSS has been generally effective.
However, the 1999 through 2003 grants need reconciliations as we found over $200,000 in
mispostings. During 2001 and 2002, only the payroll related expenses were posted on the Virgin
Islands Financial Management System (FMS)1 since all other expenses were recorded by LSS on
its system as required by the U.S. Department of Education (ED).

Prior to the third-party fiduciary arrangement, VIDH failed to draw down $102,000 of the 1999
grant and $111,000 of the 2000 grant for the Infants and Toddlers program. By examining the
data contained in the FMS, we found that VIDH had $99,500 less in net expenditures than
federal funds it drew down from the 1999 grant. The $99,500 will have to be returned to the
Federal government unless VIDH or VIDF can provide support for additional expenditures.

Conversely, the FMS contained detailed expenditures totaling more than the 2000 grant award of
$769,327. Although there were a series of mispostings, the net expenditures were still more than
the grant amount. Since VIDH only drew $658,020, it may be permitted to draw the remaining
$111,000.

In addition, the VIDF imposed administrative requirements on the Infants and Toddlers program
that negatively impacted the administration of the Infants and Toddlers grants. These
requirements are independent of the Infants and Toddlers contractual arrangement with LSS.
When the Infants and Toddlers staff is required to perform these additional financial procedures,
less time is devoted to Infants and Toddlers program matters. A solution to alleviate the
administrative burden is available if VI officials work with LSS to develop an acceptable means
to transfer fiduciary data to VIDF for entry into the FMS.

During the 2001 grant year, the Infants and Toddlers program charged $14,781 in travel
expenses to the wrong grant year. In addition, another $1,200 of 2001 grant expenses has to be
returned to the U.S. Treasury.

We provided a copy of our draft audit report to VIDH on July 22, 2005, and requested comments
within 30 days of this date. Despite follow-up inquiries, we received no comments from VIDH.




1
  FMS is the financial management system of the Virgin Islands and is operated and maintained by the Virgin
Islands Department of Finance (VIDF).



                                                        1
Virgin Islands Department of Health’s                                                Final Report
Administration of the Infants and Toddlers Program                             ED/OIG A02-E0020


                                         BACKGROUND

VIDH is responsible for administering the Part C portion of the IDEA grant. Because of VIDH’s
problems with fiscal accountability, ED determined that VIDH is a “high-risk” grantee under 34
C.F.R. § 80.12. As a result, ED attached special conditions to the 1999 and 2000 grant awards.
When VIDH did not meet the requirements, ED imposed additional special conditions on the FY
2001 through 2003 IDEA, Part C grants.

The 2001 through 2003 grant approvals noted that VIDH continued to be a “high-risk” grantee
due to its difficulties with fiscal accountability, procurement process, property management, and
personnel practices. These problems led to delays or denial of services for children. To address
these deficiencies, ED required VIDH to contract with a third-party fiduciary as a condition of
receiving the 2001 through 2003 Part C grants.

In a July 31, 2002 letter, ED approved VIDH’s choice for a financial management services
contractor. VIDH first entered into a contractual arrangement with Lutheran Social Services
(LSS) to provide fiscal services on September 18, 2002. LSS is currently in the third year of its
contract. The Infants and Toddlers program received funding of $759,069 in 1999, $769,327 in
2000, and $786,891 annually for 2001-2003. The Virgin Islands grants have been awarded
consistently late due to the VI’s financial management problems. The 2001 grant was awarded
on July 1, 2002; the 2002 grant on September 22, 2003; and the 2003 grant on September 24,
2004.




                                                     2
Virgin Islands Department of Health’s                                                 Final Report
Administration of the Infants and Toddlers Program                              ED/OIG A02-E0020


                                      AUDIT RESULTS

Finding 1: The Third-Party Fiduciary Arrangement has been Effective


The contractual arrangement between the VIDH Infants and Toddlers program and LSS
generally has been effective and has provided proper accountability of 2001 and 2002 grant
expenditures. Infants and Toddlers managers received the necessary information by which they
could monitor the receipts and disbursements and determine that funds are correctly drawn and
deposited, and that disbursements are made promptly. We also found that LSS was accounting
for the funds in a transparent manner. The differences between the draws and disbursements
were generally within the three days required by federal cash management regulations.

All funds for the 2001 and 2002 grants have been drawn. LSS properly encumbered funds prior
to the end of the 2002 grant and expended those funds prior to the end of the liquidation period.
Finally, LSS provided a proper audit trail for Infants and Toddlers program receipts and
disbursements.

By comparing the payment request dates and check dates for both professional and non-
professional services, we found that all vendors were paid in an average of eight days. Further, a
survey of 10 vendors indicated unanimous satisfaction with the timeliness of their payments.
The fiduciary contract calls for payment within 28 days of receipt of a payment request, but
records were not sufficient to allow us to determine when the invoices were received in the
Infants and Toddlers program office. To demonstrate compliance, the Infants and Toddlers
office should date stamp each invoice when received.

Pursuant to 34 C.F.R. § 80.40(a), “Grantees are responsible for managing the day-to-day
operations of grant and subgrant supported activities. Grantees must monitor grant and subgrant
supported activities to assure compliance with applicable Federal requirements and that
performance goals are being achieved.”

We found that cash management requirements of the federal cash management regulations were
generally followed. The differences between the draws and disbursements were within the
required three days with only five exceptions. In 5 instances out of 55 draws tested, checks were
dated more than 3 days after the draw. Two of these five checks were dated within five days of
the draw.

LSS employees were not aware of the three-day requirement and thought that they had more
leeway prior to disbursement. This was due to the contract stipulating that expenditures be made
within three to five days from receipt of draw down. That language should be amended to reflect
the requirements cited in 31 C.F.R. § 205.7(c)(4) (September 7, 2000), “ . . . a State shall request
funds not more than three business days prior to the day on which it makes a disbursement.”




                                                     3
Virgin Islands Department of Health’s                                               Final Report
Administration of the Infants and Toddlers Program                            ED/OIG A02-E0020


Recommendations

We recommend that the Assistant Secretary for the Office of Special Education and
Rehabilitative Services require VIDH to:

1.1    Date stamp each invoice when received to demonstrate compliance with payment
       requirements; and

1.2    Assure that the fiduciary is disbursing funds within three days after the draw has been
       made, as required, and work with ED to change the special conditions in the grant, as
       well as the third-party contract language, to reflect the three-day cash management
       requirement.




                                                     4
Virgin Islands Department of Health’s                                                  Final Report
Administration of the Infants and Toddlers Program                               ED/OIG A02-E0020




 Finding 2: Reconciliations Needed for 1999-2002 Grants


For the 1999 through 2002 grant years, we identified $201,576 in mispostings in the FMS
relating primarily to salaries and fringe benefits costs. Attachment A shows our detailed analysis
of the mispostings. Because VIDH did not draw down $102,004 of the 1999 grant year award
and $111,307 of the 2000 grant year award, we evaluated the expense data on FMS. The data
revealed that VIDH overspent on the 2000 grant. As a result, VIDH may be able to request the
$111,307 that was never drawn. However, VIDH may have to return over $99,512 charged to
the 1999 grant and over $15,985 charged to the 2001 grant. Attachments B through E show our
analyses of grant expenditures by grant year, and the amounts determined to be: overdrawn,
potentially overdrawn, misposted to the wrong grant year, improperly transferred, unallowable,
and unsupported. Only payroll costs appeared in the FMS for the 2001 and 2002 grant years due
to the third-party fiduciary arrangement that required all other expenses to be recorded by LSS.

Pursuant to 34 C.F.R. § 80.23(a), “When a funding period is specified, a grantee may charge to
the award only costs resulting from obligations of the funding period unless carryover of
unobligated balances is permitted . . . .” Under the “Tydings Amendment” Section 421(b) of the
General Education Provisions Act, 20 U.S.C. § 1225(b), any funds not obligated and expended
during the period for which they were awarded become carryover funds and may be obligated
and expended during the succeeding fiscal year.

According to 34 C.F.R. § 80.20(b)(2), “Grantees and subgrantees must maintain records which
adequately identify the source and application of funds provided for financially-assisted
activities. These records must contain information pertaining to grant or subgrant awards and
authorizations, obligations, unobligated balances, assets, liabilities, outlays or expenditures, and
income.”

Status of 1999 Grant Year Funds – Potentially $99,512 to be Returned

Based on our analysis of FMS data, we found $16,420 in improper charges to the 1999 grant.
These expenses were incurred after the grant period expired and should have been charged to the
2000 grant. The Virgin Islands FMS did not automatically close out the grant after the grant
period (including the 12-month Tydings period) expired. This allowed expenses to be entered
into the FMS and charged to the wrong grant year.

In addition, on June 10, 2002, VIDF processed an adjustment voucher for $90,277 to transfer
salaries, fringe benefits, and indirect costs from an expired Infants and Toddlers grant to the
1999 grant. Neither the Infants and Toddlers office, VIDF, nor FMS had the detail to support the
adjustments. The adjustment voucher was processed without having or maintaining the
supporting documentation indicating whose salaries and fringe benefits were originally charged.

At the time of our review, ED’s Grant Administration and Payment System (GAPS) showed that
$102,004 of the grant award had not been drawn. However, as a result of these mischarges and


                                                     5
Virgin Islands Department of Health’s                                               Final Report
Administration of the Infants and Toddlers Program                            ED/OIG A02-E0020


unsupported cost transfers, the 1999 grant had draws of $657,065, which were greater than net
expenses recorded of $557,553. The FMS showed expenditures of $664,250, but the mischarges,
$16,420, and unsupported cost transfers, $90,277, reduced expenses to $557,553. If VIDH or
VIDF cannot provide support for the mischarges or adjustments, VIDH will have to return
$99,512 to the Federal government. See Attachment B for further details.

Status of 2000 Grant Year Funds - Potentially $111,307 to be Drawn

The FMS listed $92,716 in improper charges to the 2000 grant. Based upon the timing of the
FMS entries, miscellaneous and salary and fringe expenditures were charged to the 2000 grant
rather than the 2001 grant. These expenses were incurred after the 2000 grant period expired.
Conversely, $30,117 was charged incorrectly to the 1999 and 2001 grants and should have been
charged to the 2000 grant.

When the VI programs receive new grants, the recipient organization is required to inform the VI
Department of Personnel of the funding source and of the personnel to be paid from that grant.
The VI Department of Personnel is responsible for entering both the funding source and affected
personnel into the FMS. If the personnel action failed to reflect the appropriate funding source
or the information had not been entered into FMS, the salaries would automatically be charged to
the last identified funding source. This was the apparent cause for these mischarges.

Further, the FMS had recorded expenditures of $842,429 versus a grant award of $769,327.
Although recorded expenses were much greater than the grant amount, the difference was not
reconciled. At the time of our review, GAPS showed that $111,307 of the grant award had not
been drawn.

The FMS did not automatically close out the grant after the grant period (including the 12-month
Tydings period) expired. This allowed expenses to be entered into the FMS and charged to the
wrong grant year. Overcharges apparently went unnoticed because no one evaluated the FMS
data to determine why the grant was overspent.

By transferring out the FMS mischarges of $92,716 and transferring in charges of $30,118 the
net FMS expense would be $779,831. This is $10,504 more than the grant amount. VIDH
could, if it receives ED’s approval, draw the remaining balance of $111,307. See Attachment C
for further details.

Status of 2001 Grant Funds – Potentially $15,985 to be Returned

The potential return of $15,985 resulted from travel accountability issues. Although these
expenses were properly recorded on LSS’s records, they were charged to the wrong grant year,
for improper travel expenses, and an overpayment. The details and recommendations for this
issue are discussed in Finding 4. In addition, the FMS showed that expenses were charged to the
wrong grant period. Salary and fringe benefits expenses of $21,340 were incorrectly charged to
the 2001 grant. Conversely, $92,716 in salary and fringe benefits were charged incorrectly to the
2000 rather than the 2001 grant. Since LSS was the fiduciary for the 2001 grant and properly



                                                     6
Virgin Islands Department of Health’s                                                           Final Report
Administration of the Infants and Toddlers Program                                        ED/OIG A02-E0020


accounted for these expenses, the FMS mispostings did not impact the allowable charges. See
Attachment D for further details.

Status of 2002 Grant Funds - Excess Expenses of $14,781

VIDH drew down and expended the entire 2002 grant award. However, travel expenses were
improperly charged to the 2001 rather than the 2002 grant. Therefore, the 2002 grant had excess
expenditures of $14,781. See Finding 4.

Although the FMS had expenses charged to the wrong grant period, these FMS mispostings did
not impact the allowable charges. The FMS listed $71,100 in salary and fringe expenses
incorrectly charged to the 2002 grant. The charges were for pay periods in October, November,
and December 2004, and should have been charged to the 2003 grant.2 Conversely, $7,642
should have been charged to the 2002 grant but was charged to the 2001 grant. See Attachment
E for further details.

Recommendations:

We recommend that the Assistant Secretary for OSERS require:

2.1     VIDH to prepare adjustments for the 1999–2002 grants to transfer the $201,576 in
        misposted charges, primarily for salaries and fringe benefits costs, to the appropriate
        grant years;

2.2     VIDH or VIDF to provide support for the 1999 grant or return $99,512 to the Federal
        government for the overdraws of this grant;

2.3     VIDH, for the 2000 grant, to contact ED once the adjustments are completed, to
        determine whether the additional funds can be drawn on the 2000 grant and what
        documentation would be needed to support the request;

2.4     VIDF to ensure that FMS has sufficient controls to prevent charges to incorrect grant
        periods;

2.5     VIDH to request future adjustments only after it has the detail to support the changes;

2.6     VIDF to only allow future cost adjustments when supporting documentation accompanies
        the request;




2
  The Virgin Islands grants have been awarded consistently late due to the VI’s financial management problems.
The 2002 grant expired on September 30, 2004. The 2003 grant was awarded on September 27, 2004, and expires
on September 30, 2005. The 2004 grant has not yet been awarded. Accordingly, the 2003 grant was the only
available grant to charge for pay periods in October, November, and December 2004.


                                                       7
Virgin Islands Department of Health’s                                               Final Report
Administration of the Infants and Toddlers Program                            ED/OIG A02-E0020


2.7    VIDH to timely prepare personnel actions and VI Personnel to timely enter them into the
       FMS so that expenses are charged to the correct grant year, especially at the inception of
       the grant period; and

2.8    VIDH and VIDF to reconcile situations where recorded expenses in FMS are greater than
       the grant amount. The FMS should automatically flag such a condition.




                                                     8
Virgin Islands Department of Health’s                                               Final Report
Administration of the Infants and Toddlers Program                            ED/OIG A02-E0020



Finding 3: Administrative Burdens have been Imposed on the Infants and Toddlers
           Program


VIDF imposed administrative requirements on the Infants and Toddlers program that negatively
impacted the administration of the Infants and Toddlers grants. These requirements are
independent of the program’s contractual arrangement with LSS. When the Infants and Toddlers
staff is required to perform these additional administrative procedures, less time is devoted to
program matters. A solution to alleviate the administrative burden is available if VI officials
work with LSS to develop an acceptable means to transfer fiduciary data to VIDF for entry into
the FMS.

Statements of Remittances

VIDF requires the Infants and Toddlers program office to prepare Statements of Remittances for
every payroll. We were informed these statements are to be used to verify and reconcile salary
and fringe benefit expenses. However, the statements appear to be duplicative and not needed
since the salary and fringe benefit data were already available in the FMS system. VIDF could
not provide us with procedural descriptions as to how the statements of remittances are to be
used.

Payroll Processing

Since VIDH is the grantee representing the VI Government, VIDF claims that it must continue to
process payrolls and issue payroll checks so that employees retain their government employee
status. Whether the grantee could bypass VIDF and allow the fiduciary to process payroll is a
legal question to be considered by ED officials.

Manually-Prepared Vouchers

Since the inception of the fiduciary agreement starting with the 2001 grant, only salary and
related fringe benefit expenses for the Infants and Toddlers program were recorded in the FMS
system. Non-salary expenditures were only recorded in LSS’s accounting system, and do not
appear in FMS. VIDF planned to require the Infants and Toddlers program administrators to
provide summary-level non-salary expenditure data for inclusion in FMS through the use of
manually-prepared vouchers.3

According to 34 C.F.R. § 80.20(b)(2), accounting records “must contain information pertaining
to grant or subgrant awards and authorizations, obligations, unobligated balances, assets,
liabilities, outlays or expenditures, and income.” VI officials need to ensure that they have an
efficient process for maintaining required accounting records.



3
    VIDF termed the manually-prepared voucher as a “dummy voucher.”


                                                       9
Virgin Islands Department of Health’s                                               Final Report
Administration of the Infants and Toddlers Program                            ED/OIG A02-E0020


Requiring the Infants and Toddlers program administrators to create manually-prepared vouchers
would be burdensome, as it would require summarizing accounting data that is already available
in detailed, electronic format in LSS’s accounting system. The summary-level expenses would
not provide any detailed information on the expenditures, and without such detail, it is
questionable whether an adequate audit trail would exist.

To resolve this issue and to ease the Infants and Toddlers program’s administrative burden, the
OIG suggested that the non-salary data in LSS’s accounting system be provided to VIDF.

Recommendations

We recommend that the Assistant Secretary for OSERS require VIDH to:

3.1    Eliminate the requirement for Statements of Remittances for the purposes of salary and
       fringe benefit reconciliations;

3.2    Have LSS process the payroll, if it is determined that the Infants and Toddlers program
       employees can retain their status as VI government employees; and

3.3    Have LSS electronically submit monthly data files relating to non-salary data to VIDF.
       The files should contain the same data elements used by VIDF, such as the cost center
       and accounting classification.




                                                 10
Virgin Islands Department of Health’s                                                                 Final Report
Administration of the Infants and Toddlers Program                                              ED/OIG A02-E0020




    Finding 4: The 2001 Travel Expenses were not Always Accounted for Properly


The Infants and Toddlers program sometimes did not accurately account for travel charges.
Some travel expenses were charged to the wrong grant year. One employee did not realize that
she had incurred excessive travel expenses when she detoured on her return trip. This employee
needs to reimburse the program for those costs. We also found a recouped overpayment to a
travel agency that must be returned to the program.

According to 34 C.F.R. § 75.703, “A grantee may use grant funds only for obligations it makes
during the grant period.” Section 75.707 states travel is obligated “when the travel is taken.”

Personnel at the Infants and Toddlers program were unaware of the requirements that prohibit
the use of prior year encumbrances for travel expenses in a new grant year. In addition, the
VIDH lacked a policy on employee travel.

As a result, travel expenditures totaling $14,781 were incorrectly charged to the 2001 grant
instead of the 2002 grant. In addition, the Infants and Toddlers program incurred $273 in extra
costs because an employee detoured for personal travel after attending job related conferences.
Infants and Toddlers staff inadvertently made an overpayment of $931 for patient travel.4 They
recouped the overpayment and now must return it to ED.

Because the Infants and Toddlers program had drawn down and expended all funds for the 2001
grant, the mischarges and returns of funds impact the total expenses.

                                   Travel Expense Impact on Grant Funds


                      Costs Posted       Misposted       Unallowable          Payment            Net
                          LSS             Travel           Travel              Return          Expenses
        General
        expenses          $369,201       ($14,781)           ($273)            ($931)            $353,216
        Salaries
        &                 $402,724                                                               $402,724
        Fringes
        Indirect           $14,966                                                                $14,966
        Total             $786,891       ($14,781)           ($273)            ($931)            $770,906


Based upon these adjustments, the Infants and Toddlers program had net expenditures of
$770,906. Since it had drawn down the entire $786,891 award, the Infants and Toddlers
program must return the difference of $15,985 to the Federal government. However, the prior

4
    The grant allows payment of travel expenses when a patient has to receive services outside of the Virgin Islands.


                                                           11
Virgin Islands Department of Health’s                                                Final Report
Administration of the Infants and Toddlers Program                             ED/OIG A02-E0020


year grant (2000) shows, after adjustments to the FMS figures, $10,504 more in net expenditures
than the grant award. See Attachments A and C for specifics. Since the grant periods overlap,
VIDH may be able to transfer those expenses to the 2001 grant.

Recommendations:

We recommend that the Assistant Secretary for OSERS require VIDH to:

4.1    Develop an employee travel policy requiring the traveler to pay all additional personal
       travel expenses in excess of the cost to and from professional conferences or activities;

4.2    Transfer travel expenses of $14,781 to the correct grant year or return it to ED;

4.3    Recoup overpayment of $273 for the employee’s personal travel and return it to ED; and

4.4    Return the $931 recouped for a duplicate payment to ED.




                                                 12
Virgin Islands Department of Health’s                                               Final Report
Administration of the Infants and Toddlers Program                            ED/OIG A02-E0020


                       OBJECTIVES, SCOPE, AND METHODOLOGY

The audit objectives were to determine: (1) the effectiveness of the third-party fiduciary
contractual arrangement between the VIDH and a private fiduciary agent (LSS) to manage the
IDEA, Part C grants; and (2) the status of grant funds for 1999-2002 IDEA, Part C grants.

To accomplish our objectives, we obtained an understanding of the internal controls of LSS and
the VI Infants and Toddlers Program. We reviewed the current policies, procedures, and
practices of LSS and the VI Infants and Toddlers Program and evaluated the policies developed
by the Infants and Toddlers Program office to monitor the fiduciary. We ensured that all
expenditures and drawdowns handled by the fiduciary were adequately supported and properly
documented. We did not assess the adequacy of the internal controls, but we found deficiencies
in the areas of cost allocability and lack of supporting documentation. These areas are addressed
in our Audit Results section.

We conducted our audit fieldwork at the VIDH and VIDF offices on St. Thomas and at the LSS
office on St. Croix. We extracted and evaluated data from GAPS, FMS, and LSS’ accounting
system. We interviewed officials at the Infants and Toddlers program, LSS, ED, VIDF, and
VIDH. We also contacted vendors and service providers doing business with the program.
Despite our July 22, 2005, request to the Commissioner of VIDH for management comments to
the draft audit report, VIDH did not provide any comments. Consequently, we did not have
VIDH management comments to consider when preparing the final report.

We reviewed transactions charged from 1999 to 2004 to the VI Infants and Toddlers program to
determine whether the transactions were charged to the proper years. We also audited the
allowability of a random sample of 100 vendor payments totaling $122,410 for professional and
nonprofessional services. Further, we conducted a survey of ten vendors to determine their level
of satisfaction with the third-party arrangement.

To achieve our audit objectives, we assessed the reliability of LSS’ computer-processed data.
We randomly selected 40 vendors with transactions totaling $37,337 and compared invoices,
requests for payments, and actual payments. Our review found that these transaction amounts
matched in all instances. Based on these tests, we determined that LSS’ computer processed data
was reliable for the purposes intended.

Our audit was performed in accordance with generally accepted government auditing standards
appropriate to the scope of the audit described above.




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Virgin Islands Department of Health’s                                                     Final Report
Administration of the Infants and Toddlers Program                                  ED/OIG A02-E0020


                                                                                   ATTACHMENT A



                                               Mispostings in FMS



         Cost Category              Grant Charged               Amount Charged   Correct Grant

         Miscellaneous                     1999                    $16,420           2000
                                                                   $16,420

             Salaries                      2000                    $ 72,927          2001
             Fringes                       2000                    $19,789           2001
                                                                   $92,716

             Salaries                      2001                    $ 10,481          2000
             Fringes                       2001                    $ 3,217           2000
             Salaries                      2001                    $ 5,767           2002
             Fringes                       2001                    $ 1,875           2002
                                                                   $21,340

             Salaries                      2002                    $ 13,191          2003
             Fringes                       2002                    $ 3,616           2003
                                                                   $16,807

           Salaries and
            Fringes5                       2002                    $54,293           2003
                                                                   $71,100


       GRAND TOTAL                                                 $201,576




5
    Only the combined total, with no details, was available.


                                                           14
Virgin Islands Department of Health’s                                                               Final Report
Administration of the Infants and Toddlers Program                                            ED/OIG A02-E0020



                                                                                            ATTACHMENT B



                         Analysis of Grant Funds Posted to FMS - 1999



    Grant Year              FMS                  Less:                  Less:             Net Expenses
        1999              Expenses            Unallowable           Unsupported
     Expenses             $383,158             $ 16,420               $       0             $366,738
     Salaries             $218,103             $       0              $ 68,448              $149,654
       Fringe             $ 58,649             $       0              $ 18,753              $ 39,897
      Indirect            $ 4,340              $       0              $ 3,076               $ 1,264
       Totals             $664,250             $ 16,420 6             $ 90,277 7            $557,553

 Grant Award               $759,069
Amount Drawn               $657,065
Grant Balance
  Available                $102,004

    Net Expenses          $557,553
    Amt Drawn             $657,065
     Overdrawn            ($99,512)




6
    Unallowable expenses of $16,420 were incorrectly charged to the 1999 grant instead of the 2000 grant.
7
  Unsupported charges of $90,277 were from a June 2002 adjustment voucher that was processed without
supporting documentation.



                                                          15
Virgin Islands Department of Health’s                                                             Final Report
Administration of the Infants and Toddlers Program                                          ED/OIG A02-E0020


                                                                                          ATTACHMENT C


                       Analysis of Grant Funds Posted to FMS - 2000



    Grant Year        FMS Expenses              Less:            Cost Transfers         Net Expenses
       2000                                  Unallowable
     Expenses            $166,466             $       0              $ 16,420             $182,886
     Salaries            $507,375             $ 72,927               $ 10,481             $449,929
      Fringes            $142,753             $ 19,789               $ 3,217              $126,181
      Indirect           $ 25,835             $       0              $      0             $ 25,835
       Totals            $842,429             $ 92,716 8             $ 30,118 9           $779,831

 Grant Award             $769,327
Amount Drawn             $658,020
Grant Balance            $111,307
  Available

    Grant Award          $769,327
    Net Expenses         $779,831
       Excess
     Expenses            ($10,504)




8
  Unallowable charges were comprised of salaries of $72,927 and fringe benefits of $19,789 that should have been
charged to the 2001 grant.
9
  Cost transfers represented expenses of $16,420 that were charged to the 1999 grant that should have been charged
to the 2000 grant, and salaries of $10,481 and fringe benefits of $3,217 that were charged to the 2001 grant that
should have been charged to the 2000 grant.




                                                        16
Virgin Islands Department of Health’s                                                              Final Report
Administration of the Infants and Toddlers Program                                           ED/OIG A02-E0020


                                                                                            ATTACHMENT D


                       Analysis of Grant Funds Posted to FMS - 2001



     Grant Year                Adjustments                 Adjustments                 Adjustments
        2001                     Needed                      Needed                      Needed

                               2000 Transfers             2001 Transfers              2001 Transfers
                                  to 2001                    to 2000                     to 2002

       Salaries                    $72,927                   ($10,481)                    ($5,767)

       Fringes                     $19,789                    ($3,217)                    ($1,875)


        Totals                    $92,716 10                 ($13,698) 11                ($7,642) 12




10
   These costs are comprised of salaries of $72,927 and fringe benefits of $19,789 that were charged to the 2000
grant that should have been charged to the 2001 grant.
11
  These are salaries of $10,481 and fringe benefits of $3,217 that were charged to the 2001 grant that should have
been charged to the 2000 grant.
12
  These are salaries of $5,767 and fringe benefits of $1,875 that were charged to the 2001 grant that should have
been charged to the 2002 grant.



                                                        17
Virgin Islands Department of Health’s                                                               Final Report
Administration of the Infants and Toddlers Program                                            ED/OIG A02-E0020


                                                                                            ATTACHMENT E


                       Analysis of Grant Funds Posted to FMS - 2002



     Grant Year                 Adjustments                Adjustments                 Adjustments
        2002                      Needed                     Needed                      Needed

                               2001 Transfers             2002 Transfers              2002 Transfers
                                  to 2002                    to 2003                     to 2003

       Salaries                    ($5,767)                   ($13,191)

       Fringes                     ($1,875)                     (3,616)

Salaries and Fringes                $     0                    $      0                   $54,293

        Totals                    ($7,642) 13                 ($16,807) 14                $54,293 15




13
  These are salaries of $5,767 and fringe benefits of $1,875 that were charged to the 2001 grant that should have
been charged to the 2002 grant.
14
  These are salaries of $13,191 and fringe benefits of $3,616 that were charged to the 2002 grant that should have
been charged to the 2003 grant.
15
  These are salaries and fringe benefits of $54,293 that were charged to the 2002 grant that should have been
charged to the 2003 grant. The detail breakout was not available.



                                                         18