We audited the U.S. Virgin Islands’ Public Finance Authority (PFA), a public corporation that serves as a financing conduit for the Government of the U.S. Virgin Islands (GVI). PFA incurs billions of dollars in debts and disburses the proceeds of these debts to pay for capital improvement projects and GVI’s day-to-day needs, but it has never had controls in place to ensure transparency and accountability. During our audit, we found the following deficiencies, which place millions of dollars at risk for fraud, waste, and mismanagement:
• PFA did not have internal controls over its operations, including written operating policies and procedures for its employees to follow. PFA’s failure to implement and adhere to a system of internal controls has created an environment where errors and potential conflicts of interest flourish.
• PFA has not managed its budgeted funds and bond proceeds appropriately, nor has it complied with current laws and regulations.
These deficiencies contributed to the issues we found during our fieldwork, which included $50 million in financial reporting discrepancies, potential conflicts of interest, and $101.1 million in questionable expenditures.
We issued an audit report in 2002 that provided recommendations for several issues at PFA, but these issues still existed during our current review. In fact, because PFA decision makers did not implement our recommendations, some of the issues had worsened. Had PFA taken corrective actions after our 2002 audit, there would have been greater accountability for funds entrusted to it on behalf of the people of the Virgin Islands.
This 2017 audit presents an opportunity for the Virgin Islands Legislature and PFA’s board of directors to correct longstanding problems that have weakened the Virgin Islands’ self-sustaining capabilities and increased its dependency on the U.S. Government. In our report, we offered 21 recommendations that would help improve PFA’s operations and thus safeguard the funds entrusted to it.
We addressed 18 of our 21 recommendations to PFA and the remaining 3 to the Legislature. PFA concurred with seven recommendations, partially concurred with four, and did not concur with seven; the Legislature stated that it would take action on its three recommendations. We consider six recommendations resolved and implemented, eight resolved but not implemented, and seven unresolved.
In addition to our audit, we issued a separate management advisory letter alerting GVI to procurement and project management issues we discovered in some of its agencies during our review of capital improvement projects paid for with PFA-issued bond proceeds.