The way the V.I. Port Authority handles its procurement process for capital improvement projects is leaving "… the V.I. government vulnerable to fraud, waste, and mismanagement.”
That’s according to a recent audit performed by the U.S. Interior Department’s Office of the Inspector General.
The audit, which found "circumvention" or inadequate documentation of the procurement processes, is part of the Inspector General’s annual work plan, which requires a performance assessment of VIPA’s capital improvement projects.
A draft version of the audit report, entitled “Capital Improvement Projects Administration Functions: Procurement Deficiencies Plague the V.I. Port Authority," which was sent to the V.I. government in May, differs in scope from VIPA’s annual independent fiscal audit.
The authority for Interior Department’s audit comes from the Insular Affairs Act, according to Hannibal M. Ware, an official in the IG’s office.
In addition to raising questions about VIPA’s procurement process, the audit—which took nine months and three staff to prepare—cites pervasive disorganization and incomplete files in the Authority’s procurement record-keeping system, noting “ … some projects were initiated and completed without contracts in place to protect the Authority’s best interest."
The report states that the files’ disarray impeded the audit; and while the Authority maintains that procurement practices were followed properly, auditors were often unable to locate evidence to back up VIPA’s claim.
“Contract files were haphazardly maintained without evidence to support actions taken. In terms of financial reporting deficiencies, project costs were not accurately recorded,” the audit states
In addition to other assertions, the IG report cites VIPA for failing to issue 1099 tax forms to contractors.
The IG’s report cited similar findings in a report five years ago, when it made recommendations to the Authority and Government House. The current report states that the previous findings and recommendations were ignored.
The IG report focused on 12 capital improvement projects, which amounted to $86.2 million and included 118 contractors and service providers.
Of the 12 projects, nine evidenced procurement deficiencies, the report claims.
“In those nine projects, worth $75 million, the Authority either circumvented or inadequately documented the procurement process,” the report states. “We were … unable to find any evidence that the required documents exist and have no assurance that the Authority issued contracts to the most qualified, responsive, and deserving contractors,” the report stated.
The current report names the Lindbergh Bay Park project as the most egregious example of circumvention.
“By classifying the project as “in-house,” the Authority avoided the normal contracting process and retained control over $900,000 in project funds. The Authority then used $443,300 of those funds to hire the “casual labor” of private citizens.
In other words, the report stated, " … none was an employee. Further, none provided services under a formal contract. … Upon contract completion, the former Executive Director (who also planned and managed the project) … hired three of these private citizens to work for the Authority, the three had received $394,400 of the $443,300.”
A May 19, 2010 response to the draft report (which was not made public) from Gov. John deJongh Jr. included a response from VIPA. In his letter, the governor concurred somewhat with IG’s assessment of the procurement records, stating that the lack of “timely tracking such documentation impeded VIPA’s ability to substantiate compliance.”
In addition, the governor’s letter requested revision of the IG’s report based on the Authority’s response.
VIPA’s nine-page response stated that it did not concur that it had disregarded its own internal rules and regulations, and asserts that it complied with these requirements and V.I. law, but concedes that it “…may not have kept all contract files in an organized manner. …”
Regarding Lindbergh Bay, VIPA asserted that the project was referred to as “in-house” because it was a VIPA Team project where staff members of the Authority got together and used their creativity to provide a public facility. "The Authority did not utilize its maintenance staff for major construction work due to the limitation in the union contract," the VIPA response states. "Casual labor with the assistance of the Port Authority maintenance staff was utilized to facilitate the build-out of the entire project. The project involved contribution of time and talent by members of the Authority’s staff at no additional cost to the Authority.”
In a letter to Gov. deJongh, stamped Sept. 8, acting Inspector General Mary L. Kendall responded to the governor’s request that OIG revise the report with: ”Upon careful review of the auditee’s input …we found assertions in lieu of any new or exculpatory data.” The letter went on to discuss recommendations and requested a response by Oct. 5.
Tuesday evening, Government House spokesman Jean P. Greaux emailed the Source with the following statement. “Government House will limit its comments to the governor’s and the Port Authority’s responses, both of which are contained in the final audit report.”
In response to the Source’s request for comment or an interview, VIPA spokesperson Monifa Marrero wrote Tuesday afternoon that VIPA Executive Director Kenn Hobson received the report Monday and "cannot issue any statements at this time until they have completed their review.”
VIPA board members, Attorney General Vincent Frazer and V.I. Public Works Commissioner Darryl A. Smalls, also declined comment, stating their needed to fully review the report.
