ST. CROIX — An audit of the Education Initiative Fund that plays a vital role in the territory’s public education system recently released by the Office of the Virgin Islands Inspector General highlights the need for improvement in oversight, reporting requirements, and updates to the law while revealing $5.1 million in expenses were not aligned with the Fund’s lawful purpose.
The Office of the Inspector General made 15 recommendations to address the causes of the findings relating to school funding, expenditures, internal controls, and the ambiguity of the Virgin Islands Code, according to the audit released Tuesday. VIDE agreed with all the recommendations and is taking steps to implement them.
After reviewing a draft audit, Education Commissioner Dionne Wells-Hedrington indicated in an April 23 letter to Inspector General Delia Thomas that the Virgin Islands Department of Education was grateful for the opportunity to address long-standing concerns about the Education Initiative Fund’s administration and oversight. VIDE submitted responses to the recommendations suggested by the Office of the Inspector General.
“The department is committed to strengthening its internal controls, ensuring compliance with applicable laws, and improving the timely and equitable disbursement and monitoring of funds,” Wells-Hedrington wrote.
In addition to releasing the audit Tuesday, Thomas wrote a letter to the VIDE commissioner the same day informing her about the objectives of the audit as well as the findings. She noted VIDE’s responses to the recommendations were included as an appendix of the audit.
“The recommendations were adequately addressed,” Thomas wrote. “Fourteen of 15 recommendations were resolved but not implemented. One recommendation was partially resolved, pending additional information.”
The Legislature of the Virgin Islands created the Education Initiative Fund in 1995 to enable schools to address emergencies without disrupting classroom learning and to procure specific goods and services vital for the smooth operation of schools. The threefold objectives of the audit were to determine whether VIDE accurately and timely disbursed the funds to the applicable schools, monitored the schools’ accounting of the funds in accordance with applicable laws, and expended funds and accounted for any undistributed and unused funds in accordance with the VI Code. The scope of the audit covered four fiscal years from FY 2019 to FY 2022. Wells-Hedrington was sworn in as VIDE commissioner on February 15, 2023.
OIG previously audited the Education Initiative Fund and issued its report in February 2011. The results of the new audit disclosed that VIDE made some improvements since the previous audit, but more improvement is needed in oversight to ensure the Fund is adequately managed to meet the statutory requirements. The audit found that improvements in oversight are required to ensure the consistent and complete application of the funding formula, the timely disbursement of the annual allotment to schools, and the funds are appropriately accounted for and spent within the annual limits specified by law.
In the area of school funding, education officials did not always ensure that the three phases of the formula used to provide equal distribution of funds to schools were fully applied when determining the annual Education Initiative Fund allotment for schools. The audit found education officials did not always use the same year-end bank statement data to determine the year-end balance for schools.
As a result, two schools did not receive $4,590 in FY 2019 for a student population greater than 500. When the same year-end bank statement data was not used, three schools received $18,919 more in funds, and five schools received $16,762 less in funding. In fiscal years 2019 and 2020, the St. Croix District did not receive a total of $11,175 to equalize funding to both districts. In FY 2021, funding to 27 territory schools valued at as much as $1.35 million was not distributed. From fiscal years 2019 to 2022, schools did not receive their annual allotment until 12 to 27 months past the required date.
Although VIDE has made some improvements in monitoring schools’ expenditures, the audit revealed more oversight is needed to ensure schools adhere to the law regarding the annual spending limits set for specific categories of expenses, and the monthly reporting requirement. The audit found schools routinely exceeded the $3,500 annual spending limit set for equipment and supplies for administrative offices, and the $2,500 annual limit set for personal services.
During fiscal years 2019 to 2022, a review of $1.8 million in expenses revealed some schools in both districts exceeded the Education Initiative Fund’s annual allowable spending limits for supplies, equipment, and personal services. Overall, at least $226,843 was spent above the yearly allowable limit. Of the $226,843, 63% ($143,533) was for expenditures exceeding $3,500 established for equipment and supplies for administrative offices. The school with the highest spending infraction in FY 2019, Arthur A. Richards Junior High School, exceeded the annual spending limit by $12,256. In FY 2022, Addelita Cancryn Junior High School exceeded the limit by $14,377. In FY 2019, Cancryn exceeded the limit by $10,723.
When it comes to undistributed and unused funds, the audit highlighted that VIDE did not expend and account for the undistributed and unused Education Initiative Fund monies following the requirement of the VI Code. Specifically, of the $11.6 million expended from the Fund, the auditors questioned $5.1 million in expenses paid for unallowable and questionable costs that were not aligned with the Fund’s lawful purpose.
As a result, $5.1 million in unallowable and questionable costs were paid using Fund monies. Specifically, VIDE used the Fund to pay for three projects whose costs were unrelated to the Fund, including $1.4 million for a project funded by the Federal Emergency Management Agency, $413,687 for graduation fees reimbursed, and $6,659 for a Worker Preparation Program. Additionally, VIDE used the Fund to pay for $3.2 million in questionable payroll costs, $11,954 for catering, and $6,541 for supplies. VIDE did not require schools to return unused funds as required by law.
While addressing the law’s ambiguity, the audit indicated a recommendation was made to merge two sections of the VI Code in Title 33 to address contradictory statutes when OIG previously audited the Education Initiative Fund in 2011. The new audit found that 13 years later, both sections (3093 and 3100i) remain active. OIG maintains that having both sections of the law remain active leaves room for misinterpretation, recommending both sections should be merged to maintain clarity and avoid conflicting language.
