IG finds lack of controls on governor’s slush fund
Published: September 2, 2010
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ST. THOMAS — A V.I. Inspector General audit report spurred by a 2006 investigation that landed a high-ranking Government House official in prison has been released.
The recent audit report focused on the Governor’s Special Events Fund, which was a checking account established in 1995 under Gov. Roy Schneider. It was closed in March 2007 by Gov. John deJongh Jr. shortly after he took office.
The Inspector General report focused only on the account’s activity between 2004 and 2006.
Inspector General Steven van Beverhoudt said the audit was not requested by an outside source; it was an offshoot of the 2006 Alric Simmonds investigation. Simmonds was Gov. Charles Turnbull’s deputy chief of staff, who was convicted of stealing $1.2 million from government coffers in 2007. He currently is serving an eight-year prison term.
The investigation revealed that Simmonds was siphoning money from the Anti-litter and Beautification Fund and depositing it into a Bureau of Economic Research account, from which he was withdrawing cash.
As part of the initial investigation, the inspector general identified several funds — including the Special Events Fund — that had money coming in from the Anti-litter and Beautification Fund.
“We saw money going to this fund, and said we should look into this fund, too,” van Beverhoudt told The Daily News. “There were checks coming from Anti-litter and going to this account.”
He found that the account was not legally established through the V.I. Finance Department.
“There is no authority in the Code, or rules and regulations authorizing the establishment of the Special Events Fund,” he said in the report. “Nor is there any documented purpose for how the Special Events Fund is to be used.”
The audit said the Special Events Fund was purported to fund special events traditionally hosted or sanctioned by the governor of the Virgin Islands. From 2004 to 2006, the account was administered by James O’Bryan Jr., the St. Thomas-Water Island administrator at the time. He was the sole signatory on the account, the audit report found.
Van Beverhoudt said the checking account was operated without proper controls, but no misappropriation of funds was uncovered.
“No one was stealing the money, they just didn’t follow proper controls,” he said.
Funds in the account were commingled, the inspector general found. In the two-year period of the audit, $347,472 was deposited from a mix of government accounts, private donations, employee reimbursements for payroll advances and other unknown sources.
“The checking account was used as an unofficial petty cash fund for expenses that were unrelated to the purported purpose of the account,” the audit said.
The report said that when the former deputy chief of staff — who was the certifying officer for the account — was unavailable, the account was used to pay for Governor’s Office or Anti-litter and Beautification Task Force expenses. The Department of Finance repeatedly reimbursed the account, the report said.
In 2005, the St. Thomas-Water Island administrator issued a $5,522 check to the deputy chief of staff for a “fund balance closure” without supporting documentation, the report said. Another check in 2004 was written for $2,000 and made out to cash. The inspector general wrote in the audit report that the administrator was interviewed during the course of the audit and stated that the expense was related to a meeting the governor had in Boston.
Payments for professional services, government employees, and payroll advances also were made out of the account, according to the audit.
Seventeen government employees from seven different departments received a total of $8,523 for services provided, van Beverhoudt said in the report.
“These payments were made from the checking account thereby bypassing the Government’s payroll system,” van Beverhoudt stated in the audit.
V.I. Internal Revenue Bureau income reporting requirements were not followed for the payments, the inspector general found.
Also unaccounted for is a portion of a $100,000 scholarship that was donated to the government by the Florida-Caribbean Cruise Association. The audit found that $25,000 of the donated funds was deposited into the account in 2005, but only about $11,000 was actually spent for youth activities.
“We could not determine how the remaining $14,009 of ‘scholarship’ funds was spent,” van Beverhoudt said in the report.
The Florida-Caribbean Cruise Association did not return calls for comment.
The account also received and expended private donations for the governor’s birthday party, the report found.
“However it is unclear whether this type of event could be construed as a traditional or a political event,” van Beverhoudt wrote. “Without clearly established rules and regulations, the use of the checking account could be prone to abuse.”
While the audited fund was closed by deJongh in 2007, the current administration has opened a similar fund — this time through the Finance Department — van Beverhoudt said. He did not know how the new fund was being used.
The inspector general made several recommendations for the current administration following the audit. He said the governor should make sure the Special Events Fund is in compliance with Finance policies and procedures; only use the legally sanctioned Donations Fund for private donations to the government; manage all donations and expend them only for their intended purpose; ensure that payment to contractors and vendors is done in compliance with the rules of the government; and follow payroll and casual labor compensation rules of the government.
Van Beverhoudt also recommended that the Finance commissioner issue a memo across all levels of government clarifying the policies and procedures for handling donations to the government and advising agencies to contact Finance if there are concerns about paying employees who have begun working before receiving their Notice of Personnel Action from the Division of Personnel.
The final recommendation was for the director of Personnel.
Van Beverhoudt suggested that the director also issue a memo across all levels of government detailing the procedures for paying employees who perform work for the government done outside their employment agency.
DeJongh responded to the audit in a letter dated July 16. He agreed with the audit’s findings and detailed how the inspector general’s recommendations are being implemented.
Government House spokesman Jean Greaux Jr. said the governor would not comment beyond the contents of the response letter.
O’Bryan said he had not seen the final version of the audit report, but had seen an earlier draft and understood there were very little changes in the final version.
In a written statement, O’Bryan said: “I told the IG that I thought the audit was basically fair and balanced. There were no rules governing the use of the account which was used to support Governor’s events and private funds were solicited.”
He said he inherited the account when he became administrator and noted that the inspector general did not make a conclusion about unaccounted for funds.
“Procedural errors can easily be corrected, which is the purpose of any audit,” O’Bryan said. “I thank the IG for responding to my request to cooperate fully with the two audits conducted of my conduct as a member of the Governor's office during the Turnbull administration. Both essentially cleared me of any improper conduct. In the end, I can cite them to judge my character.”
— Contact Aldeth Lewin at 774-8772 ext. 311 or e-mail alewin@dailynews.vi.
