Department of Homeland Security
 

The U.S. Virgin Islands Management of State Homeland 

Security Program Grants Awarded During Fiscal Years 

2007 through 2009 

OIG-12-29 January 2012
 
 

Office of Inspector General 

U.S. Department of Homeland Security 

Washington, DC 20528

JAN 30 2012 

Preface 

The Department of Homeland Security (DHS) Office of Inspector General (OIG) was 

established by the Homeland Security Act of 2002 (Public Law 107-296) by amendment 

to the Inspector General Act of 1978. This is one of a series of audit, inspection, and 

special reports prepared as part of our oversight responsibilities to promote economy, 

efficiency, and effectiveness within the Department. 

This report addresses The U.S. Virgin Islands’ management of State Homeland Security 

Program grants. We contracted with the independent public accounting firm Foxx & 

Company to perform the audit. The contract required that Foxx & Company perform its 

audit according to generally accepted government auditing standards. Foxx & 

Company’s report identifies eight areas where management of the grant funds could be 

improved, resulting in 22 recommendations addressed to the Assistant Administrator, 

Grant Programs Directorate. Foxx & Company is responsible for the attached auditor’s 

report dated January 9, 2012, and the conclusions expressed in the report. 

The recommendations herein have been developed to the best knowledge available to our 

office, and have been discussed in draft with those responsible for implementation. We 

trust this report will result in more effective, efficient, and economical operations. We 

express our appreciation to all of those who contributed to the preparation of this report. 

Anne L. Richards 

Assistant Inspector General for Audits 
January 9, 2012 

Ms. Anne L. Richards 

Assistant Inspector General for Audits 

Office of Inspector General 

U.S. Department of Homeland Security 

245 Murray Drive, S.W. Building 410 

Washington, D.C. 20528 

Dear Ms. Richards: 


Foxx & Company performed an audit of the U.S. Virgin Islands management of the 


Department of Homeland Security’s State Homeland Security Program grants for Fiscal 


Years 2007 through 2009. The audit was performed in accordance with our Task Order 


No. 0012 under TPD-FIG-BPA-07-0007 dated September 27, 2010. This report presents 


the results of the audit and includes recommendations to help improve the Territory’s 


management of the audited State Homeland Security Program grants. 


Our audit was conducted in accordance with applicable Government Auditing Standards,
 

2007 revision. The audit was a performance audit as defined by Chapter 1 of the 


Standards and included a review and report on program activities with a compliance 


element. Although the audit report comments on costs claimed by the U.S. Virgin 


Islands, we did not perform a financial audit, the purpose of which would be to render an 


opinion on the U.S. Virgin Islands financial statements or the funds claimed in the 


Financial Status Reports/Federal Financial Reports submitted to the Department of 


Homeland Security. 


We appreciate the opportunity to have conducted this audit. Should you have any 


questions, or if we can be of any further assistance, please call me at (513) 639-8843. 


Sincerely,
 

Foxx & Company 


Martin W. O’Neill 

Partner 
Executive Summary .......................................................................................................... 1
 

Background ....................................................................................................................... 2 


Results of Audit ................................................................................................................ 3 


Territory Grants Management Practices Need Improvement ............................... 3 


Strategic Goals and Objectives ............................................................................. 3 


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


Management Comments and Auditors’ Analysis ................................................. 7 


Sole Source Procurement and Management of Contract Deliverables ................. 8 


Recommendations .............................................................................................. 11 


Management Comments and Auditors’ Analysis ............................................... 11 


Financial Management Documentation .............................................................. 13 


Recommendations .............................................................................................. 15 


Management Comments and Auditors’ Analysis ............................................... 16 


Property Management Controls and Accountability .......................................... 17 


Recommendations .............................................................................................. 19 


Management Comments and Auditors’ Analysis ............................................... 20 


Use of Purchased Equipment .............................................................................. 21 


Recommendations .............................................................................................. 23 


Management Comments and Auditors’ Analysis ............................................... 23 


Procurement of Training ..................................................................................... 24 


Recommendations .............................................................................................. 26 


Management Comments and Auditors’ Analysis ............................................... 26 


Personnel Time Charges ..................................................................................... 27 


Recommendations .............................................................................................. 30 


Management Comments and Auditors’ Analysis ............................................... 30 


Filing Financial Reports ..................................................................................... 32 


Recommendation ................................................................................................ 33 


Management Comments and Auditors’ Analysis ............................................... 33 


High Risk Grantee .............................................................................................. 34 


Conclusion .......................................................................................................... 37 


Recommendations .............................................................................................. 38 


Management Comments and Auditors’ Analysis ............................................... 39 


Table of Contents/Abbreviations
 
Table of Contents/Abbreviations
 

Appendices 

Appendix A: 

Appendix B: 

Appendix C: 

Appendix D: 

Appendix E: 

Appendix F: 

Abbreviations 

DHS 

FEMA 

FY 

OIG 

Purpose, Scope, and Methodology ............................................... 41 


Management Comments to the Draft Report ............................... 44 


Homeland Security Grant Program Background .......................... 63 


Potential Monetary Benefits ......................................................... 64 


U.S. Virgin Islands Administrative Agency Organization Chart . 65 

Report Distribution ....................................................................... 66 

Department of Homeland Security 

Federal Emergency Management Agency 

fiscal year 

Office of Inspector General 
OIG
 

Department of Homeland Security 

Office of Inspector General 

Executive Summary 

Public Law 110-53, Implementing Recommendations of the 9/11 

Commission Act of 2007, requires the Department of Homeland 

Security, Office of Inspector General, to audit individual states’ and 

territories’ management of State Homeland Security Program and 

Urban Areas Security Initiative grants. This report responds to the 

reporting requirement for the U.S. Virgin Islands. 

The objectives of the audit were to determine if the U.S. Virgin Islands 

distributed and spent State Homeland Security Program grant funds 

(1) effectively and efficiently and (2) in compliance with applicable 

federal laws and regulations. We were to also address the extent to 

which grant funds enhanced the U.S. Virgin Islands’ ability to prevent, 

prepare for, protect against, and respond to natural disasters, acts of 

terrorism, and other man-made disasters. The audit included a review 

of approximately $4.6 million in State Homeland Security Program 

grants awarded to the U.S. Virgin Islands during fiscal years 2007 

through 2009. 

The U.S. Virgin Islands did not do an efficient and effective job of 

administering program requirements in accordance with grant guidance 

and regulations. We identified eight areas for improvement: strategic 

goals and objectives, sole source procurement and management of 

contract deliverables, financial management documentation, property 

management controls and accountability, use of purchased equipment, 

procurement of training, personnel time charges, and filing financial 

reports. As a result, we questioned $1,291,486 for specific items 

claimed and consider the entire $3,429,214 drawn down for fiscal years 

2007, 2008, and 2009 as potential questioned costs until the U.S. Virgin 

Islands provides adequate support for the funds. We concluded that the 

Federal Emergency Management Agency (FEMA) should consider 

classifying the U.S. Virgin Islands as a high risk grantee because of the 

numerous problems noted in our audit. 

FEMA concurred with our 22 recommendations to initiate 

improvements which, when implemented, should help strengthen 

program management, performance, and oversight. Written comments 

to the draft report are incorporated as appropriate and included in their 

entirety in appendix B. 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 1 
Background 

The Homeland Security Grant Program provides federal funding to 

help state, territory, and local agencies enhance capabilities to 

prevent, protect against, respond to, and recover from terrorist 

attacks, major disasters, and other emergencies. Appendix C 

provides background on the Homeland Security Grant Program 

The U.S. Virgin Islands (Territory) received $5.6 million in 

Homeland Security Grant Program funds during fiscal years (FYs) 

2007, 2008, and 2009. This included $4.6 million in State 

Homeland Security Program funds, which were managed by the 

State Administrative Agency. 

Prior to June 2009, the Adjutant General of the Virgin Islands 

National Guard was the executive head of the Virgin Islands 

Territorial Emergency Management Agency, the State 

Administrative Agency. The Director of Virgin Islands Territorial 

Emergency Management Agency and the Director of the Virgin 

Islands Office of Homeland Security coordinated activities through 

the Adjutant General. 

On June 22, 2009, the U.S. Virgin Islands legislature passed Act 

No. 7074 which reorganized responsibility for emergency 

management. The Virgin Islands Territorial Emergency 

Management Agency was designated as the lead agency for 

emergency response with responsibilities as the State 

Administrative Agency. The Office of Homeland Security was 

merged into the Virgin Islands Territorial Emergency Management 

Agency. The Virgin Islands Territorial Emergency Management 

Agency Director is responsible for coordinating the entire 

emergency management program for the Territory. 

The Homeland Security Grant Program grants included in our 

audit scope were administered under the prior organizational 

structure until September 2009 when the reorganization was 

completed. The organization as restructured is depicted in 

appendix E. None of the funds were awarded to subgrantees over 

the 3-year audit period. Appendix A provides details on the 

purpose, scope, and methodology for this audit. 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 2 
Results of Audit 

Territory Grants Management Practices Need Improvement 

The Territory did not do an efficient and effective job of administering 

program requirements in accordance with grant guidance and regulations. 

The Territory needs improvement in several areas to enhance the 

Territory’s management of the grants including: 

• Strategic goals and objectives 

• Sole source procurement and management of contract deliverables 

• Financial management documentation 

• Property management controls and accountability 

• Use of purchased equipment 

• Procurement of training 

• Personnel time charges and 

• Filing financial reports 

As a result, we questioned a total of $1,291,486 for specific items claimed 

by the Territory identified during the audit. In addition, we considered the 

entire $3,429,214 drawn down for FYs 2007, 2008, and 2009 awards as 

“at risk” as potential questioned costs until the Territory provides adequate 

support for the funds. 

In recognition of the significance of improvements needed in the areas 

listed above, Foxx & Company concluded that FEMA should consider 

classifying the Territory as a high risk grantee until the Territory 

implements program controls for safeguarding funds, and reasonably 

ensures that the grant funds are used for their intended purpose. 

Our 22 recommendations call for FEMA to initiate improvements which, 

when implemented, should help strengthen program management, 

performance, and oversight. These improvements will enhance the 

effectiveness of the Territory’s overall use of the grant funds to improve 

preparedness and response capabilities and reduce the risk associated with 

the Territory’s management of FEMA grant funds. 

Strategic Goals and Objectives 

The U.S. Virgin Islands Homeland Security strategies for FYs 2007 

through 2009 grant periods were not current and contained inaccurate 

information. The strategies were identical for each year and contained 

goals and objectives with target completion dates that had already passed. 

The strategies were copied from previous strategies and contained 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 3 
information that was no longer pertinent. In addition, the FY 2009 grant 

application was based on a June 2007 draft strategy which was not 

submitted to or approved by FEMA. 

Code of Federal Regulations Title 44 §13.40(a)(b), monitoring and 

reporting program performance, requires grantees to report grant program 

performance, comparing actual accomplishments to established objectives. 

In addition, Department of Homeland Security (DHS) State and Urban 

Area Homeland Security Strategy Guidance on Aligning Strategies with 

the National Preparedness Goal, dated July 22, 2005, states that an 

objective sets a tangible and measurable target level of performance over 

time against which actual achievement can be compared, including a goal 

expressed as a quantitative standard, value, or rate. Therefore, an 

objective should be: 

•	 Specific, detailed, particular, and focused — helping to identify 

what is to be achieved and accomplished; 

•	 Measurable — quantifiable, providing a standard for comparison, 

and identifying a specific achievable result; 

•	 Achievable — the objective is not beyond a state, region, 


jurisdiction, or locality’s ability; 


•	 Results-oriented — identifies a specific outcome; and 

•	 Time-limited — a target date exists to identify when the objective 

will be achieved. 

With respect to updating state strategies, the Strategy Guidance recognized 

the value of each state having an ongoing process of review and 

refinement as new lessons are learned, new priorities are realized, and new 

homeland security guidance is issued. The Strategy Guidance stated that 

updated State and Urban Area Homeland Security Strategies will then 

provide a context for performing the strategic exercise of asking “How are 

we organized?” and “How are we managing our homeland security 

programs?” 

The FY 2009 Homeland Security Grant Program Guidance and 

Application Kit states that use of State Homeland Security Program funds 

must be consistent with and supportive of implementation of the state 

homeland security strategy and state preparedness report. Linkages 

between specific projects undertaken with State Homeland Security 

Program funds and strategic goals and objectives will be highlighted 

through regular required reporting mechanisms, including the Biannual 

Strategy Implementation Report. 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 4 
The following events led to a condition of questionable usefulness of the 

U.S. Virgin Islands’ strategy: 

•	 The individual strategies for FYs 2007 through 2009 were 

approved by FEMA but did not include the date of FEMA’s 

approval. The strategies were identical, including 10 goals and 

43 objectives that were identical for each year. 

•	 The application packages (investment justifications) for FYs 2007 

and 2008 contained different dates for goals and objectives than 

the dates contained in the strategies. The grant application 

packages for FYs 2007 and 2008 contained goals and objectives 

that referenced and aligned with the strategies approved by FEMA. 

As shown below, all of the milestone completion dates were in 

2006, which was before the grant award dates for FYs 2007 

through 2009: 

o	 Strategic Goal 3 for all three years had a target completion 

date of July 2006; 

o	 Goals 6, 7, 8, and 10 for all three years had target completion 

dates of December 2006; and 

o	 Objectives under goals 2, 3, 4, 6, and 9 for each of the three 

years had target completion dates of February, April, May, 

June, July, August, October, and December 2006. 

•	 Although the U.S. Virgin Islands contracted to have a revised 

strategy developed for FY 2009 at a cost of $77,000, Virgin 

Islands Territorial Emergency Management Agency officials could 

not provide evidence that the revised strategy was prepared and 

submitted to FEMA. Additionally, the FEMA Program Analyst 

for the Virgin Islands did not receive the revised strategy for 

approval. 

•	 The State Administrative Agency Director said that the FEMA 

approved strategy for FY 2009 was used to prepare the application 

for the FY 2009 award. However, our review of the FY 2009 

application indicated that the application was aligned with the draft 

revised strategy and not the FEMA approved strategy. 

This draft revised strategy used to prepare the FY 2009 grant application, 

contained different goals and objectives than the FEMA approved 

strategies for FY 2007 through 2009. Examples are included in table 1. 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 5 
Table 1: Comparison of Draft Revised Strategy to FEMA Approved Strategy 

Draft Revised Strategy FEMA Approved Strategies 

FYs 2007-2009 

Goal #1: Enhance Weapons of Mass Goal #1: Develop and Institute an 

Destruction & Hazardous Materials Aggressive Infrastructure Protection 

Response and Decontamination Plan. 

Capability. 

Goal #2: Improve the Goal #2: Develop/enhance Territorial 

interoperability of territorial Quick Response Teams, EOD, and 

communications functions for “all- SWAT capabilities to respond to the 

hazards” responses, enhance the consequences of a Weapons of Mass 

communication capability among all Destruction (WMD) incident where 

first responder agencies in a multi- local resources are not available, or 

disciplinary environment, and are inadequate; 1 team on each island 

enhance the territory’s 911 system. (size may vary), for response to all 

WMD incidents. 

Goal #3: Develop a territory-wide Goal #3: Identify training 

medical surge capability to rapidly requirements by discipline, for WMD 

expand the capacity of the existing response levels. Identify all potential 

healthcare system in order to handle a candidates for each level of WMD 

catastrophic event or major incident. training by July 2006. 

Goal #4: Develop an Intelligence Goal #4: Ensure Jurisdictions 

Information Sharing Fusion Center to conduct/participate in WMD exercises 

produce up-to-date threat, to ensure a maximum level of 

vulnerability, and risk information. readiness for all response agencies and 

disciplines. 

Goal #5: Ensure that “All-Hazards” 

Emergency Management and Critical 

Infrastructure Protection planning 

and programs are maintained and 

enhanced territory-wide. 

Goal #5: Continue to improve the 

interoperability of territorial 

communications functions for WMD 

response providing for interoperable 

capability among all first responder 

agencies in a multi-disciplinary 

environment and the enhancement of 

the Territory's 9-1-1 system. 

The draft revised strategy also contained different milestones. U.S. Virgin 

Islands officials could not explain why the outdated strategies were used 

for FY 2007 and 2008 grant applications. The State Administrative 

Director told us that he thought the draft revised strategy was submitted to 

FEMA but could not provide specific information regarding when or who 

submitted the strategy. He also told us that he was uncertain whether the 

draft revised strategy was used to prepare the application for FY 2009 

grant funds. The statements by the State Administrative Agency Director 

indicates a lack of knowledge of how the applications were prepared and if 

the draft revised strategy was submitted to FEMA for approval. 

The grant applications for FY 2007 and FY 2008 did not reflect an 

updated strategy as required by the strategic guidance but instead used an 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 6 
out of date strategy which contained target completion dates that occurred 

prior to the date of the grant awards. The FY 2009 application was based 

on an updated strategy but the strategy was not approved by FEMA. By 

basing requested funds contained in each of the fiscal year applications on 

either an outdated strategy or a strategy not approved by FEMA, the 

grantee requested funds based on goals and objectives unknown to FEMA 

and without assurance that the goals and objectives aligned with national 

priorities. 

The use of outdated strategies and a strategy not approved by FEMA 

created an environment that made it difficult to measure improvements in 

preparedness and response. The basis for measuring improvements was 

unclear. It further made it difficult to provide a context for performing the 

strategic exercise of asking “How are we organized?” and “How are we 

managing our homeland security programs?” as set forth in the DHS State 

and Urban Area Homeland Security Strategy Guidance on Aligning 

Strategies with the National Preparedness Goal. 

Recommendations 

We recommend that the Assistant Administrator, Grant Programs 

Directorate, require the Director of the Virgin Islands Territorial 

Emergency Management Agency to: 

Recommendation #1: Prepare a revised strategy that includes: 

(a) the Territory’s current goals and objectives for enhancing its 

ability to prevent, prepare for, protect against, and respond to 

natural disasters, acts of terrorism, and other man-made disasters, 

and (b) goals and objectives that are specific, measurable, 

achievable, results-oriented, and time-limited. 

Recommendation #2: Submit the strategy for FEMA’s approval 

and use the revised, approved strategy to prepare future grant 

applications (investment justifications). 

Management Comments and Auditors’ Analysis 

FEMA concurred with recommendations 1 and 2 and stated that 

the Virgin Islands Territorial Emergency Management Agency 

revised the Territory’s Homeland Security Strategy in July 2011 

prior to submitting its FY 2011 Homeland Security Grant Program 

application. FEMA stated that the strategy includes current goals 

and objectives that enhance the Territory’s ability to prevent, 

prepare for, and respond to natural and man-made disasters and 

acts of terrorism. FEMA stated that the strategy goals and 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 7 
objectives are specific, measurable, achievable, results oriented, 

and time limited. FEMA will continue to assist the Virgin Islands 

Territorial Emergency Management Agency Director with strategy 

updates as needed. FEMA requested that recommendations 1 and 

2 be resolved and closed. 

Virgin Islands officials did not agree with recommendations 1 and 

2. The officials said that an updated plan already has been 

approved by the federal grantor agency. However, they also said 

that the there is no evidence that the plan for the period in question 

had been updated or submitted in the Grants Reporting Tool. The 

officials provided documents which indicated the plan had been 

provided to them by a contractor. The officials claimed that the 

Territory would not have had its investment justification and award 

approved without FEMA’s knowledge of the updated plan as this 

is a regulatory prerequisite. Initially in their comments, the Virgin 

Islands officials said they do not have evidence of the approval. 

However, later in their comments, the Virgin Islands officials said 

they have received written approval from FEMA as required. The 

officials provided a copy of the strategic plan for 2011-2014 and 

documentation that the plan was approved by FEMA. 

We reviewed the new strategy and concluded that although some 

of the goals and objectives could be improved, most of the goals 

and objectives are in accordance with the criteria. The Virgin 

Islands officials also included an annual evaluation process as part 

of the strategic plan. Annual evaluations are intended to ensure 

that improvements are being made and that the progress towards 

the goals and objectives is being tracked and measured. This 

annual evaluation is an important addition to the plan. The actions 

taken by FEMA and Virgin Islands officials are responsive to 

address the recommendations. These recommendations are 

resolved and closed. 

Sole Source Procurement and Management of Contract 

Deliverables 

The U.S. Virgin Islands spent $472,167 for professional services without 

competition. The sole source justification for the procurement award was 

based on the reputation of the contractor, and that the State Administrative 

Agency had worked with the contractor previously. The Virgin Islands 

State Administrative Agency did not receive a cost proposal from the 

contractor, nor did the Virgin Islands State Administrative Agency 

perform a cost analysis before funds totaling $472,167 were spent on the 

procurements. 

The U.S. Virgin Islands Management of State Homeland Security Program 

Grants Awarded During Fiscal Years 2007 through 2009 

Page 8 
According to the current Director, the former State Administrative Agency 

Director verbally directed the contract scope of work to focus on the 

development of a reorganization plan. Documentation supporting the 

direction of the contractor’s work and other activities relating to the 

contract were not maintained by the State Administrative Agency. As a 

result, the procurement was not in compliance with federal requirements, 

and the State Administrative Agency may have paid more than necessary. 

With the exception of a reorganization plan, which was not specifically set 

forth in the deliverables, documentation was not provided to support if any 

of the deliverables were provided. Accordingly, we consider the $472,167 

expended for this procurement to be a questioned cost. 

The contract scope of work included six deliverables. The Director of the 

State Administrative Agency said that two of the six deliverables involved 

analysis and development of documents that were not completed by the 

contractor. The first deliverable was to develop standard operating 

procedures for response in keeping with the National Response 

Framework. Specifically, the contractor was to use a gap analysis to 

determine baseline Territorial capabilities and complete a territorial and 

federal validation capabilities assessment. The second deliverable was to 

assist and guide the Territory through the process of developing a detailed 

detection response and decontamination document, to review and help rewrite Standard Operating Procedures, and to develop a pre-scripted 

mission check list for Chemical, Biological, Radiological, Nuclear, and 

Explosive events. The other four deliverables were intangible, 

immeasurable activities. One of these deliverables provided for 

consultation on management planning and protocol matters, including 

organizational assessments of agencies, review of organizational structural 

effectiveness, staffing analysis, and general support. This deliverable did 

not call for a detailed assessment that resulted in a reorganization plan. 

Code of Federal Regulations Title 44 §13.36(c)(1) requires that all 

procurement transactions be conducted in a manner providing full and 

open competition. When competition is not used, Code of Federal 

Regulations Title 44 §13.36(f)(1) requires that a cost analysis be 

conducted when adequate price competition is lacking and for sole source 

procurements. 

In addition, Code of Federal Regulations Title 44 §13.42(a) requires that 

grantees maintain all financial and programmatic records, supporting 

documents, statistical records, and other records which are required to be 

maintained by program regulations or the grant agreement, or otherwise 

reasonably considered as pertinent to program regulations or the grant 

agreement. Records must be retained for 3 years from the day the grantee 

or subgrantee submits to the awarding agency its single or last expenditure 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 9 
report for that period. Code of Federal Regulations Title 44 §13.36(9) 

states that grantees and subgrantees will maintain records sufficient to 

detail the significant history of a procurement. 

Department of Homeland Security’s Financial Management Guide dated 

January 2006, Page 41, under Procurement, Adequate Competition, states 

that “All sole-source procurements in excess of $100,000 must receive 

prior written approval of the awarding agency.” The Guide further states 

that a “Justification must be provided for non-competitive procurement 

and should include a description of the program and what is being 

contracted for, an explanation of why it is necessary to contract 

noncompetitively, time constraints and any other pertinent information. 

G&T [Grants and Training – a former DHS agency whose functions have 

since been transferred to FEMA] will approve sole-source procurements 

for direct recipients only.” 

On May 28, 2008, the U.S. Virgin Islands entered into a procurement that 

eventually cost $472,167. The contractor was selected without 

competition and justified on prior experience with the contractor. The 

State Administrative Agency Director prepared a justification letter to the 

Virgin Islands Department of Property and Procurement for approval of 

the sole source procurement. The letter stated that the contractor was 

vetted and approved by DHS to enter into federally funded contracts and 

that the State Administrative Agency had contracted with the firm 

previously. The letter further stated that based on the contractor’s 

references, capabilities, knowledge, and prior deliverables to the State 

Administrative Agency, it was chosen for the sole source procurement. 

On the basis of this letter the sole source procurement was approved by 

the Virgin Islands Department of Property and Procurement. FEMA did 

not approve this sole source procurement. Also, a cost analysis was not 

performed for the sole source procurement as required by regulations. 

According to the current Director, the former State Administrative Agency 

Director directed the contractor to develop a reorganization plan for the 

State Administrative Agency. The redirection of the contractor to develop 

a reorganization plan was not documented in contract records maintained 

by the State Administrative Agency. This effort involved gathering 

information about the existing structure and developing a proposed 

reorganizational structure. Although the scope of work provided for 

consultation services including the review of organizational structure 

effectiveness, staffing analysis, and general support, the scope did not 

specifically state that the contractor was to develop a reorganizational plan 

for the State Administrative Agency. Other than invoices submitted by the 

contractor, there were no records to document the history of the 

procurement as required by Code of Federal Regulations Title 44 

The U.S. Virgin Islands Management of State Homeland Security Program 

Grants Awarded During Fiscal Years 2007 through 2009 

Page 10 
§13.36(9). However, the contractor was paid $472,167, the full amount of 

the contract award. 

The State Administrative Agency did not have policies and procedures for 

maintaining contract documentation, including information such as 

redirecting the focus of the scope of work. The State Administrative 

Agency also did not maintain a contract file that contained the history of 

the procurement or evidence of the State Administrative Agency 

oversight. For example, the basis and justification for redirecting the 

scope of work to focus on developing a reorganization plan was not 

documented. 

Without FEMA approval as required by the DHS Financial Management 

Guide, the State Administrative Agency should not have awarded the 

contract without competition, without an adequate justification for sole 

source procurement, and without a cost analysis being performed. As a 

result, the State Administrative Agency did not have assurance that the 

cost paid was justified or whether the contract could have been awarded to 

an equally competent contractor at a lesser cost. Accordingly, we consider 

the $472,167 awarded to the contractor to be a questioned cost. 

Recommendations 

We recommend that the Assistant Administrator, Grant Programs 

Directorate, require the Director of the Virgin Islands Territorial 

Emergency Management Agency to: 

Recommendation #3: Establish policies and procedures to 

adequately justify sole source procurements, ensure that cost 

analyses are performed in accordance with federal regulations, and 

obtain FEMA approval, as necessary, for sole source 

procurements. 

Recommendation #4: Establish policies and procedures to ensure 

that documentation regarding contract activities is maintained. 

Recommendation #5: Disallow the amount paid under the 

contract and recover the $472,167 in State Homeland Security 

Program grant funds for return to FEMA. 

Management Comments and Auditors’ Analysis 

FEMA concurred with recommendations 3, 4, and 5. FEMA will 

require the Virgin Islands Territorial Emergency Management 

Agency Director to develop sole source procurement Standard 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 11 
Operating Procedures that includes policies and procedures that 

adhere to federal regulations and Territorial government policies 

and procedures. FEMA will require an update from the Virgin 

Islands Territorial Emergency Management Agency on the 

progress of implementing this corrective action within 90 days of 

the date of the grantee notification letter. FEMA will disallow the 

amount paid to the contract in question and consider options to 

recover the funds and provide initial determinations on possible 

collection options to the Virgin Islands Territorial Emergency 

Management Agency within 90 days of the date of the grantee 

notification letter. FEMA requested that recommendations 3 

through 5 be resolved and open pending implementation of the 

stated corrective actions. 

The Virgin Islands officials did not agree with recommendations 3 

through 5. The officials said that the procurement discussed in the 

report was an open market procurement but the bidder selected was 

disapproved by the Virgin Islands Governor which is allowable 

under law. While this may be allowable under Virgin Islands law 

it does not comply with federal requirements. The officials 

acknowledged that this type of procurement requires approval from 

FEMA, and that such approval was not obtained. The officials did 

not address recommendation 3 that policies and procedures be 

established to adequately justify sole source procurements, ensure 

that cost analyses are performed in accordance with federal 

regulations, and obtain FEMA approval, as necessary, for sole 

source procurements. 

For recommendation 4, the officials said that the Virgin Islands 

Department of Property and Procurement retains information 

relative to every procurement and copies of the award and 

documentation are forwarded to the user agency. They also said 

that they will utilize the Homeland Security Information Network 

to maintain documentation effective in 2012. This response did 

not address recommendation 4 to establish policies and procedures 

to ensure that documentation regarding contract activities is 

maintained. For recommendation 5 the officials said that all the 

deliverables in the contract were not met due to the unforeseen 

event of Hurricane Omar. They further said that the Virgin Islands 

procurement process was followed, monies were disbursed, and 

that the work performed was in line with the contract terms and 

conditions. 

If properly implemented, the corrective actions proposed by 

FEMA will resolve the condition reported in this finding. 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 12 
However, until firm timetables are provided for implementing 

recommendations 3 and 4, the recommendations will remain 

unresolved and open. Recommendation 5 is considered resolved, 

and will remain open until such time that corrective actions have 

been implemented. 

Financial Management Documentation 

The State Administrative Agency did not maintain adequate internal 

controls over the management of the FY 2007 through 2009 awards 

because records and supporting documentation were not maintained as 

required by federal regulations. According to the State Administrative 

Agency director, the documents were not maintained because the records 

were either lost or destroyed as a result of, or subsequent to, the 

September 2009 reorganization of the Virgin Islands Territorial 

Emergency Management Agency. As a result, there was no assurance that 

all grant funds were expended for awarded purposes, and the Territory was 

not in compliance with record keeping requirements. 

Code of Federal Regulations Title 44 §13.42, Retention and access 

requirements for records, requires that grantees maintain all financial and 

programmatic records, supporting documents, statistical records, and other 

records which are required to be maintained by program regulations or the 

grant agreement, or otherwise reasonably considered as pertinent to 

program regulations or the grant agreement. Records must be retained for 

3 years from the day the grantee or subgrantee submits to the awarding 

agency its single or last expenditure report for that period. 

Required documentation in support of the procurement of equipment with 

FY 2007, 2008, and 2009 grant funds was not complete. The State 

Administrative Agency had basic information, such as purchase orders for 

equipment, to support drawdowns of grant funds from the federal account. 

However, other records which documented the purchase justification, 

delivery, and installation of equipment were not available. 

Documentation also was not available to support the accomplishments for 

U.S. Virgin Islands personnel costs expended from grant funds for 

planning activities. There were no records to support $275,979 claimed 

for planning activities. Similarly, for personnel costs charged for training 

activities there was no documentation to support the training that was 

performed. 

This deficiency was corroborated by a FEMA monitoring visit in 

September 2010 that found Homeland Security Grant Program files were 

either missing or incomplete. In a letter to the State Administrative 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 13 
 

Agency Director, FEMA stated “a corrective action plan was needed to 

comply with federal requirements. Failure to comply may result in federal 

funds being placed on hold or having the organization designated as a high 

risk which may affect funding from other federal agencies.” 

In a November 2010 memorandum for the record, the State Administrative 

Agency acknowledged that records were missing. Specifically, the 

Agency acknowledged that the missing records included: 

1.	 All grant extension requests prior to October 2, 2009, 

2.	 All personnel listings attached to applications prior to 


October 2, 2009,
 

3.	 National Environmental Policy Act compliance checklists for 

exercises and trainings conducted prior to October 2, 2009, 

4.	 Inventory lists of equipment purchased, 

5.	 Custody receipts for equipment distributed to other U.S. Virgin 

Islands agencies, 

6.	 Any requests for budget modifications made to FEMA prior to 

October 2, 2009, 

7.	 After action reports for exercises that were conducted, 

8.	 Time verification sheets for grant funded employees, 

9.	 Semi-annual certification forms from employees prior to 


October 2, 2009, and
 

10. Quarterly reports (Financial and Programmatic) prior to 

October 2, 2009. (Note: We obtained all but one of the quarterly 

financial reports as of December 2010 for the FY 2007 through 

2009 Homeland Security Grant Program awards.) 

During the period March 22-26, 2010, FEMA provided a technical 

assistance workshop in the U.S. Virgin Islands for Virgin Islands 

Territorial Emergency Management Agency employees. One of the main 

issues addressed in the workshop was the need to improve records 

retention. FEMA’s after action report for the workshop stated that records 

retention is a requirement which must be complied with in order to avoid 

future problems with accessing grant files, documents, etc. This 

requirement, and the processes to address it, were discussed in detail with 

the State Administrative Agency staff during the workshop. It was 

recommended in the after action report that FEMA also address this 

problem, as it is one with potential legal implications having long-term 

impact on the Territory and its grant administration. The State 

Administrative Agency officials at the time of our audit were unable to 

locate and obtain the majority of the grant files and award information for 

the FY 2007 through 2009 grants to the Virgin Islands. 

The U.S. Virgin Islands Management of State Homeland Security Program 


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Page 14 
The State Administrative Agency Director said that the reorganization of 

the State Administrative Agency in September 2009 resulted in documents 

being lost during the transfer from one office location to a different 

location. The Director stated that not all documents were transferred. 

The Virgin Islands Territorial Emergency Management Agency received 

Homeland Security Grant Program grants totaling $3,429,214 during 

FYs 2007, 2008, and 2009. As a result of the missing documentation, 

there was no assurance that these grant funds were used as intended or in 

accordance with federal requirements. For example: 

•	 Without inventory lists of equipment purchased and custody 

receipts of equipment disbursed to other U.S. Virgin Islands’ 

agencies, the State Administrative Agency did not have 

information to identify, safeguard, maintain, or control the custody 

of equipment purchased with grant funds. 

•	 Without after action reports for exercises that were conducted, the 

State Administrative Agency did not know how many or what type 

of exercises were conducted and what was learned from the 

exercises that could enhance preparedness or response time. 

•	 Without proper documentation for claimed personnel costs, the 

State Administrative Agency could not support that the costs 

claimed were for approved activities or that the activities claimed 

were actually performed. 

Taken as a whole, without proper documentation, the State Administrative 

Agency could not support that the funds received were appropriately used 

or the level of improved preparedness and security that had been achieved. 

As a result, the entire $3,429,214 drawn down during FYs 2007, 2008, 

and 2009 to the U.S. Virgin Islands is considered “at risk” and should be 

considered questioned until the amount of funds that can be adequately 

supported is identified. Details of the questioned costs are provided in 

appendix D. 

Recommendations 

We recommend that the Assistant Administrator, Grant Programs 

Directorate, require the Director of the Virgin Islands Territorial 

Emergency Management Agency to: 

Recommendation #6: Develop a system to maintain required 

records to assure compliance with grant requirements. 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 15 
Recommendation #7: Reconstruct the records supporting the 

$3,429,214 drawn down for the FY 2007, 2008, and 2009 grant 

awards. 

Recommendation #8: Refund to FEMA any funds for 

expenditures that cannot be supported by appropriate 

documentation. 

Management Comments and Auditors’ Analysis 

FEMA concurred with recommendations 6, 7, and 8. For 

recommendation 6, FEMA will require the Virgin Islands 

Territorial Emergency Management Agency Director to develop 

records management Standard Operating Procedures that include 

procedures for maintaining grant records and associated 

documents. FEMA will require an update from the Virgin Islands 

Territorial Emergency Management Agency on the progress of 

implementing this requirement within 90 days of the date of the 

grantee notification letter. 

For recommendations 7 and 8 FEMA will require the Virgin 

Islands Territorial Emergency Management Agency Director to 

develop and implement a Corrective Action Plan to reconstruct 

grant files and all associated records for FYs 2007, 2008, and 2009 

in support of the $3,429,214 drawdown. Within 90 days of the 

receipt of the files FEMA will review the grant files received for 

unallowable costs and consider options to recover the full or partial 

amount of unallowable costs or costs not supported with 

appropriate documentation. Within 90 days of receiving the grant 

files FEMA will provide initial determinations on possible 

collection options to the Virgin Islands Territorial Emergency 

Management Agency. 

FEMA requested that recommendations 6 through 8 be resolved 

and remain open pending implementation of the corrective actions. 

The Virgin Islands officials did not agree with recommendations 6 

through 8. They said that a system to maintain records has already 

been implemented. The system is the Virgin Islands government 

financial management system. According to the Virgin Islands 

officials, this system has been the official custodian of revenue and 

financial transaction records since 2007. The officials further said 

that they will use the Homeland Security Information Network as 

an additional repository for documentation and records related to 

grant awards from DHS effective January 2012. 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 16 
For recommendation 7, the officials said that they have 

reconstructed records maintained at other locations and the Virgin 

Islands automated system for grant awards for FYs 2007, 2008, 

and 2009 grant awards. The officials shipped the reconstructed 

records to Foxx & Company subsequent to the completion of the 

audit. However, many of these records did not relate to the FYs 

2007, 2008, and 2009 grant awards and were not identified in a 

manner to conclude that they fully supported the awards. 

The Virgin Islands officials also did not agree with 

recommendation 8. The officials said that all funds can be 

accounted for by photos of equipment purchased, inventory 

documentation, or other means to prove that the intended purpose 

of the grants were adhered to even though there were inadequate 

records management controls. They also said that corrective action 

has been taken under the new organization to ensure compliance. 

However, the Virgin Islands officials did not provide 

documentation to support that all funds were accounted for or that 

corrective action had been taken to ensure compliance. 

If appropriately supported and properly implemented, the 

corrective actions proposed by FEMA will resolve the condition 

identified during the audit. However, until firm timetables for 

fully implementing the recommendations are provided, the 

recommendations will remain unresolved and open. 

Property Management Controls and Accountability 

The Virgin Islands Territorial Emergency Management Agency did not 

comply with federal requirements for maintaining property records or 

performing required physical inventories. The Virgin Islands Territorial 

Emergency Management Agency property records did not include all 

information required under federal regulations. Also, the process used to 

inventory property relied on the actions of individual government agencies 

without any independent verification from the Virgin Islands Territorial 

Emergency Management Agency. As a result, there was no assurance that 

property was effectively managed by the grantee. 

Code of Federal Regulations Title 44 §13.32(d) Management 

requirements sets forth procedures for managing equipment (including 

replacement equipment), whether acquired in whole or in part with grant 

funds, until disposition takes place. Grant recipients will, at a minimum, 

meet the following requirements: 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 17 
•	 Property records must be maintained that include a description of 

the property, a serial number or other identification number, the 

source of property, who holds title, the acquisition date, cost of the 

property, percentage of federal participation in the cost of the 

property, the location, use and condition of the property, and any 

ultimate disposition data including the date of disposal and sale 

price of the property. 

•	 A physical inventory of the property must be taken and the results 

reconciled with the property records at least once every two years. 

•	 A control system must be developed to ensure adequate safeguards 

to prevent loss, damage, or theft of the property. Any loss, 

damage, or theft shall be investigated. 

Code of Federal Regulations Title 44 §13.3, Definitions, defines 

equipment as tangible, non-expendable, personal property having a useful 

life of more than 1 year and an acquisition cost of $5,000 or more per unit. 

The Virgin Islands Territorial Emergency Management Agency property 

records did not include the source of the property, acquisition date, cost of 

the property, percentage of federal participation in the cost of the property, 

or use and condition of the property. The records included a description of 

the property, location, property tag number, serial number, and comment 

box. We also noted that the records did not include equipment that had 

been disposed of or the ultimate disposition data such as the date of 

disposal and sale price of the property. Although the equipment selected 

for review during the audit included property tags by color code that 

identified the type of funds used to procure the equipment, i.e., territorial 

or federal, the tags did not identify which federal agency provided the 

funds to procure the equipment. 

In addition, Virgin Islands Territorial Emergency Management Agency 

did not include software costing $5,000 or more as accountable property in 

its property records. We identified five purchases of software costing 

more than $5,000 not included in the property records. Because software 

was not included in the inventory records nor were all procurement 

records available, we could not determine the full extent that software was 

included in property records. 

Virgin Islands Territorial Emergency Management Agency did not 

perform the required physical inventories, which provide visual assurances 

concerning the location, use, and condition of property. According to 

Virgin Islands Territorial Emergency Management Agency officials, all 

procurements are made by the Virgin Islands Department of Property and 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 18 
Procurement, which had responsibility for conducting physical inventories 

for the Territory. Physical inventories of equipment by the Department of 

Property and Procurement had to be approved by individual agencies. If 

an agency did not approve inventories to be conducted, the inventories 

were not done. The Department of Property and Procurement 

Commissioner told us that at least one agency had not agreed to have a 

physical inventory of equipment. However, the Commissioner did not 

know the total number of agencies that had not agreed to have physical 

inventories. 

The Department of Property and Procurement procedures for managing 

fixed assets defined fixed assets as machinery, equipment, and other items 

having a value of $5,000 or more, but did not define software as a fixed 

asset. The procedures described how to conduct a physical inventory but 

did not specify that an inventory be conducted at least once every 2 years 

as required under federal regulations. 

Without the required physical control and accountability over items 

purchased with federal grant funds, the Virgin Islands Territorial 

Emergency Management Agency did not have reasonable assurance that 

the property procured with State Homeland Security Program funding was 

being adequately safeguarded to prevent loss, damage, or theft of the 

property. Without satisfactory controls, the grantee did not have an 

effective way to ensure that the property was adequately safeguarded or 

used solely for authorized purposes. 

Recommendations 

We recommend that the Assistant Administrator, Grant Programs 

Directorate, require the Director of the Virgin Islands Territorial 

Emergency Management Agency to: 

Recommendation #9: Develop and implement procedures to 

ensure that property records comply with inventory requirements 

for equipment purchased with federal funds. 

Recommendation #10: Withhold federal grant fund awards until 

the grantee is in compliance with the property records and 

inventory requirements. 

Recommendation #11: Conduct physical inventory and reconcile 

to property records. 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 19 
Management Comments and Auditors’ Analysis 

FEMA concurred with recommendations 9, 10, and 11. FEMA 

will require the Virgin Islands Territorial Emergency Management 

Agency Director to develop property management and inventory 

Standard Operating Procedures. The procedures should adhere to 

federal regulations and Territorial government policies and 

procedures and must include systematic procedures for property 

management and inventory. 

FEMA will require an update from the Virgin Islands Territorial 

Emergency Management Agency on the progress of implementing 

these requirements within 90 days of the date of the grantee 

notification letter for this required corrective action. FEMA will 

also consider options to withhold funding until the Standard 

Operating Procedures are developed and approved as part of an 

overall Corrective Action Plan. FEMA will advise the Virgin 

Islands Territorial Emergency Management Agency of its 

determination to withhold funds within 45 days of the date of the 

grantee notification letter. 

Within 90 days of the date of the grantee notification letter FEMA 

will require the Virgin Islands Territorial Emergency Management 

Agency Director to develop, implement, and submit to FEMA for 

approval a Corrective Action Plan to conduct a physical inventory 

of all equipment purchased with FYs 2007, 2008, and 2009 funds 

and reconcile all associated property records. Upon completion, an 

inventory report will be required to be provided to FEMA. FEMA 

will require an update report on progress of this corrective action 

from the Virgin Islands Territorial Emergency Management 

Agency within 90 days of the date of the grantee notification letter 

on the corrective action. 

FEMA requested that recommendations 9 through 11 be resolved 

and remain open pending implementation of the corrective actions. 

Virgin Islands officials agreed with recommendation 9. They said 

that the Virgin Islands Department of Property and Procurement is 

responsible for maintaining inventory but that the inventory system 

of this organization is inadequate for meeting federal requirements. 

Therefore the officials said that they are in the process of creating 

an in-house inventory tracking system. 

The officials did not agree with recommendation 10. The officials 

said that they have taken steps to comply with inventory 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 20 
requirements. This involves using automated spreadsheets to 

capture information and solicitation of specialized software from 

various vendors to achieve compliance with the recommendation. 

The due date for completion of this process is May 30, 2012. The 

officials said that withholding federal grant funds would inhibit 

completion of the project. 

For recommendation 11, Virgin Islands officials agreed, and said 

that an inventory has been conducted and property records are 

being reconciled and the inventory will be updated bi-annually. 

Guidance is also being provided to program mangers on 

accounting for acquisitions utilizing federal and local funds. 

If properly implemented, the corrective actions proposed by 

FEMA and the Virgin Islands will resolve the condition identified 

during the audit. Until a firm timetable for implementing 

recommendation 9 is provided, the recommendation will remain 

unresolved and open. Recommendations 10 and 11 are considered 

resolved, and will remain open until such time that corrective 

actions have been implemented. 

Use of Purchased Equipment 

The State Administrative Agency purchased communications equipment 

that could not be used. The equipment, purchased at a cost of more than 

$200,000, were radio encryption modules to increase security for law 

enforcement and first responder radios. However, the modules were not 

compatible with all of the Territory’s first responder radios. According to 

Virgin Islands Territorial Emergency Management Agency officials, the 

encryption modules were left with the installation contractor and the 

agency did not know the specific physical location of the modules. As a 

result, grant funds were spent for equipment that could not be used and the 

State Administrative Agency did not maintain control over the purchased 

equipment. 

Code of Federal Regulations Title 44 §13.32(c) requires that equipment be 

used by the grantee or subgrantee in the program or project for which it 

was acquired as long as needed, whether or not the project or program 

continues to be supported by Federal funds. Code of Federal Regulations 

Title 44 §13.20(a)(3) requires that effective control and accountability be 

maintained for all grant and subgrant cash, real and personal property, and 

other assets. Grantees and subgrantees must adequately safeguard all such 

property and must assure that it is used solely for authorized purposes. 

Also, Code of Federal Regulations Title 2 §215.34(f)(4) requires that a 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 21 
control system be in effect to ensure adequate safeguards to prevent loss, 

damage, or theft of the equipment. 

In September 2009 the State Administrative Agency purchased 575 radio 

encryption modules at a cost of $201,250 for installation into law 

enforcement and first responder radios. The Virgin Islands justified the 

purchase of these modules as being critical to: (1) ensure communication 

security for sensitive interdepartmental communications, (2) bypass the 

ability of criminals and others for monitoring communications, 

(3) increase the efficiency of the 9-1-1 system, and (4) improve law 

enforcement in the Territory. 

Five encryption modules were initially installed and were found not to 

work because the first responders had radios from two different 

manufacturers. When the modules were installed in one manufacturer’s 

radio, the radio signal could not be heard on the other manufacturer’s 

radio. The purchase of the incompatible encryption modules was due to 

poor procurement planning. The Virgin Islands Territorial Emergency 

Management Agency did not have information to support the actions taken 

during the procurement of the encryption modules to ensure that the 

modules were compatible with all first responder radios. 

In February 2011, we observed the encryption modules in the original 

shipping boxes from the manufacturer. The module boxes were located in 

a storage area of the module installation contractor. The State 

Administrative Agency could not provide us a location for the modules. 

We visited the contractor to observe the modules and provided the 

location to agency officials. The State Administrative Agency director 

said that the modules will eventually be used when additional radios are 

purchased from one of the two radio manufacturers to ensure that all 

radios would be from the same manufacturer. The State Administrative 

Agency director said it is uncertain when the purchase of the additional 

radios will occur. 

Because the modules did not work, the law enforcement and first 

responder radios were not secured and protected as planned. In addition, 

because the State Administrative Agency did not know where the modules 

were being stored, the State Administrative Agency had no assurance that 

the modules were in a secure location or were still available. As a result 

of the modules not being able to be used, we consider the $201,250 to be a 

questioned cost. 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 22 
Recommendations 

We recommend that the Assistant Administrator, Grant Programs 

Directorate, require the Director of the Virgin Islands Territorial 

Emergency Management Agency to: 

Recommendation #12: Expedite the procurement of radios that 

are compatible with the modules, and install the modules as 

intended. 

Recommendation #13: If compatible radios are not procured, 

return the $201,250 to FEMA. 

Management Comments and Auditors’ Analysis 

FEMA concurred with recommendations 12 and 13. FEMA will 

require the Virgin Islands Territorial Emergency Management 

Agency Director to provide documentation and written 

certification that radios compatible with encryption modules are 

procured and modules are installed as intended. FEMA will 

require an update from the Virgin Islands Territorial Emergency 

Management Agency on the progress of implementing this 

requirement within 90 days of the date of the grantee notification 

letter for this required corrective action. 

FEMA will consider options to recover the associated costs if 

documentation to support the procurement of radios and 

installation of encryption modules is not provided by the Virgin 

Islands Territorial Emergency Management Agency Director. 

FEMA will advise the Virgin Islands Territorial Emergency 

Management Agency of this determination within 45 days of the 

receipt of the documentation, or, if documentation is not received 

or insufficient, within 90 days of the date of the grantee 

notification letter. FEMA requested that recommendations 12 and 

13 be resolved and remain open pending implementation of the 

corrective actions. 

Virgin Islands officials did not agree with recommendations 12 

and 13. The officials said that prior to the audit they had identified 

the physical location of the encryption cards and the inventory 

location has been included in an automated spreadsheet. 

(However, during the audit when the audit team asked for the 

location of the encryption cards, Virgin Islands officials did not 

know the location.) The officials further stated that the vendor for 

the encryption cards has been contacted and the cards will be 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 23 
installed in those radios that can be encrypted which will meet the 

specified justification of purchase. The officials did not say how 

many of the radios on-hand might not be capable of being 

encrypted. The officials also did not address the need to 

expeditiously procure radios to replace the radios that cannot be 

encrypted. For future purchases the officials said they are 

committed to ensuring that all purchases will be interoperable. 

The officials also said that training will be provided to ensure 

future maintenance. 

For recommendation 13, the officials said that efforts are underway 

to install the encryption cards into those radios that can be 

encrypted. The officials did not address the recommendation that 

the cost of encryption cards that are not compatible be refunded to 

FEMA. 

If properly implemented, the corrective actions proposed by 

FEMA will resolve the condition identified during the audit. 

However, until a firm timetable for fully implementing 

recommendation 12 is provided, the recommendation will remain 

unresolved and open. Recommendation 13 is considered resolved, 

and will remain open until such time that corrective actions have 

been implemented. 

Procurement of Training 

The State Administrative Agency utilized a Memorandum of 

Understanding to procure training for first responders and other Virgin 

Islands officials from the University of Virgin Islands Community 

Engagement and Lifelong Learning Center. However, the agreement 

included a 25% service fee ($50,000) that was subsequently claimed as 

undocumented indirect costs. As a result, we consider the $50,000 to be a 

questioned cost because of a lack of supporting documentation. 

The University of Virgin Islands Community Engagement and Lifelong 

Learning Center is an organization within the University of Virgin Islands 

that provides training for professionals and organizations. According to 

Territorial personnel, the Memorandum of Understanding was made by 

the State Administrative Agency to avoid the Virgin Islands administrative 

processes of entering into contracts. 

Code of Federal Regulations Title 2 Appendix A to Part 220, §K.2.a.(1) 

states that no proposal to establish facilities and administrative (indirect) 

costs shall be acceptable unless such costs have been certified by the 

educational institution. Section K.2.b. (4) requires that the institution’s 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 24 
 

certification state that all costs included are properly allocable to federal 

agreements on the basis of a beneficial or causal relationship between the 

expenses incurred and the agreements to which they are allocated in 

accordance with applicable requirements. 

The State Administrative Agency entered into a Memorandum of 

Understanding on December 31, 2008, with the University of Virgin 

Islands for $200,000. Under the agreement, the University of Virgin 

Islands was to manage, coordinate, and implement training programs. The 

agreement stated that the State Administrative Agency outsourced the 

management and delivery of training in compliance with the 2007 

Homeland Security Guidance. 

The Memorandum of Understanding included a service fee of 25% 

($50,000), which was subsequently identified as indirect costs. The State 

Administrative Agency could not provide documentation to support that 

an indirect cost allocation plan in support of the $50,000 service fee had 

been prepared and approved. As a result, the makeup of the $50,000 

professional service fee could not be determined. 

During a FEMA technical assistance workshop provided to State 

Administrative Agency officials in March 2010, the Memorandum of 

Understanding with the University of Virgin Islands was reviewed. The 

after-action report following the workshop stated that it was agreed that 

the State Administrative Agency needed to either (1) terminate the 

Memorandum of Understanding and re-establish the relationship with the 

University of Virgin Islands as a subrecipient, or (2) subaward the funding 

to the Virgin Islands Territorial Emergency Management Agency Training 

Division and let it administer the project with the University of Virgin 

Islands as a contractor. The report concluded that the current 

Memorandum of Understanding did not establish the correct relationship 

nor did it include a termination clause. According to a Virgin Islands 

official, because the use of the Memorandum of Understanding was 

questioned by FEMA, a contract or subgrantee agreement will be used 

instead of a Memorandum of Understanding for future agreements with 

the University of Virgin Islands to provide training. 

In addition to the December 2008 Memorandum of Understanding for 

$200,000, the State Administrative Agency entered into two prior 

Memoranda of Understandings with the University of Virgin Islands to 

provide training, one for $150,000 with a service fee of $37,500, and 

another for $200,000 with a service fee of $50,000. Because these 

agreements were outside the scope of our audit, we did not review these 

service fees. 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 25 
The State Administrative Agency Director said that a Memorandum of 

Understanding was used with University of Virgin Islands to avoid Virgin 

Islands contract requirements. There were no Virgin Islands procurement 

policies or procedures that restricted the State Administrative Agency 

from using a Memorandum of Understanding to procure training services 

from the University of Virgin Islands. The University of Virgin Islands 

official that managed the memorandum of understanding stated that 

memorandums of understanding were also used with other Virgin Islands 

government agencies. 

The procurement of training using a Memorandum of Understanding with 

the University of Virgin Islands did not include an approved indirect cost 

allocation plan in support of the $50,000 service fee. In addition, FEMA 

determined that the Memorandum of Understanding with the University of 

the Virgin Islands was not a proper procurement method. As a result, we 

question the $50,000 paid to the University of Virgin Islands. 

Recommendations 

We recommend that the Assistant Administrator, Grant Programs 

Directorate, require the Director of the Virgin Islands Territorial 

Emergency Management Agency to: 

Recommendation #14: Recover the $50,000 paid to the 

University of the Virgin Islands as a professional service fee and 

return it to FEMA. 

Recommendation #15: Require that future agreements with the 

University of Virgin Islands be made through contractual 

agreements or through subgrantee agreements. 

Management Comments and Auditors’ Analysis 

FEMA concurred with recommendations 14 and 15. FEMA will 

require the Virgin Islands Territorial Emergency Management 

Agency Director to submit justification that supports the service 

fee paid the University of Virgin Islands. FEMA will require an 

update report on progress from the Director within 90 days of the 

date of the grantee notification letter on this required corrective 

action. FEMA will review the justification submitted and, if 

necessary, take action to recover all or part of the fee paid to the 

University of Virgin Islands. If FEMA decides to take this action, 

FEMA will advise the Virgin Islands Territorial Emergency 

Management Agency of the determination within 60 days of the 

receipt of the documentation. 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 26 
FEMA also will require the Virgin Islands Territorial Emergency 

Management Agency Director to submit written certification that 

all future fiduciary agreements for FEMA preparedness grants with 

the University of Virgin Islands are made through contractual or 

subgrantee agreements. FEMA will also require the Director to 

develop grants management Standard Operating Procedures that 

will include procedures for subgranting funds. FEMA will require 

an update from the Virgin Islands Territorial Emergency 

Management Agency on the progress to implement the corrective 

actions within 90 days of the date of the grantee notification letter. 

FEMA requested that these recommendations be resolved and 

remain open pending implementation of the corrective actions. 

Virgin Islands officials did not agree with recommendations 14 

and 15. The officials said that the University of Virgin Islands has 

an approved indirect cost rate of 65% for on-campus activities and 

a rate of 25% for off-campus activities that applies to the training 

agreement. The officials said that the $50,000 cited in the 

recommendation as a professional service fee constitutes the 

equivalent of the indirect cost. While the Virgin Islands officials 

said that the $50,000 was for indirect costs, identification of the 

$50,000 as an indirect cost was not established at the time of the 

agreement. We also note that a $50,000 fee included in a $200,000 

total cost equates to a rate of 33%, not 25%. 

For recommendation 15 the officials said that they now have 

adequate training facilities and it is not anticipated that the services 

procured will be required in the future other than rental of a larger 

facility for specialized training. If it becomes necessary to use the 

services of the University of Virgin Islands again the officials will 

use the Virgin Islands Attorney General’s Office to craft an 

acceptable agreement. 

If properly implemented, the corrective actions proposed by 

FEMA will resolve the condition identified during the audit. 

However, until firm timetables for fully implementing the 

recommendations are provided, the recommendations will remain 

unresolved and open. 

Personnel Time Charges 

The U.S. Virgin Islands did not adequately document personnel charges to 

the FYs 2007 and 2008 awards. Personnel time charges for State 

Homeland Security Program funds were not supported by activity reports 

or time sheets indicating that personnel had worked on grant projects or 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 27 
activities as required by regulations. As a result, there was no assurance 

that the time charged was spent on allowable grant activities. In addition, 

the Territory charged personnel costs to the FY 2007 award in excess of 

the allowable award percentage. The U.S. Virgin Islands personnel were 

unaware of the 15% ceiling on personnel costs. Because the State 

Administrative Agency did not comply with the 15% award requirement 

and did not adequately document personnel time charges, we consider 

personnel costs charged of $568,069 to be a questioned cost. 

According to Code of Federal Regulations Title 2 §225, Cost Principles 

for State, Local, and Indian Tribal Governments, when employees work 

on multiple activities or cost objectives, a distribution of their salaries or 

wages will be supported by personnel activity reports or time sheets. 

Personnel activity reports must reflect an after-the-fact distribution of the 

actual activity, must account for the total activity for each employee, must 

be prepared at least monthly, and must be signed by the employee. 

According to the FY 2007 Homeland Security Grant Program Guidance 

and application kit, up to 15% of the program funds may be used to 

support the hiring of full or part-time personnel to conduct program 

activities that are allowable under the FY 2007 Homeland Security Grant 

Program guidance. Allowable activities include planning, training, 

program management, and exercise program management. 

Unsupported Personnel Time Charges 

According to current Virgin Islands employees, personnel 

expenses charged to State Homeland Security Program grants for 

FYs 2007 and 2008 were based on a percentage determined by the 

former State Administrative Agency director. The current State 

Administrative Agency director could not provide documentation 

to support how the percentages were determined. 

Employee time sheets were not supported by personnel activity 

reports or records that detailed specific hours worked on grant 

activities. The time sheets simply showed calculated hours worked 

by an employee on each day. For five employees, a total salary 

amount of $210,600 was charged to the FY 2007 State Homeland 

Security Program funds. For FY 2008, the amount calculated for 

these five employees totaled $357,469. These salary amounts 

totaling $568,069 for FYs 2007 and 2008 were documented in the 

State Administrative Agency’s justifications for drawdown 

amounts for FYs 2007 and 2008. No salary amounts were charged 

in FY 2009. Virgin Islands officials stated that supporting activity 

reports for time charges are now required. However, 

documentation was not provided to support this statement. 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 28 
According to Virgin Islands officials, the Territory personnel 

approving the time sheets were not aware that supporting 

documentation was required. The State Administrative Agency 

did not have documented policies and procedures that specified the 

requirement for supporting documentation. The Territory 

personnel stated that they were first made aware of the requirement 

for supporting documents when it was identified in a single audit 

report. Without documentation indicating which grant activities 

employees worked on, there is no assurance that the time spent by 

employees was actually spent to further the purposes of the 

awarded grant. Accordingly, the $568,069 charged for FYs 2007 

and 2008 are considered questionable costs. 

The single audit report for FY 2007 also found that personnel time 

charges for State Homeland Security Program funds were not 

supported. The report stated that the Office of Management and 

Budget Circular A-87, Attachment B, item #8(h)(3), requires 

support for salaries and wages, where employees are expected to 

work solely on a single federal award or cost objective. Charges 

for salaries and wages should be supported by periodic 

certifications that the employees worked solely on that program for 

the period covered by the certification. The report concluded that 

the Virgin Islands Office of the Adjutant General was unable to 

provide the semi-annual certifications for sampled employees paid 

with federal grant funds. This occurred because policies were not 

in place to require certifications or time cards. As a result, the 

report questioned $63,042 of payroll costs for sampled time 

charges. These time charges were for the five employees that had 

total salary amounts of $210,600 for FY 2007. The $63,042 

identified from the single audit is included in the $568,069 

questioned from our audit. 

Personnel Costs Exceeded the Authorized Amount 

The State Homeland Security Program grant amount was 

$1,270,000 for FY 2007 and $1,850,000 for FY 2008, resulting in 

personnel cost ceilings (15% of the awards) of $190,500 and 

$277,500 for FYs 2007 and 2008, respectively. However, the 

Virgin Islands claimed personnel costs of $210,600 for FY 2007 

and $357,469 for FY 2008. Therefore, the allowable amount was 

exceeded by $20,100 for FY 2007 and by $79,969 for FY 2008. 

At the time of our audit, the FY 2009 personnel charges to the 

grants were within the respective ceilings. Virgin Islands 

Territorial Emergency Management Agency officials said that they 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 29 
thought the allowable amount was 50% rather than 15% for the 

FY 2007 and FY 2008 grants. 

The failure of the State Administrative Agency employees to 

support time charges to the FYs 2007 and 2008 awards with 

adequate documentation and exceeding the 15% ceiling imposed 

by FEMA requirements has resulted in $568,069 of time charges 

questioned. 

Recommendations 

We recommend that the Assistant Administrator, Grant Programs 

Directorate, require the Director of the Virgin Islands Territorial 

Emergency Management Agency to: 

Recommendation #16: Provide documentation that supports the 

questioned salary costs of $568,069, including the amounts that 

exceeded the 15% limit, or recover the amount not supported. 

Recommendation #17: Establish controls to ensure compliance 

with federal requirements concerning the limitations of grant funds 

used for personnel costs. 

Recommendation #18: Ensure that employees prepare activity 

reports that identify the specific grant to which the hours claimed 

are being charged. 

Management Comments and Auditors’ Analysis 

FEMA concurred with recommendations 16, 17, and 18. FEMA 

will require the Virgin Islands Territorial Emergency Management 

Agency Director to develop time and attendance standard 

operating procedures and establish policies requiring certification 

of timecards for all personnel paid with FEMA preparedness grant 

funds. FEMA will also require the Director to submit 

documentation that supports the questioned salary costs including 

the $21,100 that exceeded the 15% limit. FEMA will require an 

update from the Virgin Islands Territorial Emergency Management 

Agency on the progress of implementing this requirement within 

90 days of the date of the grantee notification letter. FEMA will 

analyze the documentation to determine if the costs did exceed the 

15% limit and take appropriate steps to recover the questioned 

funds. FEMA will apprise the Agency of its determination to 

recover funds within 90 days of the receipt of the subject 

documentation. FEMA requested that recommendations 16 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 30 
through 18 be resolved and remain open pending implementation 

of the corrective actions. 

Virgin Islands officials did not agree with recommendations 16 

through 18. For recommendation 16, the officials said that they 

are working on compiling the information regarding the questioned 

salary costs but they have not completed the effort and it will take 

six months to complete. The officials’ efforts to compile this 

information will not ensure that the actual time spent will be 

determined, because of the time span since salary costs were 

claimed as well as turnover of staff for which amounts were 

claimed. It is not likely the amounts arrived at from the after the 

fact effort will adequately represent time expended on the FEMA 

awards. In addition, the officials did not address the return of the 

$20,100 that exceeded the 15% grant limit. 

For recommendation 17, the Virgin Islands officials said that the 

Government of Virgin Islands has established standard operating 

procedures and best practices relative to all grant personnel costs. 

The automated system has controls disallowing transactions that 

would exceed the grant performance period and they are 

conducting monthly reconciliations of personnel costs to ensure 

timely adjustments for payroll allocation. These actions, however, 

do not address the need for controls to ensure compliance in the 

future with federal percentage limitations on the use of grant funds. 

Accordingly the need for controls will remain unresolved. 

For recommendation 18, the Virgin Islands officials said that they 

have initiated steps to create internal coding on time sheets 

delineating grant tasks with personnel cost allocation. Also, Virgin 

Islands officials said a grants management manual has been 

established that documents internal controls to ensure that 

employees provide monthly reports detailing activities for each 

grant period. 

Although the corrective actions proposed by FEMA, if properly 

implemented, may resolve the recommendations, the Virgin 

Islands’ disagreement with the recommendations could hamper the 

successful resolution of the recommendations. Until firm 

timetables for implementing these recommendations are provided, 

the recommendations will remain unresolved and open. 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 31 
 

 

 

 

Filing Financial Reports 

The State Administrative Agency did not submit required federal quarterly 

financial status reports in a timely manner. Of the 29 financial reports that 

were required to be submitted for the FYs 2007 through 2009 Homeland 

Security Grant Program between the date-of-award and December 31, 

2010, 22 were submitted late and 1 was not submitted. As a result, 

because the Territory was not in compliance with federal regulations, 

FEMA officials did not have timely information on the State’s financial 

activities in managing the grant funds. 

According to Code of Federal Regulations Title 44 §13.41, Financial 

reporting, grantees are required to submit financial status reports within 

30 days after the end of each quarter. These reports are critical tools for 

FEMA to carry out its financial stewardship duties for the Homeland 

Security Grant Program. The reports serve as a check to determine if 

grantees are expending federal funds on a timely basis. 

Table 2 shows the Virgin Islands’ history of compliance with the federal 

financial reporting requirements for the FYs 2007 through 2009 Homeland 

Security Grant Program from award date through December 31, 2010. 

Table 2: Financial Status Reports 

FY Date 

Awarded 

Quarterly Financial Reports 

Required Submitted 

on Time 

Submitted 

Late 

Average 

Days 

Late* 

Not 

Submitted 

2007 08/13/07 14 2 11 49 1 

2008 08/25/08 9 3 6 24 0 

2009 08/21/09 6 1 5 22 0 

Total 29 6 22 36 1 

* Code of Federal Regulations Title 44 §13.41 requires financial status reports to be 

filed within 30 days from the end of each quarter. The above Average Days Late begins 

on the 31st day. 

As the table shows, 22 of the 29 required status reports were filed after the 

required 30-day period following the end of each quarter. Of the 22 late 

reports, 13 were filed more than 10 days late. Although FEMA sponsored 

a training session on grant management for Virgin Islands Territorial 

Emergency Management Agency personnel in response to this condition, 

Virgin Islands Territorial Emergency Management Agency continued to 

file late reports. The State Administrative Agency Director said that he 

did not know why the financial reports were filed late or not filed at all. 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 32 
Financial reports are critical components of grant management process, 

providing visibility of the volume and timeliness of grantee use of funds. 

Without these reports being filed in a timely manner, FEMA was not 

provided information concerning the financial activities as required by the 

grant agreement. Noncompliance with filing financial reports is another 

example of the overall problems with grants management by the State 

Administrative Agency as identified in several FEMA programmatic and 

financial reviews and as reported in single audit reports. 

Recommendation 

We recommend that the Assistant Administrator, Grant Programs 

Directorate, require the Director of the Virgin Islands Territorial 

Emergency Management Agency to: 

Recommendation #19: Establish and comply with procedures to 

ensure that financial status reports are prepared and submitted in a 

timely manner in accordance with federal requirements. 

Management Comments and Auditors’ Analysis 

FEMA concurred with recommendation 19 and will require the 

Virgin Islands Territorial Emergency Management Agency 

Director to establish grants management Standard Operating 

Procedures. The Standard Operating Procedures must address the 

preparation and timely submission of financial status and any other 

reports required by FEMA. FEMA will require an update from the 

Virgin Islands Territorial Emergency Management Agency on the 

progress to implement the corrective action within 90 days of the 

date of the grantee notification letter. FEMA requested that 

recommendation 19 be resolved and remain open pending 

implementation of the corrective actions. 

Virgin Islands officials agreed with recommendation 19. The 

officials said that policies and procedures have been instituted and 

outlined in the grants management manual. Our review of this 

manual indicated that these policies and procedures consisted of 

federal financial reporting instructions and instructions for 

completing Homeland Security Quarterly progress reports. The 

officials said that there has been a marked improvement in 

reporting but changes and modifications in the DHS/FEMA 

electronic reporting system have been problematic resulting in 

instances of late reporting. 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 33 
If properly implemented, the corrective actions proposed by 

FEMA and the Virgin Islands will resolve the condition identified 

during the audit. However, until a firm timetable is provided for 

fully implementing the recommendation, the recommendation will 

remain unresolved and open. 

High Risk Grantee 

The State Administrative Agency should be considered a high risk grantee 

because it has a history of noncompliance with the terms and conditions of 

grant awards and federal regulations. The State Administrative Agency’s 

lack of compliance has been independently documented by various 

oversight organizations in single audit reports and FEMA monitoring 

reports. In addition, the results of this audit have further documented the 

State Administrative Agency’s noncompliance with the requirements of 

the FYs 2007 through 2009 State Homeland Security Program grants. 

State Administrative Agency officials were unaware of federal 

requirements, did not maintain grant expenditure and procurement records, 

did not maintain an up to date strategy, and generally did not comply with 

the federal grant requirements. As a result, unless additional oversight or 

grant restrictions are placed on the State Administrative Agency, the 

noncompliance documented by this audit and other reviews will likely 

continue into the future. 

Code of Federal Regulations Title 44 §13.12(a) sets forth conditions for 

“high-risk” grantees. A grantee or subgrantee may be considered “high 

risk” if an awarding agency determines that a grantee or subgrantee: 

(1) has a history of unsatisfactory performance, or 

(2) is not financially stable, or 

(3) has a management system which does not meet the management 

standards set forth in this part, or 

(4) has not conformed to terms and conditions of previous awards, or 

(5) is otherwise not responsible. 

If the awarding agency determines that an award will be made, special 

conditions or restrictions shall correspond to the high risk condition and 

shall be included in the award. 

We along with other independent organizations have determined that the 

State Administrative Agency was not in compliance with federal 

regulations in several areas. The State Administrative Agency was not in 

compliance in the areas of personnel time charged, financial reports filed, 

property management, preparation of applications, property management, 

supporting documentation maintained, and contracted services. 

The U.S. Virgin Islands Management of State Homeland Security Program 

Grants Awarded During Fiscal Years 2007 through 2009 

Page 34 
The State Administrative Agency has had a history of not complying with 

the terms and conditions of grant awards as reported by FEMA monitoring 

visits and single audit reports. The findings of noncompliance identified 

in these reports, listed below, clearly indicate that the State Administrative 

Agency meets the conditions of a high risk grantee. In the single audit 

report for FYs 2007 and 2008 (the latest available at the conclusion of our 

field work), the findings shown in table 3 applied to the Homeland 

Security Grant Program grants. The State Administrative Agency Director 

at that time was the Adjutant General. 

Table 3: Single Audit Report Findings 

FY 2007 Report Findings 

•	 The Office of the Adjutant General was unable to provide semi-annual 

certifications for employees paid with Federal Award funds. 

•	 The Office of the Adjutant General does not have adequate procedures to 

ensure expenditures reimbursed are adequately supported. 

•	 The Office of the Adjutant General does not have adequate controls in 

place to ensure that records are properly maintained. 

•	 The Office of the Adjutant General did not follow procedures in place to 

maintain appropriate records for acquisition and control of property 

acquired with Federal funds. 

•	 Processes were not in place to provide for the proper reconciliation of 

accounting records/information. 

FY 2008 Report Findings 

•	 Internal controls to ensure reported program expenditures were incurred 

during the grant award period are not operating effectively. 

•	 Internal controls to ensure property records are readily available for 

inspection were not operating effectively. 

•	 Internal controls to ensure financial reports are submitted to the federal 

grantor and readily available are not operating effectively. 

•	 Internal controls related to record retention to ensure supporting 


documentation for cash drawdowns are readily accessible are not 


operating effectively. 


Our audit of the Virgin Islands’ management of the State Homeland 

Security Program grants for FYs 2007 through 2009 further supports that 

the Territory should be considered a high risk grantee. The eight findings 

discussed in this report show that the Territory continues to demonstrate 

weak management, inappropriate oversight of federal grant funds, and 

lack of compliance with federal requirements concerning grants 

management. 

In March 2010, in response to the findings contained in the FYs 2007 and 

2008 single audit reports, as well as FEMA’s observations during 

The U.S. Virgin Islands Management of State Homeland Security Program 

Grants Awarded During Fiscal Years 2007 through 2009 

Page 35 
monitoring visits, FEMA provided a technical assistance workshop for 

Virgin Islands Territorial Emergency Management Agency employees. 

The workshop provided the State Administrative Agency staff with 

needed assistance regarding the compliance requirements for the 

administration of all FEMA programs, as well as methods and approaches 

to standardize the internal and external grants management 

responsibilities. 

According to an after action report on the workshop, FEMA officials, in 

preparation for the workshop, reviewed monitoring reports and the results 

of the single audits. FEMA officials also conducted conference calls with 

Virgin Islands employees. Based on this preparatory work, FEMA 

officials identified the following areas of deficiencies regarding the Virgin 

Islands’ management of FEMA grant funds: 

•	 Overdue federal financial reports and progress reports 

•	 Expenditures in excess of the federal award amount incurred 

beyond the performance period 

•	 Lack of cash management procedures and practices 

•	 Funds being drawn down without proper documentation of 


obligation or expenditure 


•	 Slow rate of fund drawdowns for current awards 

•	 Time and attendance maintenance and reporting for grant-funded 

activities 

•	 Missing travel documentation 

•	 Missing subrecipient applications, progress reports, 


correspondence, and procurement documentation 


•	 No standard operation procedures for grants management 

•	 Missed deadlines for grant applications during FY 2010 

•	 No access to online electronic grants payment and reporting 

systems (e.g., Grants Management System, Payment and Reporting 

System, Grants Reporting Tool, or Homeland Security Information 

Network) 

After the technical assistance workshop, a letter from FEMA was sent to 

the Virgin Islands Territorial Emergency Management Agency on July 27, 

2010, with recommendations to address the above issues. These 

recommendations included Virgin Islands Territorial Emergency 

Management Agency developing a grants management policy and 

procedures manual. 

On March 14, 2011, we requested information from Virgin Islands 

Territorial Emergency Management Agency officials on the status of 

implementing the FEMA recommendations. The Virgin Islands 

Territorial Emergency Management Agency responded to our request by 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 36 
sending a letter dated April 8, 2011, to FEMA regarding the status of 

implementing the recommendations. In this letter, the Virgin Islands 

Territorial Emergency Management Agency stated that they were still 

working on developing a grants management policy and procedures 

manual and taking actions to address other recommendations. However, 

the Virgin Islands Territorial Emergency Management Agency did not 

provide information on specifically what was being done to implement the 

recommendations. Eight months had passed since the Virgin Islands 

Territorial Emergency Management Agency received the 

recommendations letter from FEMA, and the agency was still working on 

implementing the recommendations. The Virgin Islands Territorial 

Emergency Management Agency did not respond to the recommendations 

until we inquired about the status of implementing the recommendations. 

According to the current State Administrative Agency Director, the Virgin 

Islands Territorial Emergency Management Agency has not had the staff 

resources needed to fully comply with the federal regulations. It was 

further stated that staff turnover has contributed significantly to the 

noncompliance with federal requirements, the lack of response to FEMA 

recommendations, and the numerous reported deficiencies in grants 

management. The Director also attributed the loss of documentation and 

unawareness of the requirements to the reorganization and relocation of 

the State Administrative Agency, along with the realignment of staff 

responsibilities. 

Conclusion 

The history of noncompliance, loss of documentation, and overall 

unawareness of the importance of complying with federal requirements 

has created a high-risk environment for the management of grant funds 

within the Virgin Islands. With this type of environment, FEMA cannot 

be certain that the grant funds will be appropriately administered 

consistent with the goals of the programs. FEMA also cannot be assured 

that the funds are adequately protected from fraud, waste, abuse, and 

mismanagement. Without FEMA taking the necessary action, such as 

declaring the Virgin Islands Territorial Emergency Management Agency a 

high-risk grantee, future grant funds likely will continue to be treated in 

the same fashion as previous awards and the Territory will not be better 

prepared to respond to incidents. 

The lack of compliance by the State Administrative Agency in the 

administration of grants as discussed in our findings and those of other 

independent reviewers indicates that action needs to be taken to force the 

State Administrative Agency to comply with grant requirements. We 

believe that designating the State Administrative Agency as high risk 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 37 
would be an effective way to force compliance by the State Administrative 

Agency. As a high-risk grantee, the State Administrative Agency would 

be under greater oversight by FEMA to comply with federal requirements. 

In regard to declaring the State Administrative Agency a high-risk grantee, 

we noted that the U.S. Department of Education had designated the Virgin 

Islands Department of Education as a high-risk grantee. In an U.S. 

Department of Education, Office of Inspector General (OIG) Audit report 

dated January 2010, Audit Report No. ED-OIG/L04J0015, the report 

outlines the financial management problems the U.S. Department of 

Education has had with the Government of the Virgin Islands and the 

Virgin Islands Department of Education. The report details audit issues 

from FYs 2003 to 2009 that have not been sufficiently resolved. Although 

the Virgin Islands Territorial Emergency Management Agency is a 

different agency than the Department of Education, many of the audit 

findings at the State Administrative Agency are very similar to the 

findings in the U.S. Department of Education OIG report, and show an 

inability or unwillingness of the Territory government to comply with 

federal requirements. The U.S. Department of Education has required the 

Virgin Islands Department of Education to enter into a compliance 

agreement and hire a third party fiduciary to manage its grant funds and to 

assist in resolving its financial management issues. 

Recommendations 

We recommend that the Assistant Administrator, Grant Programs 

Directorate: 

Recommendation #20: Assess the Virgin Islands grant 

performance and based on that assessment determine if the State 

Administrative Agency should be declared a high-risk grantee. 

Recommendation #21: Develop and implement procedures with 

special conditions and restrictions to ensure that future grants to 

the Virgin Islands are managed in accordance with federal 

requirements and that the funds are adequately safeguarded against 

fraud, waste, abuse, and mismanagement. 

Recommendation #22: Consider requiring the State 

Administrative Agency to hire a third party fiduciary to manage its 

grant funds and assist in resolving the financial management 

issues. 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 38 
Management Comments and Auditors’ Analysis 

FEMA concurred with recommendations 20, 21, and 22. In 

response to recommendations 20 and 21, FEMA will conduct an 

assessment to determine if the grantee should be given a high-risk 

designation. The assessment will include progress towards 

implementing a Corrective Action Plan and progress towards 

correcting findings identified in FEMA Financial Monitoring 

Reports and FEMA Programmatic Monitoring Reports. FEMA 

will require an update report from the Virgin Islands Territorial 

Emergency Management Agency on the progress of implementing 

this requirement within 90 days of the date of the grantee 

notification letter for this required corrective action. FEMA will 

advise the Agency of its determination regarding high risk 

designation within 90 days of the receipt of update report. 

FEMA will explore options to limit or restrict access to future and 

current grant funds until the Virgin Islands Territorial Emergency 

Management Agency Director can demonstrate that procedures are 

in place to safeguard federal funds against fraud, waste, abuse, and 

mismanagement. FEMA will make an initial determination 

regarding the information obtained and advise the Virgin Islands 

Territorial Emergency Management Agency of its findings within 

90 days of the date of the grantee notification letter. 

With respect to recommendation 22, although FEMA concurred 

with the recommendation, it stated that it is not in a position to 

require the Virgin Islands Territorial Emergency Management 

Agency to hire a third party fiduciary to manage its grant funds. 

FEMA stated it will discuss various options with the Virgin Islands 

Territorial Emergency Management Agency Director and include 

viable options as part of the Corrective Action Plan. FEMA will 

require an update report from the Virgin Islands Territorial 

Emergency Management Agency within 90 days of the date of the 

grantee notification letter stating their determinations with 

supporting justification for hiring a third party fiduciary. 

FEMA requested that recommendations 20 through 22 be resolved 

and remain open pending implementation of the corrective actions. 

Virgin Islands officials did not agree with recommendation 20. 

The officials said that since the inception of the new organization, 

personnel have reached out to the grantor agency to introduce new 

personnel and sought guidance as to corrective remedial actions 

needed. The officials also said that significant changes and 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 39 
improvements have occurred since the reorganization with 

improvements in timely reporting, establishing internal controls, 

documentation of protocols, and overhauling grants management. 

The findings in the report, according to the officials, were from 

years prior to the reorganization and do not accurately reflect the 

new organization. The officials agreed that there are areas that 

require staff training to improve further compliance but disagreed 

that the organization should be considered a high-risk agency. 

For recommendation 21, the officials said that improvements have 

been realized during the 2009-2010 grant period. Staff have 

participated in training and the officials believe that grants with 

further restrictions and conditions would hamper the Territory’s 

ability to utilize funds timely and effectively, and would have a 

negative effect on protecting the people of Virgin Islands during all 

hazard emergencies. Increased regulations would negatively 

impact the Territory’s preparedness and ability to effectively meet 

core capabilities. 

For recommendation 22, the Virgin Islands officials are opposed to 

a third party fiduciary to manage its grant funds. The officials said 

that hiring a third party would be the least cost effective method of 

achieving the desired results to improve compliance. 

In view of the magnitude and span of time that the Virgin Islands 

Territorial Emergency Management Agency has experienced 

management problems, we continue to believe that a designation of 

high risk is appropriate. The recent improvements are clearly a 

positive beginning. However, continued attention is needed to 

reduce the risk that federal grants will be mismanaged. 

Although the corrective actions proposed by FEMA, if properly 

implemented, may resolve the recommendations, the Virgin 

Islands’ disagreement with the recommendations and its history of 

grant mismanagement could hamper the successful resolution of 

the recommendations. Recommendations 20 and 21 are 

considered resolved and will remain open until such time that 

corrective actions have been implemented. Until a firm timetable 

is provided for recommendation 22, the recommendation is 

considered unresolved and open. 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 40 
Appendix A 

Purpose, Scope, and Methodology 

The objective of this audit was to determine whether the U.S. 

Virgin Islands spent State Homeland Security Program grant funds 

strategically, effectively, and in compliance with laws, regulations, 

and guidance. The goal of this audit is to identify problems and 

solutions in order to assist FEMA and the Territory to improve the 

nation’s ability to prevent and respond to all hazards on a local as 

well as a statewide level. 

The scope of this audit included the plans developed by the 

Territory to improve preparedness and all-hazards response, the 

goals set within those plans, the measurement of progress towards 

the goals, and the assessments of performance improvement that 

result from this activity. Further, the scope included the 

assessment of these activities within the context of risk to 

determine if the Territory’s plans produced strategic performance 

improvements related to the highest areas of risk rather than 

merely producing improvements in a broader sense. 

Together, the entire Homeland Security Grant Program and its five 

interrelated grant programs fund a range of preparedness activities, 

including planning, organization, equipment purchases, training, 

exercises, and management and administration costs. Because of 

the interrelationship of these grant programs, all were considered 

when evaluating the planning cycle and the effectiveness of the 

overall grant program. However, only the State Homeland 

Security Program funding, and equipment and programs supported 

by the grant funding, were reviewed for compliance. 

In accordance with the audit guide provided by the DHS Office of 

Inspector General, Foxx & Company auditors visited the 

Territory’s State Administrative Agency (Virgin Islands Territorial 

Emergency Management Agency) located in St. Thomas, Virgin 

Islands. Grant funds were not allocated to subgrantees, Territory 

agencies, or first responders. The expenditure of grant funds was 

made by the State Administrative Agency for first responders. The 

first responders in the Territory were the Police Department, Fire 

Department, and Emergency Medical Service. These first 

responders were visited to gather information for several steps in 

the audit guide. 

The Homeland Security Grant Program awards to the Virgin 

Islands for FYs 2007 through 2009 included the following 

programs and awards: 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 41 
Appendix A 

Purpose, Scope, and Methodology 

Homeland Security Grant Program 

FYs 2007 through 2009 

Funded Activity FY 2007 FY 2008 FY 2009 Total 

State Homeland 

Security Program $1,270,000 $1,850,000 $1,430,000 $4,550,000 

Law Enforcement 

Terrorism 

Prevention Program $910,000 

Not 

Applicable 

Not 

Applicable $910,000 

Citizen Corps 

Program $39,528 $39,556 $39,570 $118,654 

Grand Total $2,219,528 $1,889,556 $1,469,570 $5,578,654 

Source: Federal Emergency Management Agency 

At the State Administrative Agency, we interviewed responsible 

officials, reviewed documentation supporting management of the 

awarded grant funds (including expenditures for equipment, 

training, and exercises), and physically inspected some of the 

equipment procured with the grant funds. In addition, we met with 

representatives of first responder organizations, fire, police, and 

emergency medical services, to discuss the grant process and the 

benefits the grant funds have brought to their organization and 

communities. We also met with a representative of the University 

of Virgin Islands to discuss the training provided under the 

Memorandum of Understanding with the State Administrative 

Agency. 

We also conducted interviews and reviewed documentation at 

FEMA headquarters and Territory offices. To determine the 

effectiveness of the Virgin Islands’ grant program as well as 

compliance with applicable grant requirements, we reviewed the 

key management processes, interviewed Territory officials directly 

involved in the management and administration of the U.S. Virgin 

Islands Homeland Security Grant Program, and conducted 

inspections of equipment procured with federal grant funds. The 

team reviewed and analyzed data related to grant management and 

associated management processes as identified from discussions 

with Territory officials at the beginning of the audit. These key 

management processes included: 

• Threat, capability, and needs assessment 

• Grant application preparation and submission 

• Grant expenditure and reporting 

• Grant monitoring 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 42 
Appendix A 

Purpose, Scope, and Methodology 

We conducted the audit between January 2011 and June 2011, in 

accordance with Government Auditing Standards as prescribed by 

the Comptroller General of the United States (2007 Revision). 

Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable 

basis for our findings and conclusions based on our audit 

objectives. We believe that the evidence obtained provides a 

reasonable basis for our findings and conclusions based on our 

audit objectives. 

Although this audit included a review of costs claimed, we did not 

perform a financial audit of those costs. This was a performance 

audit as defined by Chapter 1 of the Standards, and included a 

review and report of program activities with a compliance element. 

Foxx & Company was not engaged to and did not perform a 

financial statement audit, the objective of which would be to 

express an opinion on specified elements, accounts, or items. 

Accordingly, Foxx & Company was neither required to review, nor 

express an opinion on, the costs claimed for the grant programs 

included in the scope of the audit. Had Foxx & Company been 

required to perform additional procedures, or conducted an audit of 

the financial statements in accordance with generally accepted 

auditing standards, other matters might have come to their 

attention that would have been reported. This report relates only to 

the programs specified and does not extend to any financial 

statements of the U.S. Virgin Islands. 

While the audit was being performed and the report prepared under 

contract, the audit results are being reported by the DHS Office of 

Inspector General to appropriate Federal Emergency Management 

Agency and U.S. Virgin Islands officials. 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 43 
Appendix B 

Management Comments to the Draft Report 

LS. [)"partmc-nt of lIomdulld Sc-"udt)' 

\\"Jshin~iI>l1. 1)( 2i)472 

NOV 2 3 2011 

,\nI\C L. Richards 

Audits 

FROMI)ircctor 

Office of Policy and Program Analysis 

SUBJECT: Comments to OK-; Draft Rep0l1. The Virgin Islands' .-\1mwgcmellt of State 

Home/and Security Programs (.)'IL~P) :hmrdcd dllrinr~ Fi.I\'(1/ Years 2007 

through 20(}9 

Thank you for thl.; opportunity to comment on the draft report. The findings in th!: report will be used 

to strcngthen the dfcctivencss and efficiency ofhO\v we execute and measure om programs. 'yie 

rccof,'11izc the nced to continue to improve the process, including addressing the rt.x;ommenclations 

raised In this report. Our responses to the rccommt'l1dations are as follows: 

OIG Recommendation #1: We recommend that the Assistant Administrator, (,rmll Pn,'tgrall1s ])ireelorate 

(GPD). l'l'(juin; the Director of the Virgin Islands TC1Titorial Emergency Y1an<l~clllcnl :\gcllCY (VITEMA) to 

prep,llT ,1 r~>, iscd Slr<11c.£!), 111<.11 includes: (a) lhe Territory's current goals and \1hjCl'ti\ L'S for cnlwllcing tts 

abilit) t(l PTl'\ I.'lll. prcpvrc fi'r. rrol,cct against. and respond to naturtlJ dis:l"l('r~. <lcts of lcrrnrisl1l. <lnd other 

\11;1ll-~l1;ldc d~s;htcr< ;J!1d (i,) J.!(J'lb. ;:nd objectiyc::; that (m.~ speciflc. mc;l~m~lL'k. ;h:hin ,1b1c. ~\ .. ':~llil s-ilricnlcd. 

;l:ld li'l:,,·ll:l1l!~·d 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 44
 
Appendix B 

Management Comments to the Draft Report 

l\b.1"'l'!l\\"~ tlwi l'llhdl1Cl' the Tcrriwry·:-. ability to pren:nL prepare i()r, ;md n:::-'r','lld tl\ 1);1\\lral di,~a"t...T:-'. 'Il'):., ul' 

telT\'ri~Jll .• md I'tller IlJan-l1ladc di~astcrs, Th.: goals and objectives ,In.? spc..::itiL', IllL'a~ur'\hlt.:. ilChi\:\;lhlc. 

rcsuils \ll"1-.:ntcd. and timc-llllutcd, GPD will continue to assist the Yll"E\!" Dirl.!ch1r \, ith update..; to tht.: 

qra1l'i-'~ ;l~ nCL'lkd, 

OIG Uccommcndation #3: \\"e H .. 'C(\lllllh:nd that the Assistant Adll1ini.~lralnr, (iPJ), require the Diredl'r Ill' 

V ITF:VIA 10 cstablish Pl1lkks and phh;edures to adequately justi fY i,nk ~mln,;l' prnl'UrClllL'llh. CnStll .... • Ihill CI1st 

al1<lly"e~ <-Ire PCrii)1111Cd in acetm.bncB with federal regulations. and oblmn IT\1A appro\,l1. ;l~ Ilcccssary. for 

sole source prOl:urelllcllts. 

FEMA Response: Rekr to FEMA response under rcspot1St.: to recommendation f14 beltl\\. 

OIG Recommendation #4: We recommend that the Assistant Administrator. UPI), require the Director of 

VITEMA to c~tilbli:;h \1()licics and procedures to ensure that documentation regarding comrad ac1ivities is 

maintained. 

F'Ei\lA Response to Recommendations #3 and #4: FEMA concurs \vith these rccomm~ndations, 

FEMA will require the V1'1'EMA Director to develop sole source procurement Standard Operating Procedure 

(SOP). The SOP will include polkics and procedures that adhere 10 federal regulations as wdl as USVI 

TelTitorial g()\'\:rnrnental policies and procedures, [n order to \'eriCy impicmentation, IT:\V\ will rcquire an 

update report on pnlgrcss from VITET'vlA within C)O days of the date oCtile grantee llPlifi"':<Jtiolllettcr on this 

required cOr/Teli\'!.; <'1(;liol1. 

FEMA requests Ihcse rccoml1lendations be resolved and open pending implcmCill;t1iOll I,('the stated C01Tective 

acli,·ns 

01(; RCCOUlllll'ndation #5: \\\' a:;cnrnmcnd thm th(.; Ac:sistant i\dmii~i"l;-~l',\[, l irJ), --,-,qui:".: the j)ircdc1r ui' 

\-'11'1 '\1-\ :,' d ",'~;t;), ('1' ~:;c '>;-~ l [,- ")::-;l.l \: [-)C:'!h:1;-!:1(: 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


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Appendix B 

Management Comments to the Draft Report 

rr\l,\ r~'qucst:- (hi:- n:colmncr:duriull he resolvcd and open p.:ndinf! ill1pknll'1l\d\l\111 pi-lilt' stalcd COlTccli\t,; 

;ldi\1!1~, 

OIG Rl'commt'ndation #6: \\·c rt..'c0111rtlend lhallhc A~si"ldlll .-\d1l1inisll'a1l'r, liPD. r..:qutrc the ])H..:ctor of 

VI fE'-L\ to dc\,clpp;1 ::;y::.l":)l1 t~1 m<:llllt;l1ll required recurds In Ll""ure c()lllpllancc wllh gr~\!lt r":Ljuircllh.'tllS. 

FE'\J..\ n.cspon~(': 1·'1-:\1,\ C(11lCllb wlIh lilts recommendation. 

f'F\tlA \\ill rcqulH' rill' \'lTl':\[:\ [)rrcctorto develop a re{,.:ords lWm;:igcllwlll S(}P. J'hl;.' S()P \\ill inc[udc 

procedure" for maintaining ~r;11lt records and <lssociJtcd documents. In order to \'erify lmpklllellt~ti\ln. FEMA 

\v1ll requirc an update rqwn on progress from VITE:vlA within 90 days ofthc date orth,.' g-r,mtc..: notification 

letter on this required (:~))Tl.'l.'li\'e action. 

FEMA rcqu~sts this recommendation be resolved and open pending impicmentatlOll of Ih.:- slated corrcetiyc 

actions. 

OIG Recommendation #7: We recommend that the Assistant Administrator, GPD, rcquir.:: the Director or 

VITEMA to reconslruetthe records snpp0l1ing the S3,429,214 drawn down for the FY 2007, 2008, and 2009 

grant mvards. 

FE":,\-lA Respons(': Refer 10 FEMA response under response to recommendation #8 beIl1\\". 

OlG Recommendation #8: We recommend that the Assistant Administrator, GPD. require the Director of 

VITEMA 10 r~'llmu /.n FE:vlA any funds for expenditures Ihat cannot be SUPP011Cd h~,' ilppropnatc 

documcnt,llitm, 

FEl\'J.\ Rl'sponsc: FF\L\ conwrs with recommendations;'17 and #8 

Within ()(\ d!1:-;" pj" :hL: d,llC (,I" (ile ~r;1lltce notification lene!', FE:Vl;\ \vil! l'nluHl' !hc \ -J 1'1",\1,\ !)in.'Ct('I· t(l 

d.\.'\ ,'il']l i:nd 1111pll'iTlt:11.'_ d ((If[Tctl\ (' ,,~c;iot1 plan (C AY) [n rccon:o;tnrct ~r;1JH !ik~ ,md ,111 d~"('Cl;(rCd n:cl11'd" FH' 

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Grants Awarded During Fiscal Years 2007 through 2009 


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Management Comments to the Draft Report 

ole RI.'comm('ndation #9: \\'c rCCllll1111end that the A:-.sislant Adrninr;"(;-,lh'r. tiPP. n.:quin.: the Dircctuf or 

\ 11 F\ L\ \,1 dl,.'\ dllp and 1I1lplcmenl procedures to ensure thal prppcrl;. n.y,'rd~ cl)l1lpiy \\-ith im ell\OfY 

rl,.'lluircln~'l1ts l~)r equIpment purch:1'icd \\'ith kdcral funds. 

fE)IA I~c!rtpon~c: !·T\L\ C,)Jlcurs \\ ilh tlus rCCl\llUllendJtion. 

,. 1:.\1/\ \\-ill require tIlL' \ '[TF\-L\ Dm:ctor tu develop a property managemellt allli ill\'Cl110r~ SOP The SOP 

will adhLTe [n procedures sct 1(111h In ritle 44, Code of Federal Regulation>;, ,,('eli,)!) ! 3.3:. as well as l,'SVI 

i crriloriai gmertlIllCl1l pl1lkics ,llld procedures. The SOP must also inclmk "ystClIWlic pl'llccdurcs I~)l 

pruPL'11y managcmcnt and ill\ ~'nhlry. In order to verify implementation. FEVl/\ WJlI rcqum! ,lll Upd~lll.' rcp0l1 

on progrcs~ from \"1'1"1-:\-1:\ within 90 days o.rthe date of the grantee notification ktter onlhis f<.'quin.::d 

corrcetivc net ion. 

FE:'vlA rcqucsts this rccommendation be resolved and open pending implementatJon oflhc stated corrective 

actions. 

OIG Recommendation #10: V'/e recommend that the Assistant Administrator, GPJ), require the Director of 

VITEMA to withhold Federal grant fund awards until thc grantce is in compliance \-'lith the property records 

and inventory requiremcnts. 

FE!\-'lA Response: 1·'E.\-1;\ concurs \-vith this rccommendation. 

FEMA \-vill n:quirc the VITEMA Director to develop a propc11y records and invenh'ry SUP. in order to 

verify impJclllClll<lllOn. ITMA wiJ[ require an update repol1 on progress from VfTl·:f\L\ within 90 days of the 

date of the gr,mtel" n(}tlfical i()11 letter on this required corrective aclion. FE\;l/\. \\ ill consider ()ptiol1s to 

withhold fundin[! unlil Ih(; S()P is developed and approved as part or an ovcrnll t ·,\P. FI·:\1A wiH apprise 

VITF\1.-\ (,rib!::' dc(crminalil)l1 within 45 days of the date of the grantce notilic:ninl1 icun. 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


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Appendix B 

Management Comments to the Draft Report 

11l1pkmcl\t~1!i()n. 1,']:\1/\ \\'111 n:qlllrl' i.m update report on progress fwm \-1 1'1:\1,\ \\ il11l11 ()() d;jy.~ (li"lhe dale qf 

1he granh.'L' n\ltilicilll()ll kUl:r ()n thL~ rcquired corrective action. 

FF\1.-\ request" Ihis rccormncnuatioll be rcsoh-cd and 0PCll pcndil1~ imp1cmcntalill11llflhc "tateu cnrrectiq: 

acOm)", 

OIG Recommendatiou #12: We n'::C()['tlll1L'wl that the Assista1l1 ,·\Jmini:--lr'1tOf. (iPD. requirc the Din:clllr ,If 

VITL\1A 10 cxpedlte the pro..:urclllel1l (lfradins that are compatible with the modules. ilnd lIlstall the tlhldu\cs 

~1." illlCJldcd. 

f'EMA n.esponsc: Rdcr II) FF\IA response under response to nxommendalioll ,"I ~ bchm 

OIG Recommendation #13: \Ve recommend that the Assistant Administrator, GPD. require the Director of 

VITEMA tp return the 5.201.250 to l·liMA if compatible radios are not procured. 

FEMA RespotJ:\c: H':MA concurs \vith recommendations #12 and #l3. 

FEMA will require the VITEMA Director to pnwide documentation and written ceni1icalion that radios 

compatible with encryption modules arc procured and the encryptions modules arc instaHed as intended. In 

order to verify implementation. FEMA \vill require an update report on progress from \' JTEMA within 90 

days oCthc date dtlle grantee notification lettL,]" 011 this required corrective actio11, FE;\IA will consider 

options to reco\-e1' Gssociated costs if the VITEMA Dircctor cannot provide documentation to support 

procurement il11d inslnllation orthe aforementioned equipment. FEMA will apprise V ITLMA oJ"lhis 

ddcnninat.i(,1l wJ\hin 45 days of tile date of receipt of subject documcnlation rrom \"]'['1:\-1;\ or upon 

insufficiem ,1r 111' n.x:eipl o/'subjcct documenta1ion from VITEMA within 90 days ;-]f!cr Ihe grantee 

notifkalil)1l letll:r. 

FE:'d .. \ requests Ih..::",c recommendations he resolved Dnd opcn pending impicml'lllath'll I,fthc :.tiitcd C(11Tcctive 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


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Management Comments to the Draft Report 

,111 \'1' f)~lri ~1rlhc fc>.: palU \(1 L\T 1-'1'.\1.,\ will apprise VITL?vlA of tIm, tktLTlll1Jl<lt!I'l1 \\]\11111 (,0 day.~ (lflh..: 

d;l1e \lflTC>.:ipt 11f ~'lhjCd d(lI.:Urn';:Il\U!IIHI from \'11'L\lA. 

/·T\L\ requcsts this recol1lmcndati()ll h,;: r';:;:iolved and open pcndill!.-'- implcmcnt;Jtit.'n \If the .~iatcd corrective 

actlO]b 

Ole; Recommcndation #15: \\'c rCC(lrnnll'lld that the i\ssiSl<1Ht Administrator, (jPD. n::quirc the I lircdl\]" Ilf 

VITL\L\ 10 require dWl future agn:ellll.'IHs 'with UVI be made thruugh conlractu,ll agreements 1)1" thr~lugh 

:-'llhgra!ltcl: '-1!.-'-rCCI1lCI\lS. 

FI'::\'IA Response: tT'\L\ I.:lml.:urs with this recommendation. 

FFMA will require the VTTEMA Director to submit wliltcn certiGcation that all fulure Jiduciary agreements 

in regards to IT\1;\ preparedncss grants with VV I are made through eontraetuall)r sLlh1!r:lll!<:c ;lgrcc-mcnts. 

Additionally, ITM.\ will require thc Director ofVITEMA to develop a grants mamlgclllcllt SUP that will 

tncludc procedures ll)r ~ubgranling funds, Tn order to verify implementation. FEIv-tA wdJ n:quire an update 

report on progress fn)J11 VITEMA within 90 days of the date of the grantee notifi.cation L .. !tt~r on this n .. 'quired 

corrective action. 

FEMA requests thi~ recommendation be resolved and open pending implementation of the stated corrective 

actions .. 

OIG Rccomm{'udation #16: We recommend thnt the Assistant Administrator, GPJ) .. rl'quire the Director of 

VrrEMA to pHn ide documentation that supports the questioned s<l]ary costs of S:'6" .. (l119. including the 

S:W .. IOO th;l! c"\ccedcd 111e I 5°'{) lirnit, or rccover the amOUltt not supported. 

FEM.\ Rl'!oPOIISC: Rd'<.T «1 F[-.:v1/\ response under response 10 rcc()mmCndali(lll IS hl'iow. 

OIG RN'omm('ndlltioll #11: \\'c fl.:C01l1JnClld thl1[ tile Assist;ml Adminis(!-;:111!' ~ ;PD. require the DilTl;((l; of 

\' Ii f- \ 1 -\ 1l' ,,'''-; ,1hlhl1 C\ ~1H(il\ 111 (.""fbun.: cnmpliQllce w'ith f<.xkral reuul: '--':11~'llt~ ~"Yl,','; :lil"!:: ! he :in'l!;:lllln, of 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


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Appendix B 

Management Comments to the Draft Report 

IT,\l;\ \\ illl'cl.juJrc lile VII \:\1;\ iJlro:tor to develop a time a1ld attend,IIlI.:'-' S()p and c:;l,lhlisn poilci(;:-. llUll 

I"cquirl.' L'(Tlilir.:al1<11l oCttn1ccards 1(.,]" ,ti! personnel paid with FElVL-\ pn:paredne~:; g]"im!;;. Additlonall). I:L:VL\ 

\\ 111 rcqUlrc till' VITL\'I,\ fJin.:ctnr to submlt documentation Ill;::! ;;uppm1!' thL' qUL';;!it1llcd salary cost:-. 1\1 

11l,:ludc the S:l.100 that exceeded Ihe 15"·" I1mil imposed b~ \'"J:;\l.-\. In (>rdcr ttl \"l'ril\ illlpkmcnlil!l(ln. 

1-'1:\-1:\ will nXjUlrCan upd~k' rep,)rt (111 pnlgrl':;S (r,11ll VITE\lA wjlhl1190 ,lilys (1(lh(; d~ttc Oflhc )!r;tIltec 

nnlific<ltinll leW.:r un Ihis rCljl1ircd ":l)lTe("tiv..: auiun. FE~lA \\/ill nnalY/c the Jocumc11lati('tl h) dek"l"tllille if 

costs did indeed CXCL'CJ the 15" l' limit and lakc appropriate stl>p!' to rccmn Ill!.: funds in ql1C:->tiOll. FI':\I.\ 

will appri-.e V ITF\L\ tll" lhi;; dClL'rminatill!1 within 90 days of the U8te of nxcipt of suh.icei d,,":UlllL'tH,ltinll 

from V ITL'vtA 

FEMA requests thl'S': rl'C('lll!llClldations be resolved and open pcnding implemcntation oi"lhc slall.'d 

corrective actions. 

orG Rccommcndation #19: Wc recommend that the Assistant AdministratoL GPD. rcquin: the Director of 

VITEMA to establish <111d comply with proeedurc':> to ensure that 'financial status n:pnrts arc preparcd and 

suhmitted in a timely manner in accordance with federal requircments, 

FEMA Response: FEMA concurs with this recommendation. 

FEMA \:viU require the VITEMA Director to estahlish a grants management SOP. The SOP must establish 

procedures for pn;~p;l1'ation and timely suhmission of financial status reports as well as any other reports 

required by FEJ\-L\. In order to verify implementation, FEMA will require an update report on progress from 

VITEMA within 9() J<Jys of the date of the grantee notiJieation letter on this required corrcctlve aclion. 

FE~1A request;; thi~ recommendation be resolved and open pending implemcntntinl1 i)!" the ::.Ia!ed cOlTcctive 

actions. 

O}(; Rccomnu'mlation #20: We recommend that the Assistant Admlnistralul·. (;pn. ,1SSC<;<; the Virgin 

T"l:wds' .~r'int plTillnnkl11c(: ,me! h<l~cd on that assessment defermine ifthc <-;lal~' \dl11i1l1<,\r;tli\l; i\j~CJ1(:y (S;\/\) 

~h;uld h' dC~'l;lT'l'd d hi;-;h ri~~ ;:1',11]1(.'(' 

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Grants Awarded During Fiscal Years 2007 through 2009 


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Appendix B 

Management Comments to the Draft Report 

[:[, \1, \ :'l"lllcst" tll1~ rcc()J1llnCnd;lti()t1 he rest1!yed and open pendill!; inll'lc111enl,ll1('11 ()!' the :--t,11cd C(lnectl \...: 

;ll.'tl\\n::; 

01(; Recommendation #21: We n:col11l1lcnd 111(1\ the ;\:;si:-.t~nt ,-\timini:;t1"!llll1'. (jPD, dcn:lup and l1nplcmc111 

prnccdurcs \\-illl spci..:b\ c(\nditlllll::; :llld n:slrictwlls tu ClL~un: th,ll future !-CrimI'> )(Il11e YirStll bbmb an.: 

m<lna!-Ced in ,!\,:cordancc \\'lth (-.-dewl n:quirClllcllts Hnd that the rLJnd~ ,lrC mkqudtc\y sakguartkd ag,lillsl rralllL 

\\;)qc, abiJ~L', and 1lIism'\Il'l?!L'l1lell\. 

FE\1A R~!ipomc: iT\t.\ CdllClllS \\ ith this recommendation. 

FEMt\ willl:Xpl(lJ'<.:' l1pti\1lb t\l limit or restrict access to future and current grant funds until sud! a time that 

the vn EMA I)Jrecwr call tienlonstrate that proper procedures arc established ilnd in plaL:c to sa!(:guard 

feder8j funds against rr<lud. waste. abuse .. and mismanagement. FEMA \Ovill makc an inai;!! dch.'rmination 

and apprise VITE\'[ ,'\ ~1r findings within 90 days of the date of the grantee notification Jetter 

FEMA requesb this recommendation be resolved and open pending impkmentation of Ihe slated corrective 

<'lctions 

OIG Recommendation #22: We recommend that the Assistant Administrator. GPD. consider requiring the 

SAA to hire a third party fiduciary to manage its gram funds and assist in resolving the financial management 

issues, 

FElVIA Responst': FEM/\ concurs with this recommendation, 

FEMA is n\11 ill a po"ition to require the VITEl\.'lA Director to hire a third party lidllciilry to manage its grant 

funds. fhnH'\Cr. FE'v[;\ \vill discuss various options (c,g. utilizing contrac1ors pr inlcms 10 assIst in rcso]-ving 

udmini::;trati\ e <1lld l'im11lci<l! issues) wilh the V{TEMA Director and include .111 \ i;lll1<.: 1']111(1)S a<., rart of the 

CAP. In (Order 1\) \'crify rr(l~n.:~:~ l.owurds completion, FF?vIA will rcquire'1I1 upd'lll' rCp(lrl IJ'(1111 V!TL\1A 

within '1(1 da~ s 1'1' ilK d;ll,C i'l' jhe ~[';llltcc noli 11catio11 letter stntin)1 their dl'k'rm1T1<11 i, '11" \\ i, h '-,uppol1ing 

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Appendix B 

Management Comments to the Draft Report 

VITEMA VIRGIN ISLANDS TERRlTORlAL EMERGENCY MANAGEMENT AGENCY 

8121 NlSK\', STI'IIQMAS. VI 00801 102 HERMON HJLL, sr. CHOIX. VI 00820 6 SUSANNABERG. ST. JOHN, VI 008J 

TEl- (340) 774-2244 FAX (340) 715447 TEL. (340) 773-2144 FAX (l40) nB-8980 TEL. (J.40) 176-6444 FAX (340) 179-4266 

September 30, 2011 

Mr. Martin W. O'Neill 

Partner 

FoxX & Company 

Certified Public Accountants 

Dear Mr. Martin: 

Attached are lbe responses to lbe Draft Report: The U.S. Virgin Islands Management 

oJ State Homeland Security Program Grants Awarded During Fiscal Years 2007 

through 2009 lbat performed by Foxx & Company on behalf of tbe U.S. Department of 

Homeland Security Office of Inspector General (DHS/OIG). 

Please note lbat lbe exit conference is scheduled for Friday, September 30, 2011 at lbe 

VITEMA Headquarters located at 1A & IB Nisky, St. Thomas, Virgin Islands. 

iiLu.\ BG Elton Lewis 

Director 

"ENVISI0NIN6 THE FllTUiIE AND SETTING THE AGENDA" 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


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BACKGROL'ID 

VITEM.,\ was reorganized as outlined in Act No. 7074 \vith its implementation October 9, 2009. 

11102 reorganization entailed consolidation of all emergency management functions under one 

entity in compliance with Incident Command Stmcture (Ie'S). The fUllctions are e-911 Call 

Center, the Puhlic Assistance (PA) Program, and the VI Ollicc of Homeland Security (VIOHS). 

The Virgin Islands Police Department (VIPD), the Office of rvlanagement and nudget (Orvin) 

<Uld the OfTice of the Adjutant General (OAG) had oversight responsibilities for these areas 

respectively. Consolidation of functions under the VITEIvlA umbrella was considered Phase I 

of the reorganization. 

Phase II was the construction of a state-of-the-art facility' that encompassed all of the 

consolidated components: offi.ce space; an Emergency Operations Center (EOC): videoteleconferencing capabilities: e-911 Call Center. SClf; fusion Center; as \yell as DIIS and our 

othcr federal partners that provide suppot1 for hoth natural and man-made incidents. This 

undet1aking transfonned a fonner warehouse configuration to a facility" on par \vith or better than 

most on the mainland \vith 950/0 local funding. 

At thc time of thc ITS Dcpartment of Homcland Sccurity (DHS) technical a<;sistancc visit in 

.l'vlarch, 2010. the staff had recently moved from its respective locations only t\-yO weeks prior. 

For clarification purposes. four o[ the key personnel o[ the VIOHS stalT did not male the move 

due to resignations, transfers and retirement. Additionally. not all of the positions under the then 

Office of the Adjutant General moved over to the new organization. Further, as a measure to 

streamline and consolidate functions for consistency. several positions were reclassified mld new 

position descriptions \vere crafted in order to align with the VI Division of Persotu1el standard 

policics as well a<; thc GOVClllor'S vision for thc "1\C\'V VITE}'LA". 

Morcover. since thc DHS Technical Assistance Dclivery in March. 2010 (2nd quarter FY 2010), 

the Virgin Islands has experienced tropical stonns, hurricane close calls, explosions. and cruiseship emergcncies. Howcvcr. wc werc suhsequently stmck with not one hut three major disasters. 

On September 24. 2010 the President declared a disaster for Hurricane Earl: on )Jovember 4. 

2010 [or Tropical Stonn Otto and November 24. 2010 [or Tropical Stonn Tomas. Both the 

Grants rvlanagement and the Administration and Finance stafI \vere required to change foclls to 

response and recovery activities for a period into the second quarter of FY 2011 in order to meet 

the requirements of the Stafford Act. Once situational stability was established. eflorts resumed 

to routine Homeland Security grant endeavors as well as management of long-lenn recovery 

mea':mres. 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 53
 
Appendix B 

Management Comments to the Draft Report 

2 

NOhvithstal1ding all of the above intenllinent unforeseen circumstances. the "New VITE11A" 

has tumed the comer on ali,gning b'Tant activities \vilh the designated investments; improved 

reporting; researched inventory tracking systems, moved towards consistent and reliable 

communications: upgrades to intemal controls have promoted accountability and responsibility. 

Staff trainings. first responder trainings and specialized intelligence trainings have been 

conducted routindy to maintain competency levels. Grants Ivlanagement enhancements have 

been realized in the areas of internal procurement procedures consistent \vith Administration and 

Finance directives: CotTCSpOlldcncc tracking; grant systems authori7ations; and definitive 

designation of drawdown responsibilities. 

Further. routine programmatic and financial statT meetings are held in order to monitor and track 

adhcrcncc to grant knns and conditions so that improvements may be realized. In thc craning or 

Memorandum of AgreemenVUnderstanding for various functions rdative to trainings, exercise 

<Uld outsourcing, the VI Depm1ment of Justice is providing technical assistance and guidance 

prior to any commitments. 

Lastly, Phase III of the reorganization implementation entails acceptance of position 

descriptions that are both in tandem ""ith standard grant functions, VI Division of Personnel, and 

the VI Office of I\.lanagement and Budget's promotion of the Virgin Islands Economic Stability 

Act of 20 11, which has resulted in drastic reductions in available support personnel. 

In summary', VITK\IA acknowledges that there were deficiencies in certain areas of grants 

managcmcnt compliance for grant years prior to the consolidation. As a result the '"1'\C\V 

VITEMA" embarked on establishing and executing corrective measures to improve grants 

managcment processes. The cOlTcctive measures were initiated prior to the commencement of 

this audit. These measures have addressed those conditions which ,,'.'ould have warranted the 

Territory to be adversely classified. The processes that VITE!',ilA have put in place will continue 

to protect the integrity ofthe organization mld federal funds as well as enhance the Virgin Islands 

capabilities in promoting the security of our homeland. 

FIl'\DING: STRATEGIC GOALS AND OB.JECTIVES 

Do Not Concur. 

Re('ommendation #1: Prepare a revised strategy that includes: (a) the 

Territory's current goals and objectives for enhancing its ability to 

prevent. prepare for, protect against, and respond to natural disasters, acts 

of terrorism, and other man-made disaf:..1ers, and (b) goals <md objectives 

that me specific, measurable, achievable, results-oriented, and timelimited. 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 54
 
Appendix B 

Management Comments to the Draft Report 

3 

The Virgin Islands already has an updated Strategic Plan from which the 

Investment Justifications and grant award were approved by the federal 

grantor agency. Although there is no evidence that the Plan had been 

updated and submitted in the Grants Reporting Tool, VITEMA has 

retrieved a copy of the final Strategic Plan for the period in question (See 

Attachment #1). The Territory would reason that the Investment 

Justifications and the award would not have been approved and funds 

released without DRS's knowledge of the updated Plan as this is a 

regulatory prerequisite. The updated Plan provides completion dates 

beyond this audit period. VITEMA has entered its new five-year Strategic 

Plan in the Grants Reporting Tool portal and have received written 

approval from the grantor agency as required. 

Responsible Person: SAA-POC 

Recommendation #2: Submit the strategy for FEMA's approval and use 

the revised, approved strategy to prepare future grant applications 

(investment justifications). 

Completed See Above. 

FINDING: SOLE SOURCE PROCUREMENT AND MANAGEMENT OF 

CONTRACT DELIVERABLES 

Do Not Concur. 

Recommendation #3: Establish policies and procedures to adequately 

justify sole source procurements ensure that cost analyses are performed in 

accordance with federal regulations, and obtain FEMA approval, as 

necessary, for sole source procurements. 

The initial steps taken for the Open-Market procurement was a protracted 

process that lasted nearly one year. The selected bidder was ultimately 

disapproved by the Governor of the Virgin Islands, which is allowable by 

law. This resulted in the decision to pursue anOpen-Market NonCompetitive Negotiation procurement in order to meet the established 

deadline for submission of the Investment Justifications to DRS. 

The Virgin Islands acknowledges that this type of procurement requires 

approval from the grantor agency but was not obtained. 

This contract was reviewed and approved by the VI Department of 

Property and Procurement for procurement compliance; and vetted for 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 55
 
Appendix B 

Management Comments to the Draft Report 

4 

legal sufficiency by the VI Department of Justice; and then signed by the 

Governor. 

Recommendation #4: Establish policies and procedures to ensure that 

documentation regarding contract activities is maintained. 

The Department of Property and Procurement (DP&P) retains all detailed 

information relative to every procurement from the Request for 

Procurement (RFP) to "Notice to Proceed". Copies of award and 

summary documentation are forwarded to the user agency for its records. 

VITEMA will utilize Homeland Security Information Network (HSIN) as 

an additional repository for in-house contract documentation and records 

related to grants awarded to the Virgin Islands from DHS effective 2012. 

Recommendation #5: Disallow the amount paid under the contract 

recover the $472,167 in State Homeland Security Program grant funds for 

return to FEMA. 

The deliverables outlined in the contract were not all met due to the 

unforeseen event of Hurricane Omar, which became a declared disaster by 

the President of the United States. At that juncture, priorities were realigned to address the response and recovery efforts. 

Additionally, VITEMA followed the GVI's procurement process; and 

monies disbursed and the work performed was in line with the contract 

terms and conditions. 

FINDING: FINANCIAL MANAGEMENT DOCUMENTATION 

Do Not Concur. 

Recommendation #6: Develop a system to maintain required records to 

assure compliance with grant requirements. 

A system to maintain required records has already been implemented. The 

ERP (VI Government financial management system), is the official 

custodian of revenue and financial transaction records since 2007. All 

transaction records including invoices, contracts, leases, etc, are scanned 

into the system as a component of the payment process. The ERP is 

backed-up daily at a storage facility in the US mainland. Additionally, 

The ERP Grants Management Module has come online in recent months 

for the purposes of segregating awards, budgets, grant adjustment 

notifications; and grant revenues and expenditures. 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 56
 
Appendix B 

Management Comments to the Draft Report 

5 

In addition to VITErvl:,\'s standard hard copy files, VITE!vlA will utilize 

Homdand Security InConnutioll NdviOrk (HSIN) a<.; an additional 

repository of documentation and records related to grants awarded to the 

Virgin Islands from DRS dTectiye January 2012. DRS staIT provided a 

preliminary HSl:.J training of the portals and state usage authorizations for 

records management. It was highly recommended by DIIS staff to utilize 

this platfonll for redundant records storage and retention; and VITE~IA 

concurs with this recommendation. 

Recommendation #7: RCCollstmct the records sllppot1ing the $3.429214 

dra\Vll do\-vn for the FY 2007, 200S, and 2009 grant a\-vards. 

VITEMA has reconstructed the records that \'\iere previously maintained at 

Various other locations vihere the fonner 01lice of Homeland Security 

personnel had them stored as well as those records stored on the ERP 

since 2007. Considerable drOli \vas made to retrieve and collate these 

records so as to be compliant with grant tenns and this recommendation. 

(See records shipped to Foxx & Company) 

Recommendation #8: Refund to Fmvf A any funds for expenditures that 

cmmot be supported by appropriate documentation. 

VITEMA does not concur. See response to Recommendation "Ff-6. 

All funds expended by the Virgin Islands can be accounted for whether by 

photos of equipment purchased; inventory documentation or other means 

to prove that the grants' intcndcd purposcs were adhered to cvcn if thcrc 

were inadequate records management controls in place AT THAT THvIE. 

CotTedive adion has been undertaken hy the '"New" VITmvlA to ensure 

improved compliance \-vith document management requirement of the 

grant. 

FIl'\DING: PROPERTY :\1ANAGEME'H CONTROLS AND 

ACCOUl'\TABILITY 

Concur. 

Recommendation #9: Dcvelop and implemcnt procedures to ensure that 

property records comply \vith inventol)l requirements for equipment 

purchased with federal funds. 

Although thc VI Department of Propcl1y and Procurement is the entity 

responsible for maintaining inventory, it is apparent that this system is 

inadequak to meet the requirements of the FedenLi Government. Therefore 

VITEMA is in the process of creating an in-house inventory tracking 

System by relTeating property records and advising program managers or 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 57
 
Appendix B 

Management Comments to the Draft Report 

6 

inventory requirements for all future purchases with grant funds. 

Person Responsible: Deputy Director, Grants Management 

Due Date: May 30, 2012. 

Recommendation #10: Withhold Federal grant fund awards until the 

grantee is in compliance with the property records and inventory 

requirements. 

VITEMA has taken steps Lo turnaro und the !,;ollaLi on of properl y re(;ords 

and to comply with inventory requirements. Currently, 

VITEMA is utilizing a Microsoft Office Excel spreadsheet to capture 

inventory infonnation in the interim. Soli citations from variolls vendors 

for the procurement of specialized software to achieve compliance with 

the recommendation cited is underway. nlis process takes time to upload 

inventory data and requires sufficient time to complete. We have 

identified a realistic due date to complete this process as identified below. 

Withholding federal grant funds would severely inhibit completion of this 

proj ect and would have a negative impact on achieving compliance, as 

we ll as, fu lfilling the mandates of the grant. 

Person Responsible: Acting Deputy Director, Logistics 

Due Date: May 30, 2012. 

Rccommcndation #11 : Conduct physical inventory and reconcile to 

property records. 

A physical inventory has been conducted and now VITEMA is in the 

process of reconciling property records. 111is physical inventory will be 

updated bi-annually. Guidance is being provided to program managers on 

accounting for current and future acquisitions utilizing federal and local 

funds. 

Person Responsible: Acting Deputy Director, Logistics 

Deputy Director, Grants Management 

Due Date: May 30, 2012 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 58
 
Appendix B 

Management Comments to the Draft Report 

7 

FINDING: USE OF PURCHASED EQUIPMENT 

Do Not Concur. 

Recommendation #12: Expedite the procurement of radios that are 

compati ble with the modul es, and install the modules as intended. 

The Prior to the commencement of this audit, VITEMA had identified the 

physical location of the encryption cards and has updated the relevant 

infoml ation in the intemal Microsoft Office Excel spreadsheet whi ch is 

being used to caphlre inventory infonnation. 

Contact has been initiated with the vendor for the encryption cards to be 

installed in those radios that can be encrypted, whi ch will meet the 

specified justificati on of the purchase. Training will be provided to the VI 

Bureau of Infonnation Technology technicians to ensure future 

maintenml ce. The process for the installation of the encryption cards will 

begin on November 15, 20 II. VITEMA is committed to ensuring that all 

future purchases will be interoperabl e. 

Recommendation #13: If compatible radios are not procured, return the 

$201,250 to FEMA. 

All efforts are underway for the installation of the encryption cards. (See 

response to recommendation # 12) 

FINDING: PROCUREMENT OF TRAINING 

Do Not Concur. 

Recommendation #14: Recover the $50,000 paid to the University of the 

Virgin Islands as a professional service fee and return it to FEMA. 

The University of the Virgin Islands has an approved Indirect Cost Rate 

Agreement. The approved rate of 65% for on-campus activities; and 

approved rate of 25% for off-campus activities that applies to VITEMA 

and this training agreement. 

Since the total sub-grant was $200,000 for this training agreement, the 

$50,000 cited in this recommendation as a professional service fee 

constitutes the equivalent of the indirect cost. 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 59
 
Appendix B 

Management Comments to the Draft Report 

8 

Recommendation #15: Require that future agreements with the 

University of Virgin Islands be made through contractual agreements or 

through sub grantee agreements. 

VITEMA now has adequate available training facilities in each district and 

it is not anticipated that these services will be required in the future other 

than possible rental of a larger facility for specialized training. If it 

becomes necessary to utilize the services of the University again, 

VITEMA will enlist the expertise of the VI Attorney General's Office to 

craft an acceptable agreement to be used on an "As Needed Basis". 

FINDING: UNSUPPORTED PERSONNEL TIME CHARGES 

Do Not Concur. 

Recommendation #16: Provide documentation that supports the 

questioned salary costs of $568,069, including the $20,100 that exceeded 

the 15% limit, or recover the amount not supported. 

VITEMA is diligently working on compiling the requested information 

relative to this finding. However, due to limited personnel and the short 

turnaround, we have not completed this effort. It is expected to have the 

process completed within six (6) months. 

Recommendation #17: Establish controls to ensure compliance with 

federal requirements concerning the limitations of grant funds used for 

personnel costs. 

The GVI has established standard operating procedures and best practices 

relative to all grant personnel costs. Currently, the ERP system has 

controls installed that does not allow for any transactions to be executed 

beyond the grant performance period. Internally, VITEMA is conducting 

monthly reconciliations of personnel costs in compliance with the GVI's 

grants monitoring process to ensure timely adjustments for proper payroll 

allocation. 

Recommendation #18: Ensure that employees prepare activity reports 

that identify the specific grant to which the hours claimed are being 

charged. 

VITEMA has initiated steps to create an internal coding on Time Sheets 

delineating grant tasks to coincide with grant personnel cost allocation. 

Further, the Grants Management Manual has documented internal 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 60
 
Appendix B 

Management Comments to the Draft Report 

9 

controls, which ensures that employees provide monthly reports detailing 

activities for each gnmt period. 

(Sec doclulIcnts shipped to FOll:x & Company) 

FINDING: FILING FINAI 'CIAL REPORT 

Concur. 

Recommendation #19: Establish and comply with procedures to ensure 

that financial status reports are prepared and submitted in a timely manner 

in accordance with federal requirements. 

Since the inception of the "New" VITEMA policy and procedures have 

been instituted and outlined in the Grants Management Manual in order to 

report timely on grant activities. There has been a marked improvement in 

timely reporting. Changes and modifications in the DHS/FEMA 

electronic reporting systems have been problematic resulting in some 

instances with late reporting. VITEMA continues to partner with 

DHS/FEMA to resolve these issues. 

Person Responsible: Deputy Director, Grants Management 

FINDING: HIGH RISK GRANTEE 

Do Not Concur. 

Recommendation #20: Assess the Virgin Islands grant performance and 

based on that assessment determine if the State Administrative Agency 

should be declared a high risk grantee. 

The "New VITEMA" since its inception, has reached out to the grantor 

agency to introduce the new agency personnel and to provide an overview 

of their professional grants experience and to present issues discovered 

once on-board. Moreover, past Homeland Security grant performance was 

discussed and the VITEMA staff sought guidance as to corrective 

remedial actions needed. DHS provided technical assistance and samples 

of grants management best practices from other states. Significant 

changes and improvements in Grants Management have occurred since the 

reorganization of VITEMA. Timely reporting has improved; internal 

controls have been established; documentation protocols have been 

established; and overall grants management has been overhauled. 

The findings cited in this report were from years prior to the 

reorganization of the agency and does not accurately reflect the reality of 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 61
 
Appendix B 

Management Comments to the Draft Report 

10 

the "New VITEMA". VITEMA recognizes that there are still areas that 

require staff training to improve further compliance but this does not rise 

to the level that VITEMA should be considered a "high risk" agency. We 

do recommend that another performance audit of this nature be done in 

three years and that this recommendation is revisited at that time if 

sufficient improvement is not documented. 

Recommendation #21: Develop and implement procedures with special 

conditions and restrictions to ensure that future grants to the Virgin Islands 

are managed in accordance with federal requirements and that the funds 

are adequately safeguarded against fraud, waste, abuse, and 

mismanagement. 

During the 2009-2010 grant period, improvements have been realized and 

demonstrated in reporting, inventory and procurement. Staff has 

participated in T/A Delivery and GVI Grants Management Module 

training. Grants with further restrictions and conditions would hamper the 

territory's ability to utilize the funds timely and effectively. Most 

importantly it may have a negative impact on the territory being able to 

comply with PPD-8 and protecting the people of the Virgin Islands during 

all hazard emergencies. Increased regulations, while they may 

incrementally improve compliance, they would negatively impact the 

territory's preparedness and stymie the Territory's ability to effectively 

meet the core capabilities. 

Recommendation #22: Consider requmng the State Administrative 

Agency to hire a third party fiduciary to manage its grant funds and assist 

in resolving the financial management issues. 

VITEMA is vehemently opposed to a third party fiduciary to manage its 

grant funds. Due to the economic crisis affecting both the Virgin Islands 

and the Federal Government at this time, hiring of a third party fiduciary 

would represent the least cost effective method of achieving the desired 

results to improve compliance. 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 62
 
 

Appendix C 

Homeland Security Grant Program Background 

The Homeland Security Grant Program provides federal funding to 

help state and local agencies enhance their capabilities to prevent, 

protect against, respond to, and recover from terrorist attacks, 

major disasters, and other emergencies. The Homeland Security 

Grant Program encompasses several interrelated federal grant 

programs that together fund a range of preparedness activities, 

including planning, organization, equipment purchase, training, 

and exercises, as well as management and administration costs. 

Programs include: 

•	 State Homeland Security Program provides financial 

assistance directly to each of the states and territories to 

prevent, respond to, and recover from acts of terrorism and 

other catastrophic events. The program supports the 

implementation of the State Homeland Security Strategy to 

address the identified planning, equipment, training, and 

exercise needs. 

•	 Urban Areas Security Initiative provides financial assistance 

to address the unique planning, equipment, training, and 

exercise needs of high risk urban areas, and to assist in building 

an enhanced and sustainable capacity to prevent, respond to, 

and recover from threats or acts of terrorism and other 

disasters. Allowable costs for the urban areas are consistent 

with the State Homeland Security Program. Funding is 

expended based on the Urban Area Homeland Security 

Strategies. 

In addition, the Homeland Security Grant Program includes other 

interrelated grant programs with similar purposes. Depending on 

the fiscal year these include: 

•	 Metropolitan Medical Response System 

•	 Citizen Corps Program 

•	 Law Enforcement Terrorism Prevention Program 

(through FY 2007) 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 63 
 

 

 

 

 

Appendix D 

Potential Monetary Benefits 

Classification of Monetary Benefits 

Finding Rec. 

No. 

Funds To Be 

Put to Better 

Use 

Questioned 

Costs – 

Unsupported 

Costs 

Questioned 

Costs – 

Other 

Total 

Contract 

Provisions 5 $472,167 $472,167 

Supporting 

Documentation 8 $2,137,728 * $2,137,728 

Use of Purchased 

Equipment 13 $201,250 $201,250 

Procurement of 

Training 14 $50,000 $50,000 

Personnel Time 

Charges 16 $468,000 $100,069 $568,069 

Total $2,655,728 $773,486 $3,429,214 

* We consider the entire $3,429,214 drawn down by the State Administrative Agency for the 

FYs 2007, 2008, and 2009 awards as “at risk” because of the inadequate financial records. The 

$2,137,728 listed above is the difference between the total $3,429,214 and the other itemized 

amounts. 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 64 
Appendix E 

U.S. Virgin Islands Administrative Agency Organization Chart 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 65
 
Appendix F 

Report Distribution 

Department of Homeland Security 

Secretary 

Deputy Secretary 

Chief of Staff 

Deputy Chief of Staff 

General Counsel 

Executive Secretary 

Director, GAO/OIG Liaison Office 

Assistant Secretary for Office of Policy 

Assistant Secretary for Office of Public Affairs 

Assistant Secretary for Office of Legislative Affairs 

Federal Emergency Management Agency 

Administrator 

Assistant Administrator, Grant Programs Directorate 

Federal Emergency Management Agency Audit Liaison 

Grant Programs Directorate Audit Liaison 

Office of Management and Budget 

Chief, Homeland Security Branch 

DHS OIG Budget Examiner 

Congress 

Congressional Oversight and Appropriations Committees, as 

appropriate 

The U.S. Virgin Islands Management of State Homeland Security Program 


Grants Awarded During Fiscal Years 2007 through 2009 


Page 66
 
 

 

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