VIRGIN ISLANDS WATER AND POWER AUTHORITYLocal Government

Finding Number: 2020-008 Prior Year Finding Number: 2019-009 Compliance Requirement: Data Collection Form and Single Audit Reporting Package Information on Federal Program(s) ? U.S. Department of Homeland Security Pass Through Program from Virgin Islands Territorial Emergency Management Agency: Disaster Grants ? Public Assistance (Presidentially Declared Disasters) CFDA Number: 97.036 U.S. Environmental Protection Agency Pass Through Program from Virgin Islands Department of Planning and Natural Resources: Drinking Water State Revolving Fund Cluster CFDA Number: 66.468 Criteria or Specific Requirement ? 2 CFR 200.512, Report Submission, establishes that the audit shall be completed and the data collection form and reporting package shall be submitted to the Federal Audit Clearinghouse (FAC) within the earlier of 30 days after receipt of the auditor?s report or nine (9) months after the end of the audit period, unless a longer period is agreed to in advance by the cognizant or oversight agency for audit. Condition ? The Authority did not comply with the required submission date of the data collection form and reporting package to the FAC for the fiscal year ended June 30, 2020. Questioned Costs ? Not applicable. Context ? This is a condition identified per review of the Authority?s compliance with specified requirements. Effect ? The Authority could be exposed to a reduction or elimination of funds by the federal awarding agencies. Cause ? The Authority did not have controls in place to ensure that the reporting package was submitted to the FAC within the required timeframe. Recommendation ? We recommend that the Authority establish controls to ensure the reporting package is submitted to the FAC annually within the required timeframe. Views of Responsible Officials ? The Authority concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Authority?s Corrective Action Plan which is attached as Appendix B.

Finding Number: 2020-009 Prior Year Finding Number: 2019-013 Compliance Requirement: Matching, Level of Effort, Earmarking Information on Federal Program(s) ? U.S. Department of Homeland Security Pass Through Program from Virgin Islands Territorial Emergency Management Agency: Disaster Grants ? Public Assistance (Presidentially Declared Disasters) CFDA Number: 97.036 Criteria or Specific Requirement ? In accordance with the sub-recipient grant agreement(s), the Authority is required to provide (a) 25% matching funds for all Permanent work; and (b) 10% match for all emergency work completed after the first 180 days after declaration. Condition ? The Authority did not meet the stipulated matching requirements during the fiscal year nor did it obtain a corresponding waiver. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of the Authority?s compliance with specified requirements. Effect ? The Authority is not in compliance with the stated provisions. Cause ? The Authority does not appear to have adequate policies and procedures in place to ensure compliance with applicable matching requirements. Recommendation ? We recommend that the Authority deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the match requirements throughout the fiscal year and ensure that supporting documents are available to support the local match. Views of Responsible Officials - The Authority concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Authority?s Corrective Action Plan which is attached as Appendix B.

Finding Number: 2020-010 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles; Period of Performance Information on Federal Program(s) ? U.S. Environmental Protection Agency Pass Through Program from Virgin Islands Department of Planning and Natural Resources: Drinking Water State Revolving Fund Cluster CFDA Number: 66.468 Criteria or Specific Requirement ? The Uniform Guidance in 2 CFR ?200.305(b)(6)(iv) states that, a payment must not be made to a non-Federal entity for amounts that are withheld by the non-Federal entity from payment to contractors to assure satisfactory completion of work. A payment must be made when the non-Federal entity actually disburses the withheld funds to the contractors or to escrow accounts established to assure satisfactory completion of work. Condition ? In our review of 8 out of 21 disbursement transactions during fiscal year 2020, totaling $1,682,170, we noted 2 instances where retainage had been charged to the incorrect period resulting in an overstatement of expenditures on the schedule of expenditures of federal awards. Retainage should not be reported on the schedule of expenditures of federal awards until one of the following has been met: (a) the retainage is paid to the contractor or (b) the retainage is paid into an escrow/trust account. Questioned Costs ? $83,754. Context ? This is a condition identified per review of the Authority?s compliance with specified requirements using a statistically valid sample. The known amount of the overstated expenditures reported on the schedule of expenditures of federal awards is $83,754. These amounts were paid to the vendor(s) in fiscal year 2021. Effect ? The Authority is not compliance with the stated provisions. Cause ? The Authority does not appear to have adequate policies and procedures in an effort to adequately administer the expending and accounting for all funds. Recommendation ? We recommend that the Authority improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for all funds. Views of Responsible Officials - The Authority concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Authority?s Corrective Action Plan which is attached as Appendix B.

Finding Number: 2020-011 Prior Year Finding Number: 2019-016 Compliance Requirement: Cash Management Information on Federal Program(s) ? U.S. Environmental Protection Agency Pass Through Program from Virgin Islands Department of Planning and Natural Resources: Drinking Water State Revolving Fund Cluster CFDA Number: 66.468 Criteria or Specific Requirement ? The Uniform Guidance in 2 CFR Section 200.303 requires that non-federal entities receiving federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with federal statues, regulations, and the terms and conditions of the federal award. In addition, 2 CFR section 200.305(b) requires that non-federal entities must minimize the time elapsing between the transfer of funds from the U.S. Treasury or pass-through entity and disbursement by the non-Federal entity for direct program or project costs and the proportionate share of allowable indirect costs, whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. Condition ? We reviewed 3 out of 6 drawdowns made during fiscal year 2020, totaling $3,617,903, and noted that these were received in advance of the associated disbursement. In one instance, the Authority possessed the funds for 28 days before processing the disbursement transaction. The computed interest that would have been earned on these funds, at the prevailing U.S. Treasury rates, amounted to $382. Questioned Costs ? Below reporting threshold. Context ? This is a condition identified per review of the Authority?s compliance with specified requirements using a statistically valid sample. Total fiscal year 2020 drawdown requests were $4,805,219. Effect ? The Authority is not compliance with the stated provisions. Cause ? It appears that policies and procedures were not functioning as intended. Recommendation ? We recommend that the Authority comply with the specified requirements and establish adequate policies and procedures to ensure that it minimizes the time elapsing between the transfer of funds from the U.S. Treasury or pass-through entity and disbursement for program costs. Views of Responsible Officials ? The Authority concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Authority?s Corrective Action Plan which is attached as Appendix B.

Finding Number: 2020-012 Prior Year Finding Number: 2019-017 Compliance Requirement: Procurement, Suspension and Debarment Information on Federal Program(s) ? U.S. Environmental Protection Agency Pass Through Program from Virgin Islands Department of Planning and Natural Resources: Drinking Water State Revolving Fund Cluster CFDA Number: 66.468 Criteria or Specific Requirement ? Recipients of Federal awards must have adequate policies and controls in place to ensure that the procedures are properly documented in the entity?s files, provide full and open competition supported by a cost or price analysis, provide a vendor debarment or suspension certification, provide for retention of files, and that supporting documentation corroborate compliance with these requirements. Condition ? In our review of 4 out of 5 procurement transactions during fiscal year 2020, we noted 1 instance where the procurement file selected did not have evidence of compliance with the suspension and debarment requirements. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of the Authority?s compliance with specified requirements using a statistically valid sample. We reviewed 4 procurement files with expenditures totaling $4,551,772 for fiscal year 2020. Effect ? The Authority could inadvertently contract with or provide sub-awards to parties that are suspended or debarred from doing business with the Federal government. Cause ? The Authority does not appear to have a process in place to adequately monitor and maintain completed contract files comprising of all supporting documents. Recommendation ? We recommend that the Authority improve internal controls to ensure adherence to Federal regulations relating to the procurement of goods and services and review current record retention policies. Views of Responsible Officials - The Authority concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Authority?s Corrective Action Plan which is attached as Appendix B.

Finding Number: 2019-009 Prior Year Finding Number: 2018-009 Compliance Requirement: Data Collection Form and Single Audit Reporting Package Information on Federal Program(s) ? U.S. Environmental Protection Agency Pass Through Program from Virgin Islands Department of Planning and Natural Resources: Drinking Water State Revolving Fund Cluster CFDA Number: 66.468 U.S. Department of Homeland Security Direct Program: Community Disaster Loans CFDA Number: 97.030 U.S. Department of Homeland Security Pass Through Program from Virgin Islands Territorial Emergency Management Agency: Disaster Grants ? Public Assistance (Presidentially Declared Disasters) CFDA Number: 97.036 Criteria or Specific Requirement ? 2 CFR 200.512, Report Submission, establishes that the audit shall be completed and the data collection form and reporting package shall be submitted to the Federal Audit Clearinghouse (FAC) within the earlier of 30 days after receipt of the auditor?s report or nine (9) months after the end of the audit period, unless a longer period is agreed to in advance by the cognizant or oversight agency for audit. Condition ? The Authority did not comply with the required submission date of the data collection form and reporting package to the FAC for the fiscal year ended June 30, 2019. Questioned Costs ? Not applicable. Context ? This is a condition identified per review of the Authority?s compliance with specified requirements. Effect ? The Authority could be exposed to a reduction or elimination of funds by the federal awarding agencies. Cause ? The Authority did not have controls in place to ensure that the reporting package was submitted to the FAC within the required timeframe. Recommendation ? We recommend that the Authority establish controls to ensure the reporting package is submitted to the FAC annually within the required timeframe. Views of Responsible Officials ? The Authority concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Authority?s Corrective Action Plan which is attached as Appendix B.

Finding Number: 2019-010 Prior Year Finding Number: N/A Compliance Requirement: Cash Management Information on Federal Program(s) ? U.S. Department of Homeland Security Direct Program: Community Disaster Loans CFDA Number: 97.030 Criteria or Specific Requirement ? The Uniform Guidance in 2 CFR Section 200.303, Internal Control, requires the non-federal entity to establish and maintain effective internal control over Federal awards that provides reasonable assurance that the non-federal entity is managing Federal awards in compliance with Federal statutes, regulations, and other terms and conditions. Condition ? We reviewed 2 drawdowns made during fiscal year 2019, and noted that 1 drawdown did not contain evidence of proper review and approval. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of the Authority?s compliance with the specified requirements. The total of two drawdowns reviewed amounted to $17,499,970. Effect ? There is a risk that a lack of review and approval of loan drawdown requests prior to submission could result in a failure to detect errors and could result in noncompliance with laws and regulations along with ineligible uses of loan proceeds. Further, excessive drawdowns may result in loss of future funding. Cause ? The Authority does not appear to have adequate policies and procedures and effective internal controls to review and approve loan drawdowns. Recommendation ? We recommend that the Authority improve internal controls to ensure adherence to the applicable provisions of the Department of Homeland Security Federal Emergency Management Agency Promissory Notes when requesting Federal funds. Views of Responsible Officials - The Authority concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Authority?s Corrective Action Plan which is attached as Appendix B.

Finding Number: 2019-011 Prior Year Finding Number: 2018-011 Compliance Requirement: Procurement/Suspension and Debarment Information on Federal Program(s) ? U.S. Department of Homeland Security Direct Program: Community Disaster Loans CFDA Number: 97.030 Criteria or Specific Requirement ? Recipients of Federal awards must have adequate policies and controls in place to ensure that the procedures are properly documented in the entity?s files, provide full and open competition supported by a cost or price analysis, provide a vendor debarment or suspension certification, provide for retention of files, and that supporting documentation corroborate compliance with these requirements. Condition ? In our review of 4 out of 32 procurement transactions during fiscal year 2019, we noted all of the selected files did not contain evidence of compliance with the suspension and debarment requirements. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of the Authority?s compliance with specified requirements using a statistically valid sample. We reviewed 4 procurement files with expenditures totaling $13,141,623 for fiscal year 2019. Effect ? The Authority could inadvertently contract with or provide sub-awards to parties that are suspended or debarred from doing business with the Federal government. Cause ? The Authority does not appear to have a process in place to adequately monitor and maintain completed contract files comprising of all supporting documents. Recommendation ? We recommend that the Authority improve internal controls to ensure adherence to Federal regulations relating to the procurement of goods and services and review current record retention policies. Views of Responsible Officials - The Authority concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Authority?s Corrective Action Plan which is attached as Appendix B.

Finding Number: 2019-012 Prior Year Finding Number: 2018-012 Compliance Requirement: Reporting Information on Federal Program(s) ? U.S. Department of Homeland Security Direct Program: Community Disaster Loans CFDA Number: 97.030 Criteria or Specific Requirement ? In accordance with the FEMA promissory note EMN-2018-TF-4335V101, the Authority is required to submit various reports which include (a) cash balances on a monthly basis; (b) budget reports on revenues and expenditures at least monthly; (c) 3 month cash flow forecasts; (d) other reports upon request including written and/or oral updates on the Authority?s comprehensive fiscal recovery plan; and (e) audited financial statements within 270 days after the end of each fiscal year. Condition ? We selected 9 out of 62 reports submitted during the fiscal year and noted that the Authority could not provide evidence that the following reports had been submitted and/or approved: ? 3 month cash flow forecast report for the last quarter of the year. ? 2 quarterly written and/or oral updates on the Authority?s comprehensive fiscal recovery plan. ? All reports reviewed did not evidence acknowledgement by the Chief Executive Officer, General Counsel, and financial advisor. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of the Authority?s compliance with specified requirements using a statistically valid sample. Effect ? The Authority is not in compliance with the stated provisions and required information may not have been reported to the Federal government. Cause ? It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, the Authority does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation ? We recommend that the Authority reevaluate its policies and procedures to ensure proper monitoring and review of the required reports by an appropriate official who would ensure the information submitted is complete, accurate, consistent, and submitted within the required timeframe. The Authority should also review its records retention policies to ensure that complete documentation is maintained to support information included in the various required reports. Views of Responsible Officials - The Authority concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Authority?s Corrective Action Plan which is attached as Appendix B.

Finding Number: 2019-013 Prior Year Finding Number: 2018-013 Compliance Requirement: Matching, Level of Effort, Earmarking Information on Federal Program(s) ? U.S. Department of Homeland Security Pass Through Program from Virgin Islands Territorial Emergency Management Agency: Disaster Grants ? Public Assistance (Presidentially Declared Disasters) CFDA Number: 97.036 Criteria or Specific Requirement ? In accordance with the sub-recipient grant agreement(s), the Authority is required to provide (a) 25% matching funds for all Permanent work; and (b) 10% match for all emergency work completed after the first 180 days after declaration. Condition ? The Authority did not meet the stipulated matching requirements during the fiscal year nor did it obtain a corresponding waiver. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of the Authority?s compliance with specified requirements. Effect ? The Authority is not in compliance with the stated provisions. Cause ? The Authority does not appear to have adequate policies and procedures in place to ensure compliance with applicable matching requirements. Recommendation ? We recommend that the Authority deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the match requirements throughout the fiscal year and ensure that supporting documents are available to support the local match. Views of Responsible Officials - The Authority concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Authority?s Corrective Action Plan which is attached as Appendix B.

Finding Number: 2019-014 Prior Year Finding Number: N/A Compliance Requirement: Period of Performance Information on Federal Program(s) ? U.S. Department of Homeland Security Pass Through Program from Virgin Islands Territorial Emergency Management Agency: Disaster Grants ? Public Assistance (Presidentially Declared Disasters) CFDA Number: 97.036 Criteria or Specific Requirement ? Per the Uniform Guidance in 2 CFR Section 200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Further, per the Uniform Guidance in 2 CFR Section 200.344(b), unless the federal awarding agency or pass-through entity authorized an extension, a non-Federal entity must liquidate all obligations incurred under the Federal award not later than 90 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. Condition ? We sampled and selected 60 out of 2,909 transactions and noted the following: ? 1 transaction was obligated and charged outside of the grant award period. ? 4 instances where obligated expenditures in the amount of $8,185,273 were liquidated beyond the allowable period without an authorized extension. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of the Authority?s compliance with specified requirements using a statistically valid sample totaling $44,971,958. Effect ? The Authority is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause ? The Authority did not appear to have adequate policies and procedures in place to ensure compliance with the required period of performance stipulations. Recommendation ? We recommend that the Authority strengthen its processes with respect to setting up and charging expenditures between various grant awards along with enhancing its review process to properly determine the activities of each grant relative to the appropriate period of performance. Such information should also be monitored, retained, and approved by a responsible official of the Authority in a timely manner. Views of Responsible Officials ? The Authority concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Authority?s Corrective Action Plan which is attached as Appendix B.

Finding Number: 2019-015 Prior Year Finding Number: 2018-014 Compliance Requirement: Reporting Information on Federal Program(s) ? U.S. Department of Homeland Security Pass Through Program from Virgin Islands Territorial Emergency Management Agency: Disaster Grants ? Public Assistance (Presidentially Declared Disasters) CFDA Number: 97.036 Criteria or Specific Requirement ? In accordance with the sub-recipient grant agreement(s), the Authority is required to provide quarterly progress reports to the Government Authorized Representative (GAR), no later than January 10, April 10, July 10, and October 10, covering financial transactions and performance for the three months preceding the due date. Condition ? We requested all 4 quarterly reports due for the year and noted the following: ? For 2 reports, we noted that there was no evidence of review or approval and they were submitted beyond the required due dates. ? For the remaining 2 reports, the Authority was unable to provide evidence that the reports had been completed and filed nor had it obtained a corresponding waiver. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of the Authority?s compliance with specified requirements. Effect ? The Authority is not in compliance with the stated provisions and required information may not have been reported to the Federal government. Cause ? It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, the Authority does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation ? We recommend that the Authority reevaluate its policies and procedures to ensure proper monitoring and review of the required reports by an appropriate official who would ensure the information submitted is complete, accurate, consistent, and submitted within the required timeframe. The Authority should also review its records retention policies to ensure that complete documentation is maintained to support information included in the various required reports. Views of Responsible Officials - The Authority concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Authority?s Corrective Action Plan which is attached as Appendix B.

Finding Number: 2019-016 Prior Year Finding Number: N/A Compliance Requirement: Cash Management Information on Federal Program(s) ? U.S. Environmental Protection Agency Pass Through Program from Virgin Islands Department of Planning and Natural Resources: Drinking Water State Revolving Fund Cluster CFDA Number: 66.468 Criteria or Specific Requirement ? The Uniform Guidance in 2 CFR Section 200.303 requires that non-federal entities receiving federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with federal statues, regulations, and the terms and conditions of the federal award. In addition, 2 CFR section 200.305(b) requires that non-federal entities must minimize the time elapsing between the transfer of funds from the U.S. Treasury or pass-through entity and disbursement by the non-Federal entity for direct program or project costs and the proportionate share of allowable indirect costs, whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. Condition ? We reviewed 5 out of 16 drawdowns made during fiscal year 2019, totaling $1,978,847, and noted that 3 of these were received in advance of the associated disbursement. The Authority possessed these funds for 28 to 112 days before processing the disbursement transactions. The computed interest that would have been earned on these funds, at the prevailing U.S. Treasury rates, amounted to $4,370. Questioned Costs ? Below reporting threshold. Context ? This is a condition identified per review of the Authority?s compliance with specified requirements using a statistically valid sample. Total fiscal year 2019 drawdown requests were $5,318,811. Effect ? The Authority is not compliance with the stated provisions. Cause ? It appears that policies and procedures were not functioning as intended. Recommendation ? We recommend that the Authority comply with the specified requirements and establish adequate policies and procedures to ensure that they minimize the time elapsing between the transfer of funds from the U.S. Treasury or pass-through entity and disbursement for program costs. Views of Responsible Officials and Planned Corrective Actions ? The Authority concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Authority?s Corrective Action Plan which is attached as Appendix B.

Finding Number: 2019-017 Prior Year Finding Number: N/A Compliance Requirement: Procurement/Suspension and Debarment Information on Federal Program(s) ? U.S. Environmental Protection Agency Pass Through Program from Virgin Islands Department of Planning and Natural Resources: Drinking Water State Revolving Fund Cluster CFDA Number: 66.468 Criteria or Specific Requirement ? Recipients of Federal awards must have adequate policies and controls in place to ensure that the procedures are properly documented in the entity?s files, provide full and open competition supported by a cost or price analysis, provide a vendor debarment or suspension certification, provide for retention of files, and that supporting documentation corroborate compliance with these requirements. Condition ? In our review of 4 out of 12 procurement transactions during fiscal year 2019, we noted all of the procurement files selected did not have evidence of compliance with the suspension and debarment requirements. Questioned Costs ? Not determinable. Context ? This is a condition identified per review of the Authority?s compliance with specified requirements using a statistically valid sample. We reviewed 4 procurement files with expenditures totaling $3,085,237 for fiscal year 2019. Effect ? The Authority could inadvertently contract with or provide sub-awards to parties that are suspended or debarred from doing business with the Federal government. Cause ? The Authority does not appear to have a process in place to adequately monitor and maintain completed contract files comprising of all supporting documents. Recommendation ? We recommend that the Authority improve internal controls to ensure adherence to Federal regulations relating to the procurement of goods and services and review current record retention policies. Views of Responsible Officials - The Authority concurs with the auditor?s findings and recommendations. The planned corrective actions are presented in the Authority?s Corrective Action Plan which is attached as Appendix B.

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