FAC Explorer

Audit 321658

FY End
2019-09-30
Total Expended
$4.77M
Findings
4
Programs
5
Organization: Virgin Islands Port Authority (VI)
Year: 2019 Accepted: 2024-09-27
Auditor: Bdo USA PC

Organization Exclusion Status:

Findings

ID Ref Severity Repeat Requirement
498874 2019-007 Significant Deficiency - F
498875 2019-008 Material Weakness Yes L
1075316 2019-007 Significant Deficiency - F
1075317 2019-008 Material Weakness Yes L

Programs

ALN Program Spent Major Findings
20.106 Airport Improvement Program, Covid-19 Airports Programs, and Infrastructure Investment and Jobs Act Programs $4.18M Yes 2
97.090 Law Enforcement Officer Reimbursement Agreement Program $283,520 - 0
16.738 Edward Byrne Memorial Justice Assistance Grant Program $146,494 - 0
97.072 National Explosive Detection Canine Team Program $134,667 - 0
97.036 Disaster Grants - Public Assistance (presidentially Declared Disasters) $26,156 - 0

Contacts

Name Title Type
T4ZRFC3WZ5M9 Anna Mauricia Penn Auditee
3407146622 Scott Warnetski Auditor
No contacts on file

Notes to SEFA

Title: Reporting Entity Accounting Policies: Basis of Accounting Expenditures included in the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Matching Costs Matching costs, the nonfederal share of certain program costs, are not included in the Schedule. Relationship to Federal Financial Reports The regulations and guidelines governing the preparation of Federal financial reports vary by Federal agency and among programs administered by the same agency. Accordingly, the amounts reported in the Federal financial reports do not necessarily agree with the amounts reported in the accompanying Schedule, which is prepared on the basis described above. De Minimis Rate Used: N Rate Explanation: The Authority has elected not to use the 10 percent de minimis indirect cost rate allowed. The accompanying Schedule of Expenditures of Federal Awards (the Schedule) includes the federal grant activity of the Virgin Islands Port Authority (the Authority) for the year ended September 30, 2019. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Therefore, some amounts presented in this Schedule may differ from amounts presented in, or used in, the preparation of the basic financial statements. Further, because the Schedule presents only a selected portion of the operations of the Authority, it is not intended to, and does not present, the financial position, changes in net position, or cash flows of the Authority.
Title: Summary of Significant Accounting Policies Accounting Policies: Basis of Accounting Expenditures included in the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Matching Costs Matching costs, the nonfederal share of certain program costs, are not included in the Schedule. Relationship to Federal Financial Reports The regulations and guidelines governing the preparation of Federal financial reports vary by Federal agency and among programs administered by the same agency. Accordingly, the amounts reported in the Federal financial reports do not necessarily agree with the amounts reported in the accompanying Schedule, which is prepared on the basis described above. De Minimis Rate Used: N Rate Explanation: The Authority has elected not to use the 10 percent de minimis indirect cost rate allowed. Basis of Accounting Expenditures included in the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Matching Costs Matching costs, the nonfederal share of certain program costs, are not included in the Schedule. Relationship to Federal Financial Reports The regulations and guidelines governing the preparation of Federal financial reports vary by Federal agency and among programs administered by the same agency. Accordingly, the amounts reported in the Federal financial reports do not necessarily agree with the amounts reported in the accompanying Schedule, which is prepared on the basis described above.
Title: Indirect Cost Rate Accounting Policies: Basis of Accounting Expenditures included in the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Matching Costs Matching costs, the nonfederal share of certain program costs, are not included in the Schedule. Relationship to Federal Financial Reports The regulations and guidelines governing the preparation of Federal financial reports vary by Federal agency and among programs administered by the same agency. Accordingly, the amounts reported in the Federal financial reports do not necessarily agree with the amounts reported in the accompanying Schedule, which is prepared on the basis described above. De Minimis Rate Used: N Rate Explanation: The Authority has elected not to use the 10 percent de minimis indirect cost rate allowed. The Authority has elected not to use the 10¬ percent de minimis indirect cost rate allowed under the Uniform Guidance.
Title: Contingencies Accounting Policies: Basis of Accounting Expenditures included in the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Matching Costs Matching costs, the nonfederal share of certain program costs, are not included in the Schedule. Relationship to Federal Financial Reports The regulations and guidelines governing the preparation of Federal financial reports vary by Federal agency and among programs administered by the same agency. Accordingly, the amounts reported in the Federal financial reports do not necessarily agree with the amounts reported in the accompanying Schedule, which is prepared on the basis described above. De Minimis Rate Used: N Rate Explanation: The Authority has elected not to use the 10 percent de minimis indirect cost rate allowed. The Authority is subject to audit examination by funding sources to determine compliance with grant conditions. In the event that expenditures would be disallowed, repayment could be required. Management believes that the impact of any disallowed grant expenditures would not have a material adverse effect on the Authority’s financial position, changes in net position, or liquidity. In June 2018, the Federal Aviation Administration (FAA) issued a $1.5 million civil penalty against the Authority for the alleged violations of airport safety regulations at Cyril E. King Airport and Henry E. Rohlsen Airport. In March 2020, the Authority signed a settlement agreement with the FAA and agreed to remit payment of a $1.5 million civil penalty in four installments and payments were completed in November 2020.
Title: Subsequent Events Accounting Policies: Basis of Accounting Expenditures included in the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Matching Costs Matching costs, the nonfederal share of certain program costs, are not included in the Schedule. Relationship to Federal Financial Reports The regulations and guidelines governing the preparation of Federal financial reports vary by Federal agency and among programs administered by the same agency. Accordingly, the amounts reported in the Federal financial reports do not necessarily agree with the amounts reported in the accompanying Schedule, which is prepared on the basis described above. De Minimis Rate Used: N Rate Explanation: The Authority has elected not to use the 10 percent de minimis indirect cost rate allowed. Federal and Private Assistance – Hurricanes Irma and Maria The Authority has made significant progress towards restoring its facilities which were damaged by Hurricanes Irma and Maria in September 2017. Rebuilding the Authority’s air and seaports has taken precedence over other activities and the Authority continues to tabulate the associated costs and expenses with respect to remediation, mitigation, and the restoration of services. FEMA requires the Authority to take reasonable efforts to recover insurance proceeds that it is entitled to receive when pursuing claims. In February 2021, the Authority received approximately $34.0 million as the final settlement in connection with its insurance claims related to damages incurred and FEMA project worksheets are now closed. Global Pandemic In March 2020, the Governor of the U.S. Virgin Islands declared a state of emergency due to the coronavirus pandemic known as COVID-19. The state of emergency was approved by the President of the United States under the provisions of the Stafford Act and the National Emergencies Act. A federally approved state of emergency activates Federal assistance to states in the form of financial, logistical, and technical assistance. The state of emergency also activates other emergency response protocols and systems to protect citizenry such as stay-at-home orders, travel restrictions, and social distancing requirements. Also, in March 2020, the Centers for Disease Control and Prevention (CDC) issued a No Sail Order (Order) for cruise ships. The Authority derives a material portion of its revenue from servicing cruise ships owned by established cruise lines. As a result of the Order and state of emergency, the Authority announced a temporary closure of its port. The Authority’s fee for services revenue for fiscal years 2020 and 2021 have been impacted due to the pause in cruise operations. In September 2020, the Authority closed on a loan with Banco Popular for a secured line of credit for $7.0 million to be used for operations due to the shortfall in its marine revenues. As of date of this report, the Authority has drawn $7.0 million on the line of credit. In October 2020, the CDC replaced the Order with the Conditional Sailing Order. New phases of the Conditional Sailing Order were issued in April and May of 2021, and cruise operations resumed in the United States and Territories in June 2021, with cruise lines returning to the Authority’s port in September 2021. The Conditional Sailing Order expired on January 15, 2022. Economic Relief Legislation In March 2020, the President of the United States signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.” The CARES Act, among other things, appropriated funds for the Coronavirus Relief Fund to be used to make payments for specified uses to state, territorial, local, and tribal governments. In April 2020, the Authority executed a CARES Act grant with the FAA for a total of $41.1 million to maintain the Authority’s airports. The funds were used to keep the airports operating reliably and safely to serve the aviation industry, the travelling public, and support the economy. To address issues related to the continuance of the global coronavirus pandemic, in December 2020, “The Consolidated Appropriations (CA) Act” was passed. The CA Act, among other things, provided for an extension of time to spend any CARES Act funds until December 30, 2021, and provided funding for education, healthcare, broadband, and transportation. In March 2021, “The American Rescue Plan (ARP) Act of 2021” was signed into law. The ARP Act, among other things, appropriated funds for the Coronavirus Capital Project Fund and for specified uses for state, territorial, local, and tribal governments. In April 2021, through the CA Act, the Authority received $3.8 million from the U.S. Department of Transportation for the reimbursement of costs to sanitize its airport terminals to prevent the spread of the COVID-19 virus and to provide relief from rent and minimum annual guarantees relative to on-airport car rental and parking, along with in-terminal concessions. In November 2021, through the ARP Act, the Authority received $6.4 million from the U.S. Department of Transportation to assist with the services revenue shortfall of fiscal year 2021 on account of the global pandemic. Airport and Marine Terminal Modernization In March 2024, the Authority’s Board of Governors selected a Public-Private Partnership (P3) collaborator to finance and redevelop the terminals at both CEKA and HERA. The P3 partner will also enter into a transition agreement with the Authority to operate and maintain the terminals and airports. The Authority has also received several grant award appropriations from the FAA, U.S. Economic Development Administration, U.S. Maritime Administration, and the Government of the U.S. Virgin Islands of approximately $155.9 million. As of April 30, 2024, the Authority has drawn a total of $63.8 million for additional modernization and construction projects.

Finding Details

Finding 2019-007
Finding Number: 2019-007 Prior Year Finding Number: N/A Compliance Requirement: Equipment and Real Property Management Information on Federal Program(s) - U.S. Department of Transportation: Direct Program: Federal Aviation Administration Airport Improvement Program CFDA Number: 20.106 Criteria or Specific Requirement – Per 2 CFR section 200.313, Equipment, 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 conditions of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Further, a physical inventory of equipment should be taken at least once every 2 years and reconciled to the equipment records along with the usage of an appropriate control system to safeguard and maintain equipment. Additionally, 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. Condition – The Authority did not conduct a physical inventory count of equipment in the last two years. The most recent physical inventory count was performed during fiscal year 2017. Further, it does not appear that internal controls over compliance are operating at a level of precision to ensure compliance with the physical inventory count requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of the Authority’s compliance with the specified requirements. Effect – There is a risk that inadequate monitoring of equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Cause – The internal controls established for the physical inventory count did not fully operate as designed causing the Authority to fall out of compliance with the required timing of such physical inventory count. Recommendation – We recommend that the Authority improve internal controls to ensure adherence to Federal regulations related to performing physical inventory counts of equipment. There should be timely coordination and communication amongst all departments that are responsible for handling and managing such assets. 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 2019-008
Finding Number: 2019-008 Prior Year Finding Number: 2018-009 Compliance Requirement: Reporting Information on Federal Program(s) - U.S. Department of Transportation: Direct Program: Federal Aviation Administration Airport Improvement Program CFDA Number: 20.106 Criteria or Specific Requirement – In accordance with the OMB Compliance Supplement for this program, each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Condition: During our review of the annual SF-425 annual financial report expected to be filed with the grantor agency, we noted that financial information reported did not agree with the underlying records and the report had not been submitted in a timely manner. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirement. 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 inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. 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. 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 2019-007
Finding Number: 2019-007 Prior Year Finding Number: N/A Compliance Requirement: Equipment and Real Property Management Information on Federal Program(s) - U.S. Department of Transportation: Direct Program: Federal Aviation Administration Airport Improvement Program CFDA Number: 20.106 Criteria or Specific Requirement – Per 2 CFR section 200.313, Equipment, 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 conditions of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Further, a physical inventory of equipment should be taken at least once every 2 years and reconciled to the equipment records along with the usage of an appropriate control system to safeguard and maintain equipment. Additionally, 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. Condition – The Authority did not conduct a physical inventory count of equipment in the last two years. The most recent physical inventory count was performed during fiscal year 2017. Further, it does not appear that internal controls over compliance are operating at a level of precision to ensure compliance with the physical inventory count requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of the Authority’s compliance with the specified requirements. Effect – There is a risk that inadequate monitoring of equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Cause – The internal controls established for the physical inventory count did not fully operate as designed causing the Authority to fall out of compliance with the required timing of such physical inventory count. Recommendation – We recommend that the Authority improve internal controls to ensure adherence to Federal regulations related to performing physical inventory counts of equipment. There should be timely coordination and communication amongst all departments that are responsible for handling and managing such assets. 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 2019-008
Finding Number: 2019-008 Prior Year Finding Number: 2018-009 Compliance Requirement: Reporting Information on Federal Program(s) - U.S. Department of Transportation: Direct Program: Federal Aviation Administration Airport Improvement Program CFDA Number: 20.106 Criteria or Specific Requirement – In accordance with the OMB Compliance Supplement for this program, each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Condition: During our review of the annual SF-425 annual financial report expected to be filed with the grantor agency, we noted that financial information reported did not agree with the underlying records and the report had not been submitted in a timely manner. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirement. 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 inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. 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. 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.