Federal Audit Flags Millions in Questioned USVI Spending as Eight Programs Receive Adverse Compliance Opinions

Independent auditors examining the Government of the Virgin Islands' management of federal funds issued adverse compliance opinions on eight major programs, including Medicaid, children's health insurance, child care assistance, unemployment insurance and federal recovery funding, according to findings contained in the government's fiscal year 2024 Single Audit.

The findings, prepared by independent accounting firm BDO USA, identify serious weaknesses involving financial controls, documentation, eligibility verification, program monitoring and compliance with federal requirements. Auditors also issued qualified opinions on 12 additional programs, including food assistance, special education, Head Start and FEMA disaster public assistance, indicating that substantial compliance problems extended beyond the eight programs receiving the most serious assessments.

An adverse opinion means auditors concluded that the government did not comply, in material respects, with federal requirements affecting a particular program. A qualified opinion means auditors identified material exceptions but did not conclude that the program failed to comply in material respects overall. Such findings do not automatically establish fraud, stolen funds or a requirement to repay the entire amount awarded, but they raise concerns about whether public money was properly administered and whether safeguards intended to protect federal programs were functioning.

The audit, seen here, covers the fiscal year that ended September 30, 2024, and was issued June 30, 2026. Governor Albert Bryan Jr. announced its completion in July, emphasizing progress toward eliminating the government's longstanding audit backlog. V.I. Consortium reported that announcement at the time. The underlying report, however, provides a more detailed assessment of the government's management of federal resources, including deficiencies that had also appeared in earlier audits.

Eight Programs Receive Auditors' Most Serious Compliance Assessments

The eight programs receiving adverse opinions were Medicaid, the Children's Health Insurance Program, the Child Care and Development Block Grant program, Unemployment Insurance, National Guard military operations and maintenance projects, federal coronavirus recovery funds, wastewater treatment construction grants and emergency historic preservation funding.

The programs serve markedly different purposes, ranging from healthcare for low-income residents and assistance for working families to military readiness, environmental infrastructure and economic recovery. Their common problem, as identified by the auditors, was noncompliance with federal requirements significant enough to affect the auditors' overall assessment of each program.

Twelve other major programs received qualified opinions. Those included the Supplemental Nutrition Assistance Program, better known as SNAP; federal funding for special education; Head Start; education stabilization funding; drinking water infrastructure financing; and FEMA public assistance for presidentially declared disasters.

The audit also identified programs that received unmodified opinions, meaning auditors found compliance in all material respects with the requirements they tested. Those included the regular Women, Infants and Children nutrition program, federal transit funding and the emergency rental assistance program.

Medicaid Oversight Problems Include Missing Security Review and Unaudited Hospital Cost Reports

Among the findings involving Medicaid, auditors reported that the V.I. Department of Human Services had not performed a required risk analysis and security review of the computer systems supporting the program.

Federal requirements call for periodic security assessments to evaluate protections involving sensitive systems and information. The audit found that DHS had not completed the required review and lacked sufficient records to establish whether important safeguards surrounding the environment in which Medicaid claims were maintained were functioning adequately.

The finding does not establish that Medicaid information was compromised or that a breach occurred. It does mean auditors could not confirm that federally required security oversight had been performed.

The government agreed with the finding and reported that DHS was pursuing qualified technology vendors to conduct comprehensive security assessments of its Medicaid systems. The proposed work would cover the Virgin Islands Benefits Eligibility System, provider enrollment applications, pharmacy benefit management services and related systems.

A separate Medicaid finding concerned hospital and long-term care reimbursement. Auditors reported that although DHS awarded a contract in August 2017 to audit participating facilities' cost reports, it had not received audited cost reports for fiscal year 2024.

Those reports are intended to help establish the actual costs incurred by healthcare facilities and support the calculation of federal Medicaid reimbursements. Without timely audits, the report stated, DHS lacked assurance that the costs submitted represented actual expenditures.

Auditors also warned that differences between costs claimed for reimbursement and amounts ultimately reimbursed could result in local, rather than federal, dollars being used to cover Medicaid expenses.

The government concurred with the finding and reported that DHS had strengthened oversight by establishing a Director of Audits position in September 2025. Whether the outstanding cost reports have since been completed, and what financial adjustments may have resulted, is not established by the fiscal year 2024 audit.

Child Care Monitoring Gaps Raise Health, Safety and Fraud-Detection Concerns

The findings involving federally supported child care services raise questions about whether the Department of Human Services adequately monitored participating facilities.

Auditors reviewed nine of the 47 child care providers in the program and found that three lacked evidence of monitoring for compliance with applicable minimum health and safety requirements.

Those requirements include areas such as first aid, cardiopulmonary resuscitation, safe sleeping practices and the administration of medication. The absence of documented monitoring does not independently establish that the providers maintained unsafe conditions, but it means the department could not demonstrate that required oversight had occurred.

The audit identified $2,446,801 in child care expenditures charged to the program during the year. Auditors examined a sample totaling $606,615 and identified $329,116 associated with the documented monitoring inconsistencies. That amount represents expenditures affected by the deficiencies identified in the sample, not a determination that $329,116 was stolen or improperly spent.

DHS agreed with the findings and reported that it had brought additional licensing personnel on board to increase its capacity to inspect providers and assess compliance with health and safety requirements.

Another finding concerned fraud detection. Although the department had procedures for identifying and recovering child care payments resulting from fraud, auditors said DHS could not provide evidence that the required internal audits had been conducted during the fiscal year.

The auditors warned that insufficient monitoring could allow improper payments or potential fraud to continue without being detected. They did not identify a confirmed fraud scheme in that finding or assign a specific amount of money lost.

In response, DHS said it would establish a centralized system for monitoring fraud referrals and recoveries, conduct quarterly internal audits and arrange unannounced visits to child care facilities to verify attendance.

Unemployment Insurance Accounts Could Not Be Fully Reconciled

The V.I. Department of Labor also faced significant findings concerning its management of unemployment insurance funds.

Auditors reported that VIDOL could not provide reconciled accounting information for the majority of the Unemployment Insurance Trust Fund accounts, preventing them from reaching a conclusion about compliance with certain federal requirements governing the expenditure and accounting of program funds.

Reconciliation is the process of comparing accounting records against bank balances and other financial information to identify discrepancies. Without adequate reconciliation, an agency may be unable to demonstrate that money received, held and disbursed has been accurately recorded.

In a separate review of unemployment benefit eligibility, auditors examined 60 claims from a population of 5,690 files and identified two cases in which VIDOL could not produce sufficient documentation establishing eligibility.

One claimant received $2,270 during the fiscal year without the department being able to produce evidence establishing eligibility. In another case involving $14,835 in payments, auditors could not obtain the necessary employment-eligibility documentation or the initial claim form.

The two cases accounted for $17,105 in benefits associated with the documentation deficiencies. That figure does not mean auditors established that the recipients had deliberately obtained benefits fraudulently or were necessarily ineligible. It means the department could not demonstrate that the required eligibility documentation had been maintained.

The government agreed with the findings. VIDOL attributed part of its accounting difficulties to incomplete records provided for the audit and proposed monthly reconciliations, additional staff training, strengthened oversight and improvements in recordkeeping.

Millions in Federal Recovery, Wastewater and Historic Preservation Funds Questioned

The audit's findings extend well beyond health and social services, identifying significant compliance problems involving federal pandemic recovery funding, wastewater infrastructure and historic preservation projects. In several instances, auditors assigned multimillion-dollar amounts to questioned costs because the government could not demonstrate compliance with federal requirements.

Among the most consequential findings is a $1,638,043 payment total involving Mon Ethos Pro Support, LLC, a company at the center of a federal public corruption prosecution involving former senior Virgin Islands government officials.

According to the audit, Mon Ethos received $1,638,043 in payments during 2024 from the Coronavirus State and Local Fiscal Recovery Funds program, established under the American Rescue Plan. Auditors classified the entire amount as questioned costs after examining the transactions in the context of federal bribery allegations involving former officials of the Office of Management and Budget, Virgin Islands Police Department and Department of Sports, Parks and Recreation.

Federal prosecutors alleged that officials provided or attempted to provide preferential treatment involving the approval of contracts and payments to Mon Ethos. The audit found that OMB lacked adequate monitoring, review and approval procedures to ensure that expenditures charged to federal programs complied with procurement and spending requirements.

Other findings involving the pandemic recovery program included deficiencies in procurement documentation and reporting. Auditors said OMB could not establish that its procurement records were complete, preventing them from adequately testing whether federal purchasing requirements had been followed.

They also found discrepancies between information submitted in federal recovery reports and the underlying accounting records. In a separate examination of eight of 19 organizations receiving federal recovery funds through the government, auditors found no evidence that required monitoring workbooks had been reviewed by the American Rescue Plan grants administrator.

Those organizations collectively received more than $15.1 million in fiscal year 2024, with auditors examining a sample of approximately $3.73 million. The monitoring deficiency did not result in a separately identified questioned-cost amount, but it raised concerns about the government's oversight of organizations spending federal recovery money.

Wastewater Program Faces $6.36 Million in Questioned Costs

The Environmental Protection Agency's wastewater treatment construction grant program also received an adverse compliance opinion, with auditors identifying serious shortcomings in the administration and oversight of federal infrastructure funding.

One of the most significant findings concerned the Department of Public Works' monitoring of organizations receiving federal wastewater funds through the department.

Auditors reported that DPW could not provide documentation establishing that it had implemented the required procedures to monitor those recipients during the fiscal year. Federal rules require agencies distributing grant money to other organizations to evaluate compliance risks, examine financial and performance reports and ensure that recipients use the money for authorized purposes.

Because DPW could not demonstrate that the required monitoring procedures were in place, auditors classified $6,364,139 in expenditures passed through to recipients as questioned costs. That amount represented the total reported expenditures distributed to those recipients during fiscal year 2024.

The finding does not establish that the entire amount was misspent. It means auditors could not verify compliance with the applicable monitoring requirements, leaving the expenditures subject to further federal review.

A separate finding identified discrepancies in the government's reporting of wastewater grant expenditures. Auditors found that expenditures exceeding the applicable federal award amount had been included in the government's schedule of federal spending.

The report's description identified an excess of $67,068, while its questioned-cost entry listed $67,078. The discrepancy between those two figures appears in the audit itself.

Auditors also examined six of 55 payroll transactions associated with the wastewater program and found that employee timesheets were unavailable for four transactions. Without those records, the government could not adequately support the allocation of the employees' salaries to federally funded activities.

Additional deficiencies involved financial reporting and cash management. Auditors found that one financial report contained figures that did not agree with underlying records and lacked evidence of review by an authorized official. A program report and a performance report were also unavailable for examination.

The Department of Public Works and Department of Planning and Natural Resources agreed with the findings and outlined plans to improve recordkeeping, financial reconciliations, internal reviews and oversight of organizations receiving federal funds.

Nearly $7 Million Questioned in Historic Preservation Program

The Department of Planning and Natural Resources faced similarly serious findings involving the federal Emergency Supplemental Historic Preservation Fund, which provides disaster-related assistance for historically significant properties.

Auditors assigned $6,964,757 in questioned costs to a finding that DPNR could not produce documentation establishing that it had implemented a formal process to verify whether program participants and expenditures met federal eligibility requirements.

The deficiency meant auditors could not establish that adequate safeguards existed to ensure assistance was directed to eligible recipients and activities. The finding raised the possibility that costs could be disallowed or that assistance might have been provided without the required eligibility verification.

The nearly $7 million figure is not a determination that recipients were ineligible or that the money was stolen. Rather, it reflects expenditures for which auditors identified a fundamental failure to demonstrate that eligibility requirements were properly administered.

Another finding involved federal cash withdrawals. Auditors examined 11 of 23 drawdown requests, representing approximately $7.59 million of the $7.86 million requested during the year, and found that three drawdowns lacked sufficient supporting invoices.

Those three transactions totaled $142,939, which auditors separately classified as questioned costs.

DPNR also could not provide evidence establishing that it maintained adequate procurement procedures, including safeguards intended to prevent contracts from being awarded to federally suspended or debarred vendors.

Reporting deficiencies compounded the concerns. Of four financial and progress reports examined, auditors found that two financial reports had been reviewed by someone other than the authorized official. DPNR also could not provide a listing of required federal subaward transparency reports submitted during the fiscal year.

The department concurred with the findings and proposed establishing a centralized electronic records system for eligibility decisions, procurement files, federal funding withdrawals and related documentation.

Whether the questioned expenditures have subsequently been accepted, disallowed or subjected to repayment demands is not established by the fiscal year 2024 audit. The report also does not establish whether all proposed corrective measures were completed by October 2026.

The fiscal year 2024 audit establishes the seriousness and breadth of the government's federal compliance failures, including millions of dollars in questioned expenditures. The more consequential test now is whether those deficiencies have been corrected, whether federal agencies have required repayment of any funds, and whether the safeguards intended to protect public money are finally functioning as required.