May 13, 2003 – It is unknown exactly where $16 million in federal "Y2K" funds ended up, but what is known is that the local Y2K project for which those funds were slated was inadequately planned and managed, lacked appropriate monitoring of contractors and inventories, and let contracts without benefit of established competitive bidding procedures.
According to V.I. Inspector General Steven van Beverhoudt, the audit whose findings have been released this week could account for only about half of the money borrowed or received as grants to upgrade government computer systems prior to Jan. 1, 2000. Van Beverhoudt said his office is "still trying to track down" how $16 million awarded to the territory by the Interior Department's Office of Insular Affairs was used.
Because of this, it is unknown how much money actually went into the upgrades – $31.1 million that was borrowed or $41.1 million which includes the borrowed money and the federal grant.
The grant was awarded in 1999 after $32.4 million had already been borrowed. The federal authorities therefore approved using the $16 million grant to pay back the loan. But van Beverhoudt said Tuesday he could not determine whether that is what happened.
What the audit does account for is about $24 million, including $996,186 paid to eight vendors without contracts.
Police communications suffer from lack of planning
Lack of planning has made a mess of Police Department communications. The audit found that, despite spending $680,000 on equipment and services and an additional $150,612 for three communications towers purchased more than two years ago to provide the backbone of the microwave communications system, none of the three towers has been installed — leaving large gaps in police radio communications. The audit called the gap a "potential threat to life and property."
The money to install one of the towers was redirected by the Office of Information Technology. Funding was never identified by OIT to install the other two, the report said.
Furthermore, two of the proposed installation sites may not be available, because they currently hold other towers. The Public Finance Authority has agreed to provide $500,000 for the installation once the bugs are worked out.
Vendor payments not properly executed
Of 13 vendors sampled by auditors, eight were paid in excess of the $5,000 threshold above which processing by the Property and Procurement Department is required. More than $25,000 for services and equipment must be put out for bid. One vendor was paid $290,930 solely on requisition vouchers. In another case, vouchers were split up to avoid meeting the Property and Procurement requirement.
One of the vendors has been the subject of an audit by the U.S. Interior Department's Inspector General's Office of the Public Works Department that is questioning the quality of the service provided. That particular vendor was paid via a series of requisitions that were "constantly" below the $5,000 Property and Procurement threshold, the V.I. audit stated.
Project management gets poor grades
Although the Office of Information Technology put together a "thorough" report outlining procedures to make sure all projects in all agencies were moving according to plan, the contractor hired to manage the plan provided only one status report. And it was "general in nature" and in some cases did not "accurately reflect the status of certain projects." One was the Police communications project that literally has never gotten off the ground, although the contractor said in the Jan. 3, 2000, status report that it was then 95 percent complete.
"Obviously we cannot rate the quality of the contractor's work based on one report, but our review has revealed that, even with the project management services contract, the government's Y2K project was not being properly monitored," the audit report states.
Missing and obsolete equipment
The audit estimated, based on payment documents supplied, that $10.4 million in equipment was purchased for the various Y2K projects. The auditors requested inventory records from 22 departments; 14 of the agencies could not provide them. Officials from several of the 14 departments said they thought such record keeping was Information Technology's job.
Auditors were able to help with the inventory. They found 15 unused, but now out-of-warranty and obsolete, computers in storage at the Police Department. They were told the main reason the computers were never used was "the police had no place to put them."
OIT officials said they are in the process, three years later, of inventorying the Y2K equipment.
Van Beverhoudt said on Tuesday that more than $3 million worth of equipment is still not accounted for.
Assigning blame
Roy McFarlane, special assistant to the governor for information technology, wrote on May 5 in defense of OIT's shortcomings that he simply had no personnel and no time.
Referring to the draft audit report provided for his comments, McFarlane wrote: "It is rather interesting to note that you never mentioned that this office has one full-time employee presently; with one contract employee who was not on board in 1999 and another employee on loan from the Department of Finance."
And van Beverhoudt agreed, saying he did not feel that OIT should be held solely responsible for the Y2K planning or lack thereof. Various departments and agencies should have "been aware of their specific needs," he said.
However, he said, the lessons learned from Y2K should make OIT personnel "realize they must play a more direct role in ensuring that information technology projects are thoroughly planned."
The Tourism Web site and Y2K
Another thing van Beverhoudt was clear on was the impropriety of using $668,960 of Y2K money — a year and a half after the start of the new millennium — to build the Tourism Department's Web site.
"Although the Tourism Web site may provide a beneficial advertising service to the government, the use of the Y2K funds for this program compounded the funding shortages encountered by other agencies with more critical needs," the audit report states. In response to McFarlane's contention that the Web site did fall within Y2K parameters, van Beverhoudt said: "We fail to see the relationship of a created Web site for the Tourism to the critical Y2K needs of the government."
Recommendations
The inspector general has asked McFarlane to address the needs of agencies and departments that said their Y2K projects were not completed. He has asked that procurement procedures be reviewed and adhered to, and that the Property and Procurement and Finance Departments do their jobs by not processing requests for payments that fail to meet the law or proper criteria.
Van Beverhoudt also has said that unless it is documented that the Tourism Web site falls under the use for Y2K funds, the money must be reimbursed to the Y2K account "so that other critical areas that require additional funding can be addressed."
Potential consequences
Last December, David Cohen, deputy assistant secretary of Interior, said at a meeting of the Island Governments Financial Officers Association in Honolulu, Hawaii, that responsiveness in addressing issues raised in audits will be considered in the process of awarding grants to the insular entities.
Cohen, who was in the territory last month, held no official press conferences while here and has not spoken directly about his December warning since then.
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