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Audit: Bad Checks Cost Government Millions

June 16, 2008 — The Finance Department and Internal Revenue Bureau let big bucks slip through their fingers because they didn't properly deal with bad checks, according to an audit released Monday by the V.I. Inspector General's Office.
The Finance Department returned 2,278 bad checks valued at $4.1 million to 21 departments and agencies during 2005 and 2006, the audit indicates. According to V.I. Inspector General Steven Van Beverhoudt, Finance gets the bank statements, canceled checks, bad checks and other paperwork from the bank for all departments and agencies. Except for paperwork involving Finance, the department then forwards them to the appropriate department or agency.
The Internal Revenue Bureau was nearly as bad, with $3.3 million in what the audit calls dishonored checks remaining uncollected. Some of those dated back to 1993.
When his department initially began looking at Internal Revenue's 2005 and 2006 records, Van Beverhoudt said, it found problems going back to 1993. This convinced the inspectors to expand the audit.
"They had so much old stuff," he said.
His office initiated the audit, Van Beverhoudt said.
Five government agencies accounted for 97 percent of all bad checks received by the government, according to the audit. In addition to Internal Revenue and Finance, they are the Lieutenant Governor's Office, the Finance Department's Division of Government Insurance and the Licensing and Consumer Affairs Department.
Additionally, the audit discovered that in 2005 and 2006, 21 repeat offenders had $286,000 in bad checks.
"There was no system in place to identify repeat offenders," the auditors wrote.
Those repeat offenders, described by the audit as the "more flagrant abusers," included a St. John restaurant that wrote 21 bad checks to Internal Revenue on an almost monthly basis and one to Government Insurance. Those 22 checks, valued at $16,390, remain outstanding.
A St. Croix construction company issued three bad checks to Internal Revenue. The checks, valued at $48,060, haven't been paid.
A St. Thomas construction company wrote bad checks valued at $7,100 to several government agencies. They remain outstanding.
Additionally, departments and agencies did not always assess penalties when they were able to collect on bad checks.
Finance did not follow the established written procedures and management controls when dealing with bad checks. Efforts at collection by the departments and agencies to collect were slow and, at times, "stagnant." And Finance hadn't returned bad checks to the Attorney General's office in more than seven years.
Internal Revenue did not have a step-by-step process for dealing with bad checks beyond the initial contact. It did not aggressively and in a timely manner pursue the collection of bad checks, the audit said.
Checks are returned by banks because of insufficient funds, closed accounts, lack of signature, wrong endorsee or stale date, the audit notes.
In his response, Gov. John deJongh Jr. said a revised revenue manual will be distributed to all departments and agencies responsible for the collection of revenues. It will include a section on follow-up procedures to ensure that collection procedures are followed. And each department will be responsible for providing Finance with regular updates on the status of collection activities.
The governor also said he would establish a Government Debt Collection Unit. All revenue-enhancing measures will be in place by July 31, deJongh said.
Government House spokesman Jean Greaux pointed out that the years audited were before deJongh took office.
"But any dishonored check is out money," he said.
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June 16, 2008 -- The Finance Department and Internal Revenue Bureau let big bucks slip through their fingers because they didn't properly deal with bad checks, according to an audit released Monday by the V.I. Inspector General's Office.
The Finance Department returned 2,278 bad checks valued at $4.1 million to 21 departments and agencies during 2005 and 2006, the audit indicates. According to V.I. Inspector General Steven Van Beverhoudt, Finance gets the bank statements, canceled checks, bad checks and other paperwork from the bank for all departments and agencies. Except for paperwork involving Finance, the department then forwards them to the appropriate department or agency.
The Internal Revenue Bureau was nearly as bad, with $3.3 million in what the audit calls dishonored checks remaining uncollected. Some of those dated back to 1993.
When his department initially began looking at Internal Revenue's 2005 and 2006 records, Van Beverhoudt said, it found problems going back to 1993. This convinced the inspectors to expand the audit.
"They had so much old stuff," he said.
His office initiated the audit, Van Beverhoudt said.
Five government agencies accounted for 97 percent of all bad checks received by the government, according to the audit. In addition to Internal Revenue and Finance, they are the Lieutenant Governor's Office, the Finance Department's Division of Government Insurance and the Licensing and Consumer Affairs Department.
Additionally, the audit discovered that in 2005 and 2006, 21 repeat offenders had $286,000 in bad checks.
"There was no system in place to identify repeat offenders," the auditors wrote.
Those repeat offenders, described by the audit as the "more flagrant abusers," included a St. John restaurant that wrote 21 bad checks to Internal Revenue on an almost monthly basis and one to Government Insurance. Those 22 checks, valued at $16,390, remain outstanding.
A St. Croix construction company issued three bad checks to Internal Revenue. The checks, valued at $48,060, haven't been paid.
A St. Thomas construction company wrote bad checks valued at $7,100 to several government agencies. They remain outstanding.
Additionally, departments and agencies did not always assess penalties when they were able to collect on bad checks.
Finance did not follow the established written procedures and management controls when dealing with bad checks. Efforts at collection by the departments and agencies to collect were slow and, at times, "stagnant." And Finance hadn't returned bad checks to the Attorney General's office in more than seven years.
Internal Revenue did not have a step-by-step process for dealing with bad checks beyond the initial contact. It did not aggressively and in a timely manner pursue the collection of bad checks, the audit said.
Checks are returned by banks because of insufficient funds, closed accounts, lack of signature, wrong endorsee or stale date, the audit notes.
In his response, Gov. John deJongh Jr. said a revised revenue manual will be distributed to all departments and agencies responsible for the collection of revenues. It will include a section on follow-up procedures to ensure that collection procedures are followed. And each department will be responsible for providing Finance with regular updates on the status of collection activities.
The governor also said he would establish a Government Debt Collection Unit. All revenue-enhancing measures will be in place by July 31, deJongh said.
Government House spokesman Jean Greaux pointed out that the years audited were before deJongh took office.
"But any dishonored check is out money," he said.
Back Talk Share your reaction to this news with other Source readers. Please include headline, your name and city and state/country or island where you reside.