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Audit: Lack of Financial Controls Enabled Simmonds to Embezzle

A new V.I. Inspector General’s audit has revealed more about how former government aide Alric Simmonds was able to siphon off $1.2 million from public accounts for his own personal use—and where most of the money came from.
The 29-page audit report, released Thursday by the V.I. Inspector General’s Office, said that a good chunk of the money Simmonds embezzled came from funds awarded to the government’s Abandoned Vehicle Task Force, for which he paid the bills. The report also says that a lack of financial controls at several key government agencies — such as the Finance Department and Law Enforcement Planning Commission (LEPC) — enabled him to carry out his scheme.
In 2008 Simmonds took a deal from the government before the case went to trial, pleading guilty to eight counts of embezzlement, one count of conversion and two counts of grand larceny — earning him eight years in prison, and an order from V.I. Superior Court Judge James S. Carroll II to repay what he stole.
The scheme itself cost the government at least $1.9 million, and because of the agencies’ failure to properly manage the funds, the government might have to repay $344,664 in federal funds, the report said.
The Anti-Litter and Abandoned Vehicle Task Force was set up in 2002, under the Office of the Governor. Separate task forces were established on St. Thomas and St. Croix, and headed by each island’s administrator. Each task force included staff from several government agencies that were responsible for removing abandoned vehicles from local neighborhoods, dealing with the demolition of abandoned buildings and conducting roadside cleanups, among other things.
The program was funded through federal grant awards from the LEPC and general fund appropriations from the Legislature. During fiscal years 2003 through 2006, the program received $700,000 in federal grant funds ($175,000 of which was earmarked for the St. Croix task force) and $846,500 in local funds ($250,000 of which was also earmarked for St. Croix), which were deposited into an account set up to cover task force operations.
On St. Thomas, the program was a hit, but St. Croix’s funding never made it over, the report said. Instead, Simmonds took both sets of money, depositing them into an account used to fund operations on St. Thomas.
"These funds became part of the embezzlement scheme perpetrated by this individual," the audit said.
Simmonds dealings with the Task Force money became evident when investigators began monitoring activity from a Bureau of Information Technology (BER) account, to which Simmonds, as the deputy chief of staff to former Gov. Charles W. Turnbull, was a signatory.
"Based on the results of the investigation, we determined that the funds most affected by this embezzlement scheme were funds obtained for the purposes of the task force’s operations," the report said. "A total of $1.5 million in both federal and local grant funds were deposited into a Bureau of Economic Research checking account. As a result, an internal control audit of the St. Thomas task force was necessary."
The audit found that the BER account was Simmonds’ holding pen for more than $1 million in local and federal funds earmarked for different government organizations and projects — including the task forces, BER’s operating expenses, a property cleanup in Estate Nazareth, restrooms in Charlotte Amalie and portable restrooms for Carnival. The account also included cash deposits, travel reimbursements, political contributions and a donation specifically for antique furniture — bumping the account’s balance up to about $2.1 million.
More importantly, however, the audit showed a severe lack of financial controls on three different levels. While the St. Thomas task force didn’t implement any kind of internal controls that would protect the "financial integrity" of the program, LEPC officials failed to meet their "fiduciary responsibility" by allowing the task force to manage its federal funds outside of the government’s accounting system and by giving its officials more money, even though they continued to submit incomplete financial reports.
Finance officials also allowed the task force to manage its own government appropriations without making sure that some kind of control system was in place to "safeguard" the funds, the report said.
"Finally, the former deputy chief of staff to the governor [i.e. Simmonds] … used his position in the government to circumvent accounting controls established by LEPC and Finance," the report said. "As a result, project funds were improperly distributed, not monitored, unaccounted for and co-mingled."
The total cost to the government was at least $1.9 million — $1.25 million of which was "directly embezzled" through the BER account, while an extra $309,973 was "inappropriately processed" through Finance by Simmonds, who duped the department into doubling up on appropriations payments.
If task force officials had been monitoring the funds and had more than just Simmonds handling the receipts, bank deposits, disbursements and bank reconciliation, the embezzlement scheme might have been discovered sooner, the audit said.
The report also said that Simmonds arranged with the government’s former drug policy advisor — also the head of LEPC — to have the task force’s checks made out to the Office of the Governor instead of running them through Finance. From 2004 to 2006, the LEPC approved three separate grant awards for the task force totaling $700,000.
During Fiscal Year 2004, the task force was required to submit monthly progress reports, along with a financial report that highlighted the program’s accomplishments and expenditures. In that year, only four out of 11 reports were submitted, some covering three to six months at a time.
"During the entire grant period, [Simmonds] …did not provide any supporting documentation to justify any of the expenditures," the report said. "Although the St. Thomas task force officials were not in compliance with reporting requirements, we did not find any correspondence in the files to indicate the LEPC officials made objections to the reporting infractions."
If closer attention had been paid to the reporting, LEPC would have noticed that the task force had $142,004 worth of unjustified claims for the year, according to the report.
The reporting picked up in FY 2005, but the supporting documentation for the program’s expenses still wasn’t there, despite a couple letters sent by LEPC to then St. Thomas-St. John Administrator James O’Bryan, who spearheaded the St. Thomas program.
The second letter contained a note from an LEPC examiner, saying that Simmonds had called in to say he was never before required to submit documentation and that he "maintains his own files." Meanwhile, at the end of the grant cycle, a total of $156,620 worth of unjustified claims went unnoticed, followed by $46,040 worth of claims in FY 2006.
During the period of time covered by the audit, the abandoned vehicle program also received $946,000 worth of miscellaneous appropriations from the Legislature, of which St. Thomas was supposed to receive $566,000 and St. Croix $380,000. Finance essentially relinquished control of the funds to Simmonds, without making sure there was a way to account for them, the report said.
"The former deputy chief of staff on each occasion prepared a miscellaneous disbursement voucher for the entire sum of the appropriation and was subsequently provided with a check made out to the Office of the Governor," the report explained, adding that Simmonds had arranged with then Finance Commissioner Bernice Turnbull to personally pick up the checks, which Simmonds would then deposit into the BER account.
As a result, the entire $940,000 was removed from the department’s accounting system without anyone knowing whether other controls were in place to account for them, the report said.
The report recommends that each agency basically do what it’s supposed to, by monitoring its grant funds, making sure appropriations are secured in government accounts and properly safeguarded, and by making sure more than one person has control over the task force money.
In his response to the audit, Gov. John deJongh Jr.:
-agreed with the recommendations made in the audit and said internal controls have since been put in place for the St. Thomas and St. Croix task forces, which are monitored through the new Enterprise Resource Planning System and not operating through a separate checking account;
-said that no new federal funds have been used to support the task forces and that Finance is in the process of closing all unauthorized government accounts; and
-said that all local banks have been told not to open any new government bank accounts without authorization from the Finance Commissioner, and that the department’s treasury director is under instruction to deny approval of any outside accounts.
Simmonds is currently serving out his eight-year jail sentence at St. Croix’s Golden Grove Correctional Facility. Justice officials put much of his property — including his Palm Gardens condo — up for sale this week, but only made about $7,550.
"The attorney general is considering the options for the leftover items and for the condo itself," Justice Department spokeswoman Sara Lezama said Thursday. No one entered a bid for the condo during the sale, but there are a few interested buyers that have said they would be willing to make an offer, she added.

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