USVI Audit Finds Eight Federal Programs Out of Compliance

Auditors have identified serious compliance failures across eight major federal programs administered by the Government of the Virgin Islands, according to a Single Audit covering the fiscal year ending September 30, 2024, and released on June 30, 2026.

The accounting firm BDO USA issued adverse compliance opinions on Medicaid, the Children's Health Insurance Program, the Child Care and Development Block Grant program, Unemployment Insurance, National Guard military operations and maintenance, federal coronavirus recovery funds, wastewater treatment construction grants and emergency historic preservation funding. An adverse opinion signals that auditors determined the government failed to comply with federal requirements in material respects.

Twelve more programs received qualified opinions, pointing to substantial compliance problems without the most severe classification. These included the Supplemental Nutrition Assistance Program, special education funding, Head Start, education stabilization funds, drinking water infrastructure and FEMA disaster public assistance.

The audit flagged serious weaknesses in financial controls, documentation, eligibility verification, program monitoring and adherence to federal requirements. These findings do not prove fraud or misappropriation of funds, but they indicate concerns about whether public money received proper administration.

Medicaid: Security Gaps and Hospital Costs

Within Medicaid, auditors determined that the Department of Human Services had not completed a mandated risk analysis and security review of computer systems running the program. Federal rules require periodic security assessments to test protections for sensitive systems and data. DHS lacked adequate records to confirm whether required safeguards were working properly.

The government accepted this finding and said DHS was seeking qualified technology firms to perform comprehensive security assessments covering the Virgin Islands Benefits Eligibility System, provider enrollment applications, pharmacy benefit management services and related infrastructure.

A second Medicaid issue involved reimbursement to hospitals and long-term care facilities. Although DHS signed a contract in August 2017 to audit these providers' cost reports, it had not obtained audited cost reports for fiscal year 2024. Without current audits, DHS could not verify that submitted costs reflected actual spending. The government reported that DHS had strengthened oversight by creating a Director of Audits position in September 2025.

Child Care: Monitoring and Fraud Detection Shortfalls

Auditors examined nine of 47 child care providers receiving federal support and found three lacked evidence of monitoring compliance with minimum health and safety standards, including first aid certification, cardiopulmonary resuscitation training, safe sleeping practices and medication handling.

The program spent 2.4 million dollars on child care during the year. Auditors sampled 606,615 dollars in expenditures and identified 329,116 dollars linked to documented monitoring gaps. This figure represents spending affected by the deficiencies found in the sample, not a determination that funds were misused or stolen.

Auditors also reported that DHS could not demonstrate that required internal audits for fraud detection had taken place during the fiscal year. DHS agreed with the findings and said it had hired additional licensing staff to boost inspection frequency. The department committed to establishing a centralized system for tracking fraud referrals and recoveries, performing quarterly internal audits and conducting unannounced facility visits.

Unemployment Insurance: Accounting and Documentation Issues

The Department of Labor faced major findings regarding unemployment insurance administration. Auditors stated that VIDOL could not provide reconciled accounting data for most Unemployment Insurance Trust Fund accounts, preventing them from assessing compliance with federal rules governing spending and accounting.

In reviewing unemployment benefit eligibility, auditors examined 60 claims from a pool of 5,690 files and found two instances where VIDOL lacked sufficient documentation to verify eligibility. One recipient received 2,270 dollars during the year without the department producing evidence of eligibility. Another case involved 14,835 dollars in payments without adequate supporting records.

Governor Albert Bryan Jr. announced completion of the audit in July, highlighting progress in addressing the government's persistent audit backlog.