The Office of the Comptroller of Puerto Rico issues an adverse opinion on the operations of the Authority's Fuel Office, regarding the regulations, fuel purchasing, disbursements, recovery of costs for renting tanks to fuel suppliers, and the recording and submission of contracts to the OCPR. In addition, they were not carried out in accordance with applicable law and regulations, compliance with the provisions of Act 273-2003, the plan required by Act 236-2010, and the filing of fiscal documents.
The Report reveals that the Authority had gone up to 19 years without updating the regulations governing the fuel purchasing processes in accordance with administrative, operational, and organizational changes. This situation could lead to uniform and adequate procedures not being followed, with the resulting adverse effects for the Authority.
The seven-finding audit points out multiple accounting deficiencies such as: the subletting -by email and not in a formal contract- of the fuel tanks for $2.3 to a supplier; $1.9 million had not been billed to three fuel suppliers in 2012, until our auditors requested information; the billing programs were not integrated into the Authority's system; and the information on the deposits received in the Authority's bank accounts was not reliable, among others.
In fact, the Report notes that the Department of Justice is conducting an investigation because several fuel suppliers billed based on 100% of the sales volume even though they enjoyed a 60% tax exemption. In addition, they billed the Authority a .5% municipal tax rate when in reality they paid a .25% and .4% business license tax.
Our auditors identified that the Purchasing Supervisor performs conflicting functions since, in addition to the responsibility of verifying the invoices, she prepares, processes, and makes adjustments to them. In addition, contrary to Act 18 and Regulation 33, the Authority had not submitted to the Office of the Comptroller a copy of a contract and amendment for $507 million for which it had already paid some $306 million before registering them with our Office.
In addition, the delay in the delivery of documents by the Authority hindered the work of our auditors. On 175 occasions we requested documents that, due to negligence and lack of diligence on the part of the officials, took up to 516 days to deliver, despite the three meetings with the executive directors and two with the President of the Governing Board in which we requested their intervention.
Our auditors collaborated with the Special Commission for the Study of the Norms and Procedures Related to the Purchase and Use of Petroleum by the Puerto Rico Electric Power Authority and Governmental Integrity established by the Senate on May 19, 2014. The investigation revealed, among others, irregularities in the financial statements of the bidders and in the reimbursement of business license taxes, manipulation of the calibration curves for fuel analysis, a pattern of favoritism with a laboratory that performed the fuel analyses, and multiple violations of law in the contracting of two suppliers that had been convicted of, or guilty of, crimes of fraud, embezzlement, or illegal appropriation of public funds.
The Report covers the period from January 1, 2011 to January 31, 2017.
See Audit Report CP-17-13
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