The Office of the Comptroller of Puerto Rico issues a favorable opinion with exceptions on the fiscal operations of Caguas related to the purchase of goods, the acquisition of services, the construction of works and permanent improvements, the lawsuits, the revenues, and the municipal accounting. The Report contains four findings and four special comments.
One of the comments reveals that $13.3 million were invested, of which $1.5 were municipal funds, in a project to build a train between Caguas and San Juan, without the expected usefulness. As of June 2015, the work had not begun, nor had it managed to obtain the financing necessary for its development.
The Report indicates that the Municipality paid $765,000 for political discrimination to a municipal employee without receiving any service and $211,528 to its legal representation. To pay the lawsuit, the Government Development Bank (GDB) approved two loans to the municipality of Caguas. These resources could have been used to provide services to citizens. In addition, contrary to Act 81-1991 on Autonomous Municipalities, the mayor did not request the consent of the Municipal Legislature before stipulating the payment of $80,000 for another lawsuit it had lost in the Court of First Instance in 2013.
The audit evidences multiple deficiencies in the accounts of municipal license taxes receivable from 1993 to 2015 amounting to $19 million. Our auditors' examination identified that the accounts were not evaluated to determine the uncollectible ones, nor were the filings of business volumes verified against the license tax payments made. In addition, from 2011 to 2015, the Internal Audit Unit had only performed one audit on one of the eight nonprofit corporations sponsored by the Municipality. The 2015 annual audit plan included carrying these out, but they were not performed.
For fiscal years 2010 and 2011, the Municipality did not take effective measures to cover the deficiencies in the operating funds or to increase its revenues, since it had to formalize loans for $13.9 million to pay debts to government entities and to a contractor. This situation reduces Caguas's borrowing margin, decreases the available resources, and the Municipality had to assume the financing expenses of $50,000 to obtain the loan.
In fact, the Report comments that it is not good administrative practice to cover the payment of current activities with long-term debts. In 2011 the long-term debt of Caguas was $250.1 million; in 2015 it increased to $260.9 million and by June 2040 the Municipality will have paid $441.2 million, of which $180.3 million will be only interest.
The Report covers the period from July 1, 2011 to June 30, 2015.
See Audit Report M-18-14.
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