The Office of the Comptroller of Puerto Rico issued a qualified opinion on the fiscal operations of the Municipality of Santa Isabel. A qualified opinion is issued when noncompliance, individually or as a whole, is significant but not pervasive.
The Report reveals that the Municipality did not issue the surplus certification required to approve credit transfers in any of the 552 executive orders and resolutions for more than $5 million. In addition, 312 executive orders were not submitted for authorization to the Municipal Legislature, 91 executive orders were not located, and errors were found in those recorded in the system. These situations are attributed to the fact that the mayor and the Finance director departed from the applicable law and did not administer the Municipality's finances efficiently.
The nine-finding audit notes multiple deficiencies, such as the absence of required signatures on the vouchers, and payment disbursements without being approved, or without the suppliers' certification. Our auditors also detected differences of up to $4 million between the balances in the books for the month and the balances in the Accounting Cash Flow Report, and that the bank reconciliations of nine accounts for $21.2 million had not been prepared.
The Report indicates that the Municipal Legislature could not fulfill its responsibility to evaluate the reasonableness of donations granted for $234,393, since the Mayor did not submit any of the donations to that legislative body. A similar situation had already been commented on in two previous audit reports, M-13-16 of 2012 and M-16-20 of 2016.
Contrary to current law and regulation, the Municipality issued official receipts with delays of up to 44 days, did not maintain a perpetual inventory of the blank receipts, and on instructions from the Finance director the collectors of the Santa Isabel Hotel did not issue receipts for $99,939 of the daily collections, and did not give the customers a copy of the receipt. In addition, periodic reviews of the petty cash were not performed and the person in charge of it did not have the appointment of special paymaster. These situations foster the commission of irregularities, and the improper use and loss of funds.
Our auditors identified that the Municipality had eight special and federal fund accounts totaling $23,545 inactive for more than three years, and did not maintain an investment registry of three certificates of deposit totaling $317,269 kept at a cooperative.
In Santa Isabel, the annual physical inventory of the property was not performed from 2014 to 2016 and the custodian certified that the last inventory was carried out in December 2012. Nor in the inactive archive had an inventory of the documents been prepared as of February 23, 2017.
The Report comments that Santa Isabel had accumulated deficits in the Operational Fund of $4.5 million for 2014, $3.9 million for 2015 and $3.8 million for 2016. These deficits constitute more than a third of the total budget for those years. In addition, the Municipality only appropriated $37,585 in 2016 to reduce the deficit.
Another special comment of the audit indicates that the three single audits of fiscal years 2014 to 2016 expressed disclaimers of opinion and qualified opinions. The certified public accountants determined that they lacked competent, sufficient and relevant evidence, and that the financial statements did not maintain adequate accounting records.
As of June 30, 2017, two lawsuits for $141,199 and six cases filed by the employees before the Public Service Appeals Commission were pending resolution by the courts. This is the first report on Santa Isabel and covers the period from June 1, 2014 to June 30, 2017.
See Audit Report M-19-43.
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