The Office of the Comptroller of Puerto Rico issued a qualified opinion on the fiscal operations of the Municipality of Loíza. A qualified opinion is issued when the instances of noncompliance, individually or in the aggregate, are significant but not pervasive.
The report reveals that, as of December 31, 2018, the Municipality owed $2,890,986 to seven entities; among others, the Retirement Systems Administration, the Department of the Treasury, the Aqueduct and Sewer Authority, and the federal Internal Revenue Service (Internal Revenue Services – IRS). This sum includes $260,189 in interest, penalties, and surcharges. A similar situation had been published in Audit Report M-18-02 of 2017.
In addition, in 2016 the IRS imposed three levies on the Municipality for $260,441 on 16 bank accounts for not remitting employee withholdings to federal Social Security. In 2019, the Municipality agreed to pay $7,100 monthly to the IRS until the balance of the $840,180 debt was settled. This situation is attributed to the fact that the acting mayors and Finance directors did not adequately manage Loíza's finances.
The six-finding audit notes that the Municipality paid $19,803 for audit services to a corporation legally barred from providing that service. The Municipality had formalized a contract on March 9, 2017 with said limited liability corporation. However, upon changing its legal status to a regular corporation on March 1, 2018, it could not provide audit services.
This situation was referred to the Secretary of Justice to determine the administrative or judicial actions to follow. In addition, the president of the Accounting Board of Puerto Rico and the president of the Association of Certified Public Accountants of Puerto Rico are recommended to consider this situation so as to take the pertinent measures.
Contrary to the Autonomous Municipalities Act 81-1991, the Municipality charged a debt of $4,970 to the 2017 budget for transportation services rendered between 2010 and 2013. In addition, contrary to Regulation 33 on the Registry of Contracts at the Office of the Comptroller, the Municipality registered 121 contracts and amendments totaling $3,868,335, up to 22 months after their execution.
The auditors identified that those in charge of property in Loíza did not conduct the annual physical inventories from 2016 to 2018. The person in charge of property, upon ceasing his duties in 2018, also did not conduct nor certify the inventory under his custody and responsibility. This situation does not allow for maintaining control of the property and fosters its use for purposes unrelated to the public function.
The examination of the Cash Flow Report showed that 15 special funds with economic resources of $194,841 had remained inactive between 30 and 36 months. This situation deprives the Municipality of economic resources that could be used to address other needs.
The Report comments that in 2016 Loíza had an accumulated deficit of 78% in the Operating Fund; in 2017, a deficit of 88%; and in 2018, a deficit of 105%. The Municipality did not appropriate the credits needed to reduce the current deficits of 2016 and 2017 and, the Cash Flow Report as of December 31, 2018, reflected overdrafts amounting to $9,761,001 million.
Contrary to the regulations in force, the Municipality of Loíza had 111 employees classified as temporary for periods of up to 25 years. In addition, as of December 31, 2018, it had four civil lawsuits for $1,260,000 pending resolution by the courts.
The audit recommends that the director of the Office of Management and Budget ensure the Municipality's compliance with the Corrective Action Plan established by the Office of the Comptroller of Puerto Rico.
This report covers the period from January 1, 2016 to December 31, 2018.
See Audit Report M-21-04.
To view other published reports, visit our Audit Reports section.
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