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The Office of the Comptroller of Puerto Rico issued a qualified opinion on the fiscal operations of the Municipality of Hatillo. A qualified opinion is issued when the instances of noncompliance, individually or in the aggregate, are significant but not pervasive.

The Report reveals that the Municipality contracted a regular corporation for $276,680 for maintenance and repair work on air conditioners, whose president had had his license from the Examining Board of Refrigeration Technicians expired since 2008. In addition, in the disbursement vouchers of this and another contracted corporation, there is no evidence of their certifications of work performed that guarantee the capacity and knowledge to perform as technicians, as provided by the College of Refrigeration Technicians.

These situations were referred to the Secretary of Justice on November 20, 2019, to the presidents of the Examining Board and of the College of Refrigeration and Air Conditioning Technicians of Puerto Rico, and to the president of the Environmental Quality Board, on October 8, 2019, for the corresponding actions.

The Municipality contracted an engineer to carry out plan designs, soil studies, and supervision of the construction of the Little Leagues Park of the Parcelas Nuevas of the Carrizales ward for $31,500. Contrary to the contractual clause, the engineer subcontracted, for $1,200, a regular corporation (D) to work on the soil studies. Nonetheless, the engineer billed the Municipality $3,000 for said study. This situation was referred to the president of the College of Engineers and Surveyors of Puerto Rico (CIAPR) on October 8, 2019, for the corresponding actions. Corporation D, in fact, was barred from providing the engineering services since it was not constituted as a professional corporation.

The 13-finding audit notes that the Municipality did not obtain quotations for the purchase and construction of three landmarks, or 46 spheres, totaling $48,780. In addition, the Municipality began the construction of improvements at the Luis Muñoz Marín Vacation Center, without obtaining the permits, nor did it obtain the endorsement and permit of the Department of Transportation and Public Works for the construction of three landmarks totaling $52,030, in areas adjacent to the state road.

The auditors identified that $73,504 was paid for the access and use of the Integrated System of Advanced Municipalities (SIMA) and its different modules without usefulness, since it was not in operation. This situation, contrary to Act 81-1991 on Autonomous Municipalities, is attributed to the fact that the Finance director did not protect the interests of the Municipality by not ensuring the completion of the data entry to use the module.

Contrary to the regulations in force, the Municipality contracted the professional services of an expert electrician for $62,410, without a written contract. It is a requirement that must be met without any exception that, for a contract to have binding effect, it must be in writing.

The Environmental Quality Board fined the Municipality of Hatillo $72,000 (later reduced to $36,000) for building and operating six underground injection facilities at the Punta Maracayo Recreational Center, without a permit and in violation of the Regulation for the Control of Underground Injection of 1983. This situation, in addition to reducing the available resources, could have caused environmental damage.

From 2013 to 2016, the Municipality executed 2,063 contracts and their amendments totaling $26,901,236. From the sample evaluated, the Office of the Comptroller found that the budgetary appropriations necessary for the payment of contracts were not obligated until three months after they were executed. In addition, it acquired parts and mechanical services without issuing purchase orders. This situation prevents maintaining effective control of the budgetary items.

The Finance director admitted that a perpetual inventory of the blank auxiliary collector receipt books was not maintained, nor was their existence verified with a certain periodicity. A similar situation was commented on in Audit Report M-15-29 of May 11, 2015.

Nor did the Finance director record, in the accounting systems, 416 checks that were issued manually from 2013 to 2015. In fact, the audit determined that for 75% of these checks the Authorization for Manual Checks had not been completed as provided by the applicable regulation.

The Report discloses that the Internal Audit Unit of Hatillo did not conduct audits that included, for example, the evaluation of the functioning of the Uniform Mechanized Accounting System -SUCM, of the Integrated System of Advanced Municipalities – SIMA, or of the Collections Module (Ingresys). The Municipality also did not carry out effective efforts to collect $467,144 in license taxes, leasing, and sale of cemetery lots, as of June 30, 2017.

The Municipality of Hatillo lacked regulation, as of June 2017, for the request of quotations that do not require public bids, for donating construction materials to homes, or for making purchases in cases of emergency, among others. In addition, 33 contracts and four deeds were detected that had not been recorded in the Municipality's Contracts Registry as provided by the regulations in force.

The auditors identified 44 special funds with $360,349 that had remained inactive for up to six years. The Finance director could not explain the reasons for the inactivity of said funds. This situation, which was commented on in Audit Report M-15-29, deprives the Municipality of economic resources that can be used for its needs.

The Report comments that the Municipality formalized five contracts totaling $66,300 with a regular corporation not authorized to provide engineering services. This situation was notified on October 8, 2019 to the president of the CIAPR so that it takes the pertinent actions.

A municipal official in a state of intoxication struck a horse with a Municipality vehicle, which caused its death and physical damages to its owner. The Municipality settled a lawsuit by the aggrieved party for $27,000.

Following an agreement with the U.S. Department of Labor, Wage and Hour Division, the Municipality paid $16,952 to 67 employees in 2016 for overtime worked and not paid. The Municipality also had to pay $8,364 as a refund for the hiring of a teacher without the academic preparation required for the Child Care Development Fund program.

The Municipality has pending in the courts a civil lawsuit for $26,572 for labor law, indemnification, and reinstatement.

The audit recommends that the Office of Management and Budget ensure that the Municipality complies with the Corrective Action Plan established by the Office of the Comptroller of Puerto Rico.

The Report of Hatillo covers the period from July 1, 2013 to June 30, 2017.

See the Audit Report M-21-22.

To view other published reports, visit our Audit Reports section.