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 noncompliances, individually or together, are significant but not pervasive.
The Report reveals that three informal bids awarded between 2018 and 2020, to obtain the repair and maintenance service for municipal vehicles and heavy equipment, lacked important information required under the applicable laws and regulations. For example, the bid did not include submitting the automotive mechanic license by specialty, the process for acquiring parts, or the gross weight of the vehicle fleet to separate light vehicles from heavy ones. This lack of specifications in the bids caused the Municipality not to maintain adequate control of the services, overpayment, and made it difficult for the auditors to verify the correctness of the repairs.
In addition, the Municipality formalized two vehicle repair contracts on September 4, 2020, with a company whose president and its two employees did not have their professional licenses up to date. For these services, the Municipality disbursed $204,282. This situation was referred to the Secretary of Justice on January 26, 2022, and to the director of Examining Boards of the Department of State on October 18, 2021, so that they take the corresponding action.
In this regard, the Report also comments that the Municipality did not ensure that the provider contracted for the repair services of vehicles and heavy equipment was a professional corporation as required by the applicable law and regulations. The contracted provider was constituted as a regular corporation. In addition, the provider subcontracted services without the mayor's authorization. This situation was also referred to the Secretary of Justice and to the director of the Examining Boards of the Department of State in 2001 and 2022 respectively.
The ten-finding audit lists multiple deficiencies in the repair and maintenance services of the vehicle fleet such as: the lack of written information on mechanical failures, lack of information on the cost of repairs, and invoices from the provider without identifying the mechanic, among others. In addition, the Municipality did not require the provider to submit the invoice for acquired parts, or the replaced parts, and did not maintain complete files of the vehicles. As of June 30, 2020, the Municipality had 157 units of vehicles, heavy equipment, and motorcycles.
The Municipality of Hatillo granted $12,500 to a nonprofit entity that managed the amateur baseball team of Hatillo and $17,500 to another similar entity with sports purposes. These donations were granted illegally and improperly since the entities had not complied with submitting annual reports to the Department of State. In evaluating the donations, the former director of Finance and the Municipal Legislature failed in their ministerial duty to request the Good Standing from the entities.
The report notes that Hatillo did not have its purchasing functions centralized; rather, quotes were requested by officials from other units and not by the Purchasing Office. In addition, the auditors found two purchases of 50 chairs with a logo and related equipment, totaling $17,005, without quotes from at least three representative providers in the market.
The general manager of the municipal hotel Punta Maracayo Resort did not protect the interests of the Municipality, as she issued purchase orders for $5,874 in favor of an air conditioning service provider without a refrigeration technician license. A similar situation had been commented on in Audit Report M-21-22 of 2020. This finding was referred to the Secretary of Justice, and to the presidents of the Examining Board and of the Association of Refrigeration and Air Conditioning Technicians on January 26, 2022, for the corresponding action.
Contrary to the Hotel's regulations approved in 2006, in the five leased premises rent fees lower than those established were set, fees nonexistent in the regulations were applied, and the bonds related to two contracts were not collected. The former director of Finance did not ensure effective control of the collections for the fees and bonds of the premises.
The Report highlights that the Municipality's Internal Audit Unit did not carry out periodic audits in the areas of materiality and risk such as purchases, accounts payable, and disbursements. This situation deprived management of necessary information about the operation of the Municipality.
The Municipality also did not carry out effective efforts to collect $298,922 from the 372 accounts receivable for municipal license fees, sale of plots in the cemetery, or lease of premises. The examination of the files revealed that in 90% there was no evidence of collection efforts. As a result, the Municipality could not rely on those funds to meet its obligations.
The audit publishes that no annual physical inventories of personal property were carried out for fiscal years 2019 and 2020. This has the effect that property may be used improperly or lost without it being detected in time to assign responsibilities.
The Municipality of Hatillo lacks regulations and procedures to regulate donations related to construction materials for home repairs, the use and control of toll stickers, and the authorization of manual checks. In addition, it had not updated, among others, the 2003 regulation on personnel administration, the 2012 regulation of the Bidding Board, and the 2006 regulation of the Hotel.
Contrary to Regulation 53, Registry of Positions and Related Information, the Municipality of Hatillo sent to the Office of the Comptroller of Puerto Rico the information of the position registries from 2017 to 2019, up to nine months later than the regulatory 30 days after the end of the month. In this way, the Government and the citizens were deprived of updated information on payroll expenses and occupied and vacant positions.
As of June 30, 2020, seven civil lawsuits against the Municipality for $1,096,572 were pending resolution by the courts. This first report on Hatillo covers the period from July 1, 2017, to December 31, 2020
In October 2022 we approved Audit Report M-23-03. It contains the results of the audit we conducted of the Municipality of Hatillo, to determine whether the fiscal operations were carried out in accordance with the applicable law and regulations.
See Audit Report M-23-03.
To see other published reports, visit our section of Audit Reports.
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