The Office of the Comptroller of Puerto Rico issued an adverse opinion of the fiscal operations of the Municipality of Arroyo. The tests performed and the evidence held by the Office of the Comptroller revealed that the operations were not carried out, in all significant respects, in accordance with the applicable law and regulations.
The Report notes that the Municipal Legislature authorized the mayor to assign employees to the Arroyo Surfing Park Municipal Enterprise, contrary to the Act and the ordinances in force. Employees of the municipal enterprises are subject to private-sector laws and standards, since these are for-profit corporations.
In addition, the Municipality, without legal authority, assigned four municipal employees to perform their duties at Arroyo Surfing Park and kept them with the same benefits and rights as public employees. This situation is attributed to the mayor having usurped the powers of the Board, which is the appointing authority of the Enterprise, and to the Human Resources director considering the Enterprise as just another municipal unit.
The eight-finding audit revealed that the administrator of Arroyo Surfing Park issued 329 cash checks for $64,207 instead of issuing them to the supplier of the goods and services. In addition, 10 cash withdrawals were recorded with the debit card for $1,687 without determining the purpose in four of these withdrawals.
The auditors also found invoices without the suppliers' signatures and the issuance of checks without the suppliers' invoices. These deficiencies do not allow for adequate control of the disbursement process and foster the commission of errors or irregularities in the transactions.
Contrary to the law in force, a civil suit over the collection of certain construction work at Arroyo Surfing Park was settled without the consent of the Municipal Legislature. From May 3, 2018 to December 6, 2019, the Municipality had paid $494,323 to the plaintiff.
The Report reveals that the Municipality did not require a contractor to provide the payment bond or the performance bond, or the public liability policy for the execution of public works. The contract for $258,050 with the contractor had been formalized in 2018, to demolish and dispose of debris from seven sports facilities affected by Hurricane Maria. The Municipality also did not require the contractor to pay $3,061 for municipal excise taxes and licenses.
As of June 30, 2020, the Municipality maintained a debt of $489,483 with the Electric Power Authority for energy consumption at Arroyo Surfing Park. This deficiency affects the resources that the Authority should receive, and worsens the Municipality's fiscal situation.
The Board of Directors of the Arroyo Surfing Park Municipal Enterprise had also not prepared an internal regulation for its operation or the regulations on the administrative and fiscal processes. In addition, the park administrator had not prepared the operating budgets for fiscal years 2017, 2018, or 2019.
The Report indicates that the Internal Audit Unit of Arroyo had not conducted audits in the areas of materiality and risks of the Municipal Enterprise. This type of situation deprives management of the necessary information on the effectiveness and efficiency in the use of resources and internal controls.
The audit comments that the Municipality agreed with 30 municipal employees to end, in 2018, a civil suit from 2013. A payment of $525,000 was agreed in the United States District Court for the District of Puerto Rico as part of the settlement agreement.
In addition, the audited financial statements of the Municipality of Arroyo reflected an adverse opinion with respect to the activities of the Municipal Enterprise. For fiscal years 2018 through 2019, the Municipality did not include the financial information of the enterprise in its statements.
As of June 30, 2020, a civil suit related to the challenge of a bid was pending resolution in the court. In addition, 13 cases were pending resolution before the Public Service Appellate Commission for personnel actions.
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.
This second and final report on Arroyo covers the period from January 1, 2016 to June 30, 2020.
Audit Report M-23-15 is available on our website: www.ocpr.gov.pr.
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