The Office of the Comptroller of Puerto Rico issued a qualified opinion on the fiscal operations of the Municipality of Humacao. 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 contributed $24,959 as capital, in excess of the resolutions approved by the Municipal Legislature, to establish the Municipal Enterprise for Economic, Cultural, Recreational and Sports Development. From 2012 to 2019, the Municipality disbursed a total of $3,943,284 to the Municipal Enterprise. Failing to obtain the Legislature's consent prevents it from fulfilling its responsibility to evaluate the allocation of funds.
The six-finding audit points out that the Municipality did not record in its Monet GFS accounting system the disbursement vouchers for 24 of the 51 electronic transfers it made to the Municipal Enterprise from 2016 to 2019. This represents $1,594,391 out of a total of $3,352,922 transferred in part to make improvements to the Center for Fine Arts and the Coliseum. In addition, the Municipality does not have a written procedure establishing the controls for processing payments through electronic transfers.
Contrary to the provisions of the contract formalized in 2014, the Municipality did not require the Municipal Enterprise to in turn formalize written contracts for architectural services for which it disbursed $24,165. In addition, the Municipal Enterprise also did not formalize written contracts for the services rendered as executive director by the Municipality's director of Finance as well, from 2014 to 2018 for $34,025. This situation was referred for evaluation by the Office of Government Ethics on May 20, 2022.
The Comptroller's auditors identified that the Municipality of Humacao did not hold a public bid nor require the Municipal Enterprise to carry out a bid to contract improvements to the Coliseum's infrastructure. In addition, the Municipal Enterprise made disbursements of $433,910 from 2014 to 2019 without evaluating quotes from at least three representative market providers. The accountant indicated that she was unaware of the existence of the procurement Regulation, and the executive directors did not protect the interests of the Municipal Enterprise.
Contrary to the applicable law and regulations, the Municipality had not evaluated the Enterprise's operations in the audited financial statements, nor had it evaluated the operating loss of $5,066,694, nor had it established a plan to monitor and oversee the Municipal Enterprise's operations. This lack of oversight may cause irregularities to be committed without their being detected in time to assign responsibility.
The Report comments that on May 4, 2022, the federal prosecutor's office in Puerto Rico filed conspiracy, bribery and extortion charges against the then-mayor. On May 6, 2022, he submitted his resignation from office through a letter addressed to the president of the Legislature. On April 12, 2023, the United States District Court for the District of Puerto Rico accepted the guilty plea.
The Municipal Enterprise reflects a loss of $5,066,694 in its audited financial statements from 2013 to 2020. The operating income of $1,679,097 has not been sufficient to be self-sustaining, so it depends on contributions of municipal funds.
The audit also comments that, as of December 20, 2021, the Municipal Enterprise had not received kitchen equipment, nor had it recovered the $38,556 paid as a deposit for the acquisition of the equipment. The Municipal Enterprise sued the provider for breach in 2017, and in 2019 the Court issued a default judgment and ordered the provider to also pay $15,000 in damages.
The Report recommends that the Office of Management and Budget ensure that the Municipality of Humacao complies with the Corrective Action Plan established by the Office of the Comptroller. This second and final report on Humacao covers the period from January 1, 2015 to December 31, 2020.
See Audit Report M-23-28.
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