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Comptroller reveals multiple control deficiencies with human resources in Naranjito

The Comptroller of Puerto Rico issued a qualified opinion on the fiscal operations of the Municipality of Naranjito. A qualified opinion is issued when the noncompliances, individually or as a whole, are significant but not pervasive.

The Report reveals that, during the electoral freeze from September 3, 2020, to January 11, 2021, the mayor of Naranjito and an executive aide made 21 personnel transactions without obtaining the prior waiver from the Office of Administration and Transformation of Human Resources (OATRH). Specifically, a salary increase was granted and appointments were made to 15 employees. This represented a net salary disbursement of $69,137 from 2020 to 2021.

This situation, contrary to the Municipal Code of 2020, was referred to the secretary of Justice, the director of the Office of Government Ethics, and the OATRH so that they would take the appropriate measures. In this regard, the Department of Justice concluded that no sufficient cause was found to consider it a crime, but recommended that the mayor declare said personnel transactions null.

The nine-finding audit notes that the Board of Directors of the municipal enterprise Naranjito's Sport & Enterteinment, Corp. created in 2013, assigned three municipal employees to work in this enterprise, after completing their workday in the Municipality. The payments, which totaled $19,010, constituted a double compensation prohibited by the Political Code. This situation was notified by letter to the secretary of Justice so that he takes the measures he deems necessary.

In addition, from 2013 to 2021, three employees were assigned verbally and one by letter, to work for the municipal enterprise, against current law. This situation prevented the Municipality from maintaining a separation of the legal personality of the enterprise.

The auditors detected multiple deficiencies related to the administration and operation of the enterprise Naranjito's Sport & Enterteinment. For example, when the enterprise was created in 2013, neither the mayor nor the Legislature established by regulation or ordinance the amount of initial capital, nor its return process. In addition, the mayor granted a loan of $15,000 to the enterprise without the prior authorization of the Legislature, and the Municipality's financial statements from 2014 to 2021 did not include the financial position of the enterprise.

As of September 22, 2021, the enterprise's Board had also not approved regulations to govern purchases, disbursements, collections, property, and personnel. In addition, from 2014 to 2021, they had not prepared the operating budgets, and from 2019 to 2022, they had not filed the annual reports with the Department of State. In fact, the secretary of State revoked its certificate of incorporation in 2023, for failing to comply with the filing of the annual reports. Nonetheless, as of February 6, 2024, the enterprise continued operating.

The Report indicates that the Municipality paid $10,190 to repair the engine of a truck ceded by the Municipality of Orocovis. This truck has had no use. The other three inoperable trucks donated by Orocovis to Naranjito were also abandoned. (See photos in the appendices of the Report)

From 2020 to 2021, the Municipality granted salary differentials between $137 and $442 monthly to 11 employees, without evidence justifying the additional tasks they performed. This situation does not allow adequate administration of personnel on the basis of the merit system and encourages irregularities or possible favoritism.

From the examination performed of the municipal vehicle repair services, it was detected that the Municipality did not request, nor did the suppliers establish, written warranties in the estimates and invoices. In addition, the files of the vehicles, motorcycles, and heavy equipment were not complete or updated. The Municipality had 124 vehicle units as of April 30, 2021.

In violation of the Municipal Regulation of 2016, in the Municipality's Finance area, eight disbursement vouchers for $46,159 were issued, without having the corresponding purchase orders.

The Municipality of Naranjito sent the monthly payroll and position reports to the Office of the Comptroller, up to seven months after the deadline established by current regulation. The Municipality did not send the annual reports from 2018 to 2021, on the status of all privatization, although it did send the certifications up to three years after the deadline.

The Naranjito Report reveals that, from the examination of a sample of vehicle accidents, none was reported to the Office of the Comptroller, as provided by current law. In addition, the required administrative investigations were also not conducted, to determine the causes and circumstances and to establish responsibilities.

The audit notes that the Municipality did not address the collection recommendations for $44,102 for various concepts, which have been published in four reports from 2011, 2015, and 2018.

This Naranjito Report is also referred to the president of the College of Certified Public Accountants, and to the president of the Accounting Board of Puerto Rico so that they evaluate the finding in which the Municipality did not include in its financial statements the financial position of its municipal enterprise. In addition, it is referred to them so that they assess the responsibility of the certified public accountants in issuing audited financial statements.

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

This second and final report covers the period from July 1, 2017, to December 31, 2021.

The Audit Report OC-24-63 can be obtained on our website: www.ocpr.gov.pr.