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Office of the Comptroller reveals improper, excess and contractless payments in an adverse-opinion audit at the Health Department of the Municipality of San Juan

The Office of the Comptroller of Puerto Rico (OCPR) issued an adverse opinion of the fiscal operations of the Health Department of the Municipality of San Juan. The tests performed and the evidence revealed that the operations related to contracting, disbursements and accounts receivable, among other objectives, were not carried out in all significant respects in accordance with the applicable law and regulations.

The Report reveals that the Municipality paid $299,631 in excess of the 10% provided by the Municipality's Contracts Regulation to a contractor that would provide the service and billing and collection personnel for medical plans for the medical services at the Municipal Hospital and at the nine Diagnostic and Treatment Centers (CDT). In addition, the contract formalized on July 12, 2017, indicated that it would provide services in the areas of linen, diets, ward clerks and medical office assistance. The contract established that the corporation would charge 11% of the amounts collected monthly from the billing and collection of medical plans.

In addition, $115,497 was paid without a contract for services rendered from July 1 to 11, 2017, and $22,665 for a mathematical error in excess of what was billed. Payments without a contract are detrimental since there is no legal document establishing the rights and obligations of both parties, and excess payments do not allow these resources to be used for other needs of the public.

The audit of 11 findings notes that nonprofit corporations A and B, which were incorporated in 2003 and 2010 respectively, performed work without legal authorization at the Municipal Hospital. Corporation A, in charge of the billing and collection of medical services and corporation B, responsible for providing medicine and surgery services, did not have contracts or written agreements with the Municipality.

From January 1, 2017 to December 15, 2021, corporation A received $809,383 that it did not deposit in the Municipality's accounts but in a private account of the corporation. Of these, 88% correspond to the administration of the former mayor and 12% to the current mayor. Act 56 of the Medical-Hospital Assistance System of 1969 provides that these funds must be deposited in the Municipality's accounts.

The Comptroller's auditors found that the special paymaster deposited six checks for $11,055 in her personal bank account, which were to replenish money in the special fund that reimburses the incentives for transportation and per diems of the participants of the Research Unit of the San Juan Hospital. On October 4, 2021, the area was visited to perform a cash count and the special paymaster indicated that she did not have the key to open the safe. She then took sick leave until October 24, 2021. On October 25, the Division manager told the director that the special paymaster had delivered the $7,000 to her, which is the balance determined by Ordinance 46 for this fund.

This possible embezzlement and illegal appropriation of public funds by the special paymaster was referred to the Department of Justice and the Office of Government Ethics on August 29, 2023 for their evaluation and corresponding action. It is also recommended that the National Institute of Health evaluate the situation and take the measures it deems pertinent.

The Report reveals that, on the contract of $13,250,000 for pharmaceutical, laboratory and nursing services, formalized on June 29, 2018 by the former mayor, an amendment for $2,866,833 was signed without justifying the additional services to increase the contract. In addition, the Municipality did not obligate the necessary credits at the time of awarding the contract, a fact that prevents maintaining effective control of the budgetary allocations.

The Municipality's Finance Department does not maintain the records of the accounts receivable of 50,735 patients who owe $7,180,666 for the services provided in the emergency rooms. 90% of the total corresponds to the administration of the former mayor and 10% to the current mayor.

In addition, the Municipality had billed $666,308 (77% the former mayor and 23% the mayor), in excess of the rates set for the medical services in the Diagnostic and Treatment Centers (CDT) for patients without a medical plan, including laboratories and X-rays. This action imposes an additional burden on patients and encourages irregularities to be committed.

The auditors evidenced that $2,870 was disbursed for radiology services that were not rendered and $5,040 for a differential granted to a specialist physician who as of July 1, 2021 did not perform the additional tasks for which he received the differential. These improper payments do not allow adequate personnel administration.

As of September 1, 2022, the Municipality did not have regulations or procedures for the handling of the inventories of the medical-surgical material and medications, nor for the control and disposal of expired medications. It also did not have regulations for the transfer of medications and surgical material between the CDTs, nor for the debt collection procedures. Regulations facilitate the achievement of priority results with efficiency.

The audit reports that periodic inspections of the warehouses of the medical-surgical materials were not conducted in six CDTs and in the Municipal Hospital, which as of June 30 maintained inventories for $1,214,682. In addition, the examination conducted on the collection operations revealed that the Municipality did not have auxiliary collectors to cover the 32 shifts in the emergency rooms.

The Report reveals that the Internal Audit Office of the Municipality did not conduct audits that included the areas of materiality and risk, such as the inventory of medical-surgical material, medications or the internal controls of the operation of the Oracle accounting system, or the Evolution module, among others. This situation prevented maintaining continuous and effective oversight of the Municipality's operations.

The audit comments that, as of August 19, 2024, two lawsuits for $1,054,738 were pending resolution in the courts.

The Municipality's budget was $477,771,247, $447,771,247, $435,707,777, $428,760,777, $426,447,777, $455,500,000 and $484,992,768, from 2017 to 2013 respectively. Of these, the Department was assigned $164,994,144 (35%), $157,775,730 (35%), $149,916,658 (34%), $88,110,100 (21%), $110,849,993 (26%), $131,172,955 (29%) and $140,011,957 (29%).

The financial statements reflected accumulated deficits of $103,002,116, $183,031,021, $171,914,023, $190,949,809 and $706,829 from 2017 to 2022.

The audit also recommends that the director of the Office of Management and Budget ensure that the Municipality of San Juan complies with the Corrective Action Plan of the OCPR.

This report covers the period from January 1, 2017 to August 31, 2022

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The Audit Report OC-25-27 can be obtained on our website: www.ocpr.gov.pr.