The Office of the Comptroller of Puerto Rico issued an adverse opinion on the fiscal operations of the Health Insurance Administration of Puerto Rico (ASES). The tests performed and the evidence revealed that the operations related to the contracting of professional and consulting services were not carried out, in all significant aspects, in accordance with the applicable law and regulations.
The Report reveals that the Health Insurance Administration of Puerto Rico paid more than $34 million for null professional and consulting services contracts. From the examination of a sample of the 319 contracts and 314 amendments granted for $10,362 million between 2016 and 2020, it was detected that 16% of the amendments were granted retroactively, 10% of the amendments were granted to expired contracts, and 5% of the contracts were formalized without the approval of the Board of Directors. In addition, an open, competitive and public contracting process was not carried out.
For example, in violation of the applicable law and regulations, ASES allowed a consulting firm contractor, a public relations firm and an actuarial services company to continue providing services, even though they had reached the maximum limit established by contract. In this regard, ASES granted amendments with retroactive validity to pay for those services.
This situation is attributed to the fact that ASES based its action on an erroneous legal opinion. This opinion established that the services could be paid with retroactive amendments, before the approval of additional funds by the Office of Management and Budget to then amend contracts.
In addition, on July 31 and August 1, 2018, ASES granted null amendments to contracts expired by more than $34.3 million for public relations services and of a pharmacy benefit manager. The extension of an expired contract is null and cannot be classified as an amendment.
The audit, with three findings, notes that ASES paid $2.9 million in subcontracted services without authorization and without being certain that the subcontractors were qualified to provide the service. In addition, ASES paid $3,213 to a contractor for services without a contract and $1,751 in excess of what was contracted. These deficiencies are attributed to the fact that ASES's regulations do not specify nor contain provisions on how employees should pre-audit invoices.
The auditors found that ASES allowed a company to bill $8,970 for services of two advisors outside the contract. The invoices claimed outside of a valid contract were not processed. However, the contractor acted contrary to the law and the contract, and distributed the totality of the hours in a new labor report when the contract took effect.
Regarding this finding, it is recommended that the president of the Board of Directors require an investigation into the compliance of the finance and administration personnel with their functions, and apply the regulations in case faults are detected.
The Report also reveals multiple deficiencies such as authorizing work already performed that generated retroactive payments prohibited by government contracting standards. ASES also did not have regulations to administer the advertising services and did not carry out risk evaluations from 2018 to 2022 to identify potential events and manage its risks.
The audit comments that ASES paid fees of up to $2.1 million for tasks similar to the duties and functions of positions included in the classification and compensation plans. Had it paid based on payroll, ASES's potential savings would have been $1.4 million.
As of June 30, 2022, ASES insured 1,276,451 lives. From 2017 to 2022, it had a budget of $19,176 million and made disbursements of $18,952 million.
This second and final report covers the period from July 1, 2016 to June 30, 2022.
The Audit Report OC-25-76 can be obtained on our website: www.ocpr.gov.pr.
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