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The Comptroller reveals that the Department of State contracted a foreign corporation not authorized to do business in Puerto Rico

The Office of the Comptroller of Puerto Rico (OCPR) issued a qualified opinion on the fiscal operations of the Department of State. A qualified opinion is issued when the noncompliances, individually or together, are significant but not pervasive.

The Report reveals that the Department of State contracted a foreign corporation on December 28, 2018, in effect through June 30, 2019, to process licenses and administer the examinations of 16 examining boards attached to the Department. The contract did not include the legal obligation to inform the Department of any change of name, business or merger during the term of the contract, in contravention of Act 164-2009, General Corporations Act.

Three days later, on December 31, 2018, the contracted corporation merged with another foreign corporation and offered the agreed services until December 16, 2020.

This finding indicates that the Department did not ensure compliance with the fiscal, labor and commercial laws of Puerto Rico. In addition, the foreign corporation that absorbed all the operations was 716 days without the Certificate of Authorization to do business in Puerto Rico.

The five-finding audit also notes that the Department of State did not obtain the Justification Certification from the Office of Management and Budget that would exempt this professional services corporation from being contracted through an open and competitive process. This process is mandatory for contracts of more than $250,000.

From the examination of 11 monthly collection reports of the companies contracted to administer the professional re-examination tests, the auditors identified that they were not approved by the assistant secretary of Registries and Examining Boards. The Monthly Report must be approved before being processed to the Finance Division to avoid errors or irregularities in the distribution of the collections.

In the passport application transactions, the auditors could not identify the official payment receipt in 79% of the transactions carried out from January 3 to April 11, 2022 at the Plaza las Américas and Arecibo offices. In addition, official receipts for $18,900 were found issued up to 11 days after the transaction was made, and official receipts with names of minor applicants not included in the Passport Application Transmittal (PAT) document that is mailed to the Federal Government.

This situation does not allow adequate control to be maintained over the collection process and fosters the commission of irregularities.

The Report comments that the aforementioned contract signed on December 28, 2018, included an automatic renewal clause that allowed its term until August 3, 2023 without going through an open, competitive and public process. This also has the effect of renewing a contract for which the intention not to renew is not communicated in time.

As of October 3, 2022, four examining boards were inoperative due to the lack of appointments by the governors: those of Draftsmen, Actors, Geologists and that of Contractors of Waterproofing, Sealing and Roof Repair Services. The Report recommends that the governor of Puerto Rico take the appropriate measures regarding this situation.

The Report recommends that the Secretary of Justice evaluate the finding on the contracting of a foreign corporation not authorized to do business in Puerto Rico.

The Department of State's budget from 2019 to 2022 was $63.8 million, and the disbursements amounted to $57.4 million.

This report covers the period from January 1, 2019 to June 30, 2022.

Audit Report OC-25-91 is available on our website: www.ocpr.gov.pr.