The Comptroller reveals a lack of internal controls in debt collection and contracting at the Ports Authority
The Office of the Comptroller of Puerto Rico (OCPR) issued an adverse opinion on the fiscal operations of the Puerto Rico Ports Authority. The tests performed and the evidence revealed that the contracting of the leasing of facilities and premises at the airports was not carried out, in all significant respects, in accordance with applicable law and regulations.
The Report reveals that the Ports Authority allowed the operation of 36% of its 258 commercial facilities at eight of its nine airports with contracts expired since 1993. This situation, of not renewing or formalizing new contracts for rent, services or projects at the airports' commercial facilities, does not safeguard the Authority's interests.
The contracts contained a clause contrary to law, as they implicitly encouraged the concessionaire to continue occupying the facility outside the contract. The clause established that if, on the expiration date, the tenant did not vacate or hand over the key to the property, they would pay an occupancy penalty of 10% of the monthly rent for each day following the contract termination date. In addition, it established that the tenant would pay a sum equivalent to the monthly rent established in the contract as compensation for the use and occupancy of the leased property.
The four-finding audit notes that the Authority allowed a concessionaire to place a trailer for more than 16 years on land adjacent to one of the airports without paying for the space. In addition, six facilities were not in the property inventory and it did not require the Commercial Aviation General Liability Insurance Certification policy for eight contracts.
Due to the COVID-19 pandemic, the Authority's Board of Directors agreed to reduce the monthly rent by 40% for 60 days and to collect the remaining 60% of the facilities' rent through a payment plan. In this regard, 82 credits totaling $273,015 were granted to 82 facilities. However, 61% of the credits were granted to facilities that did not have current contracts.
The Authority also granted rent incentives under the Airport Coronavirus Response Grant program to facilities that did not have current contracts. This situation shows that the incentives granted are not valid.
The audit reveals that a legal advisor of the Ports Authority took six and a half years to address a referral and issue a recommendation for the collection of $424,910 from a client. This prolonged delay creates the perception of partiality, negligence and evidences deficient management.
The audit notes that the Ports Authority had accumulated deficits of $302.5 million for fiscal years 2018 through 2021. In the financial statement as of June 30, 2021, accounts receivable amounted to $15.2 million. The lack of internal controls in the formalization of contracts and debt collection affects the Authority's liquidity and reflects assets that could turn out to be unreal.
This audit report of the Ports Authority covers the period from July 1, 2018 to March 31, 2022.
Audit Report OC-26-03 is available on our website: www.ocpr.gov.pr
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