Puerto Rico Oversight Board to conduct forensic investigation on government bank accounts

by | Dec 20, 2017 | Puerto Rico | Comments

The Financial Oversight and Management Board for Puerto Rico announced it will conduct an independent forensic investigation into what it understands is over $6 billion held on deposit in recently-published Government bank accounts. In addition to the investigation, the Board will also hold a public hearing in January that will focus on the sources and uses of the funds, as well as on the nature of their legal restrictions. “PROMESA was enacted due to the economic and debt crises in Puerto Rico,” said José Carrión, Chairman of the Board. “It is essential that we improve the transparency and accountability of public finances to put Puerto Rico on the road to economic recovery, regain access to the capital markets, and restructure its immense debt.”

“For too long, the Commonwealth has sacrificed fundamental best practices in financial reporting,” Carrión added. “For example, without timely annual Commonwealth consolidated financial reporting, full transparency of the financial situation has been impossible to achieve without inordinate time, effort, and resources. Modernization must occur as soon as possible if we are to accelerate achievement of fiscal responsibility and renewed access to the capital markets.” Carrión also noted that the territory has been without a full set of current audited financial statements for the past several years. Audited financial statements for fiscal year 2014 were not issued until June 30, 2016, and audited financial statements for fiscal years 2015, 2016, and 2017 have not yet been issued. The board has urged the Government to complete the fiscal year 2015 audit by December 31, 2017, and the fiscal year 2016 and 2017 audits by June 30, 2018.

The board also issued a request for proposals (RFP) for an independent forensic analysis team to carry out an investigation into the liquidity of the Puerto Rican Government and all its instrumentalities and entities. The Oversight Board is looking for a qualified team to compile a comprehensive inventory of all government bank accounts, cash equivalents, and investments along with their respective account balances (market value). The Oversight Board wants to know the sources and intended uses of these funds, timeline for creation of existing accounts, and any documented legal restrictions on these funds. This analysis should cover fiscal years 2015, 2016, 2017, and 2018, i.e., July 1, 2014 to date.

The independent forensic analysis team will report to the Oversight Board and will be expected to present findings, interim and final, at the Oversight Board’s public meetings and hearings. The investigation’s findings will be made public. Some areas that the Oversight Board believes are relevant in its consideration and selection process of an independent forensic analysis team are: experience conducting investigations and in forensic accounting, knowledge of government budgeting and fiscal management and ability to commence work immediately. The deadline for responses to the RFP from interested service providers is no later than 5:00 pm on Friday, December 29, 2017.

Carrión said that, to date, the Board’s oversight has resulted in improved liquidity forecasting for the TSA and for key instrumentalities, as well as more regular and reliable reporting. Since its inception, the Board has made clear to the Government its requirement that significant gaps in available data be addressed. The Board is also requiring reformed financial reporting that will provide a better framework for reliable fiscal and economic decision-making.