Comptroller finds mismanagement, failure to monitor public funds at AAFAF

By THE STAR STAFF

A recent audit by the Office of the Comptroller of Puerto Rico of the Financial Advisory and Fiscal Agency Authority (AAFAF by its initials in Spanish) uncovered severe financial mismanagement, systemic record-keeping failures and millions in unmonitored government funds. 

The extensive review evaluated the handling of $13.8 billion in bond issuance proceeds and related government debt from July 1, 2020 to June 30, 2024. AAFAF is the entity that acts as the fiscal agent, financial adviser and reporting authority for the government of Puerto Rico, its public corporations and its municipalities

The report paints a troubling picture of Puerto Rico’s debt restructuring efforts, revealing that failed refinancing initiatives triggered $123.2 million in direct losses. Ultimately, those strategic missteps inflated the government’s overall debt service costs by an astounding $3.36 billion. Budgetary strains escalated further following the partial refinancing of the 2014 Series A General Obligation bonds, which raised annual debt service obligations by $478 million a full year ahead of initial fiscal projections.

Audit findings highlighted a widespread misuse of public funds alongside improper overpayments. A $1.9 million surplus from the 2014 Series A bond issuance sat idle in an investment account before being diverted to the Debt Recovery Authority of the Government Development Bank (GDB). Additionally, the state overpaid bond and disclosure counsels by $218,333 after bypassing compensation caps previously set by the GDB’s board of directors. In another instance of redirected capital, $173,216 intended for the Highways and Transportation Authority failed to reach its targeted construction fund for critical transit improvements.

Perhaps most alarming is the total absence of documentation tracking billions of dollars in taxpayer money.

Neither the AAFAF nor its custodian agencies could produce supporting records to explain how $1.9 billion across five separate bond issues was spent. Traceability disappeared entirely for an additional $9 billion disbursed across 36 credit lines, three bond anticipation notes, and a tax anticipation note. Officials cited former administrators for failing to comply with mandatory document retention laws, effectively obstructing public oversight and obscuring the final destination of public funds.