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  • Writer's pictureThe San Juan Daily Star

Comptroller warns about financial crisis at Economic Development Bank

By The Star Staff

The commonwealth Comptroller’s Office warned Wednesday that the Economic Development Bank (EDB) is in a dire financial state and advised the governor and the Legislature to address the institution’s fiscal problems.

The remark was made as a special comment after the comptroller conducted an audit to determine whether operations related to microbusiness grants from the Community Development Block Grant Disaster Recovery Small Business Financing (CDBG-DR-SBF) Program and the island Housing Department’s application and receipt of approved grants complied with CDBG-DR-SBF Program Guidelines. No findings were discussed in the report regarding the audit’s objectives.

The EDB is a government-owned corporation that provides loans and funds to businesses whose economic activities have the effect of replacing imports in Puerto Rico.

The comptroller noted that the EDB had accumulated deficits from 2018 to 2022 as reflected in the audited financial statements. For that period, the EDB had $145.7 million in revenues and $159 million in expenditures, a capital transfer of $866,671, and a net change of $14.1 million.

“The notes to the financial statements indicate that the EDB faces significant risks and uncertainties,” the report says. “Currently, it has insufficient financial resources to meet its obligations.”

The EDB began monetizing most of its loan portfolio in 2017. Those sales provided temporary liquidity relief, but reduced the loan portfolio, endangering the bank’s operational viability.

The report recommended that the governor and the Legislature “ensure that the Board of Directors continues the plan established to address the fiscal and operational situation of the EDB.”

“The comptroller advised the president of the EDB to develop strategies to avoid net losses in its operations and maintain control of its expenses,” the document says.

The report covers the period from July 1, 2018 to July 31, 2023.

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