Concerns raised over delegation of debt audit to comptroller

By John McPhaul

The Citizen Commission for the Comprehensive Audit of Public Credit expressed concern on Thursday over House Resolution 63, which seeks to delegate the audit of public debt to the Office of the Comptroller.

“The Comptroller’s Office does not have the tools to do a forensic debt audit, as is needed, because its experience has been with compliance audits,” said José González Taboada, a certified public accountant and professor of accounting at the University of Puerto Rico and member of the commission. “Furthermore, the current comptroller, Yesmín Valdivieso, has spoken out against and constantly refused to carry out an audit of the debt for more than five years.”

Nylca Muñoz, an attorney and law professor, added that “there is a conflict of interest with the Department of Justice, to whom the measure assigns technical support tasks in the audit.”

“Several of the bond issues have an opinion from the secretary of Justice certifying their legality and many of these issues were issued in violation of the Constitution, as has been indicated in pre-audits and by the Financial Oversight and Management Board itself,” she said.

For the commission, auditing the debt means assigning responsibility and responding to all the actions and omissions that led to the worst fiscal crisis in the island’s history and the largest bankruptcy under the jurisdiction of the United States government, Muñoz said.

González Taboada added that “[a]lthough the measure mandates referrals to the Department of Justice in the face of findings of illegal debt, we are concerned that the claim to promote the cancellation of illegal debt through this mechanism will become academic, particularly given that, while this project is being announced, La Fortaleza and AAFAF [the Puerto Rico Fiscal Agency and Financial Advisory Authority] support that the [federal oversight] board submit a new Debt Adjustment Plan to the federal court that seeks to restructure, not cancel, the central government’s debt.”

The members of the commission also questioned the measure’s failure to include language that classifies all the information related to this audit as public, and that it does not have mechanisms for transparency and citizen participation in the audit process. Another deficiency of the draft resolution, the commission said, is the meager budget that is allocated to audit 70 years of debt with only $1 million, when the commission created by law had a budget of $5 million in expenses and the oversight board paid Kobre & Kim $16 million to study just a handful of issuances.

“We welcome any proposal for an independent audit of the public debt,” González Taboada said. “However, it cannot be a symbolic or futile exercise, but rather a comprehensive, independent, transparent audit with broad citizen participation so that it has credibility with the people.”

The commission is a non-profit corporation that has the mission of conducting a comprehensive audit of public credit for the benefit of the people of Puerto Rico. The commission, of a strictly citizen nature, gives continuity to the work begun by the Commission for the Comprehensive Audit of Public Credit created by Law 97 of 2015, which was eliminated in 2017.

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