Fiscal board urges House to nix bill that would amend COSSEC law

Robert Mujica, executive director of the Financial Oversight and Management Board

By THE STAR STAFF

The Financial Oversight and Management Board asked the island House of Representatives recently to reject a bill that would amend the law governing the Public Corporation for Supervision and Insurance of Cooperatives (COSSEC by its Spanish acronym).

The request is contained in a letter dated Tuesday, Jan. 24 from the oversight board’s executive director, Robert Mujica to Gov. Pedro Pierluisi Urrutia, Senate President José Luis Dalmau Santiago and House Speaker Rafael Hernández Montañez.

The oversight board said it is aware that the House is considering whether to adopt Senate Bill 644 (SB 644), which the Senate approved in June 2022. The bill would implement certain amendments to the structure and operations of the COSSEC and would change accounting rules for cooperatives.

“As we previously stated in our June 22 2022 letter to you and to the Senate, the oversight board has serious concerns that SB 644 is significantly inconsistent with the Commonwealth of Puerto Rico fiscal plan certified on January 27, 2022 and the COSSEC fiscal plan certified on May 20 2022,” Mujica wrote. “The oversight board therefore urges the House not to approve SB 644.”

The letter focuses on what the oversight board regards as three particularly troubling aspects of the bill: 1) the provisions concerning “mitigation of non-operational risk,” 2) the provisions concerning changes to COSSEC’s governance structure and board composition, and 3) the provision concerning the change in accounting principles for cooperatives.

The bill defines “non-operational risk” as the losses that cooperatives have suffered other than through their “normal operations,” including losses associated with “special investments” as defined in Act 220-2015. The bill’s proposed risk-mitigation process would require COSSEC to disburse funds directly and unconditionally to cooperatives to mitigate their “non-operational risk” – and would require the island Treasury Department to provide the necessary funds to COSSEC to make such disbursements, without negatively affecting COSSEC’s net financial position vis-à-vis its insurance fund.

According to the oversight board, the bill also interferes with COSSEC’s fiscal plan requirement that cooperatives convert their accounting books and change their accounting principles from regulatory accounting principles, or RAP, to generally accepted accounting principles, or GAAP, by June 2025, and it directs the government to submit and enact legislation.

“We are mindful that amendments to SB 644 could be introduced during the legislative process and that those amendments could alter the bill’s financial and other impacts,” Mujica’s letter notes. “We will review and comment, as appropriate, on any revised version of the legislation submitted to us. We also remind you that, should the bill be enacted in any form, the governor must submit it for the oversight board’s consideration.”