• The San Juan Daily Star

Government’s internal control failings remain a concern for fiscal board

By The Star Staff

Back in 2016 while conducting a yearly audit, government auditors spotted internal control deficiencies that to this day have not been resolved, and that the Financial Oversight and Management Board for Puerto Rico is addressing now, a letter shows.

It was on Sept. 1 that the oversight board wrote to Treasury Secretary Francisco Parés Alicea asking about the actions taken by the island government to address internal control deficiencies raised by international accounting firm KPMG as part of the 2016 audit process. The board also requested management letters for the audits of 2017 and 2018.

“The Oversight Board appreciates the submission of the KPMG management letters for 2017 and 2018 dated November 18, 2020 and August 27, 2021, respectively. After reviewing your response, the Oversight Board continues to be concerned by the internal control weaknesses identified by KPMG,” the oversight board said in a letter dated Oct. 12.

KPMG noted that no evaluations are performed periodically over internal controls and remedial actions have not been taken for most of the control deficiencies identified in previous audits. Also, many of the deficiencies identified in the 2016 management letters continue to be mentioned in the 2017 and 2018 management letters.

“As stated in the management letters, management is required to design and implement effective internal controls over financial reporting,” the oversight board said. “These internal controls should also be adequately documented across the organization and for all reporting units.”

The oversight board said it understands that many of the internal control deficiencies identified by KPMG, among other deficiencies, could be addressed by a new ERP system, which the government has developed and plans to implement.

“However, the Government should not wait for the ERP implementation to perform a comprehensive review and documentation of the internal control environment and address any potential weaknesses,” the board said. “In fact, the process of documenting policies and procedures in preparation for the ERP implementation is an appropriate time to document the control environment and improvements that can be made.”

Moreover, the government should not rely on the deficiencies identified by KPMG as its only means of identifying and correcting internal control weaknesses, the oversight board said.

As the management letters indicate, the procedures undertaken by KPMG were not designed to identify all deficiencies in internal control that might be material weaknesses. The government’s own review should be comprehensive of all internal controls relevant to each of the reporting entities, including agencies and component units, the board said.

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