July 26, 2021

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The Fiscal Board requires the audited financial statements of the government

The administration of Wanda Vázquez Garced will have 30 days to present to the Fiscal Oversight Board (JSF) a concrete plan that allows publishing, within an approximate period of 12 months, the government's audited financial statements (CAFR) for the fiscal years 2017 to 2019.

The requirement of the tax agency occurred, for the first time yesterday, when the president of the JSF, José B. Carrión and the director and former president of the Banco Giertomental de Fomento (BGF), Carlos M. García also announced their respective resignations from the tax agency .

Both resignations would be the first of what appears to be – according to sources in this newspaper – a reconfiguration of the fiscal body four years after its creation through the federal Promesa law . [19659012] The White House confirmed to night at El Nuevo Día said scenario. " Multiple JSF members have expressed interest in leaving the Board in the near future and the White House has begun working with congressional leaders to chart a path forward for the board to continue his important work, "said an official from the administration of Donald Trump .

Reacting to Carrión and García's resignations, the official – who asked not to be identified – also gave a boost to Promesa and He added that the JSF "plays an important role in improving the situation and the long-term fiscal health of Puerto Rico, after decades of negligence, debts and unfulfilled promises."

Yesterday, the resignations of Carrión and García overshadowed what It could be described as one of the most decisive public hearings for government management purposes since the creation of the JSF. The conclave could also be a glimpse of what Puerto Rico would see with a reconfiguration within the fiscal body.

Since Promesa entered into force, the directors of the JSF had been responsible for requiring the government to disclose financial statements, but it was not until yesterday – almost four years after their appointments – that the fiscal entity dedicated time to the matter in a public hearing dedicated to the subject.

The new path that "the" Congress and the White House "trace" According to sources in this newspaper, it could result in a new JSF made up of "hard line" people in budgetary and fiscal matters.

"It is no longer a time for excuses, it is a time to demand action," Garcia said in rebuke to the Secretary of the Treasury, Francisco Parés Alicea and to the executive director and chief financial officer (CFO) of the government, Omar J. Marrero .

The government of Ricardo Rosselló Nevares had pledged to the JSF to publish the 2017 CAFR one year ago and the other reports this year and the next.

Visibly upset, Garcia said it is time for the government to “think outside the box. box ”and comply with what represents a legal requirement for debt issuers in the US municipal government and also a requirement in the federal Promesa law.

According to the JSF, the delay in the publication of the CAFR by part of the government is chronic. Puerto Rico must publish its financial statements on May 1 after the close of each fiscal year.

In contrast, the CAFR corresponding to fiscal year 2017 has a delay of 1,097 days and that for the fiscal year 2018 marks a delay of 732 days. Meanwhile, the CAFR 2019 had to be published 367 days ago and, since last Tuesday, the countdown began to publish the CAFR 2020.

After the former Secretary of the Treasury Raúl Maldonado became secretary of The Government, the official stripped that agency of its role as CFO of the government under the premise that the government would do what was necessary if such functions were supervised since La Fortaleza .

The JSF has been almost four years advocating that Puerto Rico create the CFO Office, in order to unify the accounting tasks of the government without achieving any progress. After the forced departure of Rosselló Nevares, such functions were disjointed, something that was criticized yesterday by the executive director of the Board, Natalie Jaresko .

Marrero, who acts as government representative before the JSF, is also executive director of the Financial Advisory Authority and Fiscal Agency (Aafaf) and CFO.

By 2022, CAFR 2019

“I am not satisfied either "Parés Alicea replied to García just after revealing that it would take the government another two years to publish the CAFR 2019.

" I am not going to lie to the members of the Board, "added the Secretary of the Treasury. , insisting that the proposed work schedule is the most reliable projection that the agency has according to the resources it has.

According to Parés Alicea, the CAFR 2017 has already been delivered to KPMG for its corresponding opinion, and should be published in mid-August. By the end of November, the Treasury must have a "robust" draft of the CAFR 2018 to be published in April of next year, and it would not be until January 2022 when the CAFR 2019 would be published.

"That is completely unacceptable," García said. .

Given the situation, the tax agency unanimously decided to give the government 30 days, which Parés Alicea and Marrero agreed to without any objection.

The decision of the JSF it was maintained despite the fact that, a few minutes before, Parés Alicea recounted the juggling he has done to bring order to a process nuanced by all sorts of mishaps.

Parés Alicea stressed that, although the CAFR are lacking, the government is currently has published some 44 financial reports that offer a recent and broad idea to the investment community, one of the most critical voices in the management of financial disclosure in Puerto Rico.

Parés Alicea indicated that the government does not take its feet off the plate when enf profiting from three natural disasters since 2017 and the pandemic of the coronavirus .

He added that the government must produce an encompassed radiograph of a structure with 96 agencies and 75 financial institutions without having the resources to do so, and that has even been forced to apply new accounting pronouncements in matters such as the impact of pension payments on the financial situation of the agencies.

Parés Alicea added that, even, Recruiting and retaining the right staff is uphill because of government limitations to offer more competitive salaries.

The picture that Parés Alicea painted looks so daunting that the official admitted that the Government's Central Accounting Division at the Treasury – made up of barely twenty employees- suffers from a constant resignation problem and only has a certified public accountant. The resources that complement the accounting tasks in the Treasury are in the hands of consultants such as Deloitte & Touche, it was indicated.

Consequences for non-compliance

In an attempt to compensate the situation, the JSF approved an incentive program that includes a $ 1,500 bonus to employees if they manage to publish the financial statements in certain periods of time.

However, without ambiguity, García insisted that it is time to apply concrete measures, thing in which the manager Andrew Biggs agreed.

According to Biggs, who published on his Twitter account that Puerto Rico will achieve little if its political class continues to promote public governance comparable to Cuba and Mexico, the state of Louisiana He was flooded by Hurricane Katrina and his government barely took weeks in relation to the deadline to publish his financial statements at that time.

García suggested Parés Ali Cea and Marrero consider suspending funds or postponing requests for assistance from agencies that are unwilling to fulfill their duty.

"Puerto Rico will never leave Promesa," said Garcia, referring to the disclosure requirement. financial established in federal law.

During the hearing, the JSF also offered a narrative about the certified budget that it had unveiled before and gave details of the fiscal plans approved last Monday, including the plans of public corporations and the 10 municipalities that are part of the pilot plan of the JSF to straighten the finances of the municipalities.

José A. Delgado contributed with this report.

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