Board Orders 'Forensic Audit' of Governent Debt, While Citizens' Audit Falters
The Fiscal Control Board (FCB) will initiate a forensic audit of the debt of the Government of Puerto Rico, a specialized accounting process which purpose is to detect violations of law with sufficient rigor so that its findings can be used as evidence in legal proceedings.
The plan is mentioned in the letter that the FCB sent to Governor Ricardo Rosselló yesterday and it stands in contrast with the state of suspension tha ails the Debt Audit Commission established by law during the García Padilla Administration.
The 'forensic audit firm' that the Board will engage must 1) validate the financial performance between the most recent audited report of the Government of Puerto Rico, covering the year 2014, and the Fiscal Plan provided by the previous administration, and 2) provide an independent report on the total outstanding debt arranged by issuer, debt issued by each issuer, use of the proceedinngs from each issuance, the agreed payment schedule and the total outstanding debt.
According to investment information portal, Investopedia, a forensic audit 'is an examination and evaluation of the financial information of an individual or entity to be used as evidence in court. A forensic audit can be conducted to prosecute a party for fraud, embezzlement or other financial claims.'
The Board did not explain this matter further in its letter but they do refer to one of the uses that these reports could have, mainly, as tools during the voluntary negotiation process begun with government bondholders. According to the same letter, these talks will be held jointly by government and board personnel so that, although the government is the one that leads the conversations, they are held with the Board's full knowledge and endorsement which can speed final Board approval of settlements.
The Board has also not dealt with controversial issues that become relevant with these provisions, such as the fact that its members have not yet made public the personal financial disclosures that they are supposed to have submitted at the time of their appointment, and also the conflict of interest claims aimed at Board members Carlos García and José R. González, who served as presidents of the Government Development Bank and, as such, had participation on bond issues that have now fallen under a magnifying glass.
The fact that Puerto Rico bond issues are under investigation by the authorities has been a matter of public discussion since at least February 2016 when the Puerto Rico Electricity Power Authority confirmed to NotiCel that the Securities and Exchange Commission (SEC) had submitted information requests for two bond issuances. Also, since last November NotiCel also confirmed that several García Padilla Administration officials had been questioned in connection with these bonds.
The claim that the debt should not be negotiated nor paid until actual outstanding debt service can bee certified gave way to a law in 2015 creating the Integral Public Credit Audit Committee, composed of elected officials, union representatives and civil society sectors. But, apart from releasing a preliminary assessment, that group has faced obstacles in the discharge of their duty because the same government has witheld information from them and has not released funds allocated by law for the Commission's operations.