Comptroller: CFSE paid $445K to a real-estate consultant (CP-06-15)

On March 23, 2006, the Office of the Comptroller of Puerto Rico published Audit Report CP-06-15 (Rev.) on the State Insurance Fund Corporation (Unit 3165). Audit period: January 1, 1998 to June 30, 2004. It examines a financial consulting contract for real-property acquisition and investment advice. Adverse opinion: the operations covered by the report were not conducted in accordance with applicable law and regulations. Findings are classified as principal.

Finding 1: on October 29, 1997 the Administrator executed a retroactive contract (effective July 1, 1997) with a Consultant at $125 per hour (maximum $5,000 monthly) plus 2 percent of the purchase price; it was later amended to a flat $100,000 for each renegotiated building. From December 1997 to May 2000 CFSE paid the Consultant $445,437. The Comptroller documents possible conflicts of interest and deficiencies in contract formalization and administration, including services rendered before the document was signed.

Four buildings (Manatí, Arecibo, Aguadilla and Guayama) were purchased for a total of $133,046,578; the Consultant was paid four $100,000 tranches ($400,000 total) for those acquisitions. In the audited period’s financial frame, CFSE reported operating revenues of $3,077,612,052 and expenses of $2,692,755,883 (combined gain $384,856,169). As of September 1997 it held about 23 leased properties and four lease promises to relocate regional offices and medical dispensaries.

Other findings cover contractor payments, services without a current contract, and disbursements without adequate supporting documents. Recommendations to Justice, the Board of Directors and the Administrator: correct contracts and refrain from formalizing services with retroactive effect. Finding ≠ charge or conviction. Disbursement ≠ theft. Primary: OpenDoc CP-06-15. Cousin: none. Topic politics.

Source: Oficina del Contralor de Puerto Rico. https://iapconsulta.ocpr.gov.pr/OpenDoc.aspx?id=fad86328-2ccf-4286-92b8-3225224ca95e&nombre=CP-06-15