Accurate financial information is a core issue of sound public administration because it is the main tool for making economic decisions. Therefore, the government of Puerto Rico has to fine-tune its consolidated statements in order to advance the fiscal recovery plans with a firm step.
The deficiencies in the audited financial statements of fiscal year 2014-15 - exposed by experts who could not corroborate the accuracy of all the information provided by the government - show a gap that needs to be closed in order to achieve good management of fiscal operations.
The submission of the reports three years after the stipulated deadline and the calculation failures, in which the applicable accounting standards were not followed and the payment of pensions was not included as part of the budgetary responsibility in dozens of agencies, has prevented the government from demonstrating fiscal discipline.
Therefore, the need for greater controls and procedures that guarantee maximum clarity is evident, through compliance with applicable accounting standards, as well as compliance with execution schedules to achieve timely, well-documented projections.
To achieve this vital change, it would be convenient to create a unified accounting system that allows the central government and its agencies to accurately produce the complete and indispensable data required to carry out the goals of the fiscal plans and revitalize the economic system of the island. A turn in the right direction will help to regain credibility in financial markets and in the spheres of public powers of the United States to which Puerto Rico has to report accountability. At the same time, it will regain the confidence of taxpayers who are increasingly suffering from the limitation of essential services.
Before the Puerto Rican government and the Oversight Board there is a proposal for the creation of the Office of the Chief Financial Officer of the government, with powers and faculties to guarantee financial disclosure and supervise the fiscal management in each public dependency, in a centralized manner in substitution of the current ineffective fragmentation.
The recommended structure involves adopting computer systems and uniform accounting standards and centralizing the supervision of fiscal management through the budget and finance offices in the agencies, which would respond to the new office. The Officer, in addition, would have the authority to modify budgets when the estimates of expenses and collections are not met and would ensure that the agencies comply with federal and state regulations within the terms established by law.
Inserting this figure in the structure of government control of Puerto Rico demands legislation, so it is necessary that the Oversight Board and the government articulate a consensus project that allows to select a professional with experience and proven performance in charge of an office with independence of action and that transcends political cycles.
Putting into operation a structure like the one proposed should avoid the repetition of late and failed reports such as the aforementioned consolidated statements. In this regard, the auditing entity KPMG issued a mixed opinion with adverse indications, such as, for example, regarding the Medical Services Administration, given the impossibility of obtaining complete and verifiable data. The auditors pointed out that in general the agencies applied inappropriate formulas to do their calculations while about thirty of them failed to comply with the federal provisions regarding the payment of pensions as part of their budgetary responsibility.
The expert opinion represents a serious blow to the projection of the Puerto Rican government on its ability to manage finances well. Nor does it support its credibility in the face of the budgetary challenge for fiscal year 2019, whose implementation will depend on the decision taken by the federal Court in response to a lawsuit filed yesterday by the administration of Governor Ricardo Rosselló.
The budget, like the financial statements, are tools that will allow to advance the fiscal plans and the follow-up of the PROMESA Law. Its adequacy will help or not to advance the immense economic and social agenda that the Island has ahead, which demands maturity, detachment and will to change what has not worked on the part of those who have the decisional power in their hands.
The time has come to take action to promote well-documented economic decisions.
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