Wednesday, March 29, 2023

CPA Society president expresses himself about debt audit

By on April 26, 2017


SAN JUAN – As far as the Puerto Rico Society of Certified Public Accountants is concerned, the island’s debt was audited at least up to 2014 as part of the process of preparing yearly audited financial statements, so those debt balances should not raise questions.

“The government’s financial statements are audited using accounting principles and the government’s financial statements have been audited until 2014. We should not raise concerns about those balance sheets because the financial statements were audited up to 2014,” society President Luis Zayas said.

CPA Society President Luis Zayas

Puerto Rico Society of CPAs President Luis Zayas

The government has yet to release the audited financial reports for 2015 and 2016.

Debt is a component that is audited by independent accounting firms as part of the process of doing the yearly audited financial statements. “The financial statements do not only comprise the debt. There are other items such as obligations, property, public corporations, cash or accounts receivable,” he said.

Over the past few days, there has been public outcry after the government repealed a commission appointed by the past administration to audit the debt.

Zayas believes the controversy surrounding Puerto Rico’s public debt revolves around its legitimacy or legality as the public seeks to determine who is accountable for the $69 billion debt.

Accountants also perform forensic audits, which focus upon the detail of the debt to explain its purpose or how money was spent.

“People think an audit is just the numbers…but already until 2014there are two years that were not auditedthe debt has been audited… The debt has already been validated. What you want to know is how the money was used…but it’s $69 billion, and auditing all of that is a monumental task,” Zayas said.

Government Development Bank President Christian Sobrino said Wednesday he would make the government’s bond issuances public.

Zayas said the government’s issuances as well as those by public corporations that make up much of the debt are highly regulated by the Securities and Exchange Commission, law firms and consultants.

“The people outside say they want to audit the debt to determine who should be accountable for it, how the bonds were issued and under which conditions the bonds were issued, but those bonds are highly regulated. It’s not like I can buy a bond at a street corner,” he said.

What would be the purpose of auditing the debt? Zayas said that although there is a public call for auditing the debt to determine who should be accountable or whether to pay it, the reality is it is up to the courts and not the auditors to make such determinations. He said calls in favor of an audit were fueled by the government defaulting on payments. “When those bonds were issued, no one questioned them,” he said.

However, a court may be making a determination on the legality of the debt. In March, a group of Sales Tax Financing Corp. (Cofina by its Spanish acronym) bondholders alleged in U.S. District Court that the government has issued at least $3 billion in debt illegally since 2011 because at the time it had already surpassed the legal loan margin established by the constitution. The allegation was made in the case of Lex Claims, which was put on hold by the stay on litigations established in the federal Promesa law.


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