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Gov’t Finalizes Contract with KPMG for FY2015 Audited Statements

By on November 1, 2016

SAN JUAN — Alejandro García Padilla’s administration recently finalized the hiring of KPMG, which once again will be in charge of the external audit of the Puerto Rico government’s financial statements, this time corresponding to fiscal year 2015.

“The audit has already began,” recently said Treasury Secretary Juan Zaragoza to Caribbean Business.

The contract, awarded on Oct. 19, is for a total of $2.9 million, and runs until June 2017. KPMG is also retained for auditing services by the Employees Retirement Systems ($425,000) and the Government Development Bank ($1.35 million), both set to expire next summer.

(Schöning/ullstein bild via Getty Images)

(Schöning/ullstein bild via Getty Images)

As announced last month during the second official meeting of Promesa’s fiscal control boad, Zaragoza explained that the goal is to release “before the end of the first quarter of 2017” the government’s comprehensive annual financial report (CAFR) for fiscal 2015. This would entail a 10-month delay since its due date, or May 2016.

“They will not be as difficult as last year’s,” Zaragoza said, explaining that “KPMG could not start because we were doing some ‘housekeeping,’” in which a local accounting firm performed previous work “so that when KPMG arrives, it can conduct the audit.”

He added that of the 70 entities that make up the government’s financial report, 58 have completed their audit processes, although admitting such units as the retirement systems, the Government Development Bank (GDB) and the Electric Power Authority have yet to finalize theirs.

Meanwhile, when asked about whether KPMG will be the firm in charge of fiscal 2016 audited statements —the last under the current administration—Zaragoza said this would be the most logical thing to do. “We have to evaluate if we retain them. If I can do [the audit], I would do it. We must assess what is the most convenient thing to do,” he conceded.

Sources told Caribbean Business that the administration’s initial plan was to have KPMG jointly conduct the audit of fiscal years 2015 and 2016, and thus deliver a consolidated CAFR.

After a delay of more than a year and numerous setbacks, the Puerto Rico government unveiled in the wee hours of July 1 its much-awaited audited financial statements for fiscal 2014. The report showed the precarious financial situation of the central government and its instrumentalities, including the uncertainty clouding its ability to operate in the near future while fulfilling its obligations, including debt-service obligations.

Read more: KPMG Eyes Puerto Rico’s Audited Statements for Fiscal 2015

As for the GDB, an agreement with the auditors over the reserve the GDB had to include on its books as a result of the central government and instrumentalities’ outstanding debt with the GDB, allowed that entity to finish its audit process, and therefore, the delivery of fiscal 2014 audited financial statements. Actuarial studies on the retirement systems were another reason for the delay in releasing the document.

For fiscal 2015, Zaragoza told Caribbean Business that the GDB’s reserve would stay on its books, and recently warned in a letter to municipalities and public entities that hold deposits in the bank about the accounting treatment they must give to such deposits in their respective statements.

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