Wednesday, September 23, 2020

Inspection of BDO Puerto Rico government audits finds no irregularities

By on July 31, 2020

Fiscal board Executive Director Natalie Jaresko (Screen capture)

UHY Advisors: Firm’s integrity was not impaired

SAN JUAN — After an inspection of the fiscal year 2017 audit performed by BDO Puerto Rico P.S.C. of several Puerto Rico government entities, accounting firm UHY Advisors found no irregularities, it told the island’s Financial Management and Oversight Board (FOMB) in a letter dated July 30.

The firm said it “did not note any matters indicating that BDO Puerto Rico’s integrity in any of the audits inspected was impaired or otherwise affected by the alleged activities of its former managing partner or the Commonwealth government’s subsequent actions.”

UHY was tasked with determining whether the “integrity of any of the audits performed by BDO Puerto Rico was impaired or otherwise affected by alleged fraudulent or illegal activities of the firm’s former managing partner, as charged by federal authorities, and actions taken by the Commonwealth government in response thereto, including termination of said contracts,” wrote UHY’s managing director, Jack Reagan.

The U.S. House Committee on Natural Resources had suggested in August that the fiscal board investigate whether the alleged fraudulent activities of Fernando Scherrer-Caillet, the former managing partner of BDO, and his arrest and removal from the firm “impaired the integrity” of BDO’s audits and work. 

Scherrer-Caillet was charged in July 2019 in the U.S. District Court for the District of Puerto Rico in connection with a wire fraud and money laundering conspiracy related to contracts between BDO and the Puerto Rico Department of Education and the Puerto Rico Health Insurance Administration.

UHY’s inspection, the report for which can be found here, included audits of Puerto Rico’s Electric Power Authority, Highways & Transportation Authority, Teachers Retirement System, Public Broadcasting Corp. and Automobile Accidents Compensation Administration.

“We executed our inspection of the audits by utilizing the Government Audit Engagement Checklist provided in the American Institute of Certified Public Accountants Peer Review Program Manual. We also utilized financial disclosure checklists for the Certificate of Achievement for Excellence in Financial Reporting program provided by the Government Finance Officers Association. We also conducted limited testing on certain samples originally selected by BDO Puerto Rico in the conduct of its audit procedures. BDO Puerto Rico cooperated fully with our inspection, including providing open access to the audit engagement team and requested information,” Reagan told the fiscal board. 

In a letter Thursday to the Natural Resources Committee’s chairperson, Raúl Grijalva, and U.S. Rep. Nydia Velázquez, the executive director of the fiscal board, Natalie A. Jaresko, told the House committee that it “does not believe it necessary to conduct additional review of BDO’s audit work,” but “will proceed to review a sample of eleven consulting contracts between the Commonwealth of Puerto Rico and BDO which will constitute Phase 2 of the review,” with the assistance of UHY. 

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