Commonwealth of Puerto Rico OFFICE OF THE COMPTROLLER

Commonwealth of Puerto Rico OFFICE OF THE COMPTROLLER Approaches to Maximize Accountability, Minimize Risks, Improve Transparency, and Reduce Fraud in the Government Manuel Díaz Saldaña Comptroller of Puerto Rico at your service. . . May. Comptrollership 2, 2005 1

Every entity has to develop different methods or strategies to maximize accountability, minimize risks, improve transparency and reduce fraud. This is even more important when government entities are involved. The administrators or managers in public service assume a fiduciary responsibility in administering the governments’ resources. This fiduciary responsibility entails that the administrator of the goods will hand them over at the end of his tenure with an added value, improved or augmented, in quality and in quantity. Comptrollership at your service. . . 2

Programs developed in the Comptroller’s Office to maximize accountability, minimize risks, improve transparency and reduce fraud in the Government. Comptrollership at your service. . . 3

Mission, Vision and Values Mission – To oversee the transactions of public funds and property – To promote the effective and efficient use of government resources Vision – To be a world-class model for public office – To serve Puerto Rico as a true agent of change, integrating the efforts of the public and private sectors Comptrollership at your service. . . 4

Cont. Mission, Vision and Values Commitment We are dedicated to our work. Integrity We work in a responsible manner. Sensibility We respect the dignity of all human beings. Justice We watch for the strictest compliance with the law. Excellence We are constantly improving ourselves. Comptrollership at your service. . . 5

COMMONWEALTH OF PUERTO RICO CONSTITUTION Article III, Section 22 1952 The Controller shall audit all the revenues, accounts and expenditures of the Commonwealth, of its agencies and instrumentalities and of its municipalities, in order to determine whether they have been made in accordance with law. He shall render annual reports and any special reports that may be required of him by the Legislative Assembly or by the Governor. Comptrollership at your service. . . 6

Total Quality Management Based on principles of continuous revision of existing processes and constant measurement of the results – We have identified 230 processes – We have revised 151 (65 %) – 715 recommendations have been received and 80% of these recommendations have been complied with Comptrollership at your service. . . 7

Cont. Total Quality Management • First Strategic Plan (1997) • Third Strategic Plan 2004 to 2007 composed of five focus areas üOverseeing üPrevention üHuman Capital üTechnology üCustomer Services Comptrollership at your service. . . 8

“If you have failed to plan, you are planning to fail. ” Comptrollership at your service. . . 9

Strategies Directed towards : – Each of the focus areas and – Promoting the objectives or goals of maximizing accountability, minimizing risks, improving transparency in transactions and detecting and preventing or reducing fraud in the Government Two dimensions: – Internal – External Comptrollership at your service. . . 10

Internal Strategies • Anticorruption Policy (2000) – Ethic’s Committee - receives, investigates and decides the merits of ethics-related grievances or complaints – Hot-line – Internal Audit Advisory Committee (2000) Comptrollership at your service. . . 11

Cont. Internal Strategies • ISO 9000 certification • Comprehensive Annual Financial Report (beginning on 1997 -98) Comptrollership at your service. . . 12

Cont. Internal Strategies • Promoting the use of technology – Virtual Office – Team. Mate Program in the audit function – Payroll payments by electronic means, using direct deposits Comptrollership at your service. . . 13

“That which isn’t measured can’t be improved. ” Anonymous Comptrollership at your service. . . 14

Cont. Internal Strategies • Project Management Official – 116 active projects “The vision must be followed by the venture. It is not enough to stare up the steps – we must step up the stairs. ” Vance Havner Comptrollership at your service. . . 15

Cont. Internal Strategies • Human Capital – A strict recruitment process – Continous education requirements – Reduction of employee turnover – Assessment of working environment Comptrollership at your service. . . 16

External Strategies Identified six strategies geared to improve public administration and fight corruption 1. Rigorous and constant oversight 2. Promoting education and training of public employees 3. Promoting an excellent administrative and financial system with emphasis on effective internal controls 4. Fair laws 5. Dissuasive punishments 6. Strategic alliances between related agencies Comptrollership at your service. . . 17

“Leadership and learning are indispensable to each other. ” John F. Kennedy Comptrollership at your service. . . 18

Cont. External Strategies • Promoting education and training of public employees – Training of elected public officials on good management practices (Law Num. 222 of August 6, 1999) – Orientations and training on good management practices – Expositions in large commercial establishments Comptrollership at your service. . . 19

Cont. External Strategies • Massive disclosure of the role of the Comptroller’s Office Comptrollership at your service. . . 20

Cont. External Strategies “Education must stimulate the development of the capacity to create in human beings and their devotion to spiritual values. Education must also forge citizens with moral integrity and a will of service to the community. Education must be inspired by a demanding sense of excellence. ” Luis A. Ferré, Former Governor of Puerto Rico Comptrollership at your service. . . 21

Cont. External Strategies “There is nothing permanent except change. ” Heraclitus Comptrollership at your service. . . 22

Cont. External Strategies • Oversight function – Traditional oversight – New oversight methodology (periodic evaluations) • • • Property Registers Internal Audit Offices Government University Legislator’s Offices Municipalities Comptrollership at your service. . . 23

COMPARISON OF MUNICIPALITIES (78) COMPLIANCE WITH ESTABLISHED CRITERIAS FISCAL YEARS 1997 -98 AND 2003 -04 (58%) (26%) Source: Special Reports M-99 -4 A and M-05 -4 G dated May 25, 1999 and April 14, 2005. Comptrollership at your service. . . 24

MUNICIPALITIES COMPLIANCE PREPARATION OF AUDITED FINANCIAL STATEMENTS WITHIN SIX MONTHS AFTER THE END OF FISCAL YEAR (95%) (26%) Due date extended to Jan. 2005 to comply with GASB 34 Source: Special Reports M-99 -4 A y M-05 -4 G dated May 25, 1999 and April 14, 2005. Comptrollership at your service. . . 25

Cont. External Strategies - oversight • Annual evaluation of financial actions that adversely affect, from an economic point of view, government administration – Collecting information regarding civil suits against the government for unlawfully removing government employees – Our reports reflect that the loss of economic resources amounted to $65, 066, 295 in a ten year period ending on December 2004. Comptrollership at your service. . . 26

Cont. External Strategies • Actively participated in the approval of laws – In the year 2003 -2004 and until March 2005, we have received and submitted comments on 105 drafts of legislative bills Comptrollership at your service. . . 27

Cont. External Strategies - laws Cont. Actively participate in the approval of laws – Continuous education and training of public servants – Contractual and ethics requirements for those who do business with the government – Controls and disclosure of governmental transactions – Oversight and protection of informants (whistleblowers) Comptrollership at your service. . . 28

Cont. External Strategies • Recommend and promote that all government agencies use technology – Filing copies of all government contracts and other documents by electronic means – Use of the Internet to disseminate information of interest • Complaint register Comptrollership at your service. . . 29

“Leaders challenge the status quo. Continuous challenge produces continuous improvement. ” Paul B. Thornton Comptrollership at your service. . . 30

WE COUNT ON YOUR COOPERATION TO IMPROVE THE OVERSIGHT FUNCTION AND ADMINISTRATION OF PUBLIC FUNDS AND PROPERTY Comptrollership at your service. . . 31