Report: Puerto Rico oversight board’s consultant spending surpasses $2B
An Open Spaces report finds expenses significantly exceed initial estimates under the Puerto Rico Oversight, Management and Economic Stability Act.
A recent report by government watchdog Espacios Abiertos (Open Spaces) found that the Puerto Rico Financial Oversight and Management Board (FOMB) has spent more than $2 billion on consultants, significantly exceeding the original cost estimate for the Puerto Rico Oversight, Management and Economic Stability Act (Promesa).
According to the report, while the board closely monitors government spending, no federal entity appears to have full oversight or the ability to control the growing expenses for consultants, advisers and lawyers hired by both the board and the Puerto Rico government.
Congress initially projected Promesa’s total cost at $370 million. However, Open Spaces’ findings indicate that, as of early 2024, Puerto Ricans have paid more than $2.02 billion for consultant-related expenses, representing an increase of 446% over the original estimate.
The report breaks down these costs, showing that more than $308.1 million has been spent on consultants outside the Title III process, which follows U.S. bankruptcy law; more than $11.3 million on the fee examiner; and more than $1.71 billion on legal and financial advisers involved in bankruptcy proceedings.
The nonprofit, which promotes fiscal transparency, criticized the board’s lack of accountability, noting that the FOMB has not fully reported 84.8% of its total expenditures to either Puerto Rico residents or the U.S. Congress. The issue has drawn increased scrutiny, particularly as the board seeks to double its monthly legal fee reserve from $50,000 to $100,000.
“Just two days ago, the board said that the University of Puerto Rico must present formal notices and documented evidence on the changes it wants to do in its budget allocations, while the board itself only documents and breaks down its operating expenses on a monthly basis, but is not able to transparently document the largest item of expenses, which includes its own legal expenses and financial consultants in court,” said the economist Daniel Santamaría-Ots, Open Spaces’ research director.
Meanwhile, the Puerto Rico Electric Power Authority (PREPA) remains the only unresolved debt case under Title III, with a restructuring plan now overdue. U.S. District Judge Laura Taylor Swain has ordered a schedule for PREPA’s amended plan of adjustment by Feb. 28.
PREPA, the largest public corporation in the restructuring process, has $12 billion in debt and has already spent more than $438 million on consultants. Between 2023 and early 2024, that amount increased from $181.1 million to $438.8 million — an increase of 142.3%.
A growing financial burden
Based on reports from the board, federal court filings and the fee examiner of Title III cases, Open Spaces estimated in 2023 that consultant expenses had reached $1.5 billion. Updating the data to December 2024, the organization found that spending had risen by an additional $520 million, a nearly 34.8% increase, bringing the total to $2.02 billion.
“With this multimillion-dollar level of spending, the board’s lack of transparency and the poor oversight of the board … is alarming,” Santamaría-Ots said.
Open Spaces compiles data from multiple sources and maintains updated expenditure records in its Fiscal Observatory website, tracking the board’s spending patterns.
“Since the publication of our last report in June 2023, we found increases in all the board’s expenditure lines, and we were only able to make it to the first quarter of 2024, given that the Bankruptcy Court presided over by Laura Taylor Swain has not yet approved the payments until the end of last year,” said Open Spaces public policy analyst Wilmarí de Jesús-Álvarez. “When expenditures are available for all of 2024, we anticipate that the total figure will increase by several million.”
The analysts recalled that when Congress approved Promesa and created the FOMB to restructure Puerto Rico’s debt, lawmakers projected the board’s operations would cost about $370 million over 10 years, based on estimates from the Congressional Budget Office (CBO).
“The difference between what was projected and the reality is $1.6 billion to date,” de Jesús-Álvarez said. “In just eight years, the real figure has exceeded $2 billion, an increase of 446.47% over estimates. It’s worth asking ourselves if this meets congressional expectations.”
Open Spaces has produced graphs based on an analysis of federal court data illustrating Promesa-related litigation expenditures. These include payments to consultants, financial advisers, mediators and lawyers, distributed among the five largest litigation cases under Promesa.
The central government restructuring accounts for $1.12 billion, while PREPA’s debt case totals $438.8 million. The Puerto Rico Sales Tax Financing Corp. (Cofina, in Spanish) has recorded $62.8 million in consultant costs, while the Puerto Rico Highway and Transportation Authority (HTA) has spent $51.2 million. The Commonwealth’s Retirement System accounts for another $39.8 million, while the Public Buildings Authority has spent $960,400.
The central government’s consultant spending rose from $870.5 million to $1.12 billion, a 27.4% increase. PREPA’s consulting fees saw the largest jump, growing 142% over the past year. HTA’s legal costs increased 24.8%, while the Commonwealth Retirement System’s legal expenses rose by 8.5%. Cofina and the Public Buildings Authority showed minimal changes.
