Alex,
I had similar problem with pgsql 7.3.3 and 7.3.4 when
using SELECT INTO RECORD variable. I noticed that
FOUND is always set to TRUE, but if no result is found,
RECORD variable is filled with NULL values.
My workaround was to check for NULL field value,
if there should not be ever NULL (primary key, etc).
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Zygmuntowicz Michal