Gov’t accounts a “national crisis”

The state of financial accountability
reporting within the Cayman Islands government
has gotten worse within the past two years, according to a report released Tuesday
by Auditor General Dan Duguay.

“The current state of financial
accountability reporting is so dire that only significant intervention by everyone
involved…can provide the necessary means to correct the situation,” Mr. Duguay
wrote in his report. “I believe this situation has become a national crisis
that could lead to tremendous consequences for the Cayman
Islands government if not addressed immediately.”

Mr. Duguay’s report was a follow-up
to a 2008 review that had revealed some $1.5 billion of Cayman government
spending over five years remained unaudited, and that financial statements
reporting those expenses hadn’t been tallied up in annual reports presented to
the Legislative Assembly.

As of Tuesday, no central
government ministries and portfolios had produced financial reports to the Legislative
Assembly beyond the 2004/05 financial year. The Ministry of Education did not
have such a report for the 2004/05 year.

“We’re in the middle of our worst
budget crisis ever, but we don’t know what we spent last year – or even in the
last four or five,” Mr. Duguay said Tuesday. “When trying to figure out what
government can cut back on, having audited financial statements would help them
to make difficult decisions.”

Meanwhile, the only statutory
authority to have completed all its financial statements and to have reported
those to the LA was the Cayman Islands Monetary Authority,

According to Mr. Duguay, eight
statutory authorities or government owned companies had made significant
progress in improving financial reporting, and three others were generally up
to date. But that’s only 11 out of a total of 25.

Moreover, the auditor general said
he counted 73 financial statements that had been prepared by various government
agencies since 2004, but which had not been made public and presented to lawmakers
with the appropriate annual reports.

The reasons for the lack of reporting
to the LA were not always clear and that was troubling, Mr. Duguay said.

“This lack of transparency and
public scrutiny is an effective avoidance of accountability by government
officials that I consider completely unacceptable,” Mr. Duguay wrote in his

The auditor general’s office made a
number of recommendations to government to help correct the situation:

*Leadership – The auditor said
someone should be appointed “to champion” financial accountability.

*Strategic direction – The auditor
suggested that government should consider the value of completing financial
statements for entities that would be more than four years out of date, some of
which are for agencies that no longer exist.

*Governance framework – It was
unclear to auditors whether government leadership felt it had the authority to
direct financial functions of the government.

“There is a need to have more
central direction and authority for the financial function in the government to
ensure that the requirements of the Public Management and Finance Law are met,”
Mr. Duguay wrote.

*Monitoring and oversight –
Legislative Assembly or another oversight body should monitor government plans.

In response to the audit’s
findings, the Ministry of Finance stated that it was considering a “transition
period” – perhaps until the 2016/17 government budget year – in which only the
financial statement reporting requirements would have to be met by government
entities. This means annual reports and reporting of government outputs
(services provided) would not be needed.

The ministry indicated it was
looking to centralise government’s core accounting functions, while still
holding chief officers accountable for financial results in their respective
ministries and portfolios.

The Ministry of Finance also
pointed out that it has created an accounting task force to assist with the
backlog of financial statements, but acknowledged that the group had encountered
a “magnitude of challenges and issues” which prevented timely resolution of
those reports.

Those issues included: a lack of
internal controls, policies and oversight; the unavailability of chief financial
officers to respond to questions, and cumbersome methods of securing ministry

Mr. Duguay pointed out that there
is a “lack of proper teeth” in the Public Management and Finance Law to enforce
compliance with financial reporting requirements.

Please see the full story in
Thursday’s Caymanian Compass….