The Cayman Islands government was
saved by a timely audit from overpaying $1.8 million on various capital
projects in the Ministry of Education, according to a report obtained by the
Caymanian Compass under the Freedom of Information Law.
The review by government’s Internal
Audit Unit looked at millions of dollars’ worth of what are known as ‘equity
investments’ made on behalf of various government ministries and portfolios. It
found that those entities needed to pay closer attention to how approvals for
capital purchases and construction projects were made.
“A few ministries and portfolios
had significant deficiencies in their procedures,” the audit report said.
“(These) were noted particularly in the monitoring of disbursements to avoid
double funding, the safekeeping of documents and in the recording of
The review covered the period
between 1 July, 2007, and 31 March, 2008, but its results have never been
released to the public until now.
Auditors also said that no
effective oversight controls existed in the disbursement of equity investment
funds until they reviewed the process – sometimes after that money had been
appropriated. The Internal Audit Unit noted that nearly $90 million worth of
equity investments had been approved between July 2007 and March 2008.
“The Treasury Department’s role is
not one of full and detailed monitoring, but a disbursement one,” the report
stated. “There is therefore no effective oversight of the disbursement of funds
until an audit is carried out.
“This management oversight is a
critical aspect of the governance process that must be functional if the equity
investment portion of the public sector finances is to be effectively managed
in compliance with the Public Management and Finance Law.”
An equity investment is basically
funding provided by government – upon the approval of Cabinet – that is
deposited into a government ministry or portfolio’s executive bank accounts.
Typically, those funds are granted to replace an agency’s existing assets or to
buy new assets.
Some of the auditors’ findings
regarding the disbursements of these funds were relatively minor procedural
matters, such as 19 equity investments being processed without the original
signed requests for the money.
Others were more serious, such as
situations where ‘double funding’ had occurred or where supporting documents
for equity investment requests could not be located and verified.
For instance, 14 transactions
processed for the Ministry of Education – amounting to $1,833,762.25 – had already
been included in previous funding requests from the ministry. In effect, the
government would have paid for these items twice.
“However, no actual duplicate
vendor payment was made and these were all corrected in May 2008 after internal
audit brought this to the attention of the chief financial officer,” the audit
A similar situation involving a
$200,000 investment in the Portfolio of Internal and External Affairs was
caught and later corrected, according to the review.
The auditors also looked at a
sample of 373 equity investment transactions processed between July 2007 and
March 2008 and found that in nearly 200 of those requests, supporting
documentation could not be provided by the relevant ministry.
“Poor record keeping practices are
contributing to the unavailability of some documents required for the audit,”
the report noted. “Inadequate retention of supporting documents such as these eliminates
the audit trail required by the financial regulations.”
Since the audit was completed and a
report released internally to the government in August 2008, auditors noted
that most of their recommendations aimed at improving the equity investment funding
process had been accepted and implemented.