Gov’t bids audit reveals massive mismanagement

Basic failures to regulate, manage and operate government
purchases have left the Cayman Islands wasting millions of dollars each year in
buying what it needs, according to an audit completed last month.

The government buys about $250 million worth of
supplies, services and assets each year – amounting to roughly half of the
Islands’ overall public spending.

“We concluded that the government of the Cayman Islands
is mismanaging the procurement of supplies, services and assets resulting in a
lack of efficiency, transparency and fairness as well as costing the government
millions of dollars more than necessary,” Auditor General Alastair Swarbrick’s
report read. “If not addressed immediately, the procurement activities will
continue to be at significant risk of waste, abuse and potentially fraud and
corruption.”  

The auditor’s findings also revealed significant political
interference in the contract bidding and procurement process.  

Mr. Swarbrick said in his office’s report that the instances
of interference in the bid process were creating “risk, uncertainty and morale
problems” in government operations.  

“We found evidence that some politicians are not complying
with the procurement rules that have been established…and, in some cases,
contravening the laws and regulations [of the bid process],” Mr. Swarbrick
said. “In other countries, the practice of politicians being involved in the
administration of government’s transactions has resulted in cases of corruption
and abuse “  

Mr. Swarbrick expressed concern that limited “checks and
balances” exist when government transactions are conducted outside of the
established bid process.  

A management response was requested from the Cayman Islands
Deputy Governor’s office in early June to the specific points raised in the
audit of government procurement. Mr. Swarbrick said his office received some
comments from the deputy governor’s office but that officials had not provided
responses to the auditor’s recommendations at the time the report was issued.  

The auditor general’s office did not “name names” with
regard to specific instances where political interference in the bidding
process had occurred. However, the report did list several particular instances
where auditors documented the interference. 

“We were told of a number of recent situations when
political interference had created uncertainty and angst among government
employees,” Mr. Swarbrick said.  

Mr. Swarbrick said the handling of the bidding and
procurement process revealed “little regard to the consideration of value for
money” within government.  

“I am extremely concerned by the absence of senior
management leadership across the public services to ensure there is effective
and efficient procurement,’ the auditor general said. “This…has led to every
manager in government doing what they believe is appropriate to
implement…obligations. The behaviours of officials were far from ideal and have
led to a significant waste of money.”  

The audit covered only instances where more than $250,000 was
spent – those purchases required to go to the Central Tenders Committee for
final recommendation – and it covered government purchasing and bids during May
2009 to April 2011.  

Auditors recommended, among other things, that government
create a ‘chief procurement officer’ position and said entities might
reconsider the use of departmental tenders committees; those are small groups
of civil servants and, in some cases, private sector representatives that
assist in evaluating bids.   

The departmental tenders committees do not have any rules
regarding conflicts of interest with companies that might bid on various
government projects or procurements. Auditors said this problem is compounded
by the fact that most government managers do not file registers of interest
forms, as is required of elected members of the Legislative Assembly and
certain other top public officials.  

The main purchasing oversight group, the Central Tenders
Committee, also needs significant improvements, the audit found.  

“There is no mention of how many and, for example, what kind
of experience and skills the members of the committee should have,” Mr.
Swarbrick said. “We expected to find a clear definition of the role of the
[Central Tenders Committee] for its operations. We were informed that none
exist.”

Governor Duncan Taylor said Monday that he had instructed Deputy Governor Donovan Ebanks to prepare a response to the report and to address the shortcomings it identified.

“There are many dedicated and professional Public Servants who do their
best to make our procurement system work.  This report does not question
their commitment.  But it does highlight serious shortcomings in our
procurement system which we need to address and to address quickly,” Governor Taylor said.

“I note that the auditor general has reported that he had found instances of political interference in the procurement process and that there are significant risks when this happens.  I believe that the best way to eliminate those risks is to ensure that we have a robust and effective procurement system which enjoys the respect of all stakeholders.  That is what we aim to achieve.” 

Late Monday, Deputy Governor Donovan Ebanks issued the following statement concerning the audit:

“I welcome the report released today by the Auditor General’s office…and the request which His Excellency the Governor has extended to me to take the lead in responding to it.

“It has been recognised for some time that procurement is an area in which our systems have not been developed as fully as they should, or by comparison as they have been in the financial and human resources areas. This report will prove a valuable resource and stimulus to efforts which were already being contemplated to address this area during the first half of the 2011/12 fiscal year.

“While there are many principles and practices from other jurisdictions which can be referenced, it will be important that any system enhancements which are proposed reflect the uniqueness of Cayman and the markets from which we procure. And the success of these enhancements will depend on them encompassing both the rules and guidance that is provided on paper and the skills and knowledge of our people who are expected to apply them.

“While the Auditor General’s report makes a number of broadly critical statements as to the state of procurement, I am proud of, and grateful for, all of those public servants who consistently strive to ensure that the interest of the public is best served within the systems at their disposal.

“I look forward to my colleagues and I working with His Excellency, the Commission for Standards in Public Life and the Cabinet in developing a modern and resilient procurement system that continually strives for efficiency, effectiveness and value-for-money while ensuring that all entities who are eligible to provide goods, services or facilities have the opportunity to do so, and that the determination of the success of offerings is based on clear, fair and auditable criteria and processes. The public deserves no less.”

Please see Tuesday’s Caymanian Compass for much more
detail on this story….  

Click here for the Management of Government Procurement document from the Office of the Auditor General. (adobe pdf)