Auditor: Gov’t mismanaging purchases


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

The auditor’s findings also revealed significant political
interference in the contract bidding and procurement process. A story about
those issues can be found on page 1 of today’s newspaper.

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

A number of weaknesses in the management of the procurement
process within government were determined during the course of the audit.

For instance, the audit revealed there is currently no
information kept that shows how much government business one vendor receives.

There are difficulties in organising government purchases
through a single computerised system which would effect savings by “economies
of scale”, auditors said. In other words, if more government departments banded
together to buy items, it would prevent repetition in purchasing and could lead
to further savings on those purchases.

Also, a more organised central process would prevent
unqualified vendors from receiving work in other areas of government, Mr.
Swarbrick said.

“A construction company that was unsuccessful on one of the
government’s largest building projects when it had been found to be unqualified
ended up as the contractor for another significant project without management
knowing what had previously happened,” auditors noted.

The audit report found a general lack of expertise in the
procurement process and recommended government work to correct that problem as
a matter of urgency.

Mr. Swarbrick said government was also exposed to
significant risk due to the fact that there were no procedures in place to
ensure all procurement and bid contracts were legal.

“In the absence of contract policies and procedures, and
without the benefit of using standard contract forms, there is no assurance
that contracts contain the necessary clauses and conditions one would expect to
find in legally binding contracts,” he said.

Government should take steps to perform follow up audits via
its Internal Audit Unit to ensure that bidding regulations are followed, Mr.
Swarbrick found. No one in government is monitoring compliance with those
regulations right now, he said.   

As a result of all of the deficiencies identified by
auditors, it was concluded that the Cayman Islands government was probably
paying millions of dollars more for supplies and services than it needed to.
Mr. Swarbrick said this finding led to plans to conduct an information
technology audit across government departments in the future.