Opposition Leader’s response to auditor’s reports

Editor’s note: The following is the full text of a speech delivered Tuesday night by Cayman Islands Opposition Leader Alden McLaughlin.

“Following the release by the Auditor General of his most recent report on Government Procurement early last week, the country has borne witness to a most unfortunate, shocking, bitter verbal attack on the Auditor General and members of his staff by the Premier. This has resulted in the Governor being required to come to the defence of the Auditor General and his staff and to break with the precedent he has set since taking office and publicly chastise the Premier.
“The Opposition joins voice with the Governor in condemning the deeply personal, vitriolic and unwarranted attacks on the Auditor General and his office by the Premier. Not only are such attacks unbecoming of the office of Premier, but they are also an abuse of authority as they seek to intimidate the Auditor General and to reduce the credibility and reputation of that critically important office.

“Given the recent findings of the Auditor General on the way in which the Premier, who is also Minister of Finance, has handled the award of major government contracts, it is understandable that the Premier would not presently be very happy with the Auditor General. And it is understandable that the Premier would feel the need to respond to the many criticisms of political interference, outside influence, breach of financial regulations, failure to follow established procedure and poor judgment contained in the Auditor General’s recent reports. However, the manner of the response by the Premier is unjustifiable, disproportionate and deeply regrettable. It is alarming that the Premier, without proper basis, would claim that the Auditor General and his staff are “individuals who are, partially informed, spiteful and their main motive is to cause bureaucratic interference and harassment.” Describing the Auditor General as a “hit man”, as “vindictive” and of telling “lies of omission” is clearly a determined effort by the Premier to lower the Auditor General in the estimation of the general public which he serves. This is plainly and utterly wrong. But it is the type of behavior which sadly we have come to expect from Premier Bush. The former Auditor General, Mr. Dan Duguay, was the recipient of similar verbal assaults and many, including me, believe that the non-renewal of Mr. Duguay’s contract was heavily influenced by the campaign waged against him by the Premier. In the present circumstances, we applaud the Governor for publicly standing up to the deplorable intimidatory tactics of the Premier.

“There will always be a certain degree of tension between elected officials, public servants and the office of the Auditor General; this tension is an important and necessary part of our system of government. The office of the Auditor General is independent and constitutionally protected precisely because the nature of the work of that office means that often the Auditor General will be critical of government and particularly of the political directorate. The office of the Auditor General is one of the most important checks and balances on the exercise of executive authority by those who have been elected. Unwarranted attacks on the holder of that office must therefore be viewed very seriously as an attempt to undermine our very system of government.
“The Reports of the Auditor General which have resulted in the firestorm from the Premier have brought into focus alarming instances of political interference by the Premier and other members of his government in the process of awarding government contracts. The reports have highlighted the politicization of the government procurement process under the current administration and have shown what happens when, as the Premier has declared, the regulations are overridden to ensure “substance over process.” Although in his responses the Premier has insisted that interference by him and his Cabinet has saved the country millions of dollars, in no instance has the Auditor General been able to find that the political interference and the failure to follow the proper process resulted in any savings to the Cayman Islands Government. On the contrary, the political interference has incurred additional costs to the Cayman Islands Government, created the risk of fraud and corruption within the government and has undermined the reputation and integrity of the Cayman Islands. In his report of 5th July, 2011 the Auditor General said the following:

“Our audit found that the Government has not been effectively managing procurement and that there has been a fundamental breakdown in controls to ensure fairness, efficiency and transparency in procurement, as well as compliance with the laws and regulations. The issues our audit identified also clearly indicate that there has been little regard to the consideration of value for money.”

“He went on to add:

“… of great concern to me is the frequency and impact of political interference in the day to day operations of this critical government process (government procurement). Political interference has created significant risks for fraud and corruption that are virtually impossible to mitigate because of the lack of checks and balances introduced by the practice. Even if the Government implemented the best practices available to manage the procurement function, political interference would still create risks for fraud and corruption that are virtually impossible to mitigate.”

“The results of the three case studies carried out by the Auditor General on government procurement and which form the basis of the most recent report released last week are cause for grave concern. The handling of the award of the CCTV contract, the JazzFest event of 2009 and the Cohen Financing contract provide more than ample evidence and justification of the criticisms, conclusions and recommendations for change contained in the Auditor General’s recent reports.

“In his responses the Premier claims that he saved the country $3M in interest costs by delaying entering into the CI$155M long term loan. The facts as found by the Auditor General are very different. The delay in entering into the CI$155M loan was not because of any decision of the Premier. It was because Cohen and Company were unable to deliver on the promised long term loan which actually resulted in costing the government more money in both arrangement and interest costs. The Premier breached the Financial Regulations, overrode the Central Tenders Committee’s decision, ignored the advice of the Financial Secretary and other staff in the Ministry of Finance and on the recommendation of the UDP Treasurer, Peter Young, awarded the financing contract to Cohen and Company in October, 2010. But apparently, it wasn’t until he had actually awarded the contract to Cohen and Company that the Premier realized that Cohen did not have the capacity to actually lend money, that they were only able to act as an intermediary or go-between and arrange the borrowing with a proper lending institution. The result was, the Auditor General has found, that Cohen and Company was never in a position to provide the agreed financing. Instead they first arranged a short term loan for 90 days through Scotiabank for CI$77.7M in October 2010, then a top- up loan from a brand new bank known as Banque Havilland for CI$30.2M in December, 2010. The Scotiabank loan had to be extended in January 2011. The interest on these short term loans up until the Cohen deal was terminated at the end of January this year was more than a million dollars and the legal and other arrangement fees were almost $900,000.
“Had the government gone ahead with the decision of the Central Tenders Committee which had awarded the financing contract to First Caribbean International Bank and Royal Bank of Canada instead of giving it to Cohen, the arrangement fees would have been CI$450,000 less for the short term loan and the long term loan would have been entered into earlier resulting in the payment of less interest overall.

“The Premier claimed that by overriding the decision of the central tenders Committee and awarding the financing contract to Cohen and Company he would save the country $24M in interest costs. When he discovered at the end of January 2011 that these savings were just fantasy, the Premier terminated the agreement with Cohen and Company. The Auditor General found that had the Government continued with the Cohen deal and actually entered into a long-term financing arrangement for CI$155M, not only would there not have been the promised $24M in savings, but the arrangement fees would have been some $864,000 more than the arrangement fees which in the end have been paid to First Caribbean International Bank for the required CI$155M of long-term financing.

“Unquestionably, the concerns and criticisms of the Auditor General outlined in his recent reports are properly founded. I encourage the Premier and his government to turn their attention to addressing these concerns and to seek to implement the recommendations contained in the reports which are aimed at improving the process of government procurement. The Premier and his government must cease the trend of political interference in the critical and sensitive area of the award of government contracts.
“While the substance of the matter is always critical, contrary to what the Premier seems to believe, the process is also important and not just for compliance with the rule of law reasons. When due process is not followed it opens up the ominous prospect of corruption. There are huge reputational implications for the Cayman Islands Government here. It should not be forgotten by the Premier that it is the Cayman Islands Government’s reputation for probity and reliability that has made it relatively easy for it to secure financing even in these hard economic times. The spectre of corruption has the capacity to undermine any government’s reputation, including ratings by Standard and Poors and Moodys. If potential bidders come to believe that the process of awarding contracts is not fair, predictable and transparent then the attractiveness of this jurisdiction as a place to invest is lost, with potentially dire consequences.

“The Premier complains about bureaucratic harassment and what he describes as attempts by “so called good governance experts trying to make the government look like we are doing something nefarious.” He claims that this is what is preventing the government from getting the economy kick-started. No doubt the Premier is referring to the fact that after more than 2 years in office and after countless announcements of one major project after another which will get the economy rolling, so far nothing has happened and nothing is happening, I would suggest that the greatest impediment to investors staking their money and reputations on Cayman is the uncertainty created by the way this present administration does business, the unprofessionalism, the failure to follow the law, rules and regulations, the conflicts of interests and the inappropriate demands of members of the government and their operatives. These are things which are standing in the way of getting projects going. What the Premier should be doing is not beating up on the Auditor General but following the very sage recommendations which he has made in his recent reports.

“We are all gravely concerned at the lack of economic activity in Cayman. Unemployment is a real problem and increasing numbers of people are struggling to pay their bills and put food on the table. The cost of fuel has made it impossible for many to pay their electricity bills. The government has made this worse by increasing the taxes on fuel by 45 cents a gallon since they took office. The Premier and his government must focus on addressing these issues and adopt a new approach to the business of government as plainly the methods utilized in the past 2 years have not borne fruit.

“Coincidentally, immediately following the release of the Auditor General’s report last week, the Premier and Minister of Finance made a statement in which he not only slammed the Auditor General but in which he also announced that despite earlier projections of a deficit, the government had recently discovered that it had turned a CI$25M surplus in the last financial year. While we will all be delighted if this is indeed the case, we would urge the Premier to treat those figures with caution in light of recent experiences. Any decisions to increase government expenditure, including salary increases, should only be made if the government is satisfied that they will be sustainable in the medium to long term. The global economy is still in a state of grave uncertainty and the local economy is still in a very precarious position.

“The Premier noted that savings of $25M had been realized from the budgeted expenditure in the last financial year. But these savings have been achieved in large part because of significant cuts to essential services such as the Police and Children and Family Services. Given the situation with crime and with the dire financial circumstances of many people in the community, we believe that if the government determines it is able to increase expenditure, it should review the current budget allocations for these two areas in particular to determine whether these can be increased.

“These are difficult and trying times for the world and for those of us who call the Cayman Islands home. Things are tough but we must persevere. We will come through these trials together as a people as we have always done. I pray God’s guidance on the government and his continued protection on the people of these blessed Cayman Islands.”
 

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3 COMMENTS

  1. Arrogance has no limitations or boundaries and when it comes to Mr. Bush, well he goes just one step further. Chastise Mr. Bush, well now isnt that an amusing scenario.

    Mr. McLaughlin was very political when he applauded Mr. Bush and when he went on to use the word BUT it was like a Dentist saying, this is going to hurt but I have to give it to you. Mr. Bush warrants no such accolades and I dont feel that respect is warraanted.It is earned and not an entitlement. So why give it.

    I am sure that the Bushites will be all over my comments like white on rice.

    Bottom line, give Bush what he deserves and the previous contributor said it in a very concise way.

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  2. Mr McLaughlin’s speech seems a moderate, thoughtful and essentially accurate account of where the Islands are, financially speaking,as well as being politically penetrating.
    Cayman is not the Islands that Time forgot any more. The outside world is involved and listening in at what goes on here, and will take note; we cannot expect indulgence and the ignoring of the incompetence of our Government for much longer.
    Fortunately the Foreign Office has woken up to the problem – even if at the last minute-what has it been doing these last 15 years or so in regard to Cayman and other territories for which it is responsible?
    As an old hand, I am close to despair that a prosperous, well balanced community has been brought so close to disaster.

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