Bonuses totalling $24,600 and $44,355.33 were paid to the Public Service Pension funds’ managing director between 2004 and 2007.
Additional bonuses totalling between $13,557.60 and $7,132.80 were paid to staff members during the government’s 2006/07 budget year, including the director of financial reporting, the technical director-plan administrator, manager of plan administration and manager of investment policy.
In a report released last year, government auditors concluded it was “difficult to understand the justification for the amounts paid”.
That audit report also indicated the board paid some of the phone bills of the board’s Toronto-based actuary and for residential Internet service for the funds’ managing director.
Investment consulting fees were paid by the board at an annual “retainer” of US$28,000 and for “outside scope” work at US$400 per hour plus technical, administrative and out-of-pocket expenses. Expenses for the consultant to attend meetings held outside the greater Toronto area were also paid by the board, according to documents released under a Freedom of Information request filed by the Caymanian Compass.
Those rates charged to the pensions board “could not be reconciled” to some fees charged by the consultant in 2009.
According to the latest available government budget records, the Public Service Pension funds employ 28 staff members.
The Compass first reported last year regarding the bonuses and other fees paid by the Public Service Pension fund.
The internal government audit had revealed that board policies awarding pay increases, bonuses and “ad hoc” consultant payments at Cayman’s Public Service Pensions Board were unclear and, in some cases, “inherently compromised” – leading to the potential for abuse.
The review, obtained by the Compass, covered a period generally between mid-2008 and the end of 2009, although some expenditures identified in the report occurred in earlier years. The report was released in February 2011 by auditors but only became public after a Compass open records request.
The nature of some of the payments and details of who received them were redacted within the initial report given to the Compass. Following an appeal to the Information Commissioner, details of the audit were released without redaction.
The internal audit review identified a potential conflict of interest involving a previous policy that allowed subordinate members of the Public Service Pensions Board staff to approve various credit card transactions made by the funds’ managing director. The audit review found payments for the managing director’s credit card transactions from July 2008 to December 2009 – a total sample of US$27,312.13 – were approved by either the director of financial reporting or the deputy managing director of the fund.
“This arrangement inherently lacks independence as subordinate staff is required to scrutinise the transactions of the managing director,” auditors reported. “This review process … is inherently compromised and therefore increases the risk of misuse of the credit cards.”
In July 2010, the Public Service Pensions management implemented a new policy that required two members of the board of trustees to review and approve the managing director’s credit card expenses.
Government auditors also found a number of bonuses had been paid to staff between 2004 and 2008. Both of the bonuses to the managing director detailed above were approved by Public Service Pensions Board members. Bonuses to other staff members during the period were approved by the managing director acting in consultation with the board.
“It was indicated that all financial incentives given were based on the employees’ overall performance for a given period,” the internal audit review stated. “However, the draft policy does not indicate a clear correlation between a specific level of performance to the calculation of the incentives paid.
“It was gathered that the board decided to suspend the granting of these incentives in 2008 until a more objective criterion is established,” the audit read.
In the manager’s response to the audit report, it was stated that objective criteria for bonuses would be established. However, at the time the report was released the implementation date had not been determined.
A number of consultancy services invoices – totalling US$34,458 – were identified during the course of the audit. These were generally identified as “technical and administrative charges, travel and related out-of pocket expenses”.
According to government auditors, there was no documentation whatsoever provided to support these “incidental” expenses. Officials told auditors no other documentation is usually provided for incidental expenses for consultancy services.
“Without additional information to support these significant amounts, unreasonable charges may go undetected and subsequently paid,” the report noted.
In August 2010, the funds’ management stated the board’s investment consultant is now required to document all incidental costs prior to any payments being made.
One heavily-redacted section of the report included an attempt by auditors to recalculate the board’s payments to a consultancy group it hired.
“We noted that neither the section on fees and charges nor the invoice had the necessary details to allow us to be able to re-perform the computations made,” auditors noted in their report. “The inability to reconcile the figures in the billing statements against what was indicated in the terms of reference of the contract may lead to inaccurate payments.”
The figures that “could not be reconciled” included about $69,000 in payments during calendar year.
The funds’ managing director noted in the audit report that new procedures have been put in place “to capture an accurate breakdown of the services provided” and assure board members that payments were made in accordance with agreed upon rates.