An audit completed early last year found that “a number of licensees” regulated by the Cayman Islands Information and Communications Technology Authority had breached payment schedules of royalties and fees owed to government.
In addition, seven of the 14 companies licensed by the authority did not submit audited financial statements to the regulatory body during the period covered by the Internal Audit Unit’s report.
“A number of licensees have breached the law while no decisive action has been taken to ensure conformity with the law in terms of licensees discharging their financial commitments in a timely manner,” the internal audit report noted.
The authority usually collects somewhere between $7 and $8 million per year in royalty fees that are charged to the 14 business entities it regulates. Those fees are charged at 6 per cent of each licensees’ revenues and are due on the 15th day of the month following the end of each quarter.
If a licensee does not pay those fees, its operating licence can be suspended. The report did not identify any of the offending companies.
“We are unaware of the reasons for the delays in the payment of the fees,” auditors noted. “We have observed that the authority has consistently engaged the licensees regarding the outstanding amounts.”
In his response to the audit, ICTA Managing Director David Archbold said his agency has taken the view that interest charges levied on late payments were adequate.
“Licence suspension or revocation might be a disproportionate punishment for the ‘offence’,” the manager’s response indicated. However, the authority’s board has adopted a new policy to address varying instances of late payments on royalties.
The internal audit also found that half the companies regulated by the authority had not submitted proper financial statements, as required.
“The total revenue generated by some of the entities may be a major impediment in them acquiring professional audit services,” the report noted. “Despite [that issue], the licensees have all signed the agreement knowing fully the obligations they are required to fulfil.”
Mr. Archbold admitted this was a problem the authority has been trying to address for several years. He noted, of the seven entities identified as not having audited financial statements in the report, one of them no longer held an ICTA licence.
“The remainder account for less than two per cent of the royalty fees collected by the authority on behalf of the government,” he said.
Mr. Archbold said the ICTA board would consider changing audit requirements so that only limited reviews covering company turnover and deductions could be completed.