The Department of Tourism paid three companies US$1.1 million per year without putting the contracts out for public bid, according to a report from the Cayman Islands government’s Internal Audit Unit.
One of the companies was paid US$90,000 per year, with no formal service agreement, to promote the Cayman Islands as a wedding destination. The contracts with the two other companies began in 2002 and 2003 and had no specific end date.
The department blamed understaffing at the senior management level for the breach of regulations.
“For an extended period of time, only 33.3 per cent of the top three strategic positions within the CIDOT have been filled and therefore this is one area of slippage that occurred as we were forced on the results that the industry demands. Now that we are aware of the issue it is being rectified,” management responded in the report.
In addition to the tendering issues, the audit identified several violations of policies concerning nearly US$13,000 in credit card transactions, nearly $3,000 in travel advances and ex-employees’ access to government information during the 2010/11 fiscal year.
Auditors observed “a number of control weaknesses … which negatively impacts the financial and operational administration of the department”. The Caymanian Compass submitted an open records request to obtain the report, which is dated 27 July, 2012. Auditors examined transactions occurring from July 2010 to June 2011. According to the report, department management said it had implemented responses to auditors’ recommendations as of either May or July 2012.
The department’s budget for 2010/11 was $22.3 million.
The report cites regulations attached to the Public Management and Finance Law requiring a public tendering process for purchases of more than $50,000.
The auditors’ discovered that the department “was paying a monthly payment of US$7,500 per month or US$90,000 per annum to a company located in Miami, Florida, that promotes the Cayman Islands as a wedding destination. However, we have not seen any evidence of tendering nor a formal agreement for service.
“Further, we did not see any evidence that two contracts, which are still enforceable as of audit date, were offered for tender.”
Those two contracts did not have a specific end date, although they do have clauses specifying a 60 days termination notice. One contract, in the amount of US$320,000 per year, started in October 2003 and was for “strategic and tactical planning/implementation and buying services”. The second contract, in the amount of US$690,000 per year, started in September 2002 and was for “advertising in the US”, according to the report.
While those contracts were signed before the current Public Management and Finance Law was implemented, regulations at that time required public tendering for purchases of more than $10,000.
“It is against the government’s policy and value for money may not be assured when contracts for the procurement of goods and services are not tendered as required by the regulations. In addition, it will be difficult to enforce accountability between the two parties if there is no signed agreement detailing the terms and conditions of the services provided,” according to the report.
According to department management’s response, as of 1 July, 2012, “The service provider in Miami is now on a one-year contract. At the end of this contract, the services will be publicly tendered to enter into a three-year contract. The current arrangement was in place prior to the current CIDOT management team being intact.”
The report cites regulations that require government to retain financial records so they “can be readily produced for operational and audit purposes”. Additionally, the government’s credit card policy stipulates “that the cardholder must ensure that the expense claim form is completed, signed and accompanied with receipts clearly indicating the expense item”.
According to the report, “Our audit testing was limited by the unavailability of documents to support the transactions. A number of transactions from nine credit card statements processed from September to December 2010 and February to June 2011 was selected for testing and of these the supporting documentation totalling US$12,915.49 could not be provided during our fieldwork. However, the assistant director of finance stated that the department is currently working on the outstanding supporting documents.
“Poor record keeping practices contributed to the unavailability of some documents required for the audit.
“Lack of supporting documents eliminates the audit trail and prevents the full evaluation of the nature of credit card expenses.”
With an implementation date of 31 May, 2012, the management’s response was “Subsequent to this audit, we have requested that all credit card expense documentation be included with the credit card statement and this process is now in place”.
According to the report, the government’s policy on travel advances is for individuals to have previous travel advances cleared before making another application for further travel advances; to file an official travel expenses claim form within seven days of returning from the trip; and to accept that failure to act may result in deduction of the travel advance from the individual’s salary.
Auditors found “consistent noncompliance with the policies and procedures”, according to the report.
“Based on a sample of 16 travel advances we found that except for one, all other recipients submit their official travel expenses claim forms 18 to 370 days after return from travel. Further, in contravention of the said policies and procedures, at least two employees were granted a second travel advance, although they had an outstanding travel advance. One of these employees received the travel advance even though the travel engagement was cancelled a few days after it was paid. This travel advance was then converted into a loan and was repaid over a three-month period,” according to the report.
Further, according to the report, although some of the individuals had completed forms allowing government to deduct the advances from their salaries, “the amounts were on most occasions not deducted in a timely manner … or not deducted at all”.
According to the report, “Outstanding advances reduce the department’s ability to ensure the validity, accuracy and completeness of financial records and reports and ultimately safeguard government’s fund.”
According to department management’s response, which has an implementation date of 1 July, 2012, “the department has reinforced the above-mentioned policy” since July 2011.