PAC chairman laments ‘lack of transparency’

The absence of timely financial statements and annual reports from government ministries is preventing the Public Accounts Committee from effectively doing its key job of scrutinizing public spending, the committee’s chairman Roy McTaggart said on Tuesday. 

He said the “complete lack of transparency” over many years raised the risk of fraud or misuse of government funds. 

Mr. McTaggart, speaking at the opening of a training conference for government accountants, said a complete set of consolidated government accounts had not been available for review for nearly a decade. 

Government has indicated that it expects, this year, to be able to produce audited financial statements for the entire public sector for the financial years 2011, 2012 and 2013. 

Mr. McTaggart revealed on Tuesday that a committee has also been established to review the Public Management and Finance Law with a remit to make changes by July next year, with the aim of ensuring more consistent and transparent reporting of government spending going forward. 

The proposed review follows a report earlier this year from Auditor General Alastair Swarbrick highlighting a lack of transparency and accountability within government and recommending changes to the law. 

The report also called for a simplification of government’s financial and performance reporting system to ensure statements could be filed on time and could be properly audited. 

Mr. Swarbrick concludes, “My primary recommendation to the government is to immediately commence a far reaching and comprehensive review of the Public Management and Finance Law and consider seriously what kind of financial management, performance management and accountability reporting framework it needs and the organizational structure it would require to deliver it effectively and efficiently.” 

Mr. McTaggart, who was the keynote speaker on the opening day of the Cayman Islands Society for Professional Accountants’ four-day training event for government workers, said, “I think there has been an acknowledgment that the systems we have are not working as they should and change is necessary. The government has heard the message and is preparing to respond quite robustly to the report.” 

He said terms of reference were currently being finalized and a review committee would begin deliberations in January with a view to bringing changes to the Legislative Assembly in July of next year. 

Some of the changes contemplated, including multiyear budgeting and moving the government’s budget year to coincide with the calendar year, have already been raised publicly by Premier Alden McLaughlin. 

Mr. McTaggart believes government’s method of “output budgeting” will also have to change. Output budgeting allows government to outline its spending plans under vague headings connected to policy goals, such as $2.2 million towards “an internationally competitive financial services industry,” rather than specific line items like the amount each department spends on salaries. 

He said, “Our budgeting framework is based on an output basis but when it comes to reporting actual results, it is on a different basis, so there is a disconnect. It is often extremely difficult to see whether government achieves actual results against the budgeted outputs of that framework.” 

Mr. McTaggart, an independent legislator for George Town in his first term and a former managing partner at KPMG, took over leadership of the Public Accounts Committee following the election in May. He said the committee was currently limited in its ability to hold government accountable for its spending because the complete statements were simply not available for scrutiny.  

“There is a complete lack of transparency. The absence of independent scrutiny of government accounts raises the risk of fraud and misappropriation of government assets,” he said. 

Mr. McTaggart said things were improving, with consolidated statements likely to be released soon. 

“I know that things are changing and a lot of improvements have been made, and the Auditor General is about to release some reports, but the fact of the matter is the absence of any reporting to the legislature has rendered the Public Accounts Committee ineffective.”