For the first time since 2004, the government has reported a full-year set of financial statements encompassing all public sector entities.
Unfortunately, according to the auditor general’s office, the report for the 2010-11 budget year has been given a “disclaimer of opinion,” meaning accountants checking the numbers couldn’t verify how the money was spent by looking at the report.
Finance Minister Marco Archer said the 2010/11 financial statements had been disclaimed for a number of reasons including lack of sufficient and appropriate evidence of government assets, liabilities, revenues and expenses.
“This should have been gazetted [made public] from the 14th December, 2011,” Mr. Archer said.
The government is also in the process of changing its Public Management and Finance Law, which sets out how public sector entity financials are reported. The proposed changes have not been made public yet, so it is at least possible other reports similar to the 2010/11 financial statements will not be required.
Lack of accurate and timely public sector financial reporting has been a problem for Cayman since the government changed from a cash-based accounting system to accrual accounting. Dozens of financial statements turned in to auditors between 2005 and 2011 received disclaimers or “adverse” opinions – meaning there were sufficient deficiencies in the records submitted.
Since 2012, government entities have been reporting financial statements more or less on time. However, Auditor General Alastair Swarbrick has said that getting useful financial information to lawmakers and to the public has never been truly been achieved.
Mr. Swarbrick’s comments were part of a 34-page report in 2013 that recommended an entire restructuring of the government’s financial management system, which includes scrapping many of the requirements of the Public Management and Finance Law.
“The audited consolidated position for the whole government has never been publicly reported in over eight years, leaving legislators and citizens with no reliable information on how government has generated and used significant public resources,” Mr. Swarbrick said in his report.
The 2010/11 entire government financial statements were the first attempt at doing that. For accountability purposes, Mr. Swarbrick’s office said, they were largely useless.
Because of this, the over-arching objectives of the Public Management and Finance Law – essentially credible records of government stating what it does with the public’s money – were never achieved “in any meaningful way.”
“At present, it is my view that there is a significant risk that the government will ever complete this journey,” Mr. Swarbrick said, referring to updating and reporting the entire public sector financials for the absent years between 2005 and 2011.
One of the most significant gaps contained in government financial reporting was identified in the “executive transactions” area. Those transactions, which are direct expenditures by Cabinet, are only reported through consolidated financial statements for the government’s entire public sector.
“Therefore, there has never been any accountability for these transactions and balances since the introduction of the [law],” Mr. Swarbrick said. “For over eight years, government has not provided any audited information to the legislature or the public relating to the actions taken and spending of public funds by the governor in Cabinet.”
Executive transactions include a diverse collection of programs, including government scholarships, poor relief payments and nation building fund payments, among others.
Later reports from the auditor general’s office recommended that government consider abandoning the practice of allowing executive transactions.