Thefts, fraud, mismanagement cited at gov’t authorities

Widespread mismanagement in nearly a dozen government-owned companies and statutory authorities, which in some cases rose to the level of potential fraud or even theft, was identified by the Cayman Islands Auditor General’s Office in a report released Tuesday. 

The report generally covered government budget years between 2010 and 2012, but some cases where problems occurred last year were also noted.  

Auditor General Alastair Swarbrick cited numerous “governance” difficulties that led to financial and bureaucratic mismanagement, including cases of political interference, bureaucratic infighting, lack of proper financial controls and oversight weaknesses that led to “significant risk of loss and misappropriation of public funds.”  

“As a result of our findings, I am carrying out governance audits in some of the statutory authorities and government companies with a view to reporting to the Legislative Assembly on these important matters,” Mr. Swarbrick said.  

Airports authority  

The Cayman Islands Airports Authority board of directors in May 2013 agreed to pay one of its own board members $46,000 for an internal audit that eventually led to the removal of former authority chief Jeremy Jackson and chief financial officer Shelly Ware.  

The board member, Jewel Hydes, who is an accountant, was commissioned to undertake the audit of financial and other “operational matters” at the airports authority.  

The Auditor General’s Office noted in its report that, apart from “brief terms of reference,” there was no formal contract or engagement letter for the audit work.  

“Initially, we were informed by the board in January 2013 that this audit was carried out at no cost to the [authority],” Mr. Swarbrick wrote in his evaluation. “Subsequently, at the board meeting in May 2013, a resolution was passed to remunerate the board member for the audit work undertaken. The total paid to the board member was $46,000 on the basis of the time she stated she had worked.”  

Mr. Swarbrick said the airports authority would have been well within its rights to engage outside auditors to perform this type of work, and that having an authority board member perform the review “raises concerns over the independence and objectivity of the audit.”  

“In our opinion, the board circumvented good business practice, abused their authority and failed to ensure that they achieved value for money,” Mr. Swarbrick said.  

Tourism attractions  

Misappropriation of funds and a theft of $452 was reported in entities supervised by the Cayman Islands Tourism Attractions Board, according to auditors.  

Mr. Swarbrick said a “significant number of discrepancies” was found in the accounting records for the Pirates Week Festival, between the 2010 and 2012 government budget years.  

“We identified the misappropriation of approximately $5,000 for the reporting period and other irregularities, including delayed deposits of $6,000 that were reported to [the Tourism Attractions] Board,” the auditor general said. “The individual responsible was subsequently suspended but later reinstated with revised responsibilities. 

“It was clear this person was taking cash and then paying it back months later,” Mr. Swarbrick said, adding that some of the money may not have been paid back.  

Auditors also discovered several instances where invoices from the festival had cash amounts reduced or deleted without explanation.  

Another tourism attraction included in the report was the Queen Elizabeth II Botanic Park, at which a theft of $452 from a safe was reported. “The incident was reported to the financial controller [of the Tourism Attractions Board],” Mr. Swarbrick said.  

Also at the Botanic Park orchid sale in 2012, auditors found no supporting receipts for $37,000 in revenues collected. “The cash register tape was printed over and could not be read,” auditors stated.  

Pensions board  

The Cayman Islands Public Service Pensions Board, which oversees three retirement funds for civil servants, members of the Legislative Assembly and judges, apparently ignored the tendering process for a new administration system, then spent nearly double what the contract was initially proposed to cost, according to auditors.  

Mr. Swarbrick said the board awarded a $292,000 contract for a new pension computer software system called LynchVal that was not approved by the government’s Central Tenders Committee.  

Actual payments made to the company amounted to $444,000 to complete the project, and even more was spent when the pensions body bought the system rather than leasing it, after the contract was awarded.  

“As of January 2013, total payments made to LynchVal amounted to $522,000,” Mr. Swarbrick reported.  

Port Authority  

The Cayman Islands Port Authority spent more than $500,000 on items related to the proposed cruise terminal project, which “included some miscellaneous expenses such as travel and consultancy expenses.”  

“These amounts have subsequently been expended [in the 2011/12 and 2012/13 budget years] and they are unlikely to generate future value due to the change in approach taken by government,” Mr. Swarbrick said. 

Also, it appears the port authority board spent at least $200,000 or potentially more during the same period in “legal fees.”  

“Apart from one claim for damages, a substantial amount of the legal fees related to defending Freedom of Information requests at the report of the board,” auditors noted. “It raises initial concerns about the value and costs involved in undertaking such action.”  


The deputy managing director of the Cayman Islands Electricity Regulatory Authority, Louis Boucher, received an “undocumented” 5 percent pay raise in late 2011, according to the auditor general’s office.  

“We were unable to obtain valid support during the course of the audit that the raise was approved by the [regulatory authority board],” the auditor general’s report read. “We were subsequently informed that it was approved at a board meeting, although not formally documented, and we received a letter from the new managing director in October 2012 substantiating the raise given in November 2011.”  

In March 2013, the “new managing director” referred to in the above comment, Joey Ebanks, was suspended over a report from Mr. Swarbrick’s office that led to a criminal investigation into “inappropriate financial transactions” at the authority.  

Mr. Ebanks was convicted this year on theft and forgery charges related to activities at the ERA and was sentenced to more than two years in prison.  

Health services 

Approximately $7 million held in inventory by the Cayman Islands Health Services Authority’s pharmacy, clinics and hospitals was not constantly maintained, leading to the possibility of misappropriation, Mr. Swarbrick reported.  

“Detection of any variances between actual physical stock on hand and expected balances cannot by detected in a timely manner,” the auditor general noted. In other words, if someone were stealing drugs or supplies from the local hospital system, no one would know about it until it was too late.  

“Given that inventory accounted for approximately $7 million as at June 30, 2012 and supplies and materials expenses [totaled] $10.6 million, it is reasonably expected that a proper inventory system be in place.”  

In addition, auditors raised concerns about an incentive-based pay plan for Health Services Authority doctors that tied pay to hospital revenues led to “increased risk of revenue overstatement and fraud unless managed effectively.”  

National Drug Council  

Poor financial controls led to a
relatively recent incident at the National Drug Council where auditors identified $5,500 in potential fraudulent activity. 

Mr. Swarbrick later clarified the potential fraud involved misappropriation of funds. “There were a number of red flags at the time indicating an increased risk of fraud,” Mr. Swarbrick noted.  

Auditors found poor oversight in the collection of donations, an easily manipulated accounting system, the lack of bank statement reconciliations and “the level of access that former accountant had to the [financial system]” created fertile ground for errors or fraud to occur.  

Housing trust 

The National Housing Development Trust issued contracts for the construction of affordable homes in Windsor Park, George Town, during the government’s 2011/12 financial year totaling $2.8 million.  

Auditors found the trust essentially skirted government’s rules for the tendering of such public sector contracts.  

Regulations attached to the Public Management and Finance Law state that any contract valued above $250,000 should be bid through the government’s Central Tenders Committee. In this case, the housing trust split the homes construction contract into 26 parts, giving the work to 18 different contractors.  

“The entity avoided submitting construction contracts through the Central Tenders Committee by breaking the project into multiple contracts, resulting in each individual price … coming in under the $250,000 threshold,” Mr. Swarbrick wrote. 

There was no formal policy that allowed the trust to proceed on the Windsor Park homes contract in such a fashion, although one was approved by Cabinet after the fact.  

“That does not negate that the tendering process was not carried out in compliance with the laws and regulations,” Mr. Swarbrick said.  

In addition, the housing trust reported during the 2011/12 year that 92 percent of its rental and mortgage payments due from clients had not been received, increasing the agency’s reliance on funding from central government.  


The Queen Elizabeth II Botanic Park is among several government-owned companies or statutory bodies that came under the Auditor General’s Office spotlight in its most recent report. – PHOTO: CHRIS COURT


The Queen Elizabeth II Botanic Park is among several government-owned companies or statutory bodies that came under the spotlight of the Auditor General’s Office in its most recent report. – PHOTO: CHRIS COURT

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  1. The word for today is accountability.

    It sound like the government has a list of statutory authorities and government companies where they can start making cuts at an executive level. At the end of the day it would appear that many of these entities are just not being properly managed and changes to their leadership structure is what is needed in the short term if these entities are going to start to get things back on the right track.

  2. Whilst it is clear that Mr Swarbrick is doing a very good job getting stuck into tackling waste and financial mismanagement within Cayman Islands-based entities his efforts here raise yet more questions about his refusal to deal with other sensitive financial issues – specifically the funding of Operation Tempura, which as we all know was managed from the UK.

    The last attempt to find out where all the money was going took place at the beginning of 2009 – over five years ago. Since then the Tempura (or Cealt as it was re-branded) scandal has trundled on merrily draining the public coffers without any tangible results except that a number of people have probably made a nice little profit out of it.

    Apart from the actual costs of the investigation we’ve had two failed criminal cases, at least three civil actions (one of which is still on-going), two complaints, an FOI appeal that is being fought out in courts, financial settlements to two former RCIPS officers and who knows what else.

    At the time of the original audit it was estimated that about CI10 million had been spent and that only covered the first 17-18 months. We have no idea what the cost has been since but you can judge the levels of expenditure by the revelation that Martin Bridger has recently been awarded an almost unprecedented GBP480,000 (roughly CI630,000) by the Metropolitan police to cover his current legal expenses. Based on my sources the best guess is that the bill for Tempura over the seven years so far is now well over CI30million with a not insubstantial percentage of that going in legal fees.

    In addition to the hard financial issues material obtained since 2009 has raised some serious questions about validity of the original audit. Based on several FOI releases it would appear that some fairly important pieces of information supplied to Mr Swarbrick’s predecessor were, at best, a bit misleading. As one example the Metropolitan police have completely contradicted the version of events given to Dan Duguay in 2009 relating to recruitment of private contractors to take on the Tempura investigation. In blunt terms, according to their records what Mr Duguay was told is completely untrue.

    Considering these contractors were employed on what was effectively a blank cheque basis and made in excess of CI2million from the deal in just the first 8 months (we still don’t know how much they were paid in total) doesn’t that raise a few alarm bells?

    Apparently not because Mr Swarbrick, the Governor’s office and the FCO all regard Tempura as old news. According to the FCO Mr Swarbrick has better things to do than rake over the ashes of an expensive fiasco that they themselves initiated.

    I am not saying Mr Swarbrick is doing anything wrong by taking on the purely domestic financial issues in the Cayman Islands and giving them a well deserved kicking; that is after all what he gets paid for.

    What I do question is his decision to avoid tackling another funding scandal that has implications going all the way back to the people pulling the strings in London. I guess it’s OK to name and shame Caymanians but doing the same to people back home in the UK doesn’t make you very popular.

  3. John, be realistic. Like a lot of us ex-pats Swarbrick is a public servant on what is effectively nothing more than a temporary overseas posting. One day he will have to go back to the UK and find a job there. Would you rock the boat in his position?

  4. Now Mr David you know what you are saying don’t go so. Mr Swarbrick is a public servant yes, but do you really think in the back of his mind he wants to go back to the UK and find a job there? Cayman right now is one of the best places on earth to live. Every body does not know that unless you lived else where. I have not lived all over the world, but I have been to many many places and trust me, as small as this little rock is, I still prefer to stay on it each year waiting for Hurricanes and watching iguanas take over my back yard. Every body who come to Cayman want to stay, even the Millionaires, Billionaires and thrillionaires; who can spend there money anywhere they want to. I would not see the immigration full every day looking extensions and permits, and would see the airport out going line crammed. No matter what anyone want to think about Cayman, We are still free to roam. I say we are still blessed, and those who come to live on our shores should let their hair down and walk barefoot in the sand sometimes. We all are only here for a time, why not enjoy it.

  5. I said it long ago that a restructuring team should be lock-stepped with the AG to regroup these authorities who still believe and act as if they are a private entity. The problem as I see it is that the Deputy governor is having a problem putting a handle on the door in order to enact policy. Like a runner who has strayed from the governing policy path, authorities have made their own regulatory road, pulling up milestones and path markers behind them to distant themselves from any government policy route. As head of Civil service, the Deputy Governor will have to throw some weight behind the pathfinder AG and mark the course back to compliance and structured government management. If there is such a thing.