Mr. Bush: “[The report is] an almost completely fictional presentation.”
The complete lack of financial controls, management processes and oversight around the Cayman Islands’ former Nation Building Fund left the government at risk of fraud and abuse, and showed “how not to manage a government program,” Auditor General Alastair Swarbrick said Friday.
Ignoring the implied threat of legal action from Cayman’s political opposition leader if the report was released, Mr. Swarbrick made the 26-page document public at a press conference Friday morning, three days before its scheduled release on Monday, Aug. 17. Mr. Swarbrick said the early release was effected after Opposition Leader McKeeva Bush discussed aspects of the report in the Legislative Assembly on Thursday.
The findings of the report, generally affirmed and supported by Cayman’s civil service, led by Deputy Governor Franz Manderson, were reported to the Royal Cayman Islands Police Service, which for months had been looking into certain matters connected with the funds.
Mr. Swarbrick reported that $13.2 million was spent from the Nation Building Fund between 2009 and 2013. The operation of the program was done “outside the government’s own governance framework,” the auditor general said. There was no formal application process for any of the disbursements from the fund, whether for assistance to church programs, scholarships or other expenditures until 2012, when applications for fund scholarships appeared, auditors found.
Money from the Nation Building Fund was spent on the following (among other things): Unfinished church projects, including the construction of buildings, a vehicle, a $3,000 loan for a pastor that remains unpaid, and a total of $30,000 on refurbishments and planning fees for a gymnasium in West Bay that auditors could never find. The latter represented “an abuse of public funds,” according to auditors.
Some cash from the Nation Building Fund went to pay for supplemental government expenses that normally would have to be approved by the Legislative Assembly, auditors said. Those included $49,000 to pay for lawyers for the information commissioner’s office and $45,000 to help pay for government’s CCTV camera project.
“If you needed additional funding for your agency, you go back to Legislative Assembly,” Mr. Swarbrick said during the press conference on Friday. “They basically circumvented those rules. If you can’t follow that, you’re … throwing the whole process out.”
Two officials in the former premier’s office or ministry were alleged to have benefitted directly from certain disbursements from the fund for scholarships and training. In many cases, scholarship applicants were not assessed to determine whether they kept up their grades or even if they were completing their education that was funded by the government program, auditors said.
“We were unable to determine in every case that the money paid resulted in the education of a student,” auditors concluded. “We found instances where children of government officials, including one in the premier’s office, received support from the Nation Building [Fund]. Given the lack of scrutiny of applications, we believe this practice was inappropriate and provided an opportunity for possible corruption.”
Government paid $130,000 to the Hope for Today foundation, a nonprofit that helps recovering addicts. However, there was no application for those funds, nothing stating how the funds the organization was given was determined, or how the funds it received were to be used.
“This demonstrates a complete lack of respect for the use of public funds,” auditors wrote.
Another $240,000 was paid over two years to Cayman Traditional Arts to provide teaching programs for schools on heritage activities such as Cayman cooking, hat making and catboat building. There was no documentation regarding this program from the schools, auditors found, nor any statements about why the program was needed.
The report also found that Mr. Bush, the former premier, and his chief of staff, Leonard Dilbert, approved certain individual payments, and that civil service managers insisted they did not play a role in the program except to “write the checks.”
Moreover, in many cases there was no system of verifying what had been spent for which endeavors, and that record keeping was so poor in some cases that auditors could not determine what the Nation Building Fund money had been spent on.
“The reality is, trying to conduct this audit was challenging with the lack of evidence to support the payments,” Mr. Swarbrick said. “Checks were being sent out on the basis of just an email. There’s likely some value from the payments that were made, but there’s no way to assess that.”
Bush defends program
In the Legislative Assembly on Thursday, prior to the release of the audit, Mr. Bush alleged that Mr. Swarbrick was part of a wide-ranging conspiracy to drive the former premier from office in 2011-2012. He further alleged that Mr. Swarbrick had deliberately not spoken to individuals who had oversight of the Nation Building Fund program, including Mr. Dilbert and former ministry chief financial officer Josephine Sambula.
“[Mr. Swarbrick] has failed to interview the persons that he accuses, nor was the former [program] coordinator [or] myself as the former minister contacted,” Mr. Bush said. “The public would get [the audit] and I would not get an opportunity to speak to this House about it. When does a … supposed audit become a witch hunt?”
During Friday’s press conference, Mr. Swarbrick clarified that he had spoken with Ms. Sambula but had not interviewed Mr. Dilbert, the premier’s former chief of staff, who had taken up that post only toward the end of the existence of the Nation Building Fund.
The auditor general’s office does not interview politicians during the course of its audits on the operations of government in order to avoid the perception that the reports are “being cleared” by politicians, Mr. Swarbrick said.
Mr. Bush said it was “blatantly untrue” that scholarship recipients had suffered no consequences for failing grades or that he and Mr. Dilbert had made “all the decisions” in running the Nation Building Fund program.
He said the decisions on the program’s funding levels were made at the start of each budget year in the Legislative Assembly and that ministers’ participation in implementing government programs is clearly allowed and required by the Cayman Islands Constitution Order, 2009.
“[The report] fails to acknowledge government’s policy of greater assistance to churches,” Mr. Bush said, needs which he said were identified through government constituency work. “[The report is] an almost completely fictional presentation.”
During Mr. Bush’s “personal explanation” statement in the House on Thursday, George Town MLAs Roy McTaggart and Winston Connolly both stated that the opposition leader was actually seeking to make statements about the process and validity of the Nation Building Fund itself.
“This isn’t an explanation,” Mr. Connolly said.
Mr. McTaggart noted that Mr. Bush, as a member of the Legislative Assembly’s Public Accounts Committee, was making public evidence that would later be taken up by the committee and asked “whether it was appropriate for the opposition leader, who is a member of this committee, to be making utterances regarding this report.”
Speaker of the House Juliana O’Connor-Connolly said she had reviewed Mr. Bush’s statement beforehand and allowed him to continue.
“This toxic repor
t should be struck from the record or [the auditor general] should withdraw his report,” Mr. Bush said.
“This is meant to damage myself and other civil servants and other politicians,” Mr. Bush said. “He’s not far off … from being sued.”
Earlier in the week, Mr. Bush questioned whether the auditor general had legally overstepped his bounds in issuing another report concerning government land management. The audit reviewed, among a number of other land deals, the National Roads Authority agreement between the government and the Dart group of companies, and the Health City Cayman Islands agreement.
“The auditor’s reckless misuse of his position has seriously damaged the reputation of the Cayman Islands by calling into question any agreement that a foreign investor who wishes to invest in the Cayman Islands may make with government,” Mr. Bush said in the Legislative Assembly on Wednesday. “I would argue that the auditor general has done what he accused the Cayman Islands government of doing, by exercising a role that he has no legal authority to exercise.”
The audit, which was publicly released last month, stated that the Cayman Islands government acted unlawfully and “without proper authority” in signing two of the territory’s largest-ever private sector development agreements. The original National Roads Authority agreement, which paved the way for construction of a Kimpton hotel and permanent closure of a section of West Bay Road along Seven Mile Beach, was negotiated by elected ministers “without the knowledge or assistance of civil servants” the report further stated.
Mr. Bush’s dispute regarding the land management audit is essentially that it was not a “financial audit” but rather that it delved into areas of legality and governance concerning project decision-making and funding that heretofore had been the purview of the Cayman Islands courts.
“I doubt the Cayman Islands Constitution expected to confer that authority on the auditor general,” Mr. Bush said.
Making a rare personal response to Mr. Bush’s allegations of impropriety by his office, Mr. Swarbrick said international standards of public sector auditing, known as ISSAI, clearly encompass both the Nation Building Fund and government land management audit within their remit.
ISSAI 100 – the fundamental principles of public sector auditing – identifies three separate kinds of audits: financial audits, performance audits and compliance audits.
“Compliance audit focuses on whether a particular subject matter is in compliance with authorities’ identified criteria,” the principles state. “These authorities may include rules, laws and regulations, budgetary resolutions, policy, established codes, agreed terms or the general principles governing sound public sector financial management and the conduct of public officials.”