Auditors’ concerns remain about NRA deal

West-Bay-Road-Closure.jpgThe Cayman Islands government may still be acting “without proper authority” during the renegotiation process for a major land development agreement, officials with the Auditor General’s Office said last week.

“We have communicated again our concerns around this agreement in the way that’s being developed and how the process is going,” Acting Auditor General Garnet Harrison said during a Wednesday meeting of the Public Accounts Committee. “All government expenditure must be approved in the Legislative Assembly.”

The concerns center on what has become known as the National Roads Authority agreement between the government authority and Dart Realty.

The first section of that arrangement, which paved the way for construction of a Kimpton hotel and permanent closure of a section of West Bay Road along Grand Cayman’s Seven Mile Beach, was negotiated by elected ministers “without the knowledge or assistance of civil servants,” according to the auditor’s office. Other aspects of the agreement, while legally binding on government, have been in the process of renegotiation almost since the inception of the Progressives-led administration in a years-long undertaking that one senior civil servant called “tortuous.”

Asked Wednesday by George Town MLA Winston Connolly whether all negotiations now surrounding the additional amendments to the NRA agreement were being conducted “lawfully,” audit office managers opined that there were still some risks associated with the way government was handling the issue.

“We have flagged… a number of areas of disagreement in terms of whether or not we believe that the current processes being followed are in compliance with the law,” said performance audit manager Martin Ruben.  “Are the current processes being followed in compliance with the law?” Public Accounts Committee chairman Ezzard Miller asked.

“We believe that there are some areas that it’s questionable whether or not the current process is following the law,” Mr. Ruben replied.

Mr. Ruben further explained: “When these agreements are negotiated and eventually signed… before any government official can technically sign an agreement to spend money, or collect money or [forgo] revenue, in our opinion, it should be the Legislative Assembly that has the final say. For example, you could have the [assembly] approving appropriations and budget bills… and then have another whole set of financial transactions occurring during the year for which the LA has no knowledge. That is not the intent of the constitution and the Public Management and Finance Law.”

Mr. Ruben said auditors have explained their concerns regarding the negotiations to government and are trying to get the administration to comply with the law “in all respects.”

It is a matter of some dispute, in the view of civil service leaders, whether the auditor general reached the correct conclusion in his 2015 audit that certain actions by government with regard to the earlier NRA agreement negotiations were “unlawful.”

For instance, Planning Ministry Chief Officer Alan Jones noted that certain stamp duty and customs duty waivers can be provided, according to the law, without approval of the Legislative Assembly. The auditor general’s position has been that those “concessions” attached to certain property development agreements involve government waiving revenues it would normally receive and should be included in budget documents, if monetarily significant.

“There are some differences with the auditor general,” Mr. Jones said. “Some of those differences will only be resolved, I believe, if government… decides to make legislative changes.”

Legislative changes with regard to waiving certain duties, or taxes that government collects have been made relatively recently. However, auditors have said those changes would essentially serve to institutionalize corrupt practices that were criticized as part of their 2015 report on the government land deals.

The amendment to the Public Management and Finance Law involved giving the Cabinet, and in some cases the finance minister acting alone, the ability to waive government revenue collection in certain circumstances: For instance, waiving customs duty on construction materials for a needed public project. Previously, the power to waive or reduce those fees lay with the financial secretary.

This change was recommended by a select government committee which spent a year reviewing finance law amendments and was approved in October by the Legislative Assembly.

“This amendment contradicts the effective role Cabinet plays in the governance framework… reduces transparency and accountability for these types of transactions and effectively politicizes an administrative decision-making process,” Mr. Harrison told the legislature’s Public Accounts Committee during an earlier meeting.