For the second consecutive year, the Cayman Islands government’s attempt to complete an audit of public sector finances has received a failing grade from the auditor general’s office.
According to a quarterly report released Monday, government’s entire public sector finances for the 2014/15 budget year have been reviewed and given an “adverse” opinion. That means the figures presented, while able to be audited, had significant errors or gaps in information.
The review of the entire public sector finances for the civil service, as well as the 26 public authorities managed by government, was completed on Dec. 7, 2016 and has not been made available in the Legislative Assembly.
The public sector also received an adverse opinion for its 2013/14 budget year audit as well.
According to Auditor General Sue Winspear’s quarterly report, an agreement has been made on releasing the 2014/15 entire public sector audit in conjunction with a progress report on the public sector’s 2015/16 financial reporting.
“It will touch on the 2014/15 year end position, but focus on the current 2015/16 position,” Ms. Winspear said. “It will bring out the key themes and actions that would improve further financial management and financial reporting in the Cayman Islands public sector.”
All previous attempts to audit the finances of Cayman’s entire public sector were disclaimed, meaning auditors could not make sense of the information provided.
The auditor general’s office has said in recent months that most individual government agencies are submitting far better quality financial statements than they ever have under the accrual accounting system Cayman has used since 2004. Most entities are either receiving “clean” audit opinions or audits with just a few missing pieces of necessary information.
“[There is a] general trend of continued improvement seen in the quality of financial reporting by government entities during 2015/16,” Ms. Winspear’s quarterly report issued in December said.
However, some wider problems across the public sector, particularly with government liabilities for pension and healthcare and in government revenue collections, have not been resolved, auditors noted.
These issues have been revealed by Finance Minister Marco Archer over the past two years. He has said government is doing what it can to address them one-by-one.
Mr. Archer said the lack of formal acknowledgement of a projected $1.18 billion healthcare liability for retired civil servants over a 20-year period is one of the reasons government’s financial statements for the 2013/14 budget year were given an “adverse” opinion by auditors.
That the figure is contained in notes to government financial statements for all who wish to see, Mr. Archer said, indicates that local finance law would be changed to allow government not to report the figure as part of its financial statements.
In an effort to prevent its financial statements from being disclaimed or receiving an adverse opinion in the future, Mr. Archer also said government intends to split up reports for the three pension plans it manages on behalf of public sector employees.
Currently, the financial estimates for the civil servants’ pension plan, the legislators’ pension plan and the judiciary’s pension plan are reported jointly. Auditors have long argued that this is an inaccurate way to report those figures for retirement savings because each plan is in a different financial position.
The judicial pension plan, for instance, is fully funded, while the legislators’ plan is barely funded. The civil servants’ retirement fund has a significant unfunded liability as well.
The healthcare and pension issues were not the only reasons Cayman’s 2013/14 financial statements for its entire public sector received an “adverse” opinion from auditors. Other reasons included lack of updated information on government property values and lack of credible information about government earnings/receivables.