The Cayman Islands government spent nearly $35 million during a five-year period on consultants to support a range of public projects, spending which was largely not monitored and which, in many instances, was done without a business case plan, the auditor general’s office reported Monday.
The review, completed in February, was done alongside a wider audit that looked at how well the government manages its existing staff. The findings of that review will be reported separately.
Spending on consultant contracts varied from a high of $9 million during the government’s 2012-13 fiscal year to a low of $5.6 million in 2013-14.
Auditors said the government’s average spend on consultant contracts was $7 million per year between mid-2012 and mid-2017.
An additional $3.6 million was spent to hire temporary staff during the same five-year period, auditors noted. That spending was separate from consultancy fees.
“The government does not generally plan or project its need for consultants, with the exception of consultancy services for major capital projects,” Auditor General Sue Winspear wrote in the report. “Nor does the government routinely monitor how much it is spending for consultants or temporary staff.
“The government does not consistently consider value for money when engaging consultants.”
Auditors noted that 80 percent of the spending for consultants went to five general areas: legal services, IT consulting and implementation, advertising and promotion of Cayman in tourism markets, major capital projects and public relations.
Outside legal services cost $8.2 million during the five-year period, with one Queen’s Counsel often used by government in Crown prosecutions earning nearly $1 million during that time.
Advertising and public relations consultant services combined during the five years cost more than $9 million.
“Most of the spending was by the Department of Tourism on advertising agencies and placement of advertisements to promote the Cayman Islands as a tourist destination,” the audit report noted.
Meanwhile, most of the public relations consultant spending was done by the Ministry of Financial Services and Home Affairs or its predecessors in previous administrations.
As part of its review, the auditor general’s office looked at 23 consultant contracts maintained by government between 2012 and 2017.
Just six of those agreements were found to have business case studies or any justification for the services.
“In total, the government spent around $12.2 million on … 17 consultants’ contracts that were not justified by a business case,” auditors reported.
The six business case studies that were provided did “not always adequately justify the need to bring in consultants,” the review further noted.
In eight consultant contracts, nearly $5 million was spent on agreements that involved “sole source bids” – in other words, no other service provider was considered as is generally required with contracts over $250,000.
Proper public bidding for consultants can be time-consuming and auditors agreed in some cases that government needed to obtain the services quickly or discreetly. An example of the former is where the Solicitor General’s office obtains outside counsel for expertise in a court case, or the latter where the bids are for law enforcement/national security purposes.
However, there were some areas of concern raised in the audit, such as the Portfolio of Legal Affairs not having a policy in place for procurement. The portfolio, auditors said, spent $1.8 million on three consultants over the five-year period. One consultant alone received $925,000.
Meanwhile, a single-source procurement arrangement was approved by Cabinet that was a “continuation of previous, long-standing contracts” held by the Ministry of Finance.
“The government had continuously contracted with this consultant over a period of three decades,” auditors wrote. “The contract did not specify a price and was based on daily rates.”
The contract was terminated in 2016, auditors said.
“We appreciate that there may be times when the government needs access consultancy services quickly, but this should be the exception, rather than the norm,” auditors said.
Another issue raised with the consultant contracts involved the need for legal review of those deals.
Auditors found seven of the 23 contracts reviewed were subjected to lawyers’ scrutiny, but it was not clear if the other 16 had been looked at.
If no request was made for legal review on the agreements, auditors said it seemed that no such examination was performed.
“[This] may lead to weak contracts being signed by government,” the report stated.
For instance, auditors flagged up one consultancy deal done under “single source” bidding processes, where the final contract amount was $120,000 – compared to the original bid cost of $48,000.
“The scope of work changed significantly from the original contract,” the audit noted.
Two Ministry of Tourism contracts related to advertising that remained active had also been extended for significant periods. One deal, active from 2011 until 2017 was extended on five separate occasions.
Some of the bidding process issues will be sorted out when the government’s Procurement Law comes into effect, set to occur on May 1.
However, auditors noted that, at the moment, the government’s Central Procurement Office, has only two staff at present, including the office director and “lacks sufficient resources to support procurement across government.”