Emphasising the continuing improvement in the Cayman Islands government’s financial reporting, the Office of the Auditor General has given the highest possible rating to 35 of 44 public sector entities when auditing their financial statements for the 2016-2017 budget period.
“[T]his continues the positive trend seen over recent years with this being the highest number of unqualified opinions issued in one accounting period to date,” Auditor General Sue Winspear said in a news release accompanying her office’s report on the 18-month period that ended 31 Dec. 2017.
In addition to the 35 entities receiving ‘unqualified’ opinions, four received ‘qualified’ opinions – the Ministry of Community Affairs, Ministry of Human Resources and Immigration, Health Services Authority and Cayman National Cultural Foundation.
The audits of the consolidated Entire Public Sector account, and five individual entities – the Airports Authority, Port Authority, Cayman Turtle Farm, Ministry of Education and Ministry of Health – have not yet been completed.
According to the auditor general’s statement, “A decision was taken to produce the summary report now rather than wait any longer, to best serve the public interest.”
Opinions and concerns
An ‘unqualified’ opinion means all of the information in the financial statements can be relied upon – but is not an indicator of the financial health of an organisation.
A ‘qualified’ opinion means that most of the contents of the financial statements were fairly stated but a portion cannot be relied upon.
Winspear said, “Of the four entities receiving audit qualifications, this included two Ministries for failing to disclose the value of termination benefits paid to key management personnel, which is a requirement of international public sector accounting standards. I am pleased to say that all four of these entities have subsequently received an unqualified opinion in 2018.”
For 19 entities, the auditor general included ‘matters of emphasis’ or ‘other matters’ that she “believed needed to be brought to the attention of the users of the financial statements”.
The two most significant issues she included in those reports were concerns about the ability of some entities “to continue operating without the financial support they were receiving from core government”, and supplementary appropriations not being passed into law by the Legislative Assembly in a timely manner as required under the Public Management and Finance Law.
In the general report, the auditor general highlights other issues including assessing declarations of interest by ‘key management personnel’, managing travel expenditures and controlling overtime payments.
From ‘deplorable’ to ‘pleasing’
The auditor general’s report highlights the continual improvement in the quality of the government’s financial reporting over the past decade.
For example, in 2007-2008, only one of 12 core government entities – the Portfolio of Legal Affairs – received an ‘unqualified’ opinion, compared to 12 of 16 in 2016-2017.
Similarly, in 2007-2008, only 13 of 26 statutory authorities and government companies received an ‘unqualified’ opinion, compared to 23 of 28 in 2016-17.
In an April 2008 report, then-Auditor General Dan Duguay said, “I believe that the Legislative Assembly has lost effective control of the public purse … I find the current situation deplorable. It needs to be rectified immediately.”
In the current report, Winspear said, “It has been pleasing over the years to see the consistent improvements made across the public service in producing financial information which Legislators and officials can use to make effective and robust decisions regarding the allocation of resources.”
She said in the statement accompanying the report, “It is also pleasing that all entities have produced an annual report to accompany their financial statements, which helps contextualise and explain the financial results by telling the reader what they have achieved for the money they have spent.
“It is therefore disappointing that many of these insightful reports have not yet been laid in the Legislative Assembly so that people can see what was achieved during the period with public funds, and this is a key recommendation I am making for improving accountability and transparency going forward.”