EDITORIAL – Financial audits: from ‘deplorable’ to ‘pleasing’

“The quality of the Government’s financial reporting has improved significantly over recent years … Over the same period, particularly the most recent two years, there has been a marked increase in the number of entities preparing and tabling annual reports rather than only financial statements; thereby meeting a key requirement of the Public Management and Finance Law and enhancing the level of financial accountability to key stakeholders.”
– Office of the Auditor General report

Kudos to the government entities that earned high marks for financial reporting in a recent audit. As the Compass reported last week, the auditor general has given ‘unqualified opinions’ to 35 of 44 public sector entities after reviewing their financial statements for the 2016-2017 budget period.

It was the latest development in a positive trend which has seen ever more government entities reaching this important bar.

It has been just over a decade since then-auditor general Dan Duguay warned that reporting standards were so poor that, in his opinion, the Legislative Assembly had ‘lost effective control of the public purse’.

“I find the current situation deplorable,” he wrote in a report back then.

It has been a long road, but slowly, surely, a sense of order is being restored. It is well worth the effort. Officials must keep pushing for even greater thoroughness and transparency. Without accurate, reliable financial statements, lawmakers cannot make informed decisions about resource allocation; the public is left in the dark.

As Auditor General Sue Winspear noted, there is more work to do.

Two of the four entities that failed to secure an ‘unqualified audit’ did not reveal the details of termination benefits paid to key management personnel. That practice must halt immediately. When public officials are being paid from the public purse, the public has a right to know what is being paid.

The report also recommends that entities produce and table annual reports to give context and meaning to the financial documents, and offers several recommendations to improve governance, increase transparency, manage expenses and protect against fraud. In our view, implementing these recommendations would bring the Cayman Islands to the ‘next level’ of responsible governance, joining other highly functioning democracies that prioritise transparency, fairness and efficiency in government affairs.

We are particularly struck by the recommendation that government boards be active, meet regularly and be comprised of knowledgeable, impartial and politically neutral members able to provide strategic guidance and provide accountability to government works. They, too, must keep accurate records of their discussions, decisions and correspondence, and conduct their work, whenever possible, in the clear light of day.

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