The Public Accounts Committee has recommended the Auditor General’s office receive a $177,000 equity injection to ease cash flow problems.
Minutes of the Standing Public Accounts Committee meetings with the Auditor General’s office show that the problem has gone back more than a year.
When queried about the case flow difficulties, Auditor General Dan Duguay said they were because his office wasn’t being paid promptly by all of its government clients.
‘Some departments are not paying on time,’ he said, adding that cash flow situation at his office had become a real concern.
During a meeting with the PAC in January, Mr. Duguay sought the support of the committee for a $200,000 equity injection for the Audit Office.
In a Power Point presentation attached to the minutes of that meeting as an appendix, the Auditor General’s Office stated the accounts receivable collection system wasn’t working.
‘Despite good management, [the] Audit Office continues to struggle with cash flow issues,’ stated one bullet point.
Other bullet points stated that the accounts receivable balances were beyond the Audit Office’s ability to fund, and that much effort was being spent on sending out reminders and telephoning clients to get them to pay their bills.
A chart showed that as of the end of 2006, the Audit Office was owed $165,000 in arrears, an amount almost equal to its $177,000 monthly budget.
Because of the cash flow difficulties, the Audit Office was unable to pay its own bills.
The PAC agreed to an equity injection of $200,000 at that 9 January meeting, but the Audit Office is still waiting, and now will apparently receive $177,000 if the Legislative Assembly approves the supplemental appropriation.
Mr. Duguay said the cash flow problem did get somewhat better in the period between January and August, but that it was still an issue.
Through the end of August, The Audit Office had about $230,000 in accounts receivable and its August billings amounted to about $150,000, Mr. Duguay said.
‘That means for previous months, people owed $80,000,’ Mr. Duguay said.
‘We always get paid in the end,’ he added. ‘But we always seem to be living on the edge.
‘I just needed more cash flow to make things work properly.’
Mr. Duguay said only a small portion of the Auditor General’s budget comes from money approved in the Legislative Assembly.
‘About three-fourths of the money comes from other agencies,’ he said.
Cash flow has only become an issue since the implementation of the Public Management Finance Law, which requires government departments and agencies to bill other government departments and agencies for their services.
‘It was never an issue before because we didn’t bill clients and got all of our money from [Legislative Assembly],’ Mr. Duguay said.
Although it has caused the Audit Office some difficult, Mr. Duguay supports the PMFL. However, he said some people in government have complained that all the billing between government departments is ‘just making work’.
Mr. Duguay doesn’t see it that way.
‘If you want to set up government to run like a business, [billing for services] is a part of that,’ he said.
The equity injection will to be repaid with interest, Mr. Duguay pointed out.
‘It’s a loan in everything but name, really,’ he said.
When tabling in the Legislative Assembly the PAC’s report on the Annual Reports of the Cayman Islands Audit Office for the Financial Years Ending 30 June 2005 and 30 June 2006, PAC Chairman Osbourne Bodden announced the Audit Office’s need for the equity injection. He also said the Portfolio of Finance and Economics would be reviewing the billing process of Audit Office.
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