Auditor General Sue Winspear said the quality of public bodies’ financial reporting is generally good but there is much room for improvement.
She gave recommendations in the Office of the Auditor General’s 2022 annual general report on the state of financial reporting within the Cayman government.
Winspear suggested better compliance with procurement and public authorities laws, more prompt tabling of annual reports in Parliament and an increased focus on the Entire Public Sector account.
The recently published report summarises the financial results of ministries, portfolios, offices, statutory authorities and government companies.
It also provides audit opinions and information on the financial health of the public bodies.
The report, dated October 2023, says that, to date, 40 public bodies have received unqualified – clean or positive – audit opinions.
Meanwhile, six public bodies and the consolidated entire public sector account have their 2022 audits outstanding.
Winspear, in her conclusion to the report, said: “The quality of financial reporting is generally good but can be improved.”
She said the number and monetary value of audit adjustments noted in the 2022 audits are a cause for concern.
“These adjustments mean that decision and policies could be made based on inaccurate, unaudited financial information,” she said.
Winspear added public bodies can do more to ensure adequate disclosures on issues like severance payments, subsequent events, commitments and budget variances.
Non-compliance
The auditor general expressed concern about the extent of non-compliance with acts and regulations, specifically in relation to the Public Authorities Act and the Procurement Act.
The Public Authorities Act was introduced in 2019 to improve governance and align statutory authorities and government companies with the civil service.
However, a key section of the law – section 47 – has not been fully implemented or implemented consistently, Winspear said, resulting in inequality across the public sector.
The auditor general recommended that the government should consider the financial implications of that section of the act before further implementing it.
She also urged the Cayman Islands Monetary Authority, the Civil Aviation Authority and the Port Authority of the Cayman Islands to complete implementation of the section.
The Procurement Act was brought into force to improve public sector procurement and better demonstrate value for money.
The Central Procurement Office has developed significant guidance and provides advice, Winspear said.
“However, despite this, many public bodies are not complying with the legislation or complying with the guidance,” she added.
Tabling reports
Although most public bodies prepare annual reports, tabling these reports in Parliament is still a cause for concern, Winspear said in the report’s conclusion.
“The tabling and publication of annual reports are crucial for effective accountability and transparency,” she stressed.
She added that tabling annual reports is a requirement of the Public Management and Finance Act.
By not doing this, financial accountability to key stakeholders is significantly reduced, she said.
“Despite progress in tabling annual reports in previous years, it is disappointing that only 19 out of 40 audits completed for 2022 laid their annual reports,” Winspear added.
She suggested Parliament should sit more frequently to enable the tabling of annual reports or find a mechanism to enable this to happen when the House is not sitting.
Entire Public Sector
The auditor general said the Entire Public Sector account continues to receive “adverse” audit opinions year-on-year and stressed the government should focus on it.
She said her office is finalising the 2020 audit and the opinion will again be adverse.
The Entire Public Sector account includes the consolidation of the 21 ministries, portfolios and offices, and 26 statutory authorities and government companies.
It also includes executive transactions – transfer payments, coercive revenues, executive expenditure, assets and liabilities of the government.
Winspear recommended the Ministry of Finance and Economic Development continues with its corrective action plan and resolve all qualification points to improve the Entire Public Sector’s financial statements.
“This will move the Entire Public Sector account towards the desired unqualified audit opinion,” she said.
‘Lack of value’
Another recommendation was for the government to consider the necessity of the Sister Islands Affordable Housing Development Corporation continuing as a separate entity.
She said there has been a “lack of value provided to the Cayman public”.
No houses have been built or sold in the last two years, yet the costs of maintaining the entity structure, including performing a full audit, continue, she said.
Finally, Winspear recommended that public bodies take active steps to prepare themselves for upcoming changes in International Public Sector Accounting Standards and International Financial Reporting Standards.
She concluded: “While there is always work to do to improve upon what went before we should not lose sight of the vast improvements that have been made over time.”
The seven audits that are outstanding are for the Ministry of Health and Wellness; Cayman Islands Airports Authority; Cayman Turtle Conservation and Education Centre; Ministry of Planning, Agriculture, Housing and Infrastructure; National Housing Development Trust; University College of the Cayman Islands; and the Entire Public Sector.
The full report can be read here.
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