AG:Accounts a national crisis

| 20/04/2010

Cayman Islands News, Grand Cayman Island Headline news, Cayman government finance(CNS): Full update – The auditor general has warned of “tremendous consequences” if the dire situation regarding government’s accounts is not addressed immediately. Describing the situation as a national crisis, Dan Duguay said that some two years since his first review of the state of public financial accounting little has changed, despite government spending more then $1million on an accounting task force to try to get the accounts up to date. Some organisations have made no improvement at all, even falling further behind. Others, he says, have made minor progress. But while a number of government entities have caught up with their financial statements, few have filed an annual report. 

Duguay said this “national crisis” was having an impact on the country’s reputation, but above all the government was not being accountable to the people when the Constitution and the laws demanded it, a situation that he said was simply unacceptable.
Following the OK from the chair of the Public Accounts Committee, Ezzard Miller, who said he had done all he could to expedite its release by chasing members of the Legislative Assembly  to make sure they had their copy first, Duguay was finally able to release the much anticipated State of Financial Accountability Reporting 2010.
Speaking about its contents, Duguay said he really hoped that government would take the recommendations he had made as seriously as the situation warranted. He pointed out that since the last report in 2008, which first revealed the situation, no one had taken responsibility to correct what he called an appalling situation.
“Officials could not provide me with a comprehensive roadmap for how they believe financial accountability reporting will be brought up to date. I found that only a few statutory authorities have shown some improvement,” Duguay added.
Despite government spending almost $1 million in this fiscal year in an effort to address the problem with a private sector task force, the auditor general said his office had still not received the 2004/05 draft set of statements and the supporting financial records necessary for him to audit the government books from the Ministry of Finance (formerly the Portfolio of Economics).
In other words, there is still no accountability in government spending since 2003/04, the last time the Caymanian public was able to see what their government had earned and spent, and the entire government accounts were now a further two years behind from when he first revealed the serious lack of accountability to the Caymanian public in 2008.
Duguay pointed to some improvement among individual government entities, but not as much as he had hoped. He said eight of the 25 statutory authorities and government companies had improved in regard to the financial statements. In addition ICTA, CIMA and CINICO were all generally up to date, Duguay said. However, all the others either did not improve or, in the case of Cayman Airways, got worse.
Applauding the efforts of the eight which had improved, he said much more work still needed to be done as only the three noted above have actually tabled recent reports in the Legislative Assembly . He said 73 sets of financial statements had been prepared and audited by his office but they had not been appropriately tabled so they were not public documents.
“This lack of transparency and public scrutiny is an effective avoidance of accountability by government officials and I consider that completely unacceptable,” Duguay said.
The auditor also warned that in many cases where he had audited statements he was unable to offer an unqualified opinion. In other words, his audit found the information in the statements to be inaccurate or lacking in information, or that areas of the accounts were unreliable. He said in other cases there were such significant deficiencies he could only offer an adverse opinion, which meant the accounts were completely unreliable.
With ministries and all government entities for the most part still well behind in their accounts, Duguay noted that the task force might be better served if they began working on the more recent financial record.  The information they were currently working on, he observed, was now so old it could be considered almost meaningless.  
Duguay said that officials in government have informed him that they believe the governance framework is broken and that the legislation and regulations around public management and finance are an impediment for them to take corrective action to restore financial accountability, which is why there has been so little improvement since his first assessment of the situation.
The auditor also raised concerns that no one in government seemed to have taken the lead in addressing the problem since the July 2008 report was published. He said he thought government would have adopted a comprehensive plan for the restoration of financial accountability and periodic reporting to the Legislative Assembly, but government has still not responded to the recommendations in his last report.
Duguay included the press release in this latest document which was issued by the financial secretary to the 2008 report, which only offered reasons for not doing the accounts and not how the accounts would be addressed. Duguay added that government had never undertaken a review to find out the reasons why financial accountability was not working. “There was no plan developed,” Duguay added, saying no one took leadership and essentially left all of the government entities to develop their own plans.
Meanwhile, the PAC at the time of the report did not hold a meeting as recommended by Duguay to question chief financial officers and it was not until the new committee wasformed under Miller that the document was examined by members. However, when the meeting was convened there were no witnesses and the PAC agreed to wait until the next report before calling the CFOs to account.
Duguay noted that there have been no consequences for government officials involved this who have failed to account to the people of Cayman. The auditor said that if government departments do not prepare their budget financials the consequence is that they do receive any funding. “There is no such consequence for not reporting financial results,” Duguay stated in the report. “Consider how much more accountable government … would be … if there was such a tremendous consequence for not meeting the requirements of PMFL for financial reporting.”
The office of the auditor general has made four recommendations which it says provides government with a way to move forward. Firstly, the auditor general has recommended that someone is appointed to take leadership and responsibility for the crisis. Secondly, a strategic direction is established which would determine the value of trying to do accounts which are six years old against the benefits of concentrating on current activities. Thirdly, Duguay suggests that the government framework be addressed and a central direction for the financial function introduced, as Duguay said it seems unclear to senior government officials that they have this authority. Finally, Duguay emphasised the importance of oversight by the Legislative Assembly as representatives of the people.
Duguay has also included responses from the Ministry of Finance in his report, which will be on CNS later today, revealing the problems that the task force has encountered since it began its work.

Category: Headline News

Comments (33)

Trackback URL | Comments RSS Feed

  1. Anonymous says:

    This is just a prelude of things to come, I won’t  be surprised if we are faced with the same takeover as in the TCI.  I would really hate to see it happen here but there are just too many gray areas within our financials.

    For the sake our of our beloved country leaders please come together address and resolve these issues before it’s too late.  Remember the UK is watching and if our elected leader are unable to perform the task, the UK will.

     

     

  2. Git 'er done says:

    After reading this report, it becomes obvious that they decided to "shoot the messenger".

    Good luck to you Mr. Duguay you did your utmost to point it out, but you don’t need this kind of absurd behavior and the people of Cayman are stuck with it!

    Wish us luck.  Happy Trails.

  3. Anonymous says:

    RESPONSE TO 09:49

    You people are alwauys blaming caymanians . The problem is that the majority of these CO,s and CFO,s are expats, and that is the reason that the finances of the country are in such a mess

    • Anonymous says:

      Anon Wed 14:46:

      No they are not predominantly ex pat. I would love to name names but it wouldnot be fair. Besides some of them (the Caymanians) are actually doing a good job without the support of their senior managers who ARE almost 100% born Caymanians (an essential "qualification" for senior hugely paid positions in the civil service).

    • Anonymous says:

      This is patently untrue….with the exception of the Auditor General and the Complaints Commissioner, all other COs are Caymanian……get your facts straight before shooting off your mouth.

  4. Anonymous says:

    Banker at 8:18. I work at the cidb. Just to correct  that post. As reported in the LA last month, the CIDB has brought its financials upto to 2008 since the new board was appointed in July 2009. the report to the LA confirmed that the CIDB has sorted out 3 years of financials  in 7 months. (the 2008 one has not been tabled in the LA yet, but has been completed) . It will be tabled in the next session of the LA. Last month’s update to the LA also confirmed that the draft 2009 financials have already been completed and are now being checked for final sign off.

  5. Anonymous says:

    Don’t worry Mac, I took the liberty of sending a copy ofthis fine report to Dr. Shetty and associates. Best they should know what they are getting into…

  6. Mr. Helpful says:

    I am of the opinion that the people of the Cayman Islands would not trust the Civil Service to take out the trash. This is a shame but unfortunately is a well founded perception. Perception is reality. This must be fixed right now by the people we elected to govern.

  7. Anonymous says:

    Dan we going to  miss you and your refreshingly blunt honesty.  Respect, sir.

  8. Anonymous says:

    How is Cayman able to float bonds and borrow money without audited accounts? How can it prove that the money that it spent was used properly? It isn’t ignorance or stupidity that is the cause of our problem. Cayman has the highest per capita ratio of financial experts in the world.

    Who is responsible for this financial chaos? Is there a reason why they haven’t produced accounts? If the system is not accountable how do the stakeholders (lenders and citizens) know that money wasn’t stolen or thrown down sinkholes of stupidity?

    All of our Anticorruption and Freedom of information laws are meaningless without auditable accounts, without them we are no different than any other third world country where political corruption, cronyism and nepotism siphoned off the assets of the country leaving an empty shell of debts and liabilities for future generations to pay.

    This is a very serious situation. We wonder why the UK is holding our feet to the fire about new loans and our shifting budget and we complain about costly external investigations of corruption, yet these issues would disappear if we had our financial house in order. The UK is not the problem here, we are.

    Instead of focusing on good management and accountability we are scrambling for more revenue. With enough cash coming in the door nobody will pay attention to our incompetence or missing books and we can continue with business as usual, whatever that means.

    Well Caymanians are already paying the price in an unnecessary increase of duties and new fees. Next they will be asked for more in the form of new property or payroll taxes or maybe something more insidious. More money to cover over mismanagement always leads to disaster and guess who will be left holding the bag.

    With clean, traceable and accountable national accounts both the man on the street and his politicians will be able to walk with their heads held high and without worrying if the UK was going to take over the affairs of our island. Would the Turks and Caicos be in that situation if everything was above board?

    • Anonymous says:

      > How is Cayman able to float bonds and borrow money without audited accounts? How can it prove that the money that it spent was used properly?

      You seem to be thinking that purchasers of bonds should have influence on what the proceeds are used for. The capital markets simply do not work that way.

      In assessing one of these deals the purchasers will look at the risk associated with the country (primarily reported by the ratings agencies) and conduct their own due diligence. They will also consider the rate of return and then make their purchase decision.

      It has nothing to do with what the proceeds will be used for by the C.I. Government.

       

      • Anonymous says:

        Thanks for the heads up on international finance. Wish my banker felt the same way. Sounds like the same thinking that got the world into the sub-prime mess.

  9. Anonymous says:

    If the devil finds work for idle hands, protectionism promotes laziness and breeds incompetence. At what point does shame kick in?

    The boat Cayman must return to its core values of hard work, integrity and feeling secure with those who come to assist us to compete internationally.

     

     

  10. Anonymous says:

    I applaud Dan for continuing to publicise these disastrous reports, even though the powers that be have decided to get rid of him.  Dan needs to be kept on in some capacity in the new regime until this backlog is up-to-date, as it will take the new AG too long to get up to speed with these matters. – no doubt that is exactly what the Government wants.

    • Anonymous says:

      That’s it Dan!

      Rub their noses in it until the last day.

      They are standing with their back to you with their hands over their ears. They would rather do that until you leave than address the issues.

  11. Joe Bananas says:

    Hopefully this will show all Caymanians something that many people living on Cayman but from a developed country knew from the start.   And what is that?  Being a Caymanian does not automatically and magically make a person competent, or give him/her a skill or impart a much needed work ethic.

    The fact that these persons have been negligent to the point of being a criminal for the past 4 or 5 years AND still have a job to this day and beyond and still get paid for obviously not doing their jobs and not taking responsibility for something so obviously important to the future of their own country should now be obvious to everyone period.

    To have let these people get away with it for so long without holding them accountable just proves that your elected leaders suffer from the same problem.  Cayman has chosen to let itself be led down the road to failure rather than hire an outsider for anything considered important.  The Civil service is bloated with non performing but politically correct persons who are now responsible in part for the soon to be total failure of Government.  The Governor has even let them try to fix the problem with the result being?? Surprise surprise. Absolutely nothing done by almost every one of them.

    How to actually fix the problem and then keep it from reoccurring?   Well if you can’t figure that out for yourself by now then you are part of the problem.

    How bad will leadership and followers let the situation get before they finally realize that they do not magically possess what is needed to fix and then run a country successfully is the only question not answered now.

    • Anonymous says:

      Joe, you may have hit the nail on the head. Accountability applies to management as well as accounting and accountability is hard work. The first thing that a manager has to be able to do is fire people who don’t perform and by extension be fired if he doesn’t. As long as Civil Service jobs are protected we will never have accountability or competence. Time to change the whole system before it sinks us all.

  12. Anonymous says:

    Mr Duguay’s report is an extraordinary catalogue of incompetence, finger pointing and buck passing on the part of the civil service – especially those at the top. The Ministry of Finance calls for measures to be included in the PMFL to hold Chief Officers accountable for dodging their responsibilities. This is a typical approach in the civil service – make a law the entity responsible for "punishing"  ‘wrongdoers". God forbid that actual people like the Governor or Deputy Governor or Financial Secretary -all of whom have the power and authority to discipline non performing Chief Officers -should do the job. Put it in a law – like mandatory sentencing – so no person to person performance assessment and disciplinary procedures need take place. It’s pitiful. All civil servants from top to bottom are supposed to have their performance assessed regularly. If they fail to carry out their duties consequences (negative not the usual promotion) should follow.

    Mr Duguay recommends a leaderbe appointed to deal with the crisis. Er, Dan, the country thought we already had one. That would be the Financial Secretary, himself a former auditor.

  13. Anonymous says:

     The accounting task force should be working with the financial section to get the work done.  How can you bring in a task force to bring accounts up to date, if they are not going to be working with the people who could give them an insight into what they need to get the work done.

    Check the operation within the department and that will shed a light on what is happening.

  14. Banker says:

    What an astonishing report. There is much to be explained by Government but one item that hit me was the audit of the Cayman Islands Development Bank. The last one was for the year ended June 30 2004 and there has been no progress since the 2008 Auditors Report.

     

  15. Anonymous says:

    and what do we do with a national crisis ?

     

    Nothing! …or just fire the man who pointed it out.

  16. Anonymous says:

    I would like to see the AG name and shame those departments who have not made efforts to catch up. It is easy to make general sweeping comments but back it up with detail.

    • Dan Duguay says:

      Please read the report (which is highlighted in the article) It includes a chart of the exact situation for each government statutory authority and government company. The Ministries and Portfolios situation is included as Table 1 on Page 7.

  17. Lord Lucan says:

    This is an absolute disaster. All credibiliity the islands had has gone and look out for UK intervention. Having said that no doubt beloved leader will put the blame on the PPM. We call ourselves a financial centre and cannot keep the books? No wonder the AG reports get hidden and now he is off. Talk about shooting yourself in the foot.

  18. West Bayer says:

    Speak it my brother, SPEAK IT!!

    We need to hear without fear.

  19. Anonymous says:

    Of course they won’t take the report seriously but instead get defensive and say that all the AG does is attack the government, idiots.  What do you think got us into the mess in the first place.  Can you imagine letting your own finances get this out of hand…let alone those for a country of Cayman’s importance in the offshore world.  Wow, can’t wait to see what happens!

  20. Anonymous says:

    Spot on as always Dan. But the emu have their heads buried in the sand as usual…

  21. Anonymous says:

    I agree with Mr. Duguay, & it is only going to get worse with him no longer looking out for the Cayman people. It is obvious why he was ‘got rid of.’ Government & the dictator is happy!

  22. Anonymous says:

    Wait now for the civil servants to say it is all the fault of the Public Management and Finance Law/ decentralisation/ the government/ Miller report blah blah blah. The truth is they are lazy incompetent and know they are unaccountable to anyone because they will NEVER (if they’re Caymanian) be fired for non performance and the reason for that is that their bosses – the Permanent Secretaries/Chief Officers – know that they themselves wont be even disciplined, let alone fired, for THEIR refusal to BE MANAGERS and earn their money by insisting on their staffs’ performance. It wont happen because these same managers have all along encouraged their staff to think the PFML is all wrong so ignore it. And for that they earn $140,000 plus a year.

    • Anonymous says:

      If Professional Auditors have worked for one or two years at a cost of $1Million so far, is there not something seriously wrong with the Public Finance & Management Law, and its implementation ?

      Why blame the poor Civil Service who have been dealt a bad hand, and are expected to play it without the obvious support that they need.

      • Anonymous says:

        18:17, it’s not the entire civil service that is at fault just now even though they are being blamed for everything. Most of them do their work irrespective of the PMFL or any other such law -it doesn’t affecttheir daily routine. Nor is it the fault of the implementation of the PMFL which was carried out over several years in stages and with masses of training sessions provided. The problem is that certain high paid senior managers past and present refused to accept the changes to their (lazy unaccountable) comfort zone and discouraged their staff from attending these sessions. My spouse (then in a Ministry) had to argue with the Chief Officer for the time off to attend sessions, even though it had been mandated by the then Chief Secretary and Financial Secretary.

        I don’t think Mr Duguay is giving enough credit to those CFOs who are doing a pretty good job in an environment in some cases where their bosses are still resisting the accountability required by the PFML.