Role of the auditor general

| 12/11/2014

The auditor general has come in for much undeserved or un-earned criticism from certain politicians in recent times but I feel duty bound to comment on the two most recent acts by politicians during the last meeting of the Legislative Assembly. The first was thestatement by the minister of finance in offering his explanation and/or excuses for the latest bad report tabled by the auditor general on the state of government’s accounts or the lack thereof. The second was the “personal explanation” given by the leader of the opposition, who was the minister of finance for the period reported on by the auditor general.

I believe both of these statements were inappropriate and should not have been allowed by the speaker of the Legislative Assembly.

The auditor general's position and therefore the occupant at the time enjoys certain protections under the Cayman Islands Constitution Order 2009 and he cannot be instructed by anyone, not even the governor and reports only to the Public Accounts Committee (PAC) of the Legislative Assembly. The PAC is elected every four years immediately after the swearing in ceremony of the newly elected members of the Legislative Assembly.

In 2013 the most unusual thing happened. Hon. Alden McLaughlin, as premier of the Cayman Islands, nominated the former minister of finance to be a member of the PAC and I understand the other members of the committee later elected him deputy chairman of the PAC.

This has to represent a serious breach of “good governance” best practices, which the PPM government claims to uphold and practice. It has also been reported in the media that the current PAC chairman has written to the leader of the opposition and asked him to resign from the committee, a request that is not grounded in either the Cayman Islands Constitution Order 2009 or the Standing Orders of the Legislative Assembly and has been ignored by the leader of the opposition — and rightly so.

The proper course of action would be for the premier, who nominated him in the first place, or the chairman of the PAC, as a member of the Legislative Assembly, to move a motion in a duly constituted sitting of the Legislative Assembly to remove him and elect another member to the PAC.

Not likely to happen; they are afraid of the leader of the opposition's response to such a motion.

This kind of erosion of the authority and importance of the PAC and the auditor general is unfortunate and is part of the wider erosion of the morals, principles and ethics we should expect and get from elected members of the Legislative Assembly.

The proper procedure and process that is required by Standing Orders in the Legislative Assembly and the Public Management and Finance Law (PMFL) for the handling of the reports of the auditor general is as follows:

*All government entities should close their accounts and submit them to the auditor general for his audit within two months of the end of the financial year.

*The auditor general shall express an opinion on the financial statements he received within two months of receipt of the financial statements to the relative entity and to the Legislative Assembly. Such reports are normally referred to the PAC by the speaker.

*The PAC should review the finding of the auditor general and produce a report independent of the auditor general supporting or rejecting his findings. Said report of the PAC should be forwarded to the Cabinet for government’s response to the findings of the PAC.

*The government should respond to the PAC’s report in what is known as the Government Minute, detailing what their response to each of the findings will be, including an implementation timetable.

*The auditor general’s report, the PAC report and the Government Minute should all be laid on the table together and debated by the members of the Legislative Assembly.

Unfortunately, this procedure and process has been eroded and bastardized over the last decade, firstly with the delays in the entities in submitting their financial statements to the auditor general and the severe decline in the quality and reliability of the financial statements.

The PAC several years back, I believe during the first PPM administration, instead of being timely and genuine in its review of the auditor general's reports made the grave error of allowing the auditor general to release his reports to the media two days after he delivered them to the speaker. This appears to have been a compromise made between the PAC and the auditor general, who was complaining that his reports were being delayed in their release to the public, thereby denying information.

The media circus and sensationalism that surrounded these reports from the auditor general without the review to confirm or reject his findings by the PAC and the total absence of the Government Minute to correct the findings of the auditor general contributed greatly to the erosion of the role of the auditor general and the PAC.

The actual absence of any commitment by government to correct what was obviously going wrong with government accounting for its expenditure belies any sense of confidence by the public that government was actually spending the people’s money in accordance with the annual plan and estimates.

A review of the annual reports laid on the table of the Legislative Assembly, so proudly by ministers in the former UDP and now PPM governments, will show the same problems repeated year after year with none of the recommendations by the auditor general being implemented.

The alarming and concerning headlines in the media that around one billion dollars cannot be properly accounted for in a way that allows the auditor general to issue an unqualified audit statement is just the most recent example of this comedy of errors. The acceptance by those responsible of poor performance and incompetence by those charged to producethese accounts in accordance with the PMFL is rather troubling.

The statement of the minister of finance which quibbled with the figures produced by the auditor general and included the statement of actions taken by his ministry, while inappropriate in the process, should provide some small comfort to us, the general public, that he is making positive steps to correct the situation and hopefully the accounts for 2014/2015 will be much improved.

The excuses included in the “personal explanation” by the former minister of finance provided no comfort to us, the general public, as it comes so late after the facts relating to 2011/2012 accounts for which he was responsible under the PMFL. If staffing was an issue, either of incompetence or shortage in numbers, he had the authority under the law to correct it either by funding additional posts or asking the deputy governor to evaluate their performance and replace them if necessary.

After all, he was at the time premier, the same premier who may have been involved in sending three senior civil servants home on full pay and benefits.

There is and has been for at least five years widespread support and recognition that some revision of the provisions of the PMFL is needed. I hear on the radio that this PPM government has commissioned yet another study of the PMFL and we all wait with baited breath for the amending bill to be presented to the Legislative Assembly and the debate that will follow.

There is an urgent national need to have this mess cleaned up and any proposed solution should not allow for continued excuses and procrastination by the most senior of civil servants, up to and including the governor and deputy governor.

However, there seems to be a disconnect between the administering power, the UK, through the FCO, in appointing the deputy governor to manage the budgeting process, which was and is working fairly well and in accordance with the PMFL, but not putting anyone solely in charge and responsible for the financial statements.

The Strategic Policy Statement (SPS), which has been presented on or before December 1st in every year for which there has been no financial statements, is likely to be presented on time again this year by the PPM administration.

Oh why, oh why, cannot the same chief officers and chief financial officers who prepare the SPS keep the accounts of their expenditure in accordance with their budget projections and authorizations for the same year and present proper financial statements to the auditor general for auditing?

It seems rather routine and simple. They prepare a budget which is approved and expenditure authorized by the Legislative Assembly, from which they get monthly drawdowns for specific expenditures as authorized. But they can’t keep proper records of these expenditures.

Why do the persons in charge continue to release funds if there are no accounting records?

Now, here is a novel idea: do not release month three funds unless the first month is accounted for to trial balance. Is it not required that each minister sign off on the last month’s expenditure before the next month’s funds are released?

This correction will require a paradigm shift by both the political as well as the civil service.
It will require both to move away from what George Kennan observed in 1959: “The tendency today is to achieve administrative arrangements geared completely to the workings of mediocrity – arrangements which, as the saying goes, the least talented can operate and the most intelligent cannot disturb.”

They, both the politicians and the civil service, must assert their given authority, accept responsibility and accountability to do the right thing morally, ethically, principally and legally.
Simply put, when the auditor general reports inadequacies in the financial accounting, ALL must accept their authority and responsibility to correct the inadequacies during the current or at the latest the next financial year

All that is required is the auditor general must audit, make recommendations to improve the accounts, the PAC confirms the recommendations of the auditor general to the government and the government implements the recommendations.

At last, success!

The financial statements are improved and are more reliable the next year and the public has confidence that the money is being spent as intended.

Category: Viewpoint

Comments (22)

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  1. Anonymous says:

    One of the biggest reasons why this problem exists is: The promotion of  personal friends to their level of incompetence!

  2. Anonymous says:

    Thanks  Hagar for a beautiful summarization of the ineptitude that exists in our public sector!

     

  3. Anonymous says:

    I'm afraid I'm still not clear why the Finance Minister's statement was "inappropriate". Please do explain. 

  4. Anonymous says:

    Clearly, Hagar, you are very well informed as this is one of the most accurate and balanced statements about this troubling issue to appear in CNS. No doubt it will unleash a torrent of comments about how wonderful it all was before the PMFL (it manifestly was not) and demands to go back to cash based accounting and a recentralised Treasury. Ah the good old Treasury, counting receipts,virements, contingency and purchase orders manually like Dickensian clerks of 150 years ago. Not paying the bills for months because they were so swamped with bits of paper and then at Xmas not paying them at all because they had run out of money- a regular occurrence.

    The PMFL needs revision and simplification since we do not seem to be able to poduce the local staff qualified and experienced enough to "work it" properly. But it is a sound law when it coms to fiscal prudence and God knows we need that..

  5. Anonymous says:

    Look at who is the speaker of the house and it will give you a clue as to why it was allowed.

  6. My view says:

    Although Alden McLaughlin should have never made McKeeva Bush a member of the PAC, I think it was innappropriate and insulting for the Auditor General, Alastair Swarbrick to include remarks in his reports that portrayed the civil servants working in the tourism and finance ministry as "incompetent." I think that is beyond the AG's role, and again brings us back to addressing what the AG's role really is.  Is it to deliver a report, facts, and recommendations or is it to deliver a judgement to the public that portrays the Cayman Islands Civil Service as "incompetence"???

    Moreover the haste in which the AG released the reports to the public without giving the members a chance to respond, makes you wonder if he has a role to play in demeaning the financial reputation of the Cayman Islands along with the former Governor. Cayman Islands is now "incompetent" andthat made publicly!

    Right now as a Caymanian, I don't know of no other issue of grave importance as "what is the role of the Auditor General?"  Are we just going to roll over and let any report that comes from "appointed" and not elected ministers be published about these islands without us defending ourselves?  Are we so caught up with the character of our parties, the leaders, Bush, and sideline issues that we fail to as well address the roles of appointed officials???

    • Anonymous says:

      They have earned the right to be called incompetent because competent they are not!  And yes by extension the Civil service is incomptent for allowing it to happen again and again for the last ten years.  You can best defend yourselves by actually doing your jobs competently for once in the past decade.  Comeout with a solid account that the AG can deem at the very least sufficient to past.  Or just get used to being called incompetent, unreliable, lazy, good for nothing, and things that can not be mentioned here.

      • CNS Expat vs. Caymanian says:

        And so… what you are saying is, the Cayman Island's government should be publicly and internationally declared as an incompetent government?!  The tourists should see this, the financial clients around the world should see this, and anyone reading the periodicals should see an AG's opinion? 

        • Anonymous says:

          No one needs to declare CIGs incompetence to the world.  Its there for anyone to see for their own eyes as it should be.  The problem is the incompetence and not the revealing of it.  Unless your happy with incompetence.  Then I see your point.

        • Anonymous says:

          If the Hat fits then you must wear it. The sensible and perfectly achievable answer is not to let it happen, but what is absolutely certain is that we must never return to the days when the reports were not public or so delayed as to be useless, that regime much loved by Bush lead to an unacceptable situation in which the auditor was vilified for pointing to deficiencies.

        • Anonymous says:

          Yes.  Because its the truth.  And its not an expat vs. Caymanian thing unless that is how you have been taught.  Then I understand why the truth should be hidden from you.

        • Anonymous says:

          Actually yes because it is true!

        • Diogenes says:

          And so…what you are saying is that the AG should not tell the taxpayers?  The AG is there to protect us, but he can only do that by telling us what he finds out, and its a bit difficult to keep it private between him and the 55000 people living here.  You would prefer not to know what is happening with taxpayers money than be told painful truths, which you can then respond to by demanding change on penalty of your voting against the government?   Imagine how you would feel if your pension manager told you not to worry about how much money you had in your account or ask what he had done with it, and he could not let someone independent audit it or review it because that might be embarrassing?  You wouldnt tolerate that – why on earth would you tolerate CIG not being able to account for $1 billion of hard earned tax payers money?  SMH. The old quote is spot on  "Every country has the government it deserves (Toute nation a le gouvernement qu’elle mérite")  

    • Diogenes says:

      I see – what would you suggest he called it when government officials charged with a duty to account for the their use of the publics money cannot properly account for $1 billion in our hard earned money?  Maybe you are right and "incompetence" is not the right term – maybe its far worse than that. 

    • Anonymous says:

      This mess has been ongoing for more than a decade….seems pretty much "incompetent" to most objective people i'm sure.

    • Anonymous says:

      Someone needed to say it! And so I'll say it again…."incompetent". 

      The problem is glaring….too many have been "promoted to their level of incompetence".

      • Anonymous says:

        Friend, its not whether its said or not about the CS; rather, its the repercussions that follow such sweeping statements. I am sure their were other factors involved and incompetence was merely one of them, but not the only one.

        • Anonymous says:

          No actually.  This is what it means for something to be someone's RESPONSIBILITY.  

          It means RESPONSIBILITY for an outcome.  If you can't achieve the outcome you have not fulfilled your RESPONSIBILITY.  If an employer accepts excuses that it was not your fault but X, Y and Z.  There are always obstacles to achieving a goal.  It is a Manager's job to remove and otherwise overcome those obstacles.  That's why they get paid the big bucks.

    • Anonymous says:

      You seem to think that the Auditor should not allude to the incompetence that is plain for all to see, and you seem to rationalise that by suggesting that it shows Cayman in a poor light.

      His job is to tell it like it is so that something can be done about it, for years the reports were kept from public eye completely, or until they were so out of date as to be irrelevant. It is within the Islands power to account properly and on time, and that would be the better way of making sure the Islands reputation stays above reproach, if they dont do so, it is in order for those inside, and  outside the jurisdiction to ask "why dont they simply keep the books right? What are they hiding?"

      Congratulations to "Hagar" for a very complete resume of a bad situation, and what a wonderfully simple idea, you dont get this months money until you tell me what you did with the last lot!

  7. Anonymous says:

    Well Said Hagar!!