Mac costs public purse CI$450K

(CNS): The decision made by the Cayman Islands premier to circumvent the proper process in acquiring financing for government cost the public purse CI$450,000 the auditor general has revealed. In his latest damning report of government's handling of the procurement process Alastair Swarbrick raises several very serious concerns about the events which led to the cancellation of the tendering process in favour of a deal that not only failed to deliver the promised savings but in the end resulted in a serious loss to government's coffers. He says the decision to go with Cohen & Co which promised to save government $24million on the long term loan was made directly by the premier against ministerial advice and without any evidence that the savings were possible.

In his latest report which uses three cases studies to illustrate the myriad problems in government procurement the auditor general shows that when the proper process is ignored things can go very wrong when it comes to value for money for public cash. The government loan case study demonstrates clearly how when the process was circumvented the government lost money but once it came back on track during the third bid, following the regulations and engaging proper expertise the public did end up with value for money.

However, before that occurred two tendering process were cancelled and the premier in his role as  finance minister had turned to party officials to advice him about securing a $155million loan for government.

According to Swarbrick's report McKeeva Bush claimed that he abandoned the tendering process for the financing because  as he believed he could save government money and to avoid what he said was a conflict of interest among one government official involved in the bids who's family member worked at one of the banks in the joint venture which had come out on top.

Swarbrick notes that the public management and finance law has a provision which allows the minister of finance to to secure a loan for government but he said it should still have been a transparent, fair and open process. He also raised concerns that the premier had gone to a the United Democratic Party treasure  – Peter Young and not sought advice from a government civil servant or a government contracted expert with a specific accountable remit.

He said that there was no paper trail or documented transparency on the premier's decision to go to the political party ranks for advise or how Young had introduced Bush to Cohen and Co but Swarbrick indicated that Young was familiar with some of the principals at the New York finance house. The auditor said that there was no evidence that Young had been paid any fees by government as a result of the introduction.

Once the introduction had been made Cohen presented the premier with a proposal that promised to deliver $24million in savings on the $155k loan which Bush had been authorized to secure by the FCO to help government pay its bills during the 2010/11 financial year.

However, ministerial officials advised the premier against signing a deal with Cohen as they did not believe the promises made by Cohen were achievable. Despite that advice the premier chose to sign the deal and commit the government to lending from Cohen and Co and the subsequent significant loses.

“We did not find any support or documentation for the decision,” Swarbrick revealed adding that the decision was based purely on a written submission made by Cohen. “We saw no analysis to say the promises were achievable and the ministry officials did not believe they were.”

The ministry officials were proved right in the end as government was forced to withdraw from the agreement when Cohen as the New York firm was unable to provide the promised savings and what they offered in the end  would have cost the country significantly more than the winning bid in the second tendering process.

The premier did not extricate government from the potentially costly financing deal however, before two short term financing loans had been arranged via Cohen with SoctiaBank and Banque Havilland which the auditor said proved very costly. On the short term and stop gap loans government incurred costs that exceeded those it would have paid it it had gone with the legitimate winner in the CTC bid by over a half million US dollars.

Swarbrick stated that the report highlights issues that his office brought to light in his first report . In particular where the loan is concerned it demonstrates the problems of both political interference and what happens when there is blatant disregard for the process.

“Government got the best deal when it followed the process properly,” he said. “This demonstrates that there is validity to the rules being in place and being followed.”

Swarbrick also noted that in the case of the Cohen loan the premier may not have directly broken the public management and finance law which allows him to procure a government loan, however he did contravene the regulations and what he did was outside the accepted norms of good governance, transparency and fairness and above all value for money. He also noted that there is some conflict in the clause that allows the premier to secure a loan for government with the rest of the public finance law.

Check back to CNS later for more from the auditor general's report regarding the complete failure of the DoT to tender a contract over $1.2milllion in direct contravention of the law and for the problems surrounding the CCTV bid which the auditor states was unnecessarily held up as a result of  Cabinet interference.