Role of the auditor general

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.