(CNS): The Cayman Islands Government has failed to include some $1.3 billion of liabilities for post-retirement healthcare benefits and pension liabilities for civil servants in its recently completed consolidated accounts. Among the many problems identified the auditor general in the first ever Entire Public Sector (EPS) financial statements, the problem of unaccounted liabilities contributed to the adverse opinion.
In a report reviewing the first auditable set of government accounts in ten years, the Office of the Auditor General (OAG) found that government has failed to account for liabilities, including $1.18 billion in healthcare obligations and $213 million for pensions.
“In addition to not recognizing the liabilities, the complete relevant expenses for post-retirement healthcare and pensions obligations have not been recognized within the financial statements for 2013-14,” the former auditor general, Alastair Swarbrick, wrote in his report before he left. “As a result Personnel Costs have been understated. It is not practical to quantify the understatement of these expenses due to the co-mingling of pension expenses attributed to the defined benefit and defined contribution participants’ accounts for pensions and the co-mingling of current year healthcare premiums and premium payments for current beneficiaries.”
But the audit team found that the total expenses reported for the year ended 30 June 2014 by the government’s actuary were $116 million for post-retirement healthcare and $24 million for post-retirement pensions. This means that the EPS statements are “materially misstated”.
Speaking at a press conference on Wednesday, Acting Auditor General Garnet Harrison explained that the liabilities need to be managed and should be included in the accounts because not only are they required under the Public Management and Finance Law, but government cannot afford to ignore such a major liability coming down the line. He said that CIG would need to prepare to fund the liability so it must be part of its financial statements.