Audit backlog clears but no accountability

(CNS): The government has very nearly cleared its backlog of outstanding accounts. However, as public authorities begin to meet the timelines in the law, problems regarding the quality and transparency of public accounts remain. The latest reports assessing the state of public finances found that the government was still failing to demonstrate to legislators and the public how it collects and spends taxpayers’ cash. The Office of the Auditor General (OAG) has published two new reports assessing the 2013 and 2014 financial years, and despite significant improvements, the reports reveal a catalogue of ongoing critical problems.

In the reports, which were signed off by former auditor general Alastair Swarbrick before he left early this year, acknowledged the significant improvement in public accounts over his five years in office. Nevertheless, he warned that real accountability was missing and there was no effective control for government spending.

The backlog of prior year financial statements is now almost cleared and no ministry or portfolio was expected to receive an adverse opinion or disclaimer, though several will get qualified opinions, for the year ending 2013-14, but Swarbrick said many other issues were still preventing full accountability. From delays in tabling statements in the LA and the failure of ministries to table annual reports with those financials to weaknesses in the internal controls and governance, the risk of mismanagement and abuse remains.

“I have also reported my continuing concerns about deficiencies in the current financial reporting framework, as required under the PMFL, which in my view effectively obscures accountability and transparency in the use of public resources, and for the expenditures authorised by the Legislative Assembly,” Swarbrick stated in his report. “The government should set clear goals for achieving accountability.”

For the year ended 30 June 2014, from thirteen completed audits of the ministries and portfolios six received unqualified and seven qualified opinions. When these latest reports were published, Swarbrick said only three audits were still outstanding, but he noted that working with entities to improve reporting over the last two years has been challenging. Swarbrick said submissions met the statutory timetable but they did not always provide what was needed for auditing,with ministries making dozens of adjustments.

Swarbrick said the health ministry’s 2013 reports were, at the time of the statutory deadline, ready for sign-off with a qualified opinion on four matters. “We agreed to give the Ministry time to resolve the matters,” Swarbrick said, but the financial statements were then not completed for another 17 months. The Cabinet Office also asked for more time to avoid a qualified opinion on its 2014 accounts but 6 months later, when they were finally signed, the financial statements were still qualified on the same issues.

“The value of financial reporting is significantly diminished in terms of accountability and transparency, let alone decision making if entities continue to delay reports,” Swarbrick warned in the last of his reports.

A major problem highlighted by Swarbrick alongside the delays in tabling completed reports was the absence of annual reports to help legislators and the public understand the statements and hold the entities accountable for their use of public resources.

“This lack of information, required by the PMFL, undermines the work that is put into the preparation of financial reports and my audit of them. It is challenging for stakeholders to interpret the results included in the financial statements as there is no discussion and analysis to contextualize the financial information,” the auditor stated, adding government needed to press entities to present full annual reports with comprehensive discussion and analysis of their performance.

Swarbrick warned that significant elements in some ministries’ activities are not reported, and with no appropriate analysis, it is hard for the people to determine how and on what government spent taxpayers’ money.

“We have found many instances where reporting by government provides little or no assurance that the expenditure limits contained in the appropriation laws passed by the Legislative Assembly have been respected,” the report stated. “It is clear that in at least two instances over the 2012-13 and 2013-14 that M&Ps have reported deficits and incurred expenses greater than the revenue provided for through appropriations, and therefore breached the spending authority provided by the Legislative Assembly.”

As a result, despite the efforts to improve, ten years on government is still not able to account to voters how it spends the money it takes from the public.

“Looking at the information reported in the M&P financial statements, it is my opinion that they do not represent a clear picture of how each individual entity is performing and how resources are being used,” Swarbrick said in a damning summary of the ongoing state of affairs. “Financial statements in their current form do not provide the necessary information to demonstrate how government has collected and spent public resources or whether government has respected the limits set out by the Legislative Assembly.”

Pointing to a failure of government entities to consistently present annual reports and the analysis necessary to help the public interpret the information, as well as the artificial split of entity and executive transactions in addition to the failure to effectively report against the legally authorised public spending limits, Swarbrick said, yet again, that there is still no effective control for government spending.

Check back for more on today’s press briefing later as well as details from the report on statutory authorities.