(CNS): Instances of non-compliance with the law and procedures, internal control deficiencies and an absence of the expected standard of care and professional skepticism by public servants were just some of the problems that government auditors found when they reviewed the CarePay fiasco at the hospital. They found that the former hospital board chair Canover Watson, who was convicted of fraud in relation to the contract in January was able to perpetrate the crime because of a catalogue of failures and shortcomings in the management systems.
The Internal Audit Unit, which conducted the review after Watson was convicted on behalf of the deputy governor, said that while they did not find any evidence of misconduct or corruption on the part of public servants within the entities reviewed, there were numerous other problems.
The failure of the procurement process which facilitated Watson’s crimes “was heavily related to the lack of information between the Ministry of Health and the Health Services Authority regarding the procurement”, the internal auditors stated, as they described the failure of senior staff to be involved in the process of such a significant and costly project.
The auditors pointed to the “significant level of confidence and trust” that was placed in Watson during the procurement process and the life of the contract with AIS Cayman, the company that won the contract, by senior ministry and hospital staff, who “literally handed the management of the procurement off to him, without scrutiny or oversight”, the auditors said.
Public servants relied heavily on Watson to make the decisions regarding the project, which meant he was operating as the main liaison and advisor to the ministry while being chair of the HSA board as well as other conflicting roles. This was not in keeping with the principle of segregation of duties and entrusted a level of influence which was abused, auditors found.
“This not only served to blur the lines of accountability but as a result the only person who fully understood the true circumstances of the project at any point in time was the former Board Chairman,” the report states.
The auditors detailed how payments of US$1.8 million were made to AIS Cayman for the national roll-out of the system to the private sector without an approved tender and funded by an equity injection based purely on a letter from Watson to the minister at the time, Mark Scotland. In the end, millions of dollars were paid to AIS Cayman without an approved contract of service.
Deputy Governor Franz Manderson said that while he was pleased there was no evidence of corruption by civil servants, he was concerned the internal controls and governance arrangements were not robust enough to prevent the abuse of public funds. He said Watson was able to do what he did because of those failures combined with his high standing in the community. Manderson also noted that civil servants did not display the expected standard of care and professional skepticism he expected that could have “prevented or reduced” Watson’s success.
“There are many lessons to be learned from this entire episode and I wish to assure the public that action will be taken to avoid a recurrence of such an event,” Manderson stated, adding that much has changed since the CarePay contract was awarded in 2010.
While business case planning is now the norm, supported by the Framework for Fiscal Responsibility along with training in procurement good practice, new laws are coming which will clarify governance arrangements, he noted.
“Going forward, these will strengthen our procurement processes and prevent a reoccurrence of an incident similar to CarePay,” he said, adding that another new cabinet paper was coming to strengthen the system of checks and balances between the government and the statutory authority.
The HSA and health ministry both released short statements in the wake of the report. The hospital management was clearly relieved that there was no evidence of corruption on their part but recognised the lack of an effective governance arrangement that contributed to and facilitated Watson’s ability to defraud government. Officials said they were working to strengthen internal controls in an effort to mitigate against such activities in the future.
Meanwhile, the health ministry said even less, while also breathing an apparent sigh of relief that its officials were not being accused of corruption. It stated that the ministry “fully supports the Ministry of Finance’s efforts to improve the procurement process” as it also took steps “to improve the communication structure between the HSA’s Board and the Ministry”.