CarePay crime fueled by official failures

| 20/07/2016 | 37 Comments
Cayman News Service

Cayman Islands Hospital

(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”.

Final Report on the CarePay Procurement Process, 6 June 2016

Tags: , , , ,

Category: Government oversight, Politics

Comments (37)

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  1. Anonymous says:

    another glorious day for the civil service……
    nevermind sanctions /sackings….bring on more pay increases!!!!…………zzzzzzzzzzzzzzzzzz




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  2. Anonymous says:

    Scotland, Scotland……….. Scotland




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  3. Anonymous says:

    Our government is excessively massive, utterly out of control and accountable to no one.
    When costly mistakes are made by these under-achievers, they rob the public purse to right the wrong; therefore the long-suffering plebs keep on getting fleeced.

    Our government needs a a massive overhaul. The only ones capable of forcing this are patriotic Caymanians.

    Unfortunately the CIG employs so many Caymanians now, so this is practically impossible. Most of these civil servants know that all is not well, but why risk a loss in income by rocking the boat?

    There is a lot of work to be done. I am optimistic that a reset will occur by the end of this year.




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    • Anonymous says:

      Folks calm down. This happened 6 years ago . The bad guy was caught and is in prison. Our money is being recovered. Keep calm all is well.




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      • Anonymous says:

        Didn’t you read the article? What was implied was that a failure in governmental checks and balances allowed this to happen, which is why the system needs an overhaul.
        Your “all is well” is not mine.




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      • Anonymous says:

        Our money is being recovered – right. Even after conviction CIG has not yet secured a confiscation order against Canover or Webb – what makes you think that there is any money left that hasn’t been squirreled away in Canovers case – you think he sat back, got convicted, and just left the money lying around? And in Webb’s the US has already frozen it all for the FIFA case and will get it in forfeiture. Of course, CIG could have frozen these individuals assets when the scandal first emerged, like the US did with Webb, but guess what, didn’t do that either. They are about as competent in recovery as they were in preventing the fraud in the first place.




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    • Anonymous says:

      caymanians have been like pigs at the civil service trough for generations……they will be the last ones to force change……




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  4. Anonymous says:

    CEO of HSA ” It wasn’t me, it was everyone else’s fault.”




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    • Anonymous says:

      Minister of Health “Who are Canover Watson and Jeffrey Webb?”




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    • Anonymous says:

      It is common knowledge that this lady was appointed knowing that she would be taken advantage of. Fortunately the chickens are coming home to roost. Ms. Yearwood will be exonerated, but she was swimming with sharks from the beginning.
      Pastor Al is no longer with us, but his political aspirations hindered the whole thing. Sorry, but it is the truth. I was there.
      Now is the time for the spotlight to search out some other “highly lettered” freeloaders.




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  5. Ambassador of Absurdistan says:

    Just Another Day in Absurdistan




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  6. Anonymous says:

    And of course as always, no one takes a hit. Money lost, oh well, moving on, lack of accountability .




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  7. Uncivil Servant says:

    Who will be fired as a result?




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    • Anonymous says:

      The officials who failed to read the contracts and distributed funds to “Canover & Company”.




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    • Anonymous says:

      no one, c’mon, you should already know how this will play out. They will all be sent home with full pay. smdh




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  8. Anonymous says:

    So the Minister in charge of health and sports was not complicit in AIS or CIFA but his two good friends Canover and Jeffrey were. Not sure I have a lot of faith in this review of the old boys club.




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  9. Anonymous says:

    Who sat on the political appointed technical review committee and voted to move forward? Those persons are all culpable for the fiasco




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    • Anonymous says:

      When it comes to “technical review for the HSA, it never goes further than the Brac?” Too many Board members are cronies. The HSA needs to bring in an impartial party to review all policies, procedures, HR, compliance with medical records, budgets, and it will not take ore than a week to see the glaring problems and industry best-practive solutions.




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    • Anonymous says:

      another smoke and mirrors star performance




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  10. REALITY CHECK says:

    More evidence of INCOMPETENCE and A LACK OF ACCOUNTABILITY at the highest levels of the civil service within the Ministry of Health and HSA.

    Did the audit report find ANY EVIDENCE of INCOMPETENCE by Senior Civil Servants in the Ministry of Health and within the management of the HSA?

    Who approved the funds and signed off on the payments to AIS (Cayman) Ltd from the public purse? Is the public to believe that Canover Watson approved the project budget, wrote, processed and signed cheques from the Ministry and HSA without any Senior Civil Servant involvement or approvals?

    There were multiple failings by highly paid civil servants yet as usual everything is perfect at the highest levels within the Civil Service according to the Deputy Governor Franz Manderson.

    The public purse pays for some very expensive mistakes made by Chief Officers and the management of Statutory Authorities annually with no consequences but they are a class of Caymanians who are protected from the top down so that makes it alright. The tolerance of incompetence at the highest levels in addition to systemic corruption will accelerate the demise of this country as more excuses are made to protect friends and political luddites.

    God help the Cayman Islands.




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    • SuckerPunch says:

      THANK you @ 8:39am. You have hit the nail on the head!




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      • Uncivil Servant says:

        The fox is guarding the hen house. Franz Manderson has become the most powerful politician as DG in Cayman.

        His slick talking does not hide the facts that he is just like the rest. DG cannot afford for his hand picked minions to be held accountable. The actions of his senior management are reflections on his performance as DG and nobody wants to accept that the problems start at the top of the pyramid.




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        • Perry says:

          Uncivil – get a life please… this incident happened 6 years ago. Even you must accept that this would not happen in the civil service today.

          let me ask a question when staff steal in the banks and other private sector companies does their managers get fired??? noooooooo




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          • A. Civil Servant says:

            No one expects persons like Perry or those feeding at the trough to understand or to believe in accountability. Your mentality is part of the problem. You are in denial!

            Keep circling the wagons buddy.




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            • Anonymous says:

              Oh please those same persons are still in the CS today with zero consequences. Nothing has changed just more pretty talking




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      • Anonymous says:

        8:39 oh how WRONG you are.

        everything has changed in the civil service since this incident happened.

        look at the action taken thus far.

        DG actually ordered an Audit – never happened before
        DG- admitted that civil servants should have done better – never happened before.
        DG- promises action to ensure this does not happen again- wow

        News laws and policies being put in place to reduce the chances of this happening again.

        posters – the system worked – the corrupt person was reported and is in jail.




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    • Anonymous says:

      Thank you Reality Check. This is one posting that is worth reading because it is the truth and sometimes the truth hurts. I trust the DG has read this posting and will now submit to a reality check. This posting confirms that there are still individuals out there who have a complete undulterated understanding of what is going on.




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    • Anonymous says:

      Reality check. Read your post again. It just doesn’t make sense.

      Try and stick a few facts in your posts. The reality is that this incident happened 6 years ago.

      Everything has changed in the civil service since then.

      I hope CIG stops appointing private sector persons to these important roles. It’s obvious from the last few corruption cases that it is the private sector that should be worried about corruption




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  11. Anonymous says:

    Thank you DG for being open and transparent. Actually publishing this report shows how much has changed in the civil service.




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  12. Anonymous says:

    In other words, this shocking episode occurred because many people looked the other way and refused to call out failures to observe rules, regulations and normal ethical practices when they were faced with a brazen person in a position of power. All these otherwise “nice” persons became cowards. Well, that was what got most of them to where they were — put your head down and say nothing. Sad to say, the lessons from this episode may have very little impact on this self-serving attitude. The civil service inherently rewards those who avoid making “waves” and sidelines those who question and take issue with organisation failures.




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