Taxes missing from all public accounts

| 02/03/2018 | 38 Comments
Cayman Islands audits, Cayman News Service

PAC chair Ezzard Miller presents Financial Secretary Ken Jefferson with a certificate for government’s clean audits, Jan 2018

(CNS): Government departments are still not reporting on the cash that is collected from taxpayers in their individual financial and management accounts. Although civil service management and even the Public Accounts Committee has been congratulating financial officers and their teams of government accountants for finally submitting their financials on time and reaching clean audit opinions, they still fall short on the bigger picture. The accountant general, the financial secretary and the audit office told PAC last week that revenue collection, particularly coercive revenue, remains completely absent from core government books.

Auditor General Sue Winspear explained to PAC during the most recent hearing that the only place where people can see what is known as executive income is via the entire public sector accounts, which is not verified. “The civil service management cannot attest to the controls around that coercive revenue to assure us of its completeness,” she said.

Although many ministries, portfolios, authorities and government companies collect fees and taxes, none of that is recorded in the accounts submitted for audit, even if they are largely receiving clean audits.

The lack of accounting for the money government collects means there is no public accountability or transparency over what each individual entity collected in a given year in the financial reports, or how it was collected and whether what it collected was all that it was due.

None of the cash collected by government departments — including customs duty at the finance ministry, immigration fees in the ministry of labour and planning or driver related fees at the commerce ministry — are entered into the individual annual financial reports. This means that the public never gets to see how much tax each ministry collected from the people through their various departments.

Accountant General Matthew Tibbetts explained that there are two different accounting layers in the ministries, split between entity and executive levels, and the audits are only covering a portion of each public authority at the entity level. And because coercive revenue is included in the executive level, how much revenue was collected by each relevant ministry, authority or company is simply not audited.

“We have a situation where each ministry is collecting coercive revenue individually but the audit is actually conducted at the entity level… which means we can get a clean opinion on the entity level but that doesn’t mean that the coercive revenue that they collect is accurate… or complete,” Tibbetts said. “So we have a situation where a ministry is getting a clean opinion but only for a portion of their books.”

He said that consideration had been given to merging the executive and entity books, making the entities responsible for the entire books, but the concern was that during any transition, the ministries and portfolios would revert back to qualified or even adverse opinions after getting clean ones.

“We want to work with CFOs this year to get them to a position so that the executive books will get a clean opinion as well,” he said. “We don’t want a situation where it appears to the public we are going backwards.”

Financial Secretary Kenneth Jefferson said the revenue shown on the books of ministries is what they get from Cabinet for what government wants them to do, but the fees, for example for land surveys, are not on the relevant ministry’s books. Jefferson said this absence of coercive revenue reporting means that financial officers are not focused on this area and are instead focusing on getting a clean audit on the entity level accounts.

“To be blunt… we in finance do not believe that the same level of care for accounting for executive transactions exists at the same level of care for the executive transactions as they want to get a clean opinion on the entity,” he warned.

Jefferson said that the ministries had to become responsible for their coercive revenue and begin to show same level of care for those books to get the clean opinion across the board.

See the opening session of the most recent PAC hearing on CIGTV below:

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Category: Government Finance, Government oversight, Politics

Comments (38)

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  1. Anonymous says:

    The real issue is with the Leadership and the CFO’s. The FS suffers from acute inertia and “I’m crusing to retirement” while the CFO’s suffer from a variety of problems!

    Some CFO’s have no exposure to accrual accounting. They don’t understand when revenue is earned that they have to create an accounts receivable; they still follow the cash method of accounting. Some are sitting pretty and laughing that all they have to do is account for expenses. Some are overwhelmed and have no concept of how to implement internal controls to capture all revenue.

    Taxpayers you complain now, but if the Civil Servants get it right you will certainly complain more when you realize what you are getting away with… more taxes for you to pay.

    Proactive leadership by the FS and AG would ensure that the CFO’s get it right and accountability by the DG to ensure the FS does his job is what is badly needed.

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  2. Anonymous says:

    Bunch of jokers. False accounting at it’s best.

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  3. SMH says:

    So in short the clean audits are technically a sham if one looks at the full accounts and transactions in each ministry, department, government owned company and statutory authority. So why are we praising all those entities for failing to do their jobs properly and to the highest or best accounting standards? SMH

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    • Jotnar says:

      Technically a sham? Think its way worse than that. There doesn’t seem to be any audit of the revenue side – so no way to know if all the coercive revenues are actually making it into the kitty – rather worrying especially in relation to those raised in cash. Why on earth would you have a system where you audit just the expenditure side? Defies logic.

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      • Anonymous says:

        Because if you spent the money that you were budgeted that means the money came in for you to spend. It’s not illogical to have a system where revenue isn’t audited, just not ideal.

    • Anonymous says:

      Because it’s all part of tear down the brits and pat the sons of the soil on their fat laden backs.

    • Anonymous says:

      5:47am – Not so false – because the majority of Statutory Authorities and Guvernment-owned Companies have produced full sets of accounts (expenditure and revenue) over the past 12-13 years – it is the majority of Civil Service Ministries/Portfolios/Departments that have not.

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  4. Anonymous says:

    ha ha ha …the best?

  5. Anonymous says:

    Ok. Where is the Auditor General? I am no accountant but, how does any organization balance their books without accounting for their income? How can they prepare a meaningful budget without having some inkling of what the transactions for the previous say, nine months or so were? I guess that’s why so many “supplemental” sums can be found when they choose, and for what they choose. There is trough somewhere.

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  6. Anonymous says:

    I wonder if debts are included in the accounts? I have heard that many businesses(a lot of them small businesses) are owed money by Government for work they have done. Even though they have the P.O. issued by the Gov. Department prior to the work being done, they are unable to get paid. Perhaps Government conveniently also leaves these debts out of their accounting process…

  7. Anonymous says:

    Please people, we have christians in charge, they all claim to have the highest integrity and who are we to question their pure hearts. I mean gosh gee willackers, cant you all read the image above, they have certifications and win awards. And ties and they where suits, who among you can refute somebody that wheres a tie.

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  8. Anonymous says:

    There it is folks. The actual, concrete physical object that is the basis of the mythical ‘trough’!!!!!!! The bottomless pot of golden coins, there for the taking for those clever devils behind the veil. I for one will not denounce them. From this day forward I will devote my energy to getting behind that veil and dipping my fingers into the bottomless bounty, lining my pockets, and gilding my home. You saps can continue to pay in, but I for one plan on withdrawing from the honeypot. El Dorado, here I come!

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  9. Anonymous says:

    So, lets get this straight: Accounts on time, tick, clean reports, tick, but you leave out the income?
    So often I find myself asking WHY? Well, if I was a suspicious person, I might wonder if someone was hiding something, but of course I know that cannot be so. I mean why would they do that, for example if the income was being diverted to the wrong recipient, or favours were being granted to “friends” then you could understand, but that sort of thing wouldnt happen, so I am left asking, WHY?

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  10. Junior says:

    What? In the Cayman Islands? Neverrrrrr?

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  11. Anonymous says:

    Sounds like they’re running two lots of books. Sketchy!

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  12. Anon. says:

    “So we have a situation where a ministry is getting a clean opinion but only for a portion of their books.”

    I suspected some funny business was happening when suddenly everyone was getting clean audits.

    So the basically can choose what portions to submit to Audit?

    I have never heard about accounting or auditing happening his way.
    Must be something created only in the Civil Service.

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    • Anonymous says:

      Parent and subsidiary…pretty standard in almost every large corporation

      • Jotnar says:

        Yeah right. So if its the “pretty standard” parent and subsidiary set up, where is the intercompany reconciliation to make sure the two sets match? For that matter, want to explain how not auditing the revenue side is “pretty standard” in any private sector structure – or for that matter, any set of audited accounts? Thought not.

        At best this is a huge governance problem with massive exposure to abuse. When put in context of all the self praise about the significant improvement jn public sector clean audits (just omitting to note this teensy weensy detail that means that the “clean” accounts cannot possibly reflect any confidence in a true and fair view if they are materially incomplete) it is frankly nauseating.

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        • Anonymous says:

          Read what it says….”Parent and subsidiary…pretty standard in almost every large corporation” the post says nothing about no audit being standard…those are your words. Intercompany reconciliation is done when accounts are consolidated.

          • Jotnar says:

            BS.

            First, you read what it says. The OP says he doesnt understand a situation where only part of the books are audited, and 951 says its a parent and subsidiary situation – “pretty standard”. Thing is, no one is auditing the revenue, whether at the entity level or in the executive accounts. That is not pretty standard, that’s unaudited.

            Second, inter company transactions are consolidated ie netted off to zero on consolidation. Here there is no consolidation. Nor is there any reconciliation to make sure that at least the numbers due to and from the parent and subsidiary – to use that analogy – are the same in both sets of books – now that is absolutely standard, and I cannot imagine any auditor worth his salt producing separate accounts for parent and subsidiary without reconciling them. You go on thinking this is all fairly innocuous if you like, but its sure as shooting not “pretty standard”

  13. SKEPTICAL says:

    Can the AG or Jefferson give us a “ ball park “ figure for the likely amount of taxes for which there is no accounting. This would be laughable if it wasn’t so very disturbing.

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    • Anonymous says:

      All revenue is shown and accounted for in Government’s accounts and reflected in the bank…the point here is that the audit has not been conducted which should not be confused to think that Government doesn’t know how much revenue it collects…that is very wrong.

  14. Tut alors!. says:

    I am not an accountant but this gaping black hole seems to be mind boggling and it is incredible that only know has it been revealed.Why did not the Auditor General identifiy this problem earlier.

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    • Anonymous says:

      To my recollection it has been mentioned several times, only CIG seems to do nothing about it. You have to wonder why?

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    • Anonymous says:

      It has been mentioned and they are working to fix the issue.

      • Anonymous says:

        “Working to fix the issue”? Come on, it doesn’t take much work or any significant time to “include all income including Executive Income within the compass of the audit procedure”, there you are, job done. So WHY has it not been done, as I said before, if I were suspicious, I would suspect wrongdoing!

  15. Anonymous says:

    Can anyone make any sense of what Ken said “To be blunt… we in finance do not believe that the same level of care for accounting for executive transactions exists at the same level of care for the executive transactions as they want to get a clean opinion on the entity”.

    Maybe this is babble speak for we in finance do not believe we should be accountable for where the public’s money goes? Something to hide have you? This kind of avoidance is grounds for dismissal in the real world.

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  16. Le Observateur says:

    It appears that our leaders are incompetent or dishonest. I wonder which.

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  17. Anonymous says:

    Still not policy, even after a high profile skimming arrest involving theft of public funds. “A former government facilities management employee has been charged with 11 criminal counts related to the theft of >$30,000 in rent money that was paid for the use of public community centers”. How many more years until we realize we need to get a handle on this? It’s insane!

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  18. Anonymous says:

    Yep, one for me, one for you accounting…

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    • Anonymous says:

      Wrong, one for accounting and one for me, two for accounting and one, two for me, three for accounting and one, two, three for me……

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