OfReg costs more, fails to protect consumers

| 23/06/2020 | 89 Comments

(CNS): Three years after the creation of OfReg, auditors have taken a close look at the beleaguered utilities regulator and found that it has cost more than its predecessors but has failed to address its fundamental purpose of consumer protection. Inconsistent leadership, limited governance and oversight, a lack of strategic planning and direction or understanding of the funding it needed are just some of the failings, compounded by the merger being poorly planned in the first place.

Following a value for money review conducted by the Office of Auditor General (OAG) earlier this year, which found that the agency had wasted a significant amount of public cash, the independent auditors decided to take a wider view of the regulator to assess its efficiency and effectiveness.

“This has proven impossible to do due to a lack of performance measures,” Auditor General Sue Winspear said in the audit published this week.

“There were no performance measures in place for the first year of operation as OfReg, some performance measures were set for 2018 but these focused on operational activities rather than service delivery or the impact of regulatory decisions, and an entirely different set of performance measures were set for 2019,” she added.

However, the auditors pressed on with a close look at the costly regulator and found a significant number of problems, from the board not functioning as would be expected to the failure of the regulator to address its basic mission of consumer protection. The auditor has used tempered language in the report but uncovers a catalogue of issues.

Winspear said the board was not only focusing on the wrong areas and was inefficient, but questions were also raised about the ethical behaviour of some members, as she referred to a well-documented dispute over the chair wanting to become OfReg’s CEO, which almost led to a physical altercation.

The audit also points out that one of the main reasons why OfReg was created was to save public money. The merger of four separate agencies — the Electricity Regulatory Authority (ERA), the Information and Communications Technology Authority (ICTA), the Petroleum Inspectorate and the regulator arm of the Water Authority — was expected to generate savings of $250,000 per year. But the auditor noted that the business case was not clear about how this was to be achieved.

“In the absence of any monitoring of savings, we have compared the costs of the predecessor bodies to the current costs of OfReg to determine whether savings have been made and the objective achieved,” Winspear said.

The auditors found that OfReg’s total expenses in its first three years of operation totalled $13.27 million, an average of $4.42 million annually. This figure is significantly higher than the combined cost of the ERA, the ICTA and the fuels inspectorate, which the OAG said was an estimated $2.88 million in 2015–16, the last full financial year before the merger.

However, the OAG noted the difficulties of comparing costs on since OfReg’s remit is different from that of its predecessor bodies and the Water Authority’s regulating costs are not publicly available.

Although excessive spending made matters worse at OfReg, its inability to collect fees due to some government policy decisions left the agency significantly underfunded.

Winspear also found fault with OfReg’s strategic plan, saying that it does not adequately cover the principal functions set out in the Utility Regulation and Competition Law.

Among the many problems, the plan did not specify any key performance indicators (KPIs) that would help measure success or demonstrate delivery of the strategic objectives. But more importantly, it makes no mention of the principal functions in relation to consumers.

The law states that OfReg’s functions include protecting the short- and long-term interests of consumers in relation to utility services. However, Winspear found that most of its regulatory decisions have not improved consumer protection.

The regulator has not completed any regulatory impact assessments since it was created and does not have a framework for them, which has made the failings regarding consumer protection worse. Although OfReg’s 2018 Annual Plan included actions to complete consumer protection regulations by 2019, this had not happened.

“It is also important to note that the Cayman Islands does not have comprehensive legislation for protecting the interests of consumers of goods and services; nor does it have a public body dedicated to, or non-governmental organisations responsible for, consumer protection,” Winspear pointed out in the comprehensive audit.

OfReg has issued a short press release in response to the completed audit, claiming it was trying to do better. While Malike Cummings, the new CEO, admitted that there was more to be accomplished, he said the regulator had “come a long way”.

He also blamed its poor performance on the “significant challenges” that OfReg faced as a start-up in 2017 in the absence of a comprehensive change management plan.

“The entity is young and requires time to build and mature to fully satisfy its regulatory remit and inculcate core values and established positive culture,” Cummings said, adding that a reset workshop in December last year had helped.

He added that OfReg was now “on a trajectory of efficient spending, especially in areas such as the use of consultants, overseas travel and training and development”, which had all been red-flagged by the auditor general.

Meanwhile, a leaked memo from Alan Jones, the chief officer of the Ministry of Commerce, Planning and Infrastructure, to OfReg indicates that Cabinet has only recently directed the regulator to map and document the provision of information and communication technology across Grand Cayman and to ensure the full liberalisation of the telecommunications market.

The document appears to be asking the office to conduct the most fundamental tasks it was established to undertake in the first place, as Caymanians continue to battle with communication problems, especially in the Eastern Districts.

Although ICT licences require internet providers to roll out equitable quality networks across the country, provision is patchy and poor in many areas east of George Town.

While people have complained about the regulator not holding the relevant communication companies accountable, because of the difficulties in getting them to abide by the licence laws, government ended up covering the cost of rolling out the network from the public purse.

In 2018 Premier Alden McLaughlin said that all telecoms providers agreed to licence conditions that committed them to deploy fibre across the island. All of them have failed to meet that obligation.

“All these years we keep struggling, unsuccessfully, to get them to deploy the fibre that they have agreed to, so we are going to abandon that approach and we are going to build the fibre network and we are going to charge the licensees for it,” McLaughlin told the LA in March 2018.

During the last few months, as Cayman locked down to protect the community from the COVID-19 pandemic, the poor quality of internet provision and phone signals in some areas were brought into stark focus, as people switched to working from home and school children were forced to learn online.

It is not clear what, if any, work has been done by government since the premier said it would take responsibility for rolling out the network two years ago. But the memo about the Cabinet directive suggests that the project is still in the very early stages and OfReg is still not holding communication companies to account.

See the OAG reports on OfReg and the Cabinet memo in the CNS Library

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Category: Government oversight, Politics

Comments (89)

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  1. Anonymous says:

    Every day, it becomes more and more obvious that the Cayman Islands government is either the most incompetent, bloated, inefficient organization in the world or one of the most efficient criminal enterprises ever created.

    My question is why is Governor Roper playing soldiers while all of this is going on?

    There are only two answers. Either he sanctions the incompetence/corruption or he is too weak to do anything about it.

    Mr. Roper, which is it?

  2. Anonymous says:

    Sounds about right for another money wasting contract award by someone not doing their research and awarding it to a Mickey Mouse firm,

    • Anonymous says:

      Can you sack the private sector board and bring this failed entity into the civil service. Only then will we see improvement.

  3. Anonymous says:

    Please tell me who was surprised that this has turned out to be a disaster? Add that to the list that includes CDC, WORC DCI and all the rest.

    • Chris Johnson says:

      Why are they not looking at CUC. Eddington Powell who runs the sister company in TCI just announced that electricity rates for private homes will be reduced by 20% following the oil price reduction.
      CUC, the water companies and gas retailers need to give some explanation as to what they are proposing.

  4. Anonymous says:

    this is what happens when the do-nothing-ppm does something…
    why doesn’t alden stand in front of the media and answer questions on this?
    oh yes…he is the premier who stopped doing weekly press briefings because he didn’t want the media taking ‘pot-shots’ at his government.

  5. Anonymous says:

    Lets see who can come up with the best way to blame the expats for this.

    Just like everything else, it is not caymanians or the government they elect or the community leaders.

    Its all the expats fault

  6. Anonymous says:

    Can’t you see that the Cayman Islands is headed for debt. There is no one there to conserve the monies. Come 2021…virus or not…Alden and his cronies have to go.

    • SMH says:

      ALL of them must be voted out unless Cayman is doomed. Their track records of mismanagement and wasting public funds is the best indicator of their abilities.

      The ppm led government will borrow and spend whatever it takes to win re-election in 2021. The Premier’s successor Joey Hew is just as reckless as the Premier with public funds. There is no accountability within the elected government, the politically appointed boards and the senior levels of the civil service. SMH

  7. Anonymous says:

    Another bad creation by good ole KT.

  8. Paul Hurlston says:

    Was the creation of the OfReg the brain child of Mr. Circumlocution aka Kurt Tibbetts. If so, then why would anyone be surprised at what has gone on? We are just lucky it is not worse. PPM again.

  9. Anonymous says:

    I made an argument that fuel prices should have been less than $2.00 a gallon based on RBOB gasoline prices, transportation costs, taxes and a markup. The response was the OfReg looked at prices and it took 6 weeks for prices to drop because of inventory on hand. The inventory was worked off 6 weeks ago if that was the case. Anyone see prices below $3.50 anywhere other than ReFuel? Their prices are cheaper due to low corn prices and blending costs and should have been 10% lower than gasoline stations.

    Is someone in the government getting paid off to keep prices high allowing excess profits?

    • Anonymous says:

      Sure – the key point there is “and a markup” – who is to say what the limit of that markup is? It seems the gas stations have decided they can charge a giant one. The same way many local retailers do. Unless there is a statutory cap on the markup, we can send around inspectors and spend millions on a “regulator” and it won’t amount to anything.

    • Anonymous says:

      Id rather pay the higher prices than put alcohol in anything I own

  10. Covid Man says:

    This was created to put members of existing goverment workers families in a cushy spot. No one gives a dam about these goverment authorities being accountable or profitable, just how can I get a fat check and do as little as possible for earning it. This will never change and we are just going to have to accept it. WORC is another farce in the making. Thank you Unity Team!

    • Anonymous says:

      This department is headed by all Caymanian men – most of whom should have been retired a long time ago. Someone like Sue Winspear should have been appointed to lead it.
      Yes, I know she’s an expat but enough of these jobs for the boys club. They get promoted & promoted & paid waaaay too much to travel & but new cars whilst accountable to no one.
      Signed a female Caymanian (no I did not get status from Bush before all of those same old messages start).

      • Anonymous says:

        Before we go appointing people to leadership positions for merely being a critic, consider that being a critic is one of the easiest jobs in the world. Some of the best critics, when put into position to do the same job they were criticizing also fail dismally.

        This is how politics work, the opposition spends 4 years criticizing the government and telling citizens they could do a better job, you elect them, and they turn out to be worse than what you had before.

        Be careful what you wish for

        • Anonymous says:

          She is a qualified person. The boys at Ofreg and other entities (curfew time now travel time) are just friends of politicians in charge. Given jobs & salaries they are not qualified for & do nothing to justify their expense.

  11. Jackie says:

    This happens when you have people who are technical but no real clue on management total failure. There are some very good individuals around that can turn this place around.

  12. Anonymous says:

    Give them a bonus too!

  13. Anonymous says:

    Sounds like Gov needs to setup an office (call it Oversight Reg) to regulate OfReg. What a mess. Stop the bleeding and shut that thing down now!

  14. Anonymous says:

    ha ha ha….classical😯

  15. Anonymous says:

    So they are incompetent, wasting government money on trips and cars, have no plan and no results and the best they can do is say “we will try to do better”. Which they won’t. If this makes you angry remember that the ONLY people who can do anything about this are the voters. These guys with their noses in the trough are there because of political favours and shady deals. Alden, Mac and co have zero plans to hold anyone accountable. If you want change, make it happen on voting day.

  16. Noname says:

    One of the many issues to deploying fiber on the island is … The roads … yes it comes down to that … you need to run the wires somewhere and you need tubes to get the fibre network brought to you . No one on the island so far has built that capacity but along the 7 miles corridor. Overhead fiber cabling is a difficult entreprise and will rarely turn up a profit at all, therefore the island’s lack of deployment of fiber, coaxial technology on the other hand is perfectly adapted to such conditions though. Coaxial technology works well when building roads and running the fiber under them is an issue . The issue here is that Cayman went for shiny fiber while not having the proper infrastructure budget for its conduits don’t blame the Telecoms for that , their mandate only is applicable where the supporting infrastructure does exist. Another issue is pole access which is under CUC’s perview! When deploying fiber you want to use as few poles as possible to avoid dealing with an inneficient process .

  17. Tom McField says:

    what we need is an office of Off Reg Reg. Then in a couple of years we can add the Off Reg Reg Reg.

  18. Anonymous says:

    Unsurprising, it is run by people who cannot make it in the private sector.

  19. Anonymous says:

    Interesting to note that from early on following the day of its inception and following the last election this subject matter and the Office have sat with the Cabinet Secretary and effectively therefore the premier. Fact is there has been virtually no oversight at all.

  20. Anonymous says:

    The Cayman Islands government doesn’t apply any performance criteria to “regulation” in the jurisdiction, and there are no transparent annual or quarterly reports on their operations. The bureaucrat-heavy social welfare departments are nothing more than political paper shuffling edifices, pointing to their large payroll sinks as evidence of compliance investment. This is why the CIG felt it best to consolidate the roles of previous do-nothing inspectorates into one all encompassing do-nothing, and sell it as an efficient savings to the voters! It’s all a ruse while insulating their cronies from inspection. Where are the fines and arrests?

    • Anonymous says:

      By Jove, 5:38pm, I believe you have it!!! Cronies indeed! Perhaps we should change the name of our little country to “Crony Islands”.

  21. Anonymous says:

    Mismanagement, missed goals, no clear outputs, wasted funds, plushy cars, boardroom altercations! This is a national disgrace! Why should this SAGC would continue to exist? Oh, that old brotherhood.

    We easy with public money and no accountability, boy! Wha a mess!

  22. Anonymous says:

    Not about ability, it’s about who’s really making the money off this. Greased palms work very fast.

  23. Anonymous says:

    Is Mr. Pierson still head of the board? Whatever became of the Hong Kong review of fuel prices?

    • Anonymous says:

      Too many taking their pensions AND then getting cushy jobs with lots of benefits. Where are the women? Such a boys club. All men at the top, except a couple of expat hires. Find me a female manager at OfReg!!

  24. Anonymous says:

    Lack of change management, way to go CIG.

  25. Neverwannabeacivilservant says:

    To sum up OfReg in one word – “shambles”.

  26. Okay...........then. says:

    Just look at the books relative to parties, offshore trips (??training it’s called??). Look at the personal vehicles and extras…

    I am sure the majority of the 14mil could easily be found there.


  27. Anonymous says:

    This is really very old news. The report actually says the the organisation has improved on all of those previous observations. Lots to be done over there but none of this is new.

  28. Anonymous says:

    We need business men and women running this country. They would have cut these unnecessary costs long time ago

    • Anonymous says:

      Where have I heard that cry before?

    • Anonymous says:

      Outside of the Mafia, I don’t know of anything that would be worse.

    • Anonymous says:

      I would like to see some women promoted in the civil service & private sectors. Terrible % of women in management here. Please don’t get me started on the terrible people that run for government. Yes. I’m a female Caymanian. Not born here so I won’t run for office as I’m treated as driftwood despite living here for 40 years.

    • Anonymous says:

      You mean like Trump? 🤣🤣🤣

  29. Anonymous says:

    Biggest waste of money.

    • Anonymous says:

      A very expensive little unregulated private kingdom enjoyed by entitled and very well paid political cronies.
      Wouldn’t be so bad if they at least had something to show for it.

  30. Anonymous says:

    I am still not getting this, was OfReg established to go into private companies and set the prices for gasoline at each station, for flow vs. Digicel, CUC, Water Authority etc.?

    Can someone in Government clearly say what OfReg was meant to be doing?

    Where I come from, the regulator ensures market competition, availability of services, level playing field, safety etc. Is it different here?

    • Anonymous says:

      Well, yes… its different here. It’s kind of like a system to get more for themselves, and never mind the others, Always some friends and relatives and a few Brothers helping to take care of the money flow.

    • Anonymous says:

      Yes. We do not do any of those things.

  31. Anonymous says:

    The great PPM.

  32. Anonymous says:

    World class civil service, right Franz?

    • UnCivil Servant says:

      Franz Manderson is part of the problem. Being nice is not enough the lack of acceptable standards within the civil service is part of the problems. The Deputy Governor defends his reports at all costs which is why no one is held accountable. When he speaks everything is great and the management team are great but the outcomes and results prove otherwise. No one gets fired for incompetence or professional negligence just look at the CarePay scandal, CCTV debacle, that involved several senior civil servants failing to do their jobs at an appropriate professional standard. Those responsible for the waste and incompetence simply get a lateral move and less time in the public spotlight.

      None of the current chief officers or other senior staff would last a year in similar senior positions in the private sector. The buck stops at the top with management and the boards stacked with political appointees. The buck ultimate stops with the head of the civil service and his handpicked management team.

      • mary says:

        What ever happened to Former CO Cristen Suckoo? Didn’t Franz find a cushy spot for him on secondment at Ofreg to help them clean up their act? What has he actually accomplished since he as there? How long is his secondment to last?

  33. Anonymous says:

    As I have commented before I do not think it is fair to OfReg as they need more shiny SUV’s with their name on the side to be effective. How can u go to Cost u Less mid day to shop in a smaller vehicle and be expected to go home drop off your shopping and head back to the office before heading back home at 5pm? People need to be more understanding.

  34. Anonymous says:

    will keep asking..
    how many lodge members on ofreg?

  35. Anonymous says:

    another glorious day for our world class civil service.
    no accoutability, no job cuts, no salary reductions….zzzzzzzzzz

    • Anonymous says:

      This one isn’t on the shoulders of the Civil Service. This one is an SAGC cluster…

      • Anonymous says:

        Hey wait up… did you read the report? The OAG basically said the office was poorly put together – that it was not properly thought out…that falls squarely on the Ministry and CO Alan Jones.

  36. Anonymous says:

    We know this already. Bet they wont shut them down.

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