Auditor warns of continued failure of public accounting

(CNS): The auditor general has issued some severe criticisms in this year’s annual general report on the state of financial reporting on how public cash is being collected, spent and managed. Sue Winspear and her team found a catalog of issues relating to the 2023 books and government’s accounting practices on the more than $1billion the administration spent last year – especially when it comes to the Statutory Authorities and Government Companies (SAGCs). She also raised concerns about the poor quality of financial reports being submitted for audit and a failure across government to comply with legislation.

Every year the auditor releases a review of the state of the government’s accounts and while she has tracked improvements over the years with most entities now managing to get an unqualified opinion the standard of reporting was given a failing grade this year because of the many problems the office of the auditor general has documented.

“I continue to be concerned about the extent of non-compliance with Acts and regulations,” Winsprear said as she pointed out that much of the relevant legislation has been in force for many years and she has reported her concerns about this on numerous previous occassions.

“I noted again several instances of non-compliance with the Procurement Act and Regulations in 2018. Some public bodies have procured goods and services without approval from the public procurement committee, while others have directly awarded contracts for procuring goods and services or without approved business cases,” she added.

Winspear said she was disappointed that these issues persist.

“They must be addressed to ensure that public bodies get value for money when procuring goods and services using public funds,” the auditor said, adding four years on from the Public Authorities Act coming into force three SAGCs have still not aligned staff remuneration and terms and conditions with the civil service. Winspear said the general review of government’s accounts reveals a mixed picture for 2023 as she pointed out that government entities are expected to at least break-even. However, of the 21 SAGCs with completed audits for 2023, 12 made surpluses, two broke even and seven reported deficits.

Some SAGCs made significant surpluses and while others made significant losses. The Cayman Islands Monetary Authority made a surplus of $21.7 million but the Health Services Authority lost an eyewatering $82.8 million. Meanwhile the ongoing problems relating to post-retirement healthcare obligations of ten SAGCs have increased significantly over the last five years and this is affecting the financial results.

“Despite Ministries, Portfolios and Offices typically budgeting to break-even, their financial performance differs from that. For the 18 completed audits, around five broke-even, 12 made a surplus and one made a loss. Some core government entities have significant current assets, some of which relates to them holding high levels of cash.”

Winspear said several core government entities had not repaid there surpluses to the Ministry of Finance despite this being a legal requirement.

The report states that 39 public bodies received clean opinions but concerns remain as the auditor said a large number of adjustments with a significant value were made to the 2023 financial statements during the audits, which affected the final financial performance and position of many bodies. Over 360 adjustments valued at $354million were made to the accounts after they were submitted to the audit office.

“Public bodies need to do more to ensure that the financial statements submitted for audit are fully compliant with accounting standards and contain adequate disclosures,” Winspear said. “I urge public bodies to further improve their financial reporting to improve transparency and better inform decision-making.”

As at 30 September 2024, 18 audits, including the consolidated Entire Public Sector (EPS) account were outstanding. This includes seven public bodies and the consolidated financial statements of the entire public sector (EPS) for the 2023 financial year. “The Government needs to continue to implement corrective measures to improve the quality of the consolidated financial statements of the entire public sector. The Ministry of Finance needs to focus on this account and take corrective action to resolve all the qualification issues,” she said.

While Winspear usually makes recommendations in her reports on this occasion she did not as she said the Public Accounts Committee has endorsed the recommendations in her 2022 General Report and made some additional recommendations and given the similarity of the problems she now intends to follow up on the implementation of her previous recommendations and the committee’s additional recommendations from 2022.

See the full report here.