The following is taken from the Financial and Performance Reporting by the Office of the Auditor General Cayman Islands “Ministries, Portfolios and Offices for the years ending 30 June 2011 and 2012

The Report is 54 pages long. We show below only the Executive Summary, the Aud. General’s Conclusion and Appendixes A-D.

The complete Report can be downloaded at www.auditorgeneral.gov.ky

EXECUTIVE SUMMARY

I am pleased to present this report to the Legislative Assembly that summarises the financial audits of the ministries, portfolios and offices in core government (M&Ps) for the years ending 30 June 2011and 30 June 2012. I believe that Members of the Legislative Assembly will find this report useful in their role to ensure financial accountability and transparency for Government operations.

Along with government’s summary financial statements, the annual reports and financial statements of the individual entities of government are the key documents that enable the Legislative Assembly and the residents of the Cayman Islands to hold ministries, portfolios, offices, statutory authorities and government companies accountable for their use of public resources. In December 2010, I delivered my first report on the preparation and tabling of financial reports and over the subsequent three years I have provided the Legislative Assembly with reports on the progress that Government has made in preparing and tabling these fundamental accountability documents. A significant amount of time and resources was devoted by Government and my Office to clear the backlog of prior year financial statements while undertaking audits of more current financial statements.

Click on image to enlarge

This is the first general report I have been able to submit on the results of my audits of the ministries, portfolios and offices for the most recent fiscal years. Similar reports will be produced in the future and, as the completion of entity financial statements continues to be more timely. I will be able to issue these reports to the Legislative Assembly closer to the fiscal year end.

With respect to the M&Ps financial reports for the fiscal years ending 30 June 2011and 30 June 2012,I saw improvements in both timeliness and quality. Particularly, for the year ending 30 June 2012, there was progress in the quality of information presented. However, whilst the story is one of progress, there is still a significant way to go before accountability as envisioned in the Public Management and Finance Law (PMFL) is effectively achieved. The picture across the individual entities is varied, with some performing well while others are still challenged to meet their administrative and legislative responsibilities. For the year ending 30 June 2012 there has been an increase in the number of unqualified audit opinions, up to six compared to two in the previous year. However the remaining 21 opinions issued for the two fiscal years were qualified and there are at least two significant entities that still have fundamental issues in being able to present credible financial statements that can be relied upon by Legislators and the public.

In this report, I discuss my concerns regarding the timely completion and publication of credible financial and performance information including:

• the financial statements for 6 of the 15 entities for the year ending 30 June 2012 were completed in line with the statutory timetable, up from two in the previous year;
• two years after the 30 June 2012 fiscal year two entities were still outstanding;
• there continue to be significant delays in tabling annual reports and financial statements by the responsible ministries;
• financial statements are difficult to locate and access on government’ s websites
• a number of entities have only been tabling their financial statements in the Legislative Assembly and not annual reports discussing their wider performance as required under the PMFL; and
• there are significant weaknesses in the internal control environments and governance of certain entities creating increased risks of mismanagement and abuse.

The government also needs to consider whether the financial reporting required under the PMFL provides clear accountability for the use of public resources. I have also highlighted some deficiencies in the current financial reporting framework which in our view effectively obscure accountability and transparency in the use of public resources, and for the expenditures authorised by the Legislative Assembly.

For progress to continue towards the ultimate objective of restoring financial accountability, I believe entities should provide regular reports to the Legislative Assembly on the steps they are taking to improve the quality of their financial statement submissions and underlying information while strengthening their internal control environments and overall governance arrangements. This and

future reports can provide Members of the Legislative Assembly with a roadmap for how to hold entities to account.

I look forward to working with Government and the individual entities as they continue on the path of improving financial reporting and restoring accountability for the use of public funds.

CONCLUSION

1. This report provides a summary of our audits of the ministries, portfolios and offices of the Cayman Islands Government for 2010-11 and 2011-12. Whilst I continue to see improvements in the quality and timeliness of the financial statements for these entities a lot more work is required before effective financial management and accountability for the use of public resources is restored. In particular I have significant concerns about:

• the capacity in DAWLA and Tourism and Development to present reliable and credible financial statements for audit;
• the leadership, organization and use of human resources in the financial function;
• the implementation, operation and monitoring of proper internal controls and practices to protect public resources from being abused; and
• the effectiveness of the current financial reporting framework to provide transparency in the use of public funds.

1. There remains considerable room for improvement in the governance, internal controls and financial management of most entities. Senior management across government is responsible for the financial management of their entities and putting in place control systems to enable the effective stewardship of public resources and protect them from waste and abuse. There continues to be a lack of due regard by senior officials for ensuring that appropriate systems are in place exposing public funds to risks of waste and misuse.

2. The government needs to seriously consider how it organises itself to effectively manage its financial resources, and provide strong and effective leadership to the financial function. A number of matters I have raised in the conduct of my audits are very significant and could effectively undermine the credibility of the government.

3. I strongly recommend that the Legislative Assembly take note of my findings in this report and act promptly to ensure senior officials take action to mitigate the risks and opportunities for loss or abuse in the use of public resources.

APPENDIX C – AUDIT OPINION DEFINITIONS

The opinions that I can render on an entity’s financial statements and their definitions are as follows:

• Unqualified – The information contained in the financial statements can be relied upon;
• Qualified – A qualified opinion means that a portion of the financial statements cannot be relied upon,but that the rest of the statements can be relied upon by the reader;
• Adverse- There are such significant deficiencies with the information in the financial statements they should be considered unreliable for the user and the information contained therein is not trustworthy; and
• Disclaimer- I was not provided with sufficient information to conduct an audit.