Further to my Editorial yesterday “Auditor General says two ministries have tendered appalling accounts” I am continuing with the same subject as there still remains in the majority of the government ministries need for much improvement.

The Auditor General says:

“It is important to recognize the positive trend for the information in M&Ps’ financial statements and the significant work that has been undertaken to move the position forward. However this is all relative to the dire position that had been reached four years ago, when there was a large void in the reporting of credible financial statements since the introduction of the PMFL and the complete lack in accountability for the use of public resources.

“However, while some M&Ps are now operating with more effective financial management and financial reporting, there are still significant underlying issues that continue to have a fundamental impact on the effective financial management and reporting across certain M&Ps, in particular in some of the larger spending ministries.”

Alastair Swarbrick further says, “Furthermore, the Financial Regulations specifically require that a chief officer of a M&P

“ensure that an appropriate system of internal controls operates within the entity and that the system is adequate to safeguard the entity or executive resources for which the entity is responsible”.

“Whilst some entities are performing better than others, the evidence from our audits clearly shows that there are still significant issues with respect to the governance, financial management and internal control frameworks operating in core government. These issues continue to undermine real accountability for the use of public resources in the Cayman Islands Government.”

Swarbrick also brought our attention that the full annual reports were not produced and most contained “just the financial statements”. He said:

“Where reports have been tabled for 2011-12 and prior years, we found that most contain just the financial statements rather than the full annual report as required by the PMFL. In addition, we found that the annual reports were tabled well after the financial statements were signed off and too late for providing useful information to stakeholders, Legislators and the public. For 2010-11and

2011-12 the majority of the reports were tabled at least 6 months after the date the financial statements were signed off, with a significant number taking up to a year and in one instance 18 months between sign off and tabling. The lack of full accountability reports continues to be a fundamental transgression of the PMFL and represents a disregard for the accountability of public funds.

“The timely issuance of an annual report and its tabling in the Legislative Assembly is probably the most fundamental element in the accountability framework for a public sector entity. Without this, the accountability of these entities for their performance and use of resources is undermined, as Legislators and all other stakeholders are not able to review performance and hold them accountable.

“Even after annual reports or financial statements are tabled in the Legislative Assembly it can still be challenging for stakeholders to find the documents. Whilst they should be available on the website of the Legislative each entity should proactively be making their annual reports or financial statements accessible to all stakeholders on their own websites and through other appropriate mechanisms, to further promote transparency and accountability.

“In the future, as more financial statements are signed off within the statutory time frames, it should be a priority for entities to ensure that they are organized and resourced to prepare annual reports that talk more widely about their operational and financial performance, so they are tabled in Legislative Assembly in accordance with the timescales required in the PMFL, and made easily accessible to all stakeholders.”

In talking about “Financial Performance” The Auditor general notes:

“In future years as financial reporting becomes more current,and in the absence of effective discussion and analysis of financial performance in annual reports by Government and its entities, it is my intention to provide some commentary and analysis on the financial position and performance of Government entities. With respect to the years ending 30 June 2011and 2012 that are covered in this report, due to the length of time since the year end we have not included the level of analysis that we would intend to provide in future years.

“When looking at the financial performance reported by M&Ps in their entity financial statements, care needs to be taken in interpreting and understanding the results being reported. Readers need to understand that significant areas of activity undertaken by Government are not reported in the M&P financial statements, but only reported in the Entire Public Sector (EPS) financial statements. For example, transfer payments made by the Government to individual entities or organisations of approximately $31million,the purchase of outputs of nearly $29 million from non-governmental organisations and other executive expenses of nearly $17 million are only accounted for through the Entire Public Sector financial statements even though they are effectively administered by the individual M&Ps. Equally the output funding and equity investments of respectively $101.6 million and $19.5 million provided to Statutory Authorities and Government Companies, though again administered through the M&Ps are also not included in their financial reports. This is due to the artificial separation of transactions into entity and executive, with only transactions that are classified as entity being recorded in the M&P financial statements.

“Ultimately, this in my view obfuscates the financial performance and accountability of each individual ministry as the financial statements do not report the financial impact of all the activities they administer, and the reader needs to understand the complexities of the accounting framework employed by Government to interpret the information that M&Ps are reporting in their financial statements. Presently the reporting format for the EPS financial statements does not provide an analysis for each individual Ministry of all the transactions, both entity and executive, to give the reader a full understanding of the activities and costs of each individual Ministry. Therefore it would take a significant amount of additional time and analysis for any reader to try and get a clear picture of the full activities undertaken or funded through each Ministry.”

It is extraordinary that until Swarbrick was appointed we never really learnt the frustration that his predecessor, Dan Duguay, had. Whilst Swarbrick has certain protections Duguay did not have that luxury and when he went to the media he was given the chop. For trying to do his job!

Now, at last, the powers that be realise the need for accountability and the Foreign and Commonwealth Office in London demand it.

The fact that previous Auditor Generals never spoke up and to all appearances turned a “blind eye” is appalling if not understandable.

Watch this space – there is a lot more to come.