The Auditor General, Alastair Swarbrick, made public today his Office’s performance audit report on the government’s management of travel and hospitality expenditures. Mr. Swarbrick’s report is very critical of Government’s management practices for approximately $8.6 million of expenditures over three years and concludes that there is a potential waste of significant public funds. Because of deficient record keeping, the Auditor General was unable to determine exactly how much travel and hospitality expenditure was incurred and wasted over the three year period he audited, but outlines enough examples in his report to make his point.

“When my auditors can’t obtain documentation to support how money is being spent, I believe it’s time for the public to sit up and take notice,” said Mr. Swarbrick.

The report includes eleven recommendations for the Deputy Governor and his officials to implement. The recommendations build on Government’s action taken in 2013 to provide public servants with a global travel policy.

In his report, the Auditor General provides many examples of potentially wasteful government expenditure relating to travel and hospitality. Mr. Swarbrick outlines how a lack of good management led to a litany of inappropriate behaviour in the departments he audited including misinforming the public about how much is actually being spent on travel and hospitality.

“While the Government has taken an important first step by implementing a travel policy, the problems my auditors found will not be fixed by simply doing this one thing.” said Mr. Swarbrick. “I have reported to the Legislative Assembly on a number of occasions that there are insufficient controls and practices for government expenditures, and the problems I have reported in respect of travel and hospitality expenditures are indicative of these wider concerns. I have been assured that further work will be undertaken to address these problems.”

The Auditor General has issued a number of audit reports since taking office in July 2010 calling for greater leadership of the financial function and more attention to the controls needed to ensure public servants do their jobs properly, most recently in his reports on Governance issued in December 2013.

“I believe there has to be greater accountability for the actions of public servants,” said Mr. Swarbrick. “I really hope that this report and its very clear examples of waste and abuse will provide the impetus for the management of public resources with more diligence and in line with the public’s expectations. It’s time to change how we do things.”

More information regarding this report can be obtained by contacting Martin Ruben at the Office of the Auditor General at (345) 244-3206. A copy of the report is available at www.auditorgeneral.gov.ky

DEPUTY GOVERNOR’S RESPONSE (From Appendix 3 of Report)

The Deputy Governor’s Office (the “DGO”) thanks the Auditor General for the

opportunity to comment on the report entitled “Management of Travel and Hospitality Expenditures in the Cayman Islands Government” covering the period of 1 July 2009 to 30 June 2012 (the “Report”).   The DGO’s response is contained in two sections, first general commentary and second specific management responses to recommendations arising from the Report.

1.   This is a timely report which broadly identifies a range of deficiencies relating to the Cayman Islands Government’s (the “CIG”) management of travel and hospitality expenditures as of early 2013,when this audit commenced.

2. The DGO further acknowledges that at the time of the report’s compilation, while basic guidelines existed in the form of a legislative framework and prescribed forms, remedial actions were urgently warranted to enhance prescribe standards, accountability, transparency and value for money.

3. As a first step toward improving CIG’s performance against these governance metrics, the DGO implemented a Travel Policy in July 2013 which is mandatory across the civil service, irrespective of role or seniority. The travel policy addresses a number of the concerns and recommendations contained in this report.

4. The travel policy was developed after careful consideration of best practice, and in consultation with senior leaders across the service including finance and audit personnel. The policy provides uniform guidelines to minimize the range of risks identified in this report. This Policy will be monitored for compliance.

5. During the audit period, expenditures on travel and hospitality represented less than one (1) percent of total expenditures of the CIG. However, as the report correctly concludes, Cl$8.6 Million is a large sum and there are heightened inherent risks associated with these expenditures that must be effectively mitigated. The travel policy has therefore tried to strike a balance by providing cost-effective controls which manage the identified risks.

6. The report cites examples of hospitality provided in the form of Christmas parties. While the CIG still does not have a dedicated policy on hospitality generally, expenditures on Christmas functions have now been harmonised. The Portfolio of the Civil Service controls a central budget for employee Christmas functions. Expenditures are not to exceed $25 per employee.

END

The following is an abridged copy of the aforementioned “Management of Travel and Hospitality Expenditures Report”:

EXECUTIVE SUMMARY

The public expect government officials to act at all times with the highest standards of integrity, accountability, transparency, values, and ethics while ensuring value-for-money in their use of public funds. These basic management principles apply to all government related expenditures, however for expenditure related to travel and hospitality the importance of these principals is further heightened by the potential for public officials to be seen to be receiving a personal benefit.

The objective of this audit was to determine whether the Government was managing official travel and hospitality expenditures properly and with due regard to value for money. I have concluded that official travel and hospitality expenditures were not managed effectively and efficiently, leading to the high likelihood that the Government mishandled significant amounts of public resources.

Fundamental to the effective management of the types of expenditures is the clear articulation of policies for incurring travel and hospitality expenditure supported by robust procedures and controls to ensure compliance. I found that there was an absence of well-defined policies and ineffective or absent procedures and controls. Any policies that were in place were inconsistent across government and officials were left with significant if not complete discretion with regard to how travel and hospitality expenditures were incurred. Furthermore monitoring and reporting of these transactions by management was virtually non-existent.

We have identified a number of examples in this report where Government have either not clearly demonstrated the value or benefit of the expenditure incurred, or where public funds have been potentially misused. Unfortunately, the supporting documentation for travel and hospitality expenditure was very poor, and in some cases non-existent, and the records in the accounting system unreliable. As

a result we were not able to carry out all the audit procedures we had planned, limiting the scope of our audit, and our ability to provide more information to the reader on how these expenditures have been managed or quantify how much the Government mishandled or wasted during the period reviewed.

Senior management is responsible for ensuring that appropriate policies, procedures and controls are in place and operating effectively. Over the course of the period audited officials failed fundamentally to ensure that these expenditures were being managed. The Government has taken an important first step in acknowledging the serious shortcomings in the management of these expenditures by recently issuing a travel policy. However, the Government still needs to develop and implement more practices and procedures, and senior management need to take more responsibility for the effective stewardship of public money.

ABOUT THE AUDIT

11. The objective of this audit was to determine whether, in the audited period July 1, 2009 to June 30, 2012, official travel and hospitality expenditures were properly managed in core government’ entities to ensure value-for-money, with due regard to existing rules, responsibilities and policies. We also considered significant transactions and their adherence to policies in the six months after June 2012.

12. Travel expenditures consisted mainly of airfare, hotels, and per diems’ (also referred to as subsistence allowances). Hospitality expenditures included such items as catering, hosting of events, entertainment of third parties and staff along with other discretionary spending. Travel and hospitality expenditures were incurred at the entity level of the ministries and portfolios and reflected a rising trend over the period as shown in Table 1.

Table 1: Travel and hospitality expenses compared with core government entity expenses July 2009 -2012 (See attached)

13.   Of these total expenses incurred $7 million and $1.5 million related to travel and hospitality, respectively. The two core government entities with the highest travel and hospitality expenditures were (as Table 2 shows) the Ministry of Finance, Tourism and Development (MFTD) and the Ministry of District Administration, Works, Land and Agriculture (DAWLA). These two ministries represented 70% of all travel and hospitality expenditures. For that reason, we mainly focused our audit detailed testing on these two entities. However, in addition to the aforementioned, we also considered within our sampling, the policies and procedures in other ministries along with the significant control issues of travel and hospitality identified in our financial audits to determine the extent to which our findings and conclusion could be extended to the entire core government.

Table 2: Travel and hospitality expenditures, by entity for three fiscal years 2009-10 through 2011-12 (core government entities only) – See attachment

AUDIT FINDINGS

17. Generally, we found a number of areas where government officials failed to manage travel and hospitality expenditures effectively. Legislation in place provides clear responsibilities for senior management to develop and implement policies and practices in order to ensure due regard to value for money in travel and hospitality expenditures. Despite this, we found a lack of detailed guidance and controls in place were not effective in many cases. Furthermore, we noted a relatively informal framework for ensuring that expenditures were incurred only for the purpose of achieving the objectives of government programs and services.

18. Our findings with regard to travel and hospitality expenditures are consistent with work that we have done in our financial audits of core government entities over the last number of years. In our financial audits, we reported significant internal control deficiencies and poor accounting practices that resulted in our inability to fully carry out our audits or caused us to heavily qualify our audit opinions.

19. Our detailed findings in this report are presented in three categories:

1. Policies and procedures

b.        Monitoring and reporting

c.          Due regard to value for money

POLICY AND PROCEDURES

GOVERNMENT LACK THE POLICIES AND PROCEDURES REQUIRED FOR EFFECTIVE MANAGEMENT OF TRAVEL EXPENDITURES

20. Clearly documented policies and procedures ensure that all government officials understand what they are required to do to manage government expenditures effectively. They also ensure consistent application across government entities. Without clearly documented policies and procedures, officials cannot be held to account for their actions. The development, communication and implementation of policies and procedures are the most effective ways to ensure that the government’s risks in making these expenditures are managed effectively.

21. We therefore examined whether the Government’s policies and procedures (as summarized in Appendix 2) were clearly documented, communicated and designed to ensure the effective management of travel. Further we reviewed if they promoted consistency, value for money and ensured that there was a clear business need for travel in line with the government’s business objectives.

22.   We found that the limited policies and procedures in place did not promote the requirements set out in the Public Service Management Law to ensure value-for-money when government expenditures are incurred.

23. For example, we expected to find that officials who are required to travel would have comprehensive direction for areas such as air travel class, accommodation, per diem rates for staff, and transportation. Instead, we found that officials did not formally develop and implement the required policies, procedures and practices for the period under audit in many cases. Guidance for these key aspects of travel, where it had been developed in entities, was mostly vague. Generally, direction was at the discretion of the CO. This allowed for a wide range of practices across government, for example the amount paid to official business travelers for per diems varied significantly. For the most part, the framework in place provided a significant amount of flexibility in the decision making process for the incurrence of these expenditures.

24. We found that officials were not required to formally document their justification for business travel or consideration of other options. For some travel, we would have expected a more robust business case, including a description of the business being done (for example, training or a conference),the expected benefits to the Government, the options considered (with a focus on value for money), and the expected costs of the proposed travel.

GOVERNMENT HAS ISSUED A TRAVEL POLICY

25. In July 2013, the Government issued a travel policy that covered the incurrence of expenditures by civil servants, though it does not cover travel by elected representatives, including Ministers. The policy was sent out to all COs and Chi ef Financial Officers (CFOs).

26. Our audit did not include a thorough review of this travel policy, nor did we assess its implementation, as it was issued during the course of the audit. We will conduct a full review during a future audit.

Recommendation #1: The Government should develop policies for the management of travel expenditures to include such areas as key financial controls and requirements for monitoring and disclosure.

NO HOSPITALITY EXPENDITURE POLICIES OR GUIDANCE IN PLACE

27. As core government overall spent at least $1.5 million on hospitality from July 1, 2009 to June 30, 2012, including parties, dinners, and social functions, there was a clear need for a hospitality policy in place that provided officials with guidance on how they should manage these expenses. We would also expect to see a clear link made to business objectives and consideration given to value for money.

28. However, we found no hospitality or entertainment policy in place or any detailed guidance on how to effectively control and ultimately manage such expenditures. For example, we could not find any guidance that addressed the limits, frequency, oversight, or disclosure of these discretionary expenditures.

29. We also noted that there was no guidance on alcohol consumption. The Personnel Regulations section 11(iii) indicate that “no bar” should be reimbursed for travel-related expenses and that the Chief Officer can issue reasonable rules prohibiting the consumption of alcohol in the work place other than at official functions. For example, we found that DAWLA spent $29,480 on three Christmas parties, which included beverage consumption of $6,373 or 22% of the total cost. In MFTD, we identified five entertainment events including three Christmas parties, a special function, and a birthday party, with a total cost of $17,530. The alcoholic consumption costs were $5,810 or 33% of the total cost of these events

30. The lack of a hospitality policy represents a fundamental weakness in the governance framework, as the value these expenditures have to the provision of public services is subject to significant scrutiny.

Recommendation #2: The Government should develop a comprehensive hospitality policy that is clearly communicated to all staff. The policy should promote consistency, value for money, controls, accountability, and disclosure requirements. The policy should address issues such as consumption of alcohol and entertainment of third parties.

NO POLICIES OR CONTROLS IN PLACE FOR MEMBERS OF THE LEGLISLATIVE ASSEMBLY

31. There are no laws or regulations in the Cayman Islands that provide a framework for travel and hospitality expenditures by elected representatives. However, in setting up the 2009 Constitution, the Government proposed the desirability of checks and balances to, among other things, safeguard the country’s reputation for honesty, integrity, efficiency, and responsibility.

32. We therefore examined whether procedures existed for effectively managing the travel and hospitality expenditures of members of the legislative assembly (MLAs), including Ministers. We found th.at procedures used across government were very inconsistent. In MFTD, officials applied their own travel policy to all civil servants including MLAs. In DAWLA, Personnel Regulations were used a s a general guideline for MLAs; however these regulations only applied to civil servants. In other areas, such as entertainment expenditures, there were generally no rules in place.

33. We found no evidence that in the absence of rules, Members provided any formal support for their business requirements for travel or hospitality. Of greater concern, however, we found instances where former Ministers either approved their own travel claims for payment or did not provide support for their expenditures. Chief Financial Officers informed us that they requested support for these expenditures; however, we noted payments were still made without support.

Recommendation #3: The Government should agree to establish policies and procedures for travel and hospitality expenditures incurred by Members of the Legislative Assembly.   The policies and procedures should clearly outline the principles of ensuring value for money in public expenditure, the circumstances in which expenditures can be incurred, the procedures and forms to be used, and the approval process that should be followed.

INEFFECTIVE PROCEDURES FOR PR OCESSING TRAVEL E XPENDITURES

34. While we expected rigorous policies, It is compliance with procedures that ultimately indicate if policies are respected and followed. We would have expected standardized procedures for the booking ·of travel and accommodations, the processing of travel advances and the timely settlement of claims across core government entities.

35. We reviewed the procedures in place for managing travel advances and claims. Advances are usually issued to cover expenses such as daily per diems, hotel bills, ground transport, official entertainment, car rentals and other expenses that would be reasonably incurred for a business trip. Before government officials are about to travel, they are issued a travel advance. Government credit card holders which include senior officials and Ministers generally obtain a travel advance for per diems and airport transport, while non-government credit card holders may obtain an advance for any costs not directly billed to the Ministry such as hotel, subsistence and airport transfer, etc.

36. A travel advance is required to be settled with a travel expense report within seven days upon return from travel. The claimant is to document the expenditures incurred and either refund the amount of the travel advance not used or request an amount to cover additional travel expenses incurred by the claimant.

37. Our review of transactions found significant delays in the clearance of travel advances. We found that amounts remained unsettled in the accounting records, for several months and, in some cases, for several years. This indicated that there was a combination of untimely submission of travel claims and poor accounting controls over the management of the settlement of travel advances.

38. For example, we found that in 2011-12 one Ministry wrote off $167,000 for travel advances issued between 2003 and 2009. While these amounts were written off through an approval by the CO, we noted that there was little evidence of significant collection efforts made by officials in the Ministry. Procedures and accounting need to be clear for all expenditures related to travel regardless of the method of incurrence and ensure full accountability.

39. The information supporting the travel advances outstanding was very poorly maintained and difficult to analyze. It included travel transactions for both current and past employees of the entity. Of note, $32,000 of the total amount written off related to travel advances for one senior official. This practice results in the risk that expenditures could have been incurred for non­ business purposes.

40. For 2011-12, we noted that travel advances were often settled beyond the expected time frame of seven days following the travel period. In fact, we found a number of travel advances that had been outstanding in the system for more than a year, and some for up to ten years. In all, we noted 75 instances amounting to $76,000 that had been outstanding for a period of over 30 days, which is what we considered to be a reasonable settlement period. This indicated that the financial officers in these ministries failed in their duties to consistently ensure that individuals who traveled either accounted for their expenses or returned the amount of the unused advance on a timely basis.

Recommendation #4: Government officials should implement the appropriate procedures and controls to ensure that travel expenses are incurred appropriately, submitted with supporting receipts and documentation, and official travel claims are settled or accounted for on a timely basis in accordance with respective policies.

Recommendation #5:If proper evidence cannot be provided by senior officials and other current employees of the Government that they incurred the expenditures related to the travel advances that were written off, the Government should commence action to collect these amounts.

CREDIT CARD POLICI ES AND CONTROLS DISREGARDED

41. The use of government credit cards was first approved by the Legislative Assembly on 16 May 2001.

On 3 January 2002, credit cards were issued to Ministers along with a one-page document that indicated the need for a claim form to be submitted with supporting documentation to Treasury within 7 days following the trip. While not explicitly stated in the one-page document, Government credit cards were to be used only for Government business as intended by the approval in the Legislative Assembly. A more comprehensive Government-wide credit card policy was not issued until July 2010.

42. The requirements of the Government’s credit card policy and the Financial Regulations outlined in Appendix 2 clearly require proper receipts and documents to support all travel and hospitality transactions. We therefore expected that rigorous controls would be in place to ensure that these rules were being followed, especially considering the additional risks and potential for abuse by Government officials.

43. As at June 30, 2012, the following number of credit cards were issued including respective limits:

Table 3:No.of card users per credit limit amount – see attachment

44. It is the responsibility of the CO to ensure that proper controls are in place to ensure the probity of Government expenditures. In the current framework, the CO relies on the Chief Financial Officer (CFO) to implement the procedures and controls required to ensure that legislation and policies are observed. From the work we performed, we found that the CFOs involved were negligent in these duties with respect to the blow findings.

45. We conducted a thorough review of the procedures and noted that at least $458,000 in travel and hospitality expenditures was not supported by receipts and formal documentation. Furthermore, it was unclear whether the expenditures had any business purpose. We also confirmed that one former Minister effectively self-approved the payment of transactions incurred on their credit card which amounted to approximately $71,000.

46. The general practice of submitting travel claims with no receipts constituted a significant control weakness and represented a significant risk for abuse by senior government officials and Ministers.

47. In our testing, we also found examples where per diems (which cover meal expenditures) were provided to credit card holders and at the same time similar expenditures were also charged to the credit card. Due to poor record keeping and lack of financial records, we were unable to determine the true extent of this type of occurrence. As noted above, since some senior government officials and Ministers did not provide support for their credit card expenditures, CFOs could not determine whether there were instances of these occurrences.

48.   We believe these control weaknesses and disregard for ensuring the probity of financial transactions is a fundamental failure of the respective COs and CFOs to discharge their duties in accordance with the PMFL and Regulations.

Recommendation #6: Government officials should implement the necessary procedures to process credit card payments to ensure that all laws, regulations and policies are observed.

Recommendation #7:Government should provide training to Chief Officers and Chief Financial Officers on their roles and responsibilities in relation to their obligations under the Public Management and Finance Law and Public Service Management Law.

MONITORING AND REPORTING

WEAK MONITORING OF TRAVEL AND HOSPITAL ITY TRANSACTIONS AND

INCONSISTENT REPORTING

49. In previous audits, we have recommended that the Government provide greater leadership around the financial function, including clear direction on how financial transactions should be processed for accounting purposes. However, the Government has not yet implemented those recommendations.

50. Ensuring compliance with the Public Management and Finance Law (PMFL) and its regulations requires that the processing of travel and hospitality transactions be clearly documented and appropriate controls be provided. We therefore examined whether proper monitoring systems were in place to effectively identify issues, risks and trends associated with travel and hospitality.

51. We found that, other than comparison of actual to budget for supplies and consumables, there were no formal analyses or assessments of travel and hospitality expenditures. Essentially, no one in Government was looking at the travel and hospitality data over time to determine if any act on was required to more effectively manage these expenditures.

52. Given the lack of clear guidance, we found several inconsistencies in how travel and hospitality transactions were processed by the various entities in Government. As a result, while the Government’s accounting system reported a total of $8. 6 million for travel and hospitality over the three years reviewed, this amount did not include :a number of travel and hospitality expenditures that Government officials had recorded in a number of other accounts.

53. We found travel and hospitality expenditures posted in other accounts not included in the $8.6 million noted above covering training, investigations and post mortems, maintenance, and special conferences. These expenditures start at an additional $200,000 upwards of potentially $1.7 million. Due to the inconsistency in recording expenditures and limitations of the accounting information system, the data extraction methods used cannot be precise. Such inconsistencies prevent the overall reporting and analysis of the true cost of travel and hospitality.

Recommendation #8: The Government should implement our previous recommendations and develop clear guidance around the processing of and accounting for transactions relating to travel and hospitality. It should also develop and implement adequate controls to provide for monitoring of travel and hospitality expenditures and ensure value for money.

INADEQUATE PUBLIC REPORTING ON TRAVEL AND HOSPITALITY

EXPENDITURES

54. Because of the nature of travel and hospitality expenditures, and the inherent risks associated with their administration, it would be good practice to meet the public interest and the norm in other jurisdictions, for Government to fully and publicly disclose such expenditures.

55. We found that Government has no policy or guidance in place to ensure that it reports these types of expenditures appropriately. In fact, our review of Government financial reports to the Legislative Assembly and of information on the Government’s websites showed a complete lack of reporting by the Government on its travel and hospitality transactions.

56. At present, the Government discloses such information only upon request by the public made through the Freedom of Information Law {FOI). Those requests take considerable time for employees to process and create the opportunity for errors and omissions in the information provided.

57. While we did not specifically review all FOI requests during the audit period, we examined two requests because of our concerns about the quality of information provided by the Government.

58. We found that in the case of those two requests, the ministries involved had

insufficient procedures in place to ensure the accuracy of the responses.

59. In response to a FOI request of the totaI expenditures incurred involving a former Minister published on 10 December 2012 by the Caymanian Compass, Government reported a total expenditure of $42,000 for a trip to Qatar. Our review of the information provided indicated that the amount was closer to $45,642 and failed to include two additional delegates who attended the conference.

60. Furthermore, due to the poor processing of accounting transactions, we were not able to determine what portion or if the entire amount of an additional $272,000 incurred for ground transportation services was appropriately disclosed as part of travel costs in another FOI request.

Recommendation #9: The Government should develop a policy and provide sufficient guidance to officials for the proactive disclosure of information on travel and hospitality expenditures.

Recommendation #10: The Government should institute procedures to ensure the accuracy of responses to Freedom of Information requests and should implement the accounting procedures necessary to extract from the system information about an individual’s expenditures.

DUE REGARD TO VALUE FOR MONEY

MISHANDLING OF PUBLIC FUNDS BY MINISTERS AND OFFICIALS

61. During the three years reviewed by our audit, the Government dealt with significant financial problems. Its public debt based on unaudited figures increased from $577 million to $746 million to finance its operations. Throughout the period, Government took several measures to reduce expenditures, including reducing the number of employees and the salaries of public servants.

62.   During the same period, we noted that travel and hospitality (as outlined in Table 4 attached) showed an upward trend of 10% over time.

Table 4: Travel and hospitality expenditures 2009-10 through 2011-12 – see attached

63. As the three-year audit period was a time of constraint, we expected to find stringent measures in place to ensure that expenditures such as travel and hospitality were managed effectively and that the Government received good value for money spent. Instead, we found several cases which provided evidence of disregard for the use of public funds.

64.   Our audit testing process found a significant number of transactions that we believed did not represent good value for money or possible misuse of public funds. This sect on of our report highlights some of the transactions of more concern to us.

65.   Ground transportation – We found expenditures incurred through an overseas branch of the Department of Tourism amounted to $398,000 that were paid from January 1, 2009 through September 30, 2012 to two ground transportation companies for the use of limousines, vans and SUVs. We noted that spending increased each year of the review period; from $147,000 in 2010 to $162,000 in 2012.

66.   Further analysis revealed that there was a serious lack of controls over procurement and disbursement of public funds relating to ground transport suppliers:

• no contracts were in place;
• no clear link to a business purpose was documented, in other words, it is unclear from the information found in the files whether or not the expenses incurred were linked to the business objectives of the Department of Tourism or MFTD;
• no evidence to assess the probity of these transactions and to ensure they were in accordance with the intended purpose for which the amounts were appropriated;
• transportation rates charged varied from $85 to $250 USD per hour;
• there was evidence that showed usage of ground transport services while records showed that the same individuals were on personal leave;
• no assessments of value for money were made or alternative options of transport considered (for example, contracting for or purchasing a vehicle to save money).

67. In summary, the lack of controls resulted in over expenditure of the travel budget in the Department of Tourism from June 2009 to March 2011by an amount of $174,000.

68.   Per-diem rates – We found a lack of consistency with respect to the use of per diem rates used across various ministries to Ministers, senior officers and other staff members. We noted the following:

• Varying Per -Diem rates were used across ministries. Rates per day ranged from as low as $40 at the Portfolio of the Civil service (POCS) to an excessive amount of $250 at the DAWLA which covered the same expenses of meals and incidentals.
• Varying interpretations of what the per diems should cover.
• Some staff members were paid more than senior officials, COs and even Ministers without any reason given. The Ministry of Health, Environment, Youth, Sports and Culture and Portfolio of the Civil Service’s policy was to pay the CFO and Head of Departments (HODs) $50 per day while $75 per day was paid to staff for the same expenses at MFTD. A staff member at the MFTD was paid $150 per day for travel to the United Kingdom while the CO of the Financial Services organization within the same ministry was paid $90 per day for the exact same travel.
• Per diems for Ministers ranged from $100 – $250 per day. The Ministry of Health, Environment, ,Sports and Culture’s policy was to pay $100 per day to the Minister, while DAWLA paid $250 per day to cover the same expenses.

69. We summarized our findings for per diems in the attached table:

Table 5: Per diem rates across various core government entities see attached

70. One former Minister claimed and was paid $250 per day regardless of the location travelled. Although there are no rules in relation to Ministers’ per-diems in the regulations, the amount of $250 per day regardless of location cannot be deemed reasonable because it exceeds the $200 per day specified in the Personnel Regulations (2011Revision). We found that a former Minister was paid $250 per day for trips to such places as Qatar, Jamaica, and Grenada. Furthermore, we found very few examples of per diem reductions to factor in meals that would have been provided as part of conferences.

68 [70a*].   Qatar trip- In September and October 2012,the former Minister of DAWLA, her executive aide, the CO of DAWLA, Postmaster General, and Deputy Postmaster General attended an international postal conference in Qatar. The Ministry of DAWLA informed us that the CO conducted business in London prior to Qatar, these costs have not been included in the below figures. Table 7 shows a significant range of per diems, airfares, and the hotel rates paid during the trip. The Ministry indicated there were no conference costs incurred.

(*EDITOR NOTE: We believe the notation of 68 is incorrect but we have placed it in exact order as original document and marked it as 70a)

Table 7: Qatar Trip –Total Expenditures – see attached

71.   CAL Panama launch – In May 2012,the Government sponsored an eventin Panama City for the inaugural flight of CAL. A total of $71,000 was spent on 43 delegates for the three day trip. Further details are provided in Tables 8 and 9. Although there was a strategic objective for the launch event, there was no formal case prepared to support the need for all the respective travelers to attend this event and whether it was necessary for public funds to have been used to provide travel for all the participants.

Table 8: CAL Panama launch -Size of delegation – See attached

Table 9: CAL Panama launch- Expenses – See attached

72. Christmas parties-We noted that from 1July 2009 to 30 June 2012,government entities spent approximately $223,000 on Christmas part es and related gifts for employees. The two entities we reviewed accounted for $135,000 or 60% of the total as shown in Table 10.

Table 10: Christmas Party Expenditures in Core Government July 1, 2009 to June 30,2012 – See attached

73. DAWLA spent $13,000 on a Christmas party held at the Cayman Turtle Farm in December 2.009.Of the total amount spent in other ministries, we noted one instance in 2009-10 where the Portfolio of Internal and External Affairs purchased turkey and ham products for employees at a cost of $22,000.

74. Unusual expenditures- We noted a number of expenditures charged to hospitality and also in other accounts that had no clear link to Government’s business objectives or appeared excessive. In the absence of a well-defined travel and hospitality policy, we highlighted the following expenditures:

Table 11: Unusual Expenditures -Hospitality & Other Accounts – see attached

75.   Budgeted travel and hospitality expenditures, and related Minister approvals-Ministries and portfolios have set budgetary limits which are approved by the Legislative Assembly. These include travel and hospital TV expenditures. The budgets are used to make sure government officials manage expenditures within constraints to effectively deliver public services.

76.   In our review of the former Ministers’ travel and hospitality expenditures, we noted that the initiation and approval processes to incur certain travel and hospitality expenditures were confirmed to be essentially out of the hands of officials in the ministries.

77. We found that there were instances where former Ministers directed and approved the expenditure of public funds in contravention of the PMFL. In one ministry, we confirmed that it was the normal practice for the former Minister to approve credit card payments for transactions incurred. For example, we noted on statements for January 2012 and June 2012instructions to pay or as per instructed by the former Minister. The total credit card expenses over the period under audit were approximately $70,000.

78. Officials indicated that former Ministers effectively set the budget for their own travel. Officials in one ministry informed us that over spending in the areas of official travel and hospitality is not a major concern, as savings would be found in other budgeted line items under the supplies and consumables category. These explanations from senior government officials indicate that there was a general lack of control with respect to the effective management of public resources.

Recommendation #11: Because of their nature, we recommend that the details of all travel and hospitality expenditures incurred by elected representatives be disclosed by government within a reasonable time on the Government website.

CONCLUSION

79. The objective of this audit was to determine whether the Government was managing official travel and hospitality expenditures properly and with due regard to value for money. As a result of our audit work, we concluded that official travel and hospitality expenditures were not managed effectively and efficiently, leading to the high likelihood that the Government mishandled significant amounts of public resources in carrying out these transactions. While we have identified a number of examples in this report, we were unable to quantify how much the Government mishandled or wasted during the period reviewed, or how much abuse occurred.

80. Because of poor record keeping and a lack of information in the Government’s accounting system, we were not able to carry out all the audit procedures we had planned. This reduced our ability to provide more information to the reader on how these expenditures have been managed.

81. The Government took an important first step in acknowledging the serious shortcomings in the management of these expenditures by recently issuing a travel policy. However, the Government still needs to develop the necessary practices and procedures to ensure travel and hospitality expenditures are managed effectively in the future and that public funds are not misused by public officials.

82. We have made a number of recommendations in this report that highlight the need to strengthen the control framework and the role and responsibilities of government officials. Our inability to complete the audit work we planned should provide the impetus for immediate action by senior officials in Government and monitoring of their implementation.

83. As government travel and hospitality will continue to be the subject of ongoing public and media interest, we believe that implementing our recommendations will better position the Cayman Islands Government to manage its travel and hospitality expenditures in the future, in line with the public’s expectations.

Alastair Swarbrick MA {Hons), CPFA Auditor General

George Town, Grand Cayman

Cayman Islands

23May2014