Over two decades on, CIG still struggles with accounts

(CNS): Auditor General Sue Winspear still has “concerns about the quality of the submitted financial statements” by government entities after hundreds of adjustments and additional disclosures had to be made to the 2022 financials submitted for audit this year. In her latest general report on the Cayman Islands Government’s annual bookkeeping, she also noted failures to comply with legislation, particularly in relation to procurement.

Twenty-three years after the government rolled out the public management and finance legislation that changed the government’s accounting systems from basic accounting to meet proper international financial standards, the government’s army of accountants is still struggling to keep the books straight.

While Winspear admitted there had been dramatic improvements in recent years, with most ministries and public authorities getting the books in on time — and after the adjustments getting clean opinions — there are still some significant issues.

“The quality of financial information submitted to my Office by the public bodies needs improvement,” she said in the report, Financial Reporting of the CIG – General Report, 31 Dec 2022, which has a significant amount of information. “This is demonstrated by the number and value of audit adjustments made to the financial statement after they had been submitted to my Office for audit.”

Winspear explained that for the 2022 accounts, over 280 audit adjustments valued at a whopping $115 million were made by public bodies.

“These adjustments resulted in expenditure changing by over $26.5 million, which affected the bodies’ financial performance,” she wrote. “Assets and liabilities were also adjusted by over $29 million and almost $85 million, respectively, which affected public bodies’ financial positions. This means that decisions could have been made based on inaccurate financial data during the year.”

She also warned that the internal controls for most public entities still need to be strengthened, and accounting policies were often inadequate. “All of this hinders transparency of the financial reporting process,” the independent auditor said.

In a press release about the report, she said there were concerns about statuary authorities and government companies not complying with the law. Several SAGCs have still not aligned staff remuneration or terms and conditions with the civil service more than three years after the legislation was changed. The government has also failed to cost this harmonising of staff terms and conditions and consider the implications for the bottom line.

Another worry about the management of public finances is the failure of many public entities to follow procurement rules. 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 without approved business cases.

“These issues must be addressed to ensure that public bodies get value for money when procuring goods and services using public funds,” she said.

In the report, Winspear also details the sticky challenge that the government faces over its consolidated accounts. The Entire Public Sector financials are an important part of the whole process because the public is only privy to certain elements of public finances in this document, such as the actual revenue that the government collects.

Because of the CIG’s failure to implement corrective measures to improve the quality of the consolidated financial statements, her office will likely issue an adverse opinion. However, due to the catalogue of problems with these important accounts, the audit office is still working on 2020 and 2021 documents, and the 2020 financials are about to get an adverse opinion.

“The Ministry of Finance needs a roadmap for moving from an adverse opinion to a qualified audit opinion in the first instance and an unqualified one in the longer term,” she said.

Check back to CNS next week for a close-up analysis of the various financial and annual reports from some of the 47 different public bodies, the auditor general’s concerns, their financial health and their compliance with the law.

See the auditor general’s report in the CNS Library.