Government accountability challenges in the Cayman Islands

15 Dec 15

The Cayman Islands has made solid progress in turning round its financial performance thanks to the efforts of CFOs, its Audit Office and a strong training programme.

“Appalling” was how the outgoing auditor general, Alastair Swarbrick, described the state of the Cayman Islands government bodies’ financial statements looking back to December 2010 when he issued his first report. Five years on there has been some significant improvement, but huge challenges remain for all involved.

The Office of the Auditor General’s latest report on the Financial and Performance Reporting: Ministries, Portfolios and Offices (issued in September) does not pull any punches when describing the situation back in 2010:

  • 40% of the ministries, portfolios and offices in core government were outstanding (85 out of 220)
  • Only 18% of the audited financial statements had been tabled with the Legislative Assembly meaning that they were available to the public for scrutiny
  • Only 7 of the 37 opinions issued on ministry and portfolio financial statements had been unqualified, and 18 or just under half had either been disclaimed or received an adverse opinion meaning the information contained in them could not be relied on.

However, the situation has improved significantly and, as noted in this latest report, “no M&P financial statements for 2013/14 are likely to receive an adverse opinion or a disclaimer of opinion”. Nonetheless, it is a marathon and not a sprint, as the diagram below shows:

Cayman Islands financial reporting stats

 

Since 2010, the Office of the Auditor General has worked with the Accountant General and CFOs across the Cayman Islands to increase the professionalisation of the finance function within government, including the provision ongoing professional development. They are still not at the 26-mile stage of this financial marathon, only just over half way there.

“We have seen government accountants making progress at producing timely annual financial reports with better quality,” says Garnet Harrison, who is the acting auditor general. 

“However, much more work needs to be done to bring the financial function of the Cayman Islands government to where it is fully meeting its mandated role.”

But there are many reasons to be cheerful. For the first time, one of the largest ministries – the Ministry of Home Affairs – was able to have an unqualified audit opinion along with an annual report that was well received by the public within the legal timeframe. This was done by building the capacity and internal controls at the lowest levels and empowering those charged with the use of public funds to make rational decisions and be accountable.

Over the last three years, I have had the privilege of speaking at Professional Development Week, organised by the Cayman Islands Society of Professional Accountants (CISPA), recently accredited as a professional accounting organisation by the International Federation of Accountants (IFAC). Delegates have been predominantly from the government sector but it is also open to participants from private sector too.

I have spoken on topics including the role of the chief financial officer and good governance (based on the good practice guide developed with IFAC). November in the Caribbean, it is not difficult to see the attraction for me to take on this extra workload! But behind the sunshine and sandy beaches there has been progress in providing greater accountability and transparency in government financial reporting.

Globally these areas are a key focus area for IFAC, which recently launched the Accountability Now initiative. This represents a coalition of organisations that believe there’s a better way forward for governments of all sizes.

It starts with equipping governments with the foundation for good financial management: transparent, accountable financial information that:

  • captures the entire picture of funding commitments, now and in the future;
  • facilitates wise spending;
  • strengthens economies; and, most importantly,
  • builds trust with their citizens.

Better quality financial information and increased transparency will not solve all the challenges of governing, but they will greatly assist government decision making and performance.

To turn around the finance function in the public sector, we need the finance leaders to act as champions and role models for the technical and behavioural skills required. One of CIPFA’s charitable aims is to improve public financial management globally, which it is achieving this through developing several keystone publications. One such is , which sets out an overarching principles-based framework intended to apply to all public service organisations and their CFOs, irrespective of where they work. It brings together good practice and regulatory requirements, as well as the requirements professional accountancy bodies’ codes of ethics and professional standards to clarify the skills required.

The Cayman Islands government now has a strong team of CFOs who have benefited from the training provided which ed to shift the focus away from purely operational matters towards quality control and strategy. The CFOs and the Ministry of Finance are working together to improve governance as well as the quality of financial information and advice. Due to the backlog of accounts, CFOs previously had to work diligently to get their accounts in order. Now that the accounts are generally up-to-date, CFOs are poised to shift their aim toward a strategic role. Credit for this turnaround comes from a combination of having the right people in the CFO roles (who have really proven themselves), a strong Audit Office and a great training programme, which is run annually.

CIPFA CFO diagram

 

As the above diagram demonstrates, there are three corners to success: the individual, the role and the organisation are all pivotal in delivering the change required to provide greater accountability and transparency on public resources. Only then can we truly earn the trust of the public we seek to serve.

 

  • Manj Kalar

    has over 20 years’ experience, implementing accrual accounting across UK government, consolidating Whole of Government Accounts and advising other jurisdictions.

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