In January 2008, the Auditor-General submitted the Annual Report for the years ended April 1, 2006 and March 31, 2007. It was a qualified report.

The Auditor-General stated that he had not received all information and assistance needed to carry out his work and as a result, he was not able to express an auditor’s opinion on the financial statements. Some entities had not even provided the AG with all information needed to complete — and in some cases to even start — their audits for 2007.

In relation to the delay, he said: “I would hope that these reporting delays are the result of resource shortages, even a laissez-faire attitude to responsibilities, or an inability to maintain up-to-date accounting records. Because the alternative is that they are deliberate and designed to defer or prevent the audit process. In which case, concerns arise about possible wrongdoing or fraud.”

In that same report, the AG reported that of the 42 government audits completed in the year ended January 2008, half received qualified or denied audit opinions. The same percentage applied in the year ended January 2007 and for the previous two years, 2006 and 2005, more than one third received qualified or denied opinions. What this means is that either the financial statements did not comply with generally accepted accounting principles — the financial statements did not accurately reflect the true financial position of the entity — or the financial evidence was so severely lacking that in accordance with professional standards, the AG could not give any opinion.

The Auditor-General concluded by saying: “This is a dismal state of affairs and, in my view, an indictment of the quality of the financial management in these entities.”

In 2009, a Special Report of the AG was handed down detailing the reasons for qualifications on the 2008 consolidated fund.

That report documented “ ... a high level of unsupported payments as well as an override of controls at the highest level of management in the construction of the Magistrates’ Court Building and the Hamilton Police Station”. The Special Report disclosed that during the audit, the AG was denied the right to audit material expenditures related to this capital project and that in subsequent years, appropriate disclosures were not made.

In the Auditor-General’s Report for the financial years ended March 2009 and March 2010, the AG gave qualified audits for the consolidated fund (2009); the Bermuda Hospitals Board (2008) and CedarBridge Academy (2008). In relation to the capital development projects referred to above, the AG stated that “ ... we were not able to obtain sufficient, appropriate audit evidence”.

Could you imagine running a business where your auditor is refused information by the very staff hired to administer the finances of your enterprise? I would think not, but that is what was happening in relation to the accounts of government.

In the recent Auditor’s Report for the years ended March 2010, March 2011 and March 2012, the AG found that things had gone from very bad to even worse and stated that: “The annual overexpenditure by departments has now become ingrained behaviour in the conduct of government officials for which there are no consequences. For the year ended March 31, 2012, 24 ministries and departments collectively overspent approximately $36 million on current expenditures without prior legislative approval.”

She went on to say that, of the capital development transactions selected for testing during 2010, many did not comply with the relevant financial instructions. The AG requested supporting documentation for $35.5 million spent on capital contracts and purchases, and states that 15 per cent ($5.2 million) did not have supporting documentation. Of the remaining 85 per cent ($30.3 million), many failed to comply with the applicable purchasing and approval standards, and the majority lacked the required prior approval of Cabinet; they did not have agreements or contracts; and/or did not follow the basic tendering procedure.

If this is not sobering enough, it is important to note when considering the Auditor’s Reports, that an audit is not a review of every contract and transaction conducted by government entities. The AG selects a sampling of expenditures for testing and, in the case of the latest auditor’s report, the sampling appears to have been $35.5 million spent on capital contracts. It is clear that the Government spent many multiples of this sum during the years in question, which escaped the scrutiny of the AG. This is all to say that the auditor’s report and its findings is the tip of the iceberg.

In her report, the AG says: “As in the past, the issue is not whether controls exist, but, rather, that the controls are ignored or overridden, with those responsible seemingly immune to the imposition of penalties and sanctions built into financial instructions.”

This highlights that the culture of indifference and disregard to the rules governing the handling of the public purse were identified and highlighted by successive AGs throughout the years of the Progressive Labour Party government. Given that successive auditor’s reports repeatedly and loudly sounded the alarm, what did the PLP government do? The answer is nothing.

Since the Legislature passed the Public Treasury (Administration and Payments) Act 1969, we have had a statutory mechanism in place for imposing adherence to financial instructions with built-in appropriate and discretionary punitive powers for failure to do so. All persons employed by the Government who make improper payments, or payments that are not properly vouched for, stand the real risk of having these civil sanctions levied against them personally. This is powerful legislation, which every person in the employment of the Government should be aware of so that they may govern themselves accordingly in the exercise of their duties.

There is no specific limitation period imposed by the Act for these civil sanctions, and in the absence of a specific limitation period, the usual limitation period of 20 years would apply. The net cast by this Act is wide and long. It will now be up to the Commission of Inquiry to sift through the Auditor’s Report for the years 2010, 2011 and 2012, conduct its investigation and report its findings.

Whatever the findings of the commission, the investigation will have been worthwhile if we are able to identify the problems, implement necessary changes and thereby alter the culture of those who are tasked with handling public money from one of indifference and disregard of financial instructions to one of adherence and respect for those very rules that are in place to protect and to keep secure the finances of the people of Bermuda.

• Georgia Marshall is a government senator and the spokeswoman for legal affairs and education