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Unsustainable? Too right

“One of the main hallmarks of bureaucracy is avoidance of personal responsibility” — Thomas Sowell

Dear Sir,

Our auditor-general, Heather Thomas, recently tabled her 2019 annual report in the House of Assembly. The bottom line? Take a guess. It’s not good.

The Auditor-General of today is having the same problems with government financial procedure as did Larry Dennis towards the end of his 31 years in the position

In her words: “The financial accountability process for Government continues to not function well. The Government’s failures in financial accountability should be of concern to all Bermudians”.

While our unsustainable debt load continues to be of great concern, there is also an ongoing and unacceptable dysfunction in the management of government accounts.

As at March 31, 2019, she revealed there were 39 organisations falling under her mandate that were at least one year behind with their financial statements — which translates to a total of 139 sets of financial statements that are in arrears — and she noted that the backlog is getting worse, not better, from previous years.

She stated that the root cause of this lack of accountability is ineffective leadership and that there clearly are persons within the Public Service whose performance is not being held to account through disciplinary or other measures.

While her previous report of 2018 contained recommendations for ministers whose organisations continued to be in arrears with their financial reporting, it was clear that no real improvements have been made to date, in spite of the Ministry of Finance’s 2018 statement to the effect that it would endeavour to rectify the problems .

In reference to the present Auditor-General’s annual report and specifically to the subject of financial accounting in arrears, the Ministry of Finance issued yet another response statement that in part declared: “The Ministry of Finance will encourage the relevant government entities to play their part to rectify the problem by bringing all accounts up to date and delivering them in an auditable state to the Office of the Auditor-General”. This “pledge” is almost identical to that which was made in response to the 2018 Auditor-General’s report.

Larry Dennis was the Auditor-General from 1978 to 2009. His longstanding frustration with late accounts reporting and lack of critical documentation on financial transactions was evident in many annual reports he produced.

For example, in 2008, he wrote: “There are no good reasons why entities should not be able to produce annual financial statements in time for them to be audited and issued within ten months of their year-ends. For most, it is a legislated requirement. For an entity in the private sector to receive more than one denied audit opinion is almost unheard of. A denial would be deemed so serious that it would likely provoke an extensive management shake-up and urgent action to rectify the problems. Yet some Bermuda Government entities have received denials for several consecutive years with no apparent consequences for the entity, or its financial senior management.”

Back then, Mr Dennis had this recommendation: “The Ministry of Finance should consider disciplinary action, including written warnings, penalties, and, in significant or continuing situations, dismissals of chief executive officers, chief financial officers, controllers and accounting officers whose entities receive qualifications or denials of opinion in auditor’s reports on their financial statements due to the unavailability of evidential documentation supporting disbursements of public funds”.

It is important to note that various accounting institutes have long recommended that governments issue consolidated financial statements for the whole of government. At present, our government’s financial statements do not consolidate the results of all of the government-controlled organisations with the Consolidated Fund, which means that the public are not being provided with full disclosure regarding the accumulated deficit or surplus of its government.

As far back as 1992, Mr Dennis recommended that the Ministry of Finance issue consolidated financial statements. Despite every auditor-general since that time emphasising the need for this to take place, here we are, 28 years later, still without consolidated financial reporting.

It was eventually revealed that amendments to existing legislation was required to allow the Government to produce such combined statements and for the Auditor-General to audit them. Such legislation was finally passed in 2014 in the form of the Public Treasury (Administration and Payments) Amendment Act. However, the Act has a stipulation that the finance minister must decide the date when the provisions of the Act — concerning consolidated financial reporting — shall come into effect.

Two years ago, in 2018, Ms Thomas asked the Ministry of Finance to establish the date when the preparation of full, consolidated financial statements would come into force. The MoF responded: “.....the Ministry of Finance will commit to the preparation of consolidated financial statements as of the year ended immediately subsequent to that first year in which the financial statements of all government units are up to date”.

To her credit, our auditor-general unimpressed with the vagueness of the commitment by the MoF and suggested that “strong leadership” is needed, and it is the lack of such that is the fundamental reason for the impasse regarding many outstanding financial statements.

She has recommended that the Ministry of Finance assign a senior official to be responsible for overseeing the work required to eliminate the financial backlog. Further, she recommended that those entities with financial reporting backlogs be required to produce action plans in short order — and, should they not comply, disciplinary action should be taken and enforced. Once the action plans have been approved, they should be monitored to ensure action actually takes place.

Is it me? Or does it seem like the Government has to be run like an elementary school in order for people to follow the rules?



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Published November 18, 2020 at 8:00 am (Updated November 17, 2020 at 2:01 pm)

Unsustainable? Too right

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