Auditor-General explains accounts queries
The Auditor-General said today there were two reasons why her audit opinion to the Government for its 2017-18 accounts was qualified.
Heather Thomas explained there was insufficient evidence for $10.3 million of capital development and a “critical” validation in payroll tax returns was not completed.
She said: “Purchases of a capital nature initially recorded as capital development expenditures are adjusted later to tangible capital assets once analysed by management at year-end.
“Management did not complete this analysis of capital development expenditures.”
Ms Thomas was speaking after Curtis Dickinson, the finance minister, tabled the financial report for the Consolidated Fund for the last fiscal year in the House of Assembly yesterday.
She added: “The second reason for my qualification was because at year-end management did not complete a payroll tax returns validation process, which is critical in identifying errors and ensuring the reasonableness of payroll tax, accounts receivable and revenue.
“I was unable to determine whether adjustments might be necessary to revenues and related accounts receivable, total financial assets, annual deficit, accumulated deficit and net debt.”
But she confirmed that, apart from the two criticisms, the financial statements were a fair representation of the Consolidated Fund at the end of the financial year in March.
Mr Dickinson told the House of Assembly on Friday he had decided it was “prudent” to accept a qualified report rather than submit the full accounts for audit late, which would have led to penalties under the reporting covenant for the Government's private placement agreements with its creditors.
A qualified audit means that the Auditor-General was not satisfied the Government's financial statements reflected its actual financial position.
The Consolidated Fund is the Government's general operating fund for most transactions.
Mr Dickinson told the House of Assembly the capital expenditures qualification was linked to amounts reported for “assets under construction”.
The Auditor-General also reported the net debt for Bermuda's Consolidated Fund rose to $3.8 billion by the end of the 2017-18 financial year, an increase of $63 million on the year before.
Ms Thomas's report on the Independent Auditor's Report on the Consolidated Fund financial statements included a section titled “Other Matters”, used to “report significant matters that in her professional opinion should be brought to the attention of the Parliament and to the public”.
The first was the Consolidated Fund's increasing net debt, which the Auditor-General said was in general understood to be the difference between a Government's liabilities and financial assets.
The statement added: “This difference bears directly on the government's future revenue requirements and on its ability to finance its activities and meet its liabilities and contractual obligations.”
She also pointed out that the year-end financial statements of the Consolidated Fund had “limited” use.
Ms Thomas said: “The financial statements cover only the financial results and position of Government ministries and departments, the House of Assembly, the Senate and the courts.
“They do not include the financial results or the financial position of other Government-controlled organisations, such as the Bermuda Hospitals Board, the Bermuda Housing Corporation, and the Bermuda Land Development Company Limited, through which significant financial activities of the Government occur.”