AUDITOR GENERAL’S ANNUAL REPORT CALLS FOR URGENT CORRECTIVE ACTION

By Staff Writer

In a comprehensive review of the state of financial reporting by government agencies and departments, Auditor General Patrick Smith has commended “clean audits” of several departments and agencies but has also pointed out a series of shortcomings that warrant urgent attention.

He said the Ministry of Finance must implement measures to continually enhance the quality of financial statements, and public bodies must establish robust procurement compliance frameworks promptly.

“The current situation threatens the reliability of government-wide financial reporting and undermines effective governance and decision-making,” Mr Smith advised.

The 95-page report titled Financial Reporting of the Cayman Islands Government: General Report 31 December 2024, summarises the financial results, audit opinions, key audit statuses, and matters raised for the 2024 financial year. It presents a mixed picture of the financial performance and audit quality of public bodies in 2024.

According to the document, KYD150 million in corrections and widespread procurement breaches reveal significant weaknesses in financial management.

CONCERNS

Auditor General Patrick Smith says he remains concerned about persistent weaknesses in internal control and regulatory compliance across the public sector. “While 38 of 39 completed audits received clean opinions, this was only achieved after extensive corrections were made during the audit process. Public bodies collectively made 336 adjustments valued at $150 million to their financial statements after submission for audit, which raises serious questions about the reliability of financial information used for decision-making throughout the year.”

The extensive report also points out significant variations in the financial performance of public bodies.

It shows that while Statutory Authorities and Government Companies (SAGCs) achieved a combined operating surplus of $3.8 million, the situation at the Health Services Authority(HSA) “is particularly concerning”. Although it recorded an overall surplus, its $12.4 million operating deficit is particularly concerning, especially given that it received $25.6 million in government funding and earned $179 million from other sources.”

Meanwhile, Auditor General Smith says, “Core government entities performed better, achieving a combined operating surplus of over $31 million, with most entities performing better than budgeted.”

FUNDAMENTAL WEAKNESSES

The report identifies 163 significant findings across public bodies, with financial management representing the most critical area of concern, accounting for 44 per cent of all issues.

“Financial controls such as bank reconciliations and general ledger reviews are deficient across many public bodies. This indicates fundamental weaknesses in financial oversight that must be addressed urgently.

Non-compliance with acts and regulations emerged as the second most significant concern.

The Auditor General states, “I am disappointed that violations of the Procurement Act occurred in 20 public bodies, accounting for 80 per cent of all compliance breaches. These violations persist several years after the Act came into force.”

He lists among “the most concerning violations”; 20 instances of improper direct awards across 11 public bodies, 13 cases of missing procurement committee approvals across six bodies, and nine failures to publish contract awards.

As of 10 September 2025, 20 audits remain backlogged across multiple years, including eight for 2024. “This represents a worsening situation from last year,” Mr Smith says.

PARLIAMENTARY ACCOUNTABILITY

The Auditor General also expresses concern about parliamentary accountability. Only 10 of 36 annual reports with completed audits had been tabled in Parliament by mid-September 2025, despite audits being completed by 30 April 2025. Over the five years from 2020 to 2024, 52 annual reports remain untabled. Saying that “this represents a fundamental breakdown in the accountability process,” Mr Smith also highlights that the Supplementary Appropriation Bill 2024 was not tabled by the required 31 March 2025 deadline, which he describes as “undermining Parliament’s constitutional role in authorising government expenditure.”

LONG-TERM FINANCIAL CHALLENGES

The report also points out serious long-term financial challenges, including post-retirement healthcare obligations for Statutory Authorities and Government Companies totalling $394 million in 2024, representing a 10 per cent increase since 2020. “The fluctuations are dramatic – for example, the Health Services Authority’s obligations varied from $209 million in 2020 to $150 million in 2022, then jumped to $236 million in 2023 before declining to $221 million in 2024.”

The report does not include formal recommendations, but the Auditor General urges public bodies to “immediately strengthen financial controls, improve compliance frameworks, and enhance governance practices.”