AUDITOR GENERAL CALLS FOR STRONGER FINANCIAL MANAGEMENT

In the just-published annual general report on financial reporting in the Cayman Islands, Auditor General Patrick Smith has sounded a warning about financial management. He headlines the 2025 review: “Clean audits overshadowed by $172.5 million in corrections, six qualified opinions, and weaknesses that public bodies are not fixing.”

Titled “Financial Reporting of the Cayman Islands Government: General Report 31 December 2025”, the report summarises the financial results, audit opinions, audit status, and key matters arising from the 2025 financial audits.

The report presents a mixed picture. According to Auditor General Smith: “Most public bodies remain financially sustainable in the short term, but the quality of their financial management is not improving. Healthy surpluses and unqualified opinions do not, by themselves, show strong financial management.”

The report identifies 165 significant findings, two more than in 2024. “Almost half of these findings – 73 – had been reported before. In each case, management accepted the finding and agreed to act, but the weakness remains. Non-compliance with legislation and weak financial management account for more than 80 per cent of the findings.”

Non-compliance with the Procurement Act remains the largest single weakness, the Auditor General states, “I am disappointed that 20 public bodies breached the Procurement Act and Procurement Regulations 54 times, almost 80 per cent of all compliance breaches. This has not changed for at least two years. More than $9 million was spent without the required approvals.”

On financial performance, Mr Smith says, “20 of the audited Statutory Authorities and Government Companies(SAGCs) made a combined operating surplus of $7.4 million, but all 26 SAGCs together reported a $7.3 million operating deficit. The largest deficit of any audited SAGC was recorded with the Health Services Authority(HSA). The report says the HSA budgeted for a surplus of around $93,000 but generated an operating loss of almost $8.7 million despite $26 million in government funding. Eight SAGCs budgeted for a deficit, although the law requires them to at least break even. “In all, core government entities reported a combined surplus of $28.1 million,” the report shows.

The report also highlights serious long-term financial challenges, Auditor General Smith points out. “Post-retirement healthcare obligations for 11 SAGCs total almost $447 million, up 21 per cent since 2021. They are largely unfunded, and their value swings sharply from year to year. The Health Services Authority alone carries 55 per cent of this obligation.”

The report states that, as at 10 September 2026, 20 audits remain backlogged – the same number as last year, despite the Office completing 12 backlogged audits in the past 12 months.

The Auditor General also notes in his annual report that the Entire Public Sector (EPS) financial statements remain unreliable and have received adverse opinions for the last 10 years.

In conclusion, he states: “Accountability depends on every step of the reporting chain working on time. Public bodies prepare their accounts and my Office audits them, but the chain is weakest at its final steps. Until reliable information reaches Parliament and the public on time, the accountability that the Act requires is not being achieved.”