The longstanding, controversial issue of state-owned entities not producing audited financial statements should soon be a thing of the past as Government continues its restructuring exercise.
In fact, Minister in the Ministry of Finance Ryan Straughn announced on Friday that all state-owned enterprises with outstanding audited financial statements have been instructed to have their accounts brought up-to-date by the end of this financial year.
Outlining a plan he said was designed to make these entities more transparent and accountable, Straughn pleaded with the local accounting profession to step forward and help in the process.
He was addressing accounting professionals gathered for the annual conference of the Institute of Chartered Accountants of Barbados (ICAB) at the Lloyd Erskine Sandiford Centre on Friday.
“The Auditor General Report for 2017 made reference to the fact that there were 41 state agencies whose audits of accounts were in arrears for over three years or more, and this includes some of the larger state enterprises whose annual budgets are in the tens of millions of dollars. This state of affairs is not acceptable,” said Straughn.
“Under the Barbados Economic Recovery and Transformation programme the Government is seeking to have the audit of accounts of key state enterprises brought up to date by March, 31, 2019. This is a tall order, and as I indicated, your advice would be most welcomed,” he said.
Straughn insisted that it was important that the Auditor General reports did not, in the coming years, have to raise the familiar issues relating to wastage, poor contract management, weak internal controls, unaudited accounts, lack of transparency, absence of indicators to measure performance, incomplete information on liabilities and fixed assets.
“These issues will be resolved,” promised Straughn.
He pointed out that when the Mia Mottley administration took office in May this year the new Government was made aware of the arrears only up to the end of September 2017, leaving it with a “blind spot” of about eight months.
As a result, said Straughn, a directive was issued to all state entities to submit their monthly management accounts for review by the ministry of finance by the fifth of every month.
“Within a few days we were able to close that blind spot with respect to the level of arrears that would have been built up because we simply could not plan and implement a budget without having a clearer understanding as to the scale of the problem. We have reached a stage where we are reasonably comfortable there are no more skeletons in the closet. But as you know skeletons have a way of hiding,” he said.
Minister Straughn noted that a part of the plan to bring state entities more up-to-date on their finances and operate more transparently and efficiently, would include changes to the Financial Management and Audit Act that would make provision for entities to incur penalties.
“It is not only the arrears in the audited financial statements that are of concern to the Government, but also the precarious financial position of a number of state enterprises, and central Government as well,” said Straughn.
“There needs to be greater levels of corporate governance. In this regard, the activities of agencies need to be more transparent and those responsible should be held to account for their actions. The performance of the agency will be assessed on a continual basis so that any intervention that is required can be made in a timely manner,” he added.
“In an effort to strengthen the financial management system of Government, the Financial Management and Audit Act is being reformed. This Act will now be extended to cover state-owned enterprises rather than just central government operations as was previously the case,” Straughn announced.
“The Government will require these agencies to provide annual reports three months after the close of the financial year. These should highlight the strategic priorities of entities and the outputs achieved with measurable indicators of performance. These reports will be assessed by the Office of the Auditor General supplemented with the assistance of private sector auditors as required,” he explained.
According to the Minister, one of the key provisions of the change to the Act would be the introduction of the fiscal responsibility principles, which will guide Government’s fiscal policy objectives and targets.
These, he said, included achieving and maintaining prudent levels of public debt, pursuing macro-economic stability and managing fiscal risk in a prudent manner.
“The Act would allow for greater discipline in public finances. For example, there is the introduction of sanctions if a public entity creates liabilities in excess of its ability to finance them, fails to supply annual financial statements and annual reports, and fails to address issues raised by the Auditor General or other external auditors when such issues are not contested,” he warned.
An Audit Committee will also be introduced to evaluate the reports of the internal and external auditors to make sure they are kept in line with international standards and to advise the boards on complex financial matters, he said.
Straughn also revealed that government was looking at how the appointments of directors were made, adding that members of boards “must possess the prerequisite skills to be effective directors”.