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by Kemar Anson Sobers
The 2020 Audit Report is a reminder of the need to ensure Public Sector accounting staff are adequately trained and educated to address the inadequacies in accounting capacity and capabilities. “Weak’ accounting job”
a March 18, 2016 article stated: “Investigations revealed similar concerns were highlighted in the 2013-2014 report” in reference to weak accounting practices and internal controls.
Common Themes in Findings
Absence of key documentation: Account reconciliations and continuity schedules help to identify, investigate and resolve variances; however, these documents are often unavailable resulting in several errors.
For example, issues identified with the debt consolidation, tax receivables and refunds and capital assets could have been mitigated had reconciliations been completed accurately and timely.
Untimely and improper transaction recognition: Transactions were not always properly understood, recorded timely or recorded in the correct period; as a result, accounts, debits and credits were incorrect, and disclosures were inadequate.
As a professional accountant I question the application of the conservatism concept in assessing Four Seasons and LIAT; given indicators such as funding withdrawals, restart dates not materialising and accumulated losses; were write-downs/write-offs not required earlier to better assess impacts?
Restricted access to records: Access to accounting software at Barbados Revenue Authority was inadequate; limiting tax receivables investigations.
This is non-compliance with the Financial Management and Audit Act 2007-1 s 39(1)(a) and Public Finance Management Act 2019-1 s 78(1)(a); which states “….the Auditor General is at all times entitled to have access to all books, records, including data held or stored electronically, vouchers, payment requests, documents, returns, cash, stamps, securities, stores or other property in whatever form existing in the possession of the audited body; and every facility shall be given for carrying out the examination;”
Delayed Financial Statements Over the past 17 years financial statements were frequently submitted after the legislated deadline.
The current report on central government’s is for the period ending March 31, 2019 and highlighted matters from previous financial years and that March 31, 2020 financial statements remained outstanding.
In hindsight, had our financial house been in order, delays due to the debt restructure may have been reduced or eliminated.
Public Sector Entities
Most entities’ audited financial statements are in arrears; of concern is the National Insurance Scheme (NIS) which commenced its 2011 audit in 2021. NIS has often been Government’s “piggy bank”; therefore, any write down of obligations to Government of Barbados (GOB) debt held by NIS raises public concerns.
Figure 1: National Insurance & Social Security 16th Actuarial Review Page 11
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Figure 1 shows Debentures – GOB sat at 51 per cent well over the 25 per cent target in December 2017. The time has long come to set and enforce an investment limit of 15-20 per cent in GOB securities by NIS to mitigate concentration risk.
This aligns with the National Insurance & Social Security 16th Actuarial Review p.5 recommendation “for the investment policy, revise target asset allocations given the expectation that there will be no further investment in GOB securities.”
The Actuarial Review also highlights the need for outcome focussed decisions when assessing projects; switching to a “what-ifs” analysis and not a “hoped-for”.
Autonomy of the Auditor General: Staffing levels at the Auditor General have remained inadequate for over 10 years, impacting the efficiency of the office in achieving its mandate. The Auditor General’s office requires the necessary autonomy in line with international best practices so it can maximise its operational efficiency including data analytics and recruitment without the need to rely on a centralised agency.
Control environment: “…work is being undertaken to consolidate the financial statements of statutory entities with those of Central Government within a five-year time frame.” – 2011 Audit Report. This matter is one of the reasons for the 2020 qualified audit opinion.
“There are also some challenges in forming a [PAC] quorum which has also impacted on the rate of progress.” – 2020 Audit Report. This could indicate members’ low prioritisation of financial administration which filters through to the civil service.
Leaderships’ approach could be an indicator as to why we remain non-compliant with accounting standards and lack understanding of accounting concepts more than a decade after adopting an accruals system.
Conclusion
The Audit Report, like prior years, shows that public financial administration must be free of politics as successive governments failed the Office of the Auditor General and accounting competence in the civil service.
The effort required goes beyond the legislation provided by elected officials and involves civil servants in the financial administration process to prioritise accountability of taxpayers’ dollars, apply proper accounting concepts, abide by high ethical practices and enforce legislation.
It means across the spectrum we need a change in mindset to “I work for the taxpayers of Barbados” from “I work
for the government”.
The Public Finance Act 2019-1 could address some of these shortcomings, but abilities granted through this Act may be violated. Specifically;
• S 19 and S 20 allow a Minister to overrule financial administration decisions by the accounting officer.
• S 46 (2) deems a summary statement sufficient once it identifies the type, name and value for write-offs and remissions. Legislation should not be the purpose and justification for such matters.
Developing and enforcing a process with required financial deliverables to ensure timely reporting to the Auditor General could be beneficial.
Annually at a minimum, accounting staff should receive training of their requirements under the Act, accounting standards, principles and concepts. International Public Sector Accounting Standards are available for free on the IFAC website.
The recruitment process could also include a timed assignment based on accounting standards and findings in the audit report; which will form part of the hiring decision.
To maximise the value of the approximately $4M allocated to the Audit Office, the audit findings must be actioned. Robust financial administration requires our senior public servants, political appointees and elected officials to lead by example, as it can aid in resolving our social, economic and political ills.
It is evidently clear the issues largely lie in the civil service accounting capacity and capabilities. Therefore, to better assess Barbados’ financial standing the root cause leading to these issues needs to be identified, analysed and resolved.
Only then can the Public Service enhance the quality of its financial administration embodying financial management and reporting.
Kemar Anson Sobers FCCA, CPA, is a chartered accountant with several years’ experience as an internal and external auditor.
