FRIDAY, FEB. 19: In response to the tabling of the Auditor General's Report in the House of Assembly today, Minister of Finance Paula Cox issued following statement.

Minister Cox said: "The Reports prepared by the Office of the Auditor-General provide Parliament with an independent review on the adequacy of accountability and resource management practices in Bermuda's public sector. These Reports are also a valuable input for the Government to identify ways to enhance the delivery and efficiency of a range of services for all residents of Bermuda.

"It is not the role of the Auditor-General to report on the very many things that are right in the financial affairs of the public sector. The Audit Act requires his reports to focus mainly on observed problems and deficiencies. Accordingly his reports identify deficiencies in accounting and accountability systems. Therefore it is sobering to note the former Auditor General's comments that 'Financial management, accounting systems and accountability reporting are, in many areas of Government, much better than they were a decade ago'. This is a testament to the current administration's commitment to strengthening the way in which it manages and controls Bermuda's public finances. But the Government recognizes that there is still room for improvement.

"While the official Government response to the Report of the Auditor General is given in the House of Assembly once the Public Accounts Committee issues its report, my comments today serve as a preliminary and limited response at this juncture. Meanwhile, I should like to affirm the Government's continuing focus on transparency and accountability, and its continuing commitment to effecting improvements in resource management.

"The Government response which will be provided in the proper sequence will provide an opportunity for individual Departments to inform the Parliament and the public on issues and actions taken in respect to the 2007-08 Auditor-General's recommendations.

"The Auditor's Report covers transactions of the Consolidated Fund and the systems and procedures associated with this Fund for the year-ended March 31, 2008. The Report also includes commentary on a range of subsidiary funds and public sector entities."

Minister Cox continued: "Overall the Government has placed great emphasis on the need to address the numerous recommendations made by the Auditor over the years. Though there are on occasions different perspectives provided by the various departments or agencies concerned, the tone of the responses has been consistent with recognition to adopt a continuous improvement approach that is modeled on best practice. Since words mean little without action, I anticipate that very soon there will be some demonstrable improvement in some areas that will be readily apparent.

"The public should realize also that audit reports are historical documents.

"However, the reporting of the audit results and the Auditor-General's opinions in the media gives his reports a sense of immediacy that in many respects is misconstrued. This must be guarded against.

"The reason for this caution is that by the time that an audit report is released, sometimes more than a year has passed. Very often Government officials or boards of public sector entities - who have the fiduciary responsibility for their own accounts - have taken action already to address weaknesses or to make enhancements to financial systems and controls. Changes, advances and enhancements have been made between 31st March 2008 and 19th February 2010.

"For instance, the reference to Faith Based Tourism is dated as that matter is the subject of a Police enquiry that was facilitated by the Ministry of Finance.

"Similarly, I note the Auditor General's comments with regard to the Public Service Superannuation Fund in which he states that the Ministry of Finance still does not budget and account for annual deficits of the Public Service Superannuation Fund (PSSF) in the manner required by the Public Treasury (Administration and Payments) Act 1969.

"Due to actions by Government this comment is also outdated. Government has already addressed this matter based on actuarial advice. PSSF contribution rates were increased from 5% to 8% for regular members and to 9.5% for uniformed officers. The result is that the PSSF operating cash flow is now positive and there is no need to budget for a deficit on the fund.

"The Auditor's Report also includes commentary on various matters that the Auditor General considers matters of ongoing or Government wide concern. Some items may be considered contentious and it is the Government's intention to address them in a fair and practical manner. Indeed certain issues have already been the subject of a Special Auditor-General's Report and other items have been signposted to require further attention.

"Finally, I note the Auditor General's ongoing and long-standing concerns with regard to late financial reporting of certain government entities and public funds. I can report to the general public that progress is being made in accordance with the timeframe set out for this project. Finally it must be noted that even though accounts have not been audited, management accounts have been prepared and in most cases are ready to be audited.

"Departments have been directed to further strengthen public accountability through internal processes that will further improve quality and timeliness in financial reporting. Sanctions for non-compliance are being reviewed and will be applied as the control environment is enhanced.

"With respect to tendering and procurement, the public is advised that the existing system of Financial Instructions is comprehensive in respect of purchasing and tendering policies.

"These are a set of principles, policies and guidelines so that the procurement process is geared towards fairness, impartiality and the integrity of the procurement process. Public sector agencies are entrusted with the responsibility for the prudent purchase of goods, services and assets. There is also the underlying assumption that officials are principled in their handling of public assets. No organization could function effectively if this principle was not a cornerstone in the accountability framework.

"Given concerns with the management and oversight of recent and specific capital projects Government is moving already to further strengthen tendering and procurement practices, including ensuring that there is the appropriately provided expertise to ensure proper scoping and design of capital projects to reduce subsequent change orders that are often the cause of cost overruns.

"The new standards will accord with international best practice. As the Minister of Finance I stand ready to formally reply to the Public Accounts Committee in more detail when the Committee presents its report to the House of Assembly in due course."