Even if the territory’s financial books look to be in order overall, the same problem areas have wasted government money repeatedly for the last several years, according to the 2007, 2008 and 2009 auditor general’s reports, which were all made public during a Jan. 17 House of Assembly sitting.
In an interview last month, Auditor General Sonia Webster said that even in areas where she has seen improvement in the years since she was first appointed in 1996, many departments still have a long way to go.
Cash security, for example, has come up again and again, she said. Many government offices accept cash payments: taxes, utility bills and fees for documents and services. Each office has policies in place to make sure cash gets deposited at the bank, but they aren’t always followed, according to the reports.
“Despite the contractual arrangements in place to ensure that collections are regularly transported to the bank, cash security is still an ongoing issue,” the 2008 and 2009 reports state, adding that this problem has led to “losses of government revenue” in both years.
“If money is deposited after hours, that’s the cash that goes missing,” Ms. Webster said in a January interview. In addition, since the public officers collecting payments are often the junior staff and there is a high turnover, the problem is difficult to tackle. In recent years, however, the accountant general has put herself in charge of all collections, and that has helped, Ms. Webster said.
An electronic receipts system that was put in place several years ago has also helped, Ms. Webster wrote in the 2009 report, but “As in previous years, the major complaint with respect to revenue collections had to do with posting delays and tardiness in reporting revenue.”
Asked if she thought more training or enforcement are needed, Ms. Webster said it’s up to department heads to make sure their officers comply.
Development Fund
In his budget address last month, Premier Dr. Orlando Smith said government will be tougher in considering re-votes, or continuing development projects from previous years, in the 2012 budget. For this year, he said only the Ministry of Communications and Works will have re-votes.
The audit reports suggest that re-votes are a major issue affecting the territory’s budgeting process. For example, at the start of 2009, the Development Fund balance was negative $37,265,269, but the re-voted totals showed an expected surplus of $50,591,516, the 2009 report says.
“This indicates that the funding the Ministry of Finance envisages available for execution of projects in 2009 is short by some $87,856,785,” Ms. Webster wrote. The shortfall was $77 million in 2008 and $59 million in 2007.
“The difference is a combination of partial transfers of revenue allocation from the Consolidated Fund and excess expenditure incurred on past projects for which no corrective supplementary provisions were made. As a result, resources which were intended for other projects were used to cover the excess expenditure on active capital assignments,” the 2007, 2008 and 2009 reports state.
In other words, overspending on multiple projects has added up over the years.
In all three of the latest audit reports, Ms. Webster wrote, “There is an urgent need to review the status of the Development Fund so as to provide realistic balances to allow for proper management decisions.”
Although such a review hasn’t taken place, Ms. Webster said Dr. Smith’s pledge to approach re-votes differently is a sign of potential change.
Petty contracts
According to the 2009 report, “Much of the activity from the Development Fund occurs through contracts.” Major contracts – those costing more than $100,000 – are public documents and are supposed to go through a bidding process, but Cabinet usually splits major projects into multiple petty contracts, Ms. Webster said.
Of those that aren’t split, Cabinet often waives the bidding process. In 2010, for example, 38 major contracts were issued, but only nine of them went to bid, Ms. Webster said.
Petty contracts aren’t required to be public or to go through a bidding process.
“In 2008 in excess of 560 petty contracts and agreements were executed by the government for a total of $21,459,231. Approximately half of this [$10,564,219] was for petty contracts and agreements under the administration of the Public Works Department,” the report for that year states.
The 2009 report lists 388 petty contracts, for a total of $15,239,829.11. Of those, about 40 percent, worth $6,353,820, were issued under the Ministry of Communications and Works.
In 2009, Ms. Webster noted her concern with the government splitting major projects into multiple petty contracts.
“The rationale which has been provided for contract splitting is to allow for work to be shared and promote development of skills among local contractors. The result is frequently work that is of inconsistent quality or engagement of individuals who are not sufficiently qualified or experienced to perform the contract,” the report said.
In some instances, the document added, the same contractor was awarded two or more parts of a split contract, totalling more than $100,000.
“The selection of contractors on a split contract is particularly susceptible to cronyism, nepotism, favouritism, and has to a large extent become heavily politicised,” the report said.
This practice is made easy by the way contracts are divided by district, the report added.
“More needs to be done to regulate and monitor petty contracts if the government is to achieve value for money on these agreements,” the 2009 report states.
Ms. Webster’s prior reports indicate that this problem goes back more than a decade.
“As in the past, a number of instances were observed where large projects with cost estimated to exceed the petty contract ceiling were divided into several parts in order to circumvent the tendering requirement,” she wrote in the 2001 Report of the Chief Auditor. In that report, Ms. Webster calls major contract splitting a violation of government’s own rules and a “threat to the attainment of value for money on government projects.”
According to that report, the Ministry of Finance drafted guidelines for administering petty contracts in 1999, but “these were never advanced for implementation.”
Financial Secretary Neil Smith said the ministry drafted project management guidelines, but he could not recall the draft progressing any further.
Public funds, private property
Another problem with petty contracts is their usage for private development, which was first reported in the 1997 Audit Report, Ms. Webster wrote in the 2009 report. Government’s policy, the report states, is to construct roads and retaining walls on private property when the landowner has given up some property for public roads or when erosion on that property threatens public roads.
“During 2009 there were a number of petty contracts for building of private estate roads and retaining walls which did not qualify under the above criteria,” the report states, adding that work on these projects “continues to be commonplace” and has used “a substantial amount” of Public Works Department resources.
“There is now a common expectation by citizens that the government will carry out work on their private roads. While this activity is undertaken, the public roads are left in disrepair,” the report states.
Ms. Webster said she was glad to see the reports made public, but she added that auditor general’s reports are “just the financial statements” of government. For the public to have a true picture of how government is spending the people’s money, the detailed value-for-money audits should be released, she explained.
“I’d like to see the detailed reports tabled and put out there in the public,” Ms. Webster said.
The value-for-money audits look at specific projects, statutory bodies or departments. In 2009, several entities were audited: the BVI Electricity Corporation, the Ports Authority, the National Bank of the VI, the Financial Investigations Unit, the Financial Services Commission and H. Lavity Stoutt Community College.
Ms. Webster has finished reviewing the government’s 2010 financial statements, and has submitted them to the Treasury Department.
As for 2012? Ms. Webster hopes that this year the government can finally put its plans for saving money into effect.
“Every year we get new austerity measures and we don’t see them applied,” she said.