Heather Thomas, Auditor General

Bermuda’s Auditor General has stated that there was insufficient evidence for $10.3 million of capital development expenditure in her latest qualified audit opinion to the Government for 2017-18.

The report for the Consolidated Fund for the last fiscal year was tabled in the House of Assembly on Friday by Finance Minister Curtis Dickinson, who told MPs that it was “prudent” to accept a qualified report rather than submit a full accounts for audit late, to avoid penalties.

He noted that the reporting schedule was delayed due to employers’ errors in payroll tax submissions, which are manually validated by the Tax Commissioner’s office.

While noting that he was “disappointed”, he said the penalty for late reporting for the financial year ended in 2016 was $640,000 and $410,000 for 2015.

And while he could not guarantee that there would be no future delays, he said: “We’re doing the best we can to make sure that we do not get another qualified opinion.”

Public Works Minister Lieutenant-Colonel David Burch informed MPs that the $10.3 million that could not be verified primarily involved roadworks. 

He also noted that further details on the expenditure not accounted for were submitted late but he said those figures were with the Auditor General.

Meanwhile, Ms Heather Thomas, the Auditor General said there were two main reason why her audit opinion on Government accounts for 2017-18 was qualified.

“Purchases of a capital nature initially recorded as capital development expenditures are adjusted later to tangible capital assets once analysed by management at year-end,” said Ms Thomas.

“Management did not complete this analysis of capital development expenditures.”

“The second reason for my qualification was because at year-end management did not complete a payroll tax returns validation process, which is critical in identifying errors and ensuring the reasonableness of payroll tax, accounts receivable and revenue.

“I was unable to determine whether adjustments might be necessary to revenues and related accounts receivable, total financial assets, annual deficit, accumulated deficit and net debt,” she added.

She also noted that the net debt for Bermuda’s Consolidated fund rose to $3.8 billion by the end of the 2017-18 fiscal year, representing an increase of $63 million on the previous year.

It was also noted that “the public sector accounting standards generally accepted in Bermuda and Canada defines Net debt as the difference between a government’s liabilities and financial assets”.

The statement continued: “This difference bears directly on the government’s future revenue requirements and on its ability to finance its activities and meet its liabilities and contractual obligations.”

The Auditor General said that the second issue included in “Other matters” is a caution to readers that the usefulness of the financial statements of the Consolidated Fund for the year ended March 31, 2018, is limited. “It is important that Parliament and the public understand that the Consolidated Fund financial statements are not summary financial statements of the Government of Bermuda and, therefore, do not represent the full nature and extent of the overall financial affairs and liabilities of the Government of Bermuda,” explained Ms. Thomas.
“The financial statements cover only the financial results and position of Government ministries and departments, the House of Assembly, the Senate and the courts. They do not include the financial results or the financial position of other Government-controlled organizations, such as the Bermuda Hospitals Board, the Bermuda Housing Corporation, and the Bermuda Land Development Company Limited, through which significant financial activities of the Government occur.”
Ms. Thomas noted that her Annual Reports include detailed comments on the results of her audits of the Consolidated Fund financial statements. Those comments include sections on Matters of Special Importance, Audit Observations and Recommendations, and Key Indicators of the Financial Condition of the Consolidated Fund. “I expect to issue my Annual Report for the year ended March 31, 2018 shortly. That report will include my comments on my audit of the financial statements of the Consolidated Fund for the year to March 31, 2017.
“My comments on the audit of the 2018 Consolidated Fund financial statements will be included in my 2019 Annual Report,” said the Auditor General.