In an article headlined Auditor: $1.5 Billion Outstanding, published in the Cayman Net News on 17 July, Auditor General, Dan Duguay was quoted saying that annual reports accounting for spending by various entities are in arrears, with some being as much as three years behind.

The newspaper refers to a soon-to-be-released report by Mr Duguay in which he comments on outstanding annual reports for government entities.

Mr Duguay was quoted as noting that while money is given to these public organisations for 2009, there is yet to be annual report information on the 2004-05 year.

Financial Secretary Kenneth Jefferson observed that the report is not yet a public document.

He pointed out that had the proper course of action been followed, the report would have been presented to the Honourable Speaker of the Legislative Assembly - at which time it would become a public document.

Mr. Jefferson commented that any utility of the article is easily lost because the premature release of details in the Auditor General's report has resulted in an unbalanced article.

He said it is incorrect to say that government is yet to account for $1.5 billion in budgetary expenditure since the 2004-05 year.

The Public Management and Finance Law requires Annual Reports of government and public entities to be presented in the Legislative Assembly. Annual Reports consist of two main parts: audited financial statements and an audited statement of outputs by a government Ministry or Portfolio or other public entity.

Mr Jefferson said that the traditional financial statements component of annual reports have been thoroughly examined by the Auditor General's office without significant difficulties or delay.

However, the audits of outputs statements have taken a significant period of time because the preparation and audit of such statements is new to public officials - including those in the Auditor General's office. The Cayman Islands have gone the further step of Output Reporting - something only a handful of countries in the world do, or are attempting to do. Under the previous cash basis of Governmental reporting only financial statements were presented to the Legislative Assembly.

"Whilst we are generally in a position to present the financial statements of government and public entities to the Legislative Assembly, the aforementioned Law dictates that the audited financial statements must be accompanied by audited output statements: the latter is delaying the former and the end result is an overall delay," the Financial Secretary stated.

Mr Jefferson pointed out that prior to any money being released to government entities, the proposed appropriations are examined by Finance Committee of the Legislative Assembly.

He noted that at the time of such examinations, the relevant officials are called upon to explain previous spending and to give reason for changes - if any - in the proposed new expenditure.

He said this parliamentary mechanism ensures that lawmakers are at all times aware of government spending.

The Auditor General's report: 'The State of Financial Accountability Reporting' addresses compliance of government entities with the Public Management and Finance Law.

This law, which since the 2004-05 financial year moved government accounting from a cash based to an accrual system, calls for annual reports by 13 ministries, portfolios and all statutory authorities and Government companies.

These reports are to include financial statements and submissions on the entity outputs, goods or services rendered.

Mr Jefferson concluded by stating that the government appropriations are approved by the Legislative Assembly and the inclusion of financial statements in annual and supplementary budgets during the course of a year, make it clear to legislators how those approved funds have been used.