THE leadership of the island’s municipal corporations have pointed to lost documents, inadequate time frames to source documents, manual storage of documents, and other systemic issues for their inability to submit long-outstanding financial statements to the Auditor General’s Department (AuGD).

The Local Authority Act, Section 27(2) requires municipal corporations to submit financial statements to the AuGD four months after the end of each financial year, but the chief executive officers (CEOs) of several municipal corporations on Wednesday pointed to systemic issues which they claim prevented them from complying with this requirement.

The CEOs were summoned to the Public Accounts Committee (PAC) of Parliament to provide answers to issues raised in the AuGD’s annual report for 2022/2023 in relation to the outstanding financial statements.

When the report was tabled in Parliament last December it was revealed that the responsible officers had not submitted 81 financial statements.

The AuGD has noted that subsequent to the annual report it received four financial statements, but officials of the Ministry of Local Government told the PAC that 11 more submissions have since been made.

A major issue highlighted in the auditor general’s report was the absence of appropriate evidence to support the balances in some of the submitted financial statements.

An example was given of Manchester Municipal Corporation, which for the years 2013/14 to 2016/17 had unsupported expenditure of $2.5 billion and revenue of $33 million.

However, CEO of that municipal corporation Andrew Harrison told the PAC that while the information was available at the entity, the time frame given for it to be sourced and submitted was too short.

“Because the auditors were pressed to finish the audit within a specific time and some of the information — given the fact that these were backdated for some years — for us to actually find those supporting documents to submit them to the auditor within the specified time, that was really where the difficulty laid and not so much the fact that the information was not available,” said Harrison.

He said the audit of the corporations, which was done as a project — the Municipal Corporations Backlog Audit Project — saw them having to look at financial statements from as far back as 2011, and beyond.

“The fact that we are actually looking at some financial statements 10, 15 years ago would therefore mean that we would have to have the manpower to actually clear up these things and get this information…I am not sure if it really would have made a lot of financial sense in terms of getting the additional manpower to actually produce those documents,” added Harrison.

But PAC Chairman Julian Robinson stopped him there, arguing that it would be unacceptable to say you “cant make the effort to find the documentation because it means that the public would have no idea of the accounting of the millions and billions of dollars which have been spent. And the issue from going through these accounts is not just about things that go back 2011, 2012, 10 years ago — there are a lot of current statements which are outstanding.

“So, the issue cannot just be about the lack of manpower to go identify documents from 10 years ago; there is a more systemic issue which exists, not just in one, but across most of the municipalities. That’s the reality, based on the information in front of us; and it cannot be acceptable to the public to say, ‘we can’t find the documentation’ because, in essence, we then [would be] say[ing], ‘public funds cannot be accounted for’.”

Responding to Robinson, Harrison said that the situation is not true in relation to Manchester as the corporation has only one outstanding financial statement, as it has been audited up to 21/22.

In the meantime, CEO for St James Municipal Corporation Naudia Crosskill told the PAC a similar tale of systemic challenges, and insisted that she needed to set the record straight because the impression was being given that the local authorities have always been delinquent.

“What I want to say is that there was a time when the reports were being submitted, maybe not all the time on time…[But] there was no set standard…except that it must be done on a cash basis — what you collect, and what you pay, you account for that,” said Crosskill.

She said the corporations had not been audited for a long time, and when the auditing resumed around 2014/2015 the auditor general sent back the statements that were submitted, stating that they could not be audited as presented.

“So they send them back to us and they gave us a [new] format to use. There was a little discussion..to say, ‘you have to use this’, and so they sent us back as far as 2006. So, think about that. So we have to go now, we have to dig up information,” added Crosskill as she pointed out that some municipal corporations have no electronic system in place, so things have to be done manually.

She said this is what pertains in two local authorities, St Thomas and Westmoreland, and retrieving documents is not an easy task.

According to Crosskill, she has attempted to complete the statement for St James Municipal Corporation but was hampered by an inadequate staff complement.

“So even though persons are saying: ‘Why you’re not on time?’ Remember…It’s the same set of people doing the work, plus we have to do our regular work, and in the process we have lost many staff because…the auditor general came in this very House and spoke about our capacity, and our salaries, and our ability to attract the necessary persons to get the job done. So I am saying those things are also to be taken into consideration.

But, despite all those things, we continue to try to get the statements done but the problem is that…in the process some of us our servers got destroyed. In the case of St James and Portmore we thought the information was being backed up [but] it was not being backed up. Remember, we don’t have support staff like maybe central government who has support staff for everything so some persons don’t have information technology [units],” said Crosskill.

She argued that a provision should have been made in the budget to support the local authorities in getting the financial statements up to date, just as provisions were made in the budget to put a special unit in place for the auditors to get the audits up to date.

Pointing to another issue, Crosskill said the corporations were also required to change their accounting system by moving from cash to an accrual basis, under the International Public Sector Accounting Standards (IPSAS).

“What was done? The ministry formed a committee…but the only thing that was done was that they gave us some training to say, ‘Okay, read this booklet — not a physical classroom or anything — read this booklet, do an online test, and if you get 60 per cent or something like that, you pass. That is all the training that was [provided], as it relates to [that],” she said.

Government committee member Dwight Sibbles was somewhat sympathetic to some of the issues raised by the leaders of the municipal corporations, especially in relation to transitioning from one accounting system to another.

“Because if you are changing from one policy to a next…that’s if they’re moving from cash basis to accrual basis in accounting, that is not an easy feat, by no stretch of the imagination, in terms of the volume of transactions that they do. And then, it came in effect 2017. It means that they would have to prepare their financials prior to that in one format, and after that, in a different format, which is the same team of accounting personnel who would have to do that.

“The auditor general was given permission to have a temporary project unit. I have not heard that the municipalities or the ministry was given any project unit to assist the various municipal councils. So, one side was equipped — and they ought to be equipped — but I think it’s somewhat unbalanced…I am not saying the financial statements ought not to be done, because in my other life I’m also an auditor and I know the importance of transparency and accountability, but in order to get that and to get everybody on board it needs to be a balancing act,” said Sibbles.

That statement found support from the committee’s chairman who told the permanent secretary in the Ministry of Local Government Marsha Henry Martin that it was clear the municipal corporations need support.

“What’s very clear to me, madam PS, and you would have to make representation as the chief accountable officer…to ensure that there is provision in the budget to provide that support. That’s part of the reason why we are here — to move beyond the numbers — because when you hear these numbers, they don’t look good. They don’t reflect well on any of you . And it can’t be that every single accountable officer just is being derelict in his or her responsibility. I know it can’t be [that such is the case] so it reflects systemic issues which we have to address. “And so, Madam PS, there are some things that, at the level of the ministry, need to be put in place to bring the outstanding statements up to date and to provide a level of support that the municipal corporations can do what they are supposed to do, and it is clear that is absent,” said Robinson.

But Henry Martin disagreed that support for corporations is absent and pointed to, among other things, the ministry’s move to develop accounting standards, and the procurement of standardised software to be implemented across all local authorities.