This is part two of the article on matters of special importance in the Auditor-General’s report on the financial statements of the Consolidated Fund of the Government of Bermuda for the years ended March 31, 2013, 2014, 2015 and 2016. Part one was featured on September 8, 2018 here (http://www.royalgazette.com/martha-myron/article/20180908/bermudas-audit-reports-and-why-they-matter)

Reading audit reports are certainly not everyone’s cup of tea. However, readers, as you may guessed, I’ve had a financial field day with this section of the Auditor-General’s report, along with spending some time comparing these current Special Matters to prior Audit opinion reports dating back as far as 2007 from our two prior Auditors-General, Larry Dennis, (1973-2009) and Heather Jacobs Matthews (2009-2016).

The good news first:

• The Bermuda Government Consolidated Fund report above received an unqualified (clean) opinion from the AG, but in the Matters of Special Importance, there were numerous comments on potential issues, exclusions of very relevant information and cautions, if you will, along with recommendations for improvement.

Quoting liberally from the AG’s statements!

The matters of special importance “show that Government is making decisions without knowing the combined financial position of all the organisations that make up Government”.

Matters of special importance 2-7 are summarised very briefly, while matter one is the most detailed. Please read them for yourself:

1, Summary financial statements for the whole of Government

2, Borrowing and the plan to reduce the deficit and public debt, a long-term strategic plan is needed

3, Pension and other employee future benefits, the unfunded pension liabilities continue to grow, a long-term plan is needed, audited statements are not up-to-date

4, Taxpayer indebtedness to Government, amounts owed to Government have doubled in five years, the Government must address this significant tax payer indebtedness

5, Spending within parliamentary limits, overspend by ministries has been reduced, but control is still needed to stay within budgets

6, Complying with financial instructions and related rules, non-compliance with financial instructions still needs to be monitored and managed

7, Other relevant reports on government administration include the Sage Commission and the Commission of Inquiry on review of the prior audit report for the financial years 2010 to 2012, while very detailed, it appears that recommendations or implementations of actions has been limited.

The most important matter is listed on page 6, Section 2.2: financial statements for the whole of Government.

The Auditor-General noted that “the Bermuda Government Consolidated Fund Report does not reflect all of Government’s direct and indirect control (and responsibilities for liabilities) of its agencies and enterprises, such as business transacted through public funds and government-controlled organisations such as the Bermuda Housing Corporation and the Bermuda Land Development Company Ltd.

“Until summary financial statements (for the whole of Government) are presented, there is a risk that those reading and relying on the financial statements of the Consolidated Fund may mistakenly view them as the consolidated financial statements of the whole of Government. More importantly, the public is not provided with full disclosure regarding the accumulated deficit or surplus of its government.

“As such, in my opinion, the accounting policies used to prepare these financial statements are inappropriate to present fairly the financial position of the Government of Bermuda.

“In previous reports, it was recommended that Government should prepare financial statements that reflect the whole Government with the Accountant-General developing a concrete, achievable and resourced plan.”

As at the date of this audit, while legislation was passed to support this measure, no date had been announced to begin implementation of complete financial statements for whole of the Government.

Consequently, the Auditor-General has given notice (in the report) to the Minister of Finance as follows: “Unless during the financial year for the year ending March 31, 2018,

“(a) the Minister establishes the dates when the provisions of the Public Treasury (Administration and Payments) Amendment Act 2014 pertaining to the production and audit of full consolidated financial statements for the Government of Bermuda will come into operation and

“(b) I am provided with a concrete, achievable and resourced plan that addresses production of summary financial statements for the Government of Bermuda for the year ending March 31, 2019,

“I will, starting with the Consolidated Fund financial statements for the year ending March 31, 2018, expand the paragraph in my Auditor’s Report to stress that the financial statements of the Consolidated Fund are deficient because they do not represent the full nature and extent of the overall financial affairs and resources of the Government of Bermuda.”

Readers, you can take a guess as to what this decision means.

Bottom Line. Moving forward we are now more than 2½ years into the future from this Consolidated Fund Audit (not considered to be the whole of the Government’s financial affairs), so just exactly where are we now?

Finally, people! I know this epic tome is difficult to follow, but I exhort you, I beg you, please read it. Download it from the Office of the Auditor-General’s website.

Know what is going on with your money. If you don’t understand it all, ask an accountant friend to break it down for you.

Ask me, write to me!

This is what I do — explain financial concepts — possibly, not as well as the late Larry Burchall. How we miss his continual in-depth financial analyses of our government operations. He didn’t miss a thing.

Always remember our government and its civil servants work for you. Our politicians work for you. They are all in public service required to represent your best interests!

You all have a right to know everything about how your money is being managed. Get involved.

Next week: the final piece of the review of the latest audit report of government finances. The Auditor-General details recommendations where she finds that Government is not operating efficiently and responsibly in a number of financial areas.

• Martha Harris Myron CPA CFP JSM: Masters of Law — international tax and financial services. Dual citizen: Bermudian/US. Pondstraddler Life, financial perspectives for Bermuda islanders and their globally mobile connections on the Great Atlantic Pond. Finance columnist to The Royal Gazette. All proceeds earned from this column go to The Reading Clinic. Contact: martha.myron@gmail.com