A Commission of Inquiry is to investigate concerns raised by the Auditor-General over the handling of taxpayers’ money under the previous Progressive Labour Party administration.

The body will be appointed by mid-January and the four-strong team will look at how the consolidated fund was managed for the financial years ending March 31 in 2010, 2011 and 2012.

Describing the findings of Heather Jacobs Matthews’s latest Auditor-General report as “disturbing”, Michael Dunkley said yesterday that he hoped the move would “break the back of bad habits”.

The Premier added: “The Auditor-General was clear about the seriousness of the situation. Financial controls, she said, are ignored or overridden, with those responsible seemingly immune to the imposition of penalties and sanctions. The consequence of these and other identified failings appears to have fostered a culture of negligence, in which basic rules and practices for the sound management of the people’s money were not applied.”

Mr Dunkley said he expected the commission to be made up of a lawyer, an accountant, and two other members of the community.

He added that he hoped the commission would be able to provide its report within 3½ months of being appointed, saying: “The commission will identify breaches of financial instructions and how they arose, consider the adequacy of safeguards and the system of accountability, and make recommendations to prevent recurrences and to mitigate financial, operational and reputational risks.

“It can also refer any evidence of possible criminal activity, which the commission may identify, to the Director of Public Prosecutions or the police, and draw to the attention of the Minister of Finance and the Attorney-General any scope, which the commission may identify, to secure recompense under the Public Treasury Act, including financial instructions, and civil asset recovery.”

Mr Dunkley confirmed that the British Government would not be involved in the work of the independent commission.

“The commission will have the power to summon witnesses, examine them under oath and call for the production of documents,” he said. “Its meetings will be held in camera and its report made public in a timely fashion.”

The Premier has the power to form a Commission of Inquiry as a result of the recently amended Commission of Inquiry Act 1935.

The amendment was brought about last December by Progressive Labour Party MP Walton Brown after the rejection by the Governor, George Fergusson, to establish a Commission of Inquiry into the issue of historical compulsory land expropriations in Bermuda.

Mr Dunkley said his decision to form a commission had the support of the Governor and the head of the Civil Service, Derrick Binns, and he insisted that he would consult widely on the make-up of the body.

“The Auditor-General reported millions of dollars spent without Cabinet approval, millions of dollars paid without signed contracts, tens of millions of dollars committed to contracts not tendered and millions paid to consultants without prior approval,” he added.

“There is no future for Bermuda, as we know it, if there are no adequate safeguards to prevent the practices described by the Auditor-General from taking place again. They have contributed to the unsustainable spending deficits that have pushed public debt to the absolute limits of our ability to manage it.

“The situation is a danger to our international reputation, our solvency, even our self-government. We need to be sure that we have the right controls in place for the future.”

Dennis Lister, the acting PLP leader, welcomed the move, saying: “We agree that any corruption, malfeasance or unethical behaviour must be identified and punished regardless of whether the perpetrators are PLP, UBP or OBA.

“As was made clear in our 2015 Reply to the Throne Speech, good governance is good for Bermuda and good for Bermudians. An open and transparent government is attractive to investors, enhances political and economic stability, and assures the public that their government is trustworthy and free of wrongdoing.

“This commission will hopefully answer any questions, resolve any concerns of the general public, and bring about the full implementation of the Good Governance Act.”

Today, Governor George Fergusson issued a statement welcoming the announcement.

“The report raised serious concerns. It is right that these should be fully investigated and recommendations made, including on how existing rules can be enforced,” Mr Fergusson stated.

“All Bermudians have an interest in ensuring that the apparent breaches of financial instructions and related rules and conventions cannot be repeated and I am pleased that the proposed inquiry has received an immediate welcome from the Opposition.”