IDB: Bahamas has weak public financial management system

A just released analysis by the Inter-American Development Bank (IDB) has highlighted what the bank has called weaknesses in The Bahamas’ fiscal policies, governance, institutions, rules and processes, public financial management processes and public financial management.

Pointing specifically to The Bahamas’ fiscal accounting practices, the IDB stated that information is lacking on extra-budgetary expenditure of funds and that tax liability assessments and exemptions are still subject to the discretionary powers of different government entities or lack enforcement.

The analysis is a part of a book entitled “Economic Institutions for a Resilient Caribbean”, which lays out a specific reform agenda for The Bahamas, Barbados, Guyana, Jamaica, Suriname and Trinidad and Tobago, and presents recommendations on how these nations can strengthen their institutions to promote economic growth.

The IDB stated that for The Bahamas, annual financial statements do not meet international standards in terms of presentation or disclosure.

“There have been problems with reconciliations and although auditor generals highlight weaknesses and breaches of the rules, response efforts have been limited, reflecting lack of accountability and low regard for the auditor’s opinion. While key budget reports are prepared, public access and financial information are rather limited.” 

The organization also pointed out that Caribbean countries do not show systemic or timely follow up in auditor general findings, specifically in The Bahamas, Guyana, Jamaica, Suriname and Trinidad and Tobago.

The IDB analysis states that while evidence shows the public financial management processes and systems of Caribbean countries are weak in general, The Bahamas and Suriname have advanced in specific areas.

Prime Minister Dr. Hubert Minnis earlier this week sought to begin debate on several bills that are expected to address many of the country’s weaknesses pointed out by the IDB, however the opposition argued that they were not properly notified of plans to debate and were not prepared.

The debate has been put off for some time after the government completes debate on the 2020/2021 mid-year budget.

The Public Financial Management Bill, 2021; Public Procurement Bill, 2020; the Statistics Bill, 2021 and the Public Debt Management Bill, 2021 are expected to bring further transparency and accountability to the management of public finances and the issuance of government contracts.

“This is an impressive and comprehensive legal framework. However, for its effective implementation, major efforts are needed to strengthen the country’s core public financial management functions, as they ensure financial compliance and help achieve a credible budget (i.e., a budget that is implemented as planned),” the IDB noted about this country’s legislative agenda to address PFM deficiencies.

“For example, observance of the fiscal rules stated in the Fiscal Responsibility Bill may be hampered in the absence of adequate accounting and reporting systems. This suggests that developing an operational core public financial management system acquires the highest priority, including efforts to strengthen revenue collection and increase discipline in expenditure management.”

To strengthen public financial management, the IDB stated that the Bahamas government needs to improve budget classification with a clear picture of sectoral spending; intensify taxpayer registration and strengthen tax assessment, including tax audits and fraud investigation; take steps to ensure that the outturn on expenditure composition does not deviate significantly from the original budget; and integrate payroll and personnel systems to help the public service department control pay and the grading of staff.

Additionally, the IDB noted that the government should improve existing internal rules and controls for non-salary expenditure, pointing out that audits have identified widespread failure to comply with the rules that ensure probity and value for money.

“Adopt rules that require management response to internal audit findings, follow-up controls on recommendations and timely submission of audit reports to the legislature. These steps help audit reports increase accountability, but they require additional resources. Clarify the role and strategy of the audits conducted. Generally, errors and breaches of the rules identified by the auditor general are not corrected. As mentioned above, ministries do not respond to the auditor general reports, nor are these reports considered by the legislature,” the IDB recommended.

“The use of auditor general reports for the scrutiny of the government will increase accountability. Improve legislative scrutiny with the help of the previous, although such an improvement will also require providing the legislature with enough time to review budget proposals and reviews.

“Moreover, steps need to be taken to require the executive to implement the legislature’s recommendations. Improve the quality and timeliness of annual financial statements – currently produced with a delay of 12 months and with little impact – with a clear picture of the overall health of public finances and cash flow to assist in decision making.”

The post IDB: Bahamas has weak public financial management system appeared first on The Nassau Guardian.

source https://thenassauguardian.com/idb-bahamas-has-weak-public-financial-management-system/