Ministry said to have incurred financial exposure amounting to millions of dollars

Durrant Pate/Contributor

The Auditor General’s Department (AuDG) has uncovered a messy state of affairs at the Ministry of Tourism, which has circumvented financial controls, resulting in financial exposure amounting to millions of dollars.

During an audit of the Ministry of Tourism’s 2018/2019 Recurrent Appropriation Accounts, several areas of concern were found, such as circumventing the requisite controls intended to prevent expenditure from exceeding the approved budgetary allocation. 

The circumvention was done by the Tourism Ministry employing a practice of requesting its portfolio agencies to make advance payments on the Ministry’s behalf without going through the established commitment control process. 

For the period under review, “the audit identified where the Ministry of Tourism made a total of 94 requests to two of its agencies to advance sums to cover expenditure totalling $36,003,568.14. However, only $30,424,181.68 was reimbursed by the ministry in relation to the amounts requested during the year. This resulted in the ministry’s expenditure being understated by $5,579,386.46 for the 2018/2019 financial year because it failed to fully reimburse the two agencies,“ the AuGD stated in its 2024 Annual Report, which was recently tabled in parliament.

Overstatement of reported expenditure

Of the $5,579,386.46 outstanding as at March 31, 2019, some $4,349,838.12 was reimbursed in 2019/2020. Additionally, advance payments totalling $2,394,825.90 relating to the 2017/2018 financial year were reimbursed in 2018/2019, resulting in a corresponding overstatement of the 2018/2019 reported expenditure.

The Tourism Ministry’s management was advised to strengthen its controls to ensure that no commitment is entered into without first establishing the availability of funds to meet the expenditure in keeping with the Financial Instructions. The AuGD recommends that, “steps should also be taken to ensure that all payments are processed through the GFMIS and eliminate the practice of using portfolio agencies to make advance payments on its behalf.” While the financial exposure amounted to $3.2 million, the concerns of the AuGD run deep.

Stout defence advanced

In response, the Permanent Secretary indicated that the “request of the agencies to advance payments to suppliers was never due to lack of funds or to circumvent the controls, but rather to respond to urgent needs to fulfil the ministry’s financial obligations. The assistance of the agencies to advance payment on our behalf was due to the fact that some suppliers require prepayment prior to the delivery of goods/services, eg overseas travel and hotel accommodation. It should be noted that the ministry always ensures that adequate funds are available to meet its financial obligations.”

The ministry’s accounting officer admitted that “the system during the period of review was not sufficiently agile to respond to the Ministry’s urgent financial obligations. Note also that many suppliers do not accept the Ministry’s Purchase Orders. Due to the Shared Services arrangement with the Office of the Prime Minister (OPM), the Ministry of Tourism does not have direct access to make payments through the GFMIS. Given the dynamic nature of the tourism sector and the short timeframe in which we frequently must make financial commitments and payments, it was not always possible for the OPM to honour the Ministry’s payment obligations in a timely manner.”

The Permanent Secretary posited, “The Ministry and OPM have since made strides to correct the situation. Currently, the Office of the Prime Minister (OPM), the Ministry’s payment office, has put in place measures to ensure that there is quicker response time to the Ministry’s needs. In addition, the reimbursements for 2018/2019 that were made to the agencies in 2019/2020 was because of the late submission of the reimbursement invoices. Measures for better control are now in place such as the requirement for invoices to be submitted within a week after the advance payment.”

Incorrect classification of transactions

A review of the general ledger revealed that 14 expenditure transactions totalling $7,396,145.64 were incorrectly classified as Object 25 instead of Object 22. Consequently, these transactions do not accurately reflect the nature of the underlying expenditure. Regarding Unresolved Appropriations-in-Aid (AIA) Variances, there was a significant variance of $51,815,500.93 between the Ministry’s records and the amount reported as AIA by the Tourism Product Development Company (TPDCo), an agency of the Tourism Ministry. This variance remained unresolved up to the time of this report. 

Management has since advised the AuGD that steps will be taken to correct the error and strengthen the relevant controls to prevent a recurrence. Both these two matters accounted for financial exposure of $7.4 million regarding incorrect classification of transactions and $51.8 million for unresolved AIA variances.