Auditor releases special report on misuse of public funds

THURSDAY, JAN. 26: Auditor General, Mrs. Heather A. Jacobs Matthews, today issued a Special Report on the Misuse of Public Funds. Mrs. Jacobs Matthews said, “Two issues recently came to my attention which warranted immediate investigation and reporting”.

The Auditor General indicated that the results of her investigations and the fact that relevant information was withheld have caused her serious concern. “The issues discussed in this report involve elected officials and senior civil servants at the highest levels,” said the Auditor General. “Although the amounts at issue may not be seen as significant, these misuses cause me to question the ‘tone at the top’ and whether Government officials at the most senior level will do the right thing. Both issues indicate a complete disregard for the concept of good stewardship of public money. I continue to be amazed by the lack of awareness of, or the lack of commitment to, good governance".

The Special Report reveals that the former Chairman and the Deputy Chairman of the Board of Directors of the Bermuda Land Development Company Limited entered into a consultancy arrangement with the Company while they served on the Company’s Board. This arrangement resulted in them being paid $160,000 in consultancy fees. The Auditor General concluded that “the consultancy arrangement put both the Chairman and the Deputy Chairman, who actively participated in overseeing the activities of the Company, in a fundamental conflict of interest. The actions of the Chairman and the Deputy Chairman clearly represented a breach of their fiduciary duty.” In response to the Auditor General’s concerns, the former Chairman disagreed noting that the Company had every right to enter into the paid consultancy and that the arrangement was supported by the Minister of Works & Engineering.

On April 1, 2011, the Premier changed the delegated responsibility for the Company from the Minister of Public Works to the Minister of Environment, Planning and Infrastructure Strategy. On May 12, 2011, at a Special Meeting of the Company, the Board of Directors was disbanded and a new Board established. However, the Auditor General notes that “to date, the consultancy fees have not been repaid to the Company”.

In another instance of misuse of public funds, the Auditor General found that a private legal action on behalf of the former Premier and the Minister of Public Works was funded by public money in direct violation of Financial Instructions. The Auditor General concluded “In this case, where the fundamental financial rules which govern all civil servants have been blatantly disregarded at the highest levels in Government, appropriate sanctions should be applied including appearance before the Public Accounts Committee”. The funding arrangements were subsequently terminated. However, public funds paid to the overseas law firm have not been recovered.

During her investigation, the Auditor General was denied access to important information. In its refusal to provide requested documentation, the Attorney General’s Chambers cited the doctrine of legal privilege. However, Mrs. Jacobs Matthews expressed her view that attempting to cover-up an abuse of public funds behind the cloak of legal privilege is unacceptable and violates principles of good governance and transparency.

Mrs. Jacobs Matthews warned that restrictions on her access to information violate the provisions of the Audit Act 1990. “The Act provides that it is a criminal offence to fail or refuse to supply any explanation, information or assistance which I may reasonably require for the performance of my functions” said the Auditor General. “As a result, I have decided that should my access be denied in the future, I will bring the matter to the immediate attention of the House of Assembly and the public. I will also recommend that those individuals who have infringed on my right to information be required to appear before the Public Accounts Committee”.