Column: “Continuing High-Level Incompetence”

November 30, 2015

[Opinion column written by Larry Burchall]

The recent Auditor General’s Report covers the Financial Years [FY] 2009/10, 2010/11 and 2011/12. It is 305 pages long. I have read and digested that report.

Within those 305 pages there are many examples and references, by the Auditor General, to financial mis-management, uncorrected errors in payments, and breaches, by Government financial managers, of Government’s own Financial Instructions.

This report appears to have no direct evidence of ‘corruption’ that would merit immediate criminal prosecution. But there is ample direct evidence of a general and high level of incompetence in the handling of Bermuda’s national funds.

The direct evidence of incompetence comes not solely in this report on the FY’s ending 2010, 2011, and 2012. This report’s findings are complemented and supported by the compendium of past AG reports and also the yet-to-be-reported-on Financial Statements of the Consolidated Fund for 2012/13 and 2013/14.

Further, by looking at the whole picture that emerges from the long overview and by then singling out one clear, easy to understand, and consistent measure; the whole matter of the style and quality of the overall management of Government funds lays itself out the way a rolled carpet unfolds.

The one item to look at is the report on Government’s “Cash and cash equivalents, end of year”. This string of figures flows from before 2002/03 right through to 2013/14. Table ONE shows those numbers and points to the managing of Government’s cash and cash flow.

Larry Burchall Column Pic1

In simple layman’s terms, this line item tells us just how much actual ‘cash’ or securities that Government actually held in bank accounts or in safes at the end of each FY. So the item identifies the “cash-in-the-bank” that Government had on March 31st of every year. This is what is set out in Table ONE. Positive means actual cash or deposits ‘in-the-bank’. Negative means no cash or deposits ‘in-the-bank’ but cash that is “owed”.

The numbers show sudden massive change in FY 2008/09. Between 2007/08 and 2008/09, Government fell from having ‘cash-in-the-bank’ at YE to actually owing $127 million at YE. Despite the string of big loans, this end of year ‘owing cash’ situation applied from 2007 right up until 2012/13.

However, the positive position at YE 2013/14 was only possible because the eighth Minister for Finance had leftover dollars from his December 2013 borrowing of $800 million. The YE ‘cash’ position in 2013/14 happened only because all those ‘cash-in-the-bank’ dollars were foreign dollars which had just been borrowed – and which we owe to foreigners.

Precisely, on 1st April 2008, Government had $23.5m ‘cash-in-the-bank’. On 31st March 2009, Government had burned through that $23.5m and was $127.8m in the hole. Altogether, between 1st April 2008 and 31st March 2009, Government had burned through a total of $151.3 million.

That fast burn-through was likely not a ‘corruption’ problem. It was and is a worse problem. It screams out to us that at the top, there was bad-handling of Government’s finances. That kind of one year burn-through can only happen if top financial managers are bad, lazy, not competent enough, or just plain incompetent – or an amalgam of all four.

‘Corruption’ it probably wasn’t. If ‘corruption’ was the cause of that fast burn-through we would have seen trucks and shifty-eyed people loading up that $151 million and carting it off to other places!

The fact that Government’s top financial managers were performing badly is set out in this report. Their continuing incompetence is verified as late as February 2015.

In February 2015, the eighth Minister for Finance told the House of Assembly that the $800 million that Bermuda had borrowed in December 2013 was “running out” and that there was “only $95m left”.

That means that in the fourteen months between December 2013 and February 2015, Government’s top financial managers had burned through about $705 million. That is bad financial management.

Sniff and prod for corruption all you like. Even if corruption is there, it pales beside the infinitely worse problem of high level incompetence.

If you read the AG’s report as the clinical analysis – diagnosis? – that it really is, you’ll see the killer virus of continuing high-level incompetence.

- Larry Burchall

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Comments (14)

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  1. Thank God says:

    Thank God for Larry Burchall’s crystal ball which has been painting the true story. But the PLP appointed financial officers in 2000 to prevent this type of poor management. Many of them are still there. They should be held accountable and if their contracts come up the current Govt should NOT renew them. It is as simple as that. Thank God Mr. Burchall’s crystal ball is working. The PLP should have been more cautious after the first major deficit. Mr. Eugene Cox set the template with balanced budgets and they should have stuck to that AND built up a huge surplus prior to 2008.

  2. Civil Service Reform says:

    Dr. Binns recent article shows that he lacks the character and values needed to run the civil service in an effective and accountable way.The position of Cabinet Secretary is too important to be held by someone so obviously unwilling to take the responsibility and answerability that goes with the role. This gentlemen needs to resign or be “retired” if we are to take Government seriously about starting civil service reform before the next election.

    • aceboy says:

      What about Ministers? No need for them to be accountable?

      • No accountability says:

        Of course but it’s not up to the Minister to run the day to day.

  3. Civil Service Reform says:

    The Cabinet’s Secretary’s recent article seems to reflect that he lacks the character and values needed to run the civil service in an effective and accountable way.The position of Cabinet Secretary is too important to be held by someone so obviously unwilling to take the responsibility and answerability that goes with the role. This gentlemen needs to resign or be “retired” if we are to take Government seriously about starting civil service reform before the next election.

  4. Just a matter of time says:

    Let’s put aside error payments for the moment because I don’t know of any organization, private or public that does not incur payment errors from their millions and millions of yearly transactions. From the report these certainly did not comprise the hundreds of millions in so called overspending which was mainly attributed to capital spending. I always appreciate Mr. Burchall’s in depth analysis however he puts the full blame with Civil Servants, lock, stock and barrel. When things are going fine, the Ministers take the credit, and certainly the OBA Government does and have done. When things are not going fine, it’s all the Civil Service’s fault.

    The report speaks to lack of tendering for many projects. From what I last recall, major projects are already part of the yearly budget and are well known by the Minister and his/her Ministry and this goes on today. Cabinet approval via in depth Cabinet papers are the final decisions of these transactions. In other words, signed off by Minsters. For example Minister Richards has claimed to have sought permission to seek sole sourcing for a major airport project and it appears the Accountant General is disputing this for the most part. Yet the Minister feels and knows in his mind that this sole sourcing is the right decision for Bermuda despite the many opposing voices. Not one OBA supporter on this board has an issue with this. Yet anything similar that would have occurred under the PLP is vilified to the nth degree. I’m just saying can we compare consistently for a change? This convenient flip flopping to continually mudsling the last Administration serves no purpose but to antagonize.

  5. clearasmud says:

    Looks to me like Larry is saying Uncle Bob is just as bad as everyone else when it come to managing the public purse!

  6. Larry, What can the country do, when you cannot fire anyone in the Civil Service . And if there is a whistle blower there , she/ he will get blackball by their peers for speaking up. So who is protecting the Public? No one, and no one cares. In- competence is a good way to hide the lost of money. It is not a crime to be incompetent, and you can not get fired for it. Yet still the money keeps going out and the checks keep getting written. Who is to blame? NO ONE ! To put pressure on someone, and find out the” Game” that was being played, would be to reveal what some of our closes friends had done. We love the civil servants too much to take any to court, just maybe by doing so, we may come to know the truth. BUT YOU CAN’T HANDLE THE TRUTH.

  7. WILL THE GOVERNOR DO SOMETHING ABOUT THIS PROBLEM BEFORE HE GOES?

  8. mixitup says:

    Interestingly quiet on this page… I guess Larry threw a wrench in the OBA Sheeple corruption claims, they mush be so disappointed in this article..

  9. JUNK YARD DOG says:

    One of my favorite saying which I am now starting to believe in is :::

    ” Don’t put you hands in another mans pocket”.

    Black Friday ? Nothing is free.

    Is our Government doing a fantastic job? Who said they were not !
    No mater which party runs the show, salaries and waste is killing the Goose that laid the golden egg.

    Let us see what happens when two newly weds buy their first car which by the way cost twice as much as any place else.

    let me take you for a ride.

    You can do the numbers as all cars come in different size and categories, however, some percentages do change for larger vehicles.

    The first cost of a car over there, plus the double dip.

    Ocean freight.
    Shipping Insurance.
    Bank charges.
    Dealers profit.
    Dealers overheads.
    Tax ::: Payroll tax , for all company employees
    Tax ::: On overseas purchases
    Tax ::: Duty on vehicle imports.
    Tax ::: T.C.D. license.
    Tax ::: Duty on Fuel.
    tax ::: Duty on accessories and so on.

    4 people riding the public transportation is not a bargain ,it never was.

    When you look at the numbers you can clearly see why Bermuda, has as some would say, priced itself out of the market,you hear that often these days.
    They say Bermuda is to expensive.

    Car purchases are only one example of many, as Bermuda is sliding down an economic slippery slope from which it will take years to recover, may be never, as we have been living with a two tier economy.

    Do not be fooled into thinking the recession is over, many people here are still finding it extremely difficult to keep pace with the rising cost of free enterprise living, you have heard that from many,the cost of fuel here is almost 4 time as others.

    If we as a nation are going to make it, we all have to sacrifice and spend the money wisely.

  10. robert stewart says:

    The Bermuda finance ministry is like a hall of mirrors; a place where there are no answers, only evasions of responsibility. The RG called this crisis a black hole where money simply disappeared.

    The answer as to who was responsible is in the hands of the authorities. Politicians and civil servants are too heavily compromised – not to mention too corrupted. The representative of the British Government, which has ultimate responsibility, should step up to the plate. What will he do?

    Of course, the Governor will do nothing. Upton Sinclair the early 20th century author said it best “It is difficult to get a man to understand something, when his salary depends upon his not understanding it”.

    The Bermuda taxpayer is like a turkey at Thanksgiving or Xmas. Only good to be plucked and too dumb to protest.

    Well done the winning team. Taxpayers are too subservient to object to the reprehensible behaviour of those who were entrusted with the public welfare.

    Those who cannot pay utility bills, medical insurance, buy Xmas presents, paint their house, fix their car or the million and the one hundred and other things that require money can only thank those in whom they reposed their trust. Their funds were stolen.

    Not for the first time they have they been betrayed by the bandits in three piece suits.

    Please tell me I am wrong.

    Robert Stewart.

    • The Governor is about ready to leave Bermuda soon. Will he do the right thing and get our financial house in order first? The report is his. Will he take responsibility for it, or just pass it off.? Sir, We the people of Bermuda are looking to you to do the right thing for us, on our behalf.

  11. Politically incorrect says:

    I predict nothing will happen. Bermuda is now well on its way to Greece but with no EU to bail it out.