BERMUDA: AUDITORS GENERAL CALL ON POLICE TO INVESTIGATE

UNCLAS HAMILTON 000031

SIPDIS

SENSITIVE
EUR/CE (J. MARBURG AND D. PARADISE);
EUR/PPD (L. MCMANIS AND A. PIPKIN);
LONDON (R. HUBER AND R. ESCOBAR)

E.O. 12958: N/A
TAGS: PGOV ECON KCRM BD
SUBJECT: BERMUDA: AUDITORS GENERAL CALL ON POLICE TO INVESTIGATE
MISMANAGEMENT OF GOVERNMENT FUNDS


1. (U) Reports by both the current and former auditors
general found evidence of massive mismanagement of government
funds and recommended that police investigate four cases of
overspending and/or lack of oversight and poor internal
controls. A 2007/08 report by the former auditor general, Larry
Dennis, presented in the House of Assembly on February 19
recommended that the police investigate the lack of fiscal
control over a failed Faith-Based Tourism Initiative conducted
under the auspices of the Minister of Tourism/Premier Ewart
Brown to bring religious tourists to the Island. Brown had
named Andre Curtis - a political supporter - to head the
initiative, although Brown denied that bias played a role in his
selection.




2. (U) Dennis also noted the complete breakdown of internal
controls in the expenditure of USD 20.2 million by the former
National Drug Commission over a five-year period, with evidence
of fraudulent activity including payment of personal expenses.
He said that records were "unbalanced, incomplete, unsupported
and generally inadequate. Whether this was due to managerial
incompetence or a purposeful unwillingness to maintain proper
books of account, or an attempt to conceal improper conduct is
unclear." In his report, Dennis called for a police
investigation, and Finance Minister Paula Cox commented in a
February 19 press release that her ministry had already
facilitated a police investigation.




3. (U) Dennis' 2007/08 report follows earlier
recommendations by new Auditor General Heather Jacobs Matthews,
appointed in 2009, that police investigate huge cost overruns on
two government projects. On February 1, she announced special
reports on a new cruise ship terminal that almost doubled in
cost and a new vehicle emissions testing facility that also far
exceeded its budget. Matthews also warned about the overall
fiscal challenges facing the Island, including a "weakening cash
position, a substantial bank overdraft, expenditures
outstripping revenue, increasing long-term debt and a growing
deficit." In response to the Matthew's findings, Cox's February
19 press release stated, "Given concerns with the management and
oversight of recent and specific capital projects, Government is
moving already to further strengthen tendering and procurement
practices, including ensuring that there is the appropriately
provided expertise to ensure proper scoping and design of
capital projects to reduce subsequent change orders that are
often the cause of cost overruns."



Comment


4. (SBU) Governor Gozney told the Consul General on
February 18 that the Police will investigate these allegations,
although the police might need additional resources assigned to
its Financial Crimes Unit. This is not the first time that
auditors general have criticized the management of the people's
purse. The Progressive Labor Party government will, however, be
unable to continue allegations that the auditor's criticisms are
racially motivated now that the auditor general's position is
held by a black female instead of a white male. The auditor
general's report does not seem to be politically motivated,
although the effect might be to ensure that Premier Brown leaves
office as expected in October. Premier Brown has withstood
numerous allegations of improprieties, and we think he will
weather this round of criticism as well.

SHELTON