IDB analysis highlights Bahamas’ weak public financial management system

March 4, 2021

The Inter-American Development Bank (IDB) released an analysis that highlighted 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 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 emphasised 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 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.

To strengthen public financial management, the IDB suggested 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.

“Furthermore, 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.”


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