The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s financial management systems do not provide “value for money” on public procurement, and fail to co-ordinate its Budget with payroll, having reached capacity.

The not-surprising but damning conclusions are contained in a newly-released Inter-American Development Bank (IDB) document that details a proposed $45 million project designed to reform the Government’s financial management, and a public procurement system inconsistent with international best practices.

The project, which also aims to improve the Government’s monitoring of its own performance, appears badly needed, given that the IDB paper reveals that the Bahamas scored just 1.9 out of a possible five (less than 40 per cent or a ‘Failing’ grade) for public financial management in a 2009 survey.

And, in line with the BGCSE national average, the IDB disclosed that the Bahamas achieved a ‘D+’ score for “competition, value for money and controls for non-salary expenditure” in a 2010 assessment of this nation’s public procurement system.

The findings contained in the IDB report will add further fuel to the private sector’s charges that the Government’s inability to properly manage its spending and finances have in no small part contributed to the Bahamas’s existing fiscal mess.

The Coalition for Responsible Taxation, the main private sector lobby group on fiscal reform, has previously called for the Government to impose ‘Budget caps’ and other measures to rein in public expenditure. It has argued that a combination of revenue and spending measures are needed to restore the public finances to a sound footing, with equal weight given to both.

The IDB paper is likely to be interpreted as more evidence to support their case, as it suggests that “fiscal adjustments as well as sound financial management systems can stabilise the debt build-up and maintain current credit rating”.

It will also further stoke concern over how the Government will likely manage the $500 million in extra revenue per annum is is targeting by the 2016-2017 fiscal year, and whether all of this will be allocated to deficit/debt reduction as advertised.

One area identified as in critical need of reform is the multi-million dollar public procurement sector, where the IDB suggests the Government is nowhere near getting ‘value for money’.

Michael Halkitis, minister of state for finance, has previously told the House of Assembly that planned public procurement reforms could save the Government up to 20 per cent in this area. However, these reforms have yet to be enacted, with the IDB paper saying the Ministry of Finance has yet to approve the Financial Administration and Audit Act after it was passed by Parliament.

“Although records and information regarding value and method of selection of procurement exist, these data are not reported or analysed,” the IDB report said. “The existing electronic system for public procurement is more of a payment authorisation system than a platform for tendering, bidding and business intelligence, which would provide valuable data to generate value for money.

“There is an absence of consolidated, unifying instruments at the statutory level able to promote high standards in line with international best practices. There is no designated entity responsible for the development, oversight and functioning of the procurement system.

“Open, competitive methods are used, but there is limited guidance available for line ministries on evaluation criteria. The Government of the Bahamas has initiated some actions in procurement modernisation, including the development of a new supplier registry.”

As for management of the public finances, the IDB said the Government was challenged when it came to “increasing efficiency” in the use and allocation of its resources, and in basing policy on hard statistical evidence.

“The Ministry of Finance has a set of financial management systems that are outdated and have reached their capacity for expansion,” the IDB said. “Their main function is basic cash management and payment, but there lacks integration among any of the subsystems that manage budget, payroll, procurement, etc....

“The Treasury and payroll systems do not share data, resulting in information being entered manually, which produces inconsistencies, is time consuming and labour intensive. Overall the public finance management systems have limited interfaces that result in the duplication of efforts to enter and retrieve information.”

The IDB said the Government was now moving to “streamline” management of its spending, a first step in the process towards an Integrated Financial Management System.

The document linked the need to improve the Government’s financial management to the proposed National Development Plan, and also the fiscal reforms that will generate “additional resources that will need to be effectively managed”.

“The Bahamas capacity to monitor the execution of Cabinet decisions is inadequate. The IDB’s 2005 diagnostic signalled that the Government did not possess a suitable system for tracking and enforcing Cabinet decisions,” something the document said was confirmed by follow-up assessments in 2009 and 2013.

The IDB said: “Limited quality, production and use of information are undermining the Government of the Bahamas’s capacity to determine priority actions. Cumbersome processes and inconsistent practices in public financial management and procurement have reduced capabilities to align resources accordingly.

“The information presently available is of limited quality, difficult to access and consequently not widely used for evidence-based policy and decision-making. More importantly, it also undermines the development of a coherent narrative of government actions.”

Also under scrutiny was the Department of Statistics. “The results of the Tools for Assessing Statistical Capacity (TASC) that was carried out in the Bahamas in November 2013 show that the Department of Statistics/National Statistical System is weak in several key areas:(Institutional capacity (42.3/100); Dissemination of data (47.5/100); Sampling (53.8/100); Cartography (55.4/100); Data analysis (56.0/100),” the IDB said.

And, as for the consequences, the report added: “The availability of high quality and relevant data is critical and, therefore a solid statistical system is central. Some of the areas where immediate attention is required relate to the institutional capacity of the Department of Statistics.

“Improvements are needed in internal co-ordination, human and technical resources, data dissemination and the legal and normative environment (the current Statistics Act dates to 1973).

“Additionally, the outdated IT systems have hindered efforts to improve data production, create awareness of the importance of the Department of Statistics and the need to use statistics in the country for evidence-based policymaking.”

To improve matters, the IDB project is allocating $3 million to advance the Government’s management of its financial performance, and $5 million to modernise the Department of Statistics.

The bulk, some $30 million, will be devoted to a technology solution in the shape of an Integrated Financial Management System (IFMIS) designed to “consolidate seven IT systems currently in use within the Ministry of Finance”.

The final $5 million, according to the IDB report, will go to “strengthen and modernise the public procurement system” in a bid to create “a fair and transparent public procurement market”. This will lead to the establishment of a Public Procurement Unit.

The end result, the IDB said, will be “a public procurement system with fair and transparent rules, generating savings and value for line ministries and relevant public entities”.

The project will also give the Prime Minister’s Office “better capacity” to monitor the execution of public policy in line with the National Development Plan, and boost the Government’s efficiency in managing the public finances.