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DG's Statement on CarePay

Deputy Governor, Hon. Franz Manderson

Internal auditors looking into the CarePay procurement process have found no evidence of corruption by civil or public servants their report says.

Earlier this year jurors in a corruption trial found former Health Services Authority (HSA) Board Chairman Canover Watson guilty on five criminal charges including breach of trust and fraud in relation to the CarePay project. CarePay was the outcome of a search to find an online solution to the difficulties faced by HSA in verifying patients’ eligibility for health insurance and managing the resulting claims process.

At the conclusion of the criminal case, the Deputy Governor and Head of the Civil Service Franz Manderson, commissioned an investigation by the Internal Audit Unit into the procurement of the CarePay system.

In regards to auditors’ findings Mr Manderson made the following statement:

“While I am pleased that auditors found no evidence of corruption by civil servants or public servants, I am concerned that our internal controls and governance arrangements were not robust enough to prevent the serious abuse of public funds.

I have noted the remarks of Justice Michael Mettyear during the sentencing of the former Chairman in which he stated to Mr. Watson: “You are a certified accountant. Yet you behaved shamelessly, falsifying presentations, letters, emails, contracts and signatures.”

It seems to me that Mr. Watson’s conduct, as described by the Justice, together with his high standing in the community, contributed to his ability to perpetrate this fraud. However, I agree with the Internal Auditors, that civil servants did not display the expected standard of care and professional skepticism that I expect, and that the public deserves. This could have prevented or reduced Mr. Watson’s success.

There are many lessons to be learned from this entire episode and I wish to assure the public that action will be taken to avoid a recurrence of such an event.

I would also add that many persons complain of Government bureaucracy and red tape, and encourage the civil service to “just get on with it”. Yet this case highlights the need for civil servants to be diligent and deliberate in carrying out their duties, to develop sound business cases and to introduce strict internal controls.

The good news is that much has changed in the civil service since the CarePay contract was awarded in 2010 some six years ago. Business case planning is the norm and legislation, such as the Framework for Fiscal Responsibility, has strengthened our internal controls. So has recurring training in procurement good practice.

Meanwhile imminent legislative changes are underway, such as the Procurement Bill and the Public Authorities Bill, both of which emphasise role clarity in governance arrangements. Going forward these will strengthen our procurement processes and prevent a reoccurrence of an incident similar to CarePay. Both of these draft bills are in the final stages of development.”

Additionally, in order to strengthen the system of checks and balances between the government and the statutory authority, a Cabinet Paper will be presented to Cabinet to add representatives from the Ministries of Finance and Health to the HSA Board.

The Deputy Governor will also circulate the report among senior civil servants in the various ministries and portfolios to assess the vulnerability of their own relationships with statutory authorities and government companies.

(ENDS)

Editors’ Notes:

1 Future developments which will further tighten procurement controls include two pieces of draft legislation which emphasise role clarity in governance arrangements and are in the final stages of the development process. These are:

a. The draft Procurement Bill:

i. This legislation details the establishment of committees to oversee the procurement process, and specifies that membership may not extend to persons whose financial or other interests might affect how they carry out their duties.

ii. In addition Chief Officers, Chief Executive Officers, as well as board members of statutory authorities or government companies, are ineligible for membership of these procurement committees. (This is an important development as Mr. Watson, although Chairman of the Board, was allowed to serve on the procurement committee, which contributed to the successful fraud.)

iii. The Bill also empowers the newly appointed Director of Procurement to monitor the compliance of all public procurement processes.

b. The draft Public Authorities Bill

i. This legislation speaks to the importance of avoiding conflicts of interest, and promotes full disclosure, in the appointment of board members.

ii. It further specifies that only the CEO of a Public Authority, rather than its board, is responsible for procurement. It adds that any such procurement must be in line with the policy framework established by the board, and also with Government’s procurement legislation and policies.

2. An electronic copy of the Internal Audit Special Investigation Report into the

CarePay Procurement Process is available in the publications section of the Portfolio of the Civil Service website www.pocs.gov.ky. It is part of the collection entitled internal audit reports.

3. HSA and the Cayman Islands National Insurance Company (CINICO) implemented the CarePay system on 2 May 2012.

For further information contact: Suzette Ebanks