Financial Crime World

Government’s Financial Management System Under Scrutiny

A comprehensive review of the Solomon Islands’ government’s financial management system has revealed several areas of concern, including weak accounting and auditing capacity, lack of timely and consolidated financial reporting, and corruption.

Key Findings

  • 49 years of accounts dating back to 1997 were updated and audited, with the 2006 and 2007 accounts prepared in accordance with International Financial Reporting Standards.
  • A roving accountant was engaged to assist in preparing the audit of their 2008, 2009, and 2010 accounts.
  • Weak accounting and auditing capacity
  • Lack of timely and consolidated financial reporting
  • Corruption

Recommendations

  • Improvements are needed in the Ministry of Finance and training of accountants in line ministries to address these issues.

Public Procurement Reforms

New public procurement rules were introduced in 2010, requiring all expenditure greater than SI$50,000 to be put out to tender. The report noted that there are no major issues regarding procurement, with good compliance with competitive bidding requirements, transparency, and public disclosure of contracts awarded.

Anticorruption Efforts

Surveys conducted since 2005 suggest that the perception of corruption is on the rise. Although corruption is officially recognized as a legal offense, a culture of impunity limits the extent to which sanctions are applied. The report noted that:

  • The Leadership Code Commission has insufficient resources to investigate corruption cases and rarely refers such cases to the police.

Transport Sector Risks

The transport sector faces governance risks similar to those at the national level, including:

  • Poor service quality
  • Shortened lifespan of transport assets
  • Inadequate staff training

To mitigate these risks, it is recommended that the Ministry of Infrastructure Development’s financial management capacity be strengthened, procurement processes improved, anticorruption capacity built, and institutional capacity developed in planning, operation, and maintenance.

Risk Mitigation

A long-term approach to addressing governance challenges is recommended, including:

  • Improved policies and procedures
  • Capacity development
  • Strengthening the rule of law
  • Greater public awareness

National mitigation efforts should focus on:

  • Strengthening public financial management systems
  • Reviewing revenue management policy
  • Conducting public expenditure reviews
  • Providing recommendations for better expenditure control

Sector-specific mitigation efforts include:

  • Strengthening the Ministry of Infrastructure Development’s financial management capacity
  • Improving procurement processes
  • Building anticorruption capacity
  • Developing institutional capacity in planning, operation, and maintenance
  • The development of a National Transport Fund with ADB support to address severe infrastructure financing constraints.

Conclusion

The report highlights the need for proper fiduciary management of the National Transport Fund resources to ensure that they are used in an accountable and transparent manner.