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Wednesday, Jun 03, 2020

Public purse lost $1M on failed customs IT

Public purse lost $1M on failed customs IT

The financial secretary told the Public Accounts Committee last week that the customs department was forced to write off over CI$970,000 from last year’s budget after it invested in a technology system that didn’t work.
As he appeared before the committee Wednesday, Kenneth Jefferson explained what happened and tried to reassure the committee that such a costly mistake will not happen again.

Jefferson said that back in 2014 government wanted to introduce new customs codes to help it collect more specific data about all the things imported to Cayman. He admitted that at the time the analysis of what was needed was limited and the department took advice (he did not say where from) about a new system from the UK.

But the software had never been used by a customs department anywhere at that point. “It turned out to be not great,” Jefferson said. “It gave lots of problems and shut down frequently… That was awful for people queuing… and problematic for customs.”

Jefferson said there was also much concern surrounding the security of the system and importers were worried their details might be hacked. “It was was fraught with difficulties,” he noted.

But the financials secretary was candid about the source of the problem, which he said was a poor procurement process. He explained that the ministry, which was then directly responsible for the customs department, had gone to the Computer Services Department but they were not able to help as they did not have the resources or expertise. And so they turned to this untested programme.

But Jefferson said the lesson learned was that when acquiring a new product, it is not the best idea to get one that has never been used before. Pointing to the new procurement regime, which requires proper research and risk analysis before anything over $100,000 can be purchased, it would now be unlikely for any department to acquire a costly product that does not work because of the increase in scrutiny. Given that the system was so problematic, he said that, in line with best practice accounting, the government had to write off the loss.

In addition to answering to PAC about the hefty loss to the public purse, Jefferson and other witnesses were also grilled by the committee over the constant under-prediction over the last few years regarding the amount of money customs expects to collect.

Jefferson said revenue estimates are a collaboration, and although the communication between the departments, such as the ESO, and the revenue has not been well documented, the forecasts were not made in isolation.

The financial secretary and Charles Clifford, who was customs collector and now heads the new Customs and Border Control agency, both denied that there was any deliberate attempt to underestimate their earnings in order to avoid scrutiny and collect accolades, and every effort was being made to improve revenue forecasting.

PAC Chair Ezzard Miller pointed out that under-predicting would not help the customs department get the resources it needs. He asked the government officials how they could forecast around CI$156M in expected revenue for 2018 and end up with well over CI$181M, given that the original figure seemed to be based on revenue levels dating back to the recession.

Clifford said that his department was consulting with experts and based the forecasts on best guesstimates, but there was no deliberate under-budgeting.

He said it was a positive thing to collect more than expected but he accepted Miller’s point that it can be problematic when the forecast consistently fall short by so much.

Miller said it would lend more credibility to the department to make more accurate predictions about the money its collecting and given the importance of duty to the public purse of better assistance to government as a whole.

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