The Cayman Islands government spent about $10 million less than expected during the fiscal year that ended June 30.
However, it also collected about $30 million less in revenue than initially expected, leaving less cash left over, according to financial statements made public in the Legislative Assembly on Wednesday.
Bottom line: The government had an operating surplus of $63.3 million for the 2012/13 fiscal year.
Last fall, the government of former Premier McKeeva Bush had projected a surplus of $82 million.
The smaller surplus is partly due to the previous government’s decision not to implement some of the fees on the financial services industry it had initially proposed. That left core government with operating revenues of $619.6 million for 2012/13, compared to the $649.4 million first budgeted.
Operating expenses for the year were $526.6 million, instead of the planned $536.2 million.
The 2012/13 financial statements also revealed a decrease in overall public sector debt for the Cayman Islands. In the 2010/11 fiscal year, total public sector debt was $787.5 million. Two years later, the debt was reported to be about $712 million.
Despite that, the latest figures leave Cayman out of compliance with principles of responsible financial management stipulated in its Public Management and Finance Law. The two main problem areas are that core government revenues are not high enough compared to its outstanding debt, and the territory did not have 90 days of operating cash reserves available on June 30.
None of the government figures produced for the budget years has been verified by audits. Finance Minister Marco Archer said Wednesday in the Legislative Assembly that accounts have been turned over to the auditor general’s office for review.
Shortly after taking office, Mr. Archer warned civil service chief officers in a memo not to incur expenses through June 30 “simply because available budgets exist.
“[The] Internal Audit Unit will be carefully scrutinizing all transactions during this critical June 2013 period and will highlight any apparent unnecessary expenditure being incurred,” the June 7 memo stated. “Government agencies are asked to continue the good fiscal restraint exercised … by not exhausting budgetary appropriations in June 2013 simply because such appropriations may exist.”
Mr. Archer’s memo represented something of a departure from a long-standing, but unwritten, practice in the civil service. Put simply: Spend the money or they’ll take it away.
The $63.3 million operating surplus can be a bit misleading. Government still has to pay off principal amounts on its debt, as well as any capital expenses it incurred during the year, leaving about $15 million to $30 million in surplus.
Mr. Archer also previously announced in the Legislative Assembly that a $30 million overdraft facility – short-term borrowing – for the government’s July 1 to Oct. 31 interim budget had been approved. An overdraft of $46 million has been approved for the full budget year through to June 30, 2014.
“We have a $15 million bank account,” the finance minister said, which, including the overdraft facility, leaves a balance of $45 million. Coupled with $8.5 million in depreciation allowances for fixed and long-term assets, Mr. Archer said government expects an overall deficit – pegged at $56 million – to be reduced to only $2.5 million at the end of the interim budget period on Oct. 31.
Prior to the interim budget ending, government will have to adopt a full-year spending plan for the fiscal year that runs July 1, 2013 to June 30, 2014.
Premier Alden McLaughlin has said he hopes to bring that budget to the Legislative Assembly by the end of this month.
Government expenditures between July and October traditionally outpace revenues, he said. January through March, Mr. Archer said, “is when government revenues far outstrip expenditures – and the full-year budget shows a significant operating surplus.”