The government will not move to multi-year budgeting within the next year, Finance Minister Marco Archer confirmed Friday.
The presentation of the upcoming 2014/15 spending plan will adhere to the terms of the Public Management and Finance Law and stretch over a 12-month period, rather than an 18-month period as first envisioned, Mr. Archer said.
However, the finance minister said once changes to the law are made, government still plans to move ahead with multi-year budgeting. He said officials ran out of time on it for the upcoming budget.
“We are waiting for the committee to complete [its] review and provide a report on the Public Management and Finance Law,” Mr. Archer said. “We expect this in early May, but that does not leave sufficient time for Cabinet to review the report and recommendations, draft amendments….and any required accounting and information systems changes before the June 30 year end.”
Cayman eventually plans to change its budget year from the current July 1-June 30 timetable to a calendar year spending plan. It also proposes to extend the budget cycle from one year to two years, once changes to the Public Management and Finance Law are finalized.
Although it will involve some legal changes and budgetary restructuring within government departments, Premier Alden McLaughlin said a move to calendar year budgeting for Cayman shouldn’t be costly.
During a debate in the Legislative Assembly, Mr. McLaughlin said he was “hearing things in the margins of the Chamber” that switching Cayman Islands government fiscal years from January to December would be expensive. In addition, the government eventually expects to move – as of Jan. 1, 2016 – to multi-year budgeting, or planning public sector expenditures over a two-year period.
“This change can be made … by a single change to the Public Management and Finance Law. We are not doing this at a whim,” Mr. McLaughlin said.
Currently, government’s finance law requires budgets to be prepared on an annual basis. Finance Minister Marco Archer initially proposed changing that as of the upcoming fiscal year on July 1. That plan sought to move the budget cycle to an 18-month period between July 2014 and December 2015. The two-year budgets would then begin in January 2016.
“A lot of thought has already gone into this as a policy, but a great deal more will have to go into working out the mechanics of it and to make sure we get it right,” Mr. McLaughlin said.
Cayman Islands Auditor General Alastair Swarbrick indicated his office would be taking a look at government’s budget plans once they are formalized.
“The PMFL, the law governing the government’s budgetary and financial reporting responsibilities, currently requires an annual accountability cycle consistent with practices in other jurisdictions,” Mr. Swarbrick said. “Once we get more details of the government’s plans, we will be conducting our own assessment to determine the implications against the accounting standards, including the suggestions for reporting over an 18-month period.”
From Premier McLaughlin’s perspective, moving the budget cycle from January to December takes budget planning away from the elections process. Typically, Cayman’s general elections are held annually in May.
In addition, multi-year budgeting could eliminate the need for government to spend eight or nine months in the financial planning process.
“It also makes a tremendous amount of sense from the government’s financial position,” Mr. McLaughlin said. “Financial services-related revenue accounts for nearly 40 percent of the government’s total annual revenue.
“As most of these revenues are received in the January to March time frame, it means that, with the budget year starting on the first of July, the government can be as much as nine months down the track before it realizes that revenue is not tracking the way that it hoped, and by then it is almost impossible to change course, at least in a way that materially affects expenditure.”