Healthcare liability information also lacking
Two reasons the Cayman Islands government’s financial statements for 2011 were disclaimed this week have to do with long-term management issues that go far beyond a single budget year.
Put simply: The Cayman Islands government doesn’t know what its properties are currently worth and it doesn’t know how much it might have to pay for retired government servants’ healthcare over the next 20 to 30 years.
At the Legislative Assembly meeting in Cayman Brac on Wednesday, Finance Minister Marco Archer read an audit evaluation for the 2010/11 fiscal year which received a disclaimer of opinion from Auditor General Alastair Swarbrick’s office, largely because government did not have “sufficient or appropriate evidence” of assets, liabilities, revenues and expenses.
“A disclaimer of opinion is not a good audit opinion,” Mr. Archer said Wednesday. “It indicates the government has significant work to do.”
Included among the assets would be any property the Cayman Islands government maintains.
According to Mr. Swarbrick’s office, the government has not conducted a detailed appraisal of its properties since 2001. This makes it impossible for accountants to verify that the buildings and properties are worth what the government says they are worth.
Mr. Swarbrick has said an effort by government to revalue public properties is ongoing, but no reports of such a valuation have ever been made public.
Former Auditor General Dan Duguay also noted the problem when he reported on it in 2007.
Mr. Duguay claimed the last valuation of government properties was done in 2000, and stated his concern that government assets might be significantly under-insured.
At the time, Mr. Duguay noted that after the 2000 valuation on government assets, there had been one scheduled for October 2004. However, that was interrupted after Hurricane Ivan in September 2004.
When the government obtained new insurance in April 2006, it did so at a value of $400 million.
“These values were determined based on input from the insurance broker and attempted to include adjustments for estimated increases in property values,” Mr. Duguay wrote in the 2007 report.
The liabilities related to what government will have to pay for future healthcare expenses is a potentially massive issue for the public sector. Mr. Archer said Wednesday that once an evaluation of this liability is completed, it would be placed on the government’s balance sheet and counted against the net worth.
Recording future healthcare liabilities on the government’s balance sheet isn’t done in the United States, the United Kingdom or Canada.
In 2010, the Caymanian Compass reported that a 2009 bond offering memorandum made an estimate of US$798 million (CI$654 million) in unfunded liabilities for healthcare coverage due to Cayman Islands civil servants. The figure was based on an actuarial estimate in 2004.
The projections are accountants’ estimates of what the government will owe for the total benefit package at civil servants’ expected retirement dates – which can be up to 40 years in the future.