The Cayman Islands government’s financial picture is improving, but it will be a couple more years before full compliance with U.K.-mandated financial targets are met and full accountability restored to public sector finances, Finance Minister Marco Archer said Tuesday.
Mr. Archer’s comments were made to about 200 attendees at the government’s Professional Development Week conference being held this week at the Marriott Beach Resort on Grand Cayman.
“The current government administration will strive for continuous improvement whilst being cognizant of the trade-off between absolute perfection in the form of unqualified audit opinions and the cost of achieving those opinions,” Mr. Archer said. “We have to be realistic about what is affordable and what is acceptable or achievable within the short to medium term.”
Auditor General Alastair Swarbrick has issued disclaimers of opinion to Cayman’s entire public sector – meaning financial records provided by government were incapable of being audited accurately – for the three years between 2009 and 2011. Minister Archer said the government is trying to put the failures behind it during the budget year that ended on June 30, 2014.
The 2013/14 financial statements being produced by Cayman Islands government entities, are of a “standard that will satisfy most critics,” Mr. Archer said Tuesday.
However, “major systemic deficiencies” remain, which detract from the production of quality financial records, Mr. Archer said.
“The highly devolved and decentralized financial management model described by the Public Management and Finance Law created unexpected challenges,” he said. “The size and complexity of the [government] financial structure becomes more evident once you consider there are 16 ministries, portfolios and offices and 25 statutory authorities and government companies that have to prepare comprehensive [annual] financial statements alongside detailed budget documents and reports.”
Legislative changes are likely to be proposed within the next year for both the public management law and for the statutory authorities and government companies, Mr. Archer said Tuesday.
An evaluation of the Public Management and Finance Law, completed by a commission led by George Town MLA and accountant Roy McTaggart, made several recommendations for changing the legislation. Cabinet will consider the proposals over the next few weeks.
The public management law has simply not worked in its current form for the past decade, Mr. Archer said.
“[The law requires] an enormous amount of manual work and does not provide the type of information the Cabinet or the Legislative Assembly needs to evaluate performance,” he said.
Meanwhile, a Public Authorities Bill, which is expected to give elected Cabinet members more direct control over the operations of what are now independently operating statutory authorities and government-owned companies is due to come before then Legislative Assembly before next June.
The statutory authorities and government owned companies, Mr. Archer said, had sometimes been “in conflict” with the mission of the elected government, either through policies or their financial performance. The new bill was expected to address these matters and better define the roles of those entities “and their relationship to Cabinet,” he said.
Compliance by 2016
The U.K.-ordered Framework for Fiscal Responsibility document, which now forms a part of Cayman’s Public Management and Finance Law, seeks compliance with six principles of responsible financial management by mid-2016.
“We intend to meet those targets,” Mr. Archer said Tuesday.
The two areas of greatest concern for Cayman now are the rate at which the territory is paying off government debts and its available or “liquid” assets.
In the current fiscal year, Cayman expects to pay more than 10 percent of core government revenues to retire debt, Mr. Archer said. That is not in compliance with the public management law. A proposal for how it will bring the debt payments into line by June 30, 2016, will be discussed in the government’s strategic policy statement due later this month, Mr. Archer said.
Also, Cayman’s available liquid assets – funds not earmarked for a particular purpose – are supposed to cover 90 days’ worth of government operating expenses. Estimates now are that Cayman’s available assets would cover only 43 days of government operations.
Mr. Archer said the amount of cash or cash equivalents is calculated each year in December, typically the point at which Cayman’s revenues are at their lowest ebb, prior to tourism high season and when most financial services companies pay their annual fees.
“Perhaps these targets are tough to achieve, but … if we had not strayed from prudent financial management, it would not have been necessary to impose such harsh conditions on the country,” he said.