Auditor general identifies government’s ‘biggest losers’

The Cayman Islands auditor general has revealed the government entities with the largest financial losses, stating that most – if not all of them – cannot continue operating without significant future taxpayer support.

The biggest losers, at least on paper, for 2016 were the Cayman Turtle Centre and the National Housing Development Trust. However, a number of other public entities are receiving millions per year in extra cash from public coffers as well, including Cayman Airways Ltd., the Health Services Authority and the Cayman Islands Development Bank.

For instance, in the 2015/16 budget – the latest figures available – auditors noted Cayman Airways Ltd., the national airline, posted a $14.1 million operating loss – meaning its revenues were much lower than expenses. However, because central government paid $17.3 million to support the airline’s operation that year, it ended up posting a $3.2 million “surplus.”

Between 2012 and 2016, the Cayman Islands government paid more than $86 million in “output funding” toward the national airline to help it continue.

It was not all bad news for Cayman Airways. Auditors noted the airline had reduced its debts significantly over the same period and that total annual revenues had increased year-on-year since 2012.

“The entity is still a long way from financial stability as at June 30, 2016,” Ms. Winspear’s report noted. “The improvements in the financial performance and position of CAL are encouraging, but it must be stressed that in the event government decides to discontinue financial support, CAL would unlikely to be able to continue operating ….”

Auditor General Sue Winspear

Development bank

Continuing operational concerns were not unique to Cayman Airways. In its review of the Cayman Islands Development Bank, the entity that provides student loans, personal loans and some business assistance loans to Caymanians, auditors found net losses in three of the past five years and rampant non-payment of loans.

Delinquency rates on development bank loans stood at 52 percent in 2016 and 59 percent in 2015.

“The financial position and the high rate of delinquency has marginalized [the bank’s] ability to carry out its primary function to promote, facilitate and provide finance for the expansion and strengthening of economic development in the Cayman Islands,” the audit report noted. Again, auditors expressed concern about the bank’s continued ability to operate without taxpayer-funded support.

Turtle Centre

The Cayman Turtle Centre, formerly the Turtle Farm, has not been profitable since it underwent a major refurbishment and rebranding more than a decade ago.

Ms. Winspear’s office pointed out that the tourism attraction’s revenues increased significantly between 2015 and 2016, but still posted overall losses of $6.3 million for each year. Between 2012 and 2016, the Turtle Centre’s accumulated operating losses were $35.7 million.

“The financial position … indicates that the Cayman Turtle [Centre] is still dependent on government support,” auditors noted.

Health services

Perennial inability to collect patient debts led to annual losses for the Cayman Islands public hospital system over the past five years.

Overall operating deficits for the Health Services Authority topped $11.8 million between 2012 and 2016, with only one cash surplus year out of five being reported.

Despite the losses, auditors found the Health Services Authority’s position to be “generally positive,” aside from the levels of unpaid debts being reported each year, which massively impacted the public hospital’s bottom line. The hospital system’s allowance for “bad debts” – those debts owed for more than a year – went from about $30 million in 2012 to more than $94 million in 2016.

“To put this in context, the amount of account receivables the HSA deems to be uncollectible [$94 million] is greater than the revenue the HSA earned for one year from patient service fees [$89 million in 2016],” the report noted. “Ultimately, the financial performance and position of the HSA reflect the rising cost of providing healthcare.”

Housing Trust

The Cayman Islands National Housing Trust, which provides homes for lower-income Cayman residents, continues to sell those homes at a loss, auditors reported.

For instance, the trust made $2.7 million in home sales during 2015/16 on houses that cost the government $3.9 million to build.

The trust has reported operating losses totaling $8.7 million between 2012 and 2016. However, more than $15 million in financial assistance from government has allowed the agency to report an overall positive net worth during the past five years.

“On the basis of the current business model the trust will only remain financially viable in the foreseeable future with further significant financial support from government,” the auditor general’s report read.

If you value our service, if you have turned to us in the past few days or weeks for verified, factual updates, if you have watched our live streaming of press conferences or sent an article to a friend... please consider a donation. Quality local journalism was at risk before the coronavirus crisis. It is now deeply threatened. Even a small amount can go a long way to sustaining our mission of informing the public. We need our readers’ financial support now more than ever.