Senior finance managers from 20 Caribbean countries began a three-day workshop on financial management reform at the Westin Casuarina Resort Tuesday.
The workshop, which is co-hosted by Cayman’s Portfolio of Finance, the Caribbean Pubic Finance Association and the Caribbean Regional Technical Assistance Centre , focuses on the Cayman Islands Government’s switch to accrual-based output management.
CARTAC’s Public Finance Management Adviser Graeme Hansen said Cayman’s reform had generated a considerable amount of regional interest.
‘The Cayman Islands has done a remarkable job in initiating a reform that has put it at the cutting edge of financial management,’ he said.
Leader of Government Business Kurt Tibbetts welcomed the workshop’s attendees and recommended Cayman’s style of reform to others.
‘I’ve been a strong advocate of good and effective governance,’ Mr. Tibbetts said. ‘Good governance requires good management. Good management requires good information.’
Mr. Tibbetts said that good and relevant information was vital to the reform process.
‘The sterilizing effect of transparency is well known, but transparency also encourages good decision making,’ he said.
The new system also makes government more responsible and accountable, Mr. Tibbetts said.
‘Government ministries have to specify the services they want and then only pay for those services when they are delivered.’
Mr. Tibbetts indicated that there have been some difficulties with Cayman’s financial management reform.
‘No system is ever perfect. We don’t pretend ours is,’ he said. ‘But I can assure you from personal experience that it’s 1,000 times better than what we had.’
Financial Secretary Kenneth Jefferson told the attendees that Cayman’s reform was loosely based on what is known as the New Zealand Model but altered to fit this country’s circumstances.
Mr. Jefferson warned attendees that, if they were to adopt financial management reform, they would have to develop a model that suited their own country.
‘The Cayman Model is unique and suitable to the Cayman Islands,’ he said.
Mr. Jefferson said the workshop would focus on the reasons the Cayman Islands instituted reform, the major elements included in that reform, how the reform was implemented, the lessons learned during the process and the mistakes that were made along the way.
The Financial Secretary said Cayman has seen greatly improved fiscal management since the switch, but that the benefits did not stop there.
‘Although the Cayman Islands reform is often referred to as an accounting reform, the focus is much wider than that,’ Mr. Jefferson said. ‘It has improved government’s performance in all its aspects and fundamentally affected the lives of everyone in government; it’s changed the lives of politicians and civil servants alike.’
Mr. Jefferson outlined some of the specific aspects of the Cayman system such as the government requirements to operate in a surplus, to have specified borrowing limits, and to maintain cash reserves to a certain level.
‘In 2001, the government had cash reserves that were equal to less than three days of government expenditures,’ Mr. Jefferson said. ‘This would have made it very difficult to operate in an emergency situation.’
In September 2001, the government made it a goal under the new financial management system to amass a 90-day cash reserve within eight years. By the time Hurricane Ivan hit three years later, the case reserves were at 85 days, something Mr. Jefferson said helped tremendously with the post-hurricane recovery.
Chief Secretary George McCarthy, the former Financial Secretary and a driving force behind Cayman’s financial management reform, said the theme of the workshop was very close to his heart.
‘Government performance matters,’ he said. ‘The difference between a poorly managed government and a well-managed government can be as much as two per cent of the GDP (Gross Domestic Product).’
Mr. McCarthy said the system used to manage government is very important.
‘Poor public sector performance can be caused by the financial management system itself,’ he said.
Focusing on the outcomes that government is seeking to achieve is a key aspect to the reform, Mr. McCarthy said.
‘Each ministry has a financial target within which it must perform,’ he said. ‘When cost is managed by someone else, there is very little incentive to control costs.’
Mr. McCarthy said financial reform was not easy. ‘It is like giving birth to a child,’ he said.
Mr. Jefferson, speaking during the workshop’s first recess, said Cayman’s transition to accrual based output management has ‘gone reasonably smoothly’ so far, but that the process was still ‘evolving and on-going’.
‘Within five years, everything should be settled down and firmly embedded,’ he said.
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