Net Public Debt At End Of Year: $1.768 Billion

May 16, 2015

Net Public Debt, which excludes guarantees and is net of the Government Borrowing Sinking Fund, increased by $291.6 million during fiscal 2013/14 and stood at $1.768 billion at the end of the year representing a 19.7% increase, Minister of Finance Bob Richards said in the House of Assembly on Friday [May 15].

These figures were released as the Minister tabled audited financial statements relating to the Consolidated Fund for the year-ended March 31, 2014.

“I am pleased to note that the annual accounts of the Consolidated Fund of the Government of Bermuda were given an unqualified audit opinion for the second consecutive year following six years of qualified opinions,” the Minister said.

“Despite the clean audit opinion, the Auditor General has, for the fourth consecutive year, included explanatory paragraphs as ‘other matters’ which she deems appropriate. These “other matters” relate to the following:

  • The increased level of the net debt and the need for the Government of Bermuda to take concerted action to address it;
  • Ongoing incidents of non-compliance with the Government of Bermuda’s Financial Instructions; and
  • The preparation of Summary Financial Statements for the Bermuda Government.

“It is important to note that these explanatory paragraphs do not alter the Auditor General’s unqualified opinion, but are highlighted matters,” added the Minister. “However, the Government shares the Auditor’s concerns in these areas and has already started to tackle these matters.”

The Minister’s full statement follows below:

Mr. Speaker, I am pleased to table audited financial statements relating to the Consolidated Fund for the year-ended March 31, 2014.

As Honourable Members are aware the Consolidated Fund is the general operating fund of the Bermuda Government and is the Fund through which Government conducts the majority of its transactions. The Consolidated Fund financial statements report the financial position, operations, change in net debt and cash flows resulting from the activities of the Government. This includes the accounts of the Senate, the House of Assembly, all Government departments and offices and all courts.

Mr. Speaker, I am pleased to note that the annual accounts of the Consolidated Fund of the Government of Bermuda were given an unqualified audit opinion for the second consecutive year following six years of qualified opinions. Despite the clean audit opinion, the Auditor General has, for the fourth consecutive year, included explanatory paragraphs as ‘other matters’ which she deems appropriate. These “other matters” relate to the following:

  • The increased level of the net debt and the need for the Government of Bermuda to take concerted action to address it;
  • Ongoing incidents of non-compliance with the Government of Bermuda’s Financial Instructions; and
  • The preparation of Summary Financial Statements for the Bermuda Government.

It is important to note that these explanatory paragraphs do not alter the Auditor General’s unqualified opinion, but are highlighted matters.

However, the Government shares the Auditor’s concerns in these areas and has already started to tackle these matters. For instance Mr. Speaker, the Ministry of Finance has already moved to a Medium Term Expenditure Framework [MTEF], which is seeking to eliminate the deficit and ultimately reduce the debt.

Mr. Speaker, liabilities related to pension and other employee future benefits are included in the “Net Debt” amount disclosed in the Financial Statements and the Government has already started the review of these benefits to ensure their sustainability.

Mr. Speaker, Honourable Members will recall that in 2014, legislation was amended to suspend the automatic Cost of Living Adjustment [COLA] increases until such time as the sustainability of the Public Service Superannuation Fund and the Ministers and Members of the Legislature Pension Fund have been improved. This amendment resulted in a significant decrease in the actuarial liabilities of the Funds, which has been recognized in the Financial Statements.

Also, the Accountant General’s Department ensures that Financial Instructions [FI] are available to, and delivers FI training in conjunction with the Department of Human Resources for, all Public Officers.

Mr. Speaker, with regard to the preparation of Summary Financial Statements for the Bermuda Government, the Ministry agrees there are benefits to issuing consolidated financial statements and Members will recall that legislation was passed in 2014 to create the reporting entity under which summary statements will be prepared.

Whilst legislative changes are required to effect consolidated reporting, they are simply one aspect of a complex approach that would be required to achieve this accounting objective. Accordingly, progress is being made on this important initiative, but it should be emphasised that consideration must be given to resources, accounting systems, management roles and other factors that are critical in the accomplishment of this task.

Mr. Speaker, the sign-off date for the completion of the audit was March 25th 2015. The Ministry’s position is that the audited financials should be able to be completed within nine months of the March 31 year-end, and have instructed the Accountant General to work diligently to address the issues causing delays in issuing the annual accounts of the Consolidated Fund.

Some financial highlights of the 2014 Consolidated Fund Financial Statements are as follows:

The total revenue raised by the Consolidated Fund for fiscal 2013/14 was approximately $883.9 million, representing an increase of $17.3 million or 2.0% from fiscal 2012/13 total revenue of $866.6 million. This exceeded original budget estimates by approximately $12.7 million or 1.5%. The most significant generators of revenues for fiscal 2013/14 were Payroll Taxes, accounting for $330.9 million or 37.4% of total revenue; compared to $328.0 million or 37.9% in 2012/13 and Customs Duty, accounting for $175.0 million or 19.8%; compared to $169.7 million or 19.6% in 2012/13.

Current expenses for fiscal 2013/14 were $1.267 billion compared to current expensed of $1.274 billion in 2012/13. The 2013/14 figure excludes the effect of a net gain on benefit plan amendments of $214.1 million, which has the effect of reducing total current expenses to $1.053 billion for 2013/14. The net gain was primarily attributable to the elimination of the pensions’ cost of living adjustment. The three largest components of current expenses were employee costs, grants and contributions and interest on debt. Total employee costs were $594.8 million or 47.0% of total expenses, marginally less than the 2012/13 level of $600.9 million or 47.9% of total expenses. Included in this amount is $120.5 million of non-cash retirement benefit expenses. Grants and contributions were $287.0 million or 22.7% of total expenses, compared to $277.4 million or 22.1% in 2012/13]. Interest on debt was $109.7 million or 8.7% of total expenses compared to $84.3 million or 6.7 in the previous year.

Total current expenditure on a modified cash basis [Schedule 12] was $1.118 billion [2013 – $1.029 billion], which was $180 thousand less than original budget estimates of $1.118 billion. In 2013 total current expenditure on a modified cash basis was $23.4 million higher that original estimates.

Mr. Speaker total capital account cash expenditure was $65.3 million, which was $19.2 million lower than the original budget estimates.

Total capital and current account cash expenditure for 2013/14 was $1.183 billion, which was $19.4 million or 1.6% lower than the original budget estimate of $1.2 billion.

The all-inclusive results from government operations [both current and capital] for the year ending March 31, 2014, was a deficit of $184.0 million. There are many non – cash expenses included in this figure. If we strip those away, the modified cash all-inclusive results from government operations [on the same basis that is shown in the Budget Book] was a deficit of $299.4 million. This compares to a deficit of $331.6 million that was originally budgeted. Therefore, the actual overall deficit was down by $32.1 million or 9.7% when compared to the original estimate. The decreased deficit is as a result of higher that budgeted revenues and better management of discretionary current and capital expenditures.

Cash and cash equivalents at the end of fiscal 2013/14 totaled $21.8 million which was $9.6 million higher than the balance at the end of 2012/13.

Mr. Speaker, net Public Debt, which excludes guarantees and is net of the Government Borrowing Sinking Fund, increased by $291.6 million during fiscal 2013/14 and stood at $1.768 billion at the end of the year representing a 19.7% increase. The escalation was due to a successful $50 million local issue of senior notes at an interest rate of 4.75% per annum and an international offering of $750 million in senior notes at an interest rate of 4.854% per annum. The proceeds of the issuances were used to repay outstanding short-term indebtedness with local banks and to fund the 2013/14 budget deficit, with the balance deposited into the Sinking Fund to cover any further budget deficits. The Sinking Fund increased for the year by $439.4 million and was also used to retire $120 million of senior notes that matured.

The level of debt mentioned above is not only unsustainable but economically and fiscally imprudent and the Government has already committed to redouble our efforts and determination to eliminate the government deficit as soon as possible, and eventually pay down on our debt.

Mr. Speaker, the statements of the Consolidated Fund provide valuable information on the financial position of the Government and I would encourage the public to examine these statements.

Thank you Mr. Speaker

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Comments (37)

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  1. Terry says:

    Debt Gate.
    Shalom.

  2. Tom Cooke says:

    And you guys are worried about a stone wall…REALLY !!!!!!

    • mixitup says:

      And cedar beams…I mean its ridiculous!!

      • Trulytruly says:

        Cedar beams are actually of considerable value. Bda stone rubble not so much. This kind of thing has been going on for years and nobody cared less. It has now been used for political ends for obvious reasons. Those cedar beams are still missing no doubt in someone house as they had real value as you literally can’t buy them they are that rare.

      • Blankman says:

        And $800 million …

        • Truth Teller says:

          $800…I guess if you repeat a lie often enough it becomes the truth Blankman right?

          For the record there was never $800 million missing from the Government coffers. It was a myth eagerly pounced upon by the Bermuda tea party types, who while entitled to their opinions are not entitled to their set own facts.

          Blankman, why don’t you and Stormin Norman ask Bob Richards yourself as to whether $800 million was ever missing from Government coffers?

          Lastly, do you think that if $800 million was truly missing or stolen form the government coffers that the OBA government would not have pursued that vigorously? C’mon, wise up will you.

          There is no there there !

          • Zevon says:

            Like the PLP myths?
            The “worldwide recession”. The “6,000 PRCs who will get status”. The “Americas Cup will cost $77m”. “We lost the receipts but the golf course really did cost $24.5m”.
            That kind of thing?

          • Trulytruly says:

            $800m is still unaccounted for. An inconvient truth for you and others.

            • Cant Be Serious says:

              $800M missing….anyone that keeps repeating that is an idiot. Clearly some people do not realize how much $800M is. One doesn’t just transfer that money over a few years. Listen to yourselves….sound like fools when you repeat such nonsense.

              Use your brain. If anything…think about the amount of money that was lost by Bermudian investors that were taking high risk in the Madoff ponzi scheme….now that’s a story I want told in Bermuda. I bet Bermuda insurance companies, the banks and IB don’t really want that story. How convenient that this $800M nonsense came up around the same time their money got swindled away because of the highstake games they were playing.

              Stop with the $800M missing by the PLP Govt. Use your brain

              • Lois Frederick says:

                It is unaccounted for.

              • Buck-a-Roo says:

                “One doesn’t just transfer that money over a few years. Listen to yourselves….sound like fools when you repeat such nonsense.”

                No, but one could transfer that money over 14 years!!!

                Make sure you’re out of the glasshouse before throwing those stones :-)

  3. Truth is killin' me... says:

    I’m more worried about integrity FROM BOTH SIDES. Once you have that the rest will fall into place!

  4. smh says:

    I been seeing increases ever since I was promised decreases…Bob is a Joke.

    • hmmm says:

      Got to get the deficit under control first…PLP and unions fighting that every step of the way…they want Bermuda to fail.

  5. Maddog says:

    We are worse off under this OBA GOVERNMENT!!!!
    And 70 million they put aside for the American cup the OBA need to take care of its people… Bermudians.. Not FOREIGN INTEREST

    • johnny says:

      They said they were going to eliminate Bermuda’s debt. They have tripled it.

      • Trulytruly says:

        You relay don’t unerstand the financial state of bermuda. Do yourself a favour and educate yourself.

        • johnny says:

          I understand that they said they were going to cut the debt and now it has tripled.

      • Zevon says:

        First, they didn’t say they were going to “eliminate” Bermuda’s debt. Nobody said that.
        Second, they have not tripled it. It has gone up, by less than forecast, because it is not possible to immediately fire all the public employees that we don’t need. That’s what the country needs, but as we’ve seen, every time you do something to save $0.25m, the village idiots organise a march and a strike.

        Last week the PLP supporters were whining about how “austerity doesn’t work”. This week they’re whining because the debt hasn’t been “eliminated”. It must be hard to keep track.

        • hmmm says:

          Staunch PLP supporters are two faced, it is whatever suits the moment. That much is crystal clear.

        • johnny says:

          So you are saying that we don’t have to pay back the money Bob borrowed all at once because of fears of interest rates rising but that never did, so we basically borrowed money that we didn’t have to.

      • Lois Frederick says:

        Wow, two cases of economic amnesia. You really have not got a clue of how we got here do you. Or if you do you refuse to admit it. It’s impossible to reason with that level of misunderstanding.

    • Obviously you, (an some others)seem to have no concept of economics :-( “Money makes money.” without it being spent we wouldn’t see it being made…Plain and simple.

    • somuchless says:

      I agree somewhat but remember that Bermuda can’t survive alone. We need help. We grow nada, produce nada, etc. so basicly bermuda is screwed without foreign

    • Christopher Notorius says:

      Clueless mad dog

  6. defisherman says:

    By putting aside $ for things like the Americas Cup the OBA are taking care of the people! Do you have any idea of the amount of jobs that are being created by this sort of event coming to Bermy? I know 3 construction workers that got picked up in the last month who aint worked full time in 3 years and all the work is up west! The Government cant just GIVE/CREATE jobs ya nimwit!! People with $$$ invest in things and thats how people get work. Im a fisherman and im over the moon cause I know restaurants gonna be packed with foreigners and they all gonna be eating bermuda fish……tell me how this fails middle/low income people like me? Ya aint got one point! The PLP wouldnt have ever scored of win like this for Bermuda……they spent $ on things like a “African Diaspora Trail” whatever the F that was…….. ya……..bought in big bucks. Wisen up ya bunch of whiners…..Big Things Are Happening!

  7. pot stirer says:

    Put PLP back in and see what’s happens to the debt and the ongoing positiveness, if that’s a word but you get the point!

    • Lois Frederick says:

      Unfortunately that is a big reason why many Bermudians are not investing back into their island right now. It is hard for them to have any confidence of a future with even the smallest chance of a PLP govt. Sad truth and doesn’t reflect well on the PLP at all. They would do well to move to the centre which would reassure many that they are not such radical group. An immediate step towards that required goal would be to change its leader. Of course it will take years to have any confidence in their financial aptitude and that is the main point. Just like the Labour Party in the UK, the voter can’t trust or afford the PLP to hold the purse strings.

      • johnny says:

        If Bermudians are not investing in Bermuda now because of a lack of confidence of a future with even the smallest chance that the PLP will regain power, Bermudians must lack confidence that there is even the smallest chance that the OBA will regain power.

        • stunned... says:

          johnny – au conraire – it is the fear that there is a remote chance that PLP will be re-elected to destroy what they didn’t finish the last time. but hey, that’s your voting choice.

  8. Charlly X says:

    Lorl the peanut gallery is fuzzyest !!

  9. Rhonda says:

    nothing to look at guys…..get back under the oba doctrine…. if it looks bad… its the plp fault….. no need to think just follow my lead…. say 800 million unaccounted for…. and look the other way ….

  10. Trees says:

    See if we can borrow it from Larry…He’s got around 54bil to spare. I’m sure he won’t miss it. Hopefully he can clear the fuzziness :) )))))