2010 Consolidated Fund Financial Statements
On Friday [Feb 4] Premier and Minister of Finance Paula Cox tabled audited financial statements relating to the Consolidated Fund for the year-ended March 31, 2010.
The Consolidated Fund is the general operating fund of the Bermuda Government through which Government conducts the majority of its financial transactions. The Consolidated Fund financial statements report the operations, financial position and changes in financial position that result 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.
Auditor General Heather Jacobs Matthews, commented on selected financial data from the 2009/10 audited financial statements of the Bermuda Government’s Consolidated Fund, in comparison with results of prior years. “The key trends, depicted in the table and graph below, continue to highlight Bermuda’s increasing financial challenges” said Mrs. Jacobs Matthews. “These challenges include a shrinkage in revenue, a weak cash position, expenditures significantly outstripping revenues, increasing long-term debt and, by extension, a growing deficit and public debt.”
Highlights of the Consolidated Fund Financial Statements 2010, as provided by the Government, are below:
The total revenue raised by the Consolidated Fund for fiscal 2009/10 was approximately $917.3 million, representing a decrease of $33.5 million (3.53%) from fiscal 2008/09 for which balances have been restated. This was lower than original budget estimates by approximately $52.4 million (5.40%). The most significant generators of revenues for fiscal 2009/10 were Payroll Taxes accounting for $349 million or 38.1% (2009 – $356.5 million or 37.4%) and Customs Duty accounting for $219.0 million or 23.9% (2009 – $224.2 million or 23.5%). Revenues were below budget in 2009-2010 mainly due to shortfalls in Customs Duty ($23.6 million below), Stamp Duty ($18.1 million below), Hotel Occupancy Tax ($4.2 million below), and Immigration Receipts ($3.3 million below).
Current expenses for fiscal 2009/10 were $1.177 billion (2009 – $1.112 billion). The three largest components of current expenses were: employee costs; grants and contributions; and professional services. Total employee costs were $607.9 million or 51.7% (2009 – $579.7 million or 52.1%) of total expenses. Included in this amount is $143.7 million (2009 – $123.1. million) of non-cash retirement benefit expenses. Grants and contributions were $261.1 million or 22.2% (2009 – $234.9 million or 21.1%) and professional services were $111.9 million or 9.5% (2009 – $95.5 million or 8.6%).
Premier Cox stated that financial payments for professional services are often confused with payments to overseas consultants. For clarity, she explained this expenditure of $111.9 covered all government contracts including cleaning, security, legal aid, Works and Engineering maintenance, contracted services for the Department of Airport Operations, health insurance portability claims, war pensioner medical claims and other ‘locally’ contracted services.
The total current expenditure on a modified cash basis for fiscal year 2009-2010, was $1.0 billion, which was $31.3 million higher than original budget estimates. Expenditures increased due to the following:
o unanticipated increases in police salaries from arbitrated awards and overtime;
o above budget expenditure on substitute and para-professional’s salaries;
o increased expenditure on Government’s health subsidy programme for the youth, aged and indigentTotal capital account cash expenditure was $125.5 million; $25 million lower than the original budget estimates. Capital development expenditure was $10 million below original budget estimates while capital acquisitions were $15 million below the original budget.
A further look reveals the closing Net Book Value of Tangible Capital Assets for the year was $600 million (2009 – $599.3 million). Included in the net additions of $36 million (2009 – $163 million) was a net transfer of $14.1 million from Assets under Construction (2009 – $88.0 million) to completed projects.
Net Public Debt, which excludes guarantees and is net of the Sinking Fund, increased by $276.4 million (2009 – $205.3 million) during fiscal 2009/10 standing at $758.9 million at the end of the year. The escalation was mainly due to the Government issuing $315 million in various Senior Notes, whose proceeds were used to fund Government’s capital expenditure programme and repay overdraft facilities with local financial institutions.
As noted previously the Government raised $315 million in long-term debt this fiscal year. The Notes were issued in different tranches in order to maintain a balanced maturity structure and to allow for earlier repayment of some of the Notes using funds in the Sinking Fund when they fall due.
When raising funds in the capital markets, the most important objective is to provide the government with stable financing at minimal cost under the prevailing market conditions.
The credit market turmoil in the fall of 2008 increased the cost of credit to all time highs, surpassing previous highs by 50%. Coupon levels on debt climbed to levels not seen since the mid 1990. The dramatic increase was primarily due to investor caution; however these costs have now lowered to pre-crisis levels, and should lower the cost of future Government borrowing.
It is important to note that in all cases the debt issued in 2009 was priced in line with comparable sovereign issues.
When including guarantees, net public debt was $969.5 million (2009 – 483.3). As at March 31, 2010 Government guarantees total $210.5 million, which includes the Butterfield preference share offering ($200 million), a loan guarantee to WEDCO ($10 million) and student loans which are guaranteed by the Government. These amounts are contingent liabilities to the Government and are not included on the Government’s balance sheet; rather they are note-disclosed in the Financial Statements of the Consolidated Fund.
The actual net debt to GDP ratio at March 31, 2010 was about 13.6 %.
Bermuda’s debt, despite recent increases in public debt as a percentage of GDP, is still moderate when compared to other countries and remains one of the lowest, debt policy ratios amongst developed modern economies. For example Bermuda’s debt ratios are more than 40% below the median for the Fitch rated ‘AA’ category median, which includes sovereigns rated ‘AA-’, ‘AA’ and ‘AA+’.” Bermuda’s 13.6% debt to GDP ratio is also 52% below the median debt to GDP ratios of similarly rated advanced industrial countries which is about 66.0%.
The statements of the Consolidated Fund provide valuable information on the financial position of the Government and the public is encouraged to examine them.
There is no doubt that the global recession is having a negative impact on Government finances worldwide and Bermuda is not unique in facing the economic challenges that are being faced globally.
To clearly illustrate the severity of the financial crisis on government finances worldwide, one should examine the sharp increases in budget deficits of OECD countries from 2008 to 2009. In 2008 the average budget deficit of OECD countries was 3.5 per cent of GDP. In 2009 this increased to 8.2 per cent of GDP, a staggering 134 per cent increase. In the eurozone over the same period, this statistic increased from 2 per cent, to 6.1 per cent of GDP, an increase of 205 per cent.
“I wish to assure the public that the Government is sensitive to the challenges which may arise when deficits reach short term peaks, however the Government is moving ahead with a credible plan for long-term fiscal consolidation in order to reduce public debt and to keep the country on a sustainable fiscal path,” Premier Cox concluded.
The Auditor General comments on selected financial data from the Bermuda Government’s 2009/10 Consolidated Fund Financial Statements is below. Click ‘Full Screen’ for greater clarity:
Well i will say to the necessary government departments thank you for gathering the data to put out this lovely report together. But what i don’t see in this report is the MISSING $800 million from 2006 Auditor General’s Report. Can anyone tell me how a small island can loose such a large sum of money?
What $800MM…?? $800MM never went missing.
The $800 million that the Auditor General (Larry Dennis) highlight in his report from 2006 and the corruption that preceeded the 3 years prior to the 2006 report. Each year he highlighted the fraudulent, corrupt financial practices that the people with government were doing.
Google it if you don’t know about it.
The Auditor never said $800MM went “missing”. He implied that is was not properly accounted for. That is a huge difference. Show me in any report where it was stated $800MM went missing and into thin air. Just give me a page number. I have googled this and nothing indicates $800MM went missing. What has gone “missing” John is your sense of reality.
Paula Cox created this financial mess. It’s only right that she be the one to clean it up. I hope she is successful at the polls.
I think it is pathetic the way Paula continually blames the global financial crisis for the state of affairs we’re in – what, did the recession overspend on one project here after another, and waste money on useless expenditures with tax payers funds …oh, wait, we did that on our own.