“Government should make getting to grips with the debt and the deficit its highest priority,” Auditor General Heather Thomas said today [Aug 10], as she released the results of her Office’s audits of the Consolidated Fund’s financial statements for the years ended March 31, 2013 to 2016.
In releasing the report, the Auditor General’s office said, “Auditor General Heather Thomas’ observations and recommendations arising from the audits together with an analysis of the financial condition of the Government of Bermuda’s Consolidated Fund [“the Fund”] are included in the Report of the Auditor General on the audits of the Fund’s financial statements for the years ended March 31, 2013, 2014, 2015 and 2016.
Mrs. Thomas said, “Importantly, for all four years covered by today’s report, the Auditor General was able to express an unqualified opinion that the financial statements of the Fund for the year being audited presented fairly, in all material respects, the financial position of the Fund as at the year end, and the results of its operations, changes in its net debt, and its cash flows for the year ended in accordance with public sector accounting standards generally accepted in Bermuda and Canada.”
“The Auditor General’s observations and recommendations on matters arising during the audits are divided into two sections in the report. “As the title suggests, the section of the report dealing with Matters of Special Importance covers those issues that require the full attention of Government,” explained Mrs. Thomas.
“The matters of special importance describe the need for summary financial statements for the whole of Government. Because Government is not producing such financial statements, it is making decisions without knowing the combined financial position of all the organizations that make up the Government reporting entity. Neither is it providing the House of Assembly nor the public with the analytical information that would help them understand Government’s financial statements and its financial condition.
“The report also notes that there is no effective long-term plan for reducing the annual and accumulated deficits or the associated debt, the unfunded liabilities of the Fund’s major pension plans or the size of taxpayer indebtedness, all of which continue to grow unsustainably.
“Consequently, the resources available to carry out Government programmes effectively are predictably being impacted by increasing debt servicing costs,” the Auditor General said.
“Government needs to be clear about how its goals and priorities will be affected by fewer resources and needs to ensure that the reduced resources are aligned in a way that maximizes their effectiveness and has the least impact on the quality of its service delivery.”
“Another special matter comments on reports issued recently by the Spending and Government Efficiency [SAGE] Commission and the Commission of Inquiry established to investigate the matters arising under the Audit Observations and Recommendations section of the Report of the Auditor General on the Consolidated Fund of the Government of Bermuda for the Financial Years ended March 31, 2010, March 31, 2011 and March 31, 2012.
The Auditor General said, “The Commissions’ reports contain a wide range of recommendations focusing on governance, high-level policy, accountability and administration. I recommended that the Government should indicate clearly the extent to which it accepts the Commissions’ recommendations along with the rationale if there are any recommendations not accepted; set out a plan and a timeline for their implementation, and report out periodically on the status of the recommendations’ implementation”.
“A separate section of the report contains some key indicators of the financial condition of the Fund, along with the Auditor General’s commentary thereon. The indicators focus on the Fund’s future sustainability and flexibility.
Mrs. Thomas explained that, “Sustainability is important because it focuses on the impact that the level of debt could have on the Fund’s ability to provide future services to the public as well as to honour financial and other commitments to lenders, creditors, employees and others.
“Flexibility is the degree to which Government can change the Fund’s debt or tax burden on the economy to meet its existing financial obligations both in respect of its service commitments to the public and financial commitments to creditors, employees and others.”
The Auditor General said, “The indicators of financial condition set out in my report demonstrate a level of unsustainability and impaired flexibility for the Fund, which Government must make every effort to address”.
“Following the practice established by my predecessors, my major recommendations in today’s report include responses from the Ministry of Finance indicating how it intends to deal with them,” said Mrs Thomas.
“Given this, I am extremely concerned that most of the matters of special importance were raised some time ago by previous Auditor Generals. Each year of inaction exacerbates the problems, and must be addressed with a sense of urgency.
“There have been discussions and communications with respect to these matters but no formal plan of action has been developed to date. In my view, Government should make getting to grips with the debt and the deficit its highest priority and provide realistic expectations and timelines with respect to desired outcomes.”
“My report on the audit of the Consolidated Fund financial statements for the year ended March 31, 2017, will be ready for tabling in the House of Assembly in this fiscal year.”
“The Report can be downloaded here, along with previous reports prepared and published by the Office of the Auditor General of Bermuda.”
The full Consolidated Fund’s financial statements follow below [PDF here]:
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