* Graph supplied. The above graph shows expenditures consistently outpacing revenues, year over year, fueling increased borrowings to carry out the Government’s programmes. Larger graph
* Graph supplied. The above graph shows expenditures consistently outpacing revenues, year over year, fueling increased borrowings to carry out the Government’s programmes. Larger graph
MONDAY, FEB. 1: Auditor General Heather Jacobs Matthews today announced that the Bermuda Government's 2008/09 Consolidated Fund financial statements and her auditor's report thereon is now available on the Accountant-General's website at www.acg.gov.bm under Resources.

The Consolidated Fund is the general operating fund of the Bermuda Government through which the Government conducts the majority of its business. It is into this Fund that taxpayers pay license fees, customs duties, payroll tax, stamp duties, land tax and other remittances. The Government uses the taxpayers' money to fund its many programmes such as health, education, transportation, financial assistance and public works.

The Consolidated Fund financial statements show the results of the Fund's financial activities for the year (i.e., how much money was raised from taxpayers and how it was spent) and the Fund's financial position at the end of the year (i.e., what the Fund owns - its assets, less what it owes - its liabilities).

The financial statements are prepared annually by the Accountant-General and audited by the Auditor General who is required to provide an opinion as to whether the financial statements are fairly presented.

For the financial year 2008/09, the Auditor General did not issue a clean opinion on the financial statements of the Consolidated Fund.

She stated: "My auditor's opinion was qualified due to serious internal control deficiencies identified in the management of various capital development projects which carried a book value of $90 million at March 31, 2009."

Mrs. Jacobs Matthews further stated "These deficiencies led me to question the appropriateness of certain transactions and the underlying value of the assets at March 31, 2009. As a result, I was unable to determine whether adjustments might be necessary to the reported value of tangible capital assets and assets under construction, and the reported amounts for capital development expenses, the deficit and the accumulated deficit."

The Auditor General explained that she and her staff are currently conducting audits of two of the three development projects commented on above - the 2nd Cruise Port (Dockyard) and the TCD Emissions and Safety Testing Facilities.

"I will be issuing Special Reports on these projects to the House of Assembly as soon as our audit work is completed," said Mrs. Jacobs Matthews. The third project refers to the ongoing construction of the Hamilton Police Station /Magistrates Court Building, which was reported on by the former Auditor General in his February 2009 Special Report.

Auditor General's comments

Auditor General, Heather A. Jacobs Matthews, today comments on selected financial data from the 2008/09 audited financial statements of the Bermuda Government's Consolidated Fund, in comparison with results of prior years.

The audited financial statements of the Consolidated Fund for the past six years can be viewed on the Accountant General's website at www.acg.gov.bm under Resources.

"The trend speaks to financial challenges going forward," said Mrs. Jacobs Matthews. "These challenges include a weakening cash position as evidenced by a substantial bank overdraft, expenditures significantly outstripping revenues, increasing long-term debt and, by extension, a growing deficit and public debt."

According to the Auditor General, this type of analysis is very important to help Parliamentarians and the public understand the Consolidated Fund financial statements.

"Trend information, such as that shown below, in both table and graphical format, can help put the current year's figures into context," said Mrs. Jacobs Matthews [see graph, right].

"I encourage Government to produce its own analyses and discussion of the key trends each year to accompany the audited financial statements - as is done in other jurisdictions."

The graph shows expenditures consistently outpacing revenues, year over year, fueling increased borrowings to carry out the Government's programmes. To support the increasing debt, the Public Debt Legislated Limit was increased from $375 million in 2008 to $1 billion in 2009.

The following provides a brief explanation of Net Debt, the Accumulated Deficit and the Public Debt.

Net Debt is the difference between total liabilities and total financial assets. It arises due to Government's spending exceeding its revenues over time. Net Debt represents the extent to which future revenues will be required to pay for past transactions. At the end of March 31, 2009, net debt rose to $1.45 billion, up $321.2 million from March 31, 2008.

The Accumulated Deficit represents the difference between the Consolidated Fund's total liabilities (what it owes) and its total assets (what it owns). At March 31, 2009, the accumulated deficit stood at $719.9 million, up $102.4 million from March 31, 2008.

The Government Loans Act 1978 defines Public Debt as debt owed or guaranteed by the Consolidated Fund, net of the Sinking Fund. The Sinking Fund is money set aside to repay Government Loans.

At March 31, 2009, the Public Debt (net of the Sinking Fund totaling $79.8 million) stood at $483.3 million and included the following:

* $75 Million US$ Senior Notes Due June 2014

* $200 million US$ Loan Facility Due June 2010

* $140 million US$ Senior Notes Due December 2022

* $147.2 million BD$ in Overdrafts

* $0.8 million for the National Education Guarantee Scheme

Subsequent to the year end, and as shown in note 19 of the 2008/09 Consolidated Fund financial statements, the Government negotiated further borrowings of $160 million and $15 million respectively. In addition, the Government entered into a $200 million guarantee with the Bank of Butterfield.

These subsequent events effectively increased the Public Debt by $375 million to in excess of $850 million.

NOTE OF CAUTION: "The public is advised that the Consolidated Fund financial statements cover only the financial results and position of Government ministries and departments, the House of Assembly, the Senate and the courts" explained Ms. Matthews.

"They do not include the financial results or the financial position of other government-controlled organizations such as the Bermuda Hospitals Board, the Bermuda Housing Corporation and the Bermuda College."

Ms. Matthews cautioned that, consequently, the Consolidated Fund statements do not show the overall financial results or financial position of the Government of Bermuda as a whole.

It is anticipated that the Accountant General will present consolidated financial statements for the Government of Bermuda as of March 31, 2010.