Official figures don't tell full story of our money woes

WEDNESDAY, NOVEMBER 9: Accounting and public reporting of accounts, especially public financial accounts, are supposed to present an accurate picture of what has happened, and what is happening, with public funds. This is not the case with the reporting of accounts handled by the Bermuda Government.

Until 2005/06, the reported public accounts and the reports of the Auditor General were the same. Between 1968 and 2005, the only public reports were the Auditor General reports. These were the reports that Bermuda’s previous six Ministers for Finance put before the House of Assembly, offering them as the official (and audited) accounts of their stewardship of public monies.

This has changed. There are now two sets of accounts floating about. One is the Auditor General’s account; the other is the Ministry of Finance’s account. These two separate accountings of the same set of public funds show some glaring differences.

According to the current Auditor General, we are not getting the entire picture on where exactly Government stands financially.

In her media release of February 4, 2011, Heather Jacobs Matthews, the Auditor General, had this 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. “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.”

Mrs Jacobs 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. “I am hopeful that the Accountant General will be able to present consolidated financial statements for the Government of Bermuda as of March 31, 2011,” she said.”

*The Consolidated Fund is the Government’s general bank account into which tax revenue is paid and is used by the Government to make interest payments on the national debt and other regular payments.

The previous Auditor General, Larry Dennis, reported many of these Government entities are in arrears and/or management has been unable or unwilling to provide documentation or information needed to complete the audits. 

The economist Bob Stewart has stated that from his research of actuary reports that Government’s pension plans show deficits. It is not unthinkable that these plans can become bankrupt. According to Mr. Stewart who has read the actuary reports:

• The pension fund for members of the House of Assembly is 46.8% funded, representing a deficit of $8 million;

• The civil service pension which includes Police Officers, Prison Officers, teachers, blue collar workers as well as civil servants is 34.2% funded, representing a deficit of about $760 million;

• Social Insurance is a pension fund which everyone who works in Bermuda is obliged to join. The fund is 29.0% funded which means that there are insufficient assets to meet the obligations to the members, who are everyone over 65 in Bermuda. Social insurance is underfunded by $2.83 billion.

These pension fund obligations are not being reported in Government’s overall financial position.

The graph above shows the difference in the reporting between the Auditor General (AG) and the Ministry of Finance (MoF).

Discrepancy 1

In Fiscal Year (FY) 2009/10, both the Auditor General account and the Ministry of Finance account agree that Revenue was $917.3 million. However, the Ministry reports that only $1.7 million was spent on servicing debt; while the Auditor General reports that the debt service expense for that year was $34.8 million.

Discrepancy 2

In the same FY 2009/10, the Auditor General reports Government expenditures as $1.28 billion (Revenue reported as $917.3); whereas the Ministry of Finance accounts say that only $1.12 billion was spent (and Revenue reported as $917.3m).

In both instances there is a huge difference in reportage. It is not the kind of difference that would be acceptable in any well run business that was seeking to stay in business.

Whilst there is a partial explanation in saying that the MoF is reporting on a “cash account” basis, the newness of this separate accounting process couples with two other recent and important financial facts.

Financial Fact 1

In FY 2008/09, the Ministry of Finance, for the first time ever, took up a sizeable (over $1.0 million) Overdraft Facility. In the twelve months between March 2008 and March 2009, that O/D Facility went from its initial $11 million to $200 million. The Auditor General reported that the Ministry of Finance was actually overdrawn by $147.3 million on 31st March 2009 and overdrawn by $93.4 million on 31st March 2010. Seven months after 2010/11 Year End, figures for March 2011 are not available. The O/D position for 31st March 2011 is not yet known.

Financial Fact 2

With the Auditor General not getting all the information required to audit Government’s records, with the Ministry of Finance reporting figures greatly different from the Auditor General and with pension funds and other obligations not being reported by Government, Bermuda’s economy may be in a far worse position than the public is being made aware of.

Note from the authors: Get involved and send us your thoughts. This continues to be a collective effort by all Bermudians and we need your continued support, comments and ideas. For further information or to express your comments email us at [email protected] or visit us on Facebook: Regeneration of Bermuda’s Economy.

Media Releases and Financial Statements of the Consolidated Fund are available on www.acg.gov.bm