Junior Minister of Finance Wayne Furbert has disclosed that Bermuda’s taxpayers forked out just over $1 million in penalty fees for missing the deadline to submit Government financials under the former One Bermuda Alliance (OBA) administration.

He was responding to Parliamentary Questions from Progressive Labour Party MP Rolfe Commissiong, who also wanted to know what that money could have been used for, instead of being paid out as a result of late fees.

Mr Furbert replied: “It could’ve been used for more scholarships and help seniors.”

This after he tabled the audited financial statements of the Government Consolidated Fund for the year-ended March 31, 2017.

When asked by OBA leader Jeanne Atherden whether the delay was due to internal control issues, Mr Furbert’s response to the Speaker of the House was: “She was in Cabinet and she should be aware of the penalty for submitting financials late.”

When pressed for an answer on what caused the delay, he said: “It’s very simple, they submitted their financials late.”

The Consolidated Fund, which is the general operating fund of the Bermuda Government to conduct “the majority of its transactions”, carries financial statements that “report the financial position, operations, change in net debt and cash flows”.

Despite the clean audit opinion, Mr Furbert said: “The Auditor General has, for the seventh 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;
  • 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, the Ministry of Finance has already put in place a plan to eliminate the deficit and ultimately reduce the debt,” he said.

PLP MP Wayne Furbert, Junior Minister of Finance

“Liabilities related to pension and other employee future benefits are also 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.”

He also noted that “the audit report date is November 20, 2017 compared to February 3, 2017 when the 2016 audit report was dated”.

“Certain private debt placements made by the Government contain a reporting covenant requiring delivery of the audited financial statements within 240 days of the fiscal year end (November 26, 2017). This reporting covenant was met for 2017. 2016’s covenant was not met and a fee of $640,000 (a rate of 0.2%) was paid to the lenders to extend the reporting deadline,” he added.

Highlights of the 2017 Consolidated Fund Financial Statements show that “cash and cash equivalents at the end of fiscal 2016/17 totaled $95.7 million which was $53.6 million higher than the balance at the end of 2015/16”.

“Total accounts receivable net of provision for doubtful accounts decreased by 4.2 percent to $156.5 million, as compared to $163.5 million, at 31st March, 2016,” said Mr Furbert.

“The most significant contributor to the accounts receivable balance before provision was the Office of the Tax Commissioner (OTC) of $227.8 million, representing an approximate $8.3 million increase in accounts receivable from 31st March, 2016 ($219.5 million). The increase in the gross accounts receivable for the OTC was offset by an increase in the respective allowance for doubtful accounts balance of $9.2 million to $90.6 million in fiscal 2016/17 from $81.4 million in fiscal 2015/16.

“The net accounts receivable balance was 15.2 percent of revenue for the year (2016 – 17.0%). A significant portion of the gross receivable at March 31, 2017 (57.0%) represents Payroll Tax which was due and payable on 15th April, 2017. During the month of April 2017, the Government collected approximately $112.0 million in Payroll taxes (April 2016 – $101.6 million). The 2017 allowance for bad debts was $126 million, representing a $9.7 million, or 8.3 percent increase from March 31, 2016.

“The closing Net Book Value of Tangible Capital Assets for the year was relatively consistent at $686 million (2016 – $660.9 million), an increase of $25.1 million or 3.8 percent on the year. Major capital asset activities during the 2016/17 year included:

  • Re-conveyance of Heritage Wharf from Wedco to Government fro the sum of $1, with a net book value of $41.6 million, resulting in ‘Other Revenue’ for the CF of $41.6 million. Additionally, $30 million of capital expenditure relating to Heritage Wharf was transferred from Assets Under Construction, for a total capitalised cost of $71.6 million. Heritage Wharf was originally conveyed to Wedco in May 2009 for $1, at that time expensed as a capital item in the amount of $57.9 million.
  • The departments of Civil Aviation and Maritime Administration became public authorities in 2016/17 and capital assets with a total net book value of $371,000 were transferred to the authorities by Government.
  • The Department of Airport Operations ceased to be a Government department in March 2017. At Financial Close, tangible capital assets with a net book value of $21.4 million were transferred by Government to Skyport and the Bermuda Airport Authority.
  • The remaining decrease in net book value was due to standard annual amortization of capital assets.

“Net Public Debt, which excludes guarantees and is net of the Government Borrowing Sinking Fund, increased by $179.6 million (2015/16 – $2.218 billion) at the end of the year. This represents an 8.1 percent increase fro 2016. Items of note:

  • There was a public debt issue of $665 million in October 2016. A portion of the proceeds were utilised to retire $276.1 million of higher interest-bearing senior notes and to retire a $200 million BNTB loan facility.
  • $90 million of senior notes were retired during the year drawing on funds from the Sinking Fund.
  • The 2017 Sinking Fund balance was $86.6 million (2016 – $117.3 million). At the close of the year, the available borrowing limit was $102.7 million (2016 – $282.3 million).

“A full actuarial valuation was carried out at March 31, 2017. The actuarial valuation resulted in a liability for pensions and retirement benefits of $1.402 billion (2015/16 – $1.328 billion) representing a 5.5 percent increase from March 31, 2016, which is net of Plan Assets of $608.2 million (2016 – $603.2 million).”

Total revenue raised in the 2016/17 fiscal year, excluding the extraordinary revenue of $41.6 million from the re-conveyance of Heritage Wharf from Wedco, was approximately $988 million, representing an increase of $27.2 million (2.8%) from fiscal 201516’s total revenue of $960.7 million”.

Sessions House, Bermuda

“This was below original budget estimates by approximately $8.9 million or 39 percent of total revenue (2015/16 – $361.1 million or 37.6%) and Customs Duty, accounting for $211.1 million or 20 percent (2015/16 – $192.6 million or 20%).” he said.

“Current expense for fiscal 2016/17 were $1.277 billion (2015/16 – $1.176 billion). The three largest components of current expenses were employee costs, grants and contributions and interest on debt. Total employee costs were $525.7 million or 42.9 percent (2015/16 – $532.4 million or 46.2%) of total expenses. Included in this amount is $75.9 million (2015/16 – $79.1 million) of non-cash retirement benefit expenses. Grants and contributions were $293.2 million or 23.9 percent (2015/16 – $298.2 million or 10.1%). Total current expenditure on a modified cash basis was $1.071 billion), which was $15.7 million less (2015/16 – $30.6 million less) than the original budget estimates.

“Total capital account cash expenditure was $76.7 million, which was $10.6 million lower than the original budget estimates.

“Total capital and current account cash expenditure for 2016/17 was $1.170 billion, which was $26.3 million or 2.2 percent lower than the original budget estimate of $1.196 billion.”

The Junior Finance Minister noted that the financial statements “are prepared on the accrual basis of accounting and the all-inclusive results from government operations (both current and capital) for the year ending March 31, 2017, were a deficit of $247.6 million”. 

“The modified cash all-inclusive results from government operations (on the same basis tat is show in the Budget Book) was a deficit of $182 million. This compares to a deficit of $199.4 million that was originally budgeted. Therefore, the actual overall deficit was down by $17.3 million or 8.7 percent when compared to the original estimate.”

Mr Furbert concluded: “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.”

 

 

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