fp Turks and Caicos

In his address of Aug. 14, 2009, Governor Wetherell outlined the following goal for the interim government, quote: Our goal (the interim government) is to make a clean break from the mistakes of the past by establishing a durable path towards good governance, sound financial management and sustainable development. Our guiding principles will be those of transparency, accountability and responsibility.”

We are now almost at the end of the second quarter of the third fiscal year (2011/2012) and the financial results for the first quarter (April to June 2011) have been published. Where are we now? Well, the interim government has taken an initial step forward in the area of transparency by publishing the fiscal budget for 2011/2012 and a summary of first quarter results. It was a very welcome sight and we must commend the interim government. However, while it was nice to see these documents, it appears the financial results achieved do not paint an encouraging picture of improvement in fiscal planning and financial management.

First quarter results for the 2011/2012 fiscal year indicate that we had a $4,148,300.00 deficit in recurrent expenditures; $740,300.00 over budget. That means we missed the target by 21.7%. The TCI Journal in its article of Sept. 17, 2011, states that we are near a balanced budget. I cannot fully agree with that. The fact is; the report for the first quarter of this fiscal budget indicates that the first quarter estimated deficit was 80.7% of the PROJECTED FULL YEAR DEFICIT ($5,138,367.00). That means there is only $990,067.00 of cushion for the remaining 3 quarters (July 2011 to March 2012)! For the next 9 months there cannot be a deviation of more than 19.3% or we will miss our targets.

We also need to recognize that this is not a complete budget depicting the full financial situation in the TCI. For example, the budget figures do NOT deal with CURRENT PAYMENTS NOW PAST DUE. As shown below, the budget revision that resulted in a planned deficit reduction of some $22,933,702.00 was achieved by purposely deciding to defer the payment of current past due debts. That’s like ignoring your past due credit card and car loan payments and saying you have nearly balanced your budget!

This is NOT an insignificant debt load (total = $22,933,702.00). These debts did not go away; they will simply get larger as late penalty charges accumulate. The presentation of the budget for 2011/2012 gives a distorted picture of how close we really are to achieving a balanced budget. The budget does NOT recognize that our current fiscal deficit is actually almost $23 million dollars greater than shown on the budget plan. That means the TCIG is balancing the budget by NOT paying outstanding current bills that are already in arrears! The past due payments, all current payment obligations and other debts are actually part of what would be considered a complete budget.

We have an incomplete budget picture; there are other costs that are not represented. For example, the budget has an allocation of $12.0 million for overseas medical treatment but does NOT recognize other Interhealth related contractual costs that we must bear each year including:

In addition to the Interhealth contract, the TCI has a significant amount of long term debt that needs to be dealt with each fiscal year including the hospital construction loan payments the TCIG must pay each year for 25 years to repay $125 million at 12% interest! Again, this is a real yearly cost but is not clearly dealt within the TCI budget. There are more long term debts as well.

The following chart is compiled from figures on page 3-1 of the government issued budget detail document and includes the modifications shown on the page 3-2. It concerns yearly current fiscal debt accumulated between fiscal years 2008 and 2012.
 

           
The budget does NOT recognize the hospital related debt previously mentioned nor does it deal with some other current structural debts the TCIG is still responsible to make payments on each year including:

• Airport expansion debt = $70 million. This is being financed by increased airport fees but that money could have been put to better use to reduce our deficits and balance our fiscal budgets. We have yet to get European super large planes to land in the TCI because we do not have a large enough tourist accommodation base. I raised that point in an article a long time ago; before the airport expansion contract was signed. The airlines landing at Provo airport today do NOT need the extended runway.
• UK debt guarantee = $260 million. This sum will be or is already converted into debt instruments that will have to be paid back over the coming years.
• Accumulated fiscal debt = $83.4 million. This must also be paid back. The above covers the years 2008 to 2012. Unless other such debts have been paid in succeeding years they are accumulating as long term debt today and into the future.

Page 3-9 shows that the TCIG will make debt service payments of about $7.83 million during the fiscal year 2011/2012. Detailed debt information is contained in section 9 of the report but is so badly copied that it is totally unreadable! We do not know what debts the $7.83 million represents or what is left owing.

The lack of complete budget information is made more frustrating by recent actions of the TCIG. On Sept. 23, 2011, Mr. Hugh McGarel-Groves, our new Chief Financial Officer, publicly stated that the health care system in the TCI is just too expensive. He suggests talking to Interhealth Canada to see what can be done to lower costs. He goes on to state that the present 5% contribution tax is not enough to cover the costs and the TCIG needs to consider raising contributions from subscribers and/or reducing benefits. What is the present total heath care budget versus actual expenditures? Where are the figures? This is NOT the time to surprise the residents with statements about raising contributions for health care when the public has only a partial picture of where we stand with respect to the use of our funds for health care to date.

What has been presented above clearly indicates that the TCIG is a long way from achieving either a balanced budget or presenting a comprehensive budget covering all money flows. That indicates we still have inadequate financial management and reporting. I am surprised by this as it is not a new problem. One of the conclusions of the commission of inquiry was that there was significant evidence that the TCIG had no budgetary planning, control or monitoring of government ministries and departments during the period the last local government was in power. There has been three years of effort to correct this, two financial advisors from the UK and a consulting firm have been brought to bear on the problem. Why is it not solved? This is not a large scale, complex problem; after all, we are talking about managing the finances of what would be considered a small village anywhere else in the developed world! I have been involved in managing 12 communications businesses totaling an investment of over $235 million and located across 11 time zones. It did not take 3 years effort to do this properly!

We need only look at what is happening in Greece today to understand how poor financial management and a lack of control on debt accumulation can destroy a country’s economic stability. A country that cannot make payments on bills in arrears or make payments on its long term debts is a long way from achieving a balanced current budget! Budgeting and tracking of ALL financial items is mandatory! The hospital, NIB and NHIP may be separate entities but they are sources of the total revenues and expenses of the government. We need to know the total picture of the financial situation in the TCI! What we have today is only a portion of the total financial picture. A business cannot survive knowing only part of its current financial picture; neither can a country. It is time to get serious, expose our total financial situation; not just current funding of operations. The economic future of the TCI is at stake!

Fred Skovberg
Providenciales

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