Budget reduction passes scrutiny

| 20/10/2008

(CNS): Members of the Legislative Assembly’s Finance Committee have examined, voted on and approved the government’s proposal to reduce the approved overall budget for the 2007/2008 financial year by about $2 million. Once  a financial year has ended it is normal practice for government to reduce the initial budget to reflect the actual spending in real terms during that year.

Financial Secretary, Kenneth Jefferson said the reductions usually occur in two areas – capital expenditures, and operating expenditures. This is because projects often do not start as originally planned or operating expenditures end up being less than had been budgeted. During this last Finance Committee sitting Jefferson said government ended the year with a $10.6 million surplus. He added that the debt-servicing ratio for the year stood at 5.6 percent, which is under the 10 percent limit as required by the Public Management and Finance Law (PMFL), the legislation which governs how government manages the books.

In this supplementary budget which was the third ne for the year ended 30 June 2008, 199 changes were made 122 were for decreases in appropriations, totalling $43.3 million and 77 were for increases, which amounted to $41.3 million resulting in the 2 million reduction.
As government literally moved the money around with some projects going up and some coming down there were 43 appropriations in capital expenditure which resulted in a decrease of $13.6 million – $17,976,107 budgeted funds were not used on some projects while there was an increase in spending of $4,443,036 in others.

Overall, operating expenses rose by $11.6 million, based on 72 requests for increases totalling $36.9 million and although there were 84 items on which government under-spent as that only amounted to $25.3 million Jefferson said the increases were not offset. Total operating revenue for core government rose from a budgeted sum of $523.3 million to $528.5 million for the last financial year, he said and total operating expenditure also rose, from $489.3 million to $504.7 million. The bulk of this increase went to increased personnel costs, which rose from $205 million to $212 million.

Surplus from operating activities was budgeted to be $34 million. The actual unaudited surplus from operating activities for the year to 30 June 2008 was $24 million.

Financing of government’s borrowings reduced marginally to $10 million, he said. There was no change in the $3 million for government’s payments to the National Recovery Fund used for repairs to homes, budgeted under extraordinary items.

The budgeted net surplus, which takes all expenditures and revenues into account,was $20.8. The actual unaudited net surplus for the year was $11 million, approximately. Government’s total assets after liabilities stood at $509 million at end of June this year, from a budgeted figure of $519 million.

To comply with a key requirement of the PMFL, government had to maintain in 07/08 cash reserves of not less than 75 days’ of estimated executive expenses. At the end of the 07/08 fiscal year, government’s cash reserves stood at 102 days’ of expenses, Jefferson said which was better than the budgeted 91.1 days and complying with the law’s requirement.



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