$81M deficit row rolls on
(CNS): The MLA for East End has revealed a note prepared by the financial secretary in the spring of 2009 advising the government of the day that it was running a deficit of $18 million, only three months before the year finally ended with the now infamous $81 million deficit. The document, which was dated 30 April, showed a decline in revenue of $14 million on the budget predictions for that year but an increase in spending of $7 million. The revelations in the Legislative Assembly by Arden McLean further fuelled the long-running dispute between the current UDP and former PPM governments over how the deficit managed to increase so significantly in the last quarter of the 2008/09 financial year.
The figures supplied by the financial secretary were based on the general ledgers and McLean questioned, once again, how in the last three months of that year the deficit could have grown by a further $63 million.
“It is extremely unfair for this government to come here and keep saying that the PPM had an $81 million deficit and that his government has improved it, yet we can’t see the accounts that can explain all of this,” McLean told his legislative colleagues. He said the document (posted below) demonstrated that some three weeks before the election (the note was presented at the beginning of May) the financial secretary was advising Cabinet that the government was running an actual deficit far smaller than the figure it is now accused of accumulating.
The opposition has over the last three years persistently queried the current government’s claim that there was an $81 million at the end of the PPM’s administration and the UDP has in return persistently pointed to the significant deficit figure, along with the spending on the high schools, as the root of all of its financial difficulties.
During the debate McLean pointed out that when Cabinet first heard of a potential deficit, the PPM government had pushed for cuts across the civil service. When the Cabinet note was presented to them in May, it appeared things had worked and the government had averaged a monthly deficit of $2 million for the first 9 months of the year.
However, the figures claimed by the UDP when it came to office later that year suggested that the new government then proceeded to run a more than $21 million average monthly deficit for the last three months of the year, something McLean said was hard to believe.
In response to the Cabinet note being made public, the premier spent a considerable portion of his reply to the debate on the government’s stop-gap budget motion referring to a speech made by Financial Secretary Kenneth Jefferson in July 2009 in which he sought to explain the chain of events that led to the eventual $81 million shortfall.
Jefferson claimed at the time that he forecast a $68 million deficit as early as February 2009 and government worked towards decreasing the forecast deficit of Cl$68 million to the Cl$29 million deficit that was presented in the 2008/9 supplementary budget brought to the Legislative Assembly on 20 March. But even as far back as October, Jefferson said, he was warning government of a major deficit due to increasing expenses and a major fall in revenue. It was then that a policy directive was issued to all public entities to reduce operational expenditures by 6% and implement a staff freeze.
Jefferson said he had warned that without bringing a supplementary budget there was a real danger that the promised reductions would not materialize, but the PPM government did not heed that advice and agencies were allowed to continue to spend their original budget.
By February Jefferson was forecasting an operating deficit of $68 million, and according to the statement hegave in July of 2009, this forced Cabinet to make even more drastic spending cuts.
“There is absolutely no doubt that Cabinet was informed by the Portfolio of Finance and Economics that a forecast for the year to 30 June 2009, done as of 9 February 2009, indicated a deficit position of Cl$68 million,” Jefferson claimed and added that the supplementary budget eventually brought to the House was unrealistic.
Given all of this, it is still not clear why a deficit of only $18 million was forecast by the FS in the Cabinet note presented just weeks before the election.
As government has still not presented any consolidated accounts since 2004, the actual spending and earnings of the PPM administration have still not been made public, and despite promises by the current administration to address the issue of financial reporting, government has failed to complete any annual reports.
Statement in the Legislative Assembly 1 July 2009 by Financial Secretary Ken Jefferson (pdf)
Category: Politics
I am wary of any defict or surplus number coming out from the Govt now. After all it is the same FS providing the numbers so when the PPM was in power it went from 18m to 81m in three months, now the UDP is in power and they have supposedly reduced the defict to XX (pick a number). How can I be sure that depending on what happens at the next election we are not hearing "the deficit was actually increased and not reduced as previously reported or the deficit was turned around to a surplus!"
I am not familiar with the workings of the reporting unit but surely it can't be that difficult to determine Revenue – Expenses = Surplus/Deficit
Is it that the forecast was so off that the revenues were severely less than anticipated in combination with wild spending sprees that had yet to be materialized.
Why don't the current Government get the books audited, just to clarify any misconceptions. If it is what it is….prove it!! That is the SIMPLE solution. With this party system, you will always find another party trying to devalue or discredit their rival party, just to gain voting points. The books needs to be audited from 2005 – 2009 and in doing this, this will surely shed a different light on how we are now in this dire financial situation. What is so wrong in doing that?! Huh?!
The reason that there is no audit is because there is very little to audit.
The Civil Service still thinks of "accrual" as "cruel" accounting.
The financial records are a mess; a proper audit would take years and a very large team of external accountants (even then the auditor could only come up with a heavily "qualified" audit).
That is why government has left us in a state of financial uncertainty. PPM screwed up and UDP dug the hole alot deeper. We can spend all day blaming the accounts and financial secretary, but it all boils down to our government's responsibility. That is why VOTE INDEPENDENT and for the one you personally know will follow no one else but their own conviction, is the way to go!
I'm just as disappointed and ashamed of Osbourne Bodden as I am of Ken Jefferson.
Osbourne served in the LA for 4 yrs and headed up the PAC, and apparently only had ONE meeting in four (4) years.
In my opinion, neither of them did their job.
Yes, in order to save the PPM party, let's crucify Mr. Jefferson. I can see it now, the excuses
Outdoors, also Big Bird, (Big Berd on C. Compass),
The "excuses" (as BB puts it), that I would like to see are for the wildly varying estimates apparently produced by the Financial Secretary in the period leading up to the last election, and those just after. If the FS can reasonably justify his apparently wavering position then I am willing to accept that the PPM bears much of the responsibility. If not, then I think it is the F.S. and the UDP that are guilty of the politiconomics.
The political arm of the PPM (or UDP) are not necessarily financial wizards, (nor is our current Minister of Finance), and should not be expected to produce complex financial projections; that is the responsibility of our Financial Secretary and his staff. It is not unreasonable (in my opinion) for the previous Government to have based their trust in these persons, and to be perplexed when things turned out so differently after the fact.
It is the UDP Government that removed the legal requirements for this financial period to be audited. I wonder why?
As my screen name suggests, I want the truth, not politically expedient distortions.
PUZZLED??? But if the Financial Secretary was under your PPM rule at the time, shouldn't they be responsible? Are you saying that one man had PPM's hands tied behind their backs, and hence the serious financial mismanagment??? Of course the FS may have been a rude boy, but whose classroom was he sitting??? Surely PPM had their hands in the pudding and not only this man.
Under the old Constitution the PPM had no control over the FS whatsoever. The FS is supposed to be the technocrat not the elected politicians Of course they should be able to rely on his expertise in the same way as you rely on doctors to correctly diagnose you and lawyers to give you correct legal advice unless of course you slept at the Holiday Inn Express last night. Every previous govt. has relied on the FS in the same way but we didn't have a similar crisis and it wasn't this FS. In hindsight it is easy to say how he should have been second guessed. That is not to say that the PPM should not have been more prudent with the spending in any event.
Nonsense… PPM had their chance and blew it. They were RESPONSIBLE, is RESPONSIBLE, and WILL FOREVER BE RESPONSIBLE, because they were ones that were calling the shots! You can fool the people sometimes but not all the time!
Mr. Jefferson is clearly in over his head. At this point in time we need a Financial Secretary that is not only highly educated and well experienced in the world of finance, but someone with strong leadership ability and the type of personality that can stand up to these politicians with their grandiose or just plain ridiculous ideas on how to spend our money. I have heard that, during his time as Financial Secretary, Sir Vassel Johnson often locked heads with politicians over this. He stood up to them, and when there was no money in the budget for certain projects, he made damn sure the politicians understood that they simply were not going to happen.
I stand by the 125 mil deficit in 09. Because that is what it was.
And if you just think for a moment. We are still paying interest on any loans from the UK and abroad.
High interest.
That and the fact that the global economy is ina downswing. Is why we cannot bounce back.
Bush has decreased the deficit since he took office. It's now what…40ish mil? Even vs your 81 mil. That's an accomplishment! REALLY think about this. PPM we were minus 125 million. Or 80 if you want to go by your figures…understand that? I will say it again… MINUS 125 or 80 mil at the end of their year. The government and the island was BANKRUPT. What do you not understand about this? If Dart had not bailed the civil service out. You would have had no government services for 4 months. Unless everyone in the government was willing to work for 4 months for free, without pay. Because the government had no money to pay their salaries. Are you understanding it yet?
No police..No judges…no garbage removal, no road repair, no electricity subsidization, no NOTHING. Am I getting through yet?
And if that had happened, it was due to PPM spending more money in their final year, than the island could sustain. With 5 or 7 building projects (I cannot remember) started all at once.
Point the finger at bush for giving away money all you like. You think PPM didn't do the same thing?
Bush's government is now only 40ish mil in the hole. Even if we use your figure of 81 mil. That is amazing he can accomplish this.
I think one more term and she should be able to get it at least even.
If we go with your 80 mil deficit. We only make 480 mil a year. To run an entire country. We can't just pay off 80 mil like that. Because then we would need to take 80 million from something or somewhere else.
I like my roads pot hole free, my garbage removed on time, my goods coming in, with little issues, thanks to customs. And everything else the government must pay, But does not tax us for.
I don't get why anyone would complain about Bush…compared to what the PPM did in office when they were in power. How the heck do you bankrupt a country!!!??? And whats more amazing is people can overlook that HUGE issue and say oh well, lets give em another try.
BOOM as the sound of my head exploding.
If you can't understand that. Then your going to call an apple an orange all day, because you believe it's an orange. No point even trying to reason this out.
Now I understand why the Minister of Health is complaining about the increased cost for mental health care. We clearly have a "booming" population.
Tell me more about the sound of your head exploding. Do you have any other symptoms like do you have problems sleeping? Are you always depressed? Do you have feelings of guilt? Fatigue? Weight loss? Sudden mood swings? or other ailments?
How long have you been feeling this way?
The $125M deficit in 2008/09, accepting your screwed logic, is irrelevant since Bush ended 2010/11 with $25M surplus.
http://centos6-httpd22-php56-mysql55.installer.magneticone.com/o_belozerov/31115drupal622/politics/2011/08/25/25m-surplus-201011
That's a $150 million turn around in two years. If he is the financial genius you seem to think he is then why didn't he continue along that path instead of going from $25M surplus in one year to a loss of $40 million in the next?
Do you think he lost his mojo like Austin Powers, or are you starting to believe the donkey-face people who say he is pulling ALL of the figures out of his ass?
This is indeed revealing but in looking at the document, it says "confidential" and property of the Cayman Islands Cabinet. Is it possible now to FOI Cabinet Papers?
It may be a good thing but in some cases could be detrimental to our national security.
Was this an FOI request or did Mr. Mclean just release on his own?
and ……
Here we go again. Let's try to side track the issue with irrelevancies. Typical McKeeva tactic. The only real question that is pertinent is whether that was indeed the FS's note. I see nothing in it detrimental to national security. Public servants should not be allowed to lie about important public matters with impunity because the documents that can prove the lie are marked "confidential".
Things were much better in Cayman when we had cash accounting and the politicians could only spend what was in the bank. None of them is competent to dress themselves let alone run a country.
Having re-read the FS's statement from 2009 all it really tells me, as a person well versed in finance, is that government's accounting system is worse than useless. No business could survive 1 year with the ridiculous system in place in our government. The real number, whatever it was, is likely to have little to do with the $81M claimed by the $18M claimed by the PPM. There are no audited figures and claiming one number is more correct than the other is about as valid as claiming that UDP green is somehow more accurate than PPM red.
It is certainly important that the public knows the truth about whether the figure was $18 million or $81 million.
As we remember the UDP imposed substantial fee increases and fuel taxes when they took over, purportedly to cover the $81 million deficit. By the time their reign ends in 2013 they will have collected and spent more than $2 billion in taxes from an economy that is left devastated.
We have nothing to show for our $2 billion but increased unemployment, a destroyed economy, and nonsense promises about this or that, new 'pie-in-the-sky' scheme where an investor is planning to drop a fortune in our lap.
Seeing that they cant even produce a budget on time, or provide evidence of the true financial situation in 2009, I tend to believe that the deficit was not $81 and that the increased taxes were merely to give the current Govt a lot of funds to waste as they have shown they are well qualified to do…
clear as mud!
the only thing i know is that caymanian civil servants and politicians are not comptent enough to run their own affairs
Then you know nothing. You cannot make general statements about "Caymanian civil servants and politicians" being incompetent. While it is true that there are competency issues with both the previous and current administrations and within the civil service we also have very competent people who are already within the civil service and some who are potential candidates in next year's elections.
So the PPM were actually telling the truth about what they were told re the deficit. Mr. FS whatcha got to say? It wasn't me?
Without audited financial statements this is merely an exercise in name calling.
Both parties are responsible for the deficit.
The lack of audited financial statements is extremely convenient for both of them. A plague on both their houses.
No, it is not meaningless. Whether or not that was the true financial position of the country it is clear that the PPM believed the country was in a much better financial position than it was probably actually in based on the Financial Secretary's note. The FS has a lot of explaining to do. He cannot without losing all credibility claim that he was forced or misled into producing false advice. It seriously brings into question his competence.
this will never be resolved until an audit of all accounts is complete. i think the auditors are just finishing up August 31, 2002 so they're getting close (as long as nothing major has happend since then)
Whilst they row about the number 81, Cayman's economy is getting worse. I find both parties PPM and UDP are full of hotair. No one really know if the figure was 81, because government was no auditing like they should. So no one knows. For all we know 81 could have been 181 million. PPM has left the country in financial uncertainty because they thought they could make more revenue than expenditures the following year, despite an incoming global recession. But they were mistaken. They used poor judgement and that is how they lost to UDP. Now UDP sings that they got the country into81 deficit, but still no one can prove it, because no auditing was done, and still no proper auditing is being done by them. So for all you know we are in a worser state than before. Cayman, both parties have failed us terribly. Don't let Alden or McKeeva convince you otherwise. Next election vote from your conscience with no bias or party influence.
Bear in mind that auditing is done AFTER the financial year has closed. Auditing could not therefore have revealed to the PPM whether the deficit was really $81m since that financial year closed on30 June, 2009 when they had demitted office on 20 May, 2009. If proper financials have been prepared auditing could reveal to the present government what the true financial position was but strangely they do not seemed concerned about that. If they believed the true figure was even higher than $81m they would have been on this like white on rice.
Excuse me but the FS is not the auditor, and he is supposed to have an ongoing idea of what is coming in and going out and what is going to happen in the following month, etc etc. The FS is not supposed to be waiting for an audit before he knows the financial position.
Moreover Alden and Kurt was suppose to be on the FS's back during their tenure. Shame on them for not monitoring the FS. Now they putting the blame on him to deflect it on the party so they can continue another four years of destruction.
Monitoring the FS? On what basis? They were not his boss and he is supposed to be one with the financial expertise. The Minister of Finance could monitor him if he actually knew anything about finance but qestionable figures have come out under this administration too.
I am not sure if this was intended to be a response to my post at 9.47am. If it was I don't disagree with any of that and I am not sure why you thought I did.
It is simply shocking that at this stage there is no clarity on what the actual deficit was in 2009. Clearly, no matter what the true position is or was, the good Mr. Jefferson should be fired, in my humble opinion. There is simply nothing that can exculpate him. One way or the other, from what Ive read, he is responsible. He shouldn’t have been installed in that position in the first place. But, then again, who gave him that job? Here’s a hint: the same one that gave the conspicuously silent AG his Cabinet position. Its bad enough that we cant seem to get rid of “popular” politicians, no matter what they do, but it is downright shameful that these people who they install can use those positions to protect their obvious masters.
Point the finger and blame Jefferson. Sick and tired of the PPM excuses. Grow up and stop mimicking UDP!!!
This discussion is not merely an exercise in blaming someone. Serious questions remain unanswered and Mr Jefferson seems to be the source of the confusion. You need to grow up and understand that adults are responsible for their actions.
Ken Jefferson has long had some explaining to do. What good is a Financial Secretary if they cannot explain numbers which change so dramatically? Does he really know what he is doing?
Being from WB I doubt it very much.
It appears the FS is no "financial expert" either.