The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Chamber of Commerce’s chairman yesterday said the Government’s failure to-date to adopt international public sector accounting standards meant the accuracy of its Budget figures was questionable.

Gowon Bowe told Tribune Business that until the Government finally switched from a cash-based to accrual accounting system, it was impossible to determine the extent of its liabilities and spending commitments.

And, conversely, Mr Bowe, also a senior executive with the Bahamas Institute of Chartered Accountants (BICA), said it was impossible to identify and value all the Government’s assets.

He added that the Bahamas’ failure to adopt International Public Accounting Standards (IPSAS) was also subjecting this nation to international scrutiny, as it was the only item in BICA’s action plan with the International Federation of Accountants (IFC) still earning a ‘red flag’.

Speaking after yesterday’s mid-year Budget unveiling, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman said the Prime Minister’s “seasonality” explanation for the half-year deficit exceeding full-year projections (see other article on Page 1B) cut little ice with him.

“Those aspects, I’ve always said I don’t much care for the seasonality,” Mr Bowe told Tribune Business. “The reason I say that is because we don’t have an accrual accounting system.

“Looking at one six-month period to the next is not any indication of what took place. Until we get to the point where all expenditures and commitments are included, it becomes a considerable concern as to whether the numbers we get at year’s end are accurate.”

The Government’s reliance on its existing cash-based system means that future spending obligations, which it has already committed to, are not necessarily picked up in the financial data presented with each full and mid-year Budget.

The Prime Minister yesterday said the Government was moving to address this, via a combination of the $33 million Inter-American Development Bank (IDB) funded project to improve its financial management system, and a “concept paper on public sector accounting standards”.

Mr Christie said the Public Treasury was working with BICA representatives on this initiative, which “sets the stage” for the IDB project.

“The concept paper would provide the blueprint for reform of the Government’s reporting of its fiscal results in a professional and non-partisan manner,” the Prime Minister added.

“This is very important in a world where national governments are under close scrutiny from international ratings agencies, banks and investors. This is an important component of our fiscal consolidation initiative.”

Mr Bowe, meanwhile, pointed out that as part of its agreed ‘action plan’ with IFAC, BICA has to “demonstrate best endeavours to promote further awareness of IPSAS with the Auditor General and the Ministry of Finance, and encourage adoption and implementation”.

Emphasising that the ‘action plan’ was required as part of its IFAC membership, obligation and designed to correct any deficiencies in the Bahamian accounting profession’s self-regulatory regime, Mr Bowe said the IPSAS issue was the only “red [flag] that remains” because the Government has yet to implement international public sector accounting standards.

“In The Bahamas, public sector entities typically use the cash basis for financial reporting,” IFAC said in the BICA ‘action plan’.

“BICA will continue to promote the use of IPSAS with the Ministry of Finance.”

Pointing out that the situation was firmly “on the radar screen” with IFAC, Mr Bowe told Tribune Business: “In reality, the Budget communication is not a good example of where we are [on the public finances].

“It also fails to recognise our assets and the valuation of those [government] assets. We should be tracking that.”

Explaining why the Government should also be monitoring the ‘positive’ side of its balance sheet, the Chamber chief turned to the New Providence Road Improvement Project, suggesting that the alleged cost overruns were not the major issue long-term.

“The debate over the roads should not be one of the $200 million cost, but is that $200 million going to last me 20 years and cost me $1 million a year to maintain?” Mr Bowe explained.

“Or will it last me just seven years and not give good value for money?”

In similar fashion, Mr Bowe said the Government needed to inventory and value all its buildings and publicly-owned infrastructure, which would be used to “defray” the Bahamas’ $6.5 billion debt.

He suggested, for example, that if the Government owned a $1 billion land and property portfolio, it could dispose of some assets via ‘sale and leaseback’ deals, and use the proceeds to pay down the national debt.

“If we don’t have a true picture of the assets, it becomes very difficult to understand the context of the Government’s liabilities in relation to the debt-to-GDP ratio,” Mr Bowe told Tribune Business.

Meanwhile, Mr Christie yesterday said the Government was planning to eliminate all cheque payments to its vendors and beneficiaries by month’s end, while supporting the struggling Bank of the Bahamas at the same time.

“Presently, a large percentage of payments are made by direct deposit, specifically those made in respect of employee remuneration and payments to pensioners,” Mr Christie added.

“The focus now is on eliminating cheque payments to vendors. We are currently on track to effect direct deposits for payments to vendors by the end of March. This will be facilitated through the Bank of the Bahamas.

“For small businesses, this would eliminate the increasingly significant fees banks are now charging to negotiate cheques drawn on another bank.”

Mr Christie also added that the annual increase in outstanding real property tax liabilities was “decelerating”, describing this as “a positive trend”.

“I want to stress in this regard that the Government is fully cognisant of the gravity of this matter, and indeed has responded in recent years with a series of measures to address such arrears,” he said.

“Accordingly, we expect the growth in arrears in real property tax to decrease even further.”