Are we bankrupt yet?
December 12, 2012
Are we bankrupt yet?
Well, a government does not become bankrupt in the same way as a business or person. A government is rated (by agencies) on the basis that the Government can increase revenue by raising taxes, duties, fees (and not by continually increasing debt), to offset any financial shortfall. What does happen to a government is that they can run short of cash, and cannot pay employees without raising extra funds. So what is the situation here? In February, 2011, the new auditor general Heather A. Jacobs Mathews, provided a wonderful financial synopsis of Bermudas finances.
Heather A. Jacobs Mathews has since that time provided reports on the consolidated accounts (these are the high level financial statements of government). Needless to say these reports have highlighted severe deficiencies in the accounting, not to mention the lack of completeness of many underlying financial statements. All can be found at www.oagbermuda.gov.bm
Government is allowed nine months to prepare and present the consolidated accounts. Although these may be complex, allowing that amount of time in this day and age must be unnecessary, and will allow poor financial positions to deteriorate too quickly before they are discovered. The March 31st, 2012 financial statements should be completed by December 31, 2012 with the Auditors report. Before that time, they have to be tabled in the house. The financial statements have been completed as has the auditors report. So here we are two weeks from the end of the year, and no indication of the financial position has been shown. If Government were proud of the numbers, would we know something about them?
If the auditors report has something scathing in it (Heather A. Jacobs Mathews committed to review some of governments contracts issued in the past) would it be made public prior to the election? I believe the Auditor General and the powers that be have a duty to the public to provide sections of at least the auditors report to the public before the election.
Key questions about our financial failure are: Has government substantially reduced the deficit between revenue and expenditure? We are at a critical level as I will show below. I have not seen the necessary actions to stem the huge increasing deficit which was $1.4bn on March 31st, 2011; the vast majority of that occurring in the past 5 years. The deficit amounts, i.e. excess spending each year, have been $215m, $236m, $375m, $312m as at March 31 of 2008, 2009, 2010, 2011. Our public debt at March 31, 2011 was $1bn, and the net debt was $2bn. Our financial cash, or available cash funds to draw on to pay government workers, is very low or non-existent. We are now one year and nine months past that point. So if the government is not proud of the numbers, have we continued at ~$300m annual deficit? Have you seen government substantially reduce spending? If they have not, add another one year and nine months. Government estimates an additional $400m deficit (which seems low by as much as $150m) and increased borrowing of $420m by December 31, 2012. So do the math. Are we bankrupt yet?
I would expect the union to be very concerned, because unless penalising taxes are imposed, or more unbearable debt is added, the government workers may not be paid in the next few years.
While it is said that you have to spend money to make money, you cannot continue to spend beyond your means. Government is essentially deciding that we would rather pay huge burdensome taxes in the future, than curb our spending. Have you seen any abusive spending lately?
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