Auditor General Heather Jacobs Matthews yesterday said Government faced "financial challenges going forward" as it tackles rising debts.

She also confirmed that she and her staff are working on Special Reports on the project to build a new cruise ship terminal at Dockyard — which climbed from an initial estimate of $35 million to $60 million — and the TCD Emissions and Safety Testing Facilities. The reports will be presented to MPs on completion.

In a statement released 25 days before Finance Minister Paula Cox announces the 2010/11 Budget, Mrs. Jacobs Matthews pulled no punches as she described what the trends seen in the last six years' Consolidated Fund accounts — Government's operating account — say about public finances.

"These challenges include a weakening cash position, as evidenced by a substantial bank overdraft, expenditures significantly outstripping revenues, increasing long-term debt and, by extension, a growing deficit and public debt," Mrs. Jacobs Matthews said.

In a table and graph accompanying her comments, Mrs. Jacobs Matthews showed how expenditure had outstripped revenue for every one of the past six fiscal years.

She also showed the accumulated debt — the difference between what the Consolidated Fund owes and what it owns — was $719.9 million at March 31, 2009, up $102.4 million from a year earlier.

Public debt, defined as all debt owed or guaranteed by the Consolidated Fund, has topped $850 million since the end of the last fiscal year, thanks to further borrowings of $175 million and the $200 million guarantee of Butterfield Bank preferred stock, she added.

Since 2003/04, Government's annual revenue has risen from $705 million a year to $953 million. Over the same period, expenditure has soared from $720 million to $1.19 billion.

"Trend information, such as that shown, in both table and graphical format, can help put the current year's figures into context," Mrs. Jacobs Matthews said. "I encourage Government to produce its own analyses and discussion of the key trends each year to accompany the audited financial statements as is done in other jurisdictions."

Mrs. Jacobs Matthews, who succeeded the long-serving Larry Dennis as Auditor General last year, placed the slogan, "You, the Public, have a right to know!" at the foot of each page of her release. She said the Consolidated Funds accounts from the past six years can be viewed at the Accountant General's website at www.ac.gov.bm under "Resources".

Finance Minister Paula Cox was in London yesterday and did not reply by press time to a request for comment.

Financial Secretary Donald Scott, the top civil servant in the Finance Ministry, said the expenditure figures summarised by the Auditor included capital spending. He added that current account revenues had exceeded current account expenditure in every fiscal year except 2008/09 — a period impacted by a global financial crisis.

"The expenditure amounts in the table prepared by the Auditor General include current programme expenditure, debt service, contributions to the Sinking Fund and capital expenditure," Mr. Scott wrote in an e-mail. The Sinking Fund is used to pay off long-term debt.

"Most governments around the world borrow to assist in financing investment in hard assets — infrastructure, housing, public transportation systems, etc. — that deliver service over many years (and decades in some instances). The borrowing requirement in respect of financing the capital expenditure plan is set out in the annual budget.

"Government's 2010-2011 Budget will address the fiscal plan for the coming year."

Opposition Leader Kim Swan said the fiscal management of the Progressive Labour Party Government needed to be called into question.

"This is a devastating judgment on this Government's management of the public purse and it clearly brings into sharp focus the integrity of various ministerial actions and the pattern of massive overspending," the United Bermuda Party leader said.

"The Minister of Finance is the minister responsible for maintaining the strength and integrity of the Island's public finances and she must step forward to explain the deficiencies and questionable transactions."

The Auditor reiterated her reasons for giving a "qualified" opinion on the 2008/09 Consolidated Fund accounts due to "serious internal control deficiencies" in capital projects with a book value of $90 million and questioned the "appropriateness of transactions" and the value of assets as stated by the Government.

Mr. Swan said: "These red-flag questions and concerns point to across-the-board doubts about the Government's handling of the public's money.

"Beyond these doubts, the Auditor General has also highlighted trends that reveal a serious deterioration in Bermuda's fiscal position over time — a deterioration for which this Government is solely responsible. They have spent much more than taken in and raised public debt to unprecedented levels."