This is the full text of Finance Minister Paula Cox's statement delivered to the House of Assembly on Friday on the tabling of the Consolidated Fund's accounts for the year ending March 31, 2009.

Mr. Speaker, in accordance with Government’s commitment to effecting ongoing improvements in its Public Accounts and in reporting to Parliament, I am pleased to table audited financial statements relating to the Consolidated Fund for the year-ended March 31, 2009.

As Honourable Members are aware the Consolidated Fund is the general operating fund of the Bermuda Government and is the Fund through which Government conducts the majority of its transactions. The Consolidated Fund financial statements report the financial position, operations and changes in financial position resulting from the activities of the Government. This includes the accounts of the Senate, the House of Assembly, all Government departments and offices and all courts.

Mr. Speaker, I note that the annual accounts of the Consolidated Fund of the Government of Bermuda were given a qualified audit opinion. This qualification relates to the Auditor General’s opinion that there were deficiencies in internal controls in the management of certain capital development projects. Mr. Speaker, the detailed reasons for the qualification on the accounts will be included in a Special Report of the Auditor-General which will be tabled in this Honourable House. The usual parliamentary procedure would then apply whereby the Special Audit Report will be referred to the Public Accounts Committee for review. The Committee then tables its report with recommendations and there will be a formal response from the Government through the Minister of Finance in writing. There is also scope for separate Ministerial Statements from the relevant and accountable Ministers where their Ministries may be the subject of any financial shortcomings noted in the Special Report. Therefore it would be premature at this juncture to provide detailed commentary on a report that has yet to be tabled.

However Mr. Speaker, it has to be said, quite simply that when an Auditor-General speaks, Governments listen and take heed. This Government is no different and we consistently look to how we can enhance and strengthen our controls and governance institutions. Accordingly, when the Government sees room for improvement, modifications and adjustments will be made so that the value proposition for the public purse is maintained for the Government.

Mr. Speaker, it is important to note that when the 2008-2009 budget estimates were made in February 2008, it was against the background of a possible recession in the US economy and a slowing down of growth rates in other major economies. During 2008 there were seismic shifts in the financial landscape of the world economy. The bewildering collapse of some landmark corporate institutions happened almost in a twinkling of an eye. There were a number of casualties and these included Lehman, Bear Stearns, Merrill Lynch, Washington Mutual, Wachovia, AIG, and there are others.

Mr. Speaker, the global economy is an unfolding narrative as opposed to a finite position. The economy is not a static instrument and there have had to be assumptions made and some modeling done but the economic picture has been constantly evolving. Assumptions have had to be re-assessed in light of the changing evolving circumstances.

In 2008 Charles Bean, the Bank Of England's deputy governor in noting that elements of the global economy had troubled lots of economists and policy makers for a long time stated: "We knew they were unsustainable and worried that the unwinding might be disorderly, though I don't think that anyone could have guessed the course that events would actually take."

Mr. Speaker, when scrutinizing the Consolidated Fund Financial Statements for 2009 it is important that the above-mentioned circumstances be considered.

Financial highlights of the Consolidated Fund Financial Statements 2009 are as follows:

The total revenue raised by the Consolidated Fund for fiscal 2008/09 were approximately $952.3 million, an increase of $24.4 million (2.6%) from the prior fiscal year but falling short of original budget estimates by approximately $32.4 million (3.3%). The most significant generators of revenues for fiscal 2008/09 were Payroll Taxes accounting for $356.5 million or 37.4% (2008 - $337.8 million or 36.4%), and Customs Duty accounting for $224.2 million or 23.5% (2008 - $229.5 million or 24.7%).  Revenues were below budget in 2008-2009 mainly due to shortfalls in Customs Duty ($35.6 million below), Stamp Duty ($13.8 million below), Immigration Receipts ($6.4 million below) and Passenger Taxes ($3.3 million below). These amounts were partially offset by above budget receipts in Payroll Tax ($21.0 million) and International Company Fees ($8.6 million).

Mr. Speaker, it should be noted that although the 2009 revenues were moderately below budget (3.3%), overall these results compare quite favourably to the revenue intakes of other Governments during this unprecedented global financial crisis. For instance during financial year 2009, the U.S. government collected $2.1 trillion, about $400 billion (16%) less than the prior year and 22% below the original revenue estimate of $2.7 trillion.

Also Mr. Speaker, the Ministry of Finance has noted a report that revealed across OECD countries, tax receipts as a proportion of GDP fell in 2008 whereas the ratio was unchanged between 2006 and 2007.

Current expenses on an accrual basis for fiscal 2008/09 were $1,112.2 million (2008 - $1,022.9 million). The three largest components of current expenses were employee costs, grants and contributions and professional services. Employee costs accounted for $579.7 million or 52.1% (2008 - $529.3 million or 50.5%). Grants and contributions accounted for $234.9 million or 21.1% (2008 - $215.4 million or 21.1%) and professional services accounted for $95.5 million or 8.6% (2008 - $85.9 million or 8.4%). Mr. Speaker let me make it clear that the line item for professional services of $95.5 does not represent overseas consultants. As stated on innumerable occasions, professional services covers all government contracts for cleaning, security, legal aid, Works and Engineering maintenance, contracted services for the Department of Airport Operations, health insurance portability claims, war pensioner medical claims and other locally contracted services.

Mr. Speaker total current account expenditure on a modified cash basis was $994 million, which was $32.4 million higher than original budget estimates. Expenditures were above budget in 2008-2009 primarily due to the following items:

Ø unanticipated increases in police salaries from arbitrated awards;

Ø above budget expenditure on teacher’s salaries;

Ø increased expenditure on Government’s health subsidy programme for the youth, aged and indigent;

Ø increased employee overhead relating to legislated contributions to the Public Service Superannuation Fund.

Mr. Speaker total capital account expenditure was $199.8 million, which was $45 million higher than original budget estimates. Capital development expenditure was $38.7 million above original budget while capital acquisitions were $6.3 million over original budget.

Mr. Speaker, net additions to Tangible Capital Assets totaled $192.3 million (2008 - $57.8 million) in the current year, with one new asset class totaling $114.0 million, being added to the Government’s register of assets. The new class included infrastructure which has been added in accordance with public sector accounting requirements. Included in the net additions of $192.3 million was a net transfer of $88.0 million from Construction in Process (2008 - $8.7 million) to completed projects.

Mr. Speaker, Net Public Debt increased by $204.9 million (2008 - $80.5 million) during fiscal 2008/09, standing at $483.3 million at the end of the year. This increased borrowing level was the result of revenues being below budget and expenditures exceeding budget limits as mentioned above. The actual net debt to GDP ratio at this time was about 7.9 %.  The annual debt service cost, which consist of interest on long term debt and the annual Sinking Fund contribution for the year was 3.2 % of total revenue.

Mr. Speaker, even with the increased borrowing, the level of public debt as a percentage of GDP is still moderate when compared to other countries and remains one of the lowest, if not the lowest, debt policy ratios amongst developed modern economies.

Mr. Speaker, the statements of the Consolidated Fund provide valuable information on the financial position of the Government and I would encourage the public to examine these statements.

Mr. Speaker there is no doubt that the global recession is having a negative impact on Government finances worldwide, but I wish to assure the public that the Government is sensitive to these challenges and is committed to strengthening the way in which it manages and controls Bermuda’s public finances. This Government has a longstanding commitment to prudent fiscal policy and I have every confidence that this will continue.

Thank you Mr. Speaker