Innovative budget released for 2004/5

Kenneth Jefferson, Assistant Secretary Finance, (left)
and Peter Gough, Director Budget and Management
Financial Unit, hold a copy of the 2004/05 Cayman
Islands Budget document, which contains historic
changes

Tuesday, May 11, 2004

In an afternoon press briefing last Friday at the Government Information Services (GIS) conference room, Peter Gough, Director Budget and Management Financial Unit, described in greater detail the morning’s budget release at the Legislative Assembly.

With the assistance of Kenneth Jefferson, Assistant Secretary, Finance, and Tony Dale, Government Consultant to the Financial Management Initiative, Mr Gough walked members of the press through what he considers the historical budget of 2004/5.

This year’s budget marks the first budget in the history of the Cayman Islands to be done on an accrual basis rather than the previous cash basis.  “Financial Secretary (George) McCarthy had a vision in 1998 for this innovative budget and today is a landmark day for him,” said Mr Gough.

According to the three financial officials, this type of budget system now places the Cayman Islands in an elite echelon of nations, including New Zealand (the first to do so), Australia, several Scandinavian countries, the United Kingdom and Canada who have partly transitioned to the accrual based budget.

The biggest difference between the cash based budget and the accrual based budget is that now, starting with the 2004/5 budget, revenue is recognized immediately when it is due; there is no longer the waiting period required until the revenue is deposited, as was the case with previous budgets. The same practice is followed for expenditures.

What sounds like a technical nuance actually revolutionizes new government policies. As it was explained, “In the past, ministries might say, ‘We have $5 million. What can we do with his revenue?’ Now the Cabinet can say, let’s work on the literacy rate in the country and let’s align the budget to reflect that initiative. This type of budget allows policies and initiatives greater possibilities for matching funds.”

As Mr Dale stated, “This is the accounting system used in the private sector and provides a more complete and accurate picture of the financial health of the country.”

The specifics of the proposed budget for the new fiscal year beginning July 1 include: a postponement of an extra fuel levy due to the rise in world oil prices, an expected surplus of $0.47 million, a $7 million injection into Cayman Airways, a $4.5 million infusion to the Health Services Authority, $1.1 million to Cayman Islands National Insurance Company (CINICO) to assist in establishing the new agency, and $2 million of the projected $15 million toward the establishment of Barkers National Park.

In associated legal reformations, for the first time in Cayman Islands history, the books of the government will be opened for public scrutiny two months prior to the election and a Freedom of Information Law will soon be put into effect.

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