CIG debt under control but liabilities still pose problem
(CNS): The Cayman Islands Government’s debt currently stands at $429.9 million, with $48.1 million due within one year, according to the CIG’s latest unaudited accounts published earlier this month. This figure is well within the requirements of the Public Finance and Management Act, with a net debt ratio of just 17.5%, while the law allows up to 80%.
However, the area of concern remains future liabilities, as the $2.2 billion healthcare liability is not included in the accounts.
The Unfunded Pension Liability, which is included in the annual accounts, stood at $343.5 million at the end of last year regarding the defined benefits of some public sector pension plans.
Alongside its own debt, the CIG has loaned money to two government companies. One of them is the Cayman Turtle Farm, which continues to run at a loss every year. The redevelopment of the original facility into a tourist attraction has never been able to cover its own costs and has cost the taxpayer millions of dollars over the years.
The government executed an interest-free loan for the farm of CI$10.0 million on 17 January 2022. As of 30 June 2024, the full amount of CI$10.0 million has been drawn down, but a commencement date for repayment has not yet been established, according to the report.
An interest-free loan of CI$50 million was also given to the Cayman Islands Airports Authority for a number of additional capital works to enhance airport facilities. The CIAA has commenced repayments of the principal as per the agreement. As of 30 June 2024, the balance remaining on the loan was $48.3 million.
At the end of 2020, the CIG entered into an agreement with five local banks to guarantee a loan programme, which closed a year later. The amounts guaranteed by the government were equal to 50% of the aggregate of the outstanding principal and unpaid interest.
As of 31 December 2022, ten loans amounting to $5.3 million had been approved, and the outstanding principal on these loans on 30 June 2024 was $4.1 million. The government’s maximum exposure, however, is just CI$2 million. For the life of this programme, one bank has called in one guarantee of just $21.300, which has been paid.
The government’s CI$2.2 billion unfunded healthcare liability remains a major concern and is repeatedly noted in the auditor general’s annual reports on the state of government financial reporting. Because this liability is not accounted for in the government ledger, it has failed to get a clean audit opinion on Entire Public Sector accounts.
Financial Secretary Kenneth Jefferson and Deputy Governor Franz Manderson have both stated on numerous occasions that placing such a liability on the books, especially when the money is not yet due, would undermine the entire public finances and put the public purse into the hands of the United Kingdom’s government.
At a Public Accounts Committee hearing in March this year, Manderson and Jefferson spoke about this ongoing issue, but neither man was able to offer a solution to the problem, which is viewed as a political issue to resolve.
See the latest published unaudited accounts from CIG in the CNS Library.
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Category: Government Finance, Politics
I agree that the government must continue to increase its budget to ensure money for the different areas of public spending such as healthcare, education, and infrastructure, but why the frivolous spending? I can’t think of another fitting quote than “Waste Not, Want Not”.
If the government is serious about increasing its coffer and tackling some of its liabilities, why not start thinking outside the box? Traditional means are one thing but there are other ways that the government can earn money that will not add more stress for Caymanians and the average resident and bring in a great deal of money that can help with the country’s debts and bring about potential profits. For example:
1. Create a system for Bank Wire Transfers in which the Banks have to implement a tier-tax on the amount(s) that are transferred out of the Cayman Islands. (As far as I am aware the banks have a charge on such transactions but the government does not earn a penny from these transactions).
2. Implement Annual Property Tax on Land, Apartments, Homes/Condos owned by foreign persons WHO DO NOT LIVE HERE. (Such persons are already used to paying their property tax/taxes elsewhere and even if one such person decides not to buy or invest their monies in real estate because of this tax, rest assured, I do believe, there will be at least 3 more who are willing to do so).
3. Increase the percentage tax that is currently in place for remittances. In turn, this will help decrease the amount of economic leakage because foreign workers might keep some of their earners here instead of sending the vast majority of it home. Then the government gets a bigger chunk of this outflowing money.
4. Create a Law that states an elected official can only serve a maximum of TWO TERMS (8 Years). Cayman can be the first DEMOCRATIC country to do so in the 21st Century. In doing so, maybe then politicians like our ‘lifetimers’ will not have the chance to spend foolishly the monies in the coffer and maybe then we will have elected persons who care about the voters, the environment, family, education, and other areas and thus will spend money wisely and always get value for the money.
5. Create a Law that puts Cayman Politicians’ salaries in line with the earnings of politicians in other Democratic Countries. In turn (a) a load of money will be saved and (b) we might get the right quality of persons who contest seats to serve the people of the Cayman Islands and not their bank account(s). Remember, current and any future politicians, with leadership comes your responsibility to serve and NOT to think of your time in politics as a means to your ends whatever they may be.
Country First People! Country First People!
One of the side effects of ignoring the unfunded healthcare liability in the books is that no one has to care whether it is rising or falling.
Spoiler alert, it is rising. Rapidly.
The policy that, after ten years, civil servants get free healthcare for life, is utter lunacy. This is akin to private sector firms giving employees a half million dollar bonus after 10 years.
CIG are actually cooking the books in accounting terms.
It’s right here – “placing such a liability on the books, especially when the money is not yet due, would undermine the entire public finances and put the public purse into the hands of the United Kingdom’s government.”
This is not only unethical but constitutes a major fraud by the leadership of the civil service and successive governments.
Zero accountability on display by its leaders as they rearrange the deck chairs on Cayman’s titanic.
This is not really cooking the books and I’m sure is very common for governments. There is a general concept in accounting of conservatism. You record contingent liabilities when probable and reasonably estimable.
Because we know there will be health care costs in the future and an actuary can calculate an estimate you could record them on the books now. But this is many years worth of future healthcare liabilities not money owed today. CIG has many years of income ahead of it to help pay for these healthcare costs but we do not record that.
If we added these estimable healthcare liabilities without any of the income we will make to pay for them we would breach all of the debt restrictions with the UK and place our finances in their hands. Good or bad. But not recording this liability is not blatantly corrupt, though many other things we do here is.
Again – this is a future projection of costs, not monies currently owed
Claiming that future payments to be made not being represented on current financial statements is fraud is like saying that as a baby is born you present the parents with the bill for the birth and hospital stay AND the bill for that child’s future funeral and burial
Stop being silly
Nothing world class about Deputy Governor Manderson’s management of his world class civil circus.
More evidence that the Cayman Islands is not a real place!
I can’t tell from the photo, is it Franz Manderson or Ken Jefferson?
We live in a country of laws but everyone knows that there are people in this country that are above the law. The corruption runs deep in the Cayman Islands.
Franz Manderson and Kenneth Jefferson need to resign or be fired for incompetence and mismanagement. They are describing and condoning a fraudulent set of financials annually.
But keep giving money away to other countries and vagrant spending. Sickening.
As an aside what would the CAA’s financials look like if Cayman Airways paid all of its landing fees as the other non-gov’t owned airlines do?
Maybe things have changed but my understanding is that CAL essentially stiffs CAA on payments so the loss at CAL doesn’t look as bad every year.
Do you mean CIAA?
The Turtle Farm has cost this country over $80 MILLION DOLLARS in the 8 years from 2012 to 2020.
EIGHTY ONE MILLION CAYMAN DOLLARS.
That is an average of 10 MILLION CI DOLLARS EVERY YEAR.
We need to take an objective look at tourism and STOP the losses. This is madness. And please don’t tell me we need to keep it for ‘jobs’. There are cheapers ways to give 90 people a salary. At this rate, if we divide the annual equity injection (approx $10M KYD) by # of employees (90), each person at the Turtle Farm costs us about $900,000 per annum.
1 2012 audited $9,669,418.00
2 2013 audited $10,678,771.00
3 2014 audited $10,503,078.00
4 2015 audited $9,506,349.00
5 2016 audited $9,002,749.00
6 2017 audited 18 months $13,815,709.00
7 2018 audited $8,500,000.00
8 2019 audited $9,500,000.00
This isn’t a comment about the good people at the Turtle Farm, this is about leaders being fiscally responsible and doing the right thing.
** CNS Readers – in the comments, tell us where you think government should spend that $10M a year to deal with national priorities and better serve the people of the Cayman Islands?
Your maths is off, it’s about CI$111k per year for each of the 90 employees. (CI$10m divided by 90). Still a money pit mind you.
How would the government be trusted to even do that when they have not and cannot do it now, unless the whole lot are cleared out and professional, trustworthy leaders are put in place.
I don’t eat turtle. Can they subsidise my plate of stewed whelks instead?
The same Turtle Centre is a mostly unused tool in the CIG arsenal.
If optimized, it could be a major centre for local events, training and hospitality studies, as a feeder site to the country.
Successive governments have continually dumbed down our voting populace. The result is an escalating debt with few opportunities for Caymanians. It’s time we pay attention to our locals and educate them so they will make the right choice for our country and not a few select people who only cared about themselves.
Drain the sound in 2025 and elect leaders who will provide opportunities for us to take care of ourselves
what we need is names of these so called leaders that aren’t morally bankrupt because I don’t see any in this current political landscape.
We need financially prudent leaders to take over this country. If not we will all be poor foreigners in our own island. Please vote smart in 2025 as it will be our last opportunity to steer this ship back on course
Financially prudent would be a luxury….we had that with Roy.
How about just having educated representatives who can see past their plate of Oxtail.
Apart from Andre and Wayne none of them can hardly read and write….why the hell would we expect this UDP rabble to understand or deal with the country’s fiscal affairs.?
Cayman is now held hostage by the Jamaicans who got status from Mac, and who have bred all the voters needed for Saunders, Seymour, Kenneth and Mac to turn us into a third word hole that they can rule.
Don’t disagree with your commentary on the “rabble’s” capabilities, or lack thereof.
But Roy being fiscally prudent? That would be the same Roy that admitted he didn’t have a record of all the concessions given to developers and what that cost was and still is to us, the taxpayer?
That Roy, who was part of the Government that rushed through the ReGen agreement which has cost us, the taxpayers, $14m and been cancelled?
I could go on but I think you get the idea.
Roy is an experienced private sector professional accountant.
Who do we have to replace those qualities…?
He’s an experienced private sector professional accountant that didn’t keep track of how many tens of millions they gave away in concessions to foreign developers. I therefore think we could nominate just about any high school leaver equipped with a pad and pencil to take his place, for an all-but-guaranteed better result.
I think the unfunded health care liability of CI$2.2 billion needs to be better explained for this to make sense to me.
This is a liability determined by an actuarial review of the future costs of providing healthcare to CIG and statutory authority employees.
Agreed, can an anonymous accountant please explain whether this approach to accounting is a normal and/or reasonable approach in the public sector?
To the uninitiated, it looks like creative accounting with the express purpose of avoiding a legal consequence in terms of the financial arrangement with the UK.
It is an actuarially calculated future cost of healthcare to be paid by Govt. Not something they owe now or even over 5 years but over the next 20/30/40 years (not sure exactly).
Point is that it is an estimate and we anticipate income from the various sources to help pay for those costs as they are due, but we don’t record expected income for future years. So they aren’t recording this massive liability which is just future costs of healthcare for CIG covered persons.
For a set of Govt FS with debt restrictions placed on it by the UK I would say this is fine and probably the common practice. That said it is still a large number and should be considered when making budgeting decisions as we do know healthcare costs are going up and up.
To keep it simple as civil servants retire, they start drawing from their benefits which is the 300 million pension figure mentioned above, everyone understands that to some extent.
Similarly and this is the bit you are asking about as civil servants retire, they will still be covered by the CIG as part of their retirement package and that money will need to be paid for their care, that is where the 2 billion figure comes from – its projected future healthcare expenses for retired CS
Keep in mind that the money is future expenses not current expenses which is why it has been essentially set to one side to worry about later, also the entire sum will not be required at exactly the same time as obviously people retire in waves and not en masse
It is certainly an issue that we are moving towards but assuming we don’t blow surpluses over the next 5-10 years on vanity projects and invest wisely we can more than meet our obligations
Please explain why the retired CS are given the luxury of health insurance coverage at the expense of the every working person? while the every working person will still have to pay to have health insurance when they are retired. This picture is very lop sided with the every working person paying twice. Government has failed the people by not putting in place a national health insurance plan. This needs to be fixed and the sooner the better as the insurance companies are milking the public and providing the minimum coverage and our government continue to allow it with no policing in place.
The amount of beach in that picture is overstated.