The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Moody’s has proven that the Government’s 2016-2017 deficit was “never $500 million”, a well-known businessman yesterday arguing: “Let’s not keep beating that narrative.”

Sir Franklyn Wilson, the Sunshine Holdings chairman, told Tribune Business that the ratings agency had shown the Minnis administration had violated “a key principle of accounting” in arriving at that estimate.

An accountant by profession himself, Sir Franklyn said consistency in accounting methods was the norm if financial statements and other figures were to be properly compared.

He argued, after being shown Moody’s August 25 ‘credit opinion’ on the Bahamas, that the Government had been less than transparent when it “changed overnight” to accrual-based accounting for the 2016-2017 fiscal year.

“I believe this Moody’s report demonstrates so clearly how this country would benefit if we could get past partisan politics,” Sir Franklyn told Tribune Business. “If we can get past partisan political stuff, and focus on truth in this country, we agree on so much.

“In this report, for example, it clearly establishes that based on a consistent accounting, with consistent accounting principles, the deficit was not $500 million. Based on consistent accounting principles, it was not.”

The FOCOL and Arawak Homes chairman was speaking out after Moody’s ‘credit opinion’ revealed that the Minnis administration adopted accrual-based accounting methods in respect of the 2016-2017 fiscal year, which elevated the Budget deficit to $500 million (see lead article on Page 1B).

This represented a switch away from the Government’s traditional cash-based accounting system, and had the effect of ensuring that the former Christie administration’s multi-million dollar pre-election spending commitments were captured when they were made - in 2016-2017.

Many observers will argue that Minnis administration was correct in accounting for these liabilities when they were incurred, and that the Government should have switched to accrual-based accounting full-time decades ago to properly manage the Bahamas’ fiscal affairs.

However, Sir Franklyn countered that the Government could not arbitrarily change its accounting methods to suit its agenda, arguing that this was against best accounting principles.

“Let’s not keep beating that narrative about $500 million,” he told Tribune Business. “What Moody’s underscores is the deficit was not $500 million using a consistent basis of accounting.

“That [accrual-based accounting] ain’t the way the system works. That ain’t right. Cash-based accounting is the way it’s always been done. A principle in accounting is consistency. If you’re going to be consistent, you have to do it on the same basis.

“The only way to get to $500 million is to change the basis of accounting. If you do that, you have to do it with a much higher degree of consistency other than for Government to decide to change it overnight. You’ve got to be highly transparent about it, and that didn’t happen.”

K P Turnquest, deputy prime minister and minister of finance, argued that the Government’s decision to account for the Christie administration’s spending commitments when they were made had been vindicated by Moody’s decision not to downgrade the Bahamas’ sovereign credit rating to so-called ‘junk’ status.

He said the Bahamas had been given credit by Moody’s for its transparency in divulging its true fiscal reality, but Sir Franklyn suggested that the “highly partisan political speech” he gave in late May when unveiling the Budget had sparked the rating agency’s review and threatened downgrade.

“Our cupboard is not bare, and their report points to the fact the cupboard is not bare,” Sir Franklyn told Tribune Business. “Let’s stop talking down the economy. The cupboard is not bare.”