The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s fiscal transparency drive has burdened decades-old accounting and payroll systems with legally-mandated reporting deadlines they are not equipped to meet, a top official is asserting.

Simon Wilson, the Ministry of Finance’s financial secretary, told Tribune Business that The Bahamas had gone about imposing increased accountability and governance in reverse fashion by setting reporting deadlines prior to getting the necessary systems in place rather than the other way around.

Emphasising that he “fully supports” enhanced fiscal transparency, he said the Government’s accounting and payroll systems - 32 years-old and 22 years-old, respectively - have never been “integrated” and struggle to produce accurate numbers in accordance with the deadlines set by the Public Finance Management Act.

The Davis administration has constantly come under fire from the Opposition for failing to meet the reporting timeline set out by the Act, but Mr Wilson told this newspaper: “Let’s put it this way. Our accounting system is 32 years-old. It has never been upgraded. Our payroll system is 22 years-old, has never been upgraded, and they are not integrated.

“So when you see those numbers, those reports, in the timeframe required, it requires persons and hours from a team of people in the Treasury and Ministry of Finance to produce them. When we have this reporting schedule, which I fully support, the challenge is you have a reporting schedule that we have committed to but the information infrastructure is not available. That’s difficult.”

Asked whether the Act should be amended to revise the fiscal reporting deadlines, and make them more realistic and aligned with the Ministry of Finance/Treasury capabilities, Mr Wilson replied: “I’d prefer more than that. I’d prefer more modern information systems. The information system we have now is not designed for this reporting schedule.

“Typically, you have a reporting system before you have a reporting schedule. We’ve done it the other way. We’ve imposed a reporting burden on a system where, the kind of information you need in the time you need it, you can’t produce it. It requires a lot of interaction. If we could upgrade the system, then the reporting schedule would not be a problem. It’s very, very critical. The information system, these reporting deadlines, are very, very difficult.”

The Act requires the monthly fiscal reports to be submitted to the Cabinet “no later than four weeks” after the relevant period ends, with the document released publicly one week after that. Thus the November 2022 report should have been released in early January 2023, rather than on Friday, February 17, making it over one month late. The December 2022 report was also late, albeit by a week to ten days, as it should have been unveiled by the first week in February.

The Government is also late with the so-called “fiscal snapshot” for the 2022-2023 second quarter, which covers the period October-December 2022. This, too, should have been published at end-January/early February but has yet to emerge. These missed deadlines come ahead of the Davis administration’s unveiling of the mid-year Budget, which is likely to be released in the House of Assembly this week.

However, Kwasi Thompson, the Opposition’s finance spokesman, yesterday again berated the Davis administration for missing its statutory fiscal reporting deadlines. “We are grateful that the Government has finally gotten around to releasing its tardy monthly fiscal summary reports for November 2022 and December 2022,” he blasted.

“It still has not released the required second quarter fiscal report covering the period of July to December 2002, which is also late. The minister of finance seems to continuously be in violation of the statutory deadlines mandated in sections 69 and 70 of the Public Finance Management Act.”

Mr Thompson also picked up on another Opposition theme - this time the discrepancies in the Government’s explanation of how it is accessing the $232.3m in International Monetary Fund (IMF) special drawing rights (SDRs) that were held by the Central Bank as part of the external reserves.

The Government and Ministry of Finance had previously denied that this transaction involved borrowing the SDRs or “printing money”, as the Opposition had alleged. However, the December fiscal report confirmed the full $232.3m had been drawn down by the Davis administration while classifying this as “bank loans” or part of some $250m in “foreign currency loans”.

Arguing that the Government was admitting to borrowing, and the obligation to repay, in its report, Mr Thompson said: “The Central Bank detailed in its December report the Government’s ‘drawdown’ of the $232.3m IMF SDRs. Why didn’t the Ministry of Finance’s report note this as an advance specifically from the Central Bank, which it patently is?

“Why try to obscure its origin by labelling it simply a foreign currency loan? How is it now a loan when, in January, the press statement from the Ministry of Finance claimed it was not “borrowing money” from the Central Bank? What are the loan terms - the interest rate, the duration? Was money sourced from the IMF itself to monetise these drawing rights?

“Where is the MOU (memorandum of understanding) that was signed between the Ministry of Finance and the Central Bank? Why is an MOU between two public entities a secret?” Mr Thompson continued.

“Now that the Ministry in its own report has acknowledged the obvious truth - that it is taking the unprecedented step and borrowing money from the Central Bank external reverses - the minister of finance must now explain why he pursued what is clearly an illegal advance of funds from the Central Bank contrary to Section 21 of the Central Bank Act.

“This is breaking the law, plain and simple. Claiming that you are going to bring legislation to fix the breaking of the law after the fact is not an acceptable position.” Mr Wilson confirmed to Tribune Business that the $232.3m was the IMF SDRs, and that this was used to repay $180m in foreign currency borrowings, leaving $52.3m unused. He also indicated that the SDRs were encashed and monetised.

One source, speaking on condition of anonymity, argued that the SDR transaction was akin to “printing money” because of the $52.3m balance as yet unused.