Submission from Floyd B Hall, MHA, CPA,
Minister of Finance and Deputy Premier, Government of the Turks
and Caicos Islands
FOREIGN AND COMMONWEALTH OFFICE/MANAGING
RISK IN THE OVERSEAS
TERRITORIES—REPORT BY THE NATIONAL
AUDIT OFFICE
The Government welcomed the visit of the members
of the Foreign Affairs Committee to the Islands last week and
trust that you found the visit productive and enjoyable. Whereas
the above captioned report formed the backdrop to many of the
meetings in the Islands, I am writing you to offer additional
clarifications on the issues covered in the report as they relate
especially to the section on the Turks and Caicos Islands.
The Government of the Turks and Caicos Islands
readily embraced the opportunity to participate in the national
Audit Office report on Managing Risk in the Overseas Territories
during 2007. We welcomed this review as it provided a chance to
assess the roles of both the Territories and the United Kingdom
governments in managing and mitigating wide ranging risks in the
framework of evolving governance relations and internationalization
of risks, where territories operate financial centres.
We have reviewed the Report, which addresses
risk management in the most critical areas such as disaster management,
law enforcement and national security, public financial management,
regulation of financial sectors and transport safety and security.
Correctly the report noted diversity in the
Overseas Territories due to their geography and economic performance.
It also noted varying levels of performance in managing and mitigating
risks. It is observed that the more well-off a territory is economically
the better it was at managing and mitigating risk; and some success
stories from the territories were reported in areas such as disaster
management, transport safety and security and regulation of financial
centres.
The report highlighted some concerns regarding
public financial management and good governance in several of
the territories. The government of the Turks and Caicos islands
is very concerned that in most instances it had been singled out
as an example of poor public financial management and governance.
This in spite of progress we made in growing our economy and lessening
our dependence on UK financial assistance. We are very pleased
that the main economic indicators in our economy are favourable.
I would therefore like to share with you some of our plans and
information on our commitment to improving good governance and
public financial management, which are integral to our quest for
nationhood. I would also respond to some of the specific issues
raised in the Report as they relate to the Turks and Caicos Islands.
The government fully subscribed to good government
principles. Over the years we have adequately provided financial
input to related areas such as expansion of the judiciary and
law enforcement. We have in place disaster management plans. We
are also committed to proper functioning of committees of the
House of Assembly. As part of our legislative agenda, since the
Report was published, we have taken steps to ensure disclosure
of interests by public officials, including members of the House
of Assembly. In this regard you would be pleased to note that
we are in the process of piloting an Integrity in Public Office
Ordinance through the House of Assembly. This bill has already
been debated as it has gone through its first and second readings
and is now in the Committee of the Whole House for further scrutiny.
The government of the Turks and Caicos Islands
is committed to a progressive development strategy, which would
promote balanced development across and impact every island in
our archipelago. We have completed preparation of a Ten Year Development
Plan to serve as a road map to guide future development in the
Islands.
During the last few years we have been able
to promote economic growth and expansion through expansionary
fiscal policy, on both recurrent and capital programs, as this
is integral to our development strategy. We note the observation
that expenditures are routinely incurred without reference to
the legislature and that there has been instances of expenditure
in excess of annual Budget. While this might have been the case
this has only occurred to allow us to take advantage of important
development opportunities. It is also important to note all such
expenditure were approved by the Executive Council in advance
and later on by the legislature by supplementary appropriation
as has been the case with previous administrations.
We acknowledge that in some instances development
projects have been brought on during the year, following approval
of the budget, but this is consistent with our budget management
regulations. This point has been noted in several audit reports
and we are committed to addressing this in the future, but note
that there will always be circumstances when projects will have
to be introduced due to emergencies and new opportunities for
us to embrace.
Due to the growth, which our policies has ushered-in
it is true that the government has benefited from windfall revenue
in some instances. However, the suggestion that the government
has had to rely on the sale of public land to meet current account
deficits is totally incorrect. Due to the restrictions of borrowing
guidelines imposed by the UK government on occasion the proceeds
from land related transactions have been used to meet the cost
of capital development programs only. A fundamental principle
of our government is not to liquidate fixed assets to finance
recurrent expenditure.
We strongly believe that the reference to rising
public sector debt is unfounded. It is important to put this in
its proper perspective and note the low level of infrastructural
development which is in place in the Islands and the negative
implications this has on the overall level of development. Accordingly
over the last few years we had to increase public sector borrowing
to finance infrastructure to give our economy a chance to grow.
It is also important to note that all our debt has been approved
under the borrowing guidelines agreed with the UK Government and
that all of our borrowing indicators are very low by international
benchmarks.
You would be aware that the Turks and Caicos
is a small island economy. It is therefore impossible for the
government not to undertake transactions with companies owned
by family members of Ministers and officials, if these companies
are to be allowed to exercise their constitutional rights to participate
in the economic life of the country. Notwithstanding this, Ministers
do regularly and routinely register their interests.
We have always observed competitive tendering
and sort to achieve value for money in all transactions. Our financial
regulations allow for wavier of tender requirements in specific
instances and we have used these provisions to speed up project
implementation and absorption. This in part has allowed us to
expand infrastructure provision on all islands as we strive to
promote balanced development in our country.
Our programs in the areas of scholarships and
providing medical care for our citizens are consistent with expanding
our national productivity over the long term. It is worthwhile
noting that our investments in these areas are consistent with
giving our citizens the opportunity to competitively participate
in the growth and development of our economy where a majority
of professional and skilled positions are held by non-nationals.
In fact a Poverty Assessment Report, which was undertaken with
the UK assistance by the Caribbean Development Bank during 2000,
noted that investments in education and health were essential
to ensuring the Belongers are not marginalized due to the development
of their economic space. We are satisfied that the investments
in these areas are justified and have had the required impact.
Due to this we have now introduced new policies which should contain
these costs within acceptable limits in the future, as they will
need time to take effect.
In the area of medical costs containment we
are determined to reform our health sector. As part of our planned
reforms we are constructing two modern hospitals, which were procured
through a very transparent Public Finance Initiative which was
modelled on your experience in the UK. This procurement took over
two years and involved local technical experts in law, finance,
health and public administration working along with UK based advisers.
The Foreign and Commonwealth Office (FCO) was always kept informed
of developments regarding this procurement. These hospitals should
be commissioned in two years and should result in a significant
reduction in overseas medical care costs.
Additionally, as part of our health sector reform
program, the government is also committed to and has publicly
announced plans to introduce a mandatory national health insurance
program by April 2009, which should also assist in containing
medical cost and sharing the burden between citizens and the state.
As part of our overall commitment to strengthening
public financial management, we have introduced a Fiscal Stabilization
Program and a Ministry of Finance Change Project. These projects
will introduce a number of reforms over the medium term to foster
sustainable development. Important reform areas are: review of
the revenue regime; modernization of public financial ordinances,
regulations and procedures; introduction of results oriented budgeting
and sustainable debt management. As part of our plans we would
also be undertaking capacity building initiatives. We would welcome
UK assistance in these reforms and we are currently assessing
offers of assistance from the FCO.
We note the suggestion that resourcing of instruments
of scrutiny are not protected in the Constitution. Whilst this
might be the case, we are very pleased and satisfied with our
record of providing adequate funding for these important institutions
of our democracy.
In the end, I must point out the Public accounts
is made up mainly of members of the opposition so it really is
a matter for them to decide how to conduct their business. Notwithstanding
this, civil servants fully comply with requests from the Public
Accounts Committee and we would be supportive of efforts to improve
the effectiveness of this committee.
In concluding, we are concerned that the section
of the report on the Turks and Caicos focused only on information
provided by the Chief Auditor in the National Audit Report and
did not take into consideration the views of many other persons
who were interviewed. This made this section very unbalanced and
did not take into consideration the progress we have made in other
areas of risk. We are convinced that the former Chief Auditor
was well aware of many of the answers we have provided in this
correspondence which would have impacted favourably on our audit,
yet she failed to take them into consideration in the compilation
of our national audit report. It is our opinion that she never
intended to be objective in her reporting with our audit and decided
to use her office to give a parting blow to our Administration
on completion of her contract with the Turks and Caicos Islands
Government.
We trust that the foregoing information will
assist you in putting into proper perspective the various infractions
outlined in the Chief Auditor's report. Whilst we do accept that
we have confronted many challenges in disposing of our fiscal
responsibilities over the years because of our geography and other
economic realities, we believe that the harsh nature of the Chief
Auditor's contribution on the government's accounts was grossly
unwarranted and spiteful. We remain committed to good governance
and in this regard to showing progress in future audit reports.
25 March 2008
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