By Alric Lindsay
In a session of Parliament today, October 10, 2024, Deputy Premier André Ebanks announced that the $375,000 allocated for housing repair projects in the 2024 budget has now been exhausted. He explained that, with “well over 50 pre-existing cases on the ministry’s waiting list that are in desperate need of repair,” an additional $1 million must now be added to the budget. The Cabinet sought and approved this amount as an “exceptional circumstance” under section 11(5) of the Public Management and Finance Act.
What is an exceptional circumstance?
Regarding an exceptional circumstance, this is defined under section 2 of the Public Management and Finance Act as follows:
“exceptional circumstance” means an event which occurs during a financial year and which:
(a) is beyond the control of the Cabinet;
(b) could not have been reasonably anticipated at the time of enactment of the Appropriation Law for that financial year;
(c) has an economic or social impact that is significant enough to necessitate executive financial transactions different from those planned for that financial year; and
(d) requires the executive financial transactions to be entered into in a timescale that makes compliance with the procedure established by section 12 impractical
Concerning what the Cabinet must consider to approve an exceptional circumstance, section 11(5) of the Public Management and Finance Act states:
Where an exceptional circumstance has occurred during a financial year, the Cabinet may authorise executive financial transactions for which no appropriation exists if:
(a) the executive financial transactions directly relate to, and attempt to remedy the effects of, the exceptional circumstance; and
(b) the total amount authorised is no more than five per cent of budgeted executive revenue for the financial year.
The Public Management and Finance Act adds:
(6) Where the Cabinet has authorised executive financial transactions in accordance with subsection (5):
(a) a member of the Cabinet appointed by the Cabinet to do so on its behalf shall, at the next sitting of the Parliament after the exceptional circumstance has occurred, make a statement to the Parliament advising of:
(i) the exceptional circumstance, its nature, and how it complies with the definition of the term “exceptional circumstance” set out in section 2;
(ii) the type and amount of the executive financial transactions authorised or likely to be authorised; and
(iii) the effect of the authorisations, or likely authorisations on compliance with the principles of responsible financial management specified in section 14; and
(b) the authorised executive financial transactions are to be included in a supplementary Appropriation Bill introduced in the Parliament by the 31st day of March following the financial year to which those transactions relate.
Does the additional $1 million in housing repairs meet the “exceptional circumstance” definition?
Regarding whether the additional $1 million in housing repairs meets the definition of “exceptional circumstance,” the Deputy Premier said:
TP 60 Housing repairs assistance provides for housing repair assistance to Caymanians who are either older persons or persons with a disability, or who have children in need of care, as per section 19 of the Children act, that own and or occupy their residential property and have been assessed as financially indigent. There was and is an urgent need to increase the appropriation in the 2024 financial year. The cases are real, they are urgent.
The Deputy Premier added:
I have in many cases personally been in some of these houses, not just in my constituency, and they truly cannot be afforded by the vulnerable Caymanian homeowners that reside there.
It should also be recognized that deterioration continues weekly, if not daily, during the rainy season and in a very active hurricane season.
Effect of additional $1 million authorisation on compliance with the principles of responsible financial management
As it necessary under the Public Management and Finance Act for a minister to confirm the effect of the authorization of the additional $1 million on compliance with the principles of responsible financial management, the Deputy Premier said, “the aforementioned exceptional circumstances transaction which was approved by Cabinet for the ministry for the period of 2024 fiscal financial period, did not cause any non-compliance with the principles of financial management.”
None of the members of Parliament raised any questions about the Deputy Premier’s explanation of the exceptional circumstance or challenged its compliance with the principles of responsible financial management under the Public Management and Finance Act.
Note to readers on the principles of responsible financial management
When amounts are not included in a previous budget and the Cabinet later approves an additional amount as an “exceptional circumstance,” the minister giving the explanation in Parliament must explain how the additional authorized amount complies with the principles of responsible financial management specified in section 14 of the Public Management and Finance Act.
This states:
Responsible financial management
14. (1) The Cabinet shall manage the financial performance and financial position of the core government in accordance with the principles set out in this section.
(2) The policies and decisions of the Cabinet shall be consistent with the principles of responsible financial management set out in subsection (3), and the impact of those decisions on the core government’s financial performance and position shall be measured using accrual accounting.
(3) The principles of responsible financial management referred to in subsection (2) are
(a) total core government revenue less total core government expenses (measured using generally accepted accounting practice) should be positive;
(b) total core government assets less total core government liabilities (measured using generally accepted accounting practice) should be positive;
(c) borrowing should not exceed an amount for which the sum of interest, other debt servicing expenses and principal repayments (except for repayments of principal that, under relevant borrowing agreements, were not legally required to be made) for a financial year are more than ten per cent of core government revenue (calculated using generally accepted accounting practice) for that financial year, where, for the purposes of this principle, borrowing is defined as all borrowing that is in the name of the Government regardless of whether it is serviced directly by the core government, a statutory authority or government company;
(d) net debt should be no more than eighty per cent of core government revenue, where, for the purposes of this principle, net debt is defined as — (i) core government borrowing less core government liquid assets; (ii) borrowing that is serviced directly by a statutory authority or government company but is in the name of the Government; and (iii) the percentage of statutory authority and government company debt guaranteed by the Government that regulations made under this Law specify is to be included in the net debt calculation;
(e) cash reserves should be maintained at a level no less than the estimated executive expenses (measured using generally accepted accounting practice) for the following ninety days, where, for the purposes of this principle, cash reserves are defined as core government cash and cash equivalents, marketable securities and deposits, and other liquid assets, including any amounts held for restricted funds and reserves purposes; and c Revised as at 31st December, 2019 Page 19 Section 14A Public Management and Finance Law (2020 Revision)
(f) the financial risks, including contingent liabilities, facing the core government should be managed prudently so as to minimise the likelihood of any such risk resulting in an expense or liability.
(4) Cabinet decisions may depart from the principles of responsible financial management for a limited period if the Cabinet specifies in a paper laid before the Parliament for its information (which may be included in a relevant document required by this Law):
(a) the reasons for the departure;
(b) the approach that the Cabinet intends to take in order to return to those principles; and
(c) the period of time that the Cabinet expects to take to return to those principles.
