It should be of interest to the BU family there is some attempt to arrest indiscipline financial management at State Owned Entities (SOEs). Runaway spending at SOEs contributed in large measure to the current debt spiral Barbados is now mired. There is much to be done given current state.
Here is the 30 minute financial statement by Minister Ryan Straughn on the 29 October 2019.
Barbados Today reported on the matter detailed below:
Marlon MaddenPublished on
October 30, 2019
The cash-strapped Transport Board was the main underperformer among state owned enterprises for the last six months, racking up 43 per cent of the losses among the five main worst performing state entities, the Ministry of Finance said today.
But the Queen Elizabeth Hospital (QEH), and the Barbados Water Authority (BWA) were declared among the best performing agencies, according to a ministerial statement issued by Minister in the Ministry of Finance Ryan Straughn.
The Transport Board, National Conservation Commission, National Assistance Board, the Fair Trading Commission (FTC) and the Child Care Board, were listed as five main “under-performing” SOEs with deficits of $9.05 million, $5.78 million, $2.72 million, $1.99 million, and $1.49 million respectively.
Of the five entities, only the bus company and the NCC are traditionally considered commercial or revenue-generating entities which are expected to break even or deliver a surplus.
“While it is expected that the commercial entities would comprise the top performers, it is noted that two of the five under performers, the Transport Board and National Conservation Commission, had combined losses of $14.83 million, representing 55 per cent of the total,” Straughn said.
There are currently 33 SOEs targeted for scrutiny under the Government’s Technical Memorandum of Understanding (TMU) with the International Monetary Fund (IMF), 22 of which are commercial and eleven, non-commercial.
But reporting on 28 of the SOEs since the financial year began, Straughn reported a rise in their aggregate revenue by $80.63 million to $451.33 million, over $370.69 million for the previous year.
Overall, the commercial SOEs were responsible for $373.11 million or 83 per cent of the aggregate revenue.
The entities reported an aggregate net surplus of $60.95 million.
Commercial SOEs were the major contributors to the aggregate net surplus, accounting for 83 per cent or $50.85 million of the total, while the non-commercial SOEs accounted for the remaining 17 per cent or $10.10 million of the amount.
“This represents an increase of $50.70 million when compared to $10.24 million earned in the previous year,” said Straughn.
He pointed out that 15 of the entities reported “profits” of $87.90 million, while the remaining 13 incurred “losses” of $26.95 million.
The top five performers were New Life Investment Company Inc. (NLICO), with profit of $23.87 million; the Barbados Tourism Marketing Inc. (BTMI) ($17.30 million); the BWA, ($8.82 million); QEH (8.38 million); and the Barbados Agricultural Development Marketing Corporation (BADMC) with profits of $6.56 million.
The Minister said: “For 2018, the reverse was true with thirteen entities reporting profits of $55.78 million while the remaining fifteen incurred losses of $45.54 million.
“It should be noted however that NLICO’s improved performance was mainly due to gains on disposal of assets.”
The QEH was the top revenue performer mainly because of a Government subvention of $72.37 million, followed by the 2.5 per cent Health Service Contributions Levy, which contributed $30.37 million, said Straughn.
“Without these sources of income, the operations would not be sustainable since the QEH’s core business of patient services fees only brought in $5.30 million or five per cent of its total revenue,” he added.
The top five spenders for 2019 were QEH ($99.52 million), BWA ($78.32 million), BTMI ($37.01 million), Transport Board ($26.44 million) and the Sanitation Services Authority (SSA) ($24.02 million), which was largely similar to 2018.
The Minister pointed out that within the commercial entities operating revenue was the largest component, accounting for 55 per cent or $203.31 million of the groups combined income of $371.01 million.
He said: “Subventions from Government were still significant however, comprising 30 per cent of the total, while ‘Other Income’ was 15 per cent.
“Within the non-commercial entities, the situation was the opposite as Government grants totaled $62.37 million or 80 million of this group’s income. Operating income contributed $15.12 million or 19 per cent, while a mere one per cent or $0.72 million was accounted for by ‘Other Income’.”
Aggregate total expenses were $389.35 million for the fiscal year so far, an increase of $27.88 million over the 2018 period’s spending of $361.47 million.
The ministerial statement added: “Wages and salaries accounted for 48.5 per cent of the total, followed by operating expenses with 38.3 per cent.
“For 2018, wages and salaries was $184.91 million or 51 per cent, followed by operating expenses with $127.94 million or 35.4 per cent.
“The commercial SOEs were the significant contributors to the costs for both 2019 and 2018 accounting for 83 per cent and 82 per cent, respectively.
The report indicated that while the entities in the scrutiny list showed improved performance in 2019, a number of them experienced escalating operating costs when compared to 2018, the four main ones being the QEH, BWA, BTMI and the Transport Board.
Straughn declared: “Given the financial context in which the entities are operating, special focus will be given in order to identify effective measures to reduce these costs.
“Additionally, based on the analysis, entities such as the National Assistance Board, Caribbean Broadcasting Corporation, Transport Board and National Conservation Commission, have experienced operating losses ranging from $2 million to $9 million, and these will continue to be carefully monitored.
“Unfortunately, the review still identified financial and structural deficiencies that could increase Government’s exposure to fiscal risk if not properly managed.
“It is therefore important that we continue to regularly engage with these enterprises and to provide strong oversight especially in the area of financial reporting.”