Financial Regulations (2005 Revision) PUBLIC MANAGEMENT AND FINANCE LAW

Financial Regulations (2005 Revision) Supplement No. 3 published with Gazette No. 18 of 5th September, 2005. PUBLIC MANAGEMENT AND FINANCE LAW (2005 Revision) FINANCIAL REGULATIONS (2005 Revision) The Financial Regulations, 2004 consolidated with the Financial (Amendment) Regulations, 2005. Revised under the authority of the Law Revision Law (1999 Revision). Originally made - Regulations, 2004-18th May, 2004 Regulations, 2005-15th February, 2005. Consolidated and revised this 12th day of July, 2005. Financial Regulations (2005 Revision) 2 Financial Regulations (2005 Revision) FINANCIAL REGULATIONS (2005 Revision) ARRANGEMENT OF REGULATIONS PART I - Introductory 1. Citation 2. Definitions 3. Application and interpretation PART II - Information to be provided to the Portfolio 4. Supply of budget information 5. Supply of actual financial and non-financial information 6. Provision of forecast entity bank balance information 7. Provision of forecast cash disbursement profile PART III - Financial Statement Format and Accounting Policies 8. Government forecast financial statements 9. Government financial statements 10. Prescribed entity forecast financial statements 11. Prescribed entity financial statements 12. Financial information provided by statutory authorities and government companies 13. Opening balance sheet values PART IV - Centralised Accounting Information System 14. Use of the IRIS 15. Responsibility for maintaining ledgers 16. Authorisation 17. Timely recording PART V - Bank Accounts and the Centralised Cash Management System 18. Structure and operation of prescribed entity bank accounts 19. Banking of entity transactions 20. Internal control over bank accounts 21. Foreign currency entity bank accounts 22. Structure of the executive bank account 23. Responsibility for managing executive cash flows 24. Payment of interest 25. Investment of cash balances 3 Financial Regulations (2005 Revision) 26. Notification of interest rates PART VI - Capital Charge 27. Payment and calculation of capital charge 28. Capital charge rate PART VII - General Financial Management Practices of Prescribed Entities 29. System of internal controls 30. Compliance with borrowing prohibition 31. Responsibility for risk management 32. Foreign currency exposure PART VIII - Output Costing 33. Responsibility for output costing 34. Basis of cost allocation 35. Variation of allocation methods PART IX - Procurement 36. Preference to local suppliers 37. Requirement to tender 38. Application to all transactions 39. Tendering process 40. Evaluation of tenders PART X - Trust Assets 41. Managing trust assets 42. Accounting for trust assets PART XI - Financial Record Keeping 43. Records to be retained PART XII - Capital Project Appraisal 44. Responsibility of the chief officer 45. Information required 46. Timing 47. Role of the PSIC 48. Definition of “capital project” for the purposes of Part XII PART XIII – Weightings of Statutory Authority and Government Company Debt to be Included in Core Government Net Debt Calculation 49. Calculation of core government net debt 4 Financial Regulations (2005 Revision) First Schedule: Format for the Forecast Financial Statements, the Quarterly Financial Statements and the Annual Financial Statements for the Core Government and for the Entire Public Sector Second Schedule: Format for the Forecast Financial Statements, the Quarterly Financial Statements and the Annual Financial Statements of Prescribed Entities Third Schedule: Accounting Policies for Financial Statements of the Entire Public Sector, Core Government and Prescribed Entities Fourth Schedule: Accounting Policies for Opening Balance Sheet Values for the Entire Public Sector, Core Government and Prescribed Entities Fifth Schedule: Project Appraisal Documents 5 Financial Regulations (2005 Revision) 6 Financial Regulations (2005 Revision) FINANCIAL REGULATIONS (2005 Revision) PART I- Introductory 1. These regulations may be cited as the Financial Regulations (2005 Citation Revision). 2. In these regulations - Definitions “Bank” means Cayman Islands Development Bank established under section 3 of 2004 Revision the Development Bank Law (2004 Revision); “Civil Aviation Authority” means the Civil Aviation Authority of the Cayman 2005 Revision Islands established under section 3 of the Civil Aviation Authority Law (2005 Revision); “IRIS” means the centralised accounting information system; “Port Authority” means the Port Authority of the Cayman Islands established by section 3 of the Port Authority Law (1999 Revision); “Portfolio” means the Portfolio of Finance and Economics; “prescribed entity” means a ministry or portfolio, the Audit Office or the Office of the Complaints Commissioner; and “PSIC” means the Public Sector Investment Committee established by the Financial Secretary. 3. (1) These regulations apply to prescribed entities, the core government Application and interpretation and the entire public sector. (2) Parts II, III, VIII and XII apply to statutory authorities and government companies. (3) These regulations apply to financial activity relating to any financial year commencing after the 30th June, 2004. (4) The decision of the Financial Secretary shall be final as to the correct interpretation of these regulations. 7 Financial Regulations (2005 Revision) PART II - Information to Be Provided to the Portfolio Supply of budget 4. Each prescribed entity, statutory authority and government company shall information supply accurate financial and non-financial budget information to the Portfolio, in the form and within the time frame from time to time notified by the Portfolio, for the following purposes - (a) the preparation of strategic policy statements; (b) the preparation of annual plans and estimates; (c) the preparation of supplementary annual plans and estimates; (d) the preparation of the Pre-election Economic and Financial Update; and (e) such other purposes as may be required by the Portfolio. Supply of actual 5. Each prescribed entity, statutory authority and government company shall financial and non- supply accurate financial and non-financial information to the Portfolio, in the financial information form and within the time frame from time to time notified by the Portfolio, for the following purposes - (a) the preparation of Government quarterly reports; (b) the preparation of Government annual reports; (c) the monitoring of the financial and non-financial performance of the core government and the entire public sector; and (d) the monitoring of the financial and non-financial performance of prescribed entities, statutory authorities and government companies. Provision of forecast 6. (1) A prescribed entity operating an entity bank account in accordance entity bank balance with Part V, shall provide the Treasury with forecast closing balances for its information entity bank account as follows - (a) a forecast closing balance for each month in a financial year shall be provided prior to the beginning of the financial year; and (b) a forecast closing balance for each working day in a month shall be provided prior to the beginning of the month. (2) The daily cash balance forecasts shall be updated and resubmitted as necessary during the month. (3) The forecasts shall be provided in the format specified by the Treasury. Provision of forecast 7. (1) A prescribed entity operating an executive expenditure bank account in cash disbursement accordance with Part V shall provide a cash disbursement profile for that bank profile account to the Treasury as follows - 8 Financial Regulations (2005 Revision) (a) a forecast of the total expected amount of cash to be disbursed to the executive expenditure bank account in each month in a financial year shall be provided prior to the beginning of the financial year; and (b) a forecast total expected amount of cash to be disbursed to the executive expenditure bank account in each working day in a month shall be provided prior to the beginning of the month. (2) A prescribed entity operating an executive revenue bank account in accordance with Part V shall provide a cash receipts profile for that bank account to the Treasury as follows - (a) a forecast of the total expected amount of cash to be banked into the executive revenue bank account in each month in a financial year shall be provided prior to the beginning of the financial year; and (b) a forecast total expected amount of cash to be banked into the executive revenue bank account in each working day in a month shall be provided prior to the beginning of the month. (3) The daily cash disbursement and cash receipts profiles shall be updated and resubmitted as necessary during the month. (4) The forecasts shall be provided in the format specified by the Treasury. PART III - Financial Statement Format and Accounting Policies 8. Unless the Financial Secretary authorises otherwise in writing, the forecast Government forecast financial statements financial statements in the annual plan and estimates, supplementary annual plan and estimates, and pre-election economic and financial update shall be prepared in accordance with - (a) the relevant formats set out in the First Schedule; and (b) the applicable accounting policies set out in the Third Schedule. 9. Unless the Financial Secretary authorises otherwise in writing, the financial Government financial statements statements in the Government quarterly report and Government annual report shall be prepared in accordance with - (a) the relevant formats set out in the First Schedule; and (b) the applicable accounting policies set out in the Third Schedule. 10. Unless the Financial Secretary authorises otherwise in writing, the forecast Prescribed entity forecast financial financial statements in the annual budget statement of a prescribed entity shall be statements prepared in accordance with - (a) the relevant formats set out in the First Schedule; and 9 Financial Regulations (2005 Revision) (b) the applicable accounting policies set out in the Third Schedule. Prescribed entity 11. Unless the Financial Secretary authorises otherwise in writing, the financial financial statements statements in the quarterly report or annual report of a prescribed entity shall be prepared in accordance with - (a) the relevant formats set out in the Second Schedule; and (b) the applicable accounting policies set out in the Third Schedule. Financial information 12. Unless the Financial Secretary authorises otherwise in writing, the financial provided by statutory information provided by statutory authorities or government companies for authorities and government companies inclusion in the core government or the entire public sector forecast financial statements or the core government or the entire public sector financial statements shall be prepared in accordance with - (a) the relevant formats set out in the First Schedule; and (b) the applicable accounting policies set out in the Third Schedule. Opening balance sheet 13. The values for items in the opening balance sheets of a prescribed entity, the values core government and the entire public sector are to be prepared using the applicable accounting policies set out in the Fourth Schedule. PART IV - Centralised Accounting Information System Use of the IRIS 14. Unless exempted in writing by the Financial Secretary, prescribed entities shall use the IRIS to record their entity financial activity and the executive financial activity for which they are responsible. Responsibility for 15. Each prescribed entity is responsible for entering all data into the IRIS, for maintaining ledgers making all entries and adjustments to all ledgers relating to its entity or any executive reporting entity for which it is responsible, and for ensuring that the information within those ledgers is accurate, complete and up to date. Authorisation 16. (1) Access to the IRIS is to be restricted to employees authorised by the chief officer of the prescribed entity concerned. (2) The chief officer of a prescribed entity shall ensure that - (a) appropriate delegations and authorisations in relation to the IRIS are established; (b) those delegations and authorisations are complied with; and (c) authorised employees are capable of fulfilling their responsibilities. Timely recording 17. (1) A transaction shall be recorded by a prescribed entity as soon as possible after the transaction has occurred, and in all cases no later than one week from the date of the transaction. 10 Financial Regulations (2005 Revision) (2) All end of period adjustments shall be made within two weeks of the end of each quarter. PART V - Bank Accounts and the Centralised Cash Management System 18. (1) Unless exempted in writing by the Financial Secretary, a prescribed Structure and operation of prescribed entity bank entity shall operate a bank account only as part of the centralised banking system accounts operated by the Treasury at the Royal Bank of Canada. (2) Subject to the approval of the chief officer of the Portfolio, a prescribed entity may determine the main account and sub-account structure of its bank account. (3) A prescribed entity may open and close bank accounts, within its approved bank account structure. 19. (1) A prescribed entity shall bank all receipts relating to entity transactions Banking of entity transactions into its bank account. (2) A prescribed entity shall withdraw all payments relating to its entity transactions from its bank account. (3) No receipts from entity transactions may be used to make payments without first being banked in the bank account of a prescribed entity. 20. (1) The chief officer of a prescribed entity shall maintain adequate internal Internal control over bank accounts controls over the operation of the entity’s bank accounts. (2) The chief officer of a prescribed entity shall ensure the prompt receipt and banking of money received. (3) All payments (whether by cheque, tape, electronic funds transfer or other means) out of an entity bank account of ten thousand dollars or more shall be authorised by two account signatories, each of whom shall be appointed by the chief officer of the Portfolio. (4) All payments (whether by cheque, tape, electronic funds transfer or other means) out of an entity bank account of less than ten thousand dollars shall be authorised by one account signatory, appointed by the chief officer of the Portfolio. (5) Cheques shall have the name of the relevant prescribed entity printed on them. 11 Financial Regulations (2005 Revision) (6) All entity bank accounts shall be reconciled at least monthly and such reconciliations shall be prepared by the Treasury or, if authorised by the chief officer of the Portfolio, prepared by the prescribed entity concerned and reviewed and approved by the Treasury. Foreign currency entity 21. (1) Written approval from the Financial Secretary is required to operate a bank accounts foreign currency entity bank account. (2) The operation of foreign currency bank accounts is subject to the same requirements as domestic bank accounts, including all internal control requirements. Structure of the 22. (1) Executive bank accounts, including any subsidiary executive bank executive bank account accounts shall be operated only as part of the centralised banking system operated by the Treasury at the Royal Bank of Canada. (2) The main account and sub-account structure of the executive bank account shall be determined by the chief officer of the Portfolio. (3) Executive bank accounts within the determined structure shall be opened and closed, only with the authority of the chief officer of the Portfolio. Responsibility for 23. (1) A prescribed entity, statutory authority or government company which, managing executive cash by way of annual budget statement or purchase agreement, has an obligation to flows manage executive assets, executive liabilities, executive revenues or executive expenses shall also be responsible for the management of the cash flows associated with those executive transactions. (2) An entity with responsibility for managing cash flows associated with executive financial transactions shall operate a subsidiary executive bank account under delegated authority from the chief officer of the Portfolio. (3) Separate executive bank accounts shall be maintained for executive receipts and executive payments. (4) An entity with responsibility for managing cash flows associated with executive financial transactions shall deposit all such receipts into, and make all such payments from, an executive bank account. (5) The chief officer of a prescribed entity, statutory authority or government company operating an executive bank account shall maintain adequate internal controls over the operation of executive bank accounts in the manner outlined in regulation 20. 12 Financial Regulations (2005 Revision) 24. (1) All interest payable by the Royal Bank of Canada on amounts held Payment of interest within the centralised banking system shall be executive revenue and shall be paid into an executive bank account operated by the Treasury. (2) The Treasury shall pay a prescribed entity interest on balances held in entity bank accounts that are part of the centralised banking system. 25. (1) A prescribed entity shall not invest idle cash balances other than on Investment of cash balances deposit with the Treasury as part of the centralised cash management system. (2) The Treasury shall pay a prescribed entity interest on deposits made with the Treasury by the entity as part of the centralised cash management system. 26. The Treasury shall, from time to time, notify prescribed entities of the rates Notification of interest rates of interest payable by it on cash balances and deposits. PART VI - Capital Charge 27. (1) The capital charge payable by a prescribed entity under section 41(5) , Payment and calculation of capital charge is to be paid to the Portfolio on the 31st July and the 31st January of each year. (2) The 31st July payment is to be calculated on the basis of the entity’s net worth at the preceding 30th June. (3) The 31st January payment is to be calculated on the basis of the entity’s net worth at the preceding 31st December. 28. The capital charge rate shall be set annually by the Financial Secretary and Capital charge rate shall apply to all prescribed entities unless a prescribed entity has obtained permission from the Financial Secretary to use a different rate. PART VII - General Financial Management Practices of Prescribed Entities 29. A chief officer of a prescribed entity shall ensure that an appropriate system System of internal controls of internal controls operates within the entity and that that system is adequate to safeguard the entity or executive resources for which the prescribed entity is responsible. 30. A chief officer of a prescribed entity shall ensure that the prohibition on Compliance with borrowing prohibition borrowing in the Law (including finance leases and operating bank overdrafts) is not breached in his entity. 13 Financial Regulations (2005 Revision) 31. (1) A chief officer of a prescribed entity is responsible for - Responsibility for risk management (a) identifying risks to which his entity is exposed; (b) establishing strategies to mitigate or manage those risks; and (c) ensuring those strategies are implemented. (2) All risks shall be managed in accordance with the policies established by the Governor in Cabinet on the advice of the Financial Secretary. (3) All insurance coverage shall be taken out through the Risk Management Office. Foreign currency 32. (1) A prescribed entity shall not enter into any transactions in foreign exposure currencies (other than in US Dollars) except with the written authorisation of the Financial Secretary. (2) Where a prescribed entity is authorised to enter into a foreign currency transaction other than in US dollars, the chief officer of that entity shall identify the foreign exchange transaction exposures of the entity and shall design policies to cover this exposure. (3) All policies and revisions thereto shall be approved by the Portfolio. (4) A prescribed entity authorised to enter into a foreign currency transaction other than in US dollars shall only enter into foreign currency transactions on the spot market or, where the term of the exposure is known, by way of forward exchange contracts. PART VIII - Output Costing Responsibility for output 33. The chief officer of a prescribed entity, statutory authority or government costing company is responsible for ensuring that the entity has a reliable and appropriate system for allocating entity input costs to the entity’s outputs. Basis of cost allocation 34. (1) The cost of all resources consumed in the production of outputs shall be allocated to outputs. (2) Direct costs that relate to a specific output shall be allocated directly to the output to which they relate. (3) Personnel costs shall be allocated on the basis of the proportion of a person’s time spent producing the output. (4) Time spent on overhead (non-output) activities, shall be treated as an indirect cost. 14 Financial Regulations (2005 Revision) (5) Indirect costs that relate to a single cost centre shall be allocated to that cost centre. (6) Indirect costs that relate to a number of cost centres shall be allocated to cost centres on the basis of the following methods - Expense Allocation Method Audit fees Pro rata basis Building occupancy costs (including Amount of space occupied by cost rent) centre Communications (for example, Usage of services by cost centre phone, fax, mail) Computer systems Number of terminals or personal computers used by cost centre Depreciation Use of assets concerned by cost centre Insurance Same manner as other costs for the insured asset type (for example, refer building costs, vehicle costs) Utilities (for example, electricity and Amount of space occupied by cost water) centre (7) The indirect costs of a cost centre shall be allocated to the cost centre’s outputs on the basis of the proportion of the cost centre’s direct costs allocated to that output. 35. Entities may use alternative allocation policies provided that the alternative Variation of allocation methods policy provides more accurate costs and has the prior approval of the Accountant General. PART IX - Procurement 36. Subject to an overriding requirement - Preference to local suppliers (a) to ensure value for money; and 15 Financial Regulations (2005 Revision) (b) to ensure that the price and quality of goods and services is no more than overseas procurement, a prescribed entity shall give preference to procuring goods and services from suppliers trading, carrying on business or operating within the Islands. Requirement to tender 37. (1) Subject to paragraphs (2), (3) and 4, a prescribed entity is required to offer for public tender - (a) any contract for the purchase of supplies, services and assets over twenty thousand dollars; and (b) the sale of assets with a book value of twenty thousand dollars or more. (2) In the case of a contract for the purchase of supplies, services and assets over twenty thousand dollars, where, in the opinion of the chief officer of a prescribed entity, only one supplier can provide the supplies, services or assets, the chief officer is not required to offer for public tender such contract but - (a) he shall comply with regulation 40; and (b) he shall be subject to an overriding requirement to ensure value for money. (3) Without prejudice to paragraph (2), where a state of emergency is 1997 Revision proclaimed under the Emergency Powers Law (1997 Revision) or an exceptional circumstance occurs, a prescribed entity, where it is impractical to do so, is not required to offer for public tender - (a) any contract for the purchase of supplies, services or assets; or (b) the sale of any assets, and the chief officer of a prescribed entity may enter into any contract for the purpose of the restoration of the Islands, using rates established by him subject to an overriding requirement to ensure value for money. (4) Where a chief officer enters into a contract pursuant to paragraph (3), a copy of the contract shall be provided to the Director of Internal Audit and the Auditor General. Application to all 38. The requirement to use a public tender applies to both entity and executive transactions transactions. Tendering process 39. A prescribed entity shall use the following tendering process, namely - (a) advertise nationally (and internationally, if appropriate) in a newspaper or other appropriate medium; (b) offer the contract for open tender, with details of the criteria that will be used to evaluate tenders; 16 Financial Regulations (2005 Revision) (c) evaluate the tenders; (d) select a tender, taking into account the price of contracts, but with no obligation necessarily to accept the lowest bid; and (e) notify all those who tendered of the successful bidder. 40. (1) All contracts with a value less that one hundred thousand dollars shall Evaluation of tenders be evaluated by a tenders committee established by the chief officer of the purchasing prescribed entity. (2) A contract with a value of one hundred thousand dollars or more shall be evaluated by a Central Tenders Committee comprising - (a) the chief officer of the Portfolio (or his nominee) as chairman; (b) the chief officer of the purchasing prescribed entity (or his nominee); and (c) such other persons as may be appointed, from time to time, by the Financial Secretary. PART X - Trust Assets 41. An entity with an agreement and delegation from the Financial Secretary to Managing trust assets provide management services in relation to trust assets shall recognise such activity as an output, and record any fee charged for the management of trust assets as output revenue. 42. (1) Trust assets shall be accounted for separately from an entity’s own Accounting for trust assets assets and trust money shall be held in a trust bank account, separate from the entity bank account and from the executive bank account. (2) Where an entity manages more than one type of trust money, such trust money may be held in one bank account, but separate records of the movements in each type of trust money shall be kept. PART XI - Financial Record Keeping 43. (1) A prescribed entity, statutory authority or government company is Records to be retained required to retain records pertaining to output reporting, entity financial transactions and executive financial transactions (including revenue, expenses, assets and liabilities) in such a manner that such records can be readily produced for operational and audit purposes. (2) A prescribed entity shall comply with any Government record keeping requirements established by the Director of the National Archives and notified in writing to chief officers. 17 Financial Regulations (2005 Revision) PART XII - Capital Project Appraisal Responsibility of the 44. The chief officer of a prescribed entity shall ensure that all capital projects chief officer (whether entity or executive) that are three hundred thousand dollars and above are submitted to the PSIC for review. Information required 45. A chief officer is required to submit the following documentation to the PSIC using the formats for the Project Profile and Project Report set out in the Fifth Schedule - (a) in relation to projects between three hundred thousand dollars and one million dollars, Project Profile; and (b) in relation to projects over one million dollars, Project Profile and Project Report. Timing 46. All completed Project Profiles and Project Reports are to be submitted to the PSIC at least two weeks in advance of its monthly meeting. Role of the PSIC 47. The PSIC shall submit recommendations on the viability of capital projects to the Governor in Cabinet, through the Financial Secretary. Definition of “capital 48. In this Part- project” for the purposes of Part XII “capital project” means any item that will be capitalised on the balance sheet in accordance with generally accepted accounting practice and the Third Schedule, and includes the construction or purchase of physical assets and the purchase or development of computer hardware or software. PART XIII – Weightings of Statutory Authority and Government Company Debt to be Included in Core Government Net Debt Calculation Calculation of core 49. The following weightings are to be used to calculate the portion of government net debt Government guaranteed statutory authority and government company debt to be included in the calculation of core government net debt in accordance with section 34, namely, in the case of statutory authorities and government companies- (a) that require an unpredictable level of budgetary support from the Governor in Cabinet (namely, Cayman Airways Limited), eighty per cent; (b) that are financially stable and require a predictable level of budgetary support from the Governor in Cabinet (namely, the Cayman Islands Development Bank and the National Community Housing and Development Trust), fifty per cent; and 18 Financial Regulations (2005 Revision) (c) that have not required budgetary support from the Governor in Cabinet during the period of three years immediately preceding the date of the calculation (namely, the Civil Aviation Authority, the Port Authority and the Cayman Islands Turtle Farm Limited), twenty per cent. 19 Financial Regulations (2005 Revision) FIRST SCHEDULE FORMAT FOR THE FORECAST FINANCIAL STATEMENTS, THE QUARTERLY FINANCIAL STATEMENTS AND THE ANNUAL FINANCIAL STATEMENTS FOR THE CORE GOVERNMENT AND FOR THE ENTIRE PUBLIC SECTOR 1. This Schedule prescribes the format for the forecast financial statements, the quarterly financial statements and the annual financial statements for the core government and for the entire public sector. 2. The financial statements for the core government and the entire public sector shall be provided as one set of financial statements but with different column disclosures as shown in the formats. 3. In applying this format- (a) individual line items on the face of the financial statements included in this Schedule may be omitted if the amounts involved are immaterial; (b) additional line items may be added to the face of the financial statements if disclosure would be improved and the amounts are material; (c) if the information required to be included in any of the Notes to the Financial Statement prescribed by this Schedule is immaterial, the Note, or a line item within a Note may be omitted; and (d) additional Notes to the Financial Statements, or line items within a Note, not included in this Schedule, may be added if disclosure would be improved and the amounts are material. 4. Where the financial statements are forecast financial statements, the heading of each financial statement shall include the word “forecast’, for example “Forecast Operating Statement”, and the text of any financial statements amended to include the word forecast as indicated as follows in the formats: [forecast] 5. Unless the formats show otherwise, where the financial statements are forecast financial statements, the following column headings shall be used, with the dates of the relevant years inserted, for example 2004/5: 20 Financial Regulations (2005 Revision) Core Government Entire Public Sector [Budget Year] [Year before [Two years [Budget Year] [Year before [Two years Budget Year] before Budget Budget Year] before Budget Year] Year] Forecast Est. Actual Actual Forecast Est. Actual Actual $000 $000 $000 $000 $000 $000 6. Unless the formats show otherwise, where the financial statements are quarterly financial statements, the following column headings shall be used, with the dates of the relevant years inserted, for example 2004/5: Core Government Entire Public Sector [This Year] [This Year] [Last Year] [This Year] [This Year] [Last Year] Year to Date Year to Date Year to Date Year to Date Year to Date Year to Date Actual Forecast Actual Actual Forecast Actual $000 $000 $000 $000 $000 $000 7. Unless the formats show otherwise, where the financial statements are annual financial statements, the following column headings shall be used, with the dates of the relevant years inserted, for example 2004/5: Core Government Entire Public Sector [Actual This [Budget This [Actual last [Actual This [Budget This [Actual last Year] Year ] Year] Year] Year ] Year] Forecast Est. Actual Actual Forecast Est. Actual Actual $000 $000 $000 $000 $000 $000 8. In this schedule, all items within square brackets indicate either explanatory instructions or dates or words to be inserted into the format as relevant. 21 Financial Regulations (2005 Revision) Format for the Government Financial Statements STATEMENT OF RESPONSIBILITY FOR FORECAST FINANCIAL STATEMENTS [Forecast Financial Statements only] These forecast financial statements have been prepared in accordance with the Public Management and Finance Law (2005 Revision). They report the forecast financial transactions for the Core Government and the Entire Public Sector reporting entity for the forthcoming year. The forecast financial statements were prepared by the Portfolio of Finance and Economics on behalf of the Government. On the basis of the economic and financial information available, that Portfolio has used its best professional judgement in preparing the forecast statements. The forecast financial statements incorporate the fiscal and economic implications of all Government decisions and circumstances as at [date]. We accept responsibility for the accuracy and integrity of the financial information in these forecast financial statements and their compliance with the Public Management and Finance Law (2005 Revision). To the best of our knowledge the forecast financial statements are: (a) complete and reliable; (b) fairly reflect the forecast financial position [as at relevant date] and performance for the [period concerned]; (c) include all policy decisions and other circumstances that have, or may have, a material effect on the forecast statements; and (d) comply with generally accepted accounting practice. [Signature] [Signature] [Name] [Name] Financial Secretary Leader of Government Business [Date] [Date] 22 Financial Regulations (2005 Revision) STATEMENT OF RESPONSIBILITY FOR FINANCIAL STATEMENTS [Quarterly and Annual Financial Statements only] These financial statements have been prepared by the Portfolio of Finance and Economics in accordance with the Public Management and Finance Law (2005 Revision). The Financial Statements comply with generally accepted accounting practice as defined in International Public Sector Accounting Standards and International Accounting Standards. We accept responsibility for the accuracy and integrity of the financial information in these financial statements and their compliance with the Public Management and Finance Law (2005 Revision). To the best of our knowledge the financial statements are: (a) complete and reliable; (b) fairly reflect the financial position as at [balance date] and performance for the [period concerned]; and (c) comply with generally accepted accounting practice. [Signature] [Signature] [Name] [Name] Financial Secretary Leader of Government Business [Date] [Date] 23 Financial Regulations (2005 Revision) GOVERNMENT OF THE CAYMAN ISLANDS [FORECAST] OPERATING STATEMENT FOR [THE YEAR ENDING 30 JUNE [YEAR], THE QUARTER ENDED [XX MONTH YEAR], THE YEAR ENDED 30 JUNE [YEAR] which ever is relevant] Core Entire Public Government Sector Note Coercive Revenue 1 Levies on international trade and transactions Domestic levies on goods and services Levies on property Other levies Fines Total Coercive Revenue Other Revenue Sale of goods and services 2 Investment revenue 3 Donations Other operating revenue Net profit in investments in statutory authorities and government companies Total Other Revenue Total Operating Revenue Operating Expenses 4 Personnel costs 5 Supplies and consumables 6 Depreciation 7 Outputs from statutory authorities and government companies Outputs from non-governmental suppliers Transfer payments Other operating expenses Total Operating Expenses Surplus from Operating Activities Non-Operating Revenue and Expenses Financing expense 8 Gains/losses on foreign exchange transactions Gains/losses on disposal or revaluation of non current assets Other non-operating revenues or expenses Total Non-Operating Revenue and Expenses Surplus before extraordinary items Extraordinary items Net Surplus or Deficit The accounting policies and notes on pages [xx-zz] form part of these [forecast] financial statements. 24 Financial Regulations (2005 Revision) GOVERNMENT OF THE CAYMAN ISLANDS [FORECAST] BALANCE SHEET AS AT [XX MONTH YEAR] Core Entire Public Government Sector Note Current Assets Cash and cash equivalents 9 Marketable securities and deposits 10 Accounts receivable 11 Inventories 12 Other current assets 13 Total Current Assets Non-Current Assets Loans Other investments 14 Net worth of statutory authority and government companies Property, plant and equipment 15 Other non-current assets 16 Total Non-Current Assets Total Assets Current Liabilities Accounts payable 17 Unearned revenue 18 Employee entitlements 19 Other current liabilities 20 Total Current Liabilities Non-Current Liabilities Employee entitlements 21 Unfunded pension liability 22 Borrowings 23 Currency issued Other non-current liabilities 24 Total Non-Current Liabilities Total Liabilities TOTAL ASSETS LESS TOTAL LIABILITIES NET WORTH Asset revaluation reserve Accumulated surpluses 25 Total Net Worth The accounting policies and notes on pages [xx-zz] form part of these [forecast] financial statements. 25 Financial Regulations (2005 Revision) GOVERNMENT OF THE CAYMAN ISLANDS [FORECAST] CASH FLOW STATEMENT FOR [THE YEAR ENDING 30 JUNE [YEAR], THE QUARTER ENDED [XX MONTH YEAR], THE YEAR ENDED 30 JUNE [YEAR] which ever is relevant] Core Entire Public Government Sector Note CASH FLOWS FROM OPERATING ACTIVITIES Receipts Coercive receipts Sale of outputs (goods and services) Interest received Other receipts Payments Personnel costs Supplies and consumables Outputs from statutory authorities and government companies Outputs from non-governmental suppliers Transfer payments Interest and other financing costs paid Other payments Net cash flows from operating activities 26 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of non-current assets Purchase of investments Equity injections into statutory authorities and government companies Proceeds from sale of non-current assets Proceeds from sale of investments Capital withdrawals/surplus distributions from statutory authorities and government companies Net cash flows from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings Repayment of borrowings Net cash flows from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period 9 The accounting policies and notes on pages [xx-zz] form part of these [forecast] financial statements. 26 Financial Regulations (2005 Revision) GOVERNMENT OF THE CAYMAN ISLANDS [FORECAST] STATEMENT OF CHANGES IN NET WORTH FOR [THE YEAR ENDING 30 JUNE [YEAR], THE QUARTER ENDED [XX MONTH YEAR], THE YEAR ENDED 30 JUNE [YEAR] which ever is relevant] Core Entire Public Government Sector Opening balance net worth Surplus Property revaluations Investment revaluations Net revaluations during the period Total recognised revenues and expenses Closing balance net worth GOVERNMENT OF THE CAYMAN ISLANDS [FORECAST] STATEMENT OF LOANS-MADE FOR [THE YEAR ENDING 30 JUNE [YEAR], THE QUARTER ENDED [XX MONTH YEAR], THE YEAR ENDED 30 JUNE [YEAR] which ever is relevant] Core Entire Public Government Sector Civil Service Mortgage Loans Farmers/Ranchers Loans Overseas Medical Advances Other Loans to organisations [list separately if material] Other loans to individuals Total Loans The accounting policies and notes on pages [xx-zz] form part of these [forecast] financial statements. 27 Financial Regulations (2005 Revision) GOVERNMENT OF THE CAYMAN ISLANDS [FORECAST] STATEMENT OF BORROWINGS FOR [THE YEAR ENDING 30 JUNE [YEAR], THE QUARTER ENDED [XX MONTH YEAR], THE YEAR ENDED 30 JUNE [YEAR] which ever is relevant] Core Entire Public Government Sector Outstanding Debt Local Currency Debt Central Government loans Statutory bodies – self financing loans Statutory bodies – direct borrowing Total Local Currency Debt Foreign Currency Debt Central Government long-term loans Statutory bodies – self financing loans Statutory bodies – direct borrowing Total Foreign Currency Debt Total Outstanding Debt Less Marketable Securities and Deposits Local Currency Foreign Currency Total Marketable Securities and Deposits Net Public Debt The accounting policies and notes on pages [xx-zz] form part of these [forecast] financial statements. 28 Financial Regulations (2005 Revision) GOVERNMENT OF THE CAYMAN ISLANDS STATEMENT OF COMMITMENTS AS AT [BALANCE DATE, OR IN THE CASE OF FORECAST STATEMENTS THE DATE THE FORECASTS WERE FINALISED] [Statement not required for quarterly financial statements] Core Government Type One One to Over As at As at year or five five [Date] [Last less Years Years Total Annual Report Date] Total $000 $000 $000 $000 $000 Capital Commitments Land and buildings Other fixed assets Other commitments (list separately if material) Total Capital Commitments Operating Commitments Non-cancellable accommodation leases Other non-cancellable leases Non-cancellable contracts for the supply of goods and services Other operating commitments Total Operating Commitments Total Commitments The accounting policies and notes on pages [xx-zz] form part of these [forecast] financial statements. 29 Financial Regulations (2005 Revision) Entire Public Sector Type One One to Over As at As at year or five five [Date] [Last less Years Years Total Annual Report Date] Total $000 $000 $000 $000 $000 Capital Commitments Land and buildings Other fixed assets Other commitments (list separately if material) Total Capital Commitments Operating Commitments Non-cancellable accommodation leases Other non-cancellable leases Non-cancellable contracts for the supply of goods and services Other operating commitments Total Operating Commitments Total Commitments The accounting policies and notes on pages [xx-zz] form part of these [forecast] financial statements. 30 Financial Regulations (2005 Revision) GOVERNMENT OF THE CAYMAN ISLANDS STATEMENT OF CONTINGENT LIABILITIES AS AT [BALANCE DATE, OR IN THE CASE OF FORECAST STATEMENTS THE DATE THE FORECASTS WERE FINALISED] [Statement not required for quarterly financial statements] Summary of Quantifiable Contingent Liabilities Core Entire Public Government Sector As at As at As at As at [Date] [Last [Date] [Last Annual Annual Report Report Date] Date] $000 $000 $000 $000 Guarantees Item 1 heading Item 1 description Item 2 heading Item 2 description Total Quantifiable Guarantees Uncalled Capital (relating to investments in companies) Item 1 heading Item 1 description Item 2 heading Item 2 description Total Uncalled Capital Legal Proceedings and Disputes Item 1 heading Item 1 description Item 2 heading Item 2 description Total Legal Proceedings and Disputes Other Contingent Liabilities Item 1 heading Item 1 description Item 2 heading Item 2 description Total Other Contingent Liabilities The accounting policies and notes on pages [xx-zz] form part of these [forecast] financial statements. 31 Financial Regulations (2005 Revision) Summary of Non-Quantifiable Contingent Liabilities Guarantees Item 1 heading Item 1 description Item 2 heading Item 2 description Other Item 1 heading Item 1 description Item 2 heading Item 2 description The accounting policies and notes on pages [xx-zz] form part of these [forecast] financial statements. 32 Financial Regulations (2005 Revision) GOVERNMENT OF THE CAYMAN ISLANDS STATEMENT OF EMERGENCY FINANCIAL TRANSACTIONS FOR THE PERIOD ENDED XX MONTH [YEAR] [Statement not required for forecast financial statements] Under the Public Management and Finance Law (2005 Revision) if any state of emergency is proclaimed under the Emergency Powers Law (1997 Revision) the Governor in Cabinet may approve such executive financial transactions to meet the emergency as it thinks fit, whether or not those transactions have been authorised by an appropriation. A statement of those transactions that have not been appropriated are required to be included in the first Government quarterly report, the first Government annual report and the first Appropriation Bill after those transactions have been entered into. [Either: During the period no such emergency executive transactions were made. Or: During the year a [describe event] resulted in a state of emergency being declared in the areas of [state areas] and [state areas]. The Governor in Cabinet approved the following items in the absence of an appropriation. These items have been included in the financial statements for the period ended [XX month Year]. Nature of Transaction Approved by the Governor in Amount Cabinet and Requiring Appropriation $ Output expense Output description Output description Transfer payment Transfer description Other executive expenses Other executive expenses description Equity investment Equity investment Loan-made Loan-made Executive asset acquisition Asset description Borrowing Borrowing description] The accounting policies and notes on pages [xx-zz] form part of these financial statements. 33 Financial Regulations (2005 Revision) GOVERNMENT OF THE CAYMAN ISLANDS STATEMENT OF UNAPPROPRIATED FINANCIAL TRANSACTIONS FOR THE PERIOD ENDED 30 JUNE [YEAR] [Statement required only for annual financial statements] [Either: During the year no unappropriated financial transactions were made. Or: During the year the following transactions for which there was no appropriation occurred. Nature of Transaction Requiring Appropriation Unappropriated Amount $ Output expense Output description Output description Transfer payment Transfer description Other executive expenses Other executive expenses description Equity investment Equity investment Loan-made Loan-made Executive asset acquisition Asset description Borrowing Borrowing description] The accounting policies and notes on pages [xx-zz] form part of these [forecast] financial statements. 34 Financial Regulations (2005 Revision) GOVERNMENT OF THE CAYMAN ISLANDS STATEMENT OF TRUST ASSETS FOR THE PERIOD ENDED 30 JUNE [YEAR] [Statement required only for annual financial statements] Trust Opening Capital Capital Revenue Expenses Closing Balance Addition Distribtn Balance $000 $000 $000 $000 $000 $000 Name of Trust Asset Asset Name of Trust Asset Asset The accounting policies and notes on pages [xx-zz] form part of these financial statements. GOVERNMENT OF THE CAYMAN ISLANDS STATEMENT OF ACCOUNTING POLICIES FOR [THE YEAR ENDING 30 JUNE [YEAR], THE QUARTER ENDED [XX MONTH YEAR], THE YEAR ENDED 30 JUNE [YEAR] General Accounting Policies Reporting entity Basis of preparation Reporting Period Basis of Consolidation Specific Accounting Policies Revenue Expenses Assets Liabilities Commitments Contingencies 35 Financial Regulations (2005 Revision) STATEMENT OF SIGNIFICANT ASSUMPTIONS [Statement only required for forecast financial statements] General Forecast Assumptions Macroeconomic Assumptions NOTES TO THE [FORECAST] FINANCIAL STATEMENTS NOTE 1.

COERCIVE REVENUE Core Entire Public Government Sector Coercive Revenue Levies on International Trade and Transactions Import Duties • Gasoline and Diesel • Alcoholic Beverages • Tobacco Products • Motor Vehicle Duty • Food • Manufactured Goods • Machinery and Transport Equipment • Other Import Duty and Charges Other Levies on International Trade and Transactions • Cruise Ship Tax • Environmental Protection Fees • Other Total Levies on International Trade and Transactions Domestic Levies on Goods and Services Business and Professional Licenses • Law Firm Operational Licenses • Money Services Licenses • Work Permit Fees • Annual Permanent Resident Work Fees • Immigration Non-Refundable Repatriation Fee • Traders’ License • Local Company and Corporate Management Fees • Company Fees Resident • Company Fees Non- Resident • Company Fees Exempt • Company Fees Foreign • Bank and Trust Licenses • Security Investment Business Licenses • Insurance Licences • Mutual Fund Administrators • Partnership Fees • Trust Registration Fees • Liquor Licence • CUC Licence 36 Financial Regulations (2005 Revision) • ICT Licenses • Broadcasting Licences • Annual Ship Tonnage Charges • Local Vessel Licenses • Ship Manning Licenses • Ship Registration Fees • Hotel Licence • Firearms Licenses • Radio Licenses • Special Marriage Licenses • Fisheries Licenses • Spear Gun Licenses • Public Transport Drivers Licenses • Public Transport Operator Licenses • Miscellaneous Licences • HPB Fees Other Levies on Goods and Services • Motor Vehicle Charges • Road Development Fund Charges • Tourist Accommodation Tax • Misc. Stamp Duty • Misc. Immigration Fees • Package Charges Total Domestic Levies on Goods and Services Levies on Property Land Transfer Duty • Land Transfer Stamp Duty • Land Holding Companies Share Transfer Charge • Timeshare Ownership Charges Infrastructure Fund Fee Total Levies on Property Other Levies Fines Court Fines Customs Fines Compounded Penalties Procedural Fines Other Fines Total Fines Total Coercive Revenue 37 Financial Regulations (2005 Revision) NOTE 2. GOODS AND SERVICES (INCLUDING FEES AND CHARGES) Core Entire Public Government Sector Fees and Charges • Hospital Fees • Garbage Fees • Building Permit Fees • Motor Vehicle Drivers’ Licences • Planning Fees • Planning Appeal Fees • Land Registry Fees • Motor Vehicle Inspection Fees • Vehicle Bank Liens • Duplicate Vehicle Log Books • Vehicle Change of Ownership Fees • Vehicle Disposal Fees • Court Fees • Disinsection Fees • Mail Terminal Credits • Law School Fees • Customs Special Attendance Fees • Marine Survey Fees • Motor Vehicle Licence Plate Fees • Customised Motor Vehicle License Plate Fees • School Fees • Professional Legal Fees • Warehousage • Patents and Trademarks • Cemetery Fees • Training Fees • Agriculture Fees • Electrical Inspection Fees • Computing Fees • Land Registry Fees • Land Survey Fees • Tourist Reservation Fees • Examination Fees • Public Record Fees • Other Immigration Fees • Recycling Fees • Marine Rescue and Salvage Fees • Audit Fees • Authentication and Apostille of Documents Fees • Naturalisation and Registration Fees • Passport Fees • Pension Plan Registration Fees • Drivers Examination Fees • Public Library Fees • Cabinet Appeal Fees • Debit Transaction Fees 38 Financial Regulations (2005 Revision) • Environmental Service Fees • Health Insurance Fund Fees • Notary Public Fees • Legal Practitioner Fees • Baliff Fees • Other Fees Total Fees and Charges Sales of Goods • Postal Stamps • Sale of Agricultural Supplies & Produce • Sale of Advertisements • Canteen Sales • Philatelic Sales • Sale of Laws • Sales of Forms and Tariff Notes • Sales of Financial Services Handbook • Sales of Marine Publications • Sales of Gazettes and Subscriptions • Livestock Sales • Miscellaneous Planning Sales • Other Sales Total Sales of Goods Rentals • Post Boxes/ Franking Machine • School Books and Canteen • Lease of Crown Land • Rentals of Government Housing • Other Rentals Total Rentals Other Total Goods and Services NOTE 3. INVESTMENT REVENUE Core Entire Public Government Sector Interest on marketable securities, deposits and cash Interest on Loans-Made Royalties Total Investment Revenue 39 Financial Regulations (2005 Revision) NOTE 4. OPERATING EXPENSES BY FUNCTION Core Entire Public Government Sector Operating Expenses General government services Public order and safety Education Environmental protection Health Fuel and energy Social security and welfare Housing and community amenities Recreational, cultural and religious Transportation and communication Other economic affairs Total Expenses Operating expenses by function includes financing expenses that are separately disclosed in the Operating Statement. NOTE 5. PERSONNEL COSTS Core Entire Public Government Sector Personnel Costs Salaries and wages (including employee pension contributions) Employer/Government pension expense Movement in unfunded pension liability Other personnel costs Total Personnel Costs NOTE 6. SUPPLIES AND CONSUMABLES Core Entire Public Government Sector Supplies and Consumables Supply of goods and services Operating lease rentals Other Total Supplies and Consumables 40 Financial Regulations (2005 Revision) NOTE 7. DEPRECIATION Core Entire Public Government Sector Buildings Infrastructure assets Roads and sidewalks Water reticulation and sewage Other (list separately if material) Vehicles Aeroplanes Boats Furniture and fittings Computer hardware and software Office equipment Other plant and equipment Other assets Total Assets are depreciated on a straight-line basis as follows: Years Buildings Infrastructure assets Roads and sidewalks Water reticulation and sewage Other [list separately if material] Vehicles Aeroplanes Boats Furniture and fittings Computer hardware and software Office equipment Other plant and equipment Other assets NOTE 8. FINANCING EXPENSE Core Entire Public Government Sector Financing Expense Interest on Bank Loans Interest on Bank Overdraft Other Total Financing Expense 41 Financial Regulations (2005 Revision) NOTE 9. CASH AND CASH EQUIVALENTS Core Entire Public Government Sector Cash on hand Bank accounts Bank overdrafts US deposit call accounts Fixed deposits (ninety days) Other short term investments Total Cash and Cash Equivalents NOTE 10. MARKETABLE SECURITIES AND DEPOSITS Core Entire Public Government Sector Fixed deposits Other [List separately if material] Total Marketable Securities and Deposits NOTE 11. ACCOUNTS RECEIVABLE Core Entire Public Government Sector Coercive revenue Sale of goods and services Overseas medical advances Asset sales Loans due within twelve months Prepayments Interest Receivable Other Receivables Total Gross Less provision for doubtful debts Total Net Accounts receivable maturity schedule Not later than one year Later than one year and not later than two years Later than two years and not later than five years Later than five years Total 42 Financial Regulations (2005 Revision) NOTE 12. INVENTORIES Core Entire Public Government Sector Raw Materials and Consumable Stores Work in Progress Finished Goods Total Inventories NOTE 13. OTHER CURRENT ASSETS Core Entire Public Government Sector Current loans [list separately if material] Current investments [list separately if material] Other [list separately if material] Total Other Current Assets NOTE 14. OTHER INVESTMENTS Core Entire Public Government Sector Fixed deposits longer than 90 days US Treasury bonds Other [list separately if material] Total Other Investments NOTE 15. PROPERTY, PLANT AND EQUIPMENT Core Entire Public Government Sector Land Buildings Infrastructure assets Roads and sidewalks Water reticulation and sewage Other [list separately if material] Vehicles Aeroplanes Boats Furniture and fittings Computer hardware and software Office equipment Other plant and equipment Construction in progress Other assets Total Cost or Valuation 43 Financial Regulations (2005 Revision) Accumulated Depreciation Buildings Infrastructure assets Roads and sidewalks Water reticulation and sewage Other [list separately if material] Vehicles Aeroplanes Boats Furniture and fittings Computer hardware and software Office equipment Other plant and equipment Other assets Total Depreciation Net Book Value Land Buildings Infrastructure assets Roads and sidewalks Water reticulation and sewage Other [list separately if material] Vehicles Aeroplanes Boats Furniture and fittings Computer hardware and software Office equipment Other plant and equipment Construction in progress Other assets Total Net Book Value NOTE 16. OTHER NON-CURRENT ASSETS Core Entire Public Government Sector Accounts receivable Inventories Other [list separately if material] Total Other Non-Current Assets 44 Financial Regulations (2005 Revision) NOTE 17. ACCOUNTS PAYABLE Core Entire Public Government Sector Trade Creditors Operating lease rental Statutory Authority and Government Company outputs Non-governmental outputs Transfers payable [list separately if material] Other Total Accounts Payable NOTE 18. UNEARNED REVENUE Core Entire Public Government Sector Rentals paid in advance Other [list by type if material] Total Unearned Revenue NOTE 19. EMPLOYEE ENTITLEMENTS (CURRENT) Core Entire Public Government Sector Leave entitlements Other salary related entitlements Total Current Employee Entitlements NOTE 20. OTHER CURRENT LIABILITIES Core Entire Public Government Sector Provisions Pension liability Borrowings Other Total Other Current Liabilities NOTE 21. EMPLOYEE ENTITLEMENTS (NON-CURRENT) Core Entire Public Government Sector Leave entitlements Other salary related entitlements Total Non-Current Employee Entitlements 45 Financial Regulations (2005 Revision) NOTE 22. UNFUNDED PENSION LIABILITY Core Entire Public Government Sector Defined Benefit Liability Defined Contribution Liability Total Unfunded Pension Liability NOTE 23. BORROWINGS Maturity profile as at 30 June Year at Book Values (Note not required for forecast financial statements) Core Entire Public Government Sector Outstanding Debt Local Currency Debt Not later than one year Between one and two years Between two and five years Later than five Years Total Local Currency Debt Foreign Currency Debt Not later than one year Between one and two years Between two and five years Later than five years Total Foreign Currency Debt Total Outstanding Debt Marketable Securities and Deposits Local Currency Marketable Securities and Deposits Not later than one year Between one and two years Between two and five years Later than five years Total Local Currency Marketable Securities and Deposits Foreign Currency Marketable Securities and Deposits Not later than one year Between one and two years Between two and five years Later than five years Total Foreign Currency Marketable Securities and Deposits Total Marketable Securities and Deposits Net Public Debt 46 Financial Regulations (2005 Revision) NOTE 24. OTHER NON-CURRENT LIABILITIES Core Entire Public Government Sector Accounts payable Unearned revenue Provision for coercive revenue repayable Provision for licences/ fees repayable Provision for restructuring Other [list by type if material] Total Other Non-Current Liabilities NOTE 25. ACCUMULATED SURPLUS Net worth includes the following discretionary reserves. Core Entire Public Government Sector Housing Guarantee Reserve Fund Environmental Protection Fund Infrastructure Development Fund [Specify other funds as necessary] neral Funds Total Accumulated Surplus NOTE 26. RECONCILIATION OF OPERATING SURPLUS TO CASH FLOWS FROM OPERATING ACTIVITIES Core Entire Public Government Sector Operating surplus/(deficit) Non-cash movements Depreciation Increase in provision for doubtful debts Increase in payables/accruals Personnel Subsidies, grants and transfers Increase in borrowings Net gain/loss from sale of fixed assets Net gain/loss from sale of investments Increase in other current assets Increase in investments due to revaluation Increase in receivables Net cash flows from operating activities 47 Financial Regulations (2005 Revision) NOTE 27. EVENTS OCCURRING AFTER BALANCE DATE [Note only required for annual financial statements] 1. Conditions existing at balance date (a) Details of events occurring after balance date which provide additional evidence of conditions that existed at balance date or reveal for the first time a condition that existed at balance date and where the financial effect of that event was brought to account: [describe event and financial impact] (b) Details of events occurring after balance date which provide additional evidence of conditions that existed at balance date or reveal for the first time a condition that existed at balance date and where the financial effect of that event was not brought to account: [describe event and financial impact] 2. Conditions after balance date Details of events occurring after balance date which do not relate to conditions existing at balance date are as follows: [describe event and financial impact] NOTE 28. RELATED PARTY DISCLOSURES [Note only required for annual financial statements] [Note any financial transactions which have occurred between senior government officials, members of Cabinet and any bodies forming part of the reporting entity.] 48 Financial Regulations (2005 Revision) SECOND SCHEDULE FORMAT FOR THE FORECAST FINANCIAL STATEMENTS, THE QUARTERLY FINANCIAL STATEMENTS AND THE ANNUAL FINANCIAL STATEMENTS OF PRESCRIBED ENTITIES Explanatory Introduction 1. This Schedule prescribes the format for the forecast financial statements, the quarterly financial statements and the annual financial statements of ministries, portfolios, the Audit Office and the Office of the Complaints Commissioner. 2. In applying this format- (a) individual line items on the face of the financial statements included in this Schedule may be omitted if the amounts involved are immaterial; (b) additional line items may be added to the face of the financial statements if disclosure would be improved and the amounts are material; (c) if the information required to be included in any of the Notes to the Financial Statements prescribed by this Schedule is immaterial, the Note, or a line item within a Note may be omitted; and (d) additional Notes to the Financial Statements, or line items within a Note, not included in this Schedule, may be added if disclosure would be improved and the amounts are material. 3. Where the financial statements are forecast financial statements, the heading of each financial statement shall include the word “forecast’, for example “Forecast Operating Statement”, and the text of any financial statements amended to include the word forecast as indicated as follows in the formats: [forecast] 4. Where the financial statements are forecast financial statements, the following column headings shall be used, with the dates of the relevant years inserted, for example 2004/5: [Budget Year] [Year before Budget Year] [Two years before Budget Year] Forecast Est. Actual Actual $000 $000 $000 49 Financial Regulations (2005 Revision) 5. Where the financial statements are quarterly financial statements, the following column headings shall be used, with the dates of the relevant years inserted, for example 2004/5: [This Year] [This Year] [Last Year] Year to Date Year to Date Forecast Year to Date Actual Actual $000 $000 $000 6. Where the financial statements are annual financial statements, the following column headings shall be used, with the dates of the relevant years inserted, for example 2004/5: [Actual [Budget [Actual This Year] This Year ] Last Year] Forecast Est. Actual Actual $000 $000 $000 7. In this schedule, all items within square brackets indicate either explanatory instructions or dates or words to be inserted into the format as relevant. Format for the Financial Statement STATEMENT OF RESPONSIBILITY FOR [FORECAST] FINANCIAL STATEMENTS These [forecast] financial statements have been prepared by [name of Portfolio or Ministry] in accordance with the provisions of the Public Management and Finance Law (2005 Revision). I accept responsibility for the accuracy and integrity of the financial information in these [forecast] financial statements and their compliance with the Public Management and Finance Law (2005 Revision). To the best of my knowledge the [forecast] financial statements are: (a) complete and reliable; (b) fairly reflect the [forecast] financial position [as at balance date] and [forecast] financial performance for the [period concerned]; and (c) comply with generally accepted accounting practice. [Signature] [Name] Chief Officer [Ministry or Portfolio Name] [Date] 50 Financial Regulations (2005 Revision) [MINISTRY OR PORTFOLIO NAME] [FORECAST] OPERATING STATEMENT FOR [THE YEAR ENDING 30 JUNE [YEAR], THE QUARTER ENDED [XX MONTH YEAR], THE YEAR ENDED 30 JUNE [YEAR] which ever is relevant] Note Revenue Outputs to Cabinet Outputs to other government agencies Outputs to others Interest revenue Total Operating Revenue Operating Expenses Personnel costs 1 Supplies and consumables 2 Depreciation 3 Capital charge Other operating expenses Total Operating Expenses Surplus from Operating Activities Gains/losses on foreign exchange transactions Gains/losses on disposal or revaluation of non-current assets Total Non-Operating Revenue and Expenses Surplus before extraordinary items Extraordinary items Net Surplus or Deficit [MINISTRY OR PORTFOLIO NAME] STATEMENT OF CHANGES IN NET WORTH FOR [THE YEAR ENDING 30 JUNE [YEAR], THE QUARTER ENDED [XX MONTH YEAR], THE YEAR ENDED 30 JUNE [YEAR] which ever is relevant] Opening balance net worth Net surplus Property revaluations Investment revaluations Net revaluations during the period Total recognised revenues and expenses Equity investment from Cabinet Capital withdrawal by Cabinet Repayment of surplus to Cabinet Closing balance net worth The accounting policies and notes on pages [xx-zz] form part of these [forecast] financial statements. 51 Financial Regulations (2005 Revision) [MINISTRY OR PORTFOLIO NAME] [FORECAST BALANCE SHEET] AS AT [XX MONTH YEAR] Note Current Assets Cash and cash equivalents 4 Accounts receivable 5 Inventories 6 Other current assets Total Current Assets Non-Current Assets Property, plant and equipment 7 Other non-current assets Total Non-Current Assets Total Assets Current Liabilities Accounts payable 8 Unearned revenue Employee entitlements 9 Other current liabilities Total Current Liabilities Non-Current Liabilities Employee entitlements 10 Other non-current liabilities 11 Total Non-Current Liabilities Total Liabilities TOTAL ASSETS LESS TOTAL LIABILITIES NET WORTH Contributed capital Asset revaluation reserve Accumulated surpluses TOTAL NET WORTH The accounting policies and notes on pages [xx-zz] form part of these [forecast] financial statements. 52 Financial Regulations (2005 Revision) [MINISTRY OR PORTFOLIO NAME] [FORECAST] CASH FLOW STATEMENT FOR [THE YEAR ENDING 30 JUNE [YEAR], THE QUARTER ENDED [XX MONTH YEAR], THE YEAR ENDED 30 JUNE [YEAR] which ever is relevant] Note CASH FLOWS FROM OPERATING ACTIVITIES Receipts Outputs to Cabinet Outputs to other government agencies Outputs to others Interest received Payments Personnel costs Suppliers Other payments Net cash flows from operating activities 13 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of non-current assets Proceeds from sale of non-current assets Net cash flows from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Equity investment (where appropriate) Repayment of surplus (where appropriate) Capital withdrawal (where appropriate) Net cash flows from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period 4 The accounting policies and notes on pages [xx-zz] form part of these [forecast] financial statements. 53 Financial Regulations (2005 Revision) [MINISTRY OR PORTFOLIO NAME] STATEMENT OF COMMITMENTS AS AT 30 JUNE [YEAR] [Statement only required for annual financial statements] Type One year One to Over [This [Last or less five five Year] Year] years years Total Total $000 $000 $000 $000 $000 Capital Commitments Land and buildings Other fixed assets Other commitments [list separately if material] Total Capital Commitments Operating Commitments Non-cancellable accommodation leases Other non-cancellable leases Non-cancellable contracts for the supply of goods and services Other operating commitments Total Operating Commitments Total Commitments The accounting policies and notes on pages [xx-zz] form part of these [forecast] financial statements. 54 Financial Regulations (2005 Revision) [MINISTRY OR PORTFOLIO NAME] STATEMENT OF CONTINGENT LIABILITIES AS AT 30 JUNE [YEAR] [Statement on required for annual financial statements] Summary of Quantifiable Contingent Liabilities [This Year] [Last Year] $000 $000 Legal Proceedings and Disputes Item 1 description Item 2 description Total Legal Proceedings and Disputes Other Contingent Liabilities Item 1 description Item 2 description Total Other Contingent Liabilities Summary of Non-Quantifiable Contingent Liabilities Item 1 description Item 2 description The accounting policies and notes on pages [xx-zz] form part of these [forecast] financial statements. [MINISTRY OR PORTFOLIO NAME] STATEMENT OF ACCOUNTING POLICIES FOR [THE YEAR ENDING 30 JUNE [YEAR], THE QUARTER ENDED [XX MONTH YEAR], THE YEAR ENDED 30 JUNE [YEAR] which ever is relevant] General Accounting Policies Reporting entity Basis of preparation Reporting Period Specific Accounting Policies Revenue Expenses Assets Liabilities Commitments Contingencies 55 Financial Regulations (2005 Revision) NOTES TO THE [FORECAST] FINANCIAL STATEMENTS NOTE 1. PERSONNEL COSTS Salaries and wages (including employee pension contributions) Employer pension expense Other personnel costs Total Personnel Costs NOTE 2. SUPPLIES AND CONSUMABLES Supply of goods and services Operating lease rentals Other Total Supplies and Consumables NOTE 3. DEPRECIATION Buildings Vehicles Aeroplanes Boats Furniture and fittings Computer hardware and software Office equipment Other plant and equipment Other [list separately if material] Total Depreciation Assets are depreciated on a straight-line basis as follows: Years Buildings Vehicles Aeroplanes Boats Furniture and fittings Computer hardware and software Office equipment Other plant and equipment Other (list separately if material) NOTE 4. CASH AND CASH EQUIVALENTS Cash on hand Bank accounts Deposits with Portfolio Finance and Economics Total Cash and Cash Equivalents 56 Financial Regulations (2005 Revision) NOTE 5. ACCOUNTS RECEIVABLE Outputs to Cabinet Outputs to other government agencies Outputs to others Prepayments Interest receivable Other Receivables Total Gross Accounts Receivable Less provision for doubtful debts Total Net Accounts Receivable NOTE 6. INVENTORIES Raw Materials and Consumable Stores Work in Progress Finished Goods Total Inventories NOTE 7. PROPERTY, PLANT AND EQUIPMENT Cost or Accum. [This Year] [Last Year] Revalued Depreciatio Book Value Book Value Amount n $000 $000 $000 $000 Land Buildings Vehicles Aeroplanes Boats Furniture and fittings Computer hardware and software Office equipment Other plant and equipment Construction in progress Other assets Total NOTE 8. ACCOUNTS PAYABLE Trade Creditors Operating lease rental Accruals Total 57 Financial Regulations (2005 Revision) NOTE 9. EMPLOYEE ENTITLEMENTS (CURRENT) Leave entitlements Other salary related entitlements Total NOTE 10. EMPLOYEE ENTITLEMENTS (NON-CURRENT) Leave entitlements Other salary related entitlements Total NOTE 11. OTHER NON-CURRENT LIABILITIES Provision for entity revenue repayable Provision for restructuring Accounts payable Unearned revenue Other [List by type if material] Total NOTE 12. RECONCILIATION OF OPERATING SURPLUS TO CASH FLOWS FROM OPERATING ACTIVITIES Operating surplus/(deficit) Non-cash movements Depreciation Increase in provision for doubtful debts Increase in payables/accruals Personnel Other Net gain/loss from sale of fixed assets Net gain/loss from sale of investments Increase in other current assets Increase in receivables Net cash flows from operating activities 58 Financial Regulations (2005 Revision) NOTE 13. EVENTS OCCURRING AFTER BALANCE DATE [Note only required for annual financial statements] 1. Conditions existing at balance date (a) Details of events occurring after balance date which provide additional evidence of conditions that existed at balance date or reveal for the first time a condition that existed at balance date and where the financial effect of that event was brought to account: [describe event and financial impact] (b) Details of events occurring after balance date which provide additional evidence of conditions that existed at balance date or reveal for the first time a condition that existed at balance date and where the financial effect of that event was not brought to account: [describe event and financial impact] 2. Conditions after balance date Details of events occurring after balance date which do not relate to conditions existing at balance date are as follows: [describe event and financial impact] NOTE 14. RELATED PARTY DISCLOSURES [Note only required for annual financial statements] [Note any financial transactions which have occurred between senior government officials, members of Cabinet and any bodies forming part of the EPS reporting entity.] 59 Financial Regulations (2005 Revision) THIRD SCHEDULE ACCOUNTING POLICIES FOR THE FINANCIAL STATEMENTS OF THE ENTIRE PUBLIC SECTOR, CORE GOVERNMENT AND PRESCRIBED ENTITIES PART 1: BASIS AND APPLICATION Application These accounting policies in this schedule are to be used by the following reporting entities: • Entire Public Sector; • Core Government; • Ministries and Portfolios (including the Judicial Administration); • Cayman Islands Audit Office; and • The Office of the Complaints Commissioner. Financial information provided to the Portfolio of Finance and Economics by statutory authorities or government companies for incorporation in Core Government or Entire Public Sector reports must also comply with these accounting policies. Basis of Accounting Policies The accounting policies specified are based on generally accepted accounting practice as defined in the Public Management and Finance Law (2005 Revision). Generally accepted accounting practice means: • International Public Sector Accounting Standards (IPSASs) issued by the International Federation of Accountants (IFAC); • Where no guidance is provided by those standards, International Accounting Standards issued by the International Accounting Standards Committee; and • Where no guidance is provided by those standards, accounting practice that is generally accepted within the accounting profession in the United Kingdom as appropriate for reporting in the public sector. 60 Financial Regulations (2005 Revision) Periodic Review These accounting policies will be periodically reviewed and updated by the Accountant General to ensure consistency with IPSASs and any other changes in accounting practice. PART 2: GENERAL ACCOUNTING POLICIES Going Concern The financial statements are to be prepared on the basis of the going concern assumption. If the going concern assumption is not appropriate for a particular entity because of impending restructuring, a different measurement base may be used and this fact is to be reflected in the statement of accounting policies. Accrual Accounting The accrual basis of accounting is to be used. Measurement Model The measurement base is historical cost adjusted for the revaluation of certain classes of assets (known as modified historical cost). Materiality When items of revenue and expense within surplus or deficit from ordinary activities are of such size, nature or incidence that their disclosure is relevant to explain the performance of the reporting entity for the period, the nature and amount of such items is to be disclosed separately. External financial reports are to be prepared having due regard to the materiality of the information being provided. In particular, the inclusion of transactions, the levels of disclosure and the effect of an accounting treatment should be considered. Information is material if it could influence users’ decisions taken on the basis of the financial statements. If that information is misstated or if certain information is omitted, the materiality of the misstatement of omission depends on the size and nature of the item in question judged to the particular circumstances of the case. 61 Financial Regulations (2005 Revision) Items of a similar nature are to be considered in the aggregate as well as individually. Where a specific disclosure is required as a result of statutory obligations, this disclosure must be made regardless of the materiality of the item. Assessing Materiality In determining materiality those responsible for the preparation of financial statements must consider: • The value of the amount, that is, by how much would the figure have to be inaccurate to distort the users’ overall view of the accounts; • The nature of the information. Does the error affect a figure in the accounts that the users expect to be stated with a high degree of accuracy or which is likely to be of great interest to them? e.g., senior staff remuneration, the audit fee; • The context of the information. Is the error material because of its implications for other aspects of the accounts? e.g., would the amount result in the reported achievement of a key performance measure when the measure has not been achieved? In considering whether an item is material because of its value, the item should be assessed in relation to: (a) Operating Statement: the amount of the appropriate revenue or expense class. (b) Balance Sheet: the amount of the lower of net assets and the appropriate total asset and liability class. Where an amount in the Balance Sheet affects the Operating Statement, the lower materiality level is appropriate. The overriding criterion for determining materiality is whether its omission, non-disclosure or misstatement would cause the financial statements to be distorted and of less help to users. Reporting Entity The Entire Public Sector reporting entity comprises: • The Legislative Assembly and the Cabinet (Executive); • Ministries and Portfolios (including Judicial Administration); 62 Financial Regulations (2005 Revision) • The Cayman Islands Audit Office; • The Office of the Complaints Commissioner; and • Statutory authorities and government companies (fully consolidated). The Core Government reporting entities comprise: • The Legislative Assembly and the Cabinet (Executive); • Ministries and Portfolios (including Judicial Administration); • The Cayman Islands Audit Office; • The Office of the Complaints Commissioner; and • Statutory authorities and government companies (accounted for using the equity method). In the case of a ministry, portfolio, the Audit Office and Office of the Complaints Commissioner, the reporting entity comprises: • the core ministry/portfolio/Audit Office/Office of Complaints Commissioner; and • its departmental sections or units. The financial statements of each reporting entity are to include all revenues, expenses, assets, and liabilities of the reporting entity. They are not to include any revenues, expenses, assets, and liabilities, which are not controlled by the reporting entity e.g., trust assets or, in the case of a ministry or portfolio, executive financial transactions. Consolidation of Controlled Entities The consolidated financial statements of each reporting entity are to include all subsidiary entities in which the reporting entity has a controlling interest. Controlling interest is to be assessed in accordance with section 6 of the Public Management and Finance Law (2005 Revision) and by applying the concept of control in IPSAS 6 Consolidated Financial Statements and Accounting for Controlled Entities. Entities in which the entity has a controlling interest are to be consolidated using the purchase method of combination in accordance with IPSAS 6 Consolidated Financial Statements and Accounting for Controlled Entities. All material transactions and balances between sub-entities are to be eliminated on combination. Uniform accounting policies are to be applied in the preparation of consolidated financial statements. 63 Financial Regulations (2005 Revision) All reporting entities are to record details of material transactions (and any resulting balances) between the reporting entity and any other reporting entities within the Core Government/Entire Public Sector reporting entity. Combination of Associates Entities over which a reporting entity has significant influence are to be accounted for as an associate using the equity method of accounting in accordance with IPSAS 7 Accounting for Investments in Associates. If an investment is acquired and held exclusively with a view to its disposal in the near future it should be accounted for under the cost method in accordance with IPSAS 7. Reporting Period Where the financial statements of any entity incorporated in a financial report have a reporting period other than 1 July to 30 June, that fact shall be disclosed. Changes in Accounting Policies Any change in accounting policy is to be disclosed in the notes to the financial statements in accordance with IPSAS 1 Presentation of Financial Statements. PART 3: REVENUE Definition and Recognition of Revenues Revenue is the gross inflow of economic benefits or service potential during the reporting period when those inflows result in an increase in net assets/equity, other than increases relating to contributions from owners. Revenues, in accordance with IPSAS 9 Revenue from Exchange Transactions, are to be recognised when an increase in future economic benefits related to an increase in an asset or a decrease of a liability has arisen that can be measured reliably. 64 Financial Regulations (2005 Revision) Revenue received but not yet earned at the end of the reporting period is to be recognised as a liability (unearned revenue). Where revenue is waived after an amount has become due for payment the revenue is still to be recognised and the amount waived is to be recognised as an expense. Where revenue is waived before an item has become due for payment the item is not to be recognised as revenue. The amount and nature of revenue waived is to be disclosed in the notes to the financial statements. Classification of Core Government and Entire Public Sector Revenues Core Government and Entire Public Sector revenues are to be classified as follows, with further disclosure as appropriate: • Coercive Revenue • Levies on International Trade and Transactions • Domestic Levies on Goods and Services • Levies on Property • Other Levies • Fines • Other Revenue • Sale of Goods and Services • Investment Revenue • Donations • Foreign Exchange Gains/Losses • Gains/Losses on Sale of Assets • Other. Classification of Ministry, Portfolio, Audit Office and Office of the Complaints Commissioner Revenues Revenues of a ministry, portfolio, the Audit Office and Office of the Complaints Commissioner are to be classified as follows, with further disclosure as appropriate: • Sale of Goods and Services • Outputs to Cabinet • Outputs to Other Government Agencies • Outputs to Others 65 Financial Regulations (2005 Revision) • Interest Revenue • Foreign Exchange Gains/Losses • Gains/Losses on Sale of Assets • Other Revenue. Coercive Revenue Coercive revenue, as defined in the Public Management and Finance Law (2005 Revision), is to be recognised as revenue on the following basis: COERCIVE REVENUE REVENUE RECOGNITION POINT Levies on International Trade and Transactions Import Duties When goods become liable for • Gasoline and Diesel duty, generally at declaration, • Alcoholic Beverages prior to release of goods. • Tobacco Products • Motor Vehicle Duty • Food • Manufactured Goods • Machinery and Transport Equipment • Other Import Duty and Charges Other Levies on International Trade When liability for tax or fee is and Transactions incurred; date of arrival for • Cruise Ship Departure Tax cruise ships and date of • Environmental Protection Fees departure for aircraft. Domestic Levies on Goods and Services Business and Professional Licenses Upon initial application and, if • Work Permit Fees appropriate, when renewed • Traders’ License (renewal dates vary). • Company Fees • Bank and Trust License • Insurance Licences • Mutual Fund Administrators • Partnership Fees • Trust Registration Fees • Liquor Licence • CUC Licence 66 Financial Regulations (2005 Revision) • Cable and Wireless Licence • TV Station Licence • Ship Registration Fees • Hotel Licence • Other Licences • Radio stations Other Levies on Goods and When due. Services Motor Vehicle Tax Upon initial application and due date for annual renewal. Tourist Accommodation Tax Recognise when monthly return due. Misc. Stamp Duty At the time the goods are delivered (on parcels). Misc. Immigration Fees Upon application. Levies on Property Land Transfer Duty At time of transfer of ownership (set fee). Infrastructure Fund Fee For non-refundable fees, upon application for planning approval. For refundable fees, once planning approval is granted. Other Levies Court Fines When fine imposed. Other Fines When fine imposed. Investment Revenue Interest Revenue Interest revenue is to be recognised on a time proportional basis, taking into account the interest rates applicable. Interest earned, but not received, is to be accounted for as accrued revenue. Royalties Royalties (e.g., for dredging and quarrying) are to be recognised when the royalty payment is due, either annually or monthly as appropriate. Distributions/Dividends Distributions or dividends from statutory authorities and government owned companies are to be recognised when the right to receive a distribution/dividend has been established. 67 Financial Regulations (2005 Revision) Output Revenue/Revenue from Sale of Goods or Services Output revenue/revenue from sale of goods and services is to be recognised in the Operating Statement of an entity as it is earned. Revenue is normally earned when outputs are delivered, although reference should also be had to the provisions in any sales agreement or contract. If an Annual Budget Statement, Service Level Agreement or other output delivery contract does not specify the timing for output delivery, output revenue is to be recognised on a monthly basis as one twelfth of the total amount of the output contract. Revenue from partially completed services is to be recognised by reference to the stage of completion of contracts or in accordance with the underlying agreement or contract. The stage of completion is determined according to the proportion that costs incurred to date bear to the estimated total costs of completion. Where user charges (fees and charges) relate to the delivery of an output, the charges are to be accounted for as revenue from outputs to others. The detailed recognition policies for specific fees and charges are as follows: REVENUE REVENUE RECOGNITION POINT Fees and Charges Garbage Fees When payment is due. Building Permit Fees Upon planning approval. MV Drivers’ Licences Upon initial application and three yearly renewal (when renewed). Planning Application Fees Upon application. Land Registry Fees On delivery of service. MV Inspection Fees & Driving On delivery of service. Fees of Court On delivery of service. Disinsection Fees On delivery of service. Mail Terminal Credits Upon issue of quarterly invoice. Law School Fees When due: exam fees and tuition fees (3rd term and 1st week of 68 Financial Regulations (2005 Revision) 3rd term) Customs Special Attendance On delivery of service: at time of attendance. Marine Survey Fees On delivery of service: when certificate is-issued. MV Licence Plates At time of transaction: when purchased. School Fees When due: beginning of term. Professional Legal Fees On delivery of service. Warehousage On delivery of service: at declaration, prior to release of goods. Patents and Trademarks On initial application for registration of patent and trademark and subsequent renewals. Cemetery fees At time of sale. Sales of Goods Postal Stamps At time of sale. Sale of Agricultural Supplies & At time of sale. Produce Sale of Advertisements At time of sale. Other Sales At time of sale. Rentals Post Boxes/ Franking Machine Upon initial application (and payment of deposit) and subsequent refills. School Books and Canteen At time of transaction. Other Rentals At time of transaction. All other When earned/delivered. Donations Donations (resources received free of charge or for nominal consideration) are to be recognised as revenue (and increases in assets or decreases in liabilities) at time of receipt, provided that the revenue is both measurable and probable. Donations are to be recognised at fair value. 69 Financial Regulations (2005 Revision) Where donations are subject to conditions, a liability is to be recognised only when there is an obligation to repay funds because of a failure by the recipient to meet the related conditions. All conditions are to be disclosed in the notes to the financial statements. Where donated assets are restricted to a certain purpose, such restrictions are to be disclosed in the notes to the financial statements (as a note to the relevant class of assets). Donated services are to be recognised (as revenue and expense) only when the services consist of specialised skills which would have been purchased if not donated. Other donated services are not to be recognised, but disclosure should be made of their nature and fair values (where known). Where resources received free of charge cannot be reliably measured, details of these resources are to be disclosed in the notes to the financial statements. Other Revenue Surplus or Loss on Construction Contracts Revenue from construction contracts is to be accounted for in accordance with IPSAS 11 Construction Contracts. Contract revenue is to include the initial amount of revenue agreed in the contract and variations in contract work, claims and incentive payments: (a) to the extent that it is probable that they will result in revenue; and (b) they are capable of being reliably measured. Contract costs are to include: (a) costs that relate directly to the specific contract; (b) costs that are attributable to contract activity in general and can be allocated to the contract on a systematic and rational basis; and (c) such other costs as are specifically chargeable to the customer under the terms of the contract. When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs associated with a construction contract are to be recognised as revenue and expenses respectively by reference to the stage of completion of the contract activity at the reporting date. Any expected deficit on a construction contract is to be recognised as an expense immediately. 70 Financial Regulations (2005 Revision) When the outcome of a construction contract cannot be estimated reliably: • revenue is to be recognised only to the extent of contract costs incurred that it is probable will be recoverable; and • contract costs are to be recognised as an expense in the period in which they are incurred. An expected or probable deficit on a construction contract is to be recognised as an expense immediately. Operating Lease Revenue Rentals on properties and government-owned staff accommodation is to be recognised when the rent is due. Revenue from the lease of Crown land is to be recognised in the year to which it relates. Finance Lease Revenue The recognition of finance lease revenue is to be based on a pattern reflecting a constant periodic rate of return on the lessor’s net investment outstanding in respect of the finance lease. PART 4: EXPENSES Definition and Recognition of Expenses Expenses are decreases in economic benefits or service potential during the reporting period in the form of outflows or consumption of assets or incurrences of liabilities that result in decreases in net worth other than those relating to distributions to owners. Expenses are to be recognised when a decrease in future economic benefits related to a decrease in an asset or an increase of a liability has arisen that is probable and can be measured reliably. Expenses are to be recognised when incurred. 71 Financial Regulations (2005 Revision) Classification of Core Government and Entire Public Sector Expenses Core Government and Entire Public Sector expenses are to be classified under the following headings, with further disclosure as appropriate: • Personnel costs (wages, salaries and pension contributions) • Supplies and consumables • Depreciation • Transfer payments • Other operating • Borrowing expense • Losses on disposal or revaluation of assets • Foreign currency losses. In addition the Core Government and Entire Public Sector is to provide note disclosure on expenses classified in accordance with the Government Finance Statistics functional classifications: • General public services • Defence • Public order and safety • Economic affairs • Environmental protection • Housing and community amenities • Health • Recreation, culture and religion • Education • Social protection. Classification of Ministry, Portfolio, Audit Office and Office of the Complaints Commissioner Expenses Ministry, portfolio, the Audit Office and Office of the Complaints Commissioner expenses are to be classified under the following headings, with further disclosure as appropriate: • Personnel costs (Wages, salaries and pension contributions) • Supplies and consumables • Depreciation • Other operating • Capital charge • Losses on disposal or revaluation of assets • Foreign currency losses. 72 Financial Regulations (2005 Revision) Employee Expenses (Wages, Salaries and Pension Contributions) The full cost of employees’ services is to be recognised as an expense when the expense is incurred. Amounts incurred, but not paid, are to be accrued. Employee expenses include: • Gross salaries and wages paid or payable, including all allowances paid or payable; • Annual leave entitlement incurred during the reporting period; • Sick leave and other types of leave paid during the period; • Employee and employer contributions to employee pension plans; and • Health Insurance premiums. Leave passages are to be recognised as an expense in the period that the full entitlement becomes due. In relation to the defined benefit component of the pension plans, and in accordance with IAS 19 Employee Benefits, the net total of the following amounts is to be recognised as an expense in the current period: • Current service cost; • Interest cost; • The expected return on plan assets; • Actuarial gains and losses, to the extent that they are recognised in accordance with IAS 19 (this refers to fluctuations which exceed the limits set out in IAS 19); • Past service cost, to the extent that it is recognised in accordance with IAS 19; • The effect of any curtailments or settlements. In relation to the defined contribution component of the pension plans, and in accordance with IAS 19 Employee Benefits, the contribution due to a defined contribution plan in exchange for service provided by employees during the year is to be recognised as an expense. Supplies and Consumables Supplies and consumables (including office expenses) are to be recognised when incurred. 73 Financial Regulations (2005 Revision) Operating lease payments are to be accounted for in accordance with IPSAS 13 Leases.

Operating lease payments are to be recognised as an expense in the operating statement on a straight-line basis over the lease term, where this is representative of the pattern of benefits to be derived from the leased property. Depreciation All property, plant and equipment (including revalued assets) is to be depreciated. The depreciation charge for each period is to be recognised as an expense unless it is included in the carrying amount of another asset. Assets are to be depreciated in accordance with the methods and rates shown below. The default method is the straight-line method. Alternative methods or rates may be used with the approval of the Accountant General. Leasehold improvements are to be depreciated either over the unexpired period of the lease or the useful lives of the improvements, whichever is the shorter. Depreciation Methods and Rates Years Buildings and structures Buildings and structures (default class) 40-60 Boat shelters 25 Buildings (concrete) 40-60 Buildings (portable) 12 Buildings (wooden) 40 Carparks 50 Cisterns 50 Communications bunker 20 Covered walkways 25 Cruise ship landings 25 Docks 50 Driveways 50 Fences 15 Grandstands 50 Heritage buildings 100 Jetties 25 Memorials and monuments 100 Reservoirs 50 74 Financial Regulations (2005 Revision) Site huts 10 Towers (for floodlights) 25 Turtle Holding Tanks 10 Port specific buildings Arrival facility/arrival facility 25 Concrete beacon 15 Dock 50 Lighthouse 15 Port extension 50 Rotunda 25 Seawalls/ retaining walls 25 Terminal ramps 25 Towers 15 Wharf tarmac 20 Building fit-out (when accounted for separately) Building fit-out (default class) 20 Air conditioning systems 20 Air conditioning systems (in use 24 hours per day) 12 Alarm systems (fire) 20 Alarms (burglar) 10 Awnings 10 Benches (Outside seating) 10 Blinds, curtains and drapes 8 Carpets 5 Canopy 7 Ceilings (suspended) 20 Flagpoles 25 Guardrails 10 Handrails 25 Hose reels (fire) 25 Hurricane shutters 10 Lifts 25 Light fittings 10 Signs 20 Signage on dock 5 Smoke detectors 20 Sprinkler systems 25 Computer equipment Computer equipment (default class) 3-4 Backup units (tape type) 3 Cabling (not fiber optic) 10 75 Financial Regulations (2005 Revision) Mainframe computers 6 Scanners 3 Developed Software 4-10 Office equipment and furniture Office equipment (default class) 5 Office furniture (default class) 12 Binding machines 3 Calculators 3 Chairs 9 Cupboards 20 Desks 15 Dictating machines 3 Drafting tables 10 Drawing boards 10 Drinking fountain 15 Facsimile machines 5 Filing cabinets 15 Furniture (fitted) 15 Furniture (loose) 10 Guillotines 8 Intercom systems 8 Microfiche/ Microfilm equipment 8 Monitoring systems 5 PA and paging systems 8 Photocopiers 4 Plan copiers 4 Postal canceling machine 6 Postal franking machines 6 Projectors 4 Radios 5 Reception counters 20 Safes 25 Screens and partitions 15 Security systems (including fire alarm systems) 10 Shelving (fixed) 20 Shredders 8 Tables 15 Telephone systems 6 Telephones (cell/mobile) 3 Telephones (portable) 3 Time recorders 10 Typewriters 5 Water coolers 5 76 Financial Regulations (2005 Revision) Whiteboards (electronic) 5 Vehicles Vehicles (default class) 20 Ambulances 10 Buses (9 – 68 seats) 10 Car 5 Chassis 40 foot 4 Compactor 8 Container handler 12 Diggers (mini) 10 Distributor 12 Dozer 8 Emergency Rescue Unit 12 Excavator 8 Fork lift 8 Forklift 12 Freightliner 3 Grader 8 Loader 8 Motorcycles 5 Pickup truck 4 Pick-ups and utilities 4 Roller 8 Tanker (Grizzly and other) 12 Tractor 12 Tractor 4 Trailers (Boat) 8 Trailers (Other) 8 Trailers (Road marker) 8 Truck (Container) 12 Truck (Crash) 12 Truck (Garbage) 10 Truck tray 5 Van (Dental) 5 Van (Other) 5 Vans (Rescue) 5 Turtle Farm Vehicles 3 Boats and marine equipment (categories of boats being checked with relevant departments) Boats and marine equipment (default class) 15 Anchors and chains 15 77 Financial Regulations (2005 Revision) Boats – medium (23” to 30”) 12 Boats – small (14” and under 22”) 9 Boats (non-steel hulled) 30” and over 20 Boats (steel hulled) 15 Bollards 20 Buoys 20 Diving tanks 10 Dive gear 5 Fire pump 10 Hovercrafts 8 Jetski 5 Liferafts 8 Motor boats 15 Markers 5 Upright poles 15 Marker lights, solar panels and batteries 15 Outboard motors 3 Row boats 15 Sea cushion fenders 10 Seaguard fenders 10 Ship loading and unloading equipment 15 Steel plates for ro ro ramp 25 Tenders 5 Trailers 5 Tugs 25 Cleaning, refuse and recycling Cleaning, refuse and recycling equipment (default class) 8 Baling plant (wastepaper) 15 Bins (for glass) 3 Bins (metal, rubbish) 8 Bins (recycling plastic) 3 Bins (rubbish) 3 Incineration plant (rubbish) 15 Skips (metal, rubbish) 8 Refuse station plant 15 Construction and other equipment Contractors and builders equipment (default class) 15 Bitumen laying equipment 12 Cable and pipe detectors 8 Chainsaws 3 Compressor 7 Concrete mixers 8 78 Financial Regulations (2005 Revision) Crane 25 Crushers 12 Fastening guns 20 Floodlights (portable) 5 Isolating transformers 8 Ladders 8 Scaffolding 19 Surveying equipment 5 Tarpaulins 3 Tools (hand and power) 3 Waterblasters 8 Wheelbarrows 3 Telecommunications Telecommunication equipment (default class) 5 Antenna 5 Cabling (including fibre optic and copper cabling – land based) 10 Ducts and in-ground conduits 50 Fibre optic repeaters 12 Microwave radio system 7 Radio broadcasting equipment 8 Radio telephone equipment 5 Radios 5 Repeaters, line and network terminating equipment 7 Satellite dishes 7 Telephone equipment 5 Test instruments 5 Towers 20 Two-way radios 5 VHF Paging Transmitter 5 VHF Marine System 7 Books, music, manuscripts, and works of art Books 10 Library books, and periodicals (bound, in-house) 10 Library books, and periodicals (bound, law) 10 Library books, and periodicals (bound, public) 5 Library books, and periodicals (bound, school) 5 Library books, and periodicals (bound, scientific) 10 Library books, and periodicals (bound, college) 8 Manuscripts 2 Music 2 Newspapers (where to be held) 2 Periodicals (if to be held but not bound) 2 79 Financial Regulations (2005 Revision) Textbooks for class use 3 Heritage assets/collection assets Museum natural history exhibition nil Museum cultural heritage exhibition nil Clothing Non-protective clothing (default class) 3 Protective clothing (default class) 0 Footwear 0 Lifejackets 4 Parachutes 3 Roads Culverts 15 Manholes 30 Signs (road and street signs) 6 Traffic lights 12 Formation works 50 Road structure 20 Drainage works 30 Aeroplanes and airport/aviation equipment Aeroplanes (737s) 9-15 Aeroplanes (spraying) 20 Airport runways and turning bay 33 Baggage carts 10 Conveyor belt 15 X ray security system 8 Fire fighting plant and equipment Foam tender pump 12 Tanker pump 12 Rescue unit 10 Trailer pump 12 Water and sewage treatment Water and sewerage treatment (default class) 50 Cayman Brac Production 15 Lower Valley Production 10 Building 50 Mechanical 15 Electrical 15 Tools & equipment 10 80 Financial Regulations (2005 Revision) Furniture & fixtures 10 Communication equipment 5 Computers 5 Vehicles 5 Lab equipment 5 Piping 25 Other equipment Appliances (e.g., microwave, refrigerator) 8 Agricultural and horticultural machinery 15 Audio, video and photographic equipment 5 Cash registers 5 Electronic access arms 15 Electronic gates 10 Electronic scales 8 Lawnmowers 5 Guns 20 Generators (diesel, not standby) 8 Generators (gas and oil) 20 Generators (standby) 20 Generator (solar) 5 Radar navigational equipment 10 Sprayers (backpack) 3 Sprayers (mobile crop) 5 Sprayers (mobile weed) 5 Wooden pallets 10 Workshop equipment 10 Medical and medical laboratory equipment Medical laboratory plant and equipment (default class) 8 Anesthesia equipment 10 Analysers 8 Audiometers 8 Autoclaves 10 Baths (water) 7 Bedding and linen 3 Beds (Hi-Lo) 10 Beds (standard) 15 Blood warmers 7 Breathing apparatus 10 Centrifuges 8 Chambers (vacuum) 10 Chromatographs 8 Cylinders (gas) 5 81 Financial Regulations (2005 Revision) Defibrillators 6 Dental chairs 15 Dental units 8 Dialysis machines 8 Diathermy equipment 3 Electrical test meters 8 Electrocardiographs 7 Electrodiagnostic equipment 6 Electronic balances 5 Electrosurgical equipment 3 Fibre optic scopes 3 Fitness equipment 5 Flasks (vacuum) 10 Flow measuring equipment 6 Freezers 10 Fume cabinets 10 Furnaces 15 Furniture 10 Gamma cameras 8 Hoists (for patients) 10 Humidifiers 5 Hydrocollators 10 Incinerators (pathological) 20 Incubators 10 Infusion pumps (and the like) 5 Instruments (hand held) 5 Invalid scooters 8 Irradiation plant 25 Laparoscopic equipment 3 Laser surgical and dental equipment 5 Lighting 12 Linear accelerator/simulator 10 Mannequins and skeletons 10 Microscope equipment 10 Microtomes 10 Operating tables 10 Optical equipment 10 Orthopaedic appliances 3 Oscilloscopes 8 Patient monitoring equipment 6 Physiotherapy equipment 10 Recorders 8 Refrigerators 10 Respiration apparatus 10 82 Financial Regulations (2005 Revision) Resuscitators 8 Scanners 10 Sluicers 10 Solarium beds and lamps 5 Spectrophotometers 7 Splints 1 Sterilisers 10 Surgical implant instrument sets (orthopedic) 3 Treatment planning system (radiotherapy) 6 Trusses 3 Ultrasonic diagnostic equipment 5 Ultrasonic equipment 8 Vaporisers/absorbers 10 Ventilators 8 Vessels (vacuum) 10 Walking frames 3 Washing decontaminators 8 Weighing equipment (for patients—electronic) 12 Weighing equipment (for patients—mechanical) 20 Wheelchairs (non-powered) 8 Wheelchairs (powered) 6 X-ray cassettes 5 X-ray equipment, processors and viewers 10 Scientific and laboratory equipment Scientific and laboratory equipment (excluding medical laboratory equipment) (default class) 10 Analysers 8 Autoclaves 8 Baths (water) 10 Calipers 8 Centrifuges 10 Chambers (vacuum) 10 Chromatographs 8 Cylinders (gas) 5 Electrical test meters 8 Electronic balances 8 Flasks (vacuum) 5 Flow measuring equipment 6 Fume cabinets 15 Furnaces 15 Incubators (laboratory) 8 Instruments (hand held) 5 Meteorological equipment 10 83 Financial Regulations (2005 Revision) Micrometers 8 Microscope equipment 10 Microtomes 10 Navigational equipment 8 Oscilloscopes 8 Recorders 8 Spectrophotometers 8 Sterilisers 8 Surveying equipment 8 Surveying equipment (electronic) 4 Telescopes 10 Ultrasonic equipment 8 Vessels (vacuum) 10 X-ray equipment 10 Tanks and vats 25 Impairment Impairment is the loss in the service potential or future economic benefits of an asset, over and above the systematic recognition of the loss of an asset’s service potential recognised through depreciation. This policy applies to property, plant and equipment. An impairment loss is to be recognised as an expense in the operating statement for assets carried at cost and as a revaluation decrease for assets carried at revalued amounts. The following factors are to be used as possible indicators of impairment: (a) A change in the extent to which an asset is used; (b) A change in the manner in which the asset is used; (c) Significant technological development; (d) Physical damage; (e) A decline in, or cessation of, the demand or need for services provided by the asset; (f) A decision to halt the construction of the asset before it is complete or in an usable condition; (g) A change in the law, government policy or environment that limits the extent to which the asset can be used; or (h) A significant decline in the observable market value of the asset. If these indicators exist, an impairment test is to be applied. 84 Financial Regulations (2005 Revision) Impairment tests Where an asset is held for its ability to generate net cash inflows, impairment is to be measured in accordance with IAS 36 Impairment of Assets. Impairment is to be measured by reference to the higher of net selling price and value-in-use (present value of future cash flows). Where an asset is not held for its ability to generate net cash inflows the observable market value of the asset is to be used in measuring any impairment loss. Where an asset does not have an observable market value and the asset continues to have utility for the entity, its depreciated replacement cost is to be used in measuring any impairment loss. Where an asset does not have an observable market value and the asset no longer has utility for the entity, or its ability to utilise the asset has been significantly restricted, a disposal value (net selling price) should be used. Transfer payments All discretionary transfer payments (including those to individuals, local voluntary organisations, and international organisations and also including gifts and donations) are to be recognised as an expense when approved for payment, unless there is a legally enforceable obligation prior to that date. If there is a legally enforceable obligation prior to the date of payment, the expense is to be recognised at the time the obligation arises. Ongoing payments for recurrent transfer payments (such as grants and subsidies) are to be recognised when payments are due. Where a transfer payment is subject to conditions and may be repayable/returnable, the expense is to be recognised in full at the time of payment. An asset (transfer payment receivable) is to be recognised only at the point at which it is probable that the grant conditions will not be met and that the funds/asset will be returned. Borrowing expense At the end of each reporting period interest payable/accrued should be recognised as an expense for that period. Borrowing costs (including interest on bank overdrafts and short and long-term borrowings, amortisation of up front ancillary costs) are to be recognised as an expense in the reporting period in which they are incurred. 85 Financial Regulations (2005 Revision) Capital Charge The capital charge is to be recognised at the end of each reporting period on a straight-line basis. PART 5: ASSETS Definition and Recognition of Assets Assets are resources controlled by an entity as a result of past events and from which future economic benefits or service potential are expected to flow to the entity. Assets are to be recognised when, and only when: • It is probable (more likely than less likely) that the future economic benefits or service potential embodied in the asset are to eventuate; and • The asset possesses a cost or other value that can be measured reliably. All assets that fulfil the definition and recognition criteria are, subject to materiality, to be recognised in the financial statements. The threshold for recognising an asset is one thousand dollars. Assets below that amount are to be expensed. Classification of Core Government and Entire Public Sector Assets Core Government and Entire Public Sector assets are to be classified under the following headings, with further disclosure as appropriate: • Current Assets • Cash and Cash Equivalents • Marketable securities and deposits • Accounts Receivable • Inventories • Other current assets • Non-current assets • Loans • Other Investments • Property, Plant and Equipment • Intangible Assets 86 Financial Regulations (2005 Revision) • Other non-current assets • Intangible Assets. Classification of Ministry, Portfolio, the Audit Office and Office of the Complaints Commissioner Assets Ministry, Portfolio, the Audit Office and Office of the Complaints Commissioner assets are to be classified under the following headings, with further disclosure as appropriate: • Current Assets • Cash and Cash Equivalents • Accounts Receivable and Accrued Revenue • Inventories • Non-current assets • Property, Plant and Equipment • Intangible Assets • Other non-current assets. Cash and Cash Equivalents Cash and cash equivalents is to include: • Cash on hand (cash awaiting banking, cash in transit) • Bank account balances (including overdrafts) • Cash equivalents (short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, for example, short term deposits, and deposits at call). Accounts Receivable and Accrued Revenue Accounts receivable are to be recognised at the time goods or services, including outputs, are provided, that is, when revenue is earned. The raising of an invoice, assessment or any other obligation to pay usually evidences the recognition of an account receivable. Amounts invoiced to clients where the entity has not yet provided the goods or services are to be included in accounts receivable but adjusted for unearned revenue in accordance with the policy on unearned revenue. All accounts receivable are to be recorded at the amounts expected to be ultimately collected in cash. 87 Financial Regulations (2005 Revision) Bad and Doubtful Debts All bad debts are to be written-off and an adequate provision is to be made for the doubtful debts. Bad debts are to be written-off as soon as they are known to be bad. Where the bad debt was previously provided for as a doubtful debt, the bad debt is to be written-off against the provision. Where the bad debt was not previously provided for, the bad debt is to be expensed. If, at any time, the debt is recovered, the write-off is to be reversed. Inventories: General Inventories are to be recognised when title to the goods has passed to the purchaser and there is a legal obligation to pay for the goods. For goods in transit the exact point at which ownership passes will depend upon the standard contract terms. Inventories are to be measured at the lower of cost and net realisable value (NRV) on an item-by-item or group basis. When inventories are sold or consumed, the carrying amount of those inventories is to be recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value (due to obsolescence, damage etc) and all losses of inventories are to be recognised as an expense in the period the write down or loss occurs. Costs are to be assigned to inventories using specific identification or FIFO as appropriate. Inventories: Definition Inventories encompass goods purchased and held for resale including, for example, merchandise purchased by an entity and held for resale, or land and other property held for sale. Inventories also encompass finished goods produced, or work in progress being produced, by the entity. Inventories also include materials and supplies awaiting use in the production process and goods purchased or produced by an entity, which are for distribution to other parties for no charge or for a nominal charge 88 Financial Regulations (2005 Revision) Inventories: Work in Progress Work in progress is to be measured at the lower of cost and net realisable value. Where work in progress of an entity relates to the provision of non- capital outputs, work in progress is to be determined on the basis of costs to date based on the stage of completion of the output. Inventories: Capital Work in Progress Expenditure incurred on capital work in progress is to be recognised as an asset and classified as non-current. Capital work in progress is to be measured at the lower of cost and net realisable value. Capital work in progress that is completed and commissioned and held ready for use is to be transferred to the appropriate non-current physical asset category and depreciated accordingly. The cost of self-constructed assets is to be determined in accordance with IPSAS 17 Property, Plant and Equipment. Refer also to the policy for Property, Plant and Equipment. Borrowing costs are to be recognised as an expense in the reporting period in which they are incurred. Inventories: Construction Contracts Where work in progress relates to a construction contract the construction work in progress is to be accounted for in accordance with IPSAS 11 Construction Contracts. The cost of construction work in progress is to include: (a) Costs that relate directly to the specific contract; (b) Costs that are attributable to contract activity in general and can be allocated to the contract on a systematic and rational basis; and (c) Such other costs as are specifically chargeable to the customer under the terms of the contract. The gross amount due from customers for contract work is to be recognised as an asset. 89 Financial Regulations (2005 Revision) The gross amount due to customers for contract work is to be recognised as a liability. The revenue and expenses associated with a construction contract are to be recognised in accordance with the policy on Surplus or Loss on Construction Contracts. Inventories: Agricultural Crops and Livestock Agricultural crops and livestock are to be accounted for in accordance with IAS 41 Agriculture. A biological asset is to be recognised when: (a) It is probable that future economic benefits associated with the asset will flow to the enterprise; and (b) The cost or fair value of the asset can be measured reliably. Biological assets should be measured at each balance sheet date at their fair value. The change in fair value of biological assets during a period should be recognised in net profit or loss for the period as part of profit or loss from operating activities. Costs of producing and harvesting biological assets should be charged to expense when incurred. Costs that increase the number of units of biological assets owned or controlled by the enterprise are added to the carrying amount of the asset. Agricultural produce should be recognised as a separate asset at the point of harvest, at which time the agricultural produce is removed from the enterprise's biological assets. Agricultural produce derived from an enterprise's own biological assets should be measured at fair value in its harvested state at the point of harvest. Such measurement is deemed to be the cost when applying IPSAS 12 Inventories, or other applicable accounting policies. The net change in fair value between the last balance sheet date and the point of harvest should be included in determining that period's profit or loss from operating activities. 90 Financial Regulations (2005 Revision) In accordance with IAS 41 Agriculture, an entity should present a reconciliation of the changes in the carrying amount of each group of biological assets between the beginning and the end of the current financial reporting period. Inventories: Marl and Gravel Stocks of marl and gravel that have been extracted by the reporting entity are to be recognised as inventories at the earliest stage at which materials representing saleable product have been extracted and the quantities of such materials can be determined reliably. The recognition of economically recoverable reserves as assets is to be subject to the general asset recognition policy. All pre-production costs involved in locating marl or gravel are to be written-off. Sales revenue is to be recognised when, and only when, the marl and gravel is in a saleable form and there is a clear agreement to purchase the marl and gravel. Any liability for restoration costs is to be recognised as a liability in accordance with IPSAS 19 Provisions, Contingent Liabilities and Contingent Assets. Inventories: Bullion Gold and silver bullion (held for numismatic purposes) is to be valued at the lower of cost or market value. Inventories: Unissued Currency Unissued currency is to be valued at the cost of production, which includes all of the costs incurred in bring it to its present location and condition. Inventories: Postal stamps Unissued stamps are to be valued at the cost of production, which includes all of the costs incurred in bring it to its present location and condition. 91 Financial Regulations (2005 Revision) Prepayments The portion of expenditure paid in advance of receiving services is to be recognised as a prepayment. Subject to materiality, prepayments may be classified as accounts receivable for purposes of presentation on the face of the published financial statements. Separate note disclosure of prepayments (if material) is required. Investments: Loans and Advances Loans and advances provided to other entities or individuals are to be recognised as assets. They are to be valued at the lower of the balance owed or the amount that is expected to be recovered. Where recovery of a loan or advance is doubtful, the receivable is to be treated in accordance with the policy on bad and doubtful debts. Loans or advances provided at concessionary rates to related parties are to be disclosed in accordance with the policy on related party disclosures. All loans or advances are to be initially recorded at the full face value of the amount advanced (classified as current or non-current as appropriate). Principal amounts received are to be offset against the amount receivable. The interest portion of the repayment is to be recognised as interest revenue. Both interest receivable (where interest is due) and accrued interest (where payment is not yet due but a portion of the next payment has been earned) at the end of the period are to be recognised. Interest revenue is to be recognised in accordance with the policy on interest revenue. Any repayment waived is to be written off the recorded amount of the loan/advance and recognised as an expense in that reporting period. Investments: Marketable Securities Investments held as current assets are to be carried at the lower of cost or market value. When reliable measurements of market value are available, these are to be disclosed in the notes to the financial 92 Financial Regulations (2005 Revision) statements. Where market value is not known, this fact is to be disclosed. Marketable securities that are held for trading purposes are to be recorded at net current value. Where there has been a decline, other than temporary, in the value of a non-current asset, the carrying amount of the investment is to be reduced and the decline is to be recognised as an expense in the operating statement for that reporting period. Investments: Other Investments Other investments are to be recorded at the lower of cost and net current value. Investments that are held for hedging purposes are to be recorded on the same basis as the item being hedged. Property, Plant and Equipment Property, plant and equipment includes: • Land • Buildings • Leasehold improvements • Furniture and fittings • Office equipment • Motor vehicles • Infrastructure assets • Heritage assets (including monuments) • Library assets • Other plant and equipment. Items of property, plant and equipment, meeting the recognition criteria for assets, with a value of greater than one thousand dollars are to be capitalised and depreciated in accordance with IPSAS 17 Property, Plant and Equipment. Cost Items of property, plant and equipment are to be initially recorded at cost. Where an item’s cost cannot be determined, or is not reliable, it is to be recorded at its fair value as at the date it is first recognised as an asset in the financial statements. 93 Financial Regulations (2005 Revision) The cost of an item of property, plant and equipment is to include: • The purchase price (including import duties and less trade discounts and rebates) • The directly attributable costs of bringing the asset to working condition for its intended use (including the cost of site preparation, initial delivery and handling costs, installation costs, professional fees such as for architects and engineers and the estimated cost of dismantling the asset and restoring the site if required). When payment for an item of property, plant and equipment is deferred beyond normal credit terms, its cost is to be recorded as the cash price equivalent; the difference between this amount and the total payments is to recognized as interest expense over the period of credit. Self constructed plant and equipment is to be accounted for in accordance with IPSAS 17 Property, Plant and Equipment as follows: • The cost of materials, labour and other inputs used during the construction process is to be obtained from transactions with parties external to the entity; • The cost of abnormal amounts of wasted material, labour or other resources is not to be included in the cost of the asset; and • Administration and other general overhead costs are not to be included unless they can be directly attributed to the construction of the asset or bringing it to its working condition. Following acquisition Subsequent to the year of acquisition, property, plant and equipment is to be accounted for in accordance with IPSAS 17 Property, Plant and Equipment as follows: • In subsequent reporting periods, recorded at cost (less any accumulated depreciation and any accumulated impairment loss) or revalued amount (fair value at date of revaluation less any subsequent accumulated depreciation and any accumulated impairment loss); • Depreciated in accordance with the policy on depreciation; • Reviewed regularly for evidence of impairment in accordance with the policy on impairment; • Subsequent expenditure is to be capitalised only when it is probable that future economic benefits or service potential over the total life of the asset (in excess of the most recently assessed standard of performance of the existing asset), will flow to the entity. All other subsequent disbursements are to be recognised as expenses in the period in which they are incurred; and 94 Financial Regulations (2005 Revision) • Gains or losses arising from the retirement or disposal of an item of property are to be accounted for in accordance with the policy on gains and losses on disposal of non-current assets. Revaluation Land, buildings, leasehold improvements and infrastructure are to be revalued every five years. Other assets are not to be revalued. Revaluations are to be accounted for in accordance with IPSAS 17 Property, Plant and Equipment as follows: • Entire classes of assets are to be revalued; • Revaluations are to be made with sufficient regularity that the carrying amount does not differ from that which would be determined using fair value at the balance date. Three to five years will generally be sufficient unless the class of assets experiences significant movements in fair value; • Valuations are to be undertaken by a member of the valuation profession; • Where no market value exists, value is to be assessed in relation to other similar assets or depreciated replacement cost; • Any accumulated depreciation in respect of the class of assets is to first be credited to the assets to which it relates; • A revaluation increase for a class of assets is to be directly credited to an asset revaluation reserve (except that a revaluation increase is to be recognised as revenue to the extent that it reverses a revaluation decrease of the same class of assets previously recognised as an expense); • A revaluation decrease for a class of assets is to be recognised as an expense (although a decrease may be charged directly against any related revaluation surplus to the extent that the decrease does not exceed the amount held in the revaluation surplus in respect of that same class of assets); and • Revaluation increases and decreases relating to individual assets within a class of property, plant and equipment are to be offset against one another within that class but must not be offset in respect of assets in different classes. In determining the fair value of an asset, the valuation standards of the Royal Institution of Chartered Survey (Manual of Valuation Practices) are to be applied. The initial recognition of an item of property, plant and equipment at its fair value, in the absence of a determinable or reliable cost, does not constitute a revaluation. 95 Financial Regulations (2005 Revision) Property, Plant and Equipment: Library Assets Library books, text books, magazines and audio/visual material are to be capitalised and accounted for at cost less accumulated depreciation and accumulated impairment losses in accordance with IPSAS 17 Property, Plant and Equipment. Property, Plant and Equipment: Heritage assets Heritage assets are assets which cultural, environmental or historical significance. Heritage assets (including monuments) which have a market value or determinable value and which meet the definition and recognition criteria for assets are to be recognised and accounted for in accordance with IPSAS 17 Property, Plant and Equipment. Where the service potential of a collection asset does not decline over time it is not to be depreciated. Heritage assets which do not meet the definition and recognition criteria for assets should be not be recognised in the balance sheet but should be disclosed in the notes to the financial statements in accordance with the policy on assets not recognised. Heritage assets do not meet the criteria for recognition when they do not have a reliable cost or reliable fair value. Property, Plant and Equipment: Infrastructure Assets Infrastructure assets are assets that comprise public utilities and which provide essential services and enhance the productive capacity of the economy. Infrastructure assets include: • Roads and sidewalks; and • Water supply and sewerage. Infrastructure assets are to be accounted for in accordance with IPSAS 17 Property, Plant and Equipment. Each component of an infrastructure asset with a materially different useful life from other components is to be accounted for as a separate asset and depreciated over its useful life. 96 Financial Regulations (2005 Revision) Initial cost is the cost of construction. Where initial cost of construction is not known, refer to the policies for determining opening balances. Land underneath or alongside roads is valued using the opportunity cost based on adjacent use, as an approximation to net current value. Property, Plant and Equipment: Collection Assets Collection assets are to be capitalised and accounted for at cost (or fair value) less accumulated depreciation and accumulated impairment losses in accordance with IPSAS 17 Property, Plant and Equipment. Where the service potential of a collection asset does not decline over time it is not to be depreciated. Leased Assets Assets acquired under finance leases are to be accounted for in accordance with IPSAS 13 Leases. They are to be recognised as assets. The associated lease obligations are to be recognised as liabilities. Leased assets are to be depreciated in the same manner as other similar assets owned by the entity. The assets (and liabilities) are to be recognised at amounts equal at the inception of the lease to the fair value of the leased property or, if lower, at the present value of the minimum lease payments. In calculating the present value of the minimum lease payments, the discount factor is the interest rate implicit in the lease, if this is practicable to determine; if not, the lessee’s incremental borrowing rate should be used. Assets leased by way of operating lease are to be accounted for in accordance with IPSAS 13 Leases and the policy on consumables and supplies. Sale and Leaseback Transactions Sale and leaseback transactions are to be accounted for in accordance with IPSAS 13 Leases. If a sale and leaseback transaction results in a finance lease, any excess of sales proceeds over the carrying amount is to be deferred and 97 Financial Regulations (2005 Revision) amortised over the lease term. It is not to be immediately recognised as revenue in the financial statements of a seller-lessee. If a sale and leaseback transaction results in an operating lease, and it is clear that the transaction is established at fair value, any gain or loss should be recognised immediately. If the sale price is below fair value, any gain or loss should be recognised immediately except that, if the loss is compensated by future lease payments at below market price, it should be deferred and amortised in proportion to the lease payments over the period for which the asset is expected to be used. If the sale price is above fair value, the excess over fair value should be deferred and amortised over the period for which the asset is expected to be used. For operating leases, if the fair value at the time of a sale and leaseback transaction is less than the carrying amount of the asset, a loss equal to the amount of the difference between the carrying amount and fair value is to be recognised immediately. Computer Hardware and Software Computer hardware and software (purchased or developed internally) that meet the criteria for recognition are to be recorded at cost, which is equal to the purchase price, including installation costs. Training costs are to be expensed as they are incurred. Maintenance costs are to be expensed as incurred except to the extent that the expenditure improves or significantly enhances the functionality of the asset. One-off software licence fees are to be capitalised (subject to the fee meeting the definition and recognition criteria for an asset). Yearly licence fees are to be expensed in the year of payment, taking into account any prepaid portion, in accordance with the policy on prepayments. Computer equipment is to be depreciated in accordance with the policy on depreciation. 98 Financial Regulations (2005 Revision) Intangible Assets All intangible assets meeting the criteria for recognition in IAS 38 Intangible Assets are to be recognised at cost. The criteria are: • It is probable that the future economic benefits that are attributable to the asset will flow to the entity; and • The cost of the asset can be measured reliably. Expenditure on the research phase of generation is to be recognised as an expense. Expenditure on the development phase of generation is to be recognised as an asset when, and only when the entity can demonstrate: (a) The technical feasibility of completing the intangible asset so that it will be available for use or sale; (b) Its intention to complete the intangible asset and use or sell it; (c) Its ability to use or sell the intangible asset; (d) How the asset will generate probable future economic benefits or service potential; (e) The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and (f) Its ability to measure the expenditure attributable to the intangible asset during its development reliably. The cost of an internally generated intangible asset is to include all expenditure that can be directly attributed, or allocated on a reasonable and consistent basis, to creating, producing and preparing the asset for its intended use. Overheads are to be included in the cost of the asset but only to the extent that they are necessary to generate the asset and that can be allocated on a reasonable and consistent basis to the asset. Internally generated goodwill, brands, mastheads, publishing titles, customer lists and similar items are not to be recognised. In subsequent periods intangible assets are to be recognised at cost, less any accumulated amortisation and any accumulated impairment losses. Amortisation policies are to be reviewed annually. Information on intangible assets not recognised in the balance sheet is to be disclosed in the notes to the financial statements in accordance with the policy on assets not recognised. 99 Financial Regulations (2005 Revision) Contingent Assets Contingent assets are to be accounted for in accordance with IPSAS 19 and accordingly are not to be recognised. A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non- occurrence of one or more uncertain future events not wholly within the control of the enterprise. Where an inflow of economic benefits is probable, a brief description of the nature of the contingent assets at the balance date, and an estimate of their financial effect, is to be disclosed in the notes to the financial statements. PART 6: LIABILITIES Definition and Recognition of Liabilities Liabilities are present obligations of an entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits or service potential. Liabilities are to be recognised when and only when: • It is probable (more likely than less likely) that an outflow of resources embodying economic benefits will result from the settlement of a present obligation; and • The amount of the outflow can be measured reliably. Liabilities that fulfil the definition and recognition criteria specified above are, subject to materiality, to be recognised in the financial statements. Classification of Core Government and Entire Public Sector Liabilities Core Government and Entire Public Sector liabilities are to be classified under the following subheadings with further disclosure as appropriate. • Current Liabilities • Accounts Payable • Unearned Revenue 100 Financial Regulations (2005 Revision) • Employee Entitlements • Other Current Liabilities • Non-Current Liabilities • Employee Entitlements • Pension Liabilities • Borrowings • Currency Issued • Other Non-Current Liabilities. Classification of Ministry, Portfolio, the Audit Office and Office of the Complaints Commissioner Liabilities Ministry, Portfolio, the Audit Office and Office of the Complaints Commissioner liabilities are to be classified under the following subheadings with further disclosure as appropriate: • Current Liabilities • Accounts Payable • Unearned Revenue • Employee Entitlements • Other Current Liabilities • Non-Current Liabilities • Employee Entitlements • Portion of current liabilities • Other Non-Current Liabilities. Accounts Payable and Accrued Expenses Accounts Payable (Creditors) are to be recorded at the amount owing after allowing for credit notes and other adjustments. Adjustments for expenses already incurred but for which no transaction has been recorded are to be made at end of each reporting period. Provisions Provisions are to be accounted for in accordance with IPSAS 19 Provisions, Contingent Liabilities and Contingent Assets. A provision is to be recognised as a liability when, and only when: • An entity has a present obligation (legal or constructive) as a result of a past event; 101 Financial Regulations (2005 Revision) • It is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation; and • A reliable estimate can be made of the amount. Provisions are to be recorded at the best estimate of the expenditure required to settle the present obligation at the reporting date. The best estimate is to be determined using: • Judgement of management; • Experience with similar transactions; • Reports from independent experts; • Any additional evidence provided by events after the reporting date. Uncertainty regarding possible outcomes is to be dealt with by using expected values. Provisions are to be classified as other non-current liabilities (or current liabilities as appropriate). Employee Entitlements Salaries and wages are to be recognised as the expense is incurred. A liability for amounts incurred, but not paid, is to be accrued at the end of the reporting period. Annual leave due, but not taken, is to be recognised as a liability. It is to be calculated on the basis of leave owing to each employee (including any time in lieu) and is to be based on the individual employee’s current salary. The calculation of the annual leave liability is to be based on the leave records of all employees using current salary rates. Where employees have taken more leave than their entitlement at the end of the reporting period, a negative liability is to be recorded for those employees. Accrued annual leave that must be taken within the following year is to be classified as a current liability. Accrued annual leave that may be taken after the following year is to be classified as a non-current liability. 102 Financial Regulations (2005 Revision) Leave passages are to be recognised at the point that the employee becomes entitled to them. No liability or expense is to be recognised in relation to sick leave and compassionate leave until the time of absence because the employee’s services gives rise to no obligation until that time. Unearned Revenue Unearned revenue is to be recognised as a liability in the reporting period that it is received and as revenue in the period when the relevant goods or services are supplied. Pension Liability: Defined Benefit (Core Government and Entire Public Sector only) The pension liability arising in respect of the defined benefit portion of the pension plans is to be accounted for in accordance with IAS 19 Employee Benefits. The amount recognised as a defined benefit liability is to be the net of the following amounts: • The present value of the defined benefit obligation as at the balance sheet date; • Plus any actuarial gains (less any actuarial losses) not recognised as income or expense; • Minus any past service cost not yet recognised as an expense; and • Minus the fair value at the balance date of plan assets out of which the obligations are to be settled directly. Pension Liability: Defined Contribution (Core Government and Entire Public Sector only) The pension liability arising in respect of the defined contribution portion of the pension plans is to be accounted for in accordance with IAS 19 Employee Benefits. A liability for contributions payable to a defined contribution plan is recognised only if the contribution paid during the period is less than contribution required. Otherwise no liability is to be recognised. 103 Financial Regulations (2005 Revision) If the contribution already paid exceeds the contribution due for service before the end of the reporting period, an asset (prepayment) should be recognised, to the extent that such prepayments will lead to a reduction in future payments or a cash refund. Borrowings All borrowings are to be recognised as a liability when the obligation is established. Borrowings are to be measured at their book value (equal to their nominal value). Currency Issued Currency issued for circulation, including demonetised currency, is to be recognised at face value as it constitutes a liability in favour of the holder. No liability for redeeming the value of numismatic coins is to be recognised. Unissued currency is to be reported as inventory (at cost of production). Finance Lease Liabilities Finance leases are to be accounted for in accordance with IPSAS 13 Leases and the policy on leased assets. Lease payments are to be apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is to be allocated to periods during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Commitments Commitments are to be recorded in the Statement of Commitments at the value of the obligation. A commitment is a firm intention at the end of the reporting period to incur a future obligation for the purchase or construction of a capital asset, which will give rise to a future payment or sacrifice of economic benefits. 104 Financial Regulations (2005 Revision) Contingent Liabilities (including Guarantees) Contingent Liabilities are to be accounted for in accordance with IPSAS 19 Provisions, Contingent Liabilities and Contingent Assets, and accordingly are to be recognised as liabilities when they are probable. The nature and an estimate of the financial effect of contingent liabilities is to be disclosed in the Statement of Contingent Liabilities. If the information or evidence available is insufficient to reliably estimate the amount of the contingency, this fact, along with the contingency’s nature and existence is to be disclosed in the notes to the Statement of Contingent Liabilities. PART 7: NET WORTH Composition of Net Worth The net worth portion of the balance sheet is to separately disclose the following:

• Contributed capital (where relevant) • Accumulated surplus/deficit • Asset revaluation reserve The accumulated surplus/deficit of the Core Government and Entire Public Sector is to be further classified as: • Housing Guarantee Reserve Fund; • Environmental Protection Fund; • Infrastructure Development Fund; • Other Funds as necessary; and • General Funds. Contributed Capital Equity investments or capital withdrawals are to be credited or debited against contributed capital. Any return of surplus from operations for the year is to be recorded as a distribution of surplus rather than as a reduction of contributed capital. 105 Financial Regulations (2005 Revision) Accumulated Surplus and Deficit The accumulated surplus or deficit is to report the accumulated undistributed surpluses or deficits derived in each reporting period. Asset Revaluation Reserve Where assets are revalued in accordance with the policy on revaluation of assets, an asset revaluation reserve is to be established. Revaluation increments are to be credited directly to an asset revaluation reserve, except that to the extent that such an increment reverses a revaluation increment previously charged to the operating statement in respect of that same class, in which case it is to be credited to the operating statement. Revaluation decrements are to be debited to the operating statement, except that to the extent that such a decrement reverses a previous increment previously credited to, and still included in an asset revaluation reserve, in respect of that same class of assets, it is to be debited directly to the revaluation reserve. PART 8: OTHER POLICIES General Presentation and Disclosure The presentation (classification) and disclosure of items is to be in accordance with the specific accounting standards adopted. Extraordinary Items The nature and the amount of each extraordinary item are to be separately disclosed. Extraordinary items are revenue or expenses that arise from events or transactions that are clearly distinct from the ordinary activities of the reporting entity, are not expected to recur frequently or regularly and are outside the control or influence of the reporting entity. Gains and Losses on Disposal of Non-current Assets Gains and losses on disposal of non-current assets are to be recognised when control passes to the purchaser. 106 Financial Regulations (2005 Revision) When a non-current asset is retired or disposed of, the difference between its carrying amount (its historical cost or other value less any accumulated depreciation), and any net amount of proceeds on disposal is to be recognised at the time of disposal as a gain or loss on disposal. Amounts appearing in the asset revaluation reserve relating to an asset that is disposed of are to be transferred directly from the asset revaluation reserve to the accumulated surplus/(deficit). The gain or loss on disposal of a previously revalued non-current asset is to be measured as the difference between the carrying amount of the revalued asset as at the time of disposal and the net proceeds (if any) from disposal. If a non-current asset has been retired from active use and/or is held for disposal and is not expected to realise its carrying amount, the carrying amount is to be reduced to its net realisable value with the difference treated as a revaluation decrement. Revenues and expenses arising from the sale or disposal of non-current assets are to be disclosed in the operating statement on a net basis. Assets and Liabilities Transferred When an asset is transferred, the entity transferring the asset is to show the transaction as a withdrawal of capital. The entity receiving the asset is to show the transaction as an equity investment. When a liability is transferred, the entity transferring the liability is to show the transaction as an equity investment. The entity receiving the liability is to show the transaction as a withdrawal of capital. Any gain or loss on transfer (resulting from the transfer at an amount different to the net carrying amount) is to be recognised as revenue or expense. Assets and Liabilities Not Recognised Where assets and liabilities are not recognised in the financial statements because they do not meet the recognition criteria (e.g., unidentifiable financial assets) details of these items may nonetheless be disclosed in the notes to the financial statements. 107 Financial Regulations (2005 Revision) Where a specific policy requires separate disclosure of assets and liabilities not recognised (e.g., contingent liabilities), then the requirements of that specific policy are to be followed. Events After Reporting Date In accordance with IPSAS 14 Events After the Reporting Date, the amounts recognised in the financial statements are to be adjusted to reflect adjusting events after the reporting (balance) date. Adjusting events are those that provide evidence of conditions that existed at the reporting date. The amounts recognised in the financial statements are not to be adjusted to reflect non-adjusting events after the reporting date. Non- adjusting events are those that are indicative of conditions that arose after the reporting date. Where non-adjusting events are of such importance that non-disclosure would affect the ability of the users of the financial statements to make proper evaluations and decisions, the following information is to be disclosed: • The nature of the event; and • An estimate of its financial effect, or a statement that such an estimate cannot be made. Cost accounting policies The method used to allocate input costs to outputs is to be: • Documented; • Disclosed in the accounting policies of the entity; and • Applied consistently from one reporting period to the next. Comparatives Where there is any change of format or presentation from one reporting period to the next, comparatives should be restated, and that fact should be disclosed in the notes to the financial statements together with any explanation necessary for the reader to understand the changes that have occurred. 108 Financial Regulations (2005 Revision) Related Party Disclosures The following related party relationships and transactions are to be disclosed in accordance with IPSAS 20 Related Party Disclosures: • Related party relationships where control exists, regardless of whether there have been transactions between the related parties; • Transactions between related parties including the nature of the relationship, the type of transaction and the elements of the transactions necessary for an understanding of the financial statements. No disclosure is required of transactions between: • Ministries, portfolios, the Audit Office, the Office of the Complaints Commissioner statutory authorities and government owned companies acting in the course of their normal dealings; • Customers with whom an entity transacts a significant volume of business are not related merely by virtue of the resulting economic dependence. This exclusion applies to private sector or not-for- profit agencies that are dependent upon government funding. Related parties include key management personnel. Any transaction between a chief officer of an entity and the entity is therefore a related party transaction. Foreign Currency Foreign currency transactions are to be measured and recorded in Cayman Island dollars using the exchange rate in effect at the date of the transaction. Where short-term transactions are covered by a forward exchange contract, the forward rates specified in those contracts are to be used to translate the transactions into Cayman Island dollars. Gains or losses on foreign currency forward contracts are to be separately disclosed. At the end of the reporting period the following exchange rates are to be used to translate foreign currency balances: • Foreign currency monetary items are to be reported in Cayman Island dollars using the closing rate; • Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are to be reported in Cayman Island dollars using the exchange rate at the date of the transaction; and 109 Financial Regulations (2005 Revision) • Non-monetary items that are carried at fair value denominated in a foreign currency are to be reported using the exchange rates that existed when the fair values were determined. Foreign currency monetary items include borrowings denominated in foreign dollars and amounts owed for overseas purchases where the account is to be settled in another currency. Exchange differences (apart from the two exceptions listed below) arising on the settlement of monetary items, or on reporting monetary items at rates different from those at which they were initially recorded or reported, are to be recognised as revenue or expenses in the period in which they arise. The two exceptions are: • Exchange differences arising on a monetary item that, in substance, forms part of an entity’s net investment in a foreign entity; and • Exchange differences arising on a foreign currency liability accounted for as a hedge of an entity’s net investment in a foreign entity. These two forms of exchange differences are to be taken directly to the balance sheet and classified as net worth until the disposal of the net investment, at which time they should be recognised as revenue or expenses. The foreign currency transactions and balances of integral foreign operations are to be accounted for in the same way as those of the reporting entity. 110 Financial Regulations (2005 Revision) FOURTH SCHEDULE ACCOUNTING POLICIES FOR OPENING BALANCE SHEET VALUES FOR THE ENTIRE PUBLIC SECTOR, CORE GOVERNMENT AND PRESCRIBED ENTITIES 1 INTRODUCTION The purpose of this schedule is to: • Establish the criteria to be used in classifying executive assets and liabilities; • Establish the valuation policies for the opening balance sheet; and • Establish the procedures to be followed in obtaining and documenting the existence of opening balances and their values. It is to be read in conjunction with the Third Schedule: Accounting Policies for the Financial Statements of the Entire Public Sector, Core Government and Ministries and Portfolios. 2 EXECUTIVE ASSETS AND LIABILITIES Executive resources (including assets and liabilities) are to be recognised in the core government and entire public sector financial statements only. Entity resources (including assets and liabilities) are to be recorded in the financial statements of the relevant ministry and portfolio. Executive assets are those assets that are controlled by the Governor in Cabinet. Any accounts receivable associated with executive revenues (e.g., receivables associated with coercive revenue) are also an executive asset. Executive assets do not include those assets used by ministries and portfolios in the production of their outputs. Executive liabilities are those liabilities that are controlled by the Governor in Cabinet or that do not relate to the output production activities of a ministry or portfolio. They include state liabilities that relate to the government as a whole rather than a specific entity. Entity resources are the revenues, expenses, assets and liabilities under the control of a ministry, portfolio, the Audit Office, the Office of the 111 Financial Regulations (2005 Revision) Complaints Commissioner, statutory authority or government-owned company. The key criterion in distinguishing between executive and entity resources is who controls (and is accountable for) the asset/liability. The implications of this distinction for the opening balance sheet are: • All assets and liabilities need to be classified as either executive or entity; • All revenue and expenses need to be classified as either executive or entity because the receivables and payables (e.g., transfers payable) associated with revenues and expenses will be located on the relevant executive or entity balance sheet. Executive assets include: • Crown land; • Roads and sidewalks (including roads under construction); • Accounts receivable relating to coercive revenue; • Loans (excluding those made by statutory authorities and government companies); • Investments (excluding those made by statutory authorities and government companies); • The equity investment of the Government in ministries, portfolios, statutory authorities and government companies; • Marine reserves; • Cemeteries; • Civic Centres; • Community halls; • The Legislative Assembly building; • The Governor’s residence; and • Monuments. Executive liabilities include: • Borrowings; • Unfunded pension liability for defined benefit plans; • Unfunded pension liability for defined contribution plans; • Accounts payable relating to executive expenses (e.g., interest payable on borrowings); and • Transfers payable. 112 Financial Regulations (2005 Revision) 3 OPENING BALANCES VALUATION POLICIES: ASSETS Cash and Cash Equivalents Record at nominal value. Accounts Receivable and Accrued Revenue Record at net realisable value – the amount expected to be ultimately collected in cash. Where an individual receivable is known to be bad (that is unlikely to be collected) the receivable is not to be included on the opening balance sheet. Where a category of receivables may still be collected but there is uncertainty as to whether the total amount will be collected (either because of individuals defaulting or paying less than the total amount owed) the receivables are to be recorded gross and a provision for doubtful debts established. Inventories General Inventories are to be measured at the lower of cost or net realisable value (NRV). Where the cost of inventories is not known, inventories are to be measured at net realisable value (NRV) on an item-by-item or group basis. Net realisable value Net realisable value is to be determined taking account of likely sale proceeds less costs of disposal. Where inventories do not have any determinable net realisable value (because they are held for use within the public sector only) replacement cost is to be used as a proxy for net realisable value. Work in Progress Work in progress relating to the provision of outputs is not to be recorded in the opening balance sheet unless significant and identifiable costs have been incurred and there is a clear agreement that the outputs are to be delivered and paid for following the balance date. Work in progress relating to physical inventories is to be measured at the lower of cost and net realisable value. Where the amounts are not material, an opening value of zero may be used. 113 Financial Regulations (2005 Revision) Capital Work in Progress Capital work in progress is to be measured at the lower of cost and net realisable value. Where work in progress relates to land and buildings or roads, the opening value is to be determined by a registered valuer. Construction Contracts Construction work in progress is to be accounted for in accordance with IPSAS 12 Construction Contracts, that is at cost plus any surplus or loss recognised. Where cost is not known, or the construction contract relates to buildings or roads, the opening value is to be determined by a registered valuer. Agricultural Crops and Livestock Biological assets (unharvested crops and livestock) are to be measured at their net realisable value. Marl and Gravel Stocks of marl and gravel purchased for use are to be recorded at the lower of cost or net realisable value. Stocks of marl and gravel extracted by a government entity for its own use or sale are to be measured at the lower of cost or net realisable value. If cost is unknown, they are to be measured at net realisable value. Bullion Gold and silver bullion (held for numismatic purposes) is to be valued at historic cost. Unissued Currency Unissued currency is to be valued at the cost of production. Postal stamps Unissued stamps are to be valued at the cost of production. Where total cost of production is unknown, cost is to be determined with reference to the cost of the paper and printing. 114 Financial Regulations (2005 Revision) Prepayments Prepayments are to be recorded at the amount paid. If there is some doubt that the goods or services paid for will be received, the amount of the prepayment is to be reduced accordingly. Investments Loans and Advances Loans and advances are to be valued at the lower of the balance owed or the amount expected to be recovered. Marketable Securities Investments held as current assets are to be measured at the lower of cost or market value. Other Investments Other investments are to be recorded at the lower of cost or market value. Property, Plant and Equipment Land Land is to be valued at market value on the basis of existing use, not alternative use. Buildings and leasehold improvements Buildings and leasehold improvements are to be valued at depreciated replacement cost (adjusted to take into account any major differences between the actual asset and the proxy asset). They are to be valued on the basis of existing use, not alternative use. Furniture and fittings Furniture and fittings purchased or acquired since 1996 are to be recorded at cost, less the amount of accumulated depreciation that would have been recorded if they had been depreciated from date of purchase. Furniture and fittings purchased or acquired before 1996; or whose cost cannot be determined, or whose cost is not reliable, are to be recorded at depreciated replacement cost (adjusted to take into account any major differences between the actual asset and the proxy asset). 115 Financial Regulations (2005 Revision) Furniture and fittings older than the expected useful life are to be recorded at a net book value of zero. Office equipment Office equipment purchased or acquired since 1996 is to be recorded at cost, less the amount of accumulated depreciation that would have been recorded if it had been depreciated from date of purchase. Office equipment purchased or acquired before 1996; or whose cost cannot be determined, or whose cost is not reliable, is to be recorded at depreciated replacement cost (adjusted to take into account any major differences between the actual asset and the proxy asset). Office equipment older than the expected useful life is to be recorded at a net book value of zero. Motor vehicles Motor vehicles purchased or acquired since 1996 are to be recorded at cost, less the amount of accumulated depreciation that would have been recorded if they had been depreciated from date of purchase. Motor vehicles purchased or acquired before 1996; or items whose cost cannot be determined, or whose cost is not reliable, are to be recorded at depreciated replacement cost (adjusted to take into account any major differences between the actual asset and the proxy asset). Motor vehicles older than the expected useful life are to be recorded at a net book value of zero. Aeroplanes Aeroplanes purchased or acquired since 1996 are to be recorded at cost, less the amount of accumulated depreciation that would have been recorded if they had been depreciated from date of purchase. Aeroplanes purchased or acquired before 1996; or items whose cost cannot be determined, or whose cost is not reliable, are to be recorded at depreciated replacement cost (adjusted to take into account any major differences between the actual asset and the proxy asset). Aeroplanes older than the expected useful life are to be recorded at a net book value of zero. Boats 116 Financial Regulations (2005 Revision) Boats purchased or acquired since 1996 are to be recorded at cost, less the amount of accumulated depreciation that would have been recorded if they had been depreciated from date of purchase. Boats purchased or acquired before 1996; or items whose cost cannot be determined, or whose cost is not reliable, are to be recorded at depreciated replacement cost (adjusted to take into account any major differences between the actual asset and the proxy asset). Boats older than the expected useful life are to be recorded at a net book value of zero. Library Assets Library assets purchased or acquired since 1996 are to be recorded at cost, less the amount of accumulated depreciation that would have been recorded if it had been depreciated from date of purchase. Library assets purchased or acquired before 1996; or items whose cost cannot be determined, or whose cost is not reliable, are to be recorded at depreciated replacement cost (adjusted to take into account any major differences between the actual asset and the proxy asset). Library assets which are older than the expected useful life are to be recorded at a net book value of zero unless they have value as a collectors item, in which case they are to be reclassified and valued at market value. Refer to the policy on collection assets. Heritage assets Heritage assets meeting the definition of an asset and the recognition criteria for property, plant and equipment are to be recorded at market value or in the absence of market value at an assessed value. The basis for the assessment is to be disclosed. Collection assets Collection assets meeting the definition of an asset and the recognition criteria for property, plant and equipment, are to be recorded at market value or in the absence of market value at an assessed value. The basis for the assessment is to be disclosed. Infrastructure Assets Items of property, plant and equipment purchased or acquired since 1996 are to be recorded at cost, less the amount of accumulated depreciation that would have been recorded if it had been depreciated from date of purchase. 117 Financial Regulations (2005 Revision) Items purchased or acquired before 1996; or whose cost cannot be determined, or whose cost is not reliable, are to be recorded at depreciated replacement cost (adjusted to take into account any major differences between the actual asset and the proxy asset). The opening value of roads is to be determined using depreciated replacement cost based on the estimated present cost of constructing the existing component of the road by the same or (similar method) of construction. Land underneath or alongside roads is valued using the valuation method for land based on adjacent use. Leased Assets Assets acquired under finance leases are to be recorded at the fair value of the leased asset at the inception of the lease (less accumulated depreciation) or, if lower, at the present value of the minimum lease payments. Fair value is the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. Computer Hardware and Software Computer hardware and software purchased or acquired since 1996 is to be recorded at cost, less the amount of accumulated depreciation that would have been recorded if it had been depreciated from date of purchase. Computer hardware and software purchased or acquired before 1996; or whose cost cannot be determined, or whose cost is not reliable, is to be recorded at depreciated replacement cost (adjusted to take into account any major differences between the actual asset and the proxy asset). Computer hardware and software older than the expected useful life is to be recorded at a net book value of zero. Intangible Assets Only those intangible assets meeting the criteria in IAS 38 are to be recognised. 118 Financial Regulations (2005 Revision) Intangible assets purchased or acquired since 1996 are to be recorded at cost, less the amount of accumulated amortisation that would have been recorded if they had been amortised from date of purchase. Intangible assets purchased or acquired before 1996; or whose cost cannot be determined, or whose cost is not reliable, are to be recorded at amortised replacement cost (adjusted to take into account any major differences between the actual asset and the proxy asset). Intangible assets older than the expected useful life are to be recorded at a net book value of zero. Other plant and equipment Other plant and equipment purchased or acquired since 1996 is to be recorded at cost, less the amount of accumulated depreciation that would have been recorded if they had been depreciated from date of purchase. Other plant and equipment purchased or acquired before 1996; or whose cost cannot be determined or is not reliable, is to be recorded at depreciated replacement cost (adjusted to take into account any major differences between the actual asset and the proxy asset). Other plant and equipment older than the expected useful life is to be recorded at a net book value of zero. 4 OPENING BALANCES VALUATION POLICIES: LIABILITIES Accounts Payable and Accrued Expenses The opening balance of accounts payable and accrued expenses is to be the nominal value, adjusted for any bad or doubtful debts. Provisions The opening balance of provisions is to be the expected present value of the future obligation, using risk adjusted cash flows and a risk free discount rate. The best estimate of future cash flows is to be used. 119 Financial Regulations (2005 Revision) Finance Lease Liabilities Finance leases are to be accounted for in accordance with IPSAS 13 Leases. The liabilities are to be recognised at amounts equal at the inception of the lease to the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Employee Entitlements The opening balance of the liability for employee entitlements is to be valued using the average number of days owed to employees at balance date. Pension Liability: Defined Benefit (core government and entire public sector only) The opening balance of the defined benefit liability is to be the net of the following amounts: • the present value of the defined benefit obligation as at the end of the reporting period; • plus any actuarial gains (less any actuarial losses) not recognised as income or expense; • minus any past service cost not yet recognised as an expense; and • minus the fair value at the end of the reporting period of plan assets out of which the obligations are to be settled directly. The latest actuarial assessment of the pension plans is to be used as the basis for the valuation. Pension Liability: Defined Contribution (core government and entire public sector only) A liability for contributions payable to a defined contribution plan is recognised only if the contribution paid during the period is less than contribution required. Otherwise no liability is to be recognised. Borrowings The opening balance of borrowings is to be the nominal value of the borrowings. 120 Financial Regulations (2005 Revision) Unearned Revenue The opening balance of unearned revenue is to be valued at the nominal amount. Currency Issued Issued currency (excluding numismatic coins) is to be measured at face value. 5 OPENING BALANCES VALUATION POLICIES: CONTRIBUTED CAPITAL At the opening balance sheet date contributed capital is to be recorded as the net amount of assets less liabilities. Any subsequent adjustment to opening asset or liability values is to be treated as an adjustment to contributed capital. 121 Financial Regulations (2005 Revision) FIFTH SCHEDULE: PROJECT APPRAISAL DOCUMENTS PART 1: PROJECT PROFILE FORM Summary of Project Details Proposing Ministry: Project Name/Location: Project Goal: Core Project Objective: Estimated Cost: $ Estimated Duration: Signature of Chief Officer/Date: A. Project Background (a) Identification of the problem (describe the ‘core’ problem which the project addresses) (b) Justification for the project (describe the ‘without’ situation for the project and the alternative solutions) B. Objectives of the project (state the national goals to which the project contributes and its intended achievements) C. Outputs of the project (list the goods and services that the project will produce) D. Stakeholders of the project 122 Financial Regulations (2005 Revision) E. Target Institutions (specify the required resources; organizations involved in planning and implementation; and the extent of support required) F. Activities of the project (list the specific tasks within the project) G. Summary of Inputs for the project (list the major inputs required) H. Risks & Assumptions of the project I. Estimated Financial Summary of the project (throughout project life)* Investment Costs Schedule Year Year Year Year Year CI$ ('000s) 1 2 3 4 n Land Purchase Site Development Building & External Works Equipment Other* Total Investment Costs * Although detailed costs will be included in the PDD, a cost summary is required here. 123 Financial Regulations (2005 Revision) Operating Cost Year Year Year Year Year Schedule CI$ 1 2 3 4 n ('000s) Personnel Costs Other Operating & Maintenance Services Utilities Pension Contributions Other* Total Operating Costs Benefit Schedule CI$ Year Year Year Year Year ('000s) 1 2 3 4 n Financial Benefits Cost Savings Revenues Output Increases Other* Total Benefits * Any other relevant items should be placed in this category, listed separately. 124 Financial Regulations (2005 Revision) J. Non-Quantifiable Costs and Benefits (summarise other costs and benefits that cannot be captured in figures but are important for the project) K. Annex: Project Definition Document (the PDD must be attached to the Project Profile) PART 2: FORMAT FOR PROJECT REPORT 1. Executive Summary 2. Background • Nature of the problem • Options explored 3. Project Rationale • Objectives • Expected outcomes 4. Project Description • Key components • Policy and institutional support • Intended beneficiaries 5. Project Analyses • Financial • Economic • Technical • Social • Institutional • Environmental 6. Conclusion and Recommendations Annex: Project Implementation Schedule 125 Financial Regulations (2005 Revision) Publication in consolidated and revised form authorised by the Governor in Cabinet this 12th day of July, 2005. Carmena Watler Clerk of Cabinet. 126 Financial Regulations (2005 Revision) 127 Financial Regulations (2005 Revision) (Price $25.60) 128