The following is the text of the draft Framework for Fiscal Responsibility proposed for Anguilla by the British Government. It is understood that the Anguilla Government has made a number of counter-proposals. The negotiations for agreement are still to be completed.
1. The Government of Anguilla is committed to delivering a prosperous and stable future for the people of Anguilla firmly based on the implementation of sound economic and financial principles.
2. This framework for fiscal responsibility (“the Framework”) sets out the key principles by which the Government of Anguilla will deliver this commitment.
3. The Government of Anguilla will continue to be open and transparent in its management of the public finances consistent with the highest standards of governance and democracy. The principles of the Framework will therefore be encapsulated in a new public financial management law in Anguilla which will also specify the detailed requirements necessary to deliver the principles in practice. Subject to the agreement of the House of Assembly, this new law will enter into force by [1 June 2012].
4. The Government of Anguilla and the United Kingdom Government reaffirm their commitment to work in partnership and to respect the rights and responsibilities specified in the Framework and the new public financial management law.
POLICY PRINCIPLES
5. The Government ofAnguillais committed to the following principles:
a. Effective medium-term planning, to ensure that the full impact of fiscal decisions is understood;
b. Putting value for money considerations at the heart of the decision making process;
c. Effective management of risk; and
d. Delivering improved accountability in all public sector operations.
IMPROVING MEDIUM TERM PLANNING
Medium term fiscal plan
6. The Government of Anguilla will assess the impact of all proposals and decisions on expenditure, revenues, and borrowing in the context of a medium term fiscal plan (MTFP) covering a period of at least three fiscal years.
7. The MTFP will include, as a minimum, the information defined in paragraph 15 of Annex A.
Transparency
8. The MTFP will be updated and published annually. The budget that is presented for the forthcoming fiscal year will be consistent with the MTFP.
Measurement
9. The collection of accurate internal and external economic, business and social data is fundamental to effective medium term fiscal planning.
10. The Government ofAnguillawill assess any gaps in information that is required and take steps to improve inputs to the MTFP, including by:
a. improving the quality of statistical data gathered to measure accurately economic variables including economic growth, inflation, and employment; and
b. ensuring that the Government of Anguilla receives information about in-year developments in expenditure, performance against objectives and developing risks (whether or not quantifiable) from government departments and other bodies in receipt of public funds.
DELIVERING VALUE FOR MONEY
11. The Government ofAnguillarecognises that achieving value for money is central to the appropriate use of public funds. Central government and other public sector bodies will therefore ensure that effective processes are in place to provide confidence and ensure suitability, effectiveness, prudence, quality, good value and avoidance of error and other waste. The Government of Anguilla will remain focussed on developing expertise and improving processes to ensure that value for money is consistently delivered.
Projects
12. There are four key stages that will be undertaken by the Government of Anguilla in the planning, development and execution of a project:
a. appraisal and business case;
b. tendering and procurement;
c. contract management; and
d. evaluation.
Appraisal and business case
13. The Government of Anguilla will ensure that all projects, whether funded from recurrent surpluses, conventional borrowing or novel financing transactions, are suitably appraised before the procurement stage to ensure value for money and that a robust cost-benefit analysis has been carried out.
14. For projects with a lifetime value above EC$15m or for those where the use of PPPs or any other form of novel financing is being considered, the Government of Anguilla will commission independent accounting, legal, financial, economic, environmental, and other technical advice as appropriate to ensure robust investment appraisals are produced.
15. For all projects, the business case which results from the appraisal process should: demonstrate the economic need for the project; include a fully argued and costed risk and impact assessment; and specify the benefits the project is designed to deliver to ensure that an informed decision can be made on whether or not to proceed to the procurement stage.
16. All proposed capital projects with an expected lifetime value of EC$15 million or more will be incorporated in the published MTFP, and appraisals will be published for public consultation prior to procurement.
Procurement
17. Procurement processes will be open, transparent and competitive. The Government of Anguilla will adhere to agreed statutory tender processes. For projects with a lifetime value above EC$15m and where any other form of novel financing is used, the Government of Anguilla will commission independent accounting, legal, financial, economic, environmental, and other technical advice to ensure value for money.
Contract management
18. The Government ofAnguillawill retain sufficient expert advice, whether internal or external, to ensure that it is an “intelligent customer” of services or other arrangements agreed with private sector suppliers.
Delivery
19. The Government ofAnguillawill put together sufficiently competent teams to manage all projects and ensure receipt of high quality services and products as agreed at the procurement stage.
Evaluation
20. For projects with an expected lifetime value of more than EC$15 million, the Government of Anguilla will undertake an evaluation of project performance within 6 months of project completion. This evaluation will be made publicly available within 9 months of project completion.
Processes
21. The Government ofAnguillawill establish and maintain robust processes to:
a. measure the performance of government departments and other bodies in receipt of public funds;
b. allocate expense budgets, profile expenses and monitor actual results against profile budget in a timely manner;
c. determine revenue targets, profile receipts and monitor actual results against budget on a timely basis;
d. track and quantify developing risks to determine the value of actual and contingent liabilities to assess calls on current expenditure budgets and, in exceptional cases, the reserve;
e. report total public sector debt, profile debt repayments and determine debt service costs;
f. forecast cash needs on a monthly basis; and
g. undertake timely internal and external audits and act on the findings.
PUBLIC PRIVATE PARTNERSHIPS AND NOVEL FINANCING ARRANGEMENTS
22. The option to enter into Public Private Partnerships (PPPs) and any other form of novel financing within the limits set out in the Framework will not be exercised by either the Government of Anguilla or its Statutory Authorities, Government Companies or other organisations within the public sector until:
a. the Government of Anguilla has been in compliance with the Framework for two consecutive fiscal years; and
b. the Government of Anguilla and the United Kingdom Government agree that the capacity to contract and manage such arrangements is in place.
23. All mention of PPP and other novel financing transactions in this framework will be subject to these conditions.
24. The processes for ensuring that projects deliver value for money will also be applied for projects involving PPPs or any other form of novel financing, and will follow any additional processes required for projects with a lifetime value above EC$15m where these are different to the standard process.
25. In addition, for projects where the use of PPPs or any other form of novel financing is being considered, the Government of Anguilla will commission independent accounting, legal, financial, economic, environmental, and other technical advice as appropriate to ensure robust investment appraisals are produced.
26. PPPs or any other form of novel financing will only be considered where:
a. there is a sound appraisal underpinning the proposed project before financing means have been determined;
b. a financial appraisal demonstrates improved value for money against a conventionally financed alternative;
c. the long term affordability case has been assessed by the Government of Anguilla in the context of the MTFP; and
d. the correct accounting treatment in the public accounts has been utilised and agreed upon by an independent qualified accountant.
27. PPPs or any other form of novel financing will not be considered by the Government of Anguilla for:
a. projects with a lifetime value of less than EC$80m and therefore too small to justify the transaction costs; or
b. projects where the fast pace of change in the sector makes it difficult to define effectively the outputs it requires in a long term contract (such as Information Communication Technology projects).
MANAGING RISKS
Contingent and actual liabilities
28. The Government ofAnguillais committed to managing risks and ensuring that contingent and actual liabilities which accrue are consistent with sustainable public finances.
29. The Government ofAnguillawill make contingent and actual liabilities, including (but not limited to) pensions and healthcare schemes, subject to actuarial assessments at least every three years. Actuarial assessments will be published within three months of receipt. The Government will publish its proposals to address the results of the assessments no later than the budget following the receipt of the actuarial assessment.
30. The Government ofAnguillawill set out in the MTFP their strategy for managing contingent and actual liabilities and report on progress in delivering the strategy.
Capital expenditure
31. A capital investment fund will be established to fund capital expenditure which would not yield sufficient revenues to fund debt service costs. Contributions will be made to the fund from revenues received by the Government of Anguilla in accordance with the rates specified in the MTFP.
32. The total cost of all projects which propose to make use of the capital investment fund must not exceed the amount available in the capital investment fund; the House of Assembly must give its approval before the capital investment fund is accessed.
Debt
33. Where capital expenditure will yield sufficient revenues to fund debt service costs and the Government of Anguilla proposes to use debt finance to fund the expenditure, preference will be given to borrowing from concessional lenders which should ensure that the lender’s expertise is brought to projects.
34. To ensure that the level of debt is affordable and consistent with the delivery of macroeconomic and fiscal sustainability and financial stability in the short, medium and long term, the Government of Anguilla will:
a. comply with the borrowing limits defined in Annex A by no later than the dates specified in Annex D;
b. comply with the transitional ratios established in Annex D by the timeframes specified;
c. remain in compliance with the borrowing limits subsequent to the dates specified in Annex D or such earlier date by which compliance is achieved; and
d. put in place arrangements to repay loan principal.
35. The repayment of principal will be achieved either through:
a. agreeing a fully amortized structure with the lending institution; or
b. establishing a dedicated sinking fund with a binding contribution schedule capable of offsetting the outstanding principal repayment on maturity of the debt.
ACCOUNTABILITY
36. The Government ofAnguillais committed to delivering improved accountability mechanisms through the transparency delivered by the Framework and subsequently a new public financial management law and by ensuring that public accounts are:
a. prepared on a timely basis in line with International Public Sector Accounting Standards (IPSAS); and
b. subject to an annual external audit the results of which will be subject to the Public Accounts Committee’s scrutiny and publications.
PARTNERSHIP WITH THEUK
37. In support of the commitments to deliver fiscal responsibility made by the Government of Anguilla, the United Kingdom Government will:
a. undertake an annual assessment of the economy ofAnguilla, including the state of the public finances;
b. provide technical assistance by monitoring compliance with the Framework;
c. provide support in identifying sources of expertise at the request of the Government of Anguilla;
d. consider requests for technical support made by the Government of Anguilla where any such requests are accompanied by a business case and specific terms of reference.
Exchange of information
38. The Government ofAnguillawill submit the information specified in Annex C to the person(s) from time to time specified by the United Kingdom Government.
39. The Government ofAnguillawill supply the United Kingdom Government with such other information it may request, including further information on:
a. any aspect of the MTFP, including specific capital investment projects and proposed borrowing; and
b. the draft budget.
40. All information will be submitted by the Government of Anguilla within the timescales specified in Annex C unless, in exceptional circumstances, different timescales are agreed in advance in writing by the Government of Anguilla and the United Kingdom Government.
Consideration of representations
41. The Government of Anguilla will consider fully any representations made by the Secretary of State on the information provided.
42. The Government of Anguilla will not proceed with any project on which the Secretary of State has made representations until fifteen working days after a full written response has been received by the Secretary of State to those representations.
Approvals Process
43. Where the Government of Anguilla is not in compliance with the Framework, the Government of Anguilla will present, for the approval of the Secretary of State, a plan that is consistent with the MTFP to remedy the breach. The maximum period which may be permitted to rectify a breach is three fiscal years from the point at which the breach occurred or, in exceptional circumstances, such other period that may be agreed in writing between the Government of Anguilla and the Secretary of State.
44. In the event of any non-compliance by the Government of Anguilla in respect of the Framework and until the breach has been rectified the Government of Anguilla will obtain, on an annual basis, written approval from the Secretary of State before:
a. the MTFP is finalised;
b. any public borrowing or any refinancing of public borrowing is undertaken;
c. proceeding with any project with a lifetime value of more than EC$15 million;
d. using public assets as collateral as part of any arrangement with a party external to Government of Anguilla;
e. the hypothecation of any revenue stream; or
f. the divestment of public assets.
45. For the avoidance of doubt, any failure to comply with the borrowing limits or forecast failure to comply within the lifetime of the MTFP will be deemed a failure to comply with the Framework.
46. In exceptional cases, the Government of Anguilla may request the Secretary of State’s approval to make in-year changes to the approach set out in the MTFP. In such cases, the Government of Anguilla will supply the Secretary of State with:
a. a written request to make the changes, to be received no later than two months before such changes are considered to be required by the Government of Anguilla unless a shorter period is agreed in writing by the Government of Anguilla and the United Kingdom Government;
b. a compelling evidence based business case to support the request for approval; and
c. a revised MTFP, which sets out the measures the Government of Anguilla intends to take to return to the course set previously. If approval is granted, the Government of Anguilla will publish the revised MTFP.
Signed: ………………………………………………… Date: …………………
Chief Minister,Anguilla
Signed: ………………………………………………… Date: …………………
Governor,Anguilla
Signed: ………………………………………………… Date: …………………
Minister for Overseas Territories, Foreign and Commonwealth Office
