Government Minister Denis Kellman says the change from cash to accrual accounting makes Government appear to always be in deficit.
Making the first rebuttal on behalf of the ruling Democratic Labour Party (DLP) against an Opposition-tabled motion of no confidence in the House of Assembly last night, the St Lucy Member of Parliament called for accountants to educate economists on this.
Kellman also said a misunderstanding of the accounting change has caused international credit ratings agency Moody’s and many Barbados-based economists to make incorrect pronouncements on the island’s economy.
“This is the same error that Moody’s has been making on the economy of Barbados, because Moody’s has been judging the economy of Barbados on the cash basis,” Kellman said during the debate.
Noting that it was under the former Barbados Labour Party (BLP) government that the accrual system of accounting was introduced, the Minister of Housing, Lands and Rural Development said criticism by the now BLP Opposition of the DLP for running a deficit after 2008 was “an admission that [they] were ignorant of what [they] were passing when [they] passed the accrual system”.
“The accountants in Barbados need to step up to the plate, and stop allowing the economists to masquerade in this country on a topic that they are not qualified to speak on,” said Kellman, an accountant.
“I challenge all the economists to tell me that I am wrong.”
He reflected that the Opposition has been contending “that between 1962 and 2008, there were four current account deficits [and] . . . that the Democratic Labour Party was committing a criminal offence by running a deficit for the last eight years”.
Kellman argued that to the contrary, the Opposition did not recognize “that between 1962 and 2008, no Minister of Finance had a right to run a deficit, but after 2008 it was not illegal for anybody to run a deficit.”
He added this was so “because the accrual system of accounting means that you can run a deficit . . . . You do not need cash to incur expenditure under the accrual system”.
According to the Government Information Service, “From financial year 2007–2008, the Estimates of Revenue and Expenditure were prepared on an accrual basis, comprising both cash and non-cash transactions.”
GIS further explained: “Previously, the Government of Barbados prepared the Estimates of Revenue and Expenditure on the cash basis which measured monies paid out and revenue actually received.
“Under the accrual basis of accounting, revenues are recorded when earned or when they become due while expenditure is recorded when it is incurred.
“Under the accrual system of accounting, the Government reports its fiscal operations in terms of an operating statement.”