Financial Regulations

PUBLISHING DETAILS Revised under the authority of the Law Revision Act (2020 Revision). The Financial Regulations, 2004 made the 18th May, 2004, as amended by the Citation of Acts of Parliament Act, 2020 [Act 56 of 2020], and consolidated with — Financial (Amendment) Regulations, 2005 made the 15th February, 2005 Financial (Amendment) Regulations, 2006 made the 27th June, 2006 Financial (Amendment) (No.2) Regulations, 2006 made the 11th April, 2006 Financial (Amendment) Regulations, 2007 made the 8th May, 2007 Financial (Amendment) Regulations, 2009 made the 13th October, 2009 Financial (Amendment) Regulations, 2013 made the 29th January, 2013 Financial Amendment) Regulations, 2014 made the 15th July, 2014 Financial (Amendment) Regulations, 2017 made the 29th August, 2017 Financial (Amendment) Regulations, 2018 made the 30th January, 2018 Financial (Amendment) Regulations, 2021 made the 21st September, 2021 Financial (Amendment) Regulations, 2023 made the 1st August, 2023. Consolidated and revised this 31st day of December, 2023. Note (not forming part of these Regulations): This revision replaces the 2022 Revision which should now be discarded. Regulation PART 1 – PRELIMINARY PART 2 - REPEALED (INFORMATION TO BE PROVIDED TO THE MINISTRY) PART 3 - REPEALED (FINANCIAL STATEMENT FORMAT AND ACCOUNTING POLICIES) PART 4 - CENTRALISED ACCOUNTING INFORMATION SYSTEM PART 5 - BANK ACCOUNTS AND THE CENTRALISED CASH MANAGEMENT SYSTEM PART 6 - CAPITAL CHARGE PART 7 - GENERAL FINANCIAL MANAGEMENT PRACTICES OF PRESCRIBED ENTITIES PART 8 - OUTPUT COSTING PART 9 – REPEALED (PROCUREMENT) PART 9A – SALE OF ASSETS PART 10 - TRUST ASSETS PART 11 - FINANCIAL RECORD KEEPING PART 12 - PROCUREMENT PROJECT AND CAPITAL PROJECT APPRAISAL PART 13 - WEIGHTINGS OF STATUTORY AUTHORITY AND GOVERNMENT COMPANY DEBT TO BE INCLUDED IN CORE GOVERNMENT NET DEBT CALCULATION Repealed1 Regulation 1 PART 1 – PRELIMINARY Citation These regulations may be cited as the Financial Regulations (2024 Revision). Definitions In these regulations — “Cayman Islands Development Bank” means the Cayman Islands Development Bank established under section 3 of the Development Bank Act (2018 Revision); “Civil Aviation Authority” means the Civil Aviation Authority of the Cayman Islands established under section 3 of the Civil Aviation Authority Act (2015 Revision); “IRIS” means the centralised accounting information system; “Ministry” means the ministry responsible for finance; “Port Authority” means the Port Authority of the Cayman Islands established by section 3 of the Port Authority Act (1999 Revision); “prescribed entity” means a ministry or portfolio, the Audit Office or the Ombudsman; and Regulation 3 “PSIC” means the Public Sector Investment Committee established by the Financial Secretary. Application and interpretation (1) These regulations apply to prescribed entities, the core government and the entire public sector. (2) Parts 8 and 12 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. PART 2 - REPEALED (INFORMATION TO BE PROVIDED TO THE MINISTRY) PART 3 - REPEALED (FINANCIAL STATEMENT FORMAT AND ACCOUNTING POLICIES)

Repealed by regulation 3 of the Financial (Amendment) Regulations, 2017. PART 4 - CENTRALISED ACCOUNTING INFORMATION SYSTEM Use of the IRIS

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 maintaining ledgers

Each prescribed entity is responsible for entering all data into the IRIS, for 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

(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 authorised employees are capable of fulfilling their responsibilities. Timely recording

(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. (2) All end of period adjustments shall be made within two weeks of the end of each quarter. Regulation 18 PART 5 - BANK ACCOUNTS AND THE CENTRALISED CASH MANAGEMENT SYSTEM Structure and operation of prescribed entity bank accounts

(1) Unless exempted in writing by the Financial Secretary, a prescribed entity shall operate a bank account only as part of the centralised banking system operated by the Treasury. (2) Subject to the approval of the Financial Secretary, 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. Banking of entity transactions

(1) A prescribed entity shall bank all receipts relating to 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. Internal control over bank accounts

(1) The chief officer of a prescribed entity shall maintain adequate internal 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 Financial Secretary. (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 Financial Secretary. (5) Cheques shall have the name of the relevant prescribed entity printed on them. (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 Financial Secretary, prepared by the prescribed entity concerned and reviewed and approved by the Treasury. Regulation 21 Foreign currency entity bank accounts

(1) Written approval from the Financial Secretary is required to operate a 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 executive bank account

(1) Executive bank accounts, including any subsidiary executive bank accounts shall be operated only as part of the centralised banking system operated by the Treasury. (2) The main account and sub-account structure of the executive bank account shall be determined by the Financial Secretary. (3) Executive bank accounts within the determined structure shall be opened and closed, only with the authority of the Financial Secretary. Responsibility for managing executive cash flows

(1) A prescribed entity, statutory authority or government company which, by way of annual budget statement or purchase agreement, has an obligation to 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 Financial Secretary. (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. Payment of interest

(1) All interest payable on amounts held within the centralised banking system shall be executive revenue and shall be paid into an executive bank account operated by the Treasury. Regulation 25 (2) The Treasury shall pay a prescribed entity interest on balances held in entity bank accounts that are part of the centralised banking system. Investment of cash balances

(1) A prescribed entity shall not invest idle cash balances other than on 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. Notification of interest rates

The Treasury shall, from time to time, notify prescribed entities of the rates of interest payable by it on cash balances and deposits. PART 6 - CAPITAL CHARGE Payment and calculation of capital charge

(1) The capital charge payable by a prescribed entity under section 41(5) of the principal Act, is to be paid to the Ministry 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. Capital charge rate

The capital charge rate shall be set annually by the Minister of Finance and shall apply to all prescribed entities unless a prescribed entity has obtained permission from the Financial Secretary to use a different rate. PART 7 - GENERAL FINANCIAL MANAGEMENT PRACTICES OF PRESCRIBED ENTITIES System of internal controls

A chief officer of a prescribed entity shall ensure that an appropriate system 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. Regulation 30 Compliance with borrowing prohibition

A chief officer of a prescribed entity shall ensure that the prohibition on borrowing in the principal Act (including finance leases and operating bank overdrafts) is not breached in that chief officer’s entity. Responsibility for risk management

(1) A chief officer of a prescribed entity is responsible for — (a) identifying risks to which that chief officer’s entity is exposed; (b) establishing strategies to mitigate or manage those risks; and ensuring those strategies are implemented. (2) All risks shall be managed in accordance with the policies established by the Cabinet on the advice of the Minister of Finance. (3) All insurance coverage shall be taken out through the Risk Management Office. Foreign currency exposure

(1) A prescribed entity shall not enter into any transactions in foreign 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 Ministry. (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 8 - OUTPUT COSTING Responsibility for output costing

The chief officer of a prescribed entity, statutory authority or government 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

(1) The cost of all resources consumed in the production of outputs shall be allocated to outputs. Regulation 35 (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. (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 rent) Amount of space occupied by cost centre Communications (for example, phone, fax, mail) Usage of services by cost centre 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 water) Amount of space occupied by cost 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. Variation of allocation methods

Entities may use alternative allocation policies provided that the alternative policy provides more accurate costs and has the prior approval of the Accountant General. PART 9 – REPEALED (PROCUREMENT)

Repealed by regulation 3 of the Financial (Amendment) Regulations, 2018. PART 9A – SALE OF ASSETS 41A. Requirement to tender for the sale of assets 41A. A prescribed entity, statutory authority or government company shall offer for public tender the sale of any asset with a book value of fifty thousand dollars or more. PART 10 - TRUST ASSETS Managing trust assets

An entity with an agreement and delegation from the chief officer of finance to 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. Accounting for trust assets

(1) Trust assets shall be accounted for separately from an entity’s own 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. Regulation 44 PART 11 - FINANCIAL RECORD KEEPING Records to be retained

(1) A prescribed entity, statutory authority or government company is 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 Archive and notified in writing to chief officers. PART 12 - PROCUREMENT PROJECT AND CAPITAL PROJECT APPRAISAL Role of the PSIC

(1) The PSIC shall be responsible for — (a) receiving, from chief officers or chief executive officers, the business case and appendices for procurement projects and capital projects, in accordance with prescribed thresholds; (b) assessing the viability of procurement projects and capital projects; (c) reporting on the overall viability of procurement projects and capital projects and making recommendations to the Cabinet as to whether or not such projects should proceed; and (d) providing the Financial Secretary with an annual report on its activities for the financial year. (2) For the purposes of paragraph (1), “capital project” and “procurement project” have the meaning assigned by section 2 of the Procurement Act (2023 Revision). Information required

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 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. Regulation 47 Timing

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

The PSIC shall submit recommendations on the viability of capital projects to the Cabinet, through the Minister of Finance. Definition of “capital project” for the purposes of Part 12

In this Part — “capital project” means any item that will be capitalised on the balance sheet in accordance with generally accepted accounting practice and the Public Finance Manual under section 54(k) of the principal Act, and includes the construction or purchase of physical assets and the purchase or development of computer hardware or software. PART 13 - WEIGHTINGS OF STATUTORY AUTHORITY AND GOVERNMENT COMPANY DEBT TO BE INCLUDED IN CORE GOVERNMENT NET DEBT CALCULATION Calculation of core government net debt

The following weightings are to be used to calculate the portion of Government guaranteed statutory authority and government company debt to be included in the calculation of core government net debt in accordance with the Framework for Fiscal Responsibility in schedule 6, Annex B of the principal Act, namely, in the case of statutory authorities and government companies — (a) that require an unpredictable level of budgetary support from the Cabinet (namely, Cayman Airways Limited, the National Housing Development Trust, the Tourism Attractions Board and the Cayman Turtle Farm (1983) Ltd.), eighty per cent; (b) that are financially stable and require a predictable level of budgetary support from the Cabinet (namely, the Cayman Islands Development Bank), fifty per cent; and that have not required budgetary support from the Cabinet during the period of three years immediately preceding the date of the calculation (namely, the University College of the Cayman Islands, the Civil Aviation Authority, the Cayman Islands Airport Authority, the Port Authority and the Water Authority), twenty per cent. Repealed1 1Repealed by R. 5 of the Financial (Amendment) Regulations, 2021[SL65 of 2021]. Publication in consolidated and revised form authorised by the Cabinet this 30th day of January, 2024. Kim Bullings Clerk of the Cabinet Table of Legislation history: SL # Law/Act # Legislation Commencement Gazette E1/2023 Erratum: Financial Regulations (2005 Revision)* 31-Aug-2023 LG28/2023/s1 17/2023 Financial (Amendment) Regulations, 2023 31-Aug-2023 LG27/2023/s1 Financial Regulations (2022 Revision) 18-Jan-2022 LG4/2023/s5 65/2021 Financial (Amendment) Regulations, 2021 29-Sep-2021 LG53/2021/s1 Financial Regulations (2021 Revision) 29-Jan-2021 LG9/2021/s5 56/2020 Citation of Acts of Parliament Act, 2020 3-Dec-2020 LG89/2020/s1 18/2018 Financial (Amendment) Regulations, 2018 10-May-2018 GE38/2018/s1 Financial Regulations (2018 Revision) 16-Mar-2018 GE22/2018/s17 76/2017 Financial (Amendment) Regulations, 2017 8-Sep-2017 GE76/2017/s2 37/2014 Financial Amendment) Regulations, 2014 25-Jul-2014 GE55/2014/s1 Financial Regulations (2013 Revision) 21-Oct-2013 G21/2013/s9 10/2013 Financial (Amendment) Regulations, 2013 25-Feb-2013 G4/2013/s1 Financial Regulations (2010 Revision) 22-Nov-2010 G24/2010/s6 40/2009 Financial (Amendment) Regulations, 2009 6-Nov-2009 G23/2009/s3 Financial Regulations (2008 Revision) 21-Jul-2008 G15/2008/s5 4b/2007 Financial (Amendment) Regulations, 2007 25-Jun-2007 G13/2007/s1 10/2006 Financial (Amendment) (No.2) Regulations, 2006 29-Oct-2007 G22/2007/s1 Financial Regulations (2007 Revision) 20-Aug-2007 G17/2007/s3 9/2006 Financial (Amendment) Regulations, 2006 24-Jul-2006 G15/2006/s16 Financial Regulations (2005 Revision) 5-Sep-2005 G18/2005/s3 8/2005 Financial (Amendment) Regulations, 2005 21-Mar-2005 G6/2005/s4 1/2004 24-May-2004 GE17/2004/s1 * The Financial Regulations, 2004 included the definition of ‘Cayman Islands Development Bank’. This definition was inadvertently mislabelled as ‘Bank’ in the Financial Regulations (2005 Revision) and thereafter perpetuated in subsequent revisions. (Price: $4.80)