Report of the Auditor General 2007: Different year, same mess

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Posted By Christopher Ram On July 5, 2009 @ 5:09 am In Features, Sunday | No Comments
Report of the Auditor General 2007: Different year, same mess
http://www.stabroeknews.com/2009/features/07/05/business-page-67/

No change

The report of the Auditor General on the Public Accounts of the country for 2007 has been tabled in the National Assembly and is now officially available to the taxpaying public and commendably on the Audit Office’s website. The story is no different from that of last year, from that of the year before, or from that of the year before that: late by ten months beyond the statutory deadline; a story of reckless abuse of the public funds; condemnation and threats from the opposition; and the nine-day outrage by the public followed by whatever revelation inevitably comes to light. Let us go back to the report for 2000 which was reviewed in Business Page of May 19, 2002 in the form of an imaginary letter to Mr Stanley Ming, then a member of the Public Accounts Committee which is mandated to review and report on the report. In part, this is what the ‘letter’ said:

“A significant number of bank accounts currently in use, including the Guyana High Commission London Account, as well as non-operational accounts were allowed to be overdrawn by large amounts in contravention of Section 22 of the Financial Administration & Audit Act (FAA). Continues.

“The Consolidated Fund is overdrawn by tens of billions while the sum total of all bank accounts (including the overdrawn balance on the Consolidated Fund but excluding the balances on the bank accounts special projects) reflects a positive balance. Continues.

“The State continues to provide funding annually to several public entities even though they do not comply with their statutory duty to submit audited financial statements. Continues.

“The Contingencies Fund continues to be abused despite repeated negative comments on this practice. Continues.

“ Proceeds from the Guyana Lotteries are not being paid over to the Consolidated Fund but are kept in a ‘special bank account’ held at the Central Bank and used to meet public expenditure without parliamentary approval… despite the public commitment given by the President and de facto Minister of Finance that this would be corrected.”

Some change

Some things have changed. The report has been cut down in size – the 2000 report contained 2,120 paragraphs; now it is 557 paragraphs. Government expenditure has jumped from $47 billion in 2000 to $101 billion, or more than double. Reports of corruption no longer make news. There has been a Financial Management and Accountability Act that demands more not less accountability, and an Audit Act that sets greater obligations and higher standards on the Audit Office. Have things got better? I do not think so. Back then, we had a professionally qualified accountant heading the office, now we do not. The independence of the office is now more compromised than it was with Mr Deodat Sharma, Auditor General (ag) reporting that he was summoned for instructions by President Jagdeo, clearly in breach of the constitutional provision that the Audit Office should “not [be] subject to the control or direction of any person or authority.” Egregiously, the wife of the Finance Minister is now in a position to give professional guidance to the Auditor General (ag) by virtue of her position as his qualified assistant.

The administration’s response

Predictably and once again, the Minister of Finance Dr Ashni Singh has criticised the report for not reflecting the comments and responses of the various budget agencies and accounting officers. He cannot be serious. The report is in fact full of such comments, even when they make little sense or are misleading. For example on page 5, the Ministry of Finance’s response to the absence of end of year outcomes required under section 68 of the Fiscal Management and Accountability Act 2003 is that the information was not forthcoming from the ministries, agencies and departments. That obligation falls on the Minister of Finance who has more than an adequate set of sanctions to ensure that he gets the information he needs.

But I suspect that the reason is more political. One of the major variances is the revenue collected from the new VAT and Excise Tax introduced in 2007. A single agency over which the Ministry of Finance exercises controls administers those taxes. More than one of them knows that the reason for the massive surplus is that the VAT rate had been incorrectly calculated, but that despite the early detection of the error, the government persisted in what some may consider a fraud on the nation. This information was around and an independent Audit Office should have done its own assessment and put the findings to the ministry.

Indifference

A constant refrain in the responses is that the Head of the Budget Agency had indicated that this matter was being addressed by the Ministry of Finance; that these were presently engaging the attention of the Ministry of Finance; that the Head of the Budget Agency had indicated that this issue was being addressed by the Minister of Finance; and that the Head of Budget Agency had explained that the administration had since written the Finance Secretary to have this matter rectified and was awaiting a response (they are all in the same building). The state of the audits for entities coming under the Office of the President and for which reports have not been laid in the National Assembly deteriorated, while the excuse by the budget agency that “every effort is being made” to do so was met with a further comment from the Auditor General (ag) calling for “special effort” – at best an apparent form of indifference by the Audit Office. But can society be so indifferent about the failure by the administration to properly account for public funds? Since the Minister would also have been aware that a substantial part of the report is of prior year matters which have not been resolved, his response to the report can only be seen as a political rather than technocratic reaction, confident that all will soon be forgotten.

New GPC again

For all the apparent sound and fury generated by the report, all it does is identify some of the better known examples of gross financial irregularities and improprieties that feed the public’s appetite for scandal. Advances of hundreds of millions of dollars to the New GPC, friends of the President, continue to be made for the company to buy drugs for the Guyana Public Hospital Corporation in breach of the tender procedures. One of GPC’s senior officials sits on the board of the hospital, which also does not maintain proper accounting records so that both the non-receipt of items and their issue cannot be determined. What successive reports have failed to do is cause any change in behaviour by a government whose financial management is repeatedly endorsed by the electorate. Perhaps the President was right when he described segments of the public as financially illiterate.

By now the public is well aware of the breach of the constitution regarding the Lotto funds and one wonders why the report only mentions the amount over a ten-year period rather than the period covered by the audit. The report also does not state that the Lotto money is being spent by a person who has no authority under the law to spend any money. There is no great virtue in repeating the statement that the Lotto funds are not being put into the Consolidated Fund as required by the constitution. It is not that it is being held safely in trust or investments – the money is being spent by President Jagdeo as he pleases.

Tardiness and illegality

Where are the sugar unions in the face of the continuing failure to provide satisfactory evidence of $1.451 billion as deposits held for investments on behalf of the Sugar Industry Labour Welfare Fund, the Sugar Industry Rehabilitation Fund and the Sugar Industry Price Stabilisation Fund, two of which have not been audited for twenty-eight years and the other for eleven years? One of the ironies is that GINA, which is being used to defend the government’s record of financial management is itself in breach of the audit requirement.

The report also highlights a transaction involving Region 6 that smells of illegality including differences in vehicle chassis number and full up-front payment when the contract calls for progress payments. If the Customs officers could be referred to the DPP why not those involved in this purchase? And why has the Guyana Elections Commission not taken action against the “firm” that took 268 cartons of Polaroid film valued at $30.485 million which it has failed to recover from the “firm”?

Value for money

Once again the report announces that a Value-for-Money Unit (VFM) is being set up and after four years we can expect a VFM report. That we had to get assistance from Canada to achieve this is bad enough, but the choice of entity makes the idea into a mockery. I visited the Palms briefly not too long ago, and it was shocking to see the conditions under which the residents are housed and the staff have to work. The laundry, kitchen, sleeping and dining facilities are all in a state of disrepair, strangled for cash and other resources. What the Palms requires is not a Value-for-Money audit, but a money-for-value audit, refurbishment, additional staffing, new equipment for the kitchen and laundry, etc.

Conclusion

The recurrence of the egregious weaknesses and exorbitant losses resulting from poor financial administration and a weakened Audit Office suggests either an unwillingness to deal with the problem or a ‘we-like-it-so’ attitude by the government. Even the superficial enhancements in the Audit Office have to be financed with grants and loans, and in 2007 a second grant was obtained from the IDB to implement certain aspects of the office’s three-year Strategic Plan. Unable to do some of the most basic audit functions, to discharge the office’s obligations under various legislation and to complete the audits of the state entities in a timely manner, the Audit Office is now about to establish a Forensic Audit and Quality Assurance section.

How that will solve the problems that have persisted for more than ten years is anyone’s guess. Meanwhile the Auditor General tells us he cannot be sure about the accounts presented to him for audit by the Ministry of Finance.

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