Tag: Public Accounts Committee

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The ‘blasting’ Public Accounts Committee

Introduction
The Public Accounts Committee, a standing committee of the National Assembly is currently reviewing the report of the Auditor General on the audits of the ministries, departments and regions. The composition and terms of reference of the PAC are set out far too briefly in Standing Order No. 82 of the National Assembly which provides for a committee of not less than six or more than ten members. The function and duty of the committee is to examine the accounts showing the appropriation of the sums granted by the National Assembly to meet public expenditure and such other accounts laid before it as it may refer to the committee together with the Auditor General’s report thereon. The Chairman of the Public Accounts must be a member of the main opposition in the National Assembly.

From this it is clear that unlike legislation which the National Assembly makes requiring the specific qualification, experience and competence appointees to boards, commissions and committees must possess, there is no specific requirement for eligibility to membership of the PAC. Nor is there on members an obligation to attend meetings of the PAC or measures for recall so that once a person is appointed, that is good for the entire parliamentary period. Readers may recall that in a Business Page column done on the 2008 report I highlighted the unacceptable failure of key members of the committee, including Mr Stanley Ming of the PNCR and PPP/C presidential candidate Mr Donald Ramotar to participate in the meetings of the committee under the previous Parliament.

Important and challenging
Hobbled as it is by archaic and inadequate rules, this key committee clearly requires persons of competence and commitment to look after the public interest in the finances of the country. That this committee has one of the most challenging mandates of any committee cannot be an excuse for what has amounted to a dereliction of duty by its members.

At the same time, it is clearly unfair to lay the blame solely on the members. The PNCR has chaired the PAC since 1992 and that party must be aware of the egregious financial mismanagement in the country, the pervasive corruption, major deficiencies in the Audit Office – an Auditor General who does not hold a professional qualification, about 80% of the office-holders being acting appointments, non-compliance with its own act, etc – a President and a government which routinely breach to the point of recklessness the financial provisions of the constitution, the Fiscal Management and Accountability Act, the Procurement Act and several other pieces of legislation. The PNCR must have known therefore that the chairing of the PAC requires a person of considerable technical competence, professional expertise and strong personality, qualities which with the greatest of respect to Ms Volda Lawrence, I do not believe she possesses. What is worse is that the PNCR has not replaced the formidable and late Winston Murray, economist and attorney-at-law who was arguably the best chairman the PAC has ever had.

For the records, the current members of the PAC are PPP/C appointees Ms Bibi Shaddick and Indra Chandarpal and Messrs Komal Chand, Nokta and Seeraj; PNCR appointees Volda Lawrence and Ernest Elliot and from the AFC Mr David Patterson. The PAC has no secretariat and must rely on the Auditor General Deodat Sharma and the Finance Secretary Nirmal Reekha as resource persons. The ethnic composition of the sides is certainly interesting. None of this makes for an effective PAC, something which no one in our society seems to care about.

Expensive misunderstanding
The PAC seems further hobbled by some inherited misunderstanding of its obligations. As noted in the introduction above, the duty of the PAC is “to examine the accounts showing the appropriation of the sums granted by the Assembly to meet public expenditure and such other accounts laid before the Assembly as the Assembly may refer to the Committee together with [emphasis mine] the Auditor General’s report thereon.” What the PAC does is to examine only the Auditor General report by inviting public officers to appear before them to defend their ministry, department or region. That is a horrible and expensive misunderstanding of what the PAC is required to do. In my view it is required to examine the accounts whether or not the Auditor General has chosen to do so or more often, chosen not to do so. This column has already pointed out that the Audit Office turns a Nelson’s eye to the Office of the President and much of the discretionary spending that goes on in ministries and departments.

The problem with the approach taken by the PAC is that it assumes – wrongly – that we have a real Auditor General, that he acts as a professional auditor would and that the constitution and other laws are observed. It also assumes that the spending authority is the public officers when we all know that the financial system has been turned on its head and it is the ministers who make many of the discretionary spending decisions. In my view ministers too should be brought before the PAC to answer for their mismanagement and non-accountability of public funds.

Petty cash versus the real thing
I hope the members of the PAC read recently where the President and his docile cabinet told the Minister of Finance to go and find $300 million dollars to make a payment that is not only outside of the law but that suggested that the Minister commands some secret funds from which he can just pull $300 million.

In a democracy, the head of the PAC should have an open line with the Minister of Finance to discuss matters of current concern rather than a review of transactions that have taken place sometimes years earlier.

One wag once said that a $200 expenditure usual attracts more attention than a $200 million transaction, simply because that is how the ordinary mind works.

That seems to hold very true for our PAC, and only a couple of days ago Ms Bibi Shaddick was blasting one region over vehicle log books while Ms Chandarpal was raising questions about some mystery “Economic Fund” and raising questions about advances of “amounts such as $400, $600 and $1,000,” and Chairperson Lawrence was questioning an advance of $60,000. That is like auditing the petty cash and ignoring the bank accounts.

Monkey see, monkey do
It probably is a combination of an absence of institutional memory or relevant knowledge by the PAC but yet one must ask whether politics get in the way of its insisting that the government and its relevant ministries provide proper accounts for audit. For example, the government is yet to reveal the audited accounts for the expenditure associated with the 2005 flood, the 2007 World Cup and the Carifesta X festivities held here, despite repeatedly promising to do so.

This is no petty cash; it involved billions of dollars, and is it insulting to the nation that Dr Frank Anthony is not even asked for an explanation for his egregious failures in relation to the latter two events.

This is the same Minister for whom, in their role as legislators, members of the PAC vote $100 million annually which he uses as a fund to give to whomever he pleases. But because the Audit Office ignores the $100 million fund, the Carifesta X activities and the World Cup 2007, the PAC ignores them as well.

And will someone remind the three ladies on the PAC – who are the only persons who are quoted in newspaper reports – that they were supposed to have followed up uncleared travel advances for the President and his ministers. Do they recall that the President had threatened to publish in the newspapers the names of persons who had not cleared their advances within a month? Does Ms Lawrence remember that nearly three years ago she had expressed the “hope” that the government would soon advertise to fill the vacancy of Auditor General so that the work of the Office of the Auditor General (AG) would be carried out on a more professional basis and in keeping with the constitutionality of the office”? Does she feel good that her hope was in vain?

The Audit Act
To serve competently on the PAC requires a familiarity with the Audit Act 2004 and the obligations of the Auditor General to the committee. The PAC also has an obligation to the Audit Office and should have taken steps to prevent the emasculation of the office’s independence by the Fiscal Management and Accountability Act. It has failed to do so in the same way that it has failed to ensure that the Audit Office complies with its own act. It is a circle of non-compliance.

The PAC is not without its more mundane absurdities and the one that stands out is Local Government Permanent Secretary Nigel Dharamlall, who in a matter involving seized wooden piles asked that “the details regarding the species of the wood, and their dimensions be provided.”

For all its serious and fatal weaknesses the PAC is all we have in the National Assembly in terms of overseeing the controls over public funds. I hope that it will go beyond the limited scope it has imposed on itself and look forward to the early publication of its report.

If the May 21 prediction does not materialise and we are still around to read this column, I share the hope of the writer of the September 2008 letter that, “exemplars [such] as the Private Sector Commission, the Guyana Manufacturing and Services Association, the Chambers of Commerce and Industry and the Institute of Chartered Accountants” would take some real interest in the reported gaps in the management of our fiscal and financial systems and procedures and that the PAC will wake up to its responsibilities. But it will need help, lots of help.

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Threshold Country Plan/ Implementation Project was a major failure – conclusion

Introduction
Last week Business Page began a discussion on the just concluded two-year US$6.7 million Guyana Threshold Country Plan/ Implementation Project (GTCP/IP) funded by the US Government Millennium Challenge Corporation (MCC). The column argued that the assessment announced by Director of Threshold Programmes, Mr Malik Chaka, that the project had been successfully implemented was inconsistent with the actual results of key elements of the project. That announcement was made on February 17, 2010 to assembled, mainly government dignitaries, and was echoed by President Jagdeo and Minister of Finance Dr Ashni Singh.

What each of these gentlemen must have known was more than seven weeks earlier, a meeting of the MCC Board chaired by Secretary of State Hillary Clinton, was held to select the countries that would be eligible to receive Millennium Challenge Account assistance during 2010. Guyana, which was included in the lower income countries category, was not even mentioned in the release by the MCC of the decisions taken at the meeting. The countries selected were Cape Verde, Indonesia, Jordan, Malawi, Moldova, the Philippines, and Zambia.

So, before resuming an examination of the statement by Mr Chaka, I will briefly discuss the assessment by the MCC Board, and how it may have come to the decision to exclude Guyana from further MCC fund support.

The MCC decision
In determining eligibility, the Board compared countries’ performance on 17 transparent and independent indicators to assess, to the maximum extent possible, countries’ policy performance and demonstrated commitment to just and democratic governance, economic freedom, and investing in their people. Additionally, the MCC considers adjustments for data gaps, data lags, or recent events since the indicators were published, as well as strengths or weaknesses in particular indicators. From all indications, Guyana performed creditably based on the tabulated assessment, and probably did not suffer from any technical adjustments. Guyana’s failure then must have stemmed from additional quantitative and qualitative information, such as (absence of) evidence of a country’s commitment to fighting corruption and promoting democratic governance, and its effective protection of human rights.

Such additional information could include Transparency International’s Corruption Perception Index which rates Guyana among the most corrupt countries in the world; Heritage Foundation which ranked Guyana at 155 of the 183 nations in terms of economic freedom, as well as oversized government which the Foundation considers one of the biggest barriers to economic development; and the World Bank Doing Business Guide which ranks Guyana at 101 of 183 countries for ease of doing business, with 1 being the best. Then of course the United States Embassy in Guyana would prepare its own commercial and other reports on Guyana, none of which can be assumed to be particularly flattering to this country.

Broken promise
It should come as no surprise therefore, that Guyana did not win MCC’s approval, despite the President’s attempt to discredit these various reports as soon as they were published. Last year for example, he dismissed Heritage as a “conservative right-wing body” and disclosed plans to invite researchers here to dispel fictions about the situation on the ground. It is not known whether President Jagdeo brought in the researchers, or whether his subsequent silence was because their findings did not support his allegation. What it does mean is that when next Guyana complains about any such adverse report, the failure by the President to justify his allegations against these reports would certainly not help our case. Indeed, the report released by Heritage in 2010 was even more damning, demonstrating that despite the use of his bully pulpit, the President has not succeeded in deterring those who use a slightly more objective yardstick to judge the country and government’s performance.

Guyana was rated by the Center for Global Development (CGD) as having passed all the benchmark indicators although it was substantially below the average of the “3-year budget balance” among comparator countries. The median score of all countries for this indicator was a negative 1.36%, while the percentage for “substantially below” was negative 3.34%. Guyana’s score was negative 8.46%. Using the overall score, the CGD had identified Guyana from among the low income countries most likely to be selected for MCA funding. That it failed to win the Board’s approval is a measure that the modern world judges governance well beyond the construction of roads, house lots and social facilities, useful and powerful political incentives though these might be. Unfortunately, this appears to have escaped the notice of our top politicians.

As Mr Chaka had said, failure in one year is not a disqualification from participation in succeeding years. But again, President Jagdeo who demonstrates a pathological inclination to micro-manage – and to do the work of even his “bright” ministers – does not help the country’s case by building close ties with Iran whose leader seems to enjoy daring the international community to declare his country an international pariah. With corruption assuming venal proportions, the country’s biggest budget dollar deficit ever, poor governance, and further evidence of bloated big government, the prospects for Guyana being selected for MCA funding any time soon do not appear too good. So let me take up where we left off last week.

The other tasks
I had noted then that MetaMetrics, one of the project’s US-based consultants had disclosed that the project would be conducted through six tasks. Suggesting that it was against these objectives that the success – or failure – of the project should be measured, I concluded based on the evidence available to the public, the country had performed badly in relation to the first three tasks. How then did we do with the others?

4) Improve Expenditure Planning, Management, and Controls
The revelations arising from the recently concluded budget debate, including the reckless abuse of contract employees; the serial violations of the Fiscal Management and Accountability Act 2003 by ministers and officers; waste and corruption in the procurement processes both in central government and the regions; unqualified contractors; state subsidies to sugar, rice and electricity; the expending of billions on projects for which there is little or no proper technical, economic and financial assessment; the consistent weaknesses identified in the annual reports of the Audit Office; and the almost daily reports of frauds in public offices including the Guyana Revenue Authority, must more than adequately establish that we score poorly on 4) as well.

5) Empower and Create Capacity within Two Principal Parliamentary Fiduciary Oversight Committees
The two principal oversight committees are the Economic Services Sector Committee and the Public Accounts Committee. Reports are that the first has been meeting regularly to identify entities and departments it would question about their performance. Press reports indicate that the committee has met with the loss-making Guyana Sugar Corporation and the National Insurance Scheme which is appearing increasingly under-funded. That this is happening is a positive, commendable development but the information available to the public is far too sketchy to allow an objective assessment of the effectiveness of the committee’s work. It would be useful if the public were allowed to attend the meetings of this committee and its reports made public.

The better known fiduciary oversight committee is the Public Accounts Committee which has as one of its principal mandates the oversight of the Audit Office and the review of that office’s Annual Audit Report. Those reports are always late, are often incomplete and raise more questions than answers. The last report of the Audit Office for 2007 is mainly a repetition of prior years’ issues that have not been resolved and those awaiting “policy decisions.”

While the parliamentary opposition complains that their views and recommendations are ignored, the government has been showcasing the committees as inclusive governance.

The fatal weaknesses in the Audit Office need no repeating. From top to bottom the office is poorly qualified and inadequately staffed, subject to strong political influences and instructions, in violation of its own act and the constitution.

6) Business Registration and Incorporation
While MetaMetrics on their website had referred to both registration and incorporation, I do not believe that those who actually carried out the consultancy in Guyana understood the difference between the two, or that there are two laws dealing with the registration of businesses. These are the Companies Act 1991 which allows for the registration of external companies, and the Business Names Registration Act which deals with unregistered companies.

I participated in a sensitization workshop on Friday December 4, 2009 at which grand claims were made about the reforms in business registration. I was amazed at the level of misunderstanding among the consultants and what they call success. For example they spoke of 96,000 business registrations and 5,600 company registrations, even as only 700 companies file tax returns annually! It must have been the greatest act of resurrection for more than 2,000 years.

One of the lead consultants said at that forum that when the World Bank does its next Doing Business Guide, he expects Guyana to jump by about one hundred places since the time for the registration will be less than countries now in the top 10! I had to point out to him that that is one of ten criteria under one of a score of benchmarks. He did not know that.

Another example of misinformation about the success is an official website that proudly boasts that it is possible to incorporate in Guyana a company by way of the internet, and the time has been significantly shortened. That is not true. Incorporation and registration require statutory declarations by attorneys-at-law and photo ID’s while forms risk being bounced for what appears to be the pettiest of reasons. Under new money laundering rules, commercial banks would not deal with a non-resident company until it has been registered or incorporated and even residents must now produce official, unexpired proof of identity.

Conclusion
There has been more rhetoric than reality in the boasts about success of the project. It has had significant overlaps with other projects such as the National Competitiveness Strategy, parliamentary reform, and other consultancies. This allows several persons and organisations to claim credit for success, and to disown failures. What no one has so far done is consider objectively whether the country gets value for money, with the competitiveness strategy an outstanding example. With scarcely any benefit accruing to the country from that project, it will be the taxpayers who will have to find the money to repay the IDB the five billion dollars we borrowed from them for the project. The poor taxpayer gets poorer.

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The President does not have the power to issue instructions to the Audit Office

In this letter I will seek to conflate two issues involving the President and the Auditor General (ag), Mr Deodat Sharma, which taken together convince me that neither of them understands key provisions of the constitution or the Audit Act 2004, hardly a trivial issue. My conclusion is based firstly on a report in the Stabroek News of January 13, 2009 under the caption ‘Customs workers facing forensic audit as bribery probe widens,’ in which Mr Sharma is quoted as saying that the process of a forensic audit into the assets of employees at the Customs and Trade Administration (CTA) needs to be thorough since, “President Bharrat Jagdeo would expect nothing less.” The second is also an article in the same newspaper of January 20, 2009 in which questioned about the commissioning of a report into the related Customs bribery probe, President Jagdeo is reported as saying that this particular report was “a bit different than the routine annual audit,” while Mr. Sharma said it was “unlike regular reports from his Office.”

Regarding the first issue, both the President and Mr Sharma need to be reminded that the constitution makes the Audit Office “not subject to the control or direction of any person or authority.” It goes without saying that that includes the President.

The Audit Act 2004 provides for two types of audit – financial and compliance audits and performance and value-for-money audits (under section 24 (1)) while section 24 (2) provides for the scope of work and broad methodology for the two types. Section 25 of the act sets a deadline of September 30 for submission of the Auditor General’s report on the consolidated financial statements and accounts of budget agencies, while section 26 provides that, “During the year, the Auditor General may choose to conduct special audits and at his discretion prepare special reports when such audits are completed.”

Where the Auditor General and the President fall into error with the President saying it was a debating point, is the scope of section 28 which provides as follows: “The Auditor General shall [N.B. not may], in accordance with article 223 of the Constitution, submit his reports to the Speaker of the National Assembly, who shall cause them to be laid before the Assembly.” That section refers to all reports and “whether it goes through the Speaker or Minister of Finance” as the President said, is more than semantics or a procedural issue. It is the result of a constitutional amendment designed to strengthen the independence of the Audit Office so that he reports not to the executive but to the National Assembly. Sadly, neither President Jagdeo nor Mr Sharma seems to appreciate the distinction.

To any reasonable person it must be clear that together the constitution and the Audit Act make the issuing of instructions by the President to the Auditor General to undertake an investigation into the Fidelity fraud allegations, to carry out so-called forensic audits of the assets of the employees of the CTA and the submission of reports by the AG to the President, unconstitutional and unlawful. After the sterling work done by his predecessor, Mr Anand Goolsarran, Mr Sharma is allowing President Jagdeo to bring the Audit Office into disrepute and it only takes a legal action by any officer called upon to submit to Mr Sharma’s “forensic audit” to have the whole process thrown out. In no country but Guyana would the head of the state audit with responsibility to audit often complex transactions in excess of two hundred billion dollars not hold a professional accounting qualification. One of the reasons for such a requirement is that the holder is subject to a professional code of conduct regulating the quality of his work and the integrity and independence he displays.

It is not that Mr Sharma has time on his hands or no work to do. In a review of the ‘Report of the Auditor General on the public accounts for the year 2006’ carried in Sunday Stabroek’s ‘Business Page’ of August 24, 31 and September 7, 2008, I pointed out some glaring weaknesses − errors of omission and commission of a professional nature in the work of his office. Perhaps a few examples drawn from those columns would suffice. The full articles are available on the Stabroek News website or at ChrisRam.net.

1. That the report did not mention the failure by the Privatisation Unit/NICIL to account for hundreds of millions of dollars, a fundamental breach of the constitution that ranks and rankles with the infamous Lotto Funds;

2. $6.513 billion advanced from the Dependants Pension Fund Deposit Fund at December 31, 2006 not being substantiated while the old Consolidated Fund bank account NO 400 had not been reconciled since 1988;

3. The failure by the Audit Office to report on the financial statements of entities in which the Government has a controlling interest;

4. Non-reporting of the hundreds of millions of flood funds which Mr Sharma had promised more than three years ago;

5. No report on concessions granted under the Investment Act, 2004, including the illegal concessions granted to Queens Atlantic Investment Inc, the saga of 2008;

6. No audit report on World Cup Cricket even as another cricket spending spree is planned next year.

The Guyanese public is accustomed to being misled by fancy-sounding but uninformed statements by public officials, some of which confuse even lawyers of the main opposition parties. The statement about forensic audit falls in that category when looked at against the quality of work referred to above and the persistent failure by the Audit Office to carry out its mandate. Mr Sharma it seems prefers to dabble in matters improperly referred to him by the President while neglecting his constitutional and statutory responsibilities such as his report for 2007 on the public accounts, already overdue by several months, and any value-for-money audits.

The Minister of Finance is a former Deputy Auditor General who served under Mr Goolsarran, and the government must therefore be aware of the several professional and personnel limitations of the Audit Office and those who control it. But since the government transacts business involving billions of dollars, often outside the norms of proper accounting, the constitution and the Financial Management and Audit Act, it is unlikely that it would like strong and independent oversight of such spending. So, really it is convenient for the government to have someone like Mr Sharma heading the Audit Office. In addition, the wife of the Senior Minister of Finance is employed as the only professionally qualified accountant in the Audit Office. By definition she is not independent and it is absolutely incompatible for her to be in the Audit Office while her husband is Minister of Finance.

To allow such serious farce in the Audit Office in my view shows contempt for the people of our bleeding country. All the talk of forensic audit is meaningless. On top of all of this, the parliamentary oversight body, the Public Accounts Committee seems completely out of its depth. Do Guyanese really deserve this?

I will deal with the President’s uninformed and misguided call for “MP’s to declare assets within two weeks or face the courts” in later correspondence.