Category: Public sector

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Auditor General’s report 2011: sanitizing or whitewash

Introduction
The 2011 Auditor General’s report is the earliest since 1993. It is also among the poorest in terms of quality and content. Those journalists who look forward to going to town on the report will be disappointed by the shortened and sanitized work produced by the national Audit Office. Indeed two days after the report was published it had ceased to attract media attention. The word “abuse” that described the management of the Contingencies Fund by the Minister of Finance has been replaced with more acceptable language “continued to be used without meeting the requisite criteria” – “urgent, unavoidable and unforeseen.” It is more than mind-boggling that Mr Sharma could think that expenditure related to the elections of November 28, 2011 could have been “unforeseen,” particularly since in a special report on advances to the police for the elections, Mr Sharma acknowledged that such advances were also a problem in 2001 and 2006.

Here are some other issues which have been highlighted in past audit reports which have been relegated to verbiage in the report itself, if they appeared at all: Procurement of drugs for the Ministry of Health and the Georgetown Public Hospital Corporation amounting to three billion dollars from New GPC; procurement of pirated textbooks by the Ministry of Education; fraudulent payment of pensions and gratuities; stale-dated cheques; lottery abuse; etc. And things that appear to have escaped attention were monies spent on Pradoville 2, contract employees, the severe weaknesses at NCN and failure to account for NICIL.

Once again the Audit Office fails to look into the annual sum of $100 million allocated to the Ministry of Culture, Youth and Sport for arts and sports development. Had it not been for the fact that this issue has been publicly raised on several occasions, I would have suggested that, bad as it is, the Audit Office is unaware of the existence of the Fund. That they must have been aware of it points to a more serious matter: that they are not keen in helping taxpayers’ knowledge of how the $100 million per year is spent, reportedly under the direction and control of no more than two individuals.

Not understanding the implications
Some time ago, in reviewing a special report of the payments of social security, I suggested quite strongly that the Auditor General does not seem to appreciate the implications of some of his own findings – or could not really care. Let us take as an example paragraph 11 of the report which states that, “The Ministry of Health failed to adhere to the provisions of Section 43 of the Fiscal Management and Accountability Act (FMAA), which requires any unexpended balance of public moneys issued out of the Consolidated Fund to be returned and surrendered to the Consolidated Fund at the end of each fiscal year.”

Now compare this with paragraph 65 of the report which tells taxpayers that “the Guyana Office for Investment (GO-INVEST), Environmental Protection Agency (EPA) and Institute of Applied Science and Technology (IAST) failed to make timely refunds of unspent balances as at 31 December 2011, which respectively, amounted to $20.598M, $223,730 and $1.794M. Since these refunds were paid to the Office of the President during the year 2012…”

At a time when the National Assembly had voted to reduce the allocation of that Office, a clear breach of the FMAA that puts money into the Office of the President rather than into the Consolidated Fund raises legitimate questions. Not only does the report leave it to the reader to wonder whether or not the money was paid back into the Fund, but there is nothing in the National Estimates to indicate how the money was eventually disposed of.

Contingencies Fund
Let us return to the Contingencies Fund, the sole responsibility for which lies with the Minister of Finance. We learn that he authorised eighty withdrawals from the Fund over a period of nine months, or an average of nine withdrawals per month. What the Audit Report does not acknowledge is that the Minister of Finance must report to the next sitting (emphasis mine) of the National Assembly on all advances made out of the Contingencies Fund, specifying (a) the amounts advanced; (b) to whom the amounts were paid; and (c) the purpose of the advances.

The Minister must also come by way of a supplementary appropriation act and for the replenishment of the Contingencies Fund. But so that the National Assembly is aware of the consequences of its decision, the FMAA imposes another requirement on the Minister: he has to state the reasons for the proposed variations and provide a supplementary document describing the impact that the variations, if approved, will have on the financial plan outlined in the annual budget.

The requirement for a supplementary document applies to all financial papers, whether for the replenishment of contingencies or for a variation of the budget. Yet, Dr Singh has never once produced a supplementary document to the National Assembly for any of more than fifteen supplementary appropriation bills or so that he has presented to the National Assembly. Regrettably the members of the National Assembly have failed to request of the Minister that he comply with the Act as a condition for granting him any money.

I have written the Speaker of the National Assembly and he has promised to address the omission with the Minister.

Poor Ramnarine
We can now turn to the special report into the $90.649 million paid from the Contingencies Fund for feeding the Police, which was released by the Ministry of Home Affairs prior to the circulation of the wider 2011 Auditor General report. The Audit Office appears to have exonerated Mr David Ramnarine Divisional Commander, but not before his career path was seriously obstructed at the instance of the Minister of Home Affairs.

Again, in a half-baked way, the special report fails to question or explain how public funds could find their way into the bank account of the Police Welfare Fund which is not a public fund, and therefore a breach of the FMAA. Nor does the report explain why the unspent balance of several millions was only refunded into the Consolidated Fund in March 2012. There is a strong and widely held suspicion that the refund would not have happened had the opposition not brought the matter to the attention to the public. The Audit report could therefore be seen to be something of an escape route – if not a cover-up – for wider and higher-up impropriety in the Police Force. The real issue was not Ramnarine – he was the scapegoat. The issue was about the arrangement that but for the intervention of the opposition, would have left taxpayers’ money with the Police Welfare Fund.

There is one final danger point about the Contingencies Fund which I have pointed out before, and which was borne out in this case. The Audit Office not only consistently fails to report on important non-compliance by the Minister with the requirements of the FMAA, but also fails to pursue the actual spending of the sums from the Contingencies Fund. Short of appointing a professionally qualified accountant to the position of Auditor General I see little prospect for better control and oversight of the Contingencies Fund.

A solution
The National Assembly needs to act in this matter. They can do so in two ways. The first is to reduce the amount of the Contingencies Fund which the PPP/C administration raised from $500,000 to what amounts to more than $3.5 billion. If the Minister must come to the next sitting of the National Assembly for reporting and replenishment then $3.5 billion is an extraordinary sum. Reducing the amount – which requires a small legislative change – will introduce some level of accountability and oversight and rein in the Minister of Finance who seems impatient to bring supplementary appropriation bills to the National Assembly prior to spending. The second is to remove the amendment to the Constitution (Prescribed Matters) Act and return to the age limit of 55 years. Now that all our MPs are trained in legislative drafting that should be a simple task.

The fact is that Mr Sharma cannot do a proper job, given his dependence on the Government for his continuance in that position.

Value for [whose] money and drugs
And while we have not moved off from special reports it may be convenient to refer to two Value for Money audits which Mr Sharma has been working on for three years and which according to the 2009 Audit Report were “expected to be completed before December 2010.” In 2012 we are assured that the Audit Office is in the “process of finalizing” these. What makes the inordinate delay in the completion of these of considerable concern is the importance and relevance of the subject-matters of the exercise: “A Review of the Operations of the National Board and National Procurement and Tender Administration” and “An Assessment of the Management and Control of Drugs and Medical Supplies at the Ministry of Health.”

The 2011 Audit Report advertises these “projects” as demonstrative of the Office’s “commitment in ensuring the provision of reports which will facilitate improvements in the operations of our clients.” The public would recall that the exercise was first announced three years ago and would be aware that since then expenditure on goods and services has increased from around $75 billion to $125 billion and that on capital projects has almost doubled, moving from $45 billion to $75 billion. To compound the matter, the procurement laws apply to state-owned entities and other statutory bodies which would add another several billions of dollars per annum in places like GuySuCo and GPL.

And what about the purchase of drugs? For the Georgetown Public Hospital Corporation, expenditure on drugs and medical supplies in 2011 was $1.620 billion, while for the Ministry of Health the expenditure was over $2.6 billion. Not surprisingly, the lion’s share of the expenditure went to the New GPC which is known to have strong government ties and which is usually advanced the money to finance the procurement and supply of the drugs.

With the Audit Office having such fancy names as a Value for Money Unit, a Forensic Unit and a Quality Assurance Unit, taxpayers would like it to move expeditiously on a thorough examination using business principles and practice of this generous arrangement which involves reported markups on the supplies that many would consider price-gouging. And as for procurement, there can hardly be any financial and corruption issue that deserves a higher priority.

Conclusion
There is one final point to note in today’s column, and that is in relation to the 2000 Series Bank Accounts held with the Bank of Guyana. Dr Goolsarran and I have drawn attention to the drawing down of some of these accounts without complying with the law and any proper accounting for some $30 billion. Not only does the 2011 Audit Report ignore responsible and reasonable calls for explanations, but the 2011 table of the balances in Static and Active accounts is either amateurishly prepared or deliberately set up to mislead the readers and the National Assembly. In a table that is designed to show movement over time one does not exclude balances in an earlier year because the balance no longer exists. In the column for the respective year the amount ought to be shown. So that in the 2007 and 2008 columns, the amounts of $4,410.3 million and $4,690.6 million should have read $7,591.3 million and $7,868.4 million respectively.

It is troubling when an audit report itself becomes suspect.

To be continued

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An abomination for an Auditor General report

The report of the Auditor General on the public accounts of Guyana was tabled in the National Assembly on Monday. In a country with weak accounting and accountability, an Access to Freedom Act that has not been brought into force, an Integrity Commission without Commissioners, no Public Procurement Commission, no anti-corruption or whistleblowers legislation, the report by the Auditor General – if its Executive Summary is an indication of its contents – is striking for its sterility.

A comparison of the 2011 Executive Summary is an almost identical reproduction of the 2010 report.

Note that 2011 was a less effective audit than 2010 which in any case was itself not a good audit: it ignored the armies of contract employees, the off-constitution spending by that abomination called NICIL, slush funds across ministries and including the dormant accounts, the loan recovery unit, the National Frequency Management Unit.

The problem we face is an unqualified acting Auditor General who plays to his master’s voice in order to retain one of the most lucrative employment contracts in Guyana. If we need any proof of this we need go no further than the clandestine attempt to lay a path for confirmation.

If that happens, if we think the 2011 audit is poor, we have not seen anything yet.

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The danger of ignoring dangers – the NIS debacle

Introduction
The Luncheonese in the heading is deliberate. Business Page of May 10 2009 wrote that the NIS faced real and disastrous consequences from Cabinet’s failure to act on the recommendations contained in the 2001 and 2006 Actuarial Reviews of the NIS.

In one of the columns in that 2009 series on the annual report on the Scheme, I wrote that the 2006 Actuarial Report had projected that total expenditure would, in 2014, exceed total income for the first time in the scheme’s forty years and unless contribution rates are increased, the scheme’s reserves would be exhausted by 2022. I wrote then that with the likely loss of billions in capital and income in Clico and the inaction of the government and the board, including PPP/C fixtures like trade unionist Komal Chand and Chitraykha Dass, Chartered Accountant Maurice Solomon and business executive Paul Cheong, it was possible that the actuary’s fears about expenditure exceeding income could happen sooner rather than later.

Last week, on the 43rd. anniversary of the Scheme the Chairman and the General Manager made separate statements in which the word “pride” was used by both of them. But the full-page advertisement caused consternation and led to more concern than might have been warranted. Indeed another section of the media mistakenly reported that the Scheme would have a deficit for 2012 of $1.399B. The cause of the confusion was the reporting of all expenditure the Scheme would incur in 2012 but only the contribution income it would receive. Of course the NIS has two principal sources of income – contributions and investment income. In 2010 investment income amounted to $1,348 million which if continued into 2012, would cover the deficit of payments over contributions received.

Late reporting
We wait on the audited report for 2011 which Dr. Ashni Singh, as the subject-minister, is already late in presenting. But if the audit confirms the General Manager’s numbers then the actuaries are spot on with respect to their doomsday scenario – if the unlikely urgent and drastic preventive action is not taken. Indeed, since the last actuarial report predated the Clico debacle, the actuaries would have assumed that the NIS would be receiving a stream of income from Clico with no risk to its investment of nearly seven billion.

The audited financial statements of the Scheme at December 31, 2010 included accrued investment income from Clico of $90 million, and no provision for a loss on the investment. That is at best aggressive accounting – and as noted before in this column – is based on a misunderstanding of a statement by Dr. Luncheon as Head of the Presidential Secretariat to the NIS of which he has been Chairman since 1992.

But casual and irresponsible as Dr. Luncheon has been, he is not solely to be blamed for the almost irreparable financial damage to the NIS over the past ten years. At the policy level I would have to name President Jagdeo and the two Finance Ministers of the PPP/C since 2001 – Mr. Saisnarine Kowlessar and Dr. Ashni Singh.

Sharing the responsibility
Dr. Singh in particular has to take a lot of the blame because the acceleration of the deterioration was the collapse of Clico for which as Finance Minister he bears statutory responsibility, and tolerated and later excused. And he has not been contrite, modest or courteous about his serial failures in relation to the NIS. To check on the propriety of NIS investing in Clico, I wrote Minister of Finance Dr Ashni Singh a letter on February 24, 2009 pointing out that the NIS Act only allows the NIS to invest in securities approved of by the Co-operative Finance Administration (COFA) established under the Co-operative Financial Institutions. I pointed out in my letter that Dr. Singh as Finance Minister is not only the Chairman of COFA but as Minister, he also appoints its Board. The Minister of course also appoints the Board of the NIS. I asked him the following questions:

1. The names of the persons he appointed to COFA currently serving as members of the administration, and the commencement and termination dates of their appointments.

2. The securities which COFA approved for purposes of investment.

3. Whether the NIS had sought and received approval for any investments other than those determined by the administration and if so, the securities which have been so approved.

4. Whether the administration during his tenure as Minister has ever taken the opportunity under section 4 of the act for its Chairman or Secretary to attend any meeting of the National Insurance Board, and in particular the meeting at which any decision was made by the board for any special investments.

More than three years later, I am still awaiting a response.

The nature of the Scheme
The NIS is an actuarial scheme that seeks to balance out, in the long-run, its obligations against its resources. The NIS Act requires that every five years, external independent actuaries must review all the data on active and past contributors, project future income and expenses – of which pension benefits are always the more significant item – and then make recommendations to maintain/restore the actuarial balance of the Scheme.

The responsibility of the Government and the Board is to consider and act on the actuaries’ recommendations. However, for more than a decade, the Government has consistently allowed political considerations to undermine the proper management of the Scheme, ignoring the recommendations contained in the reports of the actuaries for the 2001 and 2006 reviews.

Between 2004 and 2007, every annual report of the NIS stated that the Board of Directors “is in the process of reviewing and implementing the recommendations”. But then in 2008, the Scheme’s annual report dropped the word “implementing”. Clearly, they gave up on their own plans to implement.Not surprisingly, and apparently frustrated by the failure to implement their recommendations, the actuaries in their Executive Summary of the 2006 Actuarial Review, categorically expressed a decision to limit their recommendations “given the outlook of the Fund and the concerns regarding some benefit provisions”.

We give up
They added that if the limited recommendations were implemented, “then other changes may be considered later.” In other words, ‘we give up’. When you get serious, we will too. This huge warning signal was missed by the entire Board of the NIS and the Cabinet of the country.

The result of this stubborn and irresponsible failure by the Government is that the NIS is now under serious stress from which no amount of spinning or flippancy will rescue it or detract from. In the most unbelievable statement to come out of the NIS, its Chairman Dr. Roger Luncheon, the 2009 announcement of whose removal from the Board was welcomed in many quarters, could find it possible to say that his government considers any decision on the Scheme in the same manner as it considers same-sex marriage or the decision on the death penalty!!

Source: National Insurance Scheme Annual Reports, 2004 to 2010

Under the immediate past stewardship of Drs. Luncheon and Singh, the failure to act on the recommendations of the actuaries, compounded by the collapse of its investment in Clico has left a $5 billion hole in the Scheme’s balance sheet, and no income from more than 20% of its investment. Significantly, the benefits most under threat are pensions for which the reserves to payments ratio has fallen from 4.95 times in 2002 to 1.82 times in 2010, the last year for which the annual reports of the NIS are available.

Ram & McRae in their 2012 Budget Focus repeated the fear that “the possibility cannot be ruled out that perhaps no later than in 2012, expenditure will exceed income with the situation worsening every year thereafter.” The accountants warned in their document that the resolution of the Scheme’s problems which began in earnest in 2004 cannot await the completion of the 2011 Actuarial review now in its preparatory stage. Immediate and decisive action is necessary, otherwise disaster looms.

Darkening clouds
The outlook for the NIS is grim and once again the smiling, avuncular doctor is trying to assure the public that things are not that bad. In his anniversary message he assures the country that the findings of the 8th. actuarial review would soon be presented to stakeholders who he “[expects] to contribute constructively to the resolution of the challenges facing the Scheme.”

Those confident enough to believe Dr. Luncheon are assured that the Board and the Management commits to spearhead this entire exercise with the intention of ensuring that the expectations of the stakeholders are solicited and recommended in any new disposition adopted by the Government of Guyana.”

This column is not optimistic.

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Contrary to Singh, Nandlall and Luncheon’s statements Chief Justice’s decision was not final in the Budget cuts case

The Attorney General, the Minister of Finance and the Head of the Presidential Secretariat have been busy distorting the decision in the Budget cuts case to mislead the public. They appear to use their flawed interpretation as the basis for continuing payments to party comrades like Mr Reepu Daman Persaud, Ms Gail Teixeira and Mr Kwame McCoy, in violation of a vote by the National Assembly.

On the day Mr Ian Chang, Chief Justice (ag) delivered, to use his own words, “his views,” the Attorney General Mr Anil Nandlall went from the court, via the Office of the President, to NCN to shout victory.

And in the 2012 mid-year report Finance Minister Dr Ashni Singh presented recently, he said that “The [National] Assembly was later deemed by the Courts of Guyana to have acted outside its constitutional remit in inflicting those cuts to the budget.”
Not to be left out, Dr Luncheon was quoted in the press on September 7, 2012 as saying that “the $1 that was approved by the opposition for the various agencies was totally inconsistent with the constitutional provision as ruled by the Chief Justice.”

Let us turn to the Chief Justice’s decision. He rejected the application of the Attorney General and denied the Minister of Finance the “liberty” to make advances/ withdrawals from the Consolidated Fund to restore the $21 billion 2012 budget cuts, except for the sum of $99,000,000 for the ERC. The reason for restoring the amount for the ERC, according to the Chief Justice, is that it is a constitutional body subject to a direct charge on the Consolidated Fund. Accordingly, its budget allocation was not subject to a vote of the National Assembly.

And let us be reminded that the Chief Justice concluded his decision with the words that the matter brought by Mr Nandlall is in its “preliminary stage” and that “the views expressed at this juncture are not final.” The misinterpretation suggests that the three do not have any regard for the truth, respect for the court, or deference for the National Assembly, the only body with the power over the spending of public funds. We may be tempted to discount Mr Nandlall and Dr Luncheon as ineffective political spinners. Not so Dr Singh. He controls the public purse of Guyana and the records show that he has not been unwilling to play around with the Contingencies Fund and the dormant bank accounts to the tune of billions of dollars.

So when Dr Luncheon announces in last month that “no one lost their jobs” and that “Contingency funds were approved and funds made available belatedly but still available to meet the wages and salaries of the contract workers [at OP].” it is time to get worried. Because, if that is so, the Minister of Finance is in violation of not one but two Acts – his own amended 2012 Budget Act and the Fiscal Management and Account-ability Act, under the pretext of a misrepresentation of the court’s decision.

The question now is whether, after a prolonged break, the political opposition can muster the capacity and the courage to confront with all the powers at their disposal, the continuing lawless manner in which the country’s public funds have been mismanaged and misspent by Dr Singh, assured of a pliant and ineffective Audit Office.

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Mid-Year 2012 Report shows mixed performance

Introduction
In the introduction to last week’s Business Page I pointed out that it was refreshing that the mid-year report was not only prepared within the statutory deadline but that the report was actually made public even before it was laid in the National Assembly which is presided over by the Speaker. That was certainly one step forward. Just one week later the Auditor General presented to the Speaker of the National Assembly the audit report for 2011within the statutory deadline. This was the first time that this was done under Mr Deodat Sharma as the Head of the Audit Office. And guess what the Speaker does? He not only drew comparison with what last took place twenty-one years ago, but then goes on to confuse his specially assembled audience over the timing of the submission of reports since that date. And to add vinegar, he announced that the report will be locked away until the National Assembly resumes from its prolonged recess. That certainly is not a forward step.

Last week as we reviewed the sectoral performance of the economy we saw the up-and-down performance of its major sectors even as it recorded overall growth. We also looked at the values of imports and imports and the change in the consumer price index which is popularly referred to as the inflation rate. Today we turn attention to other segments of the report and begin with revenues.

Revenues
Central government revenue for the first half of 2012 amounted to $64.9 billion. While representing only 44% of the budgeted revenue for the year, the collections represented a 5.5 % increase over first half 2011, primarily as a result of improved performance across several tax revenue categories. Tax revenue collections for the period amounted to $58.6 billion representing 90.4% of total current revenue collections or 2.9% over 2011.

Internal revenue collections for the half-year amounted to $25.9 billion compared to $26.5 billion in 2011, a decline of 2.3%, as a result of contractions of $582.2 million and $146.6 million in private and public sector corporation taxes respectively. The Minister attributed this decline to lower company tax rates, a bit of a stretch since tax rates were reduced not in 2012 but in 2011, and tax payments to June 30, 2011 would have taken the reduced rates into account last year.

A more realistic explanation lay in withholding tax collections which decreased by $624.8 million compared to first half 2011 due to arrears in dividend payments made in 2011 by a local company to its overseas parent company.

Customs and trade tax collections totalled $5.7 billion for the first half, representing a 19.6% or $930.9 million increase over 2011 half-year collections. The minister attributed this to a $900.6 million increase from import duties due to higher level of imports of most categories of goods particularly intermediate goods. Excise tax collections for the period amounted to $11 billion, a slight fall from 2011. Excise tax collections from motor vehicles amounted to $5.2 billion, an increase of $1.5 billion reflecting higher levels of vehicle imports.

Collections of value added tax (VAT) for the half-year amounted to $16.1 billion, an increase of $1.4 billion. VAT on imports of goods and services accounting for $611.7 million of the increase while VAT on domestic supplies increased by $831.1 million. Value-added tax for the full year was budgeted at $33.968 billion.

Tax evasion
Taxes collected from the self-employed amounted to a mere $1.8 billion to the revenues, compared to $1.5 billion for same period in 2011. As a percentage of tax revenues the self-employed – who dominate the professions, agriculture, fishing, car dealers, goldsmiths, artisans, contractors and most of the main shopping areas in all three counties – contribute less than 2.6% of the tax revenues of the country.

We have heard nothing recently of the so-called tax review committee announced by President Ramotar almost ten months ago, a delay that perpetuates a lop-sided, regressive tax-system in which the self-employed continue to treat taxation as a voluntary matter rather than be treated as the criminals that they are.

No Minister of Finance since 1992 has treated tax evasion seriously but all, including Dr Ashni Singh and his appointed Board of the Guyana Revenue Authority, continue to ignore the glaring statistics that show how serious and damaging the situation has become. Imports by the self-employed continue to rise by double digits, with bank deposits and import taxes not far behind. Yet the taxes the self employed merchants including our newest friends and the rest of the self-employed sector pay, move up only imperceptibly.

With all the inherent problems the GRA faces, it is quite remarkable that the taxes collected by it continue to rise. Whatever we may think of the nature of the tax system and the systemic corruption in some segments of the GRA, those of us who have to deal with the Authority on a day-to-day basis cannot help but admire – and feel a bit sorry for – the many hardworking staff who have to deal with a taxation public made up of so many groups of prominent tax evaders and money launderers.

Missing GRIF and other monies
In paragraph 3.34 of the mid-year report the Minister states that “based on developments in the first half of the year, total current revenue collections (net of GRIF inflows) are now estimated at $128.7 billion for the full year.” A review of Appendix E1 shows that while the sum of $18.4 billion was budgeted to be received, that amount has now been revised downwards to $1.975 billion. Since the Norwegian funds accounted for 15% of budgeted revenue for this year and since many of the LCDS projects were framed around the Norway funds, it was reasonable to expect that the Minister would say something of substance about the status of those funds.

Absent from revenue projections too are monies from the Lottery and the proceeds from the disposal of state assets by NICIL for sundry purposes.

Current expenditure
On the expenditure side total non-interest current expenditure to June 2012 amounted to $43.8 billion, an increase of 14.3% over the same period in 2011. This sum represents 41% of the budgeted expenditure for 2012.

The several types of expenditure where there were increases in 2012 over 2011 included statutory pensions and gratuities which had a 38% increase (no explanation offered); total other charges which increased by 11%; and subsidies and contributions to local organisations – mainly Guyana Power and Light Inc – which increased from $5.8 billion in half-year 2011 to $10.3 billion (77.6%) in the corresponding period in 2012. Old Age Pensions and Social Assistance payments in 2012 amounted to $2.4 billion compared with $1.98 billion in the corresponding half year in 2011.

While the late presentation and passing of the 2012 budget may have been responsible for a number of categories of expenditure to be lower than those for 2011, their greater significance lay in the percentages which the half-year 2012 expenditure bear to the full-year budget. Not unusually, the entire amount of $$3.7 billion for revision of wages and salaries remains unspent.

If we look further at the item Other Charges, which includes several categories of expenditure, we note that only $26.3 billion was spent up to June 30, representing 37% of what is projected for the full year. Principal among the items which had disproportionate spending in the first half of 2012 are expenditure on Materials and Supplies which represents 34% of full year projections; Rental and Maintenance of buildings18.7%; Maintenance of Infrastructure 14.5%; Transport, Travel and postage 34.3%; Utility charges 32.8%; Other Goods and Services 33.9%; Other Operational Expenses 30.1%; Education Subvention and Training 38.8%; Rates and Taxes and Subventions to Local Authorities 3.9%; and Pensions 42.5%.

The situation is no different with the capital expenditure side of the accounts.

Sectoral Capital Expenditure
What we may see and need to fear is that there will be a mad rush to spend in the second half of the year with continued negative consequences for quality and value for money as well as controls over public expenditure.

Source: Mid-Year Report 2012

Deficit and debt
The overall deficit before grants is projected at $43.5 billion, almost certainly the largest budget deficit in the country’s history, measured by absolute amount as well as a percentage of revenue. Even after projected grants of $16.8 billion, the country will need financing of $26.6 billion which will have to come from borrowings. By June 2012, the external debt had increased to US$1.3 billion, 7.6% more than the amounts owing at December 31, 2011. During the first half of 2012, external debt service totalled US$20.4 million, an increase of 10.8% compared to the same period in 2011.By December 31, 2012 the combined external and domestic debt stock will exceed the psychological US$2 billion threshold.

Conclusion
It is evident that the economy’s growth rate in 2012 was lower than in 2011. But perhaps because the Minister had projected for lower real growth in full year 2012, he concluded his report with some reassurance, if not confidence, that the performance of the first half of the year “augurs well for the remainder of the year.”

But acknowledging the events in Linden, his final words were directed not at his colleagues in his government or his ministry to implore them to exercise greater and better management, but at all national stakeholders to “ensure the preservation of the environment that is so critical for a continuation of this favourable performance, not just for the remainder of the year but into the medium term.”