Category: Public sector

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Auditor General Report 2010

Introduction
I do not share the excitement of the media and the public about the revelations in the Auditor General’s 2010 report supplying further evidence of the excesses, mismanagement and improprieties which have become routine under Dr Ashni Singh’s stewardship of the Ministry of Finance. For persons who pay taxes and advise others to do likewise this is more than a titillating news story. Accordingly, I cannot be enthused to read that the Contingencies Fund continues to be abused several years after it was first pointed out. I am not at all pleased that this Auditor General cannot see the forest for the trees, and that he is more concerned about some overpayment of $1,167 than about hundreds of millions of dollars in special funds not being audited; or that he focuses on vehicle log books not maintained while scores of government vehicles cannot be accounted for or are misused.

If our financial architecture is designed to be dysfunctional, which by any measure it is, then no amount of post-transaction audit would remedy the defects. There must be concern about the placing of square pegs in round holes, persons holding positions across the arms of the state without the requisite expertise and qualifications.

Internal audit
One of the most effective tools of financial oversight is a well-resourced internal audit mechanism headed by at least one qualified accountant. Our Fiscal Management and Accountability Act bears some resemblance to the Australian Act, but with notable exceptions. That Act which goes back to 1997, six years before the Guyana Act, provides for fraud control plans and audit committees in each agency, and applies the criminal code of that country to the misapplication, improper disposal or improper use of public money. Unlike our Act, the Minister is not exempted from such sanctions.

Under the Australian Act any borrowing of money not authorized by an Act of the National Assembly is invalid. Our relevant legislation seems far more permissive and even that is being abused with several loans and other financial agreements entered into not tabled in the National Assembly. Their Parliament must be notified of any involvement in a company by the state or a prescribed body. In Guyana, Dr Singh’s NICIL (he is the Chairman of the Board with Dr Luncheon and other Cabinet members) can form companies and use them to siphon off state resources or enter into questionable transactions. Even if, as seems probable, that had been done at Mr Jagdeo’s behest, it would not exonerate the Minister nor the Auditor General from investigating these.

A financial infrastructure
No properly managed structure would allow the Audit Office to decide that it would no longer report on concessions given by the administration, in clear violation of statute. Or to accept a self-serving opinion from a cabinet member that public moneys do not have to be put in the Consolidated Fund. The least a self-respecting audit office would do is seek an independent opinion.

Nor would a proper financial infrastructure allow the offices of Accountant General and Auditor General to be held over several years by acting appointees, or require the latter to report to the executive, contrary to the constitution. I am concerned that the Public Accounts Committee has not asserted itself, content to make less than consequential statements than address the fundamental problems facing the financial administration of the country. Concerned too that the Audit Report reflects no work on the transactions of the Office of the President except to refer approvingly to the Lethem to Providence E-Government Project, one of the immediate beneficiaries. Some $846.451M was expended on that project in 2010 which is only partly completed.

Disgrace
It seems to me a national disgrace that the government can decide that it will so frustrate the establishment of the Public Procurement Commission in order for cabinet to control all significant tenders. Or use the Fiscal Management and Accountability Act as cover to bring constitutionally independent persons under the Ministry of Finance. With all the excesses, I am not aware that any public official has ever been brought before the court for breaches of the Act.

In the days of Anand Goolsarran, before we had the Act and before we had several years of training in forensic and Value For Money audits, we could rely on the Audit Office to tell us about the stone scam, the milk scam and poor public infrastructural works. Now the Audit Report is more noted for what it leaves out than what it includes. The media – both print and electronic – constantly depress the nation with stories and pictures of shoddy multi-million works that have gone bad. The Audit Office looks at the Palms but not at NICIL, Pradoville 2, or those projects that have robbed the nation of billions. For all the controversy with the Amaila road awarded by NICIL, or the many concessions valued at billions of dollars, the Audit Office has been noticeably silent.

We must not forget that whatever the 2010 Report’s significant defects, the report was delivered within the statutory deadline for the first time since the current holder has occupied the office. But to ensure that the abuses played no part in the elections, the report was not released until four months later.

PAC
What makes for a more depressing picture is that the Opposition in the National Assembly chairs the Public Accounts Committee but is overwhelmed by the executive and people like the Financial Secretary, who is the Head of Budget Agency with responsibility for compliance with the Fiscal Management and Accountability Act and the protection of public moneys and property.

The PAC too, has constitutional responsibility to nominate the members of the Public Procurement Commission, but for ten years has failed to do so. For whatever reason, the commission has not been appointed and its constitutional functions are shared between the cabinet and the National Procurement and Tender Administration. The members of the administration are appointed by the Minister of Finance who determines the salary and allowances they receive and to whom they report.

Disdain
Past reports show the continued disdain this Minister has for the Audit Office which he once served under Goolsarran. Every year we are told that the Ministry of Finance (the Minister and the Finance Secretary) did not include explanations of any significant differences between the annual estimates of revenues and out-turn of the revenues. And that the ministry did not provide explanations for the impact of (a) movements in the underlying economic assumptions and parameters used in the preparation of the annual budget proposals; (b) changes to revenue policies during the year; and (c) slippages, if any, in the delivery of the budget measures. Because of the stubbornness of the ministry we can never be certain of the completeness, accuracy and validity of the amounts shown in the Statement of End of Year Budget Outcome and Reconciliation Report (Revenue) required under Section 68(1) of the Fiscal Management and Accountability Act 2003.

Singular contempt for the Audit Office and by extension the Public Accounts Committee and the country is demonstrated with the reaction and response to the reports of abuse of the Contingencies Fund. Responsibility for this fund lies solely with the Minister of Finance and in the past five years the amounts which the National Assembly was called upon to reimburse the fund because of expenditure under the Ashni Singh Ministry of Finance was a whopping $14 billion. Yet, as Dr Singh has shown by his behaviour over Bill # 1 of 2012, both he and the Financial Secretary Mr Nirmal Rekha appear to be in a state of denial, or arrogance. Their response to the comment by the Audit Office in 2007 about the Contingencies Fund advances not meeting the criteria provided by law, was that since Parliament subsequently passed the supplementary appropriation to cover the advances, the advances could not be contrary to the Act!

Here are a couple of other cases of bad financial management.

Two loan liabilities of $51M in 2004 were allowed to grow to $211M because of the failure of Ministry of Finance to act on them. The increase is all as a result of interest on the loans.

No deposit fund account has been established as required by section 42 of the FMA Act which requires the Minister to “establish one or more Deposit Funds into which public monies shall be paid pending repayment or payment for the purpose for which the monies were deposited.” Deposits received during year 2010 were paid directly into the Consolidated Fund (Account № 407), and related payments made therefrom.

I will close this week with a reference to the state of the country’s principal bank accounts. As at December 31, 2010, there were balances of $4.4B in static and inactive accounts and other accounts that should have been transferred to the Consolidated Fund. Indications are that these are now being transferred to plug the deficits brought on by the non-arrival of the Norway funds and excessive spending by the government.

There has been no reconciliation of amounts of maybe $46 billion held in the old Consolidated Fund which the Audit Office has been recommending be closed, but only after the impossible task of completing proper bank reconciliation – the mathematical equivalent of trying to square the circle. Meanwhile the report does not make clear whether the new account for the Consolidated Fund which was opened to bring some order to the government’s bank balances has gone the same way. It certainly seems to be in overdraft.

Continued: https://www.chrisram.net/?p=859

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The Supplementary debate and the Audit Office

Introduction
In last week’s Business Page I indicated that I would be addressing the 2010 Auditor General’s report this week. It will be remembered that the report was handed over to the Speaker of the National Assembly around the time of the dissolution of the Assembly, its release delayed because of the dissolution. Before I consider the report, however, it is useful to comment on last Thursday’s sitting of the National Assembly when Bill No 1 of 2012 containing a request by Dr Ashni Singh, Minister of Finance for $5.7 billion.

Supporting the Bill were two financial papers, one for $2,240 million to replenish the Contingencies Fund and the other $3,471 million for supplementary approval under four headings. From all appearances, it was quite a contentious session during which acting Speaker Ms Deborah Backer had to offer some maternal advice to the Finance Minister who, clearly uncomfortable with the uncharted waters, appeared several times to have lost his cool. The arguments raged to such an extent that the Bill was not fully addressed in the session and the House was adjourned for another month!

From reports, it appears that save for some transactions for about two hundred million dollars, Paper 7 was approved in principle based on explanations offered by the Minister and his junior, Bishop Edghill. I learnt from one parliamentarian that the expectation is that Paper 8 would be more contentious, having a few transactions for substantial sums. There seems a fundamental misunderstanding of the two papers and how they ought to be treated under the Financial Management and Accountability Act which sets the rules for the receipts and payments of “public moneys,” a term that is much wider than actual cash.

The Fiscal Management and Accountability Act
It does not seem to me that the genesis and provisions of this Act are understood by many of the members of the National Assembly. To start with, then Minister of Finance Saisnarine Kowlessar and Prime Minister Sam Hinds resisted the pleas of Winston Murray and James McAllister for the Bill to be referred to a Select Committee because delay could cause the government to lose US$30 million. The urgency was evident in that the Act was assented to and gazetted one day later.

Our MPs on checking the Hansard of the debate on the Bill would have seen too the arguments by Murray on what constitutes qualifying expenditure from the Consolidated Fund and how he succeeded in getting the National Assembly to insert the word “urgent” before “unavoidable and unforeseen.” Many of the items in Paper 7, even if the details were submitted in accordance with the FMA Act, would not meet the strict test for payment out of the Fund. It has to be seen therefore as an act of some considerable compromise for the opposition not only to accept oral explanations in place of the written details required by the Act but also a relaxation of the criteria which the PNCR had insisted on when the Act was passed in 2003.

I can only hope that when the Bill comes up for voting, the opposition makes it clear to Dr Singh that taxpayers‘ money is not there to be dispensed at the whim of any politician.

Enhanced obligations
While the ordinary person expects all legislators to understand the law, that obligation is greater on those who have been in the National Assembly for some time, or who have served on the Public Accounts Committee, and greatest on the Minister of Finance. It seems to me that Paper 8 reflects a lack of awareness, by all these persons, of section 21 of the Act and the concept of conditional appropriation to which Mr Murray drew attention in the parliamentary debate.

Such an appropriation would have allowed for the spending of specified sums of money, conditional upon budget agency receipts being credited to the Consolidated Fund. By definition, such a case requires prior and not subsequent approval, as Dr Singh is now seeking. There is room to speculate whether his reason for not doing the right thing at that time is because he did not wish to reflect an even larger deficit, or did want to have to answer too many questions about some of the transactions.

When it comes to budgeting – an essential element of financial management – this Minister has either been ineffective or rather cavalier. He brought eight financial papers to the National Assembly for supplementary funds for 2011. The amount he sought was over $18 billion on budget heads of less than $30 billion. He came to the National Assembly twice in September 2011 and yet he did not know that GPL was bleeding, even as it was bleeding the consumers. Any responsible Minister of Finance would have sought supplementary funds at that stage rather than wait until after the end of the year. But let us not complain: the country is the beneficiary of the miscalculation by Dr Singh in thinking he would be able to get the National Assembly to vote money for him however and whenever he wishes.

The country must now wait another month – Parliament seems to work at most, only on Thursdays – to see how Paper 8 is debated and how the vote on the Bill will go. Some MPs are hoping that when the National Assembly resumes, the Minister will add some flesh to the bare details offered in Paper 8 and that such details will be explosive.

Audit report 2010 and the Audit Office
Over the past four years Business Page has had about seven columns examining the annual reports of the Audit Office on the accounts of the ministries, departments and regions of Guyana. I have noted the standard response by the press and the public to revelations of Contingencies Fund abuse, unreconciled bank accounts; single sourcing of drugs from the New Guyana Pharmaceutical Corporation; vehicle log books not maintained and improperly kept stock records. I have written that Mr Deodat Sharma who has been acting in the position as Auditor General since 2004 often turns a Nelson’s Eye to many of the serious financial improprieties and mismanagement in some of the budget agencies, including the Office of the President.

I have said on numerous occasions that NICIL seems to have audit immunity from the Registrar of Companies as well as the Audit Office. I have suggested to the Public Accounts Committee to get a professionally qualified accountant to head the Audit Office so that staff progression is not stymied and the quality of their audits brought to an acceptable standard. Along with others, I have wondered about Article 216 of the constitution in relation to the lottery funds and how then President Jagdeo ignored the basic elements of financial management to dispose of the funds as he thought fit.

The Audit Office has been reminded of the many funds around that are not being audited and its attention drawn to the continuing failure of the majority of ministers to table the annual reports and audited financial statements of the entities for which they bear ministerial responsibilities. It has regularly been reminding him that Flood 2005 money, Carifesta and World Cup remain unaudited and that there is no evidence that it carries out the audit of “tax concessions” under the Investment Act.

No change
Despite these, nothing seems to change. That the report of the Audit Office hardly offers any new insights is evident in the number of paragraphs under each budget agency that has far more “prior year matters which have not been resolved” than current year matters. In the case of the Operations of the National Procurement and Tender Administration there are only prior year issues, as is the case with the Ministry of Foreign Affairs.

But that applies to the report of the Audit Office itself. It keeps moving the goalpost on when it will have its full complement of staff, or when it will issue its next Value For Money audit. Amidst the verbiage of the developments on VFM audits, we learn that only two such audits were concluded in 3½ years, while two were promised, first in 2009 and the same two were promised by end of 2010. It is now 2012.

We should surely be expecting more from our Audit Office that includes “six officers of the unit including the Auditor General who spent 9 month in training in Canada,” and another fifty-nine who were trained locally. We learn too that the Audit Office has a Forensic Audit Office which was established in 2008 and which has “continued to be an integral part of the Office.” Let us hope they start producing some results.

To close this first part of the review of the report it may be useful to note that for several years now the post of Accountant General has been filled with acting appointees. In the last five years, the occupants of the office were Mr H Autar – 2 years; Mr G Abrams – 2 years; and Col J Persaud. Several positions below the Accountant General are also filled by acting appointees, a situation that mirrors the Audit Office where almost the entire top brass are themselves acting. That cannot make for a healthy control environment.

To be continued

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Managing the country’s finances

Introduction
“The Contingencies Fund continued to be abused with amounts totaling $550.025 M drawn from the Fund and utilized to meet expenditure that did not meet the eligibility criteria as defined in the Act.”

Even allowing for the imprecise language, these words appearing in paragraph 3 of the Executive Summary of the Report of the Auditor General 2010 must be very discomfitting to Dr Ashni Singh, Minister of Finance. Not that the sentiment is new; words to that effect have appeared in every single report since Dr Singh was appointed a senior technocratic minister in 2006. But what makes the words perilous for him is that the report, which for four months has been kept secret from MPs and public alike, was tabled in the National Assembly on the same day as were two financial papers – Nos 7 and 8 – for $5.7 billion.

In each case of reported abuse in the past, the ministry gave one stock, banal response to the finding by the Audit Office: “that the Ministry of Finance continues to ensure that there is full compliance with the requirements of the Fiscal Management and Accountability Act.” No one can accuse Dr Singh of not understanding the Act and its requirements.

But perhaps he felt, like Steve Jobs, that he could bend reality at his command, or he underestimated the commonsense of Guyanese, or he did not care, assured of the unquestioned support and vote of his parliamentary colleagues and the cover of his former authoritarian boss, President Jagdeo.

Post November 28, that attitude can be fatal. Mr Jagdeo has gone, bequeathing a diminished PPP/C government, taking with him his immunity, and seemingly inured to any embarrassment. To President Ramotar, on the day he delivered his maiden presidential speech to the National Assembly, his Finance Minister tabled two financial papers that have his opponents excited and his own supporters confused. It is the Jagdeo legacy, so faithfully carried out by his protégé and appointee Dr Singh who, faced with criticism, demonstrates misplaced bravado and accuses me of “blatant distortions and misrepresentations.”

Over the next couple of weeks this column will review the report of the Auditor General but given the topicality of the two financial papers, these are addressed in this column.

The two papers
The two papers are respectively for $2.240 B of which $2.161B is for recurrent expenditure and $79.3 M on capital expenditure; and $3.471B, classified entirely as capital expenditure, although there seems to be some element of recurrent expenditure in at least one of the headings. It is probably worth repeating the elements of an occasion that would permit the issue of a warrant by the Minister for expenditure from the Contingencies Fund. Indeed, paragraph 29 of the 2009 and 2010 Auditor General’s reports reminds the Minister that the criteria require him [the Minister] to be satisfied that “an urgent, unavoidable and unforeseen need for the expenditure has arisen (a) for which no moneys have been appropriated or for which the sum appropriated is insufficient; (b) for which moneys cannot be reallocated as provided for under this Act; or (c) which cannot be deferred without injury to the public interest…”

The report adds that “where any advance is made, a supplementary estimate must be laid before the National Assembly as soon as is practicable for the purpose of properly authorising the replacement of the amount advanced.” What the report does not state is that the Minister, when seeking the replacement of funds, must provide to the National Assembly specifics of (a) the amounts advanced; (b) to whom the amounts were paid; and (c) the purpose of the advances. It is safe to say that this Minister has never provided the required information to the National Assembly. And equally significantly, the benign Audit Office never addresses the expenditure under the respective agency programme. Surely advancing the money to the expenditure agency is not the end of the transaction; the money has to be paid out.

Let us take a couple of examples. More than $200 million was spent by way of contingencies advances on Amerindian projects in 2010. There is not a single comment on the expenditure under the ministry. Similarly, $75.5 million was spent out of the Contingencies Fund on completing the swimming pool. Again, no mention under the report’s audit findings at that ministry.

And finally, $300 million was paid out of the Contingencies Fund under Agriculture for expenses described as “to assist farmers in regions 8 and 9 affected by prolonged rainfall.“ That would normally warrant some audit attention; none is suggested in the 2010 Audit report.

Let us now turn to the 2011 advances that have generated such excitement, starting with the Contingencies Fund. Some of the main headings are as follows:

Source: Financial Papers

It is incredible that the budget for national awards should be understated by 300%. The Office of the President has so often and so long operated outside of the already lax financial system that that is now part of its culture. Maybe the October awards were an afterthought of Mr Jagdeo with elections in mind. But Dr Singh, it must be remembered, presented a mid-year report in August and went to the National Assembly for money twice in September. He ought to have known then that GPL and Lethem Power would need substantial additional funds. The same applies to the security forces and their need for supplementary funds to cover additional security duties for the elections. And predictably, the Ministry of Agriculture gets supplementary funds for Black Bush and for Mannarabisi, while two Amerindian dormitories get $18 million in food and $3 million to get the children home for Christmas. Whether it was just poor budgeting or politicking is a matter for speculation.

The second paper
Paper 8 is for $3.471 billion and is made up of four items. These are:

1. Ferries from China
The paper seeks another $2,588 million for the two ferries from China for which Budget 2011 had an initial provision of $366M. There was no comment on this by the Minister in his 2011 mid year report but the capital project profile presented at the time of the Budget had a total cost for the ferries of $3,849 million, all of it to be financed by “foreign loans/grants.” The profile shows the project ending in 2011 and the entire amount should have been taken up at the time of the Budget.

2. Education delivery
The paper seeks approval for $160 million on this $8,943 million project for institutional strengthening of hinterland schools, school facilities, textbooks and child-friendly classrooms. $800M was approved in the 2011 Budget and with pre-2011 spending of $4,063 million, the accumulated sum drawn down at end of 2011 would have been $5,023 million, leaving a large sum undrawn. The project is shown as being financed by foreign loan/grants and comes to an end in 2011.

3. East Bank Demerara Highway Improvement Project
The project profile for this IDB-funded, five year (2011-2015) lane extension from Providence to Diamond shows a total cost of $4,510 million of which $450M was approved in the 2011 budget. The paper seeks another $261 million.

4. Electrification programme
This is listed in the capital profile as a two-year project ending December 31, 2012. It consists of:

● the expansion of the transmission and distribution systems;

● seven new sub stations;

● expansion and upgrading of two sub-stations; and

● installation of a Supervisory Control and Data Acquisition (SCADA) system.

The total project cost is $8,157M of which $1,395 M was spent before 2011 and $2,791M was approved in the 2011 budget. It would seem then that there will be some $1,000 million to be spent to the end of the project in 2012.

Conclusion
There is something fundamentally wrong with the manner of budgeting at the central government level. For example, “foreign loans/grants” is a term of confusion, not clarification. The information in the capital project profiles is unhelpful, and even unusual. It seems strange that the Budget would have had only a small part of the cost of the ferry when it was known that their delivery was scheduled in 2011. The reason it seems is a calculated strategy to mask the deficit at the time of budgeting. There is no reason to budget for part of the vessel – you either take the whole cost or none.

The Minister, as usual, was less than forthcoming in his mid-year report disclosures and projections. He then had another chance when he went to the National Assembly – not once but twice in September 2011. If he knew that there would be some matters of financial significance between the dissolution of the National Assembly and the end of the year, he should have sought to have provisions for those.

A senior minister can hardly admit that he was unaware about some of the party’s elections spending plans, although with Mr Jagdeo no one can be certain. Whatever it is, this Minister’s capacity for good budgeting and responsible financial management is being increasingly questioned.

And on the issue of the Contingencies Fund, his financial papers do not meet the requirements of the Act. Not only, in the words of the Auditor General, is the Minister a serial abuser of the Fund, but he shows some disdain for the National Assembly by his failure to provide it with the details required by section 41 of the Fiscal Management and Accountability Act.

At the wider level, the Jagdeo administration had engaged in a spending extravaganza, financed by borrowings.

So while the National Assembly persuades Dr Singh to bring financial papers in accordance with the law, and to stop the abuse of the Contingencies Fund, it also needs to bring under parliamentary control, our ballooning domestic and external debts.

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Guyana’s election machinery is not good value for money

Introduction
Last week was not a mixed week for the nation. On one day, the front page of the Stabroek News read: ‘PPP/C addressing voter loss’ and ‘Granger says [APNU] not afraid of new elections,’ both reports arising out of press conferences by their respective parties. These followed comments made by AFC presidential candidate Mr Khemraj Ramjattan that suggested that as a politician he was not unopposed to the existing structure of the electoral body the Guyana Elections Commission (Gecom).

Instead of the PPP/C Central Committee at its first sitting of the 2011 Regional and General Elections deliberating on how its government would pursue its economic and social agenda in the light of the changed landscape in the National Assembly, the report suggests that the high priests of the party were more concerned about the [2011] election strategy, and why it lost votes. Apparently seething from the loss of the Speakership of the National Assembly, it accused the APNU and the Alliance For Change (AFC) of defenestrating tradition from Parliament.

Interestingly, the word ‘defenestration’ is associated with not one, but two wars in the fifteenth and seventeenth centuries, in both cases fuelled by persons being thrown out of windows.

Mr Granger is reported to have said that he was not afraid about the prospects of government calling a new election and his group’s confidence in contesting such elections, since he did not believe that the vote-costing attitude of the government had changed for the better in six weeks.

While Mr Granger was reacting to a question from a reporter, I raise my own question whether any of the country’s political parties or civil society has considered the cost of elections in Guyana. This country has not held constitutionally required local government elections since 1994 – eighteen years! – making the claim of democracy less than convincing. And while most Guyanese and the independent observers are satisfied that the results declared by Gecom reflected the votes cast in the November 28 General and Regional Elections, there is almost unanimity that the playing field was not level; that the elections were not fair.

Exploding cost
But that is not the principal concern of today’s column. Rather it is about the cost of elections in Guyana and whether or not the country gets value for the billions it spends not only for the elections but in the intervening years as well. It is about the apparent comfort of the political class in burdening the ordinary citizen with exorbitant VAT and personal income tax which disproportionately hurt the poor and the lower paid employee, while making decisions on spending that completely ignore cost and value for money, and are sometimes designed to feather and further personal, political and commercial interests.

Guyana, with a voting population of less than half a million, has six commissioners, an Executive Chairman as well as a Chief Elections Officer. It also has approximately three hundred full-time staff. By contrast the Electoral Commission of Australia, with a voting population of over thirteen million has three commissioners, a part-time Chairman and one part time non-judicial member. They are supported by a deputy electoral commissioner and an electoral officer for each of the six states and the Northern State. It has about 875 staff operating out of 157 offices.

India, the world’s most populous democracy has seven hundred million voters, many of them not as literate or educated as the average Guyanese voter. Yet the professionally managed and fiercely independent Election Commission of India, with responsibility for the oversight, direction and preparation of the electoral rolls as well as election-related interaction with the Parliament, state legislatures, and the offices of the president and vice president delivers efficient and low-cost elections generally seen as free and fair. Local elections for urban and rural bodies are conducted by the various State Election Commissions. That country has a mere three commissioners, one of whom is designated the Chief Election Commissioner and all of whom are subject to term (five years) and age (65) limits, whichever comes first.

And how much is that?
Gecom is constitutionally responsible for the general direction and supervision of registration of voters and the administrative conduct of elections. These should be carried out with a view to ensuring impartiality, fairness and compliance with the provisions of the Constitution and any relevant Act of Parliament. For reasons that go outside of this column – but which include Gecom’s (and the courts, and the Audit Office’s) failure to take action to protect its own independence from the executive – the Commission since 1992 has failed to deliver on its complete mandate. To use the political parties as the excuse why some things are not done is nothing but a cowardly cop out.

Here is a summary of the expenditure by Gecom over the post-2006 election period 2007 to 2011. It shows that over the five year period, Gecom was funded from the public purse to the tune of over nine billion dollars, excluding any request which the Minister of Finance may bring to the National Assembly for any supplementary expenditure. As expected, the cost rose significantly in 2011 but even so it was only about a third of the expenditure for the electoral cycle, with some of the cost in the intervening period being attributable to the new registration exercise when new ID cards were issued.

Figures: G$’000
Source: National Estimates

Using the number of 475,000 eligible voters on the updated list, it has cost this country an astounding $19,000 per voter between 2007 and 2011. I have seen no statistics from anywhere around the world that comes close to this figure, one that clearly suggests caution as we make sounds about another round of elections. What is equally remarkable is that even in a non-election year the cost runs above two thousand dollars per person when the international average cost for elections runs much, much lower. Of course some part of that is understandable with an element of fixed cost for any elections body, regardless of the size of the electorate.

An example of overspending
But let us take a simple example of why the culture of cost control and management is so completely absent. Over the past five years each of the part-time, non-executive commissioners has earned a minimum of twelve million dollars. Compare that with the salary of the lowly teacher, the often maligned nurse or police officer who would have earned a mere two million dollars over the same five years. There seems neither logic nor justice that a part-time, under-employed commissioner often sitting there to carry out the wishes of the party, should earn more than five times the full-time public servant.

This column has been a persistent critic of the Audit Office but even they have expressed concerns over the integrity of the controls in Gecom, including financial management and stores controls and purchases of millions of dollars from untraceable suppliers. We have to expect better management of the billions made available to Gecom and which naturally come out of the same block of funds that inadequately provide for the health, education and other sectors. Think what some of that money can do for the University of Guyana or to ensure that there is an adequate supply of drugs in the regional hospitals and health centres or to enhance security.

Let us look at another table.

Election expenses as a percentage of National Budget

Figures: G$’Mn
Source: National Estimates

What this table tells us is that two out of every one hundred dollars spent in 2011 went towards Gecom for the administration of the elections. And to think that the cost of security is not included, or all the vote-buying and elections-related projects undertaken by the government, or the heavy campaign cost incurred by the parties!

Conclusion
I never feel safe making any claim for Guyana as the best or worst in the world but I can comfortably state that as a percentage of the national budget and on a per capita basis Guyana must have the most expensive election machinery in the world.

Following the elections there was much talk of reforming Gecom, talk that has subsided as APNU’s allegations of improprieties have receded into virtual silence. Something has to be done about our electoral machinery. A global survey published in June 2005 on the Cost of Registration and Elections offers some excellent insights on how we can cut down on the cost and yet deliver better results. Unfortunately Guyana was not included in the survey but one of the contributors was part of the Carter team that had recommended the 3-3-1 model for the 1992 elections.

That arrangement was intended to be temporary. It is time to bring it to an end and to introduce a cost efficient and politically effective model.

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It won’t be easy

Introduction
Nothing concentrates the mind like a deadline. With the date for the convening of the 10th Parliament fast approaching – it must be held within four months of the end of the previous session which ended in the last week of September, 2011 – it is expected that our politicians will soon resolve the uncertainties over who will be the Speaker as well as the simmering questions about the Statements of Poll. That would set the stage for the National Assembly to begin work in earnest over the dozens, or perhaps scores, of issues that cry out for attention. Since all of these cannot be addressed simultaneously, the Parliamentary Management Committee would have to agree on the priority issues and their timelines for completion. This will be no easy task.

The Jagdeo administration has left a damaging legacy of bad laws, unhelpful culture and lots and lots of square pegs. The parliamentary opposition, faced with exciting possibilities has promised much and they will be expected to deliver. They will be tempted to set extremely ambitious targets. How can they not want to deal with CLICO, GuySuCo, all of Jagdeo’s big money items, the legacy of corruption, constitutional reform, public sector pay within a broader wages policy, local government elections, a failed capital city, etc, etc?

It will be a huge challenge for our system of part-time politicians coming out of decades of a negative, adversarial culture which we are reminded is harder to change than people. But President Donald Ramotar can certainly assist the process if he willingly accepts the reality of the new parliamentary configuration and work with the Parliament which the constitution defines as comprising the President and the National Assembly.

Of course as Robert Burns reminded us, “The best laid schemes o’ mice an’ men
gang aft agley” (often go awry) and however carefully the members of this exciting National Assembly may plan their work there will be challenges, surprises and setbacks. Business Page today will highlight a potentially early challenge, identify an issue which I think warrants urgent attention and will comment briefly on the announcement of a tax reform committee.

Challenge
When the National Assembly met on the last occasion on September 22, Finance Minister Dr Ashni Singh obtained approval for expenditure of $3.3 billion in extra budgetary allocations via Supplementary Appropriation (No.3 for 2011) Act comprising Financial Papers 5 and 6. In paper 5, some $1,367 million was earmarked to replenish the Contingencies Fund for expenditure mainly for the procurement of drugs and medical supplies for the Georgetown, Lethem, Mabaruma and Bartica Hospitals, and some $25,871,000 of which was for the Ministry of Agriculture for expenditure associated with Phase 2 of the Grow More Campaign.

Paper 6 which was for $1,951 million was made up mainly of some $1.2 B in electricity charges and an additional $350M allocation for the Drainage and Irrigation Board and the National Agricultural Research and Extension Institute. What was significant was that just a few weeks before, Dr Singh had obtained approval from the National Assembly for $2,646 million of which $2,104 million was to replenish the Contingencies Fund, and $542 million in supplementary appropriations mainly to do with the roll on-off vessels.

From technocrat to politician
In the previous Parliament in which Dr Singh was an appointed technocratic minister, he seems to have had very easy rides when it came to getting the automatic approval of his colleagues who then enjoyed a dominant majority and who quite often never seemed to understand the financial implications of their votes. That situation has changed with the majority, albeit a razor-thin one, now on the other side. Dr Singh who has now become a political minister will find that he has far more questions to answer before obtaining such approval. This column has pointed out ad nauseam that the law provides very strict rules for the use of the Contingencies Fund.

Section 41 of the Fiscal Management and Accountability Act (FMAA) allows the Minister of Finance, by way of a drawing right, to make advances from the Contingencies Fund. The circumstances under which he may do so, however, are severely limited; the overriding test is threefold: urgent, unavoidable and unforeseen. Further, he can use this fund only where no or inadequate sums had previously been appropriated, or where reallocation under the FMAA is not possible, or finally, where delay would cause injury to the public interest. He cannot use the fund to meet a promise by the President to do something or the other, or because he failed to budget properly, or because some budget agency was careless.

The same section of the Act requires that the minister report at the next sitting of the National Assembly 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.

Strict compliance
If, as is feared, Dr Singh improperly spent moneys from the Contingencies Fund during the two months between the close of the last Parliament and the end of 2011, then I foresee some real difficulties for him. I expect that he has to face as the shadow Finance Minister Mr Carl Greenidge, who knows the system as well as the law. Public officers are also aware that an era of political fear from despotic ministers and political cover has ended and they will have to conform to the law. It is one of the unfortunate features of the FMAA that ministers cannot be prosecuted under section 85 of the Act. Only officers can, something that is unlikely to make them comfortable.

Two things the Minister needs to bear in mind: He must present to the first sitting of the 10th Parliament a report of any spending (advances) out of the Contingencies Fund since his last report. He should expect that report to be rigorously scrutinized to ensure each has met the three tests: urgent, unavoidable and unforeseen, and that any delay would have caused injury to the public interest. And second, the level of detail provided in his report of advances made out of the Fund in the past did not meet the requirements of the law.

Dr Singh is justifiably rated very highly within the PPP/C. Judging by their stout defence of Minister Irfaan Ally whose public accountability performance has been called into question by the National Assembly, the party will circle around Dr Singh. If there has been expenditure that does not meet the rigid standards of the law, there will be difficulties. I sincerely hope that this is all speculative and that if there was any expenditure from the Contingencies Fund, that it met the requirements of the FMAA.

The NIS
The National Insurance Scheme, which for nineteen years has been led by Dr Roger Luncheon, has for several of those years been faced with challenges of increasing seriousness. The problem is that no one has appeared willing to confront the challenges, some of which would have required politically unpalatable actions. Not FITUG which for several months has gone silent, not the GTUC, whose leaders are protesting everything else while ignoring the dangers faced by the Scheme, not the political parties, not anyone. The recommendations of the 2001 Actuarial Report on the Scheme were hardly acted upon except for a 1% increase in the contribution rate in 2004. The 2006 Report has largely gone unaddressed as well, in complete disregard of the actuaries’ cri de coeur that the NIS at then “40 years old, [was] at a stage where immediate measures need to be taken to maintain public confidence in the sustainability of the Scheme.”

In their 2010 country consultation the IMF staff had pointed out too that the mismatch between pension benefits and contributions and weak reserve management threatened the sustainability of the National Insurance Scheme.
They noted that under current parameters, the finances of the NIS are unsustainable. And using data provided by the NIS, they projected that after 2011 the NIS would shift from small surpluses to growing deficits.

More recently, the challenges of low rates of compliance, low investment returns, inefficient policy and executive administration, and deteriorating finances have been compounded by the Scheme’s potential loss of $5 billion in CLICO and the consequential loss of investment income thereon.

The 8th actuarial review as at December 31, 2011 is now due. The actuaries should be called in immediately, the review expedited and its recommendations acted upon. We can no longer tolerate the delays in taking remedial action or continue with a highly ineffective Board.

The Tax Reform Committee
President Ramotar had announced the appointment of a Tax Reform Committee, the terms of reference of which have not been made public. It is not clear whether the President consulted with interested groups including the political parties, consumers, the trade union movement and the Institute of Chartered Accountants of Guyana both about the scope and the membership of the committee. If he did not that is remarkable and unfortunate. VAT and personal income tax affect mainly consumers and workers, and I hope that on reflection, the President would recognize that the exclusion of representatives from those groups is a regrettable omission.

For the work of the committee to be really useful, its composition should be widened and its terms of reference publicised for comments.

A successful 2012 to all readers of this column.