Introduction
During the past week I received an irate call from the treasurer of the Guyana Relief Council complaining that the statement in the 2008 Report of the Audit Office misrepresented the status of the audits of the GRC. The treasurer pointed out that the Auditor General has long since ceased being the auditor of the GRC and that the entity’s audit is done by a private auditor. While auditors are human and make mistakes from time to time, that the Audit Office had not contacted the entity over a period of several years to enquire about their audit, is a serious indictment both of that Office’s procedures as well as its quality control system. A simple letter was all that was required.
I am not at all surprised because as this series has revealed not only does the Audit Office not have the numbers and quality of staff to carry out its mandate, but the resources which it does have are used most inefficiently and are sometimes famously misdirected. It is therefore unable to achieve the mandate set out in the Audit Act, despite all the IDB and other money invested in it over the years. The important has given way to form, with an obsession over designations and positions and the operation of bicycle level auditing in a Cadillac environment of receipts and expenditure, complex organisational arrangements and technological innovations.
Audit risks
Whether in the private sector or the public sector auditing is about risk – risks associated with the budgetary accounting or financial rules, risks related to the control and use of resources, risks concerned with the delegation and segregation of duties, risks of internal and external fraud, systemic risks, compliance risks etc.
The problem for us is not only that all these risks – and more – exist in the public sector, but that there appears absolutely no interest in introducing better controls over public moneys in budget agencies and in strengthening the Audit Office. Just imagine the billions that pass through some of the Ministries or Departments often handled by improperly trained staff, with no internal audit and some fairly archaic systems of controls. If we could save just 5% of the national budget through better controls, we would be saving $7 billion in 2010!
Instead we are misled to believe that things are just fine, that we have the most modern procurement act in the region, that we have annual audits, and that there is no cause to worry. In a private sector company, the weaknesses that are identified by the auditor would run to several pages. In the public sector, the identified weaknesses and errors in some ministries and departments run to no more than a couple of paragraphs.
Clearly, some thing must be wrong and the Public Accounts Committee should have recognised this years ago. The public and the taxpayers are being shortchanged while the watchdog is uninterested or emasculated. Billions are being spent on e-government while the Audit Office cries out for resources. Scholarships are awarded in a wide range of fields but the Audit Office remains dangerously short of professional staff. And things are getting worse.
New approach required
That level of incompetence in the proper sense of the word also allows for a fair amount of absurdities. Take for example the statement made in 2008 at a press conference by the President who said in relation to the Lotto funds: “What happens now, I think, is that they transfer a part of it to the Consolidated Fund. If there is a $50 million project, the sum required is transferred to the Consolidated Fund,” he said. He knows that that is not what happens. It was he who negotiated with the Audit Office – in complete disregard of the Constitution – that the moneys received during each year would first be placed in a special bank account and only the unspent portion would be transferred to the Consolidated Fund.
As government accounting becomes more decentralised, as the sums involved increase substantially, and as the public service comes more under political control, a new approach needs to be taken to audits in the public sector. The culture of self-help in the public sector, the empirical and anecdotal information on frauds and embezzlements, and the complex arrangements that are often necessary in particular cases, make the traditional approach to audits entirely inappropriate. There is a clear, compelling and urgent need for the introduction of strong internal audits in each ministry and department to support the external auditors who often hardly have the resources to make more than fleeting annual visits.
Assuming it is allowed to function properly, an internal audit unit can bring substantial savings, enhance efficiency and improve service delivery that no amount of Value-For-Money audit can produce. Unfortunately such a view would be considered too revolutionary for Guyana where weak systems and procedures are the order of the day.
How the government thinks
The official government line is best gauged from a document known as a Treasury Memorandum, prepared by the Finance Secretary in the Ministry of Finance, addressed to the National Assembly and setting out the comments and action that the Government intends to take in response to the report prepared by the Public Accounts Committee following its review of the report of the Audit Office. The last two such Memoranda were dated April 26, 2006 and November 7, 2008 in respect of the years 2000 and 2001, and 2002 and 2003 respectively. These are not encouraging. They indicate that very little effort is placed in the preparation of the memorandum, reflect a cynical interest in improving public sector financial management, demonstrate that the author seems to know little about a key financial law, and evidence a contempt for the National Assembly.
But then the Finance Secretary Mr. Neermal Rekha probably takes his cue from President Jagdeo who in 2008 “tasked the Minister of Finance Dr Ashni Singh to explain to the media how to interpret the Auditor General’s report on government accounts, saying that there is a great deal of illiteracy in the treatment of financial matters.” (Stabroek News August 25, 2008). As President Jagdeo went on to demonstrate his understanding of critical issues relating to the misuse of the Contingencies Fund and the Lotto Funds it was obvious that his statement about illiteracy extended beyond and above the media or the public and that he was either misleading the public or himself did not understand the report.
Cut and paste
A comparison of the two memoranda will indicate the extent of the cut and paste done and the serious deficiencies which they contain. That kind of evidence and the fact that neither the Public Accounts Committee nor the National Assembly has publicly commented on them offers little hope of improving public accountability in Guyana any time soon. Let me give some examples.
Paragraphs 15 of the 2006 memorandum and 17 of the 2008 memorandum are identical in every word. They say that the Financial Management and Accountability Act (FMAA) has been superseded by the Fiscal Management and Accountability Act 2003. That statement is only partly true. The FMAA has not been repealed in its entirety. It still requires for example that any remission of any taxes be authorised by some Act of the National Assembly. That provision makes unlawful the waiver of fees and licences offered by the President to yellow cabs, clearly indicating and implicating a collusion of ignorance.
The same paragraph assures the National Assembly that “with the introduction of the Integrated Financial Accounting and Management System (IFMAS), the Accountant General would be in a better position to access information from that system in order to prepare and make his consolidated submissions to the Auditor General within the specified time frame.” We noted earlier in this series that some of the accounts were in such a state that they were unauditable and as is well known, the accounts and the report by the Audit Office are routinely late. What is less well known is that no financial reports of other accounts approved by the Minister of Finance as required by section 73 of the Fiscal Management and Accountability Act are ever presented for audit. It seems too that section 69 of the Act is not complied with in its entirety and the debts of “other levels of Government and Public Enterprises” are similarly not presented and audited.
Diversionary tactics
In terms of delays, the Finance Secretary demonstrates remarkable confidence and even contempt for the National Assembly when he blames the Public Accounts Committee for being responsible for the longest delay in the accountability cycle owing to the length of time it takes to deliberate on each year’s public accounts. That does not of course mean that the PAC is not terribly inefficient and ineffective or that the national assembly itself takes sufficient interest in the report of how the billions it allocates annually are spent. Instead, whenever the report is presented there is a photo-op, some banal statement about VFM, and how accountability has improved since 1992!
On the issue of the Contingencies Fund the 2006 memorandum described the abuses referred to in the audit report as “perceived” but undertook that “recourse to the Contingencies Fund, outside of an unforeseen circumstance, will be obviated with strengthened public financial management, including improved planning and budgeting, earlier presentation of the national budget, stricter monitoring and control, and constant review and evaluation of projects and programmes.”
Arrogance comes to the fore in the 2008 memorandum responding to persistent concerns of violations of the Fund, supported by clear and itemized examples of breaches. The Finance Secretary dismisses these, stating that “every advance is brought to the National Assembly by way of a supplementary financial paper and is therefore subject to full parliamentary scrutiny”. Somebody either does not understand or does not want to understand. The concern of the Audit Office is that the payment does not meet the eligibility criteria of being unforeseen, urgent and unavoidable and that any delay would harm the public interest. It is not about whether or not the advance comes before the National Assembly for clearance.
The Lotto Funds
The same kind of cleverness is evident with the money received from the Lotto Company. It is now public knowledge that the issue is the breach of the Constitution which requires all receipt of public moneys to be placed in the Consolidated Fund and expenditure therefrom approved by the National Assembly. Instead the money is placed in a separate unlawful bank account and used by the President to make payments.
Instead of addressing the issue of the breaches of the Constitution and the law, the Finance Secretary not too subtly avoids them, but simply tells us “as the Government had indicated previously, that all sums deposited and withdrawn from that [special] account are properly accounted for.”
That is not the point Mr. Rekha, so please do not treat us as if we are that stupid.
To be continued