Introduction
Sometimes around now, sometimes later, the press and the public are excited when the report of the Audit Office on the accounts of the ministries, departments and regions is tabled in the National Assembly. They feed on reports 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. More recently a disproportionate amount of time was devoted in the 2008 and 2009 audit reports on expired air fresheners and Baygon and overpayments of $30,000 and $50,000 for the acquisition of purchases.
Not that these things are not important. They are. But the danger to which the press and the public fall prey is that they displace some of the really crucial issues of accounting and accountability that cost the nation billions of dollars annually, paid for by exorbitant rates of VAT and personal taxes. Perhaps a bit too subtly to be noticed, the Audit Office has been downsizing the report even as the causes and cases of wastage and misuse of public funds become more obvious. Not that size alone matters, but compare the report of 2005 with that for 2009. In 2005 the report ran to 1822 paragraphs, this year it is down to 437 paragraphs, and as the accountants would add, “a reduction of 76 %”! The 2008 report ran to 575 paragraphs so the report is well and truly trending downwards.
Strange contracts
Consider too that in 2005 the Audit Office considered it necessary to address audit issues in the Office of the President – one of the serial offenders when it comes to misuse of public funds – in fifty paragraphs running over twelve pages. This year it is down to seven paragraphs over two pages. One of those seven paragraphs is entirely informational with comments, and its inclusion not quite an audit issue.
The information was useful but a bit confusing. It reveals that two contracts were signed in 2010 (sic) in connection with the Lethem to Providence E-Government Project without identifying the other party(ies). The first for US$1.020M was entered into in April 2010 for the supply of aerial and direct burial fibre optic cables and the second, signed on March 23, 2010 was “for the connection of the Globenet System with the terrestrial fibre network in Guyana.” The report notes that the initial fee of US$1M was to be paid in three instalments. It does not say whether these contracts conformed to the Public Procurement Act.
An amount of $353.6M was provided under supplementary provisions in 2009 for which four cheques were drawn by the Ministry of Finance to the attention of the Office of the President! Except for this the only other current year issue with which the 2009 audit report takes objection was in respect of a procurement by GO-INVEST for which the approval of the National Procure-ment and Tender Administration Board could not be located. Is this for real?
In respect of the Ministry of Finance every one of the fourteen paragraphs was a “prior year matter which has not been resolved.” In the Ministry of Local Government it is five out of six issues identified. For the Ministry of Works under current year issue – Roads and Bridges – $5.894 billion, no contract register was maintained making it impossible to validate the expenditure on projects undertaken.
Conspiracy of silence
Under Customs and Trade Administration the report has quietly dropped information on remissions of duties which in 2008 amounted to $70 billion! In fact there is no evidence that the Auditor General has carried out its duty under the Investment Act of 2004 to carry out a process audit of incentives granted under section 2 of the Income Tax (In Aid of Industry) Act or to point out that the government has failed to publish in the Gazette information regarding all fiscal incentives under that act. Readers have to be forgiven for believing that there is a conspiracy of silence when it comes to such matters.
In 2008 the Audit Office found it necessary to highlight in the Executive Summary of its report the failure to appoint the Public Procurement Commission mandated by Article 212 (W) of the Constitution. In 2009 that matter has been quietly dropped while the stage is also being set that could see the elimination of any comment on the unconstitutional accounting and misuse of the Lotto funds. The 2008 report repeated a decade long, strong recommendation that the Ministry of Finance take appropriate measures to comply with the Fiscal Management and Account-ability Act and pay the government’s share of the Lottery proceeds into the Consolidated Fund. This year the report informs the nation – without comment – that the Attorney General has given a legal opinion concerning the deposit and use of those funds in which the AG states that, “There is no legal obligation to transfer moneys therefrom to the Consolidated Fund.”
If the Audit Office had been following the news he would know that this is a matter that is currently and actively engaging the courts in an action brought by citizen Desmond Trotman against the same Attorney General! The AG must therefore be aware of the case and it would seem self-serving, improper and unprofessional for the AG to have ventured an opinion in this matter. This fact should not escape the Audit Office which at the very least should have sought some independent advice on the matter.
Dormant accounts
One issue that caused me some concern is the way two long-dormant accounts were treated in the report. When I did a four-part series earlier this year on that 2008 Report I noted that there were several billion dollars lying in “Static Accounts.” Among these were two rather significant sums: one in Account #201210 EPDS – Buy Back Programme with a balance of $560.9 million and the other in Account # 201360 with a balance of $2.617 billion. The total of these two accounts of $3.177 billion had been lying idle, in the first case for more than ten years more and in the other, for six years.
Here is a background to these accounts taken from the 2008 Report:
Account № 201210 – This arose out of a 1998 grant agreement funded by the World Bank for a “commercial debt” buy-back programme. When the programme came to an end in 1999, the Bank of Guyana which had administered the programme opened a special account in the name of the Government of Guyana with this sum.
Account # 201360 – The amount of $2.617 billion was the proceeds of a loan from the International Development Association (IDA) in December 2003 for Poverty Reduction Support Credit in (a) investments in human capital under the health and education sectors; (b) strengthening of public institutions and improvement of governance; (c) expansion and improvement in the provision of basic services under the water sector; and (d) broad-based job-generating economic growth.
What troubled me was that in the corresponding table in the 2009 report, the amount does not appear and that only a total of $1.6 billion dollars was held in statistic accounts. This is explained by a statement on page 8 of the report that “The (unidentified) Head of the Budget Agency indicated that… accounts No. 201210 and No. 201360 were closed in July 2010.”
Lax controls
Forget for a moment that proper auditing methodologies would not accept a mere “indication” for even three million, let alone $3.2 billion, why are the amounts not shown in the table of special accounts at December 31, 2009, more than six months before they were supposed to have been closed? Audit is about verifying satisfactory documentary evidence, not acceptance of unsupported explanations or indications. Not even a junior auditor or someone with barely passing familiarity with banking and accounting would describe the disposal of dormant accounts with combined balances of $3.2 simply as “closed.”
My concern was partly assuaged when I saw Note 2 to the Statement of Current Assets and Current Liabilities that showed Total Inactive Accounts at December 31, 2009 with balances of $5.1 including the two that the Auditor General omitted in his report. Given the lax controls over bank accounts with no reconciliations having been done for several years, it is dangerous to the citizens of this country for billions of dollars to be left idle and unsupervised for so many years and for them to be casually closed. Think what the $2.6 billion could have done for the Women of Worth project recently introduced!
The Public Accounts Committee
Part of our problem is that the persons who have the duty to oversee the report do not understand finance and accounting. The Public Accounts Committee is chaired by a member of the opposition party in the National Assembly but the majority of the members of the committee are from the ruling party who seem, like most people, to have the capacity to grapple with issues involving a few thousand dollars but not the billions of dollars spent by the government.
We will not have proper accounting and accountability if we do not have a proper PAC that insists on better and more comprehensive audits by the Audit Office. NICIL which manages billions from the GGMC, privatisation, sale of government assets and dividends does not get a mention in the report. No wonder it can show such contempt for the law.
The information on the spending of $3.5 billion dollars from Lotteries proceeds since 1996, has been sketchy. For example, in 2009 $54.2 million was spent by the Ministry of Culture, Youth and Sport “to meet expenditure for PYARG adventure journey, Independence Anniversary etc.” and $1.2 million on the Dr Jagan Memorial football knockout tournament.
Conclusion
Unlike its approach to the 2008 report, Business Page will not examine in any detail the 2009 report which is unfortunately riddled with errors of various types. The extensive analysis on the 2008 report is posted on chrisram.net for those who are interested. Instead next week I will return to the issue of taxation.
Meanwhile this column shares with the Murray family its concerns about his illness and prays for his return to good health. He is absolutely indispensable to the debate on the finances of this country.