Author: ChrisRam

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There are numerous examples of the Finance Minister’s mismanagement

Mr. Nigel Hinds’ letter ‘Ashni is in the best and brightest category’ (Stabroek News, March 15, 2012) has drawn sharp comments on the meaning and intent of the term “best and brightest”, particularly from those who felt that Mr. Hinds was unjustifiably praising Dr. Ashni Singh, the Minister of Finance. In fact, “best and brightest” is a term of deprecation going back at least to a letter in a 1769 publication in which the writer used it mockingly and ironically to describe King George III’s ministers. Exactly two hundred years later, its place in infamy was sealed when journalist David Halberstam used it as the title of his #1 bestseller which exposed the intellectual bankruptcy of the whiz-kids of John Kennedy’s disastrous policy that led to America’s ignominious defeat in the Vietnam War.

That it was in that context of derision that Mr. Hinds identified Dr. Singh is clear from his paragraph calling for his “cleansing the Augean Stables filled with questionable deals, those facilitated by National Commercial and Industrial Development Limited (NICIL), sale of Sanata Textile Mills, Amaila Falls Project engineered by the infamous Fip Motilal, Georgetown Public Hospital Corporation [GPHC] contracts with New Guyana Pharmaceutical Corpora-tion [New GPC], and the absence of lottery funds from Consolidated Fund to name a ‘few’ ”.

It is public knowledge that Dr. Singh was personally involved in every one of these “questionable deals”, and in the case of the “infamous” Fip Motilal, Dr. Singh’s ministry caused to be issued through GINA a three page attack of undignified calumny on “Ram-like critics” who, on the bizarre selection of Fip Motilal as contractor for the road to the Amaila Falls, dared to expose Motilal as an unqualified contractor. They have been proved right and Dr. Singh wrong. In the case of the GPHC and New GPC contracts, it is the Dr. Singh-controlled National Procurement and Tender Administration Board that annually approves single source contracts, and outrageous of all, Dr. Singh chairs the truly egregious NICIL which spearheaded the tender for the Amaila Road Project.

But these were only a few examples of Dr. Singh’s “brightness”. Here are some others:

1. Every single audit report since Dr. Singh became Minister of Finance reminds us that “the Contingencies Fund continues to be abused”. And the abuser: the Minister of Finance in whom section 41 (2) of the Fiscal Management and Accountability Act (FMAA) invests sole powers and responsibilities over the Contingencies Fund.

2. Dr. Singh’s Finance Ministry has underwritten every one of the irregular transactions of the Jagdeo Administration since October 2006, including the infamous Pradoville 2 for which Dr. Singh’s NICIL allotted house lots to former President Jagdeo, Cabinet Members, members of NICIL boardand friends, all at below market price; computer purchases from a Brooklyn barbershop location; sole sourcing of school books for $90 million; disastrous multi-billion dollar road and other infrastructure contracts.

3. On all but one occasion of Dr. Singh’s presentation of the [annual] mid-year report under section 67 of the FMAA, the report pre-dates by months the date of its publication, prompting integrity concerns.

4. Dr. Singh has never once complied with section 21 of the FMAA dealing with conditional appropriations. Nor on his own recent admission in the National Assembly, has he ever complied with section 24 (4)of the FMAA, on each of the fourteen occasions he came to the National Assembly for supplementary funds, concealing the annual budget deficit.

5. Dr. Singh has begun to use creative financing to plug the ballooning budget deficit caused by over-spending and non-receipt of the Norway money. In 2010 he treated $11.117 billion as Miscellaneous Income, “the net result of the ‘closure’ of inactive accounts, and retiring long outstanding obligations in relation to the issuance and redemption of Government Securities.”

6. Dr. Singh was central to the sale of state property and the unlawful granting of tax exemptions to the Ramroop group. In these transactions, Dr. Singh had not one but three occasions to check the validity, legality and propriety of the transactions: as Minister of Finance, as Chairman of NICIL, and as a senior Cabinet minister. He missed them all.

7. As Minister of Finance, Dr. Singh controls the Consolidated Fund and has allowed the proceeds from the Lottery to be placed in a “special” account outside of the Consolidated Fund. He approves the operations of this extra-ordinarily special account from which only his mentor, former President Jagdeo could spend.

8. Dr. Singh was part of a transaction for $4 billion in which there was sufficient evidence to refer Minister of Housing Irfaan Ally to the Privileges Committee for allegedly misleading the National Assembly.

9. Dr. Singh has presented five budgets to the National Assembly totaling $627.5 Billion. During that time, we have had no natural disasters or economic shocks undermining the Budget. Yet, during the same period, Dr. Singh has returned to the Assembly with fourteen (14) supplementary appropriation bills covering over 440 transactions totaling $67.5 billion –conditions that would embarrass even a mediocre budget controller. For good measure, none of the transactions involving drawings from the Contingencies Fund, covering a minimum of $19.5 billion, was brought within the “next sitting” of the National Assembly timeframe required under section 41 (5) of the FMAA.

10. Dr. Singh has ministerial responsibility for the National Insurance Scheme and the Insurance Act. To him therefore, is due more than a quarter share of the blame in the Jagdeo-Dr. Singh-Luncheon-Gita Singh quartet for the NIS loss of $5 billion in Clico.

11. As Finance Minister Dr. Singh would have known of the mistake that led to the excessive VAT rate of 16%. In order to disguise the effect of the mistake and a windfall of close to twenty billion dollars, he sought supplementary spending provisions of $18 billion in the last two months of 2007! “Brightness” is certainly not the word to describe such shocking conduct. No wonder, neither Dr. Singh nor former President Jagdeo has responded to my several public challenges to them to release an unredacted copy of the report of the Barbadian consultant who was contracted to carry out the exercise. As a result the state has so far gouged the Guyanese taxpayer of more than fifty billion dollars.

As readers would expect, such a letter cannot address all the financial shenanigans hidden in the spending of $627 billion (US$3,135 million) during the last Parliament. Only a thorough investigation initiated by the National Assembly will reveal how the “best and brightest” Dr. Singh and his mentor, that other “best and brightest” Mr. Bharrat Jagdeo, have mismanaged the country’s finances for five years.

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Auditor General Report 2010 – Part 4 Conclusion

Introduction
Today’s column concludes the review of the Auditor General Report on the audits of the ministries, departments and regions for the year 2010. Readers will recall that the report was delivered to the Speaker of the National Assembly – conveniently for the first time in several years – within the statutory deadline but also conveniently, after the last sitting of the Ninth Parliament so that it could not be tabled and its contents become available to the public prior to the November general and regional elections. Clearly the Speaker of the National Assembly and PPP/C presidential aspirant Mr. Ralph Ramkarran, S.C. did not think it important enough to have a final sitting of the National Assembly for the tabling of the report.

Any reader of the report will be struck by the repetitiveness of the matters reported – and for the more discerning, the matters not addressed – in the report. We get excited at the level of abuse of the Contingencies Fund by the Minister of Finance. But neither the Audit Office nor the Public Accounts Committee appears to have recognised that it was not enough to consider only whether the payments from the Fund met the criteria of “urgent, unavoidable and unforeseen” required before the issuance of a drawing right by the Minister of Finance.

There is no evidence from the report that the Audit Office examined any of the following transactions financed from the Contingencies Fund: the sum of $198 million as a provision for Amerindian development projects; or $7.971 million for installation of water and electricity at the Amerindian Dormitory at Liliendaal; or $70 million for the purchase of accommodation items for the GDF; or $75.6 million to complete the National Swimming Pool (sic); or $38 million for ten compactor trucks or where they might be; or $12 million for furniture for Region 3 schools; or $26.3 million for resurfacing the cycle and car park at the National Park.

Epiphany and Nelson’s eye
The 2010 report has departed from its long-held policy of spelling out annually the expenditure from the lottery funds and was only willing to state that the money was spent “in accordance with the guidelines for access to the Lottery funding, which included funding for activities that promoted cultural and youth and sports development, financed medical treatment overseas and economic support for disadvantaged groups, among others.” The Audit Office has also reversed its position that the failure to put the proceeds into the Consolidated Fund is unconstitutional. Its epiphany it seems was the result of an opinion from the Attorney General who is also a member of the Cabinet. To most persons – but clearly not to the Auditor General – it did not seem obvious that it would take a most unusual and compelling set of circumstances for a member of the cabinet to tell the Audit Office that the Cabinet had been acting unconstitutionally for more than a decade!

Another interesting feature of the Deodat Sharma/Mrs. Geetangali Singh Audit Office is the failure to delve into transactions involving hundreds of millions of dollars of undisclosed and unaccounted funds across the ministries. The Audit Office has never, never commented on the annual sum of $100 million allocated to the Ministry of Culture, Youth and Sports for arts and sports development. Had it not been for the fact that this column has regularly criticised this annual allocation by the National Assembly in the Estimates, 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 complicit in hiding from taxpayers any information on how the $100 million per year is spent reportedly under the direction and control of no more than two individuals.

Creative financing
In 2010 it became clear that the Minister of Finance was using the dormant accounts to plug the National Budget, again revealed in the most bizarre language from the Audit Office. We learnt from the 2009 Audit Report that two accounts No. 201210 and No. 201360 with balances of more than $3.2 billion dollars “were closed in July 2010”. It was not until one turned to Note 2 to the 2010 Accounts that we learnt that $30 billion held in a number of dormant accounts in the 2000 Series Bank Accounts were transferred to the Consolidated Fund in July 2010. Yet, the 2009 Audit Report mentioned without comment only the two inactive accounts (No. 201210 and No. 201360) of nine accounts being closed in July 2010 – an interesting omission indeed. While there is nothing fundamentally incorrect in transferring these balances formally into the Consolidated Fund bank account, the timing seems as good a reason as any for the 2010 Audit Report not only to refer to the closure by a side wind, but for the embargo on the report until after the 2011 elections.

Given the significance of the amounts, a competent auditor would have reported to which account the balances were transferred and addressed the accounting treatment. So with the implicit assurance from the 2009 Audit Report that the creative practice was accepted without any adverse comment, the Finance Minister moved on to even bigger sums. Paragraph 86 of the 2010 Report refers to the sum of $11.117 billion as Miscellaneous Income, the net result it says, “of the ‘closure’ of inactive accounts, and retiring long outstanding obligations in relation to the issuance and redemption of Government Securities.” I doubt whether this accounting treatment is appropriate since these are not new funds. At all times they formed part of the Consolidated Fund since constitutionally there is only one fund and that is the Consolidated Fund with the Contingencies Fund being a sub-fund thereof.

God of small things
The title of the book by the Indian women’s activist Arundhati Roy seems an apt description of the approach of the national Audit office. Instead of addressing these big ticket, big picture issues of principles and risks such as the discretional spending at practically all the Ministries, the Audit Office prefers to report to the nation about a few thousands here and a few thousands there. Instead of reporting on the creative accounting by the Ministry of Finance it tells us that “Log books were not maintained for twelve of the Ministry’s fleet of vehicles, whilst partial submissions were received for five vehicles. In addition, an examination of the log books submitted for the five vehicles revealed that they were not properly written up in that journeys were not always authorised, fuel was seldom recorded, and there was no evidence of supervisory checks”.

Nor does it bother to report that in at least one Ministry one of its official vehicles is used by the daughter of a Minister or that that Ministry also controls and spends as it wishes tens of millions of dollars allocated by the National Assembly. I am sure taxpayers would much prefer to hear about the whereabouts of all the vehicles, tractors, excavators and equipment than about the vehicle log books of a few of them. For many ministries and departments the Report has absolutely no finding including the Office of the President where overseas travel by the President and his entourage is the order of the day and the infamous Ministry of Housing and Water for which there is only a single paragraph of a prior year matter which has not been resolved – the tabling of the 2010 reports for the Guyana Water Inc. and the Central Housing and Planning Authority.

Likes and dislikes
Is Mr. Sharma for real and does not think the circumstances of the payment of four billion dollars to GuySuCo or all the concerns about accountability in this Ministry, both in 2010 and prior years are worth addressing? If he thinks that the laying of annual reports of these entities is so important for the Ministry of Housing why is the tabling of the report of the Guyana Revenue Authority for several years or the annual reports of NICIL by the Minister of Finance who also is the Chairman of NICIL not important? Or, for that matter for the NIS, which is reeling from a loss of $5 billion invested in CLICO by the Jagdeo/Luncheon/Singh triumvirate?

Conversely, the Audit Office seems to have a special liking for the Ministry of Health and the award of contracts to the New Guyana Pharmaceutical Corporation by the Cabinet and the National Procurement and Tender Administration Board for the supply of drugs from India. The national press however gorges on this as red meat to a carnivore ignoring the more fundamental questions as to why the country which has an under-employed High Commission in India cannot facilitate the purchase of the drugs and other medical supplies which the Government pre-finances.

Not in our stars
Another area that receives no attention is the management of the billions of dollars of loans taken by the Government, particularly those for specific purposes, many of which will come up shortly for repayment. The loan schedule appended to the report has some significant errors of both omission and commission with vague dates of repayment such as “5 years following disbursements”. None of the reports of the Public Accounts Committee has ever referred to these appendices and one wonders whether it ever considers them.

The fault lies however not only in our stars but in the composition of the Public Accounts Committee which has largely been poorly constituted. A parliament that faces some of its greatest challenges as it seeks to assert its standing as one of the arms of the state now comprises some of the most inexperienced members I can recall since 1957. There are only a few who stand out as being capable, willing to work hard and with any relevant experience. Thankfully former Finance Minister Carl Greenidge meets those standards and while a couple of the ladies on the PAC during the Ninth Parliament could not be faulted for trying, they were clearly out of their depth.

Good luck
Dr. Ashni Singh as finance minister, and Mr. Deodat Sharma whose lack of a suitable qualification means that he cannot be appointed substantively to the post of Auditor General, have had an easy five years. Dr. Singh was also able to maintain a cordial relationship with the late Winston Murray who was a necessary backup to Ms. Volda Lawrence as PNCR nominated Chairperson of the Public Accounts Committee. The more likely person for appointment as Chairperson, Mr. Carl Greenidge has so far not had a good relationship with Dr. Singh and it probably will not get better.

This is an interesting background against which the 2010 report moves for detailed consideration by the PAC, a standing committee of the National Assembly. In the past, members like Bibi Shadick have used the PPP/C majority on the Committee to influence the areas for consideration and emphasis. This Committee will now comprise only nine persons and with the PPP/C losing the majority, the Committee is expected to take a far closer look at the report. In the past too, the Committee was deeply influenced by the Auditor General himself and Finance Secretary Mr. Neermal Rekha, as resource persons acting more like prosecutors.

Conclusion
If as is clear, the Report is itself deficient, then the PAC will have to do much more than just look at the report paragraph by paragraph and proceed to “blast” the unfortunate officer sent to defend the Budget Agency on the limited findings and recommendations contained in the Report. The Committee should be insisting on time frames to be given to implementing the recommendations made year after year. They should also be asking the Auditor General why over a five-year cycle he has not found it necessary or possible to audit the various funds and entities which are allocated huge sums each year but for which there is no accounting to the public.
Most importantly the PAC needs to have financial and technical resources at its disposal rather than rely entirely on the erratic attendance of part-time members supported by a couple of individuals with their own interests to protect.

Within the existing construct, the PAC cannot properly carry out the functions required of an oversight body to which the nation looks for proper accounting of state funds. It must use the existing composition of the National Assembly and itself to fix the structural problems inhibiting its scope.

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Citizens have a constitutional right in relation to budget consultations

The exchanges between Dr. Ashni Singh, Minister of Finance and Mr. Carl Greenidge, former Finance Minister about whether or not there will be a meeting of the parliamentary parties on the 2012 Budget should not have been necessary given the country’s constitutional framework.

Prior to 2003, Article 11 (now Article 13), Chapter II PRINIPLES AND BASES OF THE POLITICAL, ECONOMIC AND SOCIAL SYSTEM provided that “The principal objective of the political system of the State is to extend socialist democracy by providing increasing opportunities for the participation of citizens in the management and decision-making processes of the State.” To the representatives of the PNC Government who questioned the justiciability of the specific Article, then Chancellor Keith Massiah responded in the 1987 decision in the case Attorney General v Mohammed Ally that “I see no reason to think that the articles in Chapter II of the Constitution have no juridical relevance and are merely idealistic references with cosmetic value only. So to think would be to seek to debase the Constitution.”

In a subsequent amendment, the strength and justiciability of Article 13 were put beyond doubt when by Act 10 of 2003 the right to be consulted was made into a fundamental right under Article 149C in the following terms: “No person shall be hindered in the enjoyment of participating through co-operatives, trade unions, civic or socio-economic organisations of a national character in the management and decision making processes of the State.”

However, since his appointment in 2006, Dr. Singh has shown a disdain and intolerance for the annual budget consultations – arguably the single most important decision made by the State in any year – and discontinued them for his first Budget in 2007.

Ironically, while Dr. Singh might have argued against any meeting with the parliamentary opposition on the grounds that they were not contemplated within “trade unions, civic or socio-economic organisations”, and that they have all the opportunities to participate in the debate in the National Assembly, he has agreed to meet with them even as he has blocked out entities as women’s groups, the professional accounting body, the trade unions, the private sector organisations, etc.

President Ramotar has to be careful that his preference for a more open presidency and non-violation of the Constitution applies not only to himself, but to his Ministers as well. It is not whether or not Dr. Singh cares for consultations or whether he thinks they are useful.

It is that citizens have a constitutional right to participate in such a process.

And as a Minister of the Government Dr. Singh has a corresponding duty to engage persons, and not only the parliamentary opposition, in such consultations.

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The Apple Store – a wonderment in itself

Introduction
I am unable to carry my review of the 2010 Report of the Auditor General as I am in the USA without access to all the relevant material. I will resume and conclude that review next week. Instead, today’s column is about a shopping experience I had on Friday that – to use a term consistent with today’s column – blew my mind.

I could not help but share it with the readers of Business Page and to contrast it with our antediluvian Guyana.

Ever since as Christopher L. Ram & Co. I first used a computer, around the mid-eighties, I have always gone for what are referred to as the PC, as in PC versus the Apple (formerly the Macintosh and then Mac) rather than in PC versus desktop.

No doubt influenced by my conservative embrace of habit, and given the practicalities of the wider range of software to support an accounting practice, Ram & McRae has stuck steadfastly with the PC – both the portable laptop and the desktop which, except for the monitor, survives largely unchanged in its configuration, but certainly not its capacity or speed.

Yet one cannot help but admire the Apple, the brainchild of Steve Jobs, one of the world’s most influential men, and the product of its most successful company, ever. I felt strongly enough about the death of Jobs in October 2011 that I dedicated an entire column to his life and works (S/N October 9, 2011). I read Walter Isaacson’s fascinating account of the remarkable life of a man whose passion for perfection and brutal drive for excellence are credited with having revolutionised six industries: personal computers, animated movies, music, phones, tablet computing, and digital publishing. My experience last Friday suggests that there is a seventh – how to create the most successful retail outlet with annual sales of tens of millions of dollars. And to have done this when on-line shopping is now the vogue and Amazon is able to find and supply anything – well almost anything – under the sun, is an achievement without parallel.

Jobs vision
The Apple Store is Jobs’ invention even if the success belongs to Ron Johnson, the retailer’s guru, who carried out the vision, and the army of staff who make it all possible with their boundless enthusiasm, energetic drive and religious passion.

Coke as in Coca Cola, is often described as the triumph of marketing over substance. Apple is the ultimate triumph: marketing and substance.

The combination of vision, enthusiasm, drive and passion just described – and more – were on display when I visited the Apple Store in one of America’s ubiquitous malls to have them look at my son’s Apple computer.

It was early morning, but time seems never to matter to the owners of an Apple computer who even with the occasional product flop, seem to have an exceptional brand loyalty that suggests a faith that “Jobs is in charge”. America is still clawing its way out of a housing bubble that threatened to bring the economic house down – but that is hardly evident among the army of Apple fans.

To them the Apple Store is their equivalent of the fundamentalists’ mosque or church, a place to meet fellow believers in the vision, to share life changing experiences, and to learn about the next version of the ever evolving and improving products.

As Johnson said, even though Apple products can be purchased for less elsewhere, people visit Apple’s stores for the experience, not only for the products on offer.

The Apple store is a place where the faithful congregate for reassurance that the founder lives on, as much in the products as in the people. Almost invariably, the store is likely to be the busiest shop in the entire mall but still, the greeting as one enters is sincere but not intrusive, warm and signals a willingness to help.

The store is a melting pot of people of various ethnicities, gender, age and size, the attendants in their distinctive blue polo shirts each carrying the electronic version of the slate, each with access to a common data base and all integrated.

The genius bar
Having explained the purpose of my visit, I was given – electronically, of course – an appointment with the Genius Bar, the name of the in-store service centre for which only the best are recruited after more than a half dozen interviews. The occasional or new visitor might have dropped in for a specific purpose but then finds the range of products so helpfully and usefully displayed almost irresistible.

One does not leave the store without looking at all the products, from the high end computers and phones to the mundane but very effective cleaning supplies they stock. Not surprisingly, the brand name was iClean.

As I waited for the hard drive of my son’s computer to be replaced, I managed to walk around and with the help of an Asian attendant, bought two cans of iClean. I could see no cash register or cashier so, as I took out the cash to pay, I furtively looked around to see what he would do with it. Pulling an exquisitely well-hidden drawer from under one of the display tables he took the money, asked for my email address, confirmed it by showing me his handheld device, and gave me my change.

Reluctantly, but not wanting to be stopped on my way out with items but no evidence of payment, I asked for a receipt. I just emailed it to you, he said, as if that was the most obvious way to do business. It was their LCDS in practice.

Beyond service
The next surprise was to see that the store had a sign-language expert attending to the special needs of two children brought in by their parents and using the Apple programme designed for such circumstances. The attendant was competent in more than sign-language ability: she was a model of patience and understanding that we see only in a few of our teachers.

I wondered whether this is one of the things that distinguish the successful from the average businesses, the strong from the mediocre countries and the caring from the insensitive societies.

The millions who have read Isaacson’s book on – not of – Jobs, knew about his obsession in creating the perfect store, where everything is done, and redone more than once, until perfection, like Jobs’ Buddhist nirvana, is achieved.

But there must be something more that the simple elegance or the perfect symmetry of the walls meeting doors, doors blending with the ceiling and ceiling’s contrasting with floors, that would make people willing to pay more in store for a product available elsewhere.

Johnson thinks that what drives the phenomenon are the several components of the experience, the most important of which is that the staff are not focused on selling stuff, but on building relationships and trying to make people’s lives better, which is what Jobs was all about.

At the Apple stores, the remuneration of employees is not based on how much sales the employee or the store one generates. Accordingly, they do not need to encourage people to buy pricey products or services they would hardly use.

By connecting with their customers, understanding their needs and helping them figure out how to satisfy those needs, even if it is a product which Apple does not carry, the Apple store employee builds a relationship with the customer that not even Bill Gates has managed to recreate, let alone displace.

Exploit the sucker, no one is looking
At the same time I wondered about the prehistoric manner in which retailers and departmental stores do business in Guyana. Maybe I am being naive, in even entertaining the thought.

So many of our retailers pay little attention to the quality of their employees, selected after the most perfunctory of interview, in receipt of remuneration below the relevant minimum wage, let alone a living wage. They care not about the defective and shoddy products they pass on to their customers under the unlawful “goods not returnable” stipulation.

With a couple of standout exceptions – I think of Nigels and Bounty, Courts and Singers, Digicel and GT&T – the attitude of many of our retailers is that there will always be a poor sucker to be exploited the next day.

I wondered too how none of our retail companies would grant their employees a stake in their business, many of them keeping the real accounts of their business to themselves and away from the GRA.

At Apple, the employee is part owner, however modest.

The question we need to ask is not whether the Apple store model is possible in Guyana but rather whether anyone who is anybody in Guyana is interested, including the government and the consumer representatives. Our Sale of Goods Act setting out the obligations of the seller goes back to the UK of 1893; the consultation on a Consumer Protection Act took nearly a decade for it to secure passage in the National Assembly and it is anyone’s guess how long it will take to bring it into force.

Four months after the November 28 general elections, the President is yet to announce a Minister of Trade. One of the biggest businesses in Guyana over the past fifteen years is the second hand vehicle market and yet there is no law regulating them. No wonder they can sell a five million dollar vehicle on a two month warranty but with little or no paper work, including a VAT invoice. It is really unfortunate that they manage to do so without more attention from the Guyana Revenue Authority, or justice in the courts.

One lawyer representing such a business even had the courage to say that the consumer should be more careful about what they buy under the maxim caveat emptor – let the buyer beware.

Conclusion
Operating under an unregulated regime of consumer laws, an absence of consumer activism, a consumer unaware of her common law rights and a government that is far friendlier to business than it is to the consumer, our businesses have little incentive and no compulsion to upgrade their business model or the quality of their service. They do not realise that their store environments and customer service are unimaginative.

Johnson is adamant that any online store can transact, but success comes only to the stores that enrich people’s lives and add value beyond simply providing merchandise. So, how does a store accomplish those seemingly illusive objectives? They need to move, as Johnson said, from a transaction mind-set—“how do we sell more stuff?” – to a value-creation mind-set.

Perhaps the absence of a challenge from on-line stores, minimal competition and the whole environment, discourage any imagination and innovation. But as Apple shows, there is a pot of gold at the end of the rainbow.

Correction

In last week’s column I recommended under the paragraph headed Local Loans that the debts of over $13 billion shown as owing to the state by defunct or dormant public corporations such as LINMINE, the porous Guyana Power and Light and the long-dead Guyana Airways Corporation and carried in the national accounting records should be “written off and charged against the Contingencies Fund”. That should have read Consolidated Fund. The error was corrected in the on-line edition of the Sunday Stabroek. The error is regretted.

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Auditor General Report 2010

Introduction
Today we continue the review of the Auditor General Report which we commenced a fortnight ago on February 19, 2012. In acknowledgement of the hard work the print media have been doing to publicise some of the report’s major findings, this column has been looking at the broad and deeper issues of the role of the Ministry of Finance. These include the perpetuation of lawlessness instead of leadership, poor accounting rather than proper accountability and mismanagement of state resources rather than the strict management of finance.

Before proceeding it is important that we note two matters in connection with the “specialty hospital,” inspired if not financed by the Indians, and the Chinese ferries at a total cost of close to US$20M. A diligent search of the parliamentary records from 2008 -2011 reveals that no loan agreement was tabled for either of these projects and one can only speculate on how these are to be financed.

Hospital and ferries
It is a matter of public record that $179M of taxpayers’ money has been spent on the specialty hospital, a brainchild of former President Jagdeo. In the absence of any loan agreement the country may have to expend a yet undetermined sum on a project that is still – as far as the National Assembly is aware – at the stage of “preparatory studies and designs.” For those persons who are confused by the rhetoric about the “financial papers,” this is the problem. The National Assembly approved what appeared to have been an excessive and still to be accounted for sum of $150 million on preparatory work, but the super-confident Finance Minister decided, without any approval, to proceed to spend another $29 million on mobilization work.

With respect to the vessels, the draft of which may be too deep for the Essequibo at low tide, whether the financing is by way of loan or a grant any prudent financial manger would ask about the reasonableness of the value. If it is a loan then the External Loans Act 74:08 is being breached.

The Audit Office has never carried out specific audits of any of this contingencies spending, other than to say that they did not meet the criteria set out in section 41. Failure to address these has driven concerns that by its conduct, the Audit Office is actually encouraging such financial adventurism.

For example, in 2010 the Ministry of Agriculture expended $36 million on a long-boom excavator for Wakenaam and $18 million for one excavator. Taxpayers would expect the state auditor to assure us that these exist and are properly accounted for. Similarly there was the $3,730 million to the Ministry of Housing and Water that was never properly explained.

Local loans
The management of loans is another area of weakness in the country’s public finance system. On the receivable side the audit report provides the following information:

While the report views the amount receivable from Linmine as very remote, the position of GPL can be no different, with its massive line losses and financial outflows which the state has to keep subsidizing. And I do not think there is any person who thinks the Guyana Airways Corporation exists, let alone has the ability to pay any debt owing to the state.

In my view, the entire $13.6 B should be written off and charged against the Consolidated Fund. To keep it there is to live in a dream world, one that does not exist. Moreover, one needs to ask whether GuySuCo is not similarly indebted to the state or are those regular transfers no more than annual subsidies in disguise?

Management of spending
During 2010 the Minister of Finance, after presenting the biggest budget ever, went back to the National Assembly on three occasions, seeking supplementary appropriations for $9.2 billion, for all kinds of purposes. Yet, year after year, many of the largest ministries are unable to spend the sums originally allocated while others seem to engage in spending sprees as the year draws to a close.

The table below shows four of the largest budget agencies which in 2010 were unable to spend their budget allocations. Yet year after year they are allocated even larger budgets by the National Assembly on the recommendation each year of the Minister of Finance.

Strangely the Audit Office offers advice that the ministries should begin their spending earlier in the year without any apparent recognition that the process cannot really begin until the budget is approved. The Audit Office, of all places, should recognise too that inherent in the haste to push projects is the risk that procedures and controls will be overlooked, facilitating fraud, sloppy work and loss of resources; the very matters against which the the office is supposed to guard.

Minister’s failure to report
In the 2010 Budget the Minister of Finance had budgeted for the receipt of $6,150M as Miscellaneous Receipts of Norway funds. In fact none came. So the clever Finance Minister did a novel thing. In place of the $6,472M he brought into the books some $14,381M of which $11.117 B represented “the net outcome of the closure of inactive accounts, and retiring long outstanding obligations in relation to the issuance and redemption of Government Securities. Also included in the sum of $14.367 billionwas an amount of $2 billion, which represented revenue received through the Guyana Geology and Mines Commission.”

Yet, the Minister did not think that this matter was worthy of a comment in his report to the National Assembly on the performance and outcome for 2010 when he presented the 2011 Budget for approval. That in my view borders on deception and one has to wonder whether this was repeated in 2011 – an election year in which an even larger sum ($14 billion) was projected to be received under the Guyana-Norway agreement.

Declining lottery funds
In 2010, the sum of $255M was received as proceeds from the Guyana Lottery Company, being Guyana’s 24% share of the lottery’s gross takings. Expenditure for the year from the fund was $38M, but unlike previous years, the 2010 Report provides no details of the expenditure except to say that “The above expenditure was within the National Sectors previously identified and was in accordance with the guidelines for access to the Lottery funding, which included funding for activities that promoted cultural and youth and sports development, financed medical treatment overseas and economic support for disadvantaged groups, among others” – hardly the kind of generalisations one expects from any auditor, let alone the state auditor.

The Audit Office appears to have reversed an eleven year view that the lottery funds should be credited to the Consolidated Fund, apparently relying on a self serving “opinion” by the former Attorney General. I have seen a copy of that note from the Attorney General and in my view it defies both logic and law, but appears to have been welcomed by the Auditor General.

Deposit funds
The public accounts continue to treat cavalierly with various deposit funds it holds, representing sums of money that should be paid out at some future time. Particularly, there is uncertainty surrounding the accuracy of $1.477 billion shown as deposits held for investments on behalf of the Sugar Industry Labour Welfare Fund, the Sugar Industry Rehabilitation Fund and the Sugar Industry Price Stabilisation Fund.

What is worse is that the Audit Office which is charged with responsibility for auditing these funds has not done so, in two cases for more than thirty-two years! That is scandalous and it is surprising that the union has not taken up the issue in relation to the Sugar Industry Labour Welfare Fund.

A similar concern exists in relation to the Dependants’ Pension Fund, the deposit account for which shows an amount of $501.269M. However, the audited accounts of the entity for 2010 reflected a balance of $666.376M, resulting in an unaccounted difference of $165.107M between the Deposit Fund and that of the entity. Sadly, this has been the state of the account for several years.

To be continued