It is now established that the Report of the Auditor General was late by more than ten months. By law, the Auditor General is required to report “at least annually, and within nine months of the end of each fiscal year, on the results of his audit of the consolidated financial statements and the accounts of budget agencies in relation to that fiscal year.” It is not only that he has failed to do so, but he has also failed to report on several of the Budget agencies which have spent tens of billions of taxpayer and loan funds without any audit or accountability. In the next few columns, we will review the report not only for what it says but more importantly for what it should have contained but does not, and we shall make our own conclusions about the real value of the report to the people of Guyana.
We will bear in mind too that several months ago the acting Auditor General had promised the report no later than June 30 of this year and failed to say anything when that time came and went. We will, as space permits, look at whether the Auditor General has met his other obligations under the laws, among other things.
More sound than substance
One of the ironies of the 2006 report is that it is far less comprehensive than the report for 2005. Not that size alone matters but some valid reasons should have been offered for the downsizing of the report from 1,822 paragraphs in 2005 to 525 paragraphs in 2006, many of which are devoted to “Prior year matters that have not been fully resolved.” The size of the Guyana National Budget has expanded dramatically, state corporations formed under the Public Corporations Act and the Companies Act have increased the volume and value of transactions they carry out each year while legislation in 2003 and 2004 introduced new systems of accountability as well as new responsibilities of the Audit Office as it is now called.
Yet, the 2006 report which does little more than repeat the several failures highlighted in earlier reports has generated considerably more public discussion and interest, eliciting responses from the Ministers of Health and Finance, the Head of the Presidential Secretariat and his boss the President himself. In fact the statements from the latter two were in stark conflict with Dr Luncheon suggesting quite inaccurately that the closure of certain bank accounts was proving difficult, “fundamentally because of a lack of information and timely reconciliation.”
Perhaps the Minister of Finance who spoke after Dr Luncheon should have advised him that the closure of accounts has nothing to do with whether or not accounts are reconciled as any person who has held a bank account will attest! In fact closure actually helps with reconciliations since it brings an end to all business being conducted on that account.
But if Dr Luncheon’s statement was uninformed and misleading, it was the President’s contribution that truly caught the imagination and raised some parallel with his contribution to the debate on tax holidays for QA II. Attributing some of the findings in the report to factors ranging from financial ‘illiteracy’ to the previous government for perceived irregularities outlined in the 2006, President Jagdeo described the government’s failure to deal with Lotto funds in accordance with the constitution as a “technical issue,” and incredibly described the billions of dollars held in dormant accounts as “not real cash, it is a book entry…”
This is a matter with which the last Auditor General Anand Goolsarran had taken issue for several years and if the President were right – though he clearly is wrong – then each report for the past several years is deficient since dormant bank accounts usually represent cash confirmed as being held by a financial institution. What the President might have said is that there are possible explanations and controls to prevent the fraudulent use of these accounts, but without the benefit of this information one cannot determine whether the Auditor General was referring to confirmed bank balances or balances extracted from the accounting records. Past reports have been highlighting these same issues as far back as the nineties, and the accuracy of similar findings and comments were never questioned by any of the incumbent Finance Ministers, one of whom was the current President.
Where the President and his Finance Minister do have a point is in relation to outstanding advances drawn from the contingencies fund. Indeed normally a report would have identified the period for which the advances were outstanding, whether or not they were all proper charges on the contingencies fund, and would have highlighted the fact that many of these advances amounting to hundreds of millions of real dollars were made in the last week of 2006, including separate sums of $300 million each to the Ministry of Housing and the Ministry of Housing and Water, on December 29 and 30, respectively.
Why did the Auditor General not tell the nation the amount outstanding on the ten advances made in 2006 to the Ministry of Culture and Sport totalling $450 million dollars, or why in the space of seven days that ministry had to be advanced identical sums of $84.375 million?
Cabinet outreach and explanations
2006 was an election year in which all caution and rules were thrown to the wind, with a Cabinet outreach featuring outboard engines, food and other supplies funded by the state. Regrettably, the report is conspicuously silent on this or on any monies advanced to those like Omprakash Shivraj to get Guyana ready for World Cup Cricket.
Understandably there was no reaction to any of these omissions but the Guyanese public hopes that the Public Accounts Com-mittee (PAC), the body responsible for reviewing the reports from the Audit Office would raise the many questions which the report has failed to address.
And while the government, as indeed every citizen, has every right to express itself on any issue and to correct inaccurate reporting in the press, the established procedure for it to respond to the Auditor General’s Report is by way of a Treasury Mem-orandum following the review and report of the PAC. I believe that it is legitimate and necessary for any report by the Audit Office to mention that the government is in breach of the requirement of the Standing Orders of the National Assembly that this be submitted within ninety days of the PAC’s report. My information is that the last such memorandum was issued in respect of the 2001 and 2002 reports.
Dr Singh, the Minister of Finance, has challenged the report for not adequately reflecting explanations that would have been proffered by the government ministries and departments.
In fact I believe that the report was generous to a fault, accepting some of the most simplistic excuses offered by officials.
The report for example accepts the explanation by GINA that it breached the Procurement Act because it needed a minibus urgently! But the most glaring and arguably dangerous example not only of the acceptance of banal explanations but the apparent condoning by the Audit Office of a breach of the constitution is in relation to the Lotto Funds on which the report concludes that the unconstitutional expenditure from those funds “was within the National Sectors previously identified and in accordance with the guidelines for access to the Lottery funding”! Mr Sharma, if the thing is unconstitutional what can it accord with? No wonder then that Health Minister Dr Leslie Ramsammy could explain the breach by his ministry and the Georgetown Public Hospital Corporation in its purchase of drugs from New GPC as being in accordance with a cabinet decision.
The Audit Act
Under section 4 of the Audit Act, the Auditor General is the auditor of all public accounts defined in the constitution as including all central and local government bodies and entities; all bodies and entities in which the state has a controlling interest; all projects funded by way of loans or grants by a foreign state or organisation. All entities set up under that act are required to submit to the minister within 6 months of the end of the financial year a report including accounts of the corporation, which should be tabled in the National Assembly no later than three months thereafter. One such entity, GO-Invest, appears not even to know of this requirement!
Under the Companies Act all government companies have similar reporting requirements, but these too just ignore the law with impunity. Some of the larger active government companies are GuySuco, Guyana Power & Light Inc, Guyana National Newspapers Limited, Guyana National Shipping, GUYOIL, National Communications Network Inc and NICIL.
Audit responsibilities and non-compliance
Apart from its responsibility to audit the ministries and departments that come directly under the government the Audit Office is also responsible for auditing the Budget agencies listed in the Fiscal Management and Accountability Act, including the National Parks Commission which comes under the Office of the President, the National Trust, the Guyana Cooperative Financial Services, the Guyana Energy Agency, the Guyana Post Office Corporation, the Civil Aviation Authority, the Integrity Commission, the National Sports Commission and the Dependents Pension Fund. Another such entity is the Sugar Industry and Welfare Fund which controls close to $1.4 billion of real money for the direct benefit of the sugar workers but which has not been audited since 1996.
Indeed, instead of stating the status of the audits of all such entities the report simply identifies those that are more than five years in arrears! Moreover in respect of the backlog audits which are completed, the Audit Office does not report its detailed findings such as breaches of procurement laws, etc, but merely refers to the reasons for any adverse or disclaimer opinions given on the financial statements for the last year for which audits have been done. As a result we are completely in the dark about the Guyana Post Office Corporation which has not been audited since 1998.
In addition to its report on the Public Accounts the Audit Office is required to submit to the Public Accounts Committee (PAC) within one month of each quarter a quarterly report on the performance and operation of the Audit Office and within (t1)4* months of the end of year an Annual Performance and Financial Audit Report. Under the Audit Act the PAC is required to appoint an independent auditor. There is nothing to indicate that any of these reports has been submitted or that the Audit Office has itself been audited.
There is a similar deadline and procedural requirement for the Auditor General in respect of special audits conducted by him. In other words the reports on his special audits of all the so-called scams that have taken place during the year should also be tabled in the National Assembly but while the 2006 report refers to twenty-three special investigations having been finalized in 2006, there is no evidence that the reports on these audits or investigations have been submitted by him for laying in the National Assembly.
Under section 37 of the Investment Act the Auditor General is required to carry out annually a procedural or process audit of incentives granted under section 2 of the Income Tax (In Aid of Industry) Act and to submit to the National Assembly for laying within six months after the end of each financial year the report thereon. No such report has even been laid nor is there any indication that the responsibility was discharged. If that was properly done then the concessions illegally granted to QA II and whoever else would have been exposed a long time ago and the revenues of the country protected.
The scope of the responsibilities of the Audit Office is wide and it requires as its head not someone in an acting capacity but a professionally qualified accountant who can act independently of the politicians. In next week’s column we will look at some of the challenges facing the office, review the report in some detail and offer our own view on how the findings could have been made more useful.
*(t1)Supposed to be section 43