Auditor General Report 2010

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

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