Author: ChrisRam

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Gave advice on technical issues to PPP/C as well as opposition parties

I would not even try to engage Mr Kwame McCoy on issues of competence, substance or integrity. I have no time for someone who questions the veracity of serious statements attributed to him only after he is publicly challenged on them. If Kwame had been following Business Page for the past decade and more he would not raise the question of whether a professional can write on matters which come to him in that capacity. That question has been dealt with publicly on several occasions, but for Kwame’s benefit, the answer is no.

His new twist is that my role as a columnist to the Stabroek News conflicts with the firm’s role as the auditor of the company which publishes it. Let me share a secret with Kwame: For the entire period that I have been a contributor to the Sunday Stabroek, I have done so as the masthead to Business Page says, as a public service, pro bono without ever taking a copy of the paper, an entitlement of every contributor.

There is no issue then of my professional obligations and any personal gain or interest conflicting. That is the test of conflict which I suggest Kwame apply to his political colleagues and tell us the results.

Kwame then claims that I am a co-author of the 2006 Manifesto of the People’s National Congress Reform. How this gentleman can elevate my statement “that I was consulted and sat in on working sessions of two of the main groups,” as co-authorship is beyond reason. My role was on technical issues relating to economics, taxation and social security, all areas in which I have some experience.

Mr McCoy may not be aware that I advised Dr Jagan on similar issues in 1992 and did the same for the PPP/C both before and to a lesser extent after the 2006 elections, adding Company Law to the list of topics. Does that make me a co-author of the PPP/C’s manifesto or policy papers?

This has nothing to do with party politics, but with serving our country.

Finally, I am glad to see the President announce the tabling of the report on the Fidelity “Mixed Beverages” scam which by pure coincidence he did on the same day that I called for its immediate release.

In tabling the report I hope the government will say how it will treat with all the relevant issues arising from it.

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The President does not have the power to issue instructions to the Audit Office

In this letter I will seek to conflate two issues involving the President and the Auditor General (ag), Mr Deodat Sharma, which taken together convince me that neither of them understands key provisions of the constitution or the Audit Act 2004, hardly a trivial issue. My conclusion is based firstly on a report in the Stabroek News of January 13, 2009 under the caption ‘Customs workers facing forensic audit as bribery probe widens,’ in which Mr Sharma is quoted as saying that the process of a forensic audit into the assets of employees at the Customs and Trade Administration (CTA) needs to be thorough since, “President Bharrat Jagdeo would expect nothing less.” The second is also an article in the same newspaper of January 20, 2009 in which questioned about the commissioning of a report into the related Customs bribery probe, President Jagdeo is reported as saying that this particular report was “a bit different than the routine annual audit,” while Mr. Sharma said it was “unlike regular reports from his Office.”

Regarding the first issue, both the President and Mr Sharma need to be reminded that the constitution makes the Audit Office “not subject to the control or direction of any person or authority.” It goes without saying that that includes the President.

The Audit Act 2004 provides for two types of audit – financial and compliance audits and performance and value-for-money audits (under section 24 (1)) while section 24 (2) provides for the scope of work and broad methodology for the two types. Section 25 of the act sets a deadline of September 30 for submission of the Auditor General’s report on the consolidated financial statements and accounts of budget agencies, while section 26 provides that, “During the year, the Auditor General may choose to conduct special audits and at his discretion prepare special reports when such audits are completed.”

Where the Auditor General and the President fall into error with the President saying it was a debating point, is the scope of section 28 which provides as follows: “The Auditor General shall [N.B. not may], in accordance with article 223 of the Constitution, submit his reports to the Speaker of the National Assembly, who shall cause them to be laid before the Assembly.” That section refers to all reports and “whether it goes through the Speaker or Minister of Finance” as the President said, is more than semantics or a procedural issue. It is the result of a constitutional amendment designed to strengthen the independence of the Audit Office so that he reports not to the executive but to the National Assembly. Sadly, neither President Jagdeo nor Mr Sharma seems to appreciate the distinction.

To any reasonable person it must be clear that together the constitution and the Audit Act make the issuing of instructions by the President to the Auditor General to undertake an investigation into the Fidelity fraud allegations, to carry out so-called forensic audits of the assets of the employees of the CTA and the submission of reports by the AG to the President, unconstitutional and unlawful. After the sterling work done by his predecessor, Mr Anand Goolsarran, Mr Sharma is allowing President Jagdeo to bring the Audit Office into disrepute and it only takes a legal action by any officer called upon to submit to Mr Sharma’s “forensic audit” to have the whole process thrown out. In no country but Guyana would the head of the state audit with responsibility to audit often complex transactions in excess of two hundred billion dollars not hold a professional accounting qualification. One of the reasons for such a requirement is that the holder is subject to a professional code of conduct regulating the quality of his work and the integrity and independence he displays.

It is not that Mr Sharma has time on his hands or no work to do. In a review of the ‘Report of the Auditor General on the public accounts for the year 2006’ carried in Sunday Stabroek’s ‘Business Page’ of August 24, 31 and September 7, 2008, I pointed out some glaring weaknesses − errors of omission and commission of a professional nature in the work of his office. Perhaps a few examples drawn from those columns would suffice. The full articles are available on the Stabroek News website or at ChrisRam.net.

1. That the report did not mention the failure by the Privatisation Unit/NICIL to account for hundreds of millions of dollars, a fundamental breach of the constitution that ranks and rankles with the infamous Lotto Funds;

2. $6.513 billion advanced from the Dependants Pension Fund Deposit Fund at December 31, 2006 not being substantiated while the old Consolidated Fund bank account NO 400 had not been reconciled since 1988;

3. The failure by the Audit Office to report on the financial statements of entities in which the Government has a controlling interest;

4. Non-reporting of the hundreds of millions of flood funds which Mr Sharma had promised more than three years ago;

5. No report on concessions granted under the Investment Act, 2004, including the illegal concessions granted to Queens Atlantic Investment Inc, the saga of 2008;

6. No audit report on World Cup Cricket even as another cricket spending spree is planned next year.

The Guyanese public is accustomed to being misled by fancy-sounding but uninformed statements by public officials, some of which confuse even lawyers of the main opposition parties. The statement about forensic audit falls in that category when looked at against the quality of work referred to above and the persistent failure by the Audit Office to carry out its mandate. Mr Sharma it seems prefers to dabble in matters improperly referred to him by the President while neglecting his constitutional and statutory responsibilities such as his report for 2007 on the public accounts, already overdue by several months, and any value-for-money audits.

The Minister of Finance is a former Deputy Auditor General who served under Mr Goolsarran, and the government must therefore be aware of the several professional and personnel limitations of the Audit Office and those who control it. But since the government transacts business involving billions of dollars, often outside the norms of proper accounting, the constitution and the Financial Management and Audit Act, it is unlikely that it would like strong and independent oversight of such spending. So, really it is convenient for the government to have someone like Mr Sharma heading the Audit Office. In addition, the wife of the Senior Minister of Finance is employed as the only professionally qualified accountant in the Audit Office. By definition she is not independent and it is absolutely incompatible for her to be in the Audit Office while her husband is Minister of Finance.

To allow such serious farce in the Audit Office in my view shows contempt for the people of our bleeding country. All the talk of forensic audit is meaningless. On top of all of this, the parliamentary oversight body, the Public Accounts Committee seems completely out of its depth. Do Guyanese really deserve this?

I will deal with the President’s uninformed and misguided call for “MP’s to declare assets within two weeks or face the courts” in later correspondence.

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The Fidelity report should be released immediately

In yesterday’s Sunday Stabroek `Fidelity report still to be tabled in Parliament’ you report Office of the President Spokesman Mr. Kwame McKoy as declining to say whether Parliament had received the report. Mr. McKoy then added that the report would be tabled in due course, adding that “there are other pressing things before the house”, suggesting that “the Auditor General’s report would likely have to wait in line.”

Does the Office of the President (OP) rather than the Speaker and the Clerk of the National Assembly decide whether it has other pressing matters and does OP believe the Assembly works like a taxi rank where you have to join a queue?

Mr McKoy should reserve such crass absurdity, presumption and arrogance for his television show rather than try to insult the intelligence of the more right thinking Guyanese. Whatever Mr. McKoy and the Office of the President may want us to think, many Guyanese regard the report as bearing on the conduct of both public and private sector officials possibly involving corruption and the loss of substantial revenue. Its publication therefore is long overdue and should be released immediately.

It makes me angry to think that my hard-earned tax dollars are used to pay people of McKoy’s calibre and makes me wonder how many more McKoys reside in the Office of the President.

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Staggering increase in external debt

Bad news
The country’s stock of external public and publicly guaranteed debt rose by 20.3 per cent to US$804 million from the end of September 2007 to the end of September 2008. This dramatic increase has been reported in a quarterly report by the Bank of Guyana for the nine months ended September 30, 2008. As a consequence, external debt service costs increased by 10.5 per cent to US$11.5 million, reflecting new debt payment schedules primarily for multilateral creditors. These were among a number of interesting issues raised in a most commendable effort by the central bank, and the Governor, Mr Lawrence Williams and his team deserve kudos for what appears to be a first for the bank.

Otherwise the report makes for a most depressing report on the management of the economy by President Bharrat Jagdeo and his Finance Minister Dr Ashni Singh, of whom so much was expected when he first was appointed a minister after the 2006 elections. By almost every measure the economy in the three months July to September 2008 performed worse than it did in the same quarter in 2007.

There was lower output in all the country’s major commodities during the third quarter of 2008 compared with the same period in 2007. Sugar fell by 3.6%, rice by 1.6% and poultry by 12%, while in forestry products, diamond and fishing the story was the same. Someone counted the eggs and came up with a 64% increase in the country’s production of eggs while there was modest growth in the mining sector, including the foreign owned bauxite companies blessed with generous concessions which the government has refused to disclose.

More bad news
If the overall performance of the manufacturing sector is depressing, the non-performance of segments of the sector must be a cause for serious concern. The production of paints and alcoholic beverages increased by 1.7 per cent and 6.3 per cent, respectively, whereas there were declines in the production of pharmaceuticals by 2.5 per cent and non-alcoholic beverages by 33 per cent. Our pharmaceutical company is another beneficiary of concessions and valuable contracts to supply Indian manufactured drugs to the government.

And if non-alcoholic beverages include Coke, Pepsi and I-cee, is it an error or did we in the third quarter produce only two bottles when three months earlier we were producing three? Where are we going and what does it say that a senior official of one of those beverage companies is a top member of the increasingly useless National Competitiveness Council?

Inflation
The Bank of Guyana, sourcing its information from the Bureau of Statistics reported that the inflation rate “during the third quarter of 2008 grew by 7.8 percent compared with 13.9 percent for the corresponding period in 2007.” There must be some error here, however, since the inflation during the quarter could not be 7.8% and was probably the rate for the nine months. The food basket maintained by Ram & McRae for the quarter reflected an increase of 8.2% over the three months but for the year the firm’s basket of food showed an increase of 33%, similar to the increase in Trinidad and Tobago. Conveniently, the Bank of Guyana concludes, without offering the kind of analysis and evidence expected from such a body, that the level of inflation in Guyana was driven by higher international fuel and commodity prices.

What is troubling is that the report indicates that price data for the third quarter were not available. Yet we will be expected to accept without question inflation figures pronounced by Dr Singh when he presents another of his big budgets that would not only include all of the third quarter but the entire year! It is hardly surprising therefore that leading economists and the public have ceased to give any credence to the numbers provided by the government, particularly on inflation and GDP, two politically sensitive variables.

Wages and employment
The Bank of Guyana clearly forgot that these are key issues in the economy since they give them a complete pass, meaning no mention. Expectedly, it did devote much attention to the financial sector reporting that the foreign exchange market continued to grow during the review period. The bank seems to forget as well the role and scale of the underground and parallel economy, and as our newspapers show, the role of drug money in the economy. It has decided, again without solid information, that sales of foreign currency “were related to higher import costs.”

Almost half of the transactions by value in the foreign exchange market were accounted for by the cambios with the bank itself purchasing some US$376 million, comprising mainly purchases of US$212 million from GuySuCo and the Guyana Gold Board. Despite the perceived strong links between the non-bank cambios and the underground economy the report does not reflect any cause for concern on the part of the bank in its supervisory role over these entities, most of which are unincorporated businesses not requiring independent audit of their books.

The drugs trade
At least as readers of the daily newspapers, the bank must be aware of the drug trade with its own oligarchy. And so too must be the one-man Financial Intelligence Unit, located within the Ministry of Finance, that is supposed to prevent money-laundering. The report indicates that sales by the non-bank cambios represented 8% of total currency sales. Even Lewis Carroll would have hesitated before writing this figure. This column has criticised the law regulating the non-bank cambios, noting that they have outlived their initial purpose and called for their abolition. In a remarkable sign of impotence and or lack of will, the response has been that it will drive the business back onto the streets. This seems to suggest that instead of running the country on the basis of laws, we are at best closing our eyes and ears to reality, operating on fear of stepping on the toes of the powerful.

Despite the bank’s poor record of supervision of the cambio sub-sector the report devotes several pages on the remittance business, advising of the steps being taken to bring it under its control. The report notes the significant increase in the inflow of remittances during the past six years, increasing from US$3.4 million in 2002 to US$224.4 million in 2007. In the first half of 2008, net flows of remittances increased by 6.3 per cent, or US$6.6 million to US$111.8 million compared to half year 2007. Interestingly, Caricom countries now rank only behind the United States of America as the dominant countries from which Guyanese receive remittances.

Tax, borrow and spend
The report emphasises that the overall surplus of the public sector contracted during the review period, resulting from relatively higher expenditure by the central government since receipts from corporations and tax revenues increased slightly. The tax and spend approach that has characterised President Jagdeo’s style of financial management seems to have been taken to new levels by Dr Singh. With him at the helm of the Finance Ministry, it is now tax, borrow and spend. Since moneys borrowed have to be repaid later, no government, elected or otherwise, should be allowed to borrow away the future of a country. There should be a cap on how much a government is permitted to borrow, even if it is to stabilise excess liquidity in the financial system as the report indicates.

The report which was created in PDF format on December 29, 2008 for publication on the bank’s website “predicted” that in the fourth quarter, the economy would continue its growth path, particularly in the mining, construction and services sectors, and that the agriculture sector which had faced “minor setbacks in the third quarter” would register modest growth. Clearly it could not be referring to sugar where the drama became even more surreal. In a cleverly worded disclaimer for the (mis)management of the economy, the report notes that the efficacy of the bank’s policies will depend on the stance of central government fiscal policy. And we all are aware of the history of that policy.

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What is the usefulness of the President’s overseas visits?

It is almost impossible to count the number of times the President goes on overseas visits. He is by far the most travelled President/Prime Minister in the region even as our country remains only above Haiti as the poorest in Caricom. The latest overseas visit is reported in your January 12, 2009 edition which carries a release by the Government Information Agency (GINA) that President Bharrat Jagdeo is on a visit to Libya, Qatar and Greece that will last one week. He is accompanied by four other persons, two ministers, the largely unknown George Hallaq, Presidential envoy to the Middle East and Greece and the religious leader close to the government and some time civil society activist Fazeel Ferouz, President of the Central Islamic Organisation of Guyana.

Weighed down by the yoke of flooding, high cost of living, ministers who in the absence of the President become even more unproductive, lawlessness and punitive taxation, Guyanese have a right to know the reasons, timing and the usefulness to them of such visits. Is it to meet with Guyanese nationals in those countries, to expand trade and investments or to seek diplomatic support for some major international initiative Guyana is launching? If it is trade, why not take a private sector representative or is that hat being worn by Mr Ferouz?

And we all know that when the President returns home, he makes no proper report as any responsible manager, let alone a country President would, but more often than not simply calls a press conference to discuss trite domestic issues which his ministers are paid to address, and little else.

And of course we must not forget cost. My information is that each overseas visit the President makes costs thousands of US dollars and somewhat less for ministers. How much is this visit going to cost taxpayers in total and would that money not be better spent on the poor and the flooded out in Guyana or on the numerous problems that drive Guyanese from the country?

This seems to be a perfectly legitimate question for our reporters who turn up like sheep at the President’s post-visit press conference to ask. Indeed it would be useful to know how much was spent on overseas travel by the President, his ministers and their entourages during 2008. Perhaps the Accountant General can provide us with this information, failing which I would like to see the Public Accounts Committee demand the information.

Taking full advantage of our system of electocracy, the government seems all too ready to do as it wants, when it is confident that it controls the instruments of disclosure, accounting, accountability and audit so that the public remains powerless and ignorant.

I hope that when next the government asks the inane question where the money will come from to pay living public sector wages, reasonable pensions to our senior citizens and better flood control measures, we will have several answers ready.