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.

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

Auditor General Report 2010

Introduction
I do not share the excitement of the media and the public about the revelations in the Auditor General’s 2010 report supplying further evidence of the excesses, mismanagement and improprieties which have become routine under Dr Ashni Singh’s stewardship of the Ministry of Finance. For persons who pay taxes and advise others to do likewise this is more than a titillating news story. Accordingly, I cannot be enthused to read that the Contingencies Fund continues to be abused several years after it was first pointed out. I am not at all pleased that this Auditor General cannot see the forest for the trees, and that he is more concerned about some overpayment of $1,167 than about hundreds of millions of dollars in special funds not being audited; or that he focuses on vehicle log books not maintained while scores of government vehicles cannot be accounted for or are misused.

If our financial architecture is designed to be dysfunctional, which by any measure it is, then no amount of post-transaction audit would remedy the defects. There must be concern about the placing of square pegs in round holes, persons holding positions across the arms of the state without the requisite expertise and qualifications.

Internal audit
One of the most effective tools of financial oversight is a well-resourced internal audit mechanism headed by at least one qualified accountant. Our Fiscal Management and Accountability Act bears some resemblance to the Australian Act, but with notable exceptions. That Act which goes back to 1997, six years before the Guyana Act, provides for fraud control plans and audit committees in each agency, and applies the criminal code of that country to the misapplication, improper disposal or improper use of public money. Unlike our Act, the Minister is not exempted from such sanctions.

Under the Australian Act any borrowing of money not authorized by an Act of the National Assembly is invalid. Our relevant legislation seems far more permissive and even that is being abused with several loans and other financial agreements entered into not tabled in the National Assembly. Their Parliament must be notified of any involvement in a company by the state or a prescribed body. In Guyana, Dr Singh’s NICIL (he is the Chairman of the Board with Dr Luncheon and other Cabinet members) can form companies and use them to siphon off state resources or enter into questionable transactions. Even if, as seems probable, that had been done at Mr Jagdeo’s behest, it would not exonerate the Minister nor the Auditor General from investigating these.

A financial infrastructure
No properly managed structure would allow the Audit Office to decide that it would no longer report on concessions given by the administration, in clear violation of statute. Or to accept a self-serving opinion from a cabinet member that public moneys do not have to be put in the Consolidated Fund. The least a self-respecting audit office would do is seek an independent opinion.

Nor would a proper financial infrastructure allow the offices of Accountant General and Auditor General to be held over several years by acting appointees, or require the latter to report to the executive, contrary to the constitution. I am concerned that the Public Accounts Committee has not asserted itself, content to make less than consequential statements than address the fundamental problems facing the financial administration of the country. Concerned too that the Audit Report reflects no work on the transactions of the Office of the President except to refer approvingly to the Lethem to Providence E-Government Project, one of the immediate beneficiaries. Some $846.451M was expended on that project in 2010 which is only partly completed.

Disgrace
It seems to me a national disgrace that the government can decide that it will so frustrate the establishment of the Public Procurement Commission in order for cabinet to control all significant tenders. Or use the Fiscal Management and Accountability Act as cover to bring constitutionally independent persons under the Ministry of Finance. With all the excesses, I am not aware that any public official has ever been brought before the court for breaches of the Act.

In the days of Anand Goolsarran, before we had the Act and before we had several years of training in forensic and Value For Money audits, we could rely on the Audit Office to tell us about the stone scam, the milk scam and poor public infrastructural works. Now the Audit Report is more noted for what it leaves out than what it includes. The media – both print and electronic – constantly depress the nation with stories and pictures of shoddy multi-million works that have gone bad. The Audit Office looks at the Palms but not at NICIL, Pradoville 2, or those projects that have robbed the nation of billions. For all the controversy with the Amaila road awarded by NICIL, or the many concessions valued at billions of dollars, the Audit Office has been noticeably silent.

We must not forget that whatever the 2010 Report’s significant defects, the report was delivered within the statutory deadline for the first time since the current holder has occupied the office. But to ensure that the abuses played no part in the elections, the report was not released until four months later.

PAC
What makes for a more depressing picture is that the Opposition in the National Assembly chairs the Public Accounts Committee but is overwhelmed by the executive and people like the Financial Secretary, who is the Head of Budget Agency with responsibility for compliance with the Fiscal Management and Accountability Act and the protection of public moneys and property.

The PAC too, has constitutional responsibility to nominate the members of the Public Procurement Commission, but for ten years has failed to do so. For whatever reason, the commission has not been appointed and its constitutional functions are shared between the cabinet and the National Procurement and Tender Administration. The members of the administration are appointed by the Minister of Finance who determines the salary and allowances they receive and to whom they report.

Disdain
Past reports show the continued disdain this Minister has for the Audit Office which he once served under Goolsarran. Every year we are told that the Ministry of Finance (the Minister and the Finance Secretary) did not include explanations of any significant differences between the annual estimates of revenues and out-turn of the revenues. And that the ministry did not provide explanations for the impact of (a) movements in the underlying economic assumptions and parameters used in the preparation of the annual budget proposals; (b) changes to revenue policies during the year; and (c) slippages, if any, in the delivery of the budget measures. Because of the stubbornness of the ministry we can never be certain of the completeness, accuracy and validity of the amounts shown in the Statement of End of Year Budget Outcome and Reconciliation Report (Revenue) required under Section 68(1) of the Fiscal Management and Accountability Act 2003.

Singular contempt for the Audit Office and by extension the Public Accounts Committee and the country is demonstrated with the reaction and response to the reports of abuse of the Contingencies Fund. Responsibility for this fund lies solely with the Minister of Finance and in the past five years the amounts which the National Assembly was called upon to reimburse the fund because of expenditure under the Ashni Singh Ministry of Finance was a whopping $14 billion. Yet, as Dr Singh has shown by his behaviour over Bill # 1 of 2012, both he and the Financial Secretary Mr Nirmal Rekha appear to be in a state of denial, or arrogance. Their response to the comment by the Audit Office in 2007 about the Contingencies Fund advances not meeting the criteria provided by law, was that since Parliament subsequently passed the supplementary appropriation to cover the advances, the advances could not be contrary to the Act!

Here are a couple of other cases of bad financial management.

Two loan liabilities of $51M in 2004 were allowed to grow to $211M because of the failure of Ministry of Finance to act on them. The increase is all as a result of interest on the loans.

No deposit fund account has been established as required by section 42 of the FMA Act which requires the Minister to “establish one or more Deposit Funds into which public monies shall be paid pending repayment or payment for the purpose for which the monies were deposited.” Deposits received during year 2010 were paid directly into the Consolidated Fund (Account № 407), and related payments made therefrom.

I will close this week with a reference to the state of the country’s principal bank accounts. As at December 31, 2010, there were balances of $4.4B in static and inactive accounts and other accounts that should have been transferred to the Consolidated Fund. Indications are that these are now being transferred to plug the deficits brought on by the non-arrival of the Norway funds and excessive spending by the government.

There has been no reconciliation of amounts of maybe $46 billion held in the old Consolidated Fund which the Audit Office has been recommending be closed, but only after the impossible task of completing proper bank reconciliation – the mathematical equivalent of trying to square the circle. Meanwhile the report does not make clear whether the new account for the Consolidated Fund which was opened to bring some order to the government’s bank balances has gone the same way. It certainly seems to be in overdraft.

Continued: http://www.chrisram.net/?p=859

The Supplementary debate and the Audit Office

Introduction
In last week’s Business Page I indicated that I would be addressing the 2010 Auditor General’s report this week. It will be remembered that the report was handed over to the Speaker of the National Assembly around the time of the dissolution of the Assembly, its release delayed because of the dissolution. Before I consider the report, however, it is useful to comment on last Thursday’s sitting of the National Assembly when Bill No 1 of 2012 containing a request by Dr Ashni Singh, Minister of Finance for $5.7 billion.

Supporting the Bill were two financial papers, one for $2,240 million to replenish the Contingencies Fund and the other $3,471 million for supplementary approval under four headings. From all appearances, it was quite a contentious session during which acting Speaker Ms Deborah Backer had to offer some maternal advice to the Finance Minister who, clearly uncomfortable with the uncharted waters, appeared several times to have lost his cool. The arguments raged to such an extent that the Bill was not fully addressed in the session and the House was adjourned for another month!

From reports, it appears that save for some transactions for about two hundred million dollars, Paper 7 was approved in principle based on explanations offered by the Minister and his junior, Bishop Edghill. I learnt from one parliamentarian that the expectation is that Paper 8 would be more contentious, having a few transactions for substantial sums. There seems a fundamental misunderstanding of the two papers and how they ought to be treated under the Financial Management and Accountability Act which sets the rules for the receipts and payments of “public moneys,” a term that is much wider than actual cash.

The Fiscal Management and Accountability Act
It does not seem to me that the genesis and provisions of this Act are understood by many of the members of the National Assembly. To start with, then Minister of Finance Saisnarine Kowlessar and Prime Minister Sam Hinds resisted the pleas of Winston Murray and James McAllister for the Bill to be referred to a Select Committee because delay could cause the government to lose US$30 million. The urgency was evident in that the Act was assented to and gazetted one day later.

Our MPs on checking the Hansard of the debate on the Bill would have seen too the arguments by Murray on what constitutes qualifying expenditure from the Consolidated Fund and how he succeeded in getting the National Assembly to insert the word “urgent” before “unavoidable and unforeseen.” Many of the items in Paper 7, even if the details were submitted in accordance with the FMA Act, would not meet the strict test for payment out of the Fund. It has to be seen therefore as an act of some considerable compromise for the opposition not only to accept oral explanations in place of the written details required by the Act but also a relaxation of the criteria which the PNCR had insisted on when the Act was passed in 2003.

I can only hope that when the Bill comes up for voting, the opposition makes it clear to Dr Singh that taxpayers‘ money is not there to be dispensed at the whim of any politician.

Enhanced obligations
While the ordinary person expects all legislators to understand the law, that obligation is greater on those who have been in the National Assembly for some time, or who have served on the Public Accounts Committee, and greatest on the Minister of Finance. It seems to me that Paper 8 reflects a lack of awareness, by all these persons, of section 21 of the Act and the concept of conditional appropriation to which Mr Murray drew attention in the parliamentary debate.

Such an appropriation would have allowed for the spending of specified sums of money, conditional upon budget agency receipts being credited to the Consolidated Fund. By definition, such a case requires prior and not subsequent approval, as Dr Singh is now seeking. There is room to speculate whether his reason for not doing the right thing at that time is because he did not wish to reflect an even larger deficit, or did want to have to answer too many questions about some of the transactions.

When it comes to budgeting – an essential element of financial management – this Minister has either been ineffective or rather cavalier. He brought eight financial papers to the National Assembly for supplementary funds for 2011. The amount he sought was over $18 billion on budget heads of less than $30 billion. He came to the National Assembly twice in September 2011 and yet he did not know that GPL was bleeding, even as it was bleeding the consumers. Any responsible Minister of Finance would have sought supplementary funds at that stage rather than wait until after the end of the year. But let us not complain: the country is the beneficiary of the miscalculation by Dr Singh in thinking he would be able to get the National Assembly to vote money for him however and whenever he wishes.

The country must now wait another month – Parliament seems to work at most, only on Thursdays – to see how Paper 8 is debated and how the vote on the Bill will go. Some MPs are hoping that when the National Assembly resumes, the Minister will add some flesh to the bare details offered in Paper 8 and that such details will be explosive.

Audit report 2010 and the Audit Office
Over the past four years Business Page has had about seven columns examining the annual reports of the Audit Office on the accounts of the ministries, departments and regions of Guyana. I have noted the standard response by the press and the public to revelations 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. I have written that Mr Deodat Sharma who has been acting in the position as Auditor General since 2004 often turns a Nelson’s Eye to many of the serious financial improprieties and mismanagement in some of the budget agencies, including the Office of the President.

I have said on numerous occasions that NICIL seems to have audit immunity from the Registrar of Companies as well as the Audit Office. I have suggested to the Public Accounts Committee to get a professionally qualified accountant to head the Audit Office so that staff progression is not stymied and the quality of their audits brought to an acceptable standard. Along with others, I have wondered about Article 216 of the constitution in relation to the lottery funds and how then President Jagdeo ignored the basic elements of financial management to dispose of the funds as he thought fit.

The Audit Office has been reminded of the many funds around that are not being audited and its attention drawn to the continuing failure of the majority of ministers to table the annual reports and audited financial statements of the entities for which they bear ministerial responsibilities. It has regularly been reminding him that Flood 2005 money, Carifesta and World Cup remain unaudited and that there is no evidence that it carries out the audit of “tax concessions” under the Investment Act.

No change
Despite these, nothing seems to change. That the report of the Audit Office hardly offers any new insights is evident in the number of paragraphs under each budget agency that has far more “prior year matters which have not been resolved” than current year matters. In the case of the Operations of the National Procurement and Tender Administration there are only prior year issues, as is the case with the Ministry of Foreign Affairs.

But that applies to the report of the Audit Office itself. It keeps moving the goalpost on when it will have its full complement of staff, or when it will issue its next Value For Money audit. Amidst the verbiage of the developments on VFM audits, we learn that only two such audits were concluded in 3½ years, while two were promised, first in 2009 and the same two were promised by end of 2010. It is now 2012.

We should surely be expecting more from our Audit Office that includes “six officers of the unit including the Auditor General who spent 9 month in training in Canada,” and another fifty-nine who were trained locally. We learn too that the Audit Office has a Forensic Audit Office which was established in 2008 and which has “continued to be an integral part of the Office.” Let us hope they start producing some results.

To close this first part of the review of the report it may be useful to note that for several years now the post of Accountant General has been filled with acting appointees. In the last five years, the occupants of the office were Mr H Autar – 2 years; Mr G Abrams – 2 years; and Col J Persaud. Several positions below the Accountant General are also filled by acting appointees, a situation that mirrors the Audit Office where almost the entire top brass are themselves acting. That cannot make for a healthy control environment.

To be continued

Audit Office turns a Nelson’s eye to Office of the President

Introduction
Today’s column resumes the review of the 2011 budgetary allocations to the principal ministries of government. Some of the ministries covered so far are the Ministry of Education, the Ministry of Health and the Ministry of Finance. It focuses on the Office of the President, the budget for which has jumped from $4.274 billion in 2010 to $7.175 billion in 2011, an increase of 68%.

This is even higher – percentage wise – than the increase of 64.3% in the Finance Ministry’s 2011 budget due to the expectation of proposed spending on LCDS projects, including equity spending on the Amaila Falls Hydro-electricity project.

[table to be inserted]

All figures in millions of Guyana dollars.

Source: National Estimates 2011 and 2010.

Public policy? Not really
At first sight, it is striking that only in his last year as President has Mr Jagdeo seen it fit to set up a Public Policy and Planning functional unit in his office, and one naturally wonders whether this function resided in the past with him. But on closer examination the function falls far short of public policy, having as its stated objective “supporting and sustaining the successful transformational process of the Public Service through the necessary reform…”

The absurdity of it all becomes even more apparent when one looks at the impacts and indicators which the operations of the programme are designed to produce. These include reports to Cabinet, stakeholder consultations and documented research on public service reform in the Caribbean and elsewhere.

There is clearly an irony here – no president, perhaps other than Forbes Burnham, has done more to destroy the independence, professionalism and efficiency of the public service than President Jagdeo, and even if he is now seeking to correct his mistakes, he is clearly taking the wrong approach. To add to the irony, every one of the persons in this unit is a contract employee.

In his post-2006 term President Jagdeo realised how easy it is to bloat the public service with politically connected or useful persons and as a consequence the numbers of contract employees have grown inexorably since then. In 2011 alone the number of contract employees in the Office of the President has jumped from 106 to 144, a 26% increase, while over the period 2007 to 2011 it is a staggering 95% increase, as more and more party persons, their relatives and friends are placed on the payroll.

I know one person who told me that there simply were not enough desks for everyone and they had the option of working from home!

Missing line item
A recent expose of an order for spy equipment valued at $118 million (US$583,000) has raised some eyebrows, if only very fleetingly. The question though is where is the line item which is being charged with this grand sum? A reading of the 2011 Estimates does not help as the only line items in excess of this amount are Training and Subsidies and Contributions to local organisations. The Office of the President is known to control extra-budgetary funds well outside of the law and there is a possibility that whatever the spy equipment is, it may have been sourced from one of those secret funds.

It is easy to wonder and link some activities to the yet-to-be explained destination of more than $3 billion that had been lying for years in dormant bank accounts which were suddenly closed in July 2010.

Taken for a ride
The subventions too are paid outside of the law to some agencies that have an unenviable record when it comes to accountability and audit, including GINA, NCN and the Integrity Commission. In respect of the Presidential Guard, Castellani House and the Joint Intelligence Coordinating Agency (‘Spy Agency’), the exchanges between the Audit Office and Dr Nanda Gopaul, the administrative head of the Office of the President have reached a level of absurdity that has to be seen to be believed. Ever since at least 2004, the Audit Office has been drawing attention to the fact that departments of OP cannot be financed by subventions but only by operational programmes. For several years now, Dr Gopaul has given the same response, that the administration, ie, Dr Gopaul, has “written the Finance Secretary to have the matter rectified and is awaiting a response.”

If there is no answer for several years, there ought to be no reason for not discontinuing the subvention and terminating the services of the persons responsible.

The capital budget
The lion’s share of the $4,888 million budgeted to be spent in 2011 is for what is described as the Information Communication Technology project which entails the communication fibre optic networking system from Lethem to Georgetown, the construction of wireless and terrestrial networking systems from Moleson Creek in Berbice to Anna Regina in Essequibo. The total project cost is $9,607 million of which $1,200 million was spent up to the end of 2010.

Not surprisingly, both the fibre optic project and the One Laptop Per Family (OLPF) project are surrounded in mystery, secrecy and controversy, and are not without concerns about impropriety and illegality. The fibre optic project it seems is not as innocuous as it is represented to be and there are persons with connections within the PPP hierarchy whom the project will benefit. Absent this, the government and GT&T could have worked out a much more cost-effective and mutually beneficial relationship but politics it seems is not that straightforward.

The OLPF project has caused the Office of the President some embarrassment as its statements have been found to be misleading as a consequence of subsequent revelations from persons within the project, including a former manager who was astounded at the money which was thrown at him! Volume 3 of the Estimates indicates that of the $4,347 million to be spent in 2011, $2,500 million will be financed by foreign grants/loans and $1,847 million will be financed by the government. All the persons employed in the project in 2011 are employed on contract. Moreover, given the nature and components of the OLPF, rules of accounting would deem some of the expenditure recurrent rather than capital.

Office of Climate Change
The Office of Climate Change cannot be identified at all in the Estimates under Office of the President. One therefore wonders about the accountability of the money that is being spent in running this office which we are told is responsible for managing the whole LCDS process. Indeed, the head of the unit, Mr Shyam Nokta claims that he is working for the unit and the country without remuneration, a claim which may be surprising but which surely does not apply to everyone else. The law requires that all public expenditure should be accounted for, even where it is grant-funded, but this it seems is not being done. This lack of transparency does not encourage and inspire confidence over the substantial sums that are likely to flow from the Norwegians and the more secretive Chinese and Indians.

Missing too are the payments from the lottery proceeds which the government adamantly refuses to place in the Consolidated Fund but which is spent without authority, accountability and any regard for accounting and audit principles.

Audit silence
One would have expected that with all the allegations of financial illegalities and improprieties enveloping the Office of the President, the Audit Office would wish to appear at least to be showing some interest. Indeed it should have had resident auditors there or ensured that there was a competent team of internal auditors. Not so. In 2009, the last year for which there was an Audit Office report, not a single transaction was referred to as being reportable. Does the Audit Office not know and consider the failure to have written contracts a reportable breach? Or the operation of unaccounted funds? Or breaches of the procurement rules? Or unaccounted advances?

If this was the case in 2009 alone, it might be excusable on the basis of rotation. But it has happened for all the recent years, a situation from which one should be able to draw the inescapable inference that as in so many different ways, the Office of the President is out of bounds. Maybe it is just too hard to audit.