Auditor General’s report 2011: sanitizing or whitewash

The 2011 Auditor General’s report is the earliest since 1993. It is also among the poorest in terms of quality and content. Those journalists who look forward to going to town on the report will be disappointed by the shortened and sanitized work produced by the national Audit Office. Indeed two days after the report was published it had ceased to attract media attention. The word “abuse” that described the management of the Contingencies Fund by the Minister of Finance has been replaced with more acceptable language “continued to be used without meeting the requisite criteria” – “urgent, unavoidable and unforeseen.” It is more than mind-boggling that Mr Sharma could think that expenditure related to the elections of November 28, 2011 could have been “unforeseen,” particularly since in a special report on advances to the police for the elections, Mr Sharma acknowledged that such advances were also a problem in 2001 and 2006.

Here are some other issues which have been highlighted in past audit reports which have been relegated to verbiage in the report itself, if they appeared at all: Procurement of drugs for the Ministry of Health and the Georgetown Public Hospital Corporation amounting to three billion dollars from New GPC; procurement of pirated textbooks by the Ministry of Education; fraudulent payment of pensions and gratuities; stale-dated cheques; lottery abuse; etc. And things that appear to have escaped attention were monies spent on Pradoville 2, contract employees, the severe weaknesses at NCN and failure to account for NICIL.

Once again the Audit Office fails to look into the annual sum of $100 million allocated to the Ministry of Culture, Youth and Sport for arts and sports development. Had it not been for the fact that this issue has been publicly raised on several occasions, 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 not keen in helping taxpayers’ knowledge of how the $100 million per year is spent, reportedly under the direction and control of no more than two individuals.

Not understanding the implications
Some time ago, in reviewing a special report of the payments of social security, I suggested quite strongly that the Auditor General does not seem to appreciate the implications of some of his own findings – or could not really care. Let us take as an example paragraph 11 of the report which states that, “The Ministry of Health failed to adhere to the provisions of Section 43 of the Fiscal Management and Accountability Act (FMAA), which requires any unexpended balance of public moneys issued out of the Consolidated Fund to be returned and surrendered to the Consolidated Fund at the end of each fiscal year.”

Now compare this with paragraph 65 of the report which tells taxpayers that “the Guyana Office for Investment (GO-INVEST), Environmental Protection Agency (EPA) and Institute of Applied Science and Technology (IAST) failed to make timely refunds of unspent balances as at 31 December 2011, which respectively, amounted to $20.598M, $223,730 and $1.794M. Since these refunds were paid to the Office of the President during the year 2012…”

At a time when the National Assembly had voted to reduce the allocation of that Office, a clear breach of the FMAA that puts money into the Office of the President rather than into the Consolidated Fund raises legitimate questions. Not only does the report leave it to the reader to wonder whether or not the money was paid back into the Fund, but there is nothing in the National Estimates to indicate how the money was eventually disposed of.

Contingencies Fund
Let us return to the Contingencies Fund, the sole responsibility for which lies with the Minister of Finance. We learn that he authorised eighty withdrawals from the Fund over a period of nine months, or an average of nine withdrawals per month. What the Audit Report does not acknowledge is that the Minister of Finance must report to the next sitting (emphasis mine) of the National Assembly on all advances made out of the Contingencies Fund, specifying (a) the amounts advanced; (b) to whom the amounts were paid; and (c) the purpose of the advances.

The Minister must also come by way of a supplementary appropriation act and for the replenishment of the Contingencies Fund. But so that the National Assembly is aware of the consequences of its decision, the FMAA imposes another requirement on the Minister: he has to state the reasons for the proposed variations and provide a supplementary document describing the impact that the variations, if approved, will have on the financial plan outlined in the annual budget.

The requirement for a supplementary document applies to all financial papers, whether for the replenishment of contingencies or for a variation of the budget. Yet, Dr Singh has never once produced a supplementary document to the National Assembly for any of more than fifteen supplementary appropriation bills or so that he has presented to the National Assembly. Regrettably the members of the National Assembly have failed to request of the Minister that he comply with the Act as a condition for granting him any money.

I have written the Speaker of the National Assembly and he has promised to address the omission with the Minister.

Poor Ramnarine
We can now turn to the special report into the $90.649 million paid from the Contingencies Fund for feeding the Police, which was released by the Ministry of Home Affairs prior to the circulation of the wider 2011 Auditor General report. The Audit Office appears to have exonerated Mr David Ramnarine Divisional Commander, but not before his career path was seriously obstructed at the instance of the Minister of Home Affairs.

Again, in a half-baked way, the special report fails to question or explain how public funds could find their way into the bank account of the Police Welfare Fund which is not a public fund, and therefore a breach of the FMAA. Nor does the report explain why the unspent balance of several millions was only refunded into the Consolidated Fund in March 2012. There is a strong and widely held suspicion that the refund would not have happened had the opposition not brought the matter to the attention to the public. The Audit report could therefore be seen to be something of an escape route – if not a cover-up – for wider and higher-up impropriety in the Police Force. The real issue was not Ramnarine – he was the scapegoat. The issue was about the arrangement that but for the intervention of the opposition, would have left taxpayers’ money with the Police Welfare Fund.

There is one final danger point about the Contingencies Fund which I have pointed out before, and which was borne out in this case. The Audit Office not only consistently fails to report on important non-compliance by the Minister with the requirements of the FMAA, but also fails to pursue the actual spending of the sums from the Contingencies Fund. Short of appointing a professionally qualified accountant to the position of Auditor General I see little prospect for better control and oversight of the Contingencies Fund.

A solution
The National Assembly needs to act in this matter. They can do so in two ways. The first is to reduce the amount of the Contingencies Fund which the PPP/C administration raised from $500,000 to what amounts to more than $3.5 billion. If the Minister must come to the next sitting of the National Assembly for reporting and replenishment then $3.5 billion is an extraordinary sum. Reducing the amount – which requires a small legislative change – will introduce some level of accountability and oversight and rein in the Minister of Finance who seems impatient to bring supplementary appropriation bills to the National Assembly prior to spending. The second is to remove the amendment to the Constitution (Prescribed Matters) Act and return to the age limit of 55 years. Now that all our MPs are trained in legislative drafting that should be a simple task.

The fact is that Mr Sharma cannot do a proper job, given his dependence on the Government for his continuance in that position.

Value for [whose] money and drugs
And while we have not moved off from special reports it may be convenient to refer to two Value for Money audits which Mr Sharma has been working on for three years and which according to the 2009 Audit Report were “expected to be completed before December 2010.” In 2012 we are assured that the Audit Office is in the “process of finalizing” these. What makes the inordinate delay in the completion of these of considerable concern is the importance and relevance of the subject-matters of the exercise: “A Review of the Operations of the National Board and National Procurement and Tender Administration” and “An Assessment of the Management and Control of Drugs and Medical Supplies at the Ministry of Health.”

The 2011 Audit Report advertises these “projects” as demonstrative of the Office’s “commitment in ensuring the provision of reports which will facilitate improvements in the operations of our clients.” The public would recall that the exercise was first announced three years ago and would be aware that since then expenditure on goods and services has increased from around $75 billion to $125 billion and that on capital projects has almost doubled, moving from $45 billion to $75 billion. To compound the matter, the procurement laws apply to state-owned entities and other statutory bodies which would add another several billions of dollars per annum in places like GuySuCo and GPL.

And what about the purchase of drugs? For the Georgetown Public Hospital Corporation, expenditure on drugs and medical supplies in 2011 was $1.620 billion, while for the Ministry of Health the expenditure was over $2.6 billion. Not surprisingly, the lion’s share of the expenditure went to the New GPC which is known to have strong government ties and which is usually advanced the money to finance the procurement and supply of the drugs.

With the Audit Office having such fancy names as a Value for Money Unit, a Forensic Unit and a Quality Assurance Unit, taxpayers would like it to move expeditiously on a thorough examination using business principles and practice of this generous arrangement which involves reported markups on the supplies that many would consider price-gouging. And as for procurement, there can hardly be any financial and corruption issue that deserves a higher priority.

There is one final point to note in today’s column, and that is in relation to the 2000 Series Bank Accounts held with the Bank of Guyana. Dr Goolsarran and I have drawn attention to the drawing down of some of these accounts without complying with the law and any proper accounting for some $30 billion. Not only does the 2011 Audit Report ignore responsible and reasonable calls for explanations, but the 2011 table of the balances in Static and Active accounts is either amateurishly prepared or deliberately set up to mislead the readers and the National Assembly. In a table that is designed to show movement over time one does not exclude balances in an earlier year because the balance no longer exists. In the column for the respective year the amount ought to be shown. So that in the 2007 and 2008 columns, the amounts of $4,410.3 million and $4,690.6 million should have read $7,591.3 million and $7,868.4 million respectively.

It is troubling when an audit report itself becomes suspect.

To be continued

An abomination for an Auditor General report

The report of the Auditor General on the public accounts of Guyana was tabled in the National Assembly on Monday. In a country with weak accounting and accountability, an Access to Freedom Act that has not been brought into force, an Integrity Commission without Commissioners, no Public Procurement Commission, no anti-corruption or whistleblowers legislation, the report by the Auditor General – if its Executive Summary is an indication of its contents – is striking for its sterility.

A comparison of the 2011 Executive Summary is an almost identical reproduction of the 2010 report.

Note that 2011 was a less effective audit than 2010 which in any case was itself not a good audit: it ignored the armies of contract employees, the off-constitution spending by that abomination called NICIL, slush funds across ministries and including the dormant accounts, the loan recovery unit, the National Frequency Management Unit.

The problem we face is an unqualified acting Auditor General who plays to his master’s voice in order to retain one of the most lucrative employment contracts in Guyana. If we need any proof of this we need go no further than the clandestine attempt to lay a path for confirmation.

If that happens, if we think the 2011 audit is poor, we have not seen anything yet.

The Attorney General completely disregarded the principles and authorities on bias in the matter of Mrs Singh’s position

Attorney General Anil Nandlall’s letter SN ‘The squabble over conflict of interest in the Audit Office is much ado about nothing’ July 13, 2012 refers. Mr. Nandlall accuses those who have taken a position on what he dubs as a “concocted” and “politically inspired” matter involving Dr. Ashni Singh as Minister of Finance and his wife Mrs. Gitanjali Singh of the Audit Office of not subjecting the relevant facts and surrounding circumstances to mature analysis.

I respond to make the following points not because I think Mr. Nandlall’s letter has any validity or merit but because of the position he holds as leader of the Bar of Guyana, and to counteract the mischief his letter created.

1. I wonder if the Attorney General considered the propriety of his public intervention in the matter, citing some weak and discarded legal authorities, while the Institute of Chartered Accountants of Guyana is considering formal complaints over the same issues.

2. If Mr. Nandlall had apprised himself of the relevant facts he would not have misled the country about Mrs. Singh’s service at the Audit Office. She could not and did not commence her career at the Auditor General’s Office in 1992 and worked continuously since then in that office. Mr. Nandlall and his colleagues might wish to believe that everything began in 1992 but the fact is that in 2001/2, Mrs. Singh was Director, Internal Audit at the Georgetown Public Hospital Corporation.

3. And for Mr. Nandlall’s further information, Mrs. Singh left that position because a conflict of interest question arose.

4. For someone who prides himself on accurate and precise language, not once in his several references to Mr. Deodat Sharma did Mr. Nandlall acknowledge that the current Auditor General is an acting appointee – no trivial matter. As the country’s Attorney General tasked with advising the President and the Government, Mr. Nandlall may wish to confirm whether the holder of that important constitutional office was appointed to the acting position in accordance with the provisions of the Constitution which require the advice of the Public Service Commission.

5. Completely disregarding the principles and authorities on bias, Mr. Nandlall asserts that there is no scintilla of evidence of an actuality of conflict. May I respectfully refer Mr. Nandlall to the Pinochet extradition case in which a decision of the House of Lords was overturned after it emerged that Lord Hoffmann was a director of Amnesty International, a party to the case. A second strong House of Lords court, without Hoffmann, came to the same decision during which time the senior law lord, Lord Browne-Wilkinson, and four other law lords criticised Lord Hoffmann for flouting the basic principle that “justice must not only be done but must be seen to be done”.

6. And as for Mr. Nandlall’s “actuality of bias”, may I refer him to the case of Guyana Telephone and Telegraph Company Limited No. 13-M/1999, in which Justice Carl Singh as he then was, said “whenever a test is required to be applied for the determination of allegations of bias, the test [is] whether a fair minded observer might reasonably suspect the existence of bias”. I assume Mr. Nandlall knows about Justice Singh’s ruling but I prefer not to speculate about his reason for disregarding it.

7. Amazingly and with no legal foundation to support him, Mr. Nandlall seeks to apply the practice of one profession by analogy with the written Code of another, a sin of commission that is beyond legal heresy. As an accountant and attorney-at-law I submit that Mr. Nandlall’s analogy between the legal and accounting professions is misinformed, misconceived, misleading and unworthy of the learned Attorney General. Practitioners of the two professions are subject to entirely different Codes of Ethics. Lawyers describe the circumstances under the rubric “bias”: for accountants, it is an independence issue.

In penning his letter, Mr. Nandlall must have recognised that it would be seen as self-serving and opportunistic. With that burden, he could at least have taken the time to better inform himself of all the relevant rules and apply them to the factual circumstances, as he erroneously and misleadingly accused others of not doing.

Canadian auditor’s suggestion that Sharma be appointed Auditor General was tantamount to improper interference in Guyana’s affairs

Mr Deodat Sharma may not be a proper Auditor General but he surely knows how to play the political game. Last week, the Audit Office which he heads hosted a team of two from the Audit Office of Newfoundland and Labrador (AONL) with which the Guyana Audit Office claims a “twinning partnership.” The website of the AONL indicates no such partnership.

I understand from persons who attended a workshop conducted by the two visitors from Canada that one of them actually sought to advance the case for the confirmation of Mr Sharma who for seven years could not be substantively appointed because of lack of qualifications.

Mr Sharma’s lack of qualifications would likely prevent him from being appointed Audit Manager, much less Audit Principal or Auditor General, in the Newfoundland Audit Office.

In my view, the attempt by the Canadian gentleman was insulting, inappropriate and tantamount to improper interference in the operations of Guyana’s national financial watchdog which no Canadian Audit Office would accept and tolerate for itself.

Here are some interesting statistics. The Auditor General of Newfoundland and Labrador is appointed for a 10 year non-renewable term by the Lieutenant-Governor in Council and confirmed by a resolution of the House of Assembly. (Term limit for Auditors General is a common feature in other countries as well, but not in Guyana.) The Newfoundland Office has less than a quarter of the staff of the Guyana Audit Office – 36 compared with 150 – but while 28 of their staff hold professional accounting designations (78%) only 2 or 3 persons (1.33% or 2%) in the Guyana Audit Office are similarly qualified.

In its work, the Office of the Auditor General of Newfoundland and Labrador complies with the professional and ethical standards established by the Canadian Institute of Chartered Accountants. And according to that Audit Office, they adhere to professional codes of ethics and independence standards; exhibit independence in fact and in appearance; and avoid perceived and real conflicts of interest. In Guyana we aspire to and apply low or no standards.

I do not for one moment however believe that it is only because of lack of qualifications throughout the Guyana Audit Office that it has failed so miserably in unearthing the kind of frauds which the reporters from Kaieteur News and to a lesser extent, the Stabroek News, have been uncovering.

Rather, it is because some of those who hold senior positions cannot afford to jeopardise their position or embarrass the Minister of Finance and the government.

It is time that Guyana has a proper Auditor General

A recent news item in the print media gave the impression that the appointments of four senior members of the Audit Office’s staff have already been made by the long-acting Auditor General Mr Deodat Sharma. That would conflict with the Audit Act under which any proposed appointment first must have the approval of the Public Accounts Committee.

I am concerned that this attempt by Mr Sharma – which not surprisingly has received the support of the head honchos of the PPP/C members of the Public Accounts Committee – is a precursor for himself to be confirmed. Clearly, if the number two position from which he was moved up is subsequently filled, he cannot then step back into it, if and when a decision is finally made to appoint a qualified Auditor General from outside the Audit Office.

Mr Sharma has many handicaps. The first is that he is does not have the qualification to be the Auditor General. Accordingly, he has to rely on – as his key qualified staff – the wife of the Minister of Finance who is responsible for the country’s public finances generally and solely responsible for the Contingencies Fund.

The lack of that competence that comes with professional training has meant that in the six audit reports on the public accounts Mr. Sharma has issued since he was appointed to act, he could do no better than identify two major issues – the tendering procedures for drug purchases and the fact that the drawings from the Contingencies Fund did not meet the qualifying test. But he did not initiate the disclosures – they were continuing developments identified by his predecessors.

In relation to the Contingencies Fund, his reports consistently misquote the law relating to replenishments – conveniently to the advantage of the Minister – and second and very importantly, he does not report findings on the actual payments. No wonder it takes him more than three months to report on a $90 million expenditure in an engagement in which he is taking a lead role. Such an audit should take a pair of reasonably capable junior auditors properly guided two weeks maximum.

Mr Sharma has made lots of promises before. He promised in the 2009 Audit Report to complete before December 2010 value for money audits of the drug purchases by the Ministry of Health and the tender procedures of the government. Before that he had promised audits of the Cricket World Cup, Carifesta and the 2005 Flood Audit. And of course, he had promised that by end of April 2012 he would have completed the $90 million audit of Contingencies Fund, a promise accepted by the National Assembly.

It is impossible to say whether Mr Sharma is as keen to be confirmed in the job as the government is to have someone who hesitates to go after Mr Ramkarran’s “pervasive corruption.” The compensation package now enjoyed by Mr Sharma is the same as that of the Chief Justice and the Chancellor. It would seem that it is as normal for no one to risk giving up such an undeserved package as it is for no government to appoint, even in an acting capacity, a Chancellor or Chief Justice possessing only a para-legal degree.

The Constitution of Guyana provides that whether as a substantive appointment or acting Auditor General, the appointment of the Auditor General is made by the President acting in accordance with the advice of the Public Service Commission.Whether or not President Ramotar wants to deal with corruption, it is time that Guyana has a proper Auditor General.

Once a substantive Auditor General has been appointed, that person working with the Public Accounts Committee can then address the other senior positions and indeed the rest of the staffing of the Audit Office, including the issue of conflict of interest under the Code of Conduct governing accountants.