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.

It’s not too late for President to honour promise to Globe Trust depositors

The Kaieteur News of Thursday April 9, 2009 reported the Office of the President (OP) as stating that I and other (sic) directors of Globe Trust blocked payout of up to $100,000 each to 5,404 depositors of the financial institution. Apparently OP produced a “critique” to support its allegation that it was certain that up to “$235M would have been recovered from the realizable assets of Globe Trust”. I will deal briefly with the allegation, indicate my role in the Globe Trust imbroglio and offer a possible reason for President Jagdeo’s breach of promise.

The allegation though malicious and misleading is not surprising. It is also a mathematical impossibility. Even a junior clerk in the Office of the President could have told the manufacturer of the allegation that 5,404 times $100,000 is $540.4M. Where would the balance of $305.4 M ($540.4 M – $$235 M) have come from? But even the figure of $235 M is what the Liquidator very recently said was actually collected to date.

The architects of the allegation obviously intended to divert attention from my assertion – which I now repeat – that Jagdeo on August 3, 2001 had promised that approximately 2,000 small depositors defined by him as those with savings “in the vicinity of about $10,000 each” would get back their money. Instead of responding to my factual assertion, they create this absurd allegation and spurious diversion.

Second, I never was a director of Globe Trust or had a direct role in the Globe Trust case. Ram & McRae was retained by the institution to advise on and prepare a restructuring plan to address the difficulties being faced by the company. I was not a party to the action No 429/P in which Bank of Guyana (BoG) was the petitioner and Globe Trust was the respondent. I appeared as a witness to explain what came to be referred to as the Ram & McRae plan. I should add that the plan itself had identified as a first step – partly for administrative reasons – the repayment of all the under $10,000 accounts. In other words, there was no opposition to Jagdeo’s pledge which by coincidence was consistent with the Ram & McRae plan.

The basis of the intervention by Globe Trust in the legal action was that the BoG had acted outside of the law (the Financial Institutions Act) when on September 20, 2001 it took possession of Globe Trust “for the purpose of liquidation”. Then Chief Justice Carl Singh in his prompt, written judgment found that the decision by the BoG “manifested its misconception of its powers”; that the determination by the BoG that Globe Trust could not be restored to financial soundness was made “in a manner that was unfair to Globe Trust”; and that Globe Trust had been “unfairly treated”. The Chief Justice however did not hesitate to criticise the directors of Globe Trust for their “failure to act decisively in the face of lax, loose and grossly incompetent management.”

I should add that as set out in the written submission of Attorney-at-Law Stephen Fraser for Globe Trust, its intervention and proposed restructuring plan was not an objection to the Bank of Guyana assuming possession. In fact the point was made by Globe Trust director Professor Clive Thomas and emphasised by Mr. Fraser that the foundation of the Ram & McRae plan was that it would operate under the protection of the Financial Institutions Act. The premature and high-handed manner in which the Bank of Guyana acted leads inescapably to the conclusion that it did not want Globe Trust to survive.

Regarding the President’s failure to honour his commitment, it is possible that he forgot, which is human. But my belief is that when he made his promise on August 3, 2001 he hoped to neutralise popular opposition to an unlawful and politics-driven decision that had already been made but not yet announced – to liquidate Globe Trust. The liquidation announcement came seven weeks later. In the end he got both his wishes, i.e. the liquidation of Globe Trust and preempting any opposition. No need then to bother about any commitment.

A final thought. For years I have tried unsuccessfully to get the President not to make unlawful and unconstitutional spending out of the Lotto funds and more recently out of the Privatisation proceeds. Now OP would have the public believe that I prevented the President from meeting an obligation he made in good faith. Like their math, this just does not add up.

But it is still not too late. The President’s guarantee on Clico involving failures by his people is the equivalent of a blank cheque for billions and billions. He knows the exact and comparatively modest exposure on Globe Trust. It is far easier and clearly less costly for him to honour that commitment. I am not in his way.

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.