The Apple Store – a wonderment in itself

Introduction
I am unable to carry my review of the 2010 Report of the Auditor General as I am in the USA without access to all the relevant material. I will resume and conclude that review next week. Instead, today’s column is about a shopping experience I had on Friday that – to use a term consistent with today’s column – blew my mind.

I could not help but share it with the readers of Business Page and to contrast it with our antediluvian Guyana.

Ever since as Christopher L. Ram & Co. I first used a computer, around the mid-eighties, I have always gone for what are referred to as the PC, as in PC versus the Apple (formerly the Macintosh and then Mac) rather than in PC versus desktop.

No doubt influenced by my conservative embrace of habit, and given the practicalities of the wider range of software to support an accounting practice, Ram & McRae has stuck steadfastly with the PC – both the portable laptop and the desktop which, except for the monitor, survives largely unchanged in its configuration, but certainly not its capacity or speed.

Yet one cannot help but admire the Apple, the brainchild of Steve Jobs, one of the world’s most influential men, and the product of its most successful company, ever. I felt strongly enough about the death of Jobs in October 2011 that I dedicated an entire column to his life and works (S/N October 9, 2011). I read Walter Isaacson’s fascinating account of the remarkable life of a man whose passion for perfection and brutal drive for excellence are credited with having revolutionised six industries: personal computers, animated movies, music, phones, tablet computing, and digital publishing. My experience last Friday suggests that there is a seventh – how to create the most successful retail outlet with annual sales of tens of millions of dollars. And to have done this when on-line shopping is now the vogue and Amazon is able to find and supply anything – well almost anything – under the sun, is an achievement without parallel.

Jobs vision
The Apple Store is Jobs’ invention even if the success belongs to Ron Johnson, the retailer’s guru, who carried out the vision, and the army of staff who make it all possible with their boundless enthusiasm, energetic drive and religious passion.

Coke as in Coca Cola, is often described as the triumph of marketing over substance. Apple is the ultimate triumph: marketing and substance.

The combination of vision, enthusiasm, drive and passion just described – and more – were on display when I visited the Apple Store in one of America’s ubiquitous malls to have them look at my son’s Apple computer.

It was early morning, but time seems never to matter to the owners of an Apple computer who even with the occasional product flop, seem to have an exceptional brand loyalty that suggests a faith that “Jobs is in charge”. America is still clawing its way out of a housing bubble that threatened to bring the economic house down – but that is hardly evident among the army of Apple fans.

To them the Apple Store is their equivalent of the fundamentalists’ mosque or church, a place to meet fellow believers in the vision, to share life changing experiences, and to learn about the next version of the ever evolving and improving products.

As Johnson said, even though Apple products can be purchased for less elsewhere, people visit Apple’s stores for the experience, not only for the products on offer.

The Apple store is a place where the faithful congregate for reassurance that the founder lives on, as much in the products as in the people. Almost invariably, the store is likely to be the busiest shop in the entire mall but still, the greeting as one enters is sincere but not intrusive, warm and signals a willingness to help.

The store is a melting pot of people of various ethnicities, gender, age and size, the attendants in their distinctive blue polo shirts each carrying the electronic version of the slate, each with access to a common data base and all integrated.

The genius bar
Having explained the purpose of my visit, I was given – electronically, of course – an appointment with the Genius Bar, the name of the in-store service centre for which only the best are recruited after more than a half dozen interviews. The occasional or new visitor might have dropped in for a specific purpose but then finds the range of products so helpfully and usefully displayed almost irresistible.

One does not leave the store without looking at all the products, from the high end computers and phones to the mundane but very effective cleaning supplies they stock. Not surprisingly, the brand name was iClean.

As I waited for the hard drive of my son’s computer to be replaced, I managed to walk around and with the help of an Asian attendant, bought two cans of iClean. I could see no cash register or cashier so, as I took out the cash to pay, I furtively looked around to see what he would do with it. Pulling an exquisitely well-hidden drawer from under one of the display tables he took the money, asked for my email address, confirmed it by showing me his handheld device, and gave me my change.

Reluctantly, but not wanting to be stopped on my way out with items but no evidence of payment, I asked for a receipt. I just emailed it to you, he said, as if that was the most obvious way to do business. It was their LCDS in practice.

Beyond service
The next surprise was to see that the store had a sign-language expert attending to the special needs of two children brought in by their parents and using the Apple programme designed for such circumstances. The attendant was competent in more than sign-language ability: she was a model of patience and understanding that we see only in a few of our teachers.

I wondered whether this is one of the things that distinguish the successful from the average businesses, the strong from the mediocre countries and the caring from the insensitive societies.

The millions who have read Isaacson’s book on – not of – Jobs, knew about his obsession in creating the perfect store, where everything is done, and redone more than once, until perfection, like Jobs’ Buddhist nirvana, is achieved.

But there must be something more that the simple elegance or the perfect symmetry of the walls meeting doors, doors blending with the ceiling and ceiling’s contrasting with floors, that would make people willing to pay more in store for a product available elsewhere.

Johnson thinks that what drives the phenomenon are the several components of the experience, the most important of which is that the staff are not focused on selling stuff, but on building relationships and trying to make people’s lives better, which is what Jobs was all about.

At the Apple stores, the remuneration of employees is not based on how much sales the employee or the store one generates. Accordingly, they do not need to encourage people to buy pricey products or services they would hardly use.

By connecting with their customers, understanding their needs and helping them figure out how to satisfy those needs, even if it is a product which Apple does not carry, the Apple store employee builds a relationship with the customer that not even Bill Gates has managed to recreate, let alone displace.

Exploit the sucker, no one is looking
At the same time I wondered about the prehistoric manner in which retailers and departmental stores do business in Guyana. Maybe I am being naive, in even entertaining the thought.

So many of our retailers pay little attention to the quality of their employees, selected after the most perfunctory of interview, in receipt of remuneration below the relevant minimum wage, let alone a living wage. They care not about the defective and shoddy products they pass on to their customers under the unlawful “goods not returnable” stipulation.

With a couple of standout exceptions – I think of Nigels and Bounty, Courts and Singers, Digicel and GT&T – the attitude of many of our retailers is that there will always be a poor sucker to be exploited the next day.

I wondered too how none of our retail companies would grant their employees a stake in their business, many of them keeping the real accounts of their business to themselves and away from the GRA.

At Apple, the employee is part owner, however modest.

The question we need to ask is not whether the Apple store model is possible in Guyana but rather whether anyone who is anybody in Guyana is interested, including the government and the consumer representatives. Our Sale of Goods Act setting out the obligations of the seller goes back to the UK of 1893; the consultation on a Consumer Protection Act took nearly a decade for it to secure passage in the National Assembly and it is anyone’s guess how long it will take to bring it into force.

Four months after the November 28 general elections, the President is yet to announce a Minister of Trade. One of the biggest businesses in Guyana over the past fifteen years is the second hand vehicle market and yet there is no law regulating them. No wonder they can sell a five million dollar vehicle on a two month warranty but with little or no paper work, including a VAT invoice. It is really unfortunate that they manage to do so without more attention from the Guyana Revenue Authority, or justice in the courts.

One lawyer representing such a business even had the courage to say that the consumer should be more careful about what they buy under the maxim caveat emptor – let the buyer beware.

Conclusion
Operating under an unregulated regime of consumer laws, an absence of consumer activism, a consumer unaware of her common law rights and a government that is far friendlier to business than it is to the consumer, our businesses have little incentive and no compulsion to upgrade their business model or the quality of their service. They do not realise that their store environments and customer service are unimaginative.

Johnson is adamant that any online store can transact, but success comes only to the stores that enrich people’s lives and add value beyond simply providing merchandise. So, how does a store accomplish those seemingly illusive objectives? They need to move, as Johnson said, from a transaction mind-set—“how do we sell more stuff?” – to a value-creation mind-set.

Perhaps the absence of a challenge from on-line stores, minimal competition and the whole environment, discourage any imagination and innovation. But as Apple shows, there is a pot of gold at the end of the rainbow.

Correction

In last week’s column I recommended under the paragraph headed Local Loans that the debts of over $13 billion shown as owing to the state by defunct or dormant public corporations such as LINMINE, the porous Guyana Power and Light and the long-dead Guyana Airways Corporation and carried in the national accounting records should be “written off and charged against the Contingencies Fund”. That should have read Consolidated Fund. The error was corrected in the on-line edition of the Sunday Stabroek. The error is regretted.

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

Provisions of two financial Acts are vastly different

One of the attributes of someone engaged in teaching, as I have been at various times, is the constant and necessary effort to put things over in a manner that facilitates comprehension by students. While that does not apply to Mr Ralph Ramkarran, his response of March 1 to my letter of February 29 on the two financial papers currently before the National Assembly, suggests that he missed several points which I thought would be quite obvious, particularly since he presided over the parliamentary debate on the Fiscal Management and Accountability Act 2003 which is again being hotly contested in the National Assembly. Mr Ramkarran either does not understand, or is unwilling to accept, that the Financial Administration and Audit Act Cap. 73:01 is as different from the 2003 Act as chalk is from milk.

In order to make the differences between the relevant Contingencies Fund provisions of the two Acts excruciatingly clear – borrowing the words of our energetic new Attorney General – I thought it would be helpful to set those features out in tabular form. Visually, the following ought to be obvious: that the provisions are vastly different; the reasons for their being different (the sums involved, ever evolving standards of accountability and transparency); what the legislators set out to do to manage the risks associated with the huge sums involved (detailed reporting, a statement showing the impact on the annual budget); and statutory sanctions against the Minister.

Financial Administration and Audit Act Cap. 73:01 (1961)  

Fiscal Management and Accountability  Act 2003

1. Purpose:
To meet unforeseen and urgent expenditure.

1. Purpose:
To meet urgent, unavoidable and unforeseen expenditure.
2. Circumstances:
Expenditure cannot be postponed without injury to the public, and no other provision exists to meet the expenditure.

2. Circumstances:
Expenditure cannot be deferred without injury to the public interest and there have been no or insufficient appropriated sums for which no reallocation is possible.

3. Mechanism
An advance
3. Mechanism
Issuance of a drawing right

4. Maximum Spending:
$500,000

4. Maximum Spending:
2% of expenditure approved by the national assembly of the preceding year. Currently equivalent to $2.5 Billion.

5. Report to National Assembly
NONE
5. Report to National Assembly
Report by minister specifying:
I. The amounts advanced;
II. To whom paid;
III. Purpose of advances; and
IV. A supplementary document describing the impact that the variations, if approved, will have on the financial plan outlined in the annual budget.

6. Time for taking to National Assembly
As soon as possible
 
6. Time for taking to National Assembly
Next sitting of the Assembly
 
7. Procedures:
a) Preparation of supplementary estimates.
b) Approval by National Assembly.
7. Procedures:
a) The Submission of supplementary appropriation bill.
b) Approval by National Assembly.
8. Sanctions against the Minister of Finance
NONE  
8. Sanctions against the Minister of Finance
Minister personally liable for any loss which he caused or to which he contributed.

It may have escaped the attention, not only of the learned Senior Counsel Mr Ramkarran but also the entire National Assembly, that the limit remained at a modest dollar sum for thirty-seven years because the circumstances – even at the lower pre-2003 standards – so extreme that it would have been unimaginable that any person would be given discretion to spend such huge sums without parliamentary approval when the convening of the National Assembly is a telephone call away! Section 41 should be amended immediately to restore some discipline to the demonstrated tendency of Dr Ashni Singh to abuse his powers and to act recklessly. I recommend a figure of no more than $50 million, which is one hundred times the pre-2003 limit.

Finally, as demonstrated by letters in the press, Mr Ramkarran is not the only person who appears to have difficulties with the nature and implications of the 2003 vis-à-vis the 1961 Act. He shares company with Mr Philip Bynoe and pollster Vishnu Bisram, who can only see an “Indian hospital.” Not too long ago, Mr Bisram saw a landslide; it was a mirage.

To my disappointment, Mr Ramkarran, stung by my letter, allowed himself in his March 1 letter to degenerate into the public ‘cuss-down’ which up to recently he had opposed from his nemesis Mr Jagdeo. I would suggest that he moderate any intemperate response to this letter, since he himself is not without vulnerabilities.

Ramkarran has disregarded essential facts in his comments on the 1961 and 2003 finance Acts

In his column in last Sunday’s Weekend Mirror defending the government’s $5.7 billion Supplementary Appropriation Bill No. 1 of 2012, Mr Ralph Ramkarran SC may have been guilty of some of the very charges – political opportunism, a disregard for essential facts and, over one significant issue, the taint of racially inspired motives – which he makes against Mr Carl Greenidge, the APNU shadow Finance Minister.

Even politicians, who often find truth and history inconvenient, do their best to avoid some of the errors made by Mr Ramkarran in his column. It is more than semantics that Mr Ramkarran describes the Bill as Estimates rather than what it was – an appropriation for 2011 transactions for which parliamentary approval is being sought in 2012. Mr Ramkarran’s statement that the Fiscal Management and Accountability Act 2003 Act, which he mis-identified, had “only one material amendment” to a 1961 Act is way off mark. In fact, the 2003 Act repealed twenty-eight of the forty sections of the 1961 Act, including two of its three substantive parts. The remaining substantive part and one general part were removed one year later.

I find those lapses most amazing since Mr Ramkarran, as Speaker of the National Assembly, was in the chair when the 2003 Act was debated and passed on December 16, 2003, assented to the same day, and gazetted one day later. I can overlook, as an inconsequential error, Mr Ramkarran’s miscalculation about the duration of the combined operation of section 24 of the FAA Act (it really is section 25) and section 41 of the FMA Act – it is fifty and not forty years as he states. What I am hesitant in allowing to pass is his suggestion of similarity between “the methodology and format … of approaching the National Assembly to approve the expenditure of funds by way of supplementary estimates” under the 1961 and 2003 Acts. The contrast between the two Acts is fundamental, touching on provisions of the Constitution of Guyana and involving the difference between substantial sums – half-a-million dollars under the old Act and billions of dollars currently.

I will take a short walk down memory lane with Mr Ramkarran and point to the fact that Guyana was a colony when the Financial Administration and Audit Act was passed in 1961. Five years later in 1966 we had our Independence Constitution, and fourteen years thereafter, the present day 1980 Constitution. In 2003 came what on paper was the path-breaking Fiscal Management and Accountability Act designed to give effect to the provisions of the constitution requiring strict financial discipline over the moneys received by the government and the procedures for approving and accounting for expenditure.

Mr Ramkarran is therefore being more than a little disingenuous in speaking of “only one material amendment”; that ‘section 41 added “unavoidable” as a qualification to “unforeseen and urgent.” The real and substantial differences between the two Acts lie not only in whether or not the Minister of Finance has discretion but in several major areas:

1. The amount in the Contingencies Fund is now 2% of the previous year‘s budget which in 2011 would have translated to approximately $2.5 billion compared with $500,000 prior to the passing of the 2003 Act.

2. The Minister is required to report to the National Assembly all withdrawals from the Consolidated Fund, providing specific information on the payments made.

3. Specific allocation of responsibilities, the creation of offences and imposition of penalties, including on the Minister;

4. the concept of conditional appropriations;

5. mid-year reporting;

6. government guarantee levy, etc.

Mr Ramkarran seems to find it inconvenient to acknowledge the vastly different sums involved in “Contingencies” spending between 1961 and now, or that the concept of transparency and accountability is a defining feature of modern public sector management. As a defender of a Bill and financial papers not brought to the National Assembly in accordance with the Act, Mr Ramkarran and the Finance Minister Dr Singh should be happy that the parliamentary opposition allowed almost all of Financial Paper # 7 to pass, not mock them with references to the “Indian” hospital.

Let me put this scenario to Mr Ramkarran as the CEO of the country’s oldest law practice. His chief finance officer comes to him saying that he has spent, without any evidence whatsoever, not only the $150 million the management had approved for “preparatory studies and designs on a specialty hospital,” but also another $29.1 million on “mobilization payment” for which he now seeks approval. I cannot see Mr Ramkarran approving the additional payment – as he is now asking not only the opposition, but the entire National Assembly – without some serious and penetrating questions and demands for documentary evidence. I know Mr Ramkarran quite well and I am certain that, couched in some good Guyanese language, he would demand, under threat of sacking, a copy of the study to examine its recommendations before any further expenditure is incurred. It troubles me therefore that in what amounts to a similar response by the Opposition, Mr Ramkarran can see some racially inspired undertones.

If Mr Ramkarran had understood the significance of the legislative changes in the 2003 Act, he would not have filled the remainder of the column with a learned but irrelevant discussion on the exercise of ministerial judgment. The space would have been better utilised reminding Dr Singh that as Speaker he had cause to caution the Minister with the message that arrogance and disrespect ought to have no place in Guyanese society, let alone the National Assembly.

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