Financial Lawlessness
Just suppose
Just suppose for a moment that you as a shareholder of DDL or Banks DIH
were presented with a report from the auditors advising you that:
- The Finance Department has not complied with the company's articles
and by-laws requiring them to submit to you for audit the company's
statements of assets and liabilities i.e. what the company owns and what
it owes;
- The statements of outstanding loans and advances made from the
company's main funds and the balances held on deposit as well as
outstanding advances are so inadequate that he is unable to say whether
they are accurate;
- Departmental financial reports are presented to the auditor late or
not at all;
- That monies sent to the regions are not being properly accounted for;
- That many of the systems which have been established to protect the
integrity and reliability of the records, to prevent fraud, to provide
for proper accounting and accountability and generally to safeguard the
assets of the company have been systematically flouted;
- That there is widespread evidence that breaches of the system if not
outright fraud is evident year after year;
- That the number one man in the organisation keeps walking around
asking for (further) proof while his number two states on public
television that he has not read the audit reports months and months
after they have been submitted to the company;
- The management of the company does not even know how much money it has
in close to one thousand bank accounts;
- That funds due to the company are being collected but not paid into
the company;
- That the directors spend these illegally held funds without any
reference to the relevant authority.
- That poor financial management of the company is causing the
shareholders to lose billions of dollars annually;
- That you have been reporting these problems year after year with no
visible attempt by the company to address them.
Suppose further that the directors now come to you and tell you that they
need more money to run the company and pay themselves higher salaries and
exorbitant perks which cost the company millions of dollars in scarce funds.
Speculation and reality
The only thing that is speculative about the above is that it refers to
two of our better- known private sector establishments. The rest is factual
and is drawn from the past four years Reports of the Auditor General on the
accounts of the Ministries/Departments/Regions. It makes sad reading and is
a reflection not only of the Government but of Parliament which imposes
burdensome taxes without any effective attempts to ensure proper
accountability in this country.
PNC-Reform Parliamentarian Stanley Ming who brings to the National
Assembly a private sector paradigm which recognises that income has to be
earned and not legislated as in the case of taxes, is so upset about this
lawless state of affairs that he is threatening to withhold the payment of
taxes and to resign from Parliament if there is no significant improvement.
These bold statements reflect the frustration of those who pay their taxes
and feel completely powerless in how their money is spent and accounted for.
Parliament must not forget the dictum "Taxation without representation
is tyranny" or fail to recognise the immense frustration in the wider
society about the increasing evidence of mismanagement, corruption and
absence of meaningful accountability.
Public Accounts Committee
It is indeed unfortunate that the Public Accounts Committee which from
all appearances is a very private and select group from which even other
Members of Parliament, the press and the public are excluded, is only now
considering the Auditor General's Report for 1999. Since their own report on
the Auditor General's Report may not be issued until in the new year, their
efforts will have come far too late to make any serious impact. More
contracts would have been split to circumvent tender procedures while the
wastage, inefficiencies and illegalities would have continued.
In October 2000, the Public Accounts Committee submitted to the Speaker
and Members of the National Assembly their Report for the years 1995-1998.
At that time the report could be of no than academic interest although it
highlighted some of the more egregious matters raised in the Auditor
General's Report. The explanation offered by the PAC for the late
consideration of the Reports by the Auditor General were as follows: The
delay in having the Committee constituted following the resignation of the
previous Chairman; the Public Service strike in 1999; and the staffing
difficulties at the National Assembly's Secretariat.
It is hard to accept this explanation as anything more than weak excuses.
These reports were submitted to the Minister of Finance and laid before the
National Assembly in reasonably good time though not within the statutory
deadline. Our archaic rules do not require that the report by the PAC be
discussed in Parliament but do impose on the Government a duty to prepare a
response in the form of a Treasury Memorandum outlining the action it has
taken or proposes to take on the issues contained in the Auditor General's
Report. No such Memorandum has ever been issued on any report for the last
eight years.
Financial Mismanagement
Today we look at some serious evidence of financial and cash management
at the national level.
A significant number of bank accounts currently in use, as well as
non-operational accounts were allowed to be overdrawn by large amounts in
contravention of Section 22 of the Financial Administration & Audit Act.
(FAA) These resulted in substantial interest charges being incurred as in
the case of the Guyana High Commission London account which now has a
liability of Sterling 200,212 pounds and outstanding interest of Sterling
1,496,053 pounds. As long ago as 1996, the Auditor General found it
necessary to point out that 'interest charges are several times the actual
overdrafts which is an indicator of the length of time the overdrafts had
been in existence" He cautioned that "unless urgent action is
taken to liquidate the overdrafts, the indebtedness to the bank would
continue to increase significantly"
At December 31, 1999, the Consolidated Fund was overdrawn by $57.110
billion, up from $38.229 billion three years earlier. On the other hand, the
sum total of all bank accounts (including the overdrawn balance on the
Consolidated Fund but excluding the balances on the bank accounts special
projects) reflected a positive balance of $14.101billion. This situation has
been highlighted each year by the Auditor General but no action has been
taken to regularise this situation.
In 1996, the Auditor General reported that the eleven ministries,
thirteen departments and ten regions had a combined total of seven hundred
and thirty-three bank accounts. He recommended the closure of all accounts
with positive balances and their transfer to the Consolidated Fund and the
opening of new bank accounts to avoid contamination with the older accounts.
However, the opening of new accounts has actually led to an increase, not
decrease in the number of bank accounts in operation.
The State continues to provide funding annually to several public
entities even though they do not comply with their statutory duty to submit
audited financial statements. This is particularly true of the town councils
across the country in complete defiance of the Municipal and District
Councils Act, Chapter 28:01 and despite the fact that there are two
ministers in the Ministry of Local Government.
The Contingencies Fund continues to be abused despite repeated negative
comments on this practice. S25 of the FAA Act stipulates that this Fund
should only be used if the proposed expenditure is (a) unforeseen (b) urgent
(c) no other provision exists and (d) the expenditure cannot be postponed
without injury to the public interest until adequate provision is made by
the National Assembly. Proceeds from the Guyana Lotteries are not being paid
over to the Consolidated Fund but are kept in a "special bank
account" held at the Central Bank and used to meet public expenditure
without parliamentary approval. The same is true of the Guyana Defence
Force, the Commander-in-Chief of which is the President and which 'continues
to harbour the belief that the Financial Regulations should not be
applicable to it, especially as they relate to procurement and contracts for
works. The Guyana Forestry Commission is in the same league and has used
funds improperly held to purchase a vehicle for use by a Minister of the
Government.
...To be continued next week.
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