Business Page – December 9th, 2001


Public Accounting and Accountability

-Conclusion

 

Introduction

This week we conclude the series began two weeks ago examining the state of the central governmental accounting and financial information systems. Over the decades central and local government accounting had deteriorated to the point where the books were unauditable. At least since 1992, we can look forward annually to the report of the Auditor General which is delivered to the Minister of Finance around October/November for tabling in Parliament. As a consequence of some recent constitutional amendments, future reports are likely to be delivered to the National Assembly, a sign of the growing independence of the Office of the Auditor General. These all point to improvements and must therefore be welcome.

In the first two parts we identified some egregious examples of bad financial management, poor accounting and indeed some transactions which are clearly in contravention of the law. As a country committed to accounting and accountability we must recognise that while the progress under the PPP/C since 1992 cannot be ignored there is a very long way to go before Guyanese can be satisfied that our books are up to standard.

Cause for Optimism

While this column has expressed grave concern about the state of affairs, there is still cause for optimism. The appointment of Mr. Nermaul Rekha as Secretary to the Treasury and Dr. Ashni Singh as Budget Director has the potential for an excellent team at the Ministry of Finance which is the heart of the government accounting system. The highly experienced Winston Jordan can now concentrate on his role as Budget Advisor and help to make the budgeting process an effective tool of management. As a team they have both the energy and the professionalism to revolutionise the whole public accounting system. What they need is the necessary authority and a clear mandate from the political directorate to do the job.

Every government would like to be seen as accountable and transparent even when they use some rather unhelpful benchmarks. Some of the action the government needs to take may demand greater patience and additional resources than are now available. Other very significant and indeed symbolic action takes no more than the will and the stroke of a pen. Take the Lotto money. That money should legally go into the Consolidated Fund without any deductions or expenditure there from. It is to this Government's discredit that despite repeated concerns from all sections of society not only is this money not paid into the Consolidated Fund but worse, it is used to make selective public expenditure without any reference to the National Assembly. The situation is the same with some of the public bodies such as the Guyana Forestry Commission which continues to operate outside of the law as far its receipts are concerned. Compliance with the law must be a non-negotiable when it comes to public finance to prevent accusations of corruption and impropriety.

Reducing the number of bank accounts

Many fraudulent transactions are done by cheques and the regular and timely reconciliation of the bank accounts is one opportunity for detecting unusual or improper banking transactions. As reported by the AG there are well over eight hundred bank accounts in the name of the government, many of which are dormant and some of which have been overdrawn and are accumulating unnecessary interest. These too can be addressed as a matter of urgency, closing all those which are no longer operational and retaining only those that are necessary. Reconciling all the bank accounts that have not been done for several years may require the accounting equivalent of Hercules since for many of them the source records may simply not be there and the limited resources available could be better expended on ensuring that the newly opened accounts do not go the same route.

Strengthening the Ministries/departments

Many of the ministries and departments of the government have annual budgets considerably larger than some top private sector companies. Yet the accounting resources at their disposal are way below the level in the private sector. While accounting in the public and private sectors have notable differences, the higher levels of both types of organisations require expertise in financial management that are common. There is no reason why professionally qualified accountants would not be able to operate in and contribute valuably in a typical government department. Indeed it is possible that such a person is actually worth more in Government than in the private sector. The chief financial officer in the larger ministries and departments should have the same role as their private sector counterpart with salaries to match.

The Financial Regulations provide for the surcharging of accounting officers for breaches of those Regulations but the Secretary to the Treasury was quoted in the press recently as saying that no such action has been taken recently. Not only are the rules there to be observed but knowing that they will be held accountable will make accounting officers far more careful about how they discharge their duties.

The need for internal auditors

With the limited resources at its disposal, the Office of the Auditor General almost invariably begins their audit some time in the year following the transactions. Good as it might be, there is a limit to the value of an exercise that reviews a transaction that is well over one year old. Most medium to large private sector organisations have well resourced Internal Audit Departments whose staff are on site year round and whose work is planned to complement the work of the external auditors. Their presence can serve as a powerful deterrent against fraud while narrowing the lag between the dates of the transactions and their audits.

While the internal auditor does not enjoy the same degree of independence as his external counterpart, the value of the work can be no less important if the work programme of the internal auditors is planned in conjunction with that of the external auditors.

Revamping the system

While some attention has been given to reviewing and modernisation of the central government budgeting system, there is no indication of similar efforts with respect to the accounting system. The Public Accounts Committee has recommended the complete overhaul of the accounting system including more effective use of computers. New Zealand has a model system and no doubt could be persuaded to assist Guyana either directly or through one of the international organisations.

Tender Procedures

In its report referred to earlier in this series, the Public Accounts Committee referred to the "alarming level of non-compliance with existing Tender Board Regulations". Parliament cannot ignore its own Committee's recommendation for "urgent reforms by way of legislation….. to ensure as far as possible greater transparency, fairness, equity and accountability in the system" It is time that these concerns be put to rest.

Equipping the Auditor General's Office

The Public Accounts Committee has echoed concerns about the staffing constraint confronting the Audit Office, one of the consequences of which is that the Office is forced to contract out most of the work of public corporations and other entities. Had those fees accrued to the Audit Office, then it would be able to operate more as its private sector counterparts and while corporatising its operations. Now that the Office reports direct to Parliament, it is hoped that the required resources would be made available and the Catch 22 unlocked.

Conclusion

The new management team in the Ministry of Finance should take on board the challenge of addressing the weaknesses of our public accounting systems. These weaknesses are costing the country significant losses and facilitate frauds. Parliament too has its role to play. The Public Accounts Committee needs to become more active, seeking outside help if necessary while ensuring that its membership has the capacity to deal with significant financial and control issues. It must insist that the law be maintained and that proper financial practice such as the Treasury Memorandum is issued promptly. Let us hope that Parliamentarian Ming does not have to carry out his threat of withholding his tax payments.