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.
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