Public Accounting and Accountability
Last week we reviewed the Report of the Public Accounts Committee on the
accounts of the Auditor General (AG) for the year 1995-1998 and commented on
some of the more worrying findings of the AG during those years in relation
to financial management by the various ministries and departments of the
Government. Today, in the second of this three-part article, we continue
that review and look at some other significant areas that drew adverse
comments from the AG.
Tendering Procedures
Justifiably, this is an area of legitimate concern for several reasons:
the vast sums spent annually on contracts awarded to private contractors
financed out of government revenues and loans require that the country
receive proper value for money; every level of society must be concerned at
the quality of work done by some of these contractors including the Charity
Wharf, roads, bridges and buildings that require re-work sometimes within
months of their completion; and finally for years the AG has been drawing
attention to these failures and there have been repeated calls in and out of
Parliament for a complete re-organisation of the operations of the Central
Tender Board to reflect membership from outside the Public Service e.g. the
professional engineering bodies, trade unions, the Consumers' Association
and the University of Guyana.
Several years ago, with the assistance of consultants, draft legislation
on public procurement was prepared and the issue was also addressed by the
Constitutional Reform Commission. In his 1999 Report, the AG noted that at
the time of the audit, despite an assurance that this would be done, there
was no evidence of action taken to reform the tendering procedures by way of
legislation. No doubt, with no action taken since that time, the AG will
again report on the lack of progress. Here are some of the specific cases
reported on by the AG in his 1999 Report:
1. The tender documents relating to the
award of a significant number of contracts by the Central Tender Board (CTB)
were not made available during the course of the audit. The minutes kept of
meetings held were also found to be deficient. As a result, the basis of the
award of these contracts could not be determined. The reasons advanced by
the manager of the CTB for the state of affairs were as tenuous if not as
ludicrous as those offered by The Public Accounts Committee for the late
consideration of the AG's Reports for 1995-8. The manager of the CTB
attributed this state of affairs to (a) the fire which destroyed the
Ministry of Finance Building in 1998 (b) the lack of a computerised database
and (c) resource constraints, having regard to the large number of contracts
required to be adjudicated upon. The Auditor General is clearly a patient
person for he would be fully aware that copies of the relevant documents
would have been available elsewhere.
2. Simplistic ploys utilised by ministries
and departments include the absence of a system of competitive bidding and
numerous instances of contract splitting to avoid adjudication of the
Central Tender Board. In particular the minutes of the meetings of the GDF
Departmental Tender Board did not make reference to other bidders or the
basis of the award of the contracts, raising doubts as to whether a system
of competitive bidding was followed before contracts were awarded.
3. In one particular case, the Guyana
Defence Force awarded five contracts valued at $4.3Mn. to the same
contractor on the same day for work of the same description. The GDF must
understand that no one, however powerful, is above the law. Numerous cases
of contract-splitting were also reported at the Supreme Court of Judicature
and the high-spending Ministry of Public Works. Another ploy is the award of
contracts to low-balling bidders and the subsequent payment of huge sums as
variations. At the Ministry of Home Affairs no vouchers and supporting
documents were produced to substantiate payments totaling $171.6Mn, and
$48Mn. in the case of the Ministry of Education. At this Ministry there were
three BCM accounts without authority and no supporting documents were
produced to verify the transactions relating to those accounts.
Walking on the edge of the law
The Report indicates that the manipulation of the voted provisions at
several Ministries to exhaust the budgetary allocations is more a rule than
an exception and several instances were noted where cheques were drawn in
January 2000 but were backdated to December 31, 1999 in complete violation
of Section 36 of the FAA Act which provides that all appropriations lapse on
the 31 December and unexpended balances are to be surrendered to the
Consolidated Fund. A number of statutory bodies in receipt of subventions
were also significantly in arrears in terms of financial reporting.
A related issue raised by the AG is the non-compliance with the statutory
requirement that all unspent amounts released to the Ministries, Regions and
Departments be refunded into the Consolidated Fund at the end of the year.
According to the Auditor General 'the main reason for this most
unsatisfactory state of affairs, indeed a serious breach of the Law, was the
general failure to effect reconciliation of the bank accounts so as to be
able to establish accurate balances at the end of the year for the purpose
of effecting such transfers'.
Even the IDB has been fingered for criticism in the Report. The Auditor
General points out that contrary to the legal requirement that the balance
on the Agriculture Research Project Account be paid into the Consolidated
Fund, the IDB signed a Memorandum of Understanding with the government and
the Bank of Guyana that the funds be retained in the Account.During 1997,
five amounts totaling $1.107Bn. were withdrawn from the account to meet
expenditure relating to road rehabilitation but contrary to the MOU no
amounts were paid over to the Consolidated Fund.
In December 1997, quite incredibly, the IDB approved the 'temporary
transfer' of US$2Mn. to facilitate the rehabilitation of the Georgetown
Roads which as the Auditor general noted was not an IDB project. Up to the
time of his Report in November 2000, 'this temporary transfer' had not been
reimbursed.
Surely the IDB owes the people of Guyana an explanation for its conduct
particularly given that the transactions would be associated with general
elections held that year.
Contributions to local organisations
The AG reports that payments totaling $266.9Mn.were made in respect of
departments within the Ministry of Finance and therefore ought to have been
accounted for in the ordinary manner of categorisation. These include
$16.4Mn.for BASS, $10.7Mn.for COMU, $55Mn. for CANU, $84Mn. for the long
defunct State Secretariat and $58Mn. for the Statistical Bureau. The
Government must be aware of concerns about the legality of some of these
bodies and recognise that by these allocations it is actually reinforcing
those concerns.
Conclusion
It is clear that the national accounts are in a serious state and that
taxpayers do not get value for money. Considerably greater efforts need to
be demonstrated by the government, Parliament and the Public Accounts
Committee for anyone to take them seriously. Grave as the findings are, the
Auditor General noted for our benefit that his Report should not be relied
upon to reflect the results of a comprehensive review of the financial
operations of the Government. He considers such a review desirable and
indeed sees this as the "intention of the Law'. However, in view of the
depleting staffing situation in the Audit Office, that Office could adopt
only a selective approach in view of the timeframe within which it has to
report to the National Assembly.
There is no question that the government, probably more than any other
employer in Guyana is faced with the losing battle of recruiting and
retaining adequate numbers of suitably qualified staff. The ministries,
departments and agencies need such staff not only to perform routine
accounting functions but also to facilitate proper internal controls and the
execution of the internal audit functions in these bodies. As the AG points
out the absence of internal audit departments in large ministries continue
to militate against an effective system of internal control and has
contributed significantly over the years to the deterioration in financial
management at both the ministry and central levels.
Next week we will make specific recommendations to address at least
some of the problems.
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