Business Page – June 9th, 2002

Introduction

Business Page today concludes its review of the Report of the Auditor General on the Accounts of the Ministries, Departments and Regions for the year 2000. While the whole country reacts in various ways to the crime wave which took a decidedly serious turn following the February 23, 2002 jailbreak, there appears little or no interest in the continuing poor quality of the financial management of the country and the unacceptable state of the government accounts. The Stabroek News has tried to generate some interest while the state-owned media appear unaware of the existence of the Report, more interested in announcements of unbudgeted spending by the President on his Cabinet outreach in Berbice. The Report reflects a level of financial management not usually associated with a democracy or an educated society. While President Jagdeo calls on the nation to close ranks and work with the Government to deal with the crime situation, he in particular and his government generally have shown a most unfortunate disregard for the laws and practices of financial accountability.

Business Page commends the Office of the Auditor General for its persistence in bringing to the nation’s attention the serious deficiencies in the accounts of the public sector. Timeliness is an important characteristic of financial information and it is therefore regrettable that the Report is published some sixteen months after the end of the financial year to which it relates. Hopefully the Accountant General will ensure that the accounts are ready for in good time and that the AG’s Report for 2001 will be ready before the statutory deadline of September 2002. 

New Act, New Team

The government was committed to put in place a new Audit Act by May 1 of this year and a final draft is in circulation. State audit agencies around the world have been evolving from rudimentary voucher auditing to exercises designed to establish accounting accuracy, effective financial audits, economy in government, rooting out corruption and programme evaluations. The OAG clearly has a long way to go but for it to achieve that level, it will require financial and technical resources, fundamental changes in the law and very significantly, a commitment by the government to proper management of the country’s scarce financial resources. The recent constitutional changes include some reform of the OAG to make it independent of the executive on which it is required to report. It is now to operate more as part of the legislative arm of the State instead of to the Minister of Finance who had the extra leverage of the purse strings to exert influence if not pressure on the Office. Changes in the law governing the Audit Office will require corresponding changes in the way the PAC operates but there is no indication that these are being considered.

The optimism expressed in this column on December 9, 2001 arising from what is considered a quality team in the Ministry of Finance comprising Mr. Winston Jordan as Budget Advisor, Mr. Nermaul Rekha as Secretary to the Treasury and the appointment of former Deputy Auditor General Dr. Ashni Singh as Budget Director, is beginning to wane. President Jagdeo clearly will not allow the Ministry of Finance to control expenditure spending or to respect his own Government’s Budget as is so evident in his spending pronouncements. Dr. Singh would find the discipline which he brought from the Office of the Auditor General severely tested as more and more he discovers that the Budget is really not what it should be. It must challenge both him and Mr. Rekha that they are part of a system whereby the government continues to breach the Constitution, other relevant legislation and the Financial and Stores Regulations. Unfortunately they cannot look to their nominal Minister for protection since he has the responsibilities as the Minister without the powers and authority which have been retained and are exercised by President Jagdeo.

Treasury Memorandum

This column has drawn attention to the requirement for what is called a Treasury Memorandum prepared by the Secretary to the Treasury indicating how the concerns raised by the Report will be addressed. There has been none since the re-appearance of the Annual Report under the PPP/C which diminishes the credit which they otherwise deserve in this matter. Business Page continues to hope that the Ministry of Finance will take the initiative and do what it is required to do. The top people in the Ministry of Finance will earn the country’s respect by demonstrating a higher level of professionalism by doing what is right and necessary than sheepishly following instructions from their political bosses.  

Usually the next step in the Report is its consideration by the Public Accounts Committee of the Parliament which is chaired by the opposition PNC. Over the past few months the PNC MP’s have not been attending Parliament and whether and when the 2000 report will be considered by the Committee is uncertain. In any case, with its limited powers and resources there is little that the PAC can now do about the Report other than corrective future action and perhaps recommend penalties for offenders.

Financial Management And Economic Performance

It would be naïve to think that there is no correlation between the financial management in the government and the performance of the economy or that it is only in the area of financial management that there is such a worrying low level of achievement. When President Jagdeo took over the Ministry of Finance from Mr. Asgar Ally, the economy had been recording several years of impressive growth and in his first Budget Speech as Finance Minister in 1996, President Jagdeo had said that the Budget was designed with a view ‘to boosting progress that is already underway”. It turned out that 1997 was the last of the good years and while elections-related activities certainly contributed to the economy’s underperformance, there was little that was done to counteract the negative adverse political and social developments.

There has been little effort to stem the wastage and corruption from a tendering system which no doubt has cost taxpayers billions of dollars. The government has played politics with the tax system and gives exemptions and reliefs without any consideration of cost. For example, total import and consumption tax exemptions which in 1997 amounted to $15.9Bn or 50% of total taxes collected in that year have grown to $22.6Bn. in 2001, representing 59% of total taxes. Since the major portion of this represents remissions granted by the Minister of Finance and since the exemptions represent an increasing percentage of GDP it makes idle and suspect any talk of widening the tax net. Something is wrong when the percentage of taxes paid by employed persons double over a 9-year period while the contribution of company taxes remain constant or in which the average tax paid by the employed person is several times the average tax paid by the self-employed.

Broken Commitments

The Government has rejected all efforts at removing political control over the tax system under which the President (whose income is by law exempt from Income tax) can waive taxes and grant tax holidays without any form of accountability. The draft report of a study just done by the IMF has been submitted to the Government. It is not known whether copies have been made available to the private sector, the labour movement or any other stakeholder or what its contents might be. What is likely however is that the patience of the international financial institutions must be wearing thin as the country reneges on one commitment after another on key issues such as the investment code, procurement reform, the Audit Act and meaningful tax reform, all areas of economic and financial importance. Our business community has to recognise that while they may individually negotiate with the politicians for special treatment, they do so at the cost of a better-performing economy which is hardly in their longer-term interest. 

All Forms of Lawlessness Are Bad

As the country grapples with the new wave and level of criminal activities, the Government properly asks society to denounce those activities. As a column dedicated to business and the economy, Business Page utterly rejects any activities which adversely affect the economy, place at risk the well-being of our citizens or threaten the social fabric of the country. The country badly needs a climate where every Guyanese feels secure not only in their home but at the place of work and indeed throughout Guyana. But the Government must recognise that all forms of lawlessness are bad and that it derives its authority to call for lawful behaviour only by conducting itself and the country’s business properly, transparently and lawfully.

It has to start by showing not only respect but concern for the findings of the Auditor General. It must be prepared to take action against those accounting officers who breach the rules while allowing them the independence to do their work. It must demonstrate an interest in efficiency, savings and productivity and reject and deal condignly with corruption, waste and incompetence. Too many ministries with an over-abundance of advisers and little work to do, tax the resources of the country. The Government must seriously examine the need for them.

It must immediately cease using the Lotto money as slush funds and stop the abuse of the Contingencies Fund. The President must confer on the Minister of Finance the necessary authority to go with his responsibilities failing which the Minister should resign. The Ministry of Finance must bring some order to the several billions of dollars scattered in so many bank accounts while others are in overdraft. The President must demand from Ministers and particularly those big-spenders a higher standard than they have demonstrated so far - or he must replace them. The Government must commit itself to presenting not only to the Auditor General but to the nation a clean set of financial statements in a timely manner. It must feel guilty about accusing some local authorities and trade unions about improper accounting while its own house is in a similar mess. It must stop using the tax system to reward those of whom it approves thereby making the playing field more uneven. It must strengthen the Audit Office, reform the tender procedures, give the PAC more authority and treat its own Budget with more respect. It must resolve that subsequent reports of the AG have less to complain about and Business Page less to write about!