A Tale of Bad
Report of The Auditor
Business Page today begins
its review of the Report of the Auditor General on the accounts of the
Ministries/departments/regions for the year ended December 31, 2001. When
one considers that the Auditor General Mr. Anand Goolsarran is on leave, the
achievement of the acting Auditor General Mr. B. Balram and his team is all
the more remarkable. Readers will recall that the report on the year 2000
was issued on April 30, of this year and was reviewed in these columns on
May 19 & 26 and June 3, 2002) The review of the reports continues to
depress confirming as it does the little regard shown for proper financial
management at all levels in the society. While we must be seriously
concerned by the magnitude of the problem at the level of the central
government we cannot ignore the absence of proper financial management at
the level of local government, statutory bodies and trade unions. Clearly
mismanagement and poor accountability are now rooted in our culture making
it all the more difficult for any one sector to criticise any other.
By way of example, the
report indicates that the last year audited for Rose Hall Town Council was
1981 and that ‘audits are in progress for 1994-1998” while for Linden
the last year audited was 1984 and the report notes “no financial
statements for later years.” Georgetown and Corriverton have both been
audited to 1998 and audits are in progress for 1999 – a significant
improvement for the Georgetown City Council. The report also identifies
those statutory bodies the audits of which are in arrears for five years or
more. These include the National Science Research Council (1982), Sugar
Industry and Labour Welfare Fund (1993), the University of Guyana Pension
Scheme (1994) and the State Planning Commission (1991). It seems that the UG
Pension Scheme will run foul of the Insurance Industry Act while it would
otherwise be unthinkable that the highest learning institution in the
country can be so careless about its workers’ pensions.
Over the years, Business
Page has shared the frustrations and sentiments of the report at the
financial mismanagement and blatant disregard for public funds and
established controls (not sure if we can called them established controls
anymore). It seems clear that in Guyana nothing shocks anymore and the
report appears to have no impact on those whose stewardship it reviews and
the rest of the citizenry all of whom are directly or indirectly affected.
Even the Public Accounts Committee, perhaps the only functioning
parliamentary body seems to be overwhelmed by its inability to bring about
any change. Business Page understands that the PAC has not even completed
its review of the 2000 report while the Ministry of Finance blatantly
disregards the requirement that it publish a Treasury Memorandum indicating
the steps it proposes to take in relation to the deficiencies identified in
If readers were to go back
to earlier reviews done by Business Page of previous reports, they would
notice the monotony with which the same cases of poor accounting, fraud and
mismanagement take place year after year within the same ministries,
departments and regions. They would notice for example that the number of
bank accounts which are unreconciled keep rising, that we continue to fund
several public entities which do not meet minimum standards of
accountability, the abuse of the Consolidated Fund, splitting of contracts
to bypass tender rules, misuse of the lotteries monies and the complete
disregard for the Financial Administration & Audit Act by just about
every Ministry, Department and Region.
The Audit Report
An auditor carries out his
work with the objective of expressing an opinion on the financial statements
which he has audited. He does this by taking what he considers would be a
representative sample of transactions and tests them for accuracy,
authenticity, and authorisation by way of approved procedures. If these
conditions are all or substantially met he will issue what is referred to as
an unqualified opinion. If not he would qualify his opinion, or state that
he is unable to form an opinion or that the financial statements do not
present a proper picture. In the case of the 2001 statements the AG
specifically mentioned his inability to satisfy himself with 1) Statement of
Outstanding Loans and Advances from the Consolidated Fund, 2) Balances held
on deposits by the Accountant General and 3) Statement of current assets and
liabilities of the Government.
The certificate is identical
to the preceding two years while the discrepancies and shortcomings
identified in the body of the Report are different only in the higher number
of cases and the larger sums involved.
Timeliness of The Report
The report was submitted to
the Speaker of the National Assembly on October 31, 2002, one month later
than the statutory deadline of September 30, 2002. This is a commendable
effort from the AG’s office taken into account the limited resources at
its disposal and the fact that none of the ten (10) statements and accounts
including the Statement of the Receipts and Payments of the Consolidated
Fund, the Statements of Public Debt and the Current Assets and Liabilities
of the Government on which he reports on was submitted to AG within the
required timeframe of four months after the year-end.
However, at least ten months
would have elapsed before the findings are reported thereby reducing the
extent to which discrepancies could be acted upon and recommendations
implemented. A critical part of the process of addressing the discrepancies
is the operation of the Public Accounts Committee but its failure to
complete its work on time and make strong recommendations on the
shortcomings is almost fatal. As long ago as November 25, 2000 Business Page
had called for changes in the terms of reference of the PAC if its work is
to have more than academic interest. Regrettably, nothing appears to have
been done while the nation can only watch helplessly.
What was particularly
striking about the 2001 report was the similarity with the findings reported
for the year 2000 – the same Ministries/Departments/regions and the same
problems except that the numbers are larger.
Here are some of the issues identified in the Executive Summary
presented by the Auditor General.
The Consolidated Fund was overdrawn by $63.726
billion (2000 $54.263 billion) at the end of 2001 while the sum total of
Government bank accounts (including the overdrawn balance on the
Consolidated Fund but excluding the balances on the bank accounts of special
projects) reflected a positive balance of $15.983 billion (2000 $22.143
billion). Despite the Consolidated Fund being the single most important
account of the Government, the bank account was not reconciled since
Significant breaches in the Tender Board Regulations
at the Guyana Defence Force and the Supreme Court were noted. In the case of
the GDF there was lack of a system of competitive bidding and numerous
instances of contract-splitting. In the case of the Supreme Court
contract-splitting and “apparent misappropriation of funds’ were
uncovered in Georgetown and other magisterial districts due to the absence
of proper segregation of duties and failure to reconcile bank accounts.
The report also identifies as a “serious breach of
parliamentary approval” the transfer by the Ministry of Home Affairs of
the unspent balances totaling $18.8 million on five capital programmes to
deposit accounts instead to the Consolidated Fund. It is hard to contemplate
the state of mind of anyone who can conceive of such an abuse.
The majority of Ministries/Department/Regions
violated Section 36 of the Financial Administration Act (FAA) which requires
all unspent balances as at December 31 of every year be surrendered to the
Consolidated Fund. Cashbooks were kept open until January 23, 2002 while
payments were systematically and deliberately backdated to December 31,
2001. In Enron this was called their time machine.
The report notes that while a total of 1,003 cargo
vessels arrived in port in 2001, completed ships’ files in respect of only
220 (22%) were made available for audit examination. The remainder are
reported to have been “still at the various transit sheds”. In relation
to the Internal Revenue Department, of the 3,712 registered companies, less
than 10% (327) had submitted annual returns.
The Ministry of Education continues to misuse the
main bank account to make advances and the report points out that for the
period 1997 to 2001, 565 advances totaling $49 million remained outstanding.
Ninety (90) payment vouchers for a total of $19 million or an average of
$211, 111per voucher were not presented for audit examination.
And at the Ministry of Public Works and
Communications, there were several instances of overpayments on contracts.
The report notes without identifying the contractor that a contract valued
at $179 million for sea defence works was treated as a variation of an
ongoing contract for a smaller value of $179 million instead of being
awarded by a process of competitive bidding.
The majority of the advances granted from the
Contingency Fund did not satisfy the criteria for such advances. This was
because recourse to the Contingencies Fund was an easier and more expedient
proposition than seeking Supplementary Estimates from Parliament. Similarly,
the Ministry of Finance continues to misuse the proceeds from the Guyana
Lotteries which it retains in a special bank account. Of the $1.7Bn.
received so far, only $211.7 M. has been paid into the Consolidated Fund
while payments of $1.5Bn. have been made out of the special (read unlawful)
account without parliamentary approval.
To be continued...