Business Page – January 05th, 2003

A Tale of Bad Accounting

Report of The Auditor General 2001


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 the report.

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.

Discrepancies Continues

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 February 1998.       

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...