Business Page – January 12th, 2003

A Tale of Bad Accounting

Report of The Auditor General 2001 - Part 2


This week’s Business Page concludes the review of the Report of the Auditor General (AG) on the accounts of the Ministries /Departments /Regions for the year ended December 31, 2001 which was started last week.

The Consolidated Fund

Under the country’s constitution all revenues are to be paid into the Consolidated Fund (CF) and all expenses met therefrom. This would make the CF the most important account of the government. Despite this, the bank account has not been reconciled since February 1988, a point recurrently made by the Auditor General who cautions that the failure to reconcile bank accounts ‘can lead to the perpetration of serious irregularities without detection’. The Report points out that some efforts are being made to address the problem but that the approach and the process being employed will not yield reliable results.

The CF was overdrawn at the end of 2001 by some $63.7Bn., an increase of $41.3Bn. since 1995!! Not only has the overdraft gone up but the net positive balance on all the bank accounts has gone the other way – a decrease from $22.1Bn. in 2000 to $ December 31, 2001. It is worth noting as well that the Report cautions that given the level of resources at the disposal of the Accountant General, the Non-Sub-accounting bank account which has a balance of $13.2Bn. has become unmanageable and recommends the transfer of the balance to the Consolidated Fund. Despite the sums involved, the Minister of Finance does not appear to regard this as either urgent or important.

At the Ministry of Public works and Communications, four senior officers of the Central Accounting Unit have been working on reconciling bank accounts of the Ministry since 1996. However after incurring expenditure of $851,891 in overtime, the reconciliations are still not up to date. 

Readers will appreciate that cash and bank balances are the most liquid of assets and most easily susceptible to manipulation. The government’s failure to arrest this situation is perhaps its most egregious example of poor financial management.

Repair or Buy?

The Report notes that the Office of the President spent $23.1 million over the last three years on repairs and maintenance of 17 vehicles despite earlier recommendations by the AG to dispose of these vehicles. Similarly the Ministry of Information spent $1.7 million on a single vehicle while the Ministry of Public Works spent $18.5 million on 18 vehicles over the same period. The AG noted that the repair costs in some cases for vehicles exceeded their duty free prices.

Except because of limits on capital expenditure, it is hard to understand why the Minister of Finance would allow such a situation to persist particularly since it only increases the deficit on the current account.

Multiple Contracts

The Report highlights the fact that repairs on the five buildings at the Office of the President were executed under sixty-six contracts valued at $3.6Mn. while the maintenance of the Amerindian Hostel was executed by sixty-four contracts valued at $2.9Mn. The same pattern prevailed in several other entities.

In the case of the Ministry of Agriculture five contracts valuing $4.8 million were awarded to the same contractor (name not stated) without competitive bidding. At the Ministry of Public Works and Communications, eleven contracts valuing $4.2 million were not awarded through a system of competitive bidding while numerous contracts were also split to avoid submission to the Tender Committee. The Report also notes that in the same Ministry, a compensation package of US$20,300 plus a vehicle and other reimbursable per month was paid to a road safety consultant without Cabinet’s approval. This contract was initially for one year but was extended for another.


The Government granted remissions of duties totaling $16.33 billion (2000 - $13.2 billion) to various sectors of the economy, an increase of 23.7% following a 75.13% increase in 2000. The remissions in 2001 represented 90.2% of the actual collections (2000 - 69%). The Auditor General reports that he was unable to verify $1.54 Bn. of the remissions in 2001 since the records for the period February 13 to April 4 were not produced for audit examination. The issue of remissions has been a serious area of concern among the private sector and the political opposition and was in fact addressed in the draft Investment Act prepared for the private sector. The Government however, rejected the attempts to control and make more transparent such remissions which have increased dramatically over the past few years.

The Guyana Revenue Authority received in 2001 some $1.2Bn. to meet its expenses, an increase of  16.1% over 2000. By contrast collections by the GRA fell from $38.1Bn. in 2000 to $37.8Bn. in 2001. The Report also notes that no report has yet been tabled by the Minister of Finance for the Authority which came into operation on January 27, 2000. An annual report is required to be tabled in Parliament within six months of the close of the financial year.

Review of System

The AG recommend urgent review of the financial management system as the present system which has been in existence since colonial times is out of sync with the modern developments. While the review is obviously desirable, it will only make sense if the people or groups responsible for the execution have regard for systems and models. One does not need a system to prevent the GDF and others from splitting contracts to avoid going to the tender committee. Instead of imposing sanctions, Cabinet which is not highly regarded for its financial literacy and respect for systems subsequently ratify such improper transactions. Who then is more guilty, the GDF or Cabinet?

Auditor General’s Conflict

The AG is responsible for reviewing and reporting on the accuracy and legitimacy of its own financial transaction creating an obvious conflict of interest. The new draft Audit Act makes provision for independent auditing of the Office but this has been held up at Cabinet level. Business Page suggests that the AG refuse to undertake such an audit which will always be regarded as suspect regardless of the glass ceiling or Chinese wall he may set up in his audit arrangements.

Very Poor to Fair

There are no quick fixes to the problems of financial management which seem to be rooted in our culture. The massive irregularities reported by the AG are merely symptoms of more fundamental problems within our economic, social and political systems. The establishment of effective Internal Audit Departments within the Ministries, Departments and Regions recommended by the Report would be a step in addressing some of the problems in their early stages. However, a wider level, we need a massive cultural shift over a sustained period towards a culture of accountability, integrity, professionalism respect, political stability, maturity good governance etc. to solve the current dilemma.  We cannot ignore the fact that none of our political parties has shown any commitment to accountability within their parties feeding the culture in the public sector.

In “Good to Great,” a book in which James Collins examined why some companies make the leap to greatness and others languish in the doldrums, he stressed the importance of having the right people on board  you need the right people on the bus, get the wrong people off, seat the right people in the right seat, have a good driver and then you will figure where to drive the bus.   

While we can only hope for our country to be good and think about great later we can use James Collins’ analogy - we need a good system of governance (the bus), the right people (policy-makers, executives and effective watch-dog bodies, including the political opposition), seat them correctly (not square pegs in round holes) and a good driver (President and other senior officials) to make the leap not from “Good to Great,” but from “Very Poor to Fair.” That itself would be a remarkable achievement given where we are now.


Year after year, the AG reports on the same weaknesses only to have his Report and recommendations ignored. As we pointed out last year, an independent auditor would certainly consider resigning his position if the client shows no interest in correcting major deficiencies. The AG has no such option and must continue to demonstrate the same level of professionalism in the face of extreme frustration. This frustration is shared by the rest of the society including Members of Parliament. Readers will recall that PNC-R Mr. Stanley Ming was so upset about the lawless state of the management and affairs of Government finances that he publicly announced to withhold payment taxes and to resign from Parliament if there was no significant improvement in these matters in subsequent years. It would be interesting to have Mr. Ming’s reaction to this Report.

Under our Constitution the President and his Ministers “solemnly declare that [they] will bear true faith and allegiance to the People of Guyana, that [they] will faithfully execute the office of ………………………. without fear or favour, affection or ill-will and in the execution of the functions of that office [they] will honour, uphold and preserve the Constitution of the Co-operative Republic of Guyana.” The Report of the Auditor General suggests that the President and all his Ministers are guilty of breaching their oath of Office. Integrity and competence cannot be compartmentalised and this Report can only feed dissatisfaction among citizens who crave for law and order in all areas of public and private life.