Business Page – April 04, 2004

Laws and the Minister of Finance

 Introduction

According to the Minister of Finance, "the Government [has] enacted the most comprehensive piece of legislation [Fiscal Management and Accountability Act 2003] on budgeting ever formulated in this country." He goes on to say in his 2004 budget speech that the act which he loosely referred to as the new "budget law" provides for a modern legislative framework for managing public finances, and includes a number of provisions of this legislation aimed at widening the scope of fiscal reporting to the National Assembly, thereby fostering transparency, efficiency and effectiveness of public financial and economic management. If only reality could be half as good as the Minister's flowery language, then yes, Guyana would be on the way to achieving the potential my grandmother's father told his wife about in persuading her to come to Guyana.

But we need to look deeper into the speech for some reality. "The Government is currently negotiating with the IDB, a loan of US$32.8M for a project to support the rational and transparent management of its fiscal and financial affairs. Implementation of the project will start later this year." After twelve years in government and billions of a combination of taxpayers' money and loans - which in the long run are one and thesame - the Minister now promises to impose another $6.4B debt burden on taxpayers to bring accountability to this impoverished nation. But that is not all. He informed the nation that the government had secured a grant of US$1M from the IDB to "support the design of the institutional and operational model for proper project cycle management system" - a term that despite the extravagant language begs the question about the model we currently use to meet this objective.

Praise for the budget shortfall

The President in his address last Friday evening praised the Finance Minister and his 2004 Budget team for "coming up" with "a well-put together" National Budget for this year, describing it as one which sets the tone for a massive capital programme that entails billions of dollars to be spent on improving the social sectors in the country. While this column has previously commented favourably on the team at the Ministry of Finance, surely spending billions of dollars in an environment where there is no "institutional and operational model for proper project cycle management system" is a regrettable indictment of those who committed the expenditure. Before rushing to extend praise, the President should have asked for explanations regarding the consistent failure to achieve capital expenditure targets which have been growing and which in 2003 reflected an under-achievement of the budgeted capital expenditure of $22,247.2B, or 22 per cent, similar to the shortfall in 2002.

The crux of our financial problem is a policy of tax, beg, borrow and spend. After all, the press has now joined our politicians in (mis)leading the nation into believing that bigger is better - a not uncommon fallacy. When it comes to public finances this is not only wrong, but is downright dangerous.

We are all aware that lean and clean has been corrupted by greed rather than need, but is the concept dead as well? Must we now accept as normal and proper the creation of new ministries for the less than successful (Messrs Reepu Daman Persaud, Rohee and Sash Sawh), positions for those who served the PPP/C government well (Laurie Lewis, Robert Persaud, Manniram Prashad and Feroze Mohammed), and super salaries for the chosen few? And is it just an oversight that the word 'accountability' was not used by the Minister to speak of the legislation?

But there is another fallacy which appears to dominate the mindset of the politicians and that is, that all one has to do to address a problem is to pass legislation. Hoyte enacted the Offshore Banking Act in 1986 but how many off-shore banks did we attract?

And last year we had the Kidnapping Act but have the police or the DPP applied this in any way and has it been of any effect? And how have we fared since the introduction of the Domestic Violence Act? People and their managers solve problems, not money and legislation.

Unfortunately, it appears that even the President now equates value with huge chunks of money, while the international donor community indulges in a mad spree of disbursing moneys to countries to enable it to extend its loan portfolio and report on its contribution to good governance and accountability in the recipient countries.

The return of the Auditor General's report

The return of the Auditor General's report on the national finances was not brought about either by new law or the PPP/C but by a courageous and determined Anand Goolsarran who was appointed Auditor General by President Desmond Hoyte, and who was willing to challenge the powers in the Ministry of Finance including Minister Carl Greenidge who were unhappy with the intrusive and professional approach signalled by Mr Goolsarran.

I recall an exercise in which I participated more than two decades ago in Grenada along with the Accountant General Angus Smith, ACCA and the Auditor General Godfrey Bain, FCCA.

Broadly, the exercise had as its aim repealing and replacing the Financial and Stores Rules and the Financial Administration and Audit Act which were considered by the Peoples' Revolutionary Gov-ernment of Maurice Bishop as archaic and irrelevant, and for good measure an "unacceptable legacy of the colonial past."

That exercise which did not have any significant incremental cost - we all had our substantive duties - could find nothing inherently wrong with the elements of internal controls existing in those rules and it is embarrassing to admit that the results were little more than cosmetic changes, such as replacing Financial Secretary with Permanent Secretary, and Accounting Officer with Chief Financial Officer.

The Minister has never given any indication of his familiarity with the findings and comments in the annual Report of the Auditor General. However, an understanding of those reports would better inform the Minister that it is not so much that we need more legislation - one is even tempted to call for a moratorium on new legislation pending the implementation of that which has recently been passed - but rather better governance and management, clearly defined and articulated policies, integrity, competence, non- interference by the politicos in the day-to-day administration of the government, and ministers being held responsible for their non-compliance with laws.

Failed legislation

Where is the debt strategy when we beg for debt relief one day and then borrow and inefficiently spend an almost equal amount the next? Would it not be instructive if the Minister in reviewing all the great achievements since 1992 could tell us that we have borrowed externally some US$900M since then, and that despite the usual song and dance of debt write-offs, the internal debt excluding the non-interest bearing debentures has increased since 1992 from $18.9B to $61.9B or 230 per cent, while the Guyana dollar equivalent of external debt, despite all the write-offs, has only reduced from $247.9B to $214.6B, or 13 per cent.

The Integrity Act has failed to arrest the corruption in political and public life due as much to politics as to the general cynicism and widespread corruption in the society. How many money launderers and narco-traders have been placed before the courts let alone put behind bars for blatant infringements of recent laws?

The review of the Auditor General's report will also reflect some other serious cases of laws being completely ignored by past and present ministers, including the very Minister who is now telling us about the virtues of more legislation. Let us look at some of those cases.

In his 1996 report the Auditor General identified the need for the complete re-organisation of the Central Tender Board. The 2002 report stated that the Procurement Act 2002 had received presidential assent, but because of deficiencies therein it was "replaced" in 2003 by another Procurement Act, yet all the Minister could report in 2004 is that "the regulations to accompany the new Procurement Act will be drafted this year."

Next year, no doubt, we will hear that they have been drafted and are being reviewed.

It's the people, not the system

The 1997 report repeated the urgent need for a review of the entire financial management system, and while noting some initial reforms in the budget process, the report emphasised the need for a more comprehensive and all-embracing approach to financial management reform.

This was repeated in the 2000 and 2002 reports with the latter report indicating that the Ministry of Finance was in the process of drafting new legislation to improve the government financial administration.

The Minister would find as well that there are several deficiencies reported by the Auditor General which have to do with people simply ignoring the laws - assured of the absence of sanctions against them.

The majority of ministries/departments/regions violated Section 36 of the FAA Act, which requires all unspent balances as at December 31 of every year to be surrendered to the Consolidated Fund. In some instances, cash books are kept open well into the new year while payments were backdated.

The proceeds of the Guyana lotteries continue to be retained in a special bank account outside the Consolidated Fund, which is a clear violation of the law and which has been abused by the President and his ministers.

Serious deficiencies are reported annually at the Ministry of Home Affairs which in one year transferred unspent balances on three capital programmes to the Deposits Fund bank account, instead of the Consolidated Fund, a serious breach of the Parliamentary approval to incur expenditure; breaches in the Tender Board Regulations at the Guyana Defence Force and the Supreme Court of Judicature; the awarding of several contracts by the Ministry of Agriculture which could not be properly audited because of the unavailability of the related files, advances unaccounted for at the Ministry of Education, large number of the ships' files at the Customs and Excise not available to the auditors, an official of the Ministry of Public Works and Communication being in collusion with certain contractors and several cases of overpayments on a contract as well as several contracts being awarded through a selective tendering process.

Next week, we will conclude this article by highlighting the several deficiencies in the Fiscal Management and Accountability Act 2003, and refer to the number of cases of legislation for which the Minister has responsibility and which are routinely being breached.

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