Introduction
Last week, we examined the 2011 Auditor General’s report on a number of financial statements comprising the audited public accounts and we noted the following:
- Budget Outcome and Reconciliation Report: The FMA Act requires a detailed explanation, as part of the annual consolidated financial statements, of the significant differences between annual estimates and out-turn. However, the reconciliation report did not provide any such explanation. Despite this, the Auditor General concluded that the statement was properly presented in accordance with the Act. Although the situation had not changed in 2011, this was quite in contrast to the position the Auditor General took in his 2010 report in relation to compliance with the Act;
- Receipts and Payments of the Consolidated Fund: The old account had an overdraft of $46.776 billion due to the failure not only to maintain a proper cash book since 1988 but also to reconcile the account. The new account had a positive balance of $535 million. This gives a net overdraft of $46.241 billion. It is evident that not all public moneys have been paid over to the Consolidated Fund, some of which were kept in other bank accounts. The Auditor General’s assessment was that, had the necessary transfers been made, the Consolidated Fund would have reflected a positive balance of $58.776 billion. We suggested that the two accounts be merged and appropriate measures taken to ensure that all moneys that are due to the Consolidated Fund are paid over to it. If NICIL ceases to retain the proceeds of the privatization of State assets as well as dividends and other State revenues, the balance on the Consolidated Fund would be significantly higher; and
- Auditor General’s opinions on the financial statements: We found a number of inconsistencies between the conclusions drawn in the body of the report and the opinions issued on the financial statements.
Today, we continue our discussion of the report by examining the other audited financial statements comprising the public accounts.
Receipts and Payments of the Contingencies Fund
Under the sole control of the Minister of Finance, and with no delegation of authority, the Contingencies Fund can only be used to meet urgent, unforeseen and unavoidable expenditure for which: (a) no provision or insufficient provision exists; (b) no reallocation of funds is possible; and (c) expenditure cannot be deferred without injury to the public interest. It is in effect an emergency fund to be used only in certain circumstances, such as a national disaster similar to the 2005 floods, at a time when it is impracticable for Parliament to convene to approve of additional funds. It follows that any use of the Contingencies Fund to meet routine expenditure would be a violation of not only the FMA Act but also the Constitution. However, successive Ministers have found it a more expedient proposition to use the Contingencies Fund rather than to seek Parliament’s prior approval for supplementary provisions in view of the need to properly justify the proposed expenditure, hence the abuse over the years to which the PAC referred.
An examination of the Statement of Receipts and Payments of the Contingencies Fund indicated that the Minister authorized 80 advances totalling $7.691 billion, compared with 47 advances totalling $2.074 billion granted in 2010. This gives 70 per cent and 371 per cent increases in quantity and dollar value respectively.
In his 2010 report, the Auditor General stated that previous reports highlighted continued abuse of the use of the Contingencies Fund and that “the instances which did not meet the eligibility criteria, support the opinion that the abuse continued during 2010”. He then proceeded to list eleven instances that appeared to be routine expenditure. Fast forward to 2011, despite the significant increase in the number of advances granted, the Auditor General was more circumspect in his assessment when he stated that:
Previous reports highlighted instances where the criteria were not fully met for the granting of some advances, however, it has been observed that there has been a closer monitoring of advances issued out of the Contingencies Fund resulting in only four advances totaling $1.146 billion listed below not meeting the criteria.
The word “abuse” was dropped and replaced by “criteria not fully met”. It is also not clear how closer monitoring of advances issued to some 20 Ministries/Departments/Regions could result in a reduction in the number of advances not meeting the eligibility criteria. This is only likely to happen if there is closer monitoring of budgetary allocations against actual expenditure, and timely measures taken to seek supplementary provisions if approved funds prove inadequate. On the contrary, closer monitoring of advances issued is likely to result in an early replenishment of the Fund, and not a reduction in the number advances that do not meet the above criteria.
We know that 2011 was an election year and that Parliament was dissolved three months before the national elections. The Constitution states that where Parliament has been dissolved before any provision or insufficient provision is made, the Minister is authorized to withdraw “such sums from the Consolidated Fund as he may consider necessary for the purpose of meeting expenditure on the public services until the expiry of three months…” Despite this, 39 advances were granted from the Contingencies Fund in the three months before the national elections. In particular, 26 advances were issued to the Ministry of Home Affairs alone, most of which took place within days of the national elections.
In addition, 36 advances were granted during the period March to August 2011 to various ministries and departments. This was a period when Parliament was in session, but there was no evidence that urgent and unforeseen circumstances had existed to justify drawing funds from the Contingencies Fund. If budgetary allocations were insufficient, then supplementary estimates should have been sought.
Current assets and liabilities of the Government
While the Government had a healthy cash balance of some $63 billion, its liabilities totalled approximately $100 billion, resulting in net current liabilities totalling $37 billion. These liabilities relate mainly to the issue of Treasury Bills, the proceeds of which are kept in a special account styled “Monetary Sterilisation Account” that was set up in 1993.
Statement of the Public Debt
The public debt stood at $378.850 billion as at 31 December 2011, compared with $338.433 billion as at the end of 2010, an increase of $40.417 billion. External debt accounted for $227.951 billion or US$1.139 billion, compared with $191.394 billion or US$956.990 million at the end of 2010, an increase of $36.557 billion or US$182.785 million. This is well within the $400 billion limit set by the External Loans Act.
The Auditor General listed seven new loans amounting to $24.992 billion which were received in 2011 and that the related agreements for only five amounting to $17.004 billion were laid in the National Assembly. Included in the list was a loan from Venezuelan Government under the PetroCaribe Agreement in the sum of US$45.736 million. However, the schedule of the public debt indicates that there were 35 shipments of petroleum products valued at US$108.738 million, each having its own repayment terms. This apart, it would have been more helpful if the Auditor General had done a reconciliation and had explained how the increase of $36.557 billion in the external debt was accounted for.
Schedule of issuance and extinguishment of all loans
There were 19 loans with balances totaling $29.570 billion that remained outstanding as at 31 December 2011. Except for the Guyana Power and Light, these loans were coming forward for several years. GPL accounted for $22.919 billion or 77.5 per cent of this amount. This is in addition to subsidies GPL might have received over the years. In 2011 alone, GPL received loans totalling $15.966 billion. Given the financial difficulties GPL is currently facing, the possibility of repayment of the loans in the foreseeable future appears doubtful. Most of the other entities are no longer in existence. It would therefore be necessary for a financial paper to be tabled in the National Assembly requesting approval for a write-off of the amounts involved.
The schedule also includes LINMINE with a balance of $5.666 billion. The Government divested 70 per cent of its interest in the company. In response to the Auditor General’s comments about the doubtfulness of the recovery of the above amount, the Ministry of Finance stated that “payments to LINMINE were not loans but rather subsidies for community power within the region”. If this was the case, LINMINE should not have been included in the schedule of loans, and a prior year adjustment should have been to expenditure since the subsidies were granted prior to 2011.
Financial report of the Deposit Fund
The FMA Act provides for the Minister to establish one or more Deposits Funds into which public moneys are paid pending repayment or payment for the purpose for which the moneys were deposited. According to the Auditor General, the Deposit Fund was not used in 2011, and all receipts and payments were made through the Consolidated Fund.
The financial report of the Deposit Fund, however, showed deposits totaling $4.211 billion while advances amounted to $9.959 billion. The above amounts were arrived at based on information provided by Ministries/Departments/Regions since the records of the Ministry of Finance could not be relied on. The Auditor General indicated his difficulty in verifying these figures, and he quite rightly disclaimed his opinion in the financial report on the Deposit Fund. It is now left to the Ministry of Finance to clean up what appears to be a very messy situation that has been coming forward since 1992 and earlier periods.
Schedule of Government Guarantees
This schedule is the same as that of contingent liabilities. The Guyana Transport Services Ltd., which is indebted to the Bank of India in the sum of $45.368 million, is no longer in existence.
The indebtedness should therefore be transferred to the public debt. In relation to Guyana Telecommunications Corporation, which is indebted to ITT World Communi-cations Inc. in the sum $165.272 million, it is not clear how this matter was dealt with when the Corporation was privatized. The Ministry of Finance may wish to look into this before deciding whether to transfer the amount to the public debt.
Next week, we will review the Auditor General’s report as it relates to Ministries, Departments and Regions.
