The International Anti-Corruption Day will be observed on Wednesday, 9 December. According to the United Nations Office for Drugs and Crime (UNODC), to mark this occasion Governments, the private sector, non-governmental organisations, the media and citizens around the world will be joining forces to fight this cross-cutting crime which undermines social and economic development in all societies. The campaign, jointly developed by the UNODC and the United Nations Development Programme, is held under the theme “Break the Corruption Chain” and aims to support a positive and pro-active stance against corruption through a number of means, including;
Networking and mobilising people to action, involving organizing public meetings and rallies, making speeches, distribution of campaign materials, setting up petitions, and organising workshops and other events;- Raising your voices and advocating, including the use of newspaper articles and advertisements, and participation in televised interviews; and
- Speaking out on social media, including adopting the logo as your picture profile, like and share our Facebook page, and using content from the social media pact to raise awareness around the International Anti-Corruption Day.
To observe this event, the Transparency Institute Guyana Inc. has organized its third annual march from the site of the Umana Yana to Parliament Buildings, commencing at 10.00 a.m. on Wednesday. Participating in the two previous marches were key members of the then Opposition, while officials of the previous Administration abstained. One hopes that both sides of the political divide will see it fit to support the event. After all corruption affects all of us, but more especially it often benefits the rich and powerful at the expense of the poor, the vulnerable, the unemployed and other disadvantaged groups.
So far, we have carried four articles on the 2014 Auditor General’s report. The last article dealt with the key findings relating to the Office of the President and to a lesser extent the Guyana Revenue Authority. This article concludes our discussion on the topic by looking at the Ministry of Finance. The Auditor General has not commented much on the operations of this Ministry, despite the enormous amount of funds expended.
Revenue and expenditure
Total revenue and expenditure (capital and current) for 2014 amounted to $25.880 billion and $21.879 billion respectively. In terms of current revenue, only $200 million was received by way of dividends from the National Industrial and Commercial Investments Ltd. (NICIL). Dividends from government’s investments in public corporations and other entities were retained by NICIL and treated as its revenue, in violation of Article 216 of the Constitution. However, there was no comment from the Auditor General in relation to this violation. The Government had also budgeted to collect $18.563 billion (equivalent to US$92.816 million) from the Guyana REDD+ Investment Fund. However, actual collection was $1.014 billion (equivalent to US$5.072 million).
In terms of current expenditure, Other Employment Costs accounted for $4.405 billion but there was no analysis of this expenditure, a greater portion of which would have been in relation to salary increases for public servants and payments to contracted employees. In a previous column, I had stated that, like the Office of the President, more than 50% of the employees of the Ministry were employed on a contractual basis. One hopes that the results of the work of the Commission of Inquiry into the Public Service will see an end to this practice and a unified system of pay and grades reintroduced. The Public Service Commission, the constitutional agency responsible for the recruitment of all public servants, needs to get its act together to ensure transparency, equity and fairness in government hiring. This is a key requirement of both the Inter-American Convention Against Corruption and the United Nations Convention Against Corruption to which Guyana is a signatory.
Electricity charges accounted for $4.007 billion. Given the size of this expenditure, some analysis and commentary from the Auditor General would have been necessary. Unfortunately, this was not done, and one is left to wonder which other entities were involved in the payment of electricity charges from this line item.
In relation to subsidies and contributions to local organisations, which accounted for $8.540 billion in expenditure, the Auditor General noted that the Bureau of Statistics, the Ethnic Relations Commission and the Rights Commission have not been producing audited financial statements. In addition, the last set of audited accounts of the Guyana Revenue Authority, which received a subvention of $4.185 billion, was in respect of 2011, and the last report to be laid in the National Assembly was in relation to 2006. The Linden Electricity Company also received a subvention of $3.108 billion, but was yet to have its audited accounts beyond 2011 laid in the Assembly.
Privatisation proceeds
The Auditor General reported that amounts of US$2 million and US$900,000 remained outstanding from the sale of Guyana Stores Ltd. in 2000 and the National Paints Co. in 1991 respectively. These observations can be traced to the Auditor General’s reports for 2003 and earlier years, and are therefore not new findings. It is nevertheless useful to keep them on the front burner lest we lose sight of them.
The Lotteries Fund
The Auditor General saw nothing wrong with this constitutional breach and appeared to give the impression that a Cabinet decision of August 1996 has the force of law. Following on the footsteps of his predecessor, he had queried the establishment of the Fund but in the light of a former Attorney General’s opinion on the matter (which this column considered seriously flawed), the Auditor General has backed down.
The Minister responsible for governance has since publicly stated that: (a) the Lotto Fund would be closed and all proceeds would be paid over to the Consolidated Fund; and (b) the Minister of Finance would issue the relevant order “soon”. This announcement prompted my column of 3 August 2015 entitled “A victory for public accountability: The decision to pay over the Lotto proceeds to the Consolidated Fund”. One hopes that with effect from 1 January 2016, reference to the Lotto funds will be a thing of the past.
NICIL’s accounts
The Auditor General merely reported on the status of the audit of NICIL as an individual entity and of NICIL’s consolidated accounts. The latter was last audited in 2006, and the consolidation was awaiting the availability of the audited financial statements of the 2007 Cricket World Cup. The event was financed in part by NICIL in the sum of $650 million via transfers by Cabinet decision from the Guyana National Cooperative Bank, Guyana Forestry Commission and the National Frequency Management Unit. The fact that after eight years the audited accounts of the World Cup are yet to be produced is a serious indictment on those responsible. A similar observation can be made in relation to the Great Flood of 2005 where some $1.8 billion was reportedly expended; and CARIFESTA X where the forensic audit uncovered several irregularities.
This column is of the firm view that a parent company-subsidiary company relationship does not exist between NICIL and the public corporations that were vested in it since, among others, there was no exchange in value, and substance takes precedence over form. Besides, the entities involved are so dissimilar in their operations that the results of any consolidation would be meaningless and misleading. This exemption is provided for under the Companies Act. It is also doubtful whether the International Financial Reporting Standards, on which NICIL relies as a basis for the preparation of its financial statements, would allow for such a practice.
The Auditor General appeared to have relied on the Management Cooperation Agreement approved by Cabinet in 2002 as the basis for not querying NICIL retaining dividends received from public corporations and other entities as well as the proceeds from the sale of State assets and properties, instead of paying them to the Consolidated Fund. As a result, since 2002 NICIL has been recording windfall gains, as evidenced by the 2002 financial statements which showed an after tax profit of $1.645 billion and an earning per $1 share of $16,445! The Government is yet to release the results of the forensic audit of NICIL as well as those of the Marriott Hotel (financed in part by NICIL) which were completed and finalized more than a month ago.
Integrated Financial Management Accounting System (IFMAS)
Since 2004 when IFMAS was introduced, the Auditor General has been reporting on the status of its implementation. To date, two of the eight modules are yet to be implemented. These are the Purchasing and Asset & Inventory modules. Given that some 70% of the National Budget relates to procurement, a significant deficiency in our public financial management system still remains. In this day and age, reliance on manual systems for the proper accountability for assets and inventories is simply unacceptable and leaves room for improprieties.
The Ministry’s explanation was that: (a) it would be imprudent to operationalize the two outstanding modules at this point in time because the current business practice would need to be reviewed so as to influence change in the software; and (b) there was need to upgrade the current platform (hardware and software) so as to make the system more efficient and effective. In 2013, the Ministry had explained that the Accountant General’s Department needed to build capacity before the two modules could be implemented. In 2012, the Ministry had given the assurance that “this situation is expected to improve, since the operationalisation of the Ministry’s Audit Department would facilitate the conduct of Agency checks thereby ensuring compliance with existing record keeping standards. Additionally, the Department continues to focus on training as a means of ensuring consistency in the actions and interactions of the various functional classes within the Integrated Financial Management and Accounting System (IFMAS)”. The year 2015 is about to close, and it is doubtful whether any progress has been made as regards the implementation of these two modules. And so, over the years, one excuse after another has been given for the continued failure to activate these two important modules.
Internal audit
This column has been at pains to bemoan the absence of strong and effective internal audit units, especially at large Ministries and Departments. The Auditor General has produced a table to highlight the extent of the problem. The agencies without internal audit units include: Guyana Defence Force; Guyana Police Force; Office of the President; Ministries of Education, Health, Agriculture and Home Affairs; and the ten Regions. At the Ministry of Public Works, the largest Ministry, there is only one Internal auditor. Some of these agencies nevertheless have field auditors or stock verifiers but they are hardly a substitute for dedicated internal audit units.
The Fiscal Management and Accountability Act requires the Heads of budget agencies to maintain effective internal audit capability. There is nevertheless hope in that the Government has recently signed on to a Budget Transparency Action Plan developed by the European Union. This is likely to see, among other actions, full-fledged internal audit units at the larger Ministries and Departments beginning next year.
