By John Seeram
Is the Government of Guyana producing annual and half yearly financial statements (FSs) that contain accurate information? Are these FSs complying with international public sector accounting standards, international financial reporting standards, and international accounting standards?
This writer is in no way being critical of the FSs of the Government of Guyana (GoG) but needs to raise some observations made of the 2014 statements. In the preparation of FSs, the fundamental principle is that they should be simplified, be as accurate as possible, and provide detailed explanatory notes so that their users can, among others, follow, understand, analyse, and make meaningful decisions. There are many categories of users of GoG’s FSs both external (aid donors, etc) and internal (Parliament, Public Accounts Committee, Cabinet, etc).
It is my understanding that the GoG possesses highly qualified accountants and financial analysts at the Ministry of Finance and the various budget agencies. This being so, why are we (this writer included) having trouble understanding the FSs?
The objective of this article is to give some brief remarks on the way forward since we are now in our 50th year of independence and our financial reporting standards appear to still be in their infancy stage. In so doing, I will be focusing only on a few statements which basically will address the issues. At the same time, I will take this opportunity to provide readers with what they need to know on the GoG’s FSs.
What motivated me to pen this article was my reading the Statement of Current Assets and Liabilities (SCAL) of the Government of Guyana for 31 December, 2014. That statement should not be titled ‘current’ since it includes the old Consolidated Fund bank account No 400. On the liabilities, the Sugar Industry Fund accounts are not current. The balance of $1.167 billion for the Labour Welfare Fund originated in the mid-1990s, and is held in trust; the finance secretary is the trustee. How could this account be current?
The advances as shown in the report of the deposits fund for the year ending 31 December 2014 are not included in the asset portfolio of this statement as an accounts receivable. Further ‘for the year ending’ should be ‘as at 31 December 2014’, since the balances of these deposits fund accounts are carried forward to 2015.
More attention should be paid to having adequate explanatory notes to the SCAL so that the various stakeholders can have a good understanding of the statements. Also, amounts of the accounts on the FSs should be in agreement with those embodied in the notes to the accounts.
My view is that based on the information provided, the SCAL appears to have shortcomings. I did not set out to examine each account on this statement but just to mention a few to support my arguments.
Government accounting is based on the principle of fund accounting, hence we need to produce such a financial statement to meet that of fund accounting principles. We need a Statement of Assets and Liabilities (SAL) which will include both current and non-current accounts under the following headings such as:
Current Assets – Bank Accounts in use
Other Assets – Investments
– Accounts Receivable (Deposit Accounts)
– Bank Accounts not in use
– Othe
Assets (A)
Current Liabilities – Treasury Bills
Other Liabilities – Sugar Industry Fund Accounts
Other Deposit Accounts
Funds – Consolidated Fund Balance
– Contingencies Fund Balance
– Deposits Fund Balance (if operational)
Total Liabilities (L)
A=L
The SAL should be showing the accumulated balance whether positive or negative of the Consolidated, Contingencies and if applicable, the Deposits funds. The balances in these funds will mainly comprise the yearly surpluses or deficits and adjustments in the respective financial position statements (balance sheets).
In the absence of the balances of the respective funds, the present SCAL would result in it being incomplete according to my understanding of fund accounting principles. Also, just to mention, if the GoG has investments in entities, then they need to be disclosed. The present statement indicates that it has no such investments. Is this correct?
There is need to review all the financial statements with the intention of improving them. This may possibly entail amendments to the respective sections in the Fiscal Management and Accountability Act of 2003.
The time is long overdue for the GOG to move from the cash basis to the accrual basis of accounting in meeting international public sector accounting standards. It is imperative that the FSs include revenue and expenditure which are accrued at 31 December. In this respect a true and fair financial position is shown. Also, the value of stores as an inventory account needs to be disclosed in the accrued system.
In the absence of not having an accrual system, revenue receivable and expenditure payable at 31 December for those budget agencies should be disclosed, since it will/should be brought to account in the following year. Also, with the inclusion of the unpaid expenditure, it can be determined whether that expenditure would have exceeded the voted provision.
After 50 years, we are yet to have an official annual report on the accounts and financial statements of GoG. This report should be issued by either the Office of the Accountant General or by the finance secretary, and should be done in a professional manner.
Before I close, this writer has fond memories of the establishment of the Consolidated Fund. It had commenced on 26 May, 1966 via Ministry of Finance Circular No 7/1966 dated 28 May, 1966. This was followed up with a Treasury Circular 12/1966 dated 24 November 1966, and an amendment to the Financial Administration and Audit Act No 39 of 1961 by order 39 of 1966.
On 26 May, 1966 the Consolidated Fund as an accounting entity had replaced the Development Fund. I was an audit clerk of the then audit department assigned to the treasury audit team. The establishment of the Consolidated Fund had brought together teams from the audit department, the secretary to the treasury’s office, the accountant general’s department and the Bank of Guyana. Each team had comprised the head of those entities.
I was grateful for that exposure and the experience gained on the establishment and operations of the Consolidated Fund. In order to prepare the FSs of the Consolidated Fund, one needs to understand, among others, the principles and practice of fund accounting and the legal framework.
In closing, we need to have another team in this the 50th year to determine meaningful and simplified financial statements, prepared in accordance with international standards. It is my view that there is an urgent need to improve on the standard of financial reporting by the Government of Guyana. This will take some time to accomplish, however, those in authority need to address this issue early. Let’s get our act together.
John Seeram is a former lecturer in Accounting at UG and UWI and consultant to the Ministry of Finance
