Public financial management: 1966 – present (Final)

By Anand Goolsarran On In Accountability Watch |

This is the fifth and final in a series of articles on the above aimed at highlighting the extent of our achievements in the post-Independence period. We can conveniently categorise this period into a number of phases or waves of development. The first, covering the period 1966-1985, was characterized by our collective failure to uphold and build upon the solid foundation that the British left Accountability Watchus, resulting in a marked decline in public financial management. The second phase, 1985-1992, saw an attempt to retrieve the situation, followed by a period of revival and restoration of normalcy in the years 1992 to 1997.There was a lull in the years 1998 to 2002, except for the constitutional amendments of 2001, followed by a burst of reform initiatives in the 2003-2004 mainly due the conditionalities imposed on us by the International Financial Institutions to enable us to reap the benefits from the Highly Indebted Poor Countries (HIPC) Initiative.

Today, we discuss the two final reform initiatives, namely the implementation of the IT-based Integrated Financial Management System (IFMAS); and our efforts to introduce legislation on anti-money laundering and the countering of terrorist financing. We will then make some concluding remarks.

 

Introduction of IFMAS

The introduction of the Integrated Financial Management System (IFMAS) is 2004 was not only a timely intervention to take advantage of advances in information technology and to lessen the burden and paperwork associated with manual systems. A Canadian-based software company was contracted to undertake the exercise with the objective of “rapidly implementing a robust integrated budgeting and accounting system for the Government and to further the modernization of the public financial management system of the country”.

IFMAS has seven modules, namely, Appropriation, Expenditure, General Ledger, Budgeting Preparation System and Reporting System (BPRS), Purchasing, Revenue and Asset & Inventory modules. An integral component of the programme involved training of staff to provide them with the skills needed to operate the system. This task was completed by October 2003 in preparation for the roll-out in January 2004 of the first three modules. Following the 2006 national elections, two additional modules – Budgeting Preparation and Reporting System (BPRS); and the Revenue Module – were implemented, leaving the remaining two modules – Purchasing; and Asset & Inventory – unimplemented to date.

The Purchasing and Asset & Inventory modules are very much interlinked in that they both involve public procurement which is the single most important financial management activity of the Government. It is therefore inconceivable, especially in this day and age, that we have not seen it necessary to automate its procurement and asset/inventory systems. A typical private sector organization is unlikely to remain competitive, indeed survive, without such systems. At the time of writing, the Government has reportedly engaged the services of the software developer to upgrade the system.

 

AML/CFT Act 2009 and related amendments

The first evaluation report by the Caribbean Financial Action Task Force (CFATF) on Guyana issued in October 2006 highlighted the absence of legislation on money laundering. In response, the Government tabled draft legislation in the National Assembly in January 2007. The Assembly referred it to the Select Committee, and it took more than two years for the legislation to be approved in the form of the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) Act 2009.

The third evaluation report dated 25 July 2011 was, however, very critical of the Act. The main conclusion was that Guyana’s legislation needed to be overhauled to conform to the standard recommendations used to evaluate countries’ efforts to combat money laundering and terrorist financing. CTATF informed Guyana that the steps it had taken were minimal and that it remained in “expedited follow-up”. In particular, there was concern that the Financial Intelligence Unit (FIU) had only a Director, whereas it was to be staffed also with a lawyer, an accountant and such other officials trained in investigative work.

On 7 May 2013, the Government tabled amendments to the Act based on the deficiencies identified by the CFATF. The Assembly referred them to a Select Committee for detailed scrutiny. The Government was, however, unhappy with the Assembly’s decision. It wanted an urgent passage of the amendments as presented, contending that: (a) they addressed all the concerns that the CFATF had raised; (b) the latter had dictated the contents of the amendment Bill; and (c) if the amendments were not approved by the 27 May 2013 deadline, Guyana would be blacklisted.

The then Opposition felt that the opportunity should be taken to carry out a more rigorous and comprehensive review of the legislation in view of the following:

The Government was, however, unwilling to extend the Select Committee’s work to other aspects of the legislation and was concerned only with the deficiencies identified by CFATF.  The Opposition’s position was that it would not be rushed into passing the amendments to the Act. If the deadline was not met, it would be the Government’s fault since it had adequate time since July 2011 to prepare the amendments. The Opposition had stated that it would not support the Bill because the Government withheld information it was requested to share with the Opposition. That information was contained in a letter dated 10 April 2013 from the CFATF addressed to the President. The letter referred to several warnings and references to earlier notifications of the precarious position to which Guyana was exposed since November 2012 as well as assurances given by the Attorney General, the Minister of Finance and the Head of the Presidential Secretariat that the issues raised were being dealt with expeditiously.

The Government had suggested that in order to meet the deadline, whatever amendments agreed upon so far should be passed in the Assembly, and that the other proposed amendments could be dealt with later. The suggestion did not, however, find favour with the Opposition on the grounds that, based on past experience, the Government could not be trusted to keep its word.  Fuelled by the thought that doomsday had arrived, the business community, through their elected representatives, went full gear into a panic-stricken mode in support of the Government’s position that caused quite a hysteria among the populace. Before any further action could have been taken, Parliament was prorogued, followed by its dissolution and the holding of fresh elections on 11 May 2015.

One of the first tasks of the new Administration was the tabling of the proposed amendments to the Act based on the position it had taken while in Opposition. The current political Opposition chose to boycott the event and therefore the Bill gained unanimous support from those legislators who were present. The amendments, which were assented to by the President on 10 July 2015, cover three main areas, namely: (a) the expansion and tightening of certain definitions, and the inclusion of new ones in the Interpretation Section of the Act; (b) the creation of an AML/CFT Authority which will act as a kind of Board to provide oversight of the operations of the FIU; and (c) new procedures for the appointment of the Director and the Deputy Director of the FIU.

The entire subsection 2(1) has been replaced, essentially to remove the role of the Attorney General in recommending to the Minister of Finance appropriate action in respect of any person or entity suspected of being involved in anti-money laundering activities and of violating the Act. The amendments now vest that responsibility with the Director of the FIU. In addition, the creation of an AML/CFT Authority removes ministerial control over the functioning of the FIU and places oversight responsibility in the hands of this body which is to comprise of ten members appointed by the National Assembly by simple majority on the recommendation of the Parliamentary Committee on Appointments.

The Minister was responsible for appointing the Director of the FIU. The relevant section has now been amended to provide the Assembly by simple majority with the authority to appoint the Director and the Deputy Director, based on a recommendation of the Parliamentary Committee on Appointments. The second amendment provides for, among others, a new definition for beneficial ownership; procedures for the freezing of property of a terrorist or terrorist organization; and amendments of three other Acts referred to in the Schedule.

The last amendment in early May 2016 provides for: (a) the tightening of the language in the Principal Act; (b) the requirement for all financial institutions to adopt effective risk-based procedures relating to wire transfers; (c) additional responsibilities of the FIU Director as regards funds or assets of persons or entities suspected to have met the criteria set out in the United Nations Security Council Resolution 1267 and its successor resolutions, and the  procedures to be followed for the freezing of those funds or assets; and (d) amendments to four other Acts contained in the Schedule.

 

Concluding remarks

There is no doubt that the post-1992 period has been a turning point in the history of public financial management in Guyana, particularly 1993, which saw the restoration of public accountability after a ten-year gap.  That gap would remain a significant blemish for the country, and an indictment against the decision-makers and those responsible for maintaining the public accounts.

With the restoration of public accountability, the work of the PAC has been facilitated. Unfortunately, for the fiscal years 1992 and 1993, the PAC allowed political expediency to take precedence over the national interest but in subsequent years, it settled down and discharged its responsibility in an objective manner. However, there have been slippages in the timeliness of its work and in the preparation of its reports since at the time of writing the PAC was still to finalize its reports for the fiscal years 2010 to 2014.

The passing of the Integrity Commission Act, the Public Procurement Act, the FMA Act and the creation of the Guyana Revenue Authority should be viewed in a positive light.  However, the Commission has not been functioning effectively since 2006. In addition, after 15 years, the Procurement Commission is yet to become a reality.  Indeed, Guyana’s fight against corruption over the years has left much to be desired, as confirmed by successive US Department of State country reports on human rights practices.

Several of the requirements of the FMA Act have yet to be complied with, including: quantifying indicators of achievement by Ministries and Departments in the National Budget as well as programme impacts achieved; liquidation overdrafts; promulgating accounting standards; establishing an organized system of internal audit; and reconciling planned execution of the annual budget with the out-turn of that budget, including detailed explanations of any significant variances and their related impact.

The reform initiatives relating to the Audit Office to insulate it from political influence and to provide it with autonomy and flexibility to discharge its mandate, are a welcome development, and so is the introduction of IFMAS. However, two important modules of IFMAS remain unimplemented.

Finally, Guyana now has in place effective anti-money laundering legislation.  However, there is a need to accelerate the appointment of the Director and other staff members of the FIU as well as the members of the Anti-Money Laundering Authority.