During a recent hearing on the examination of the 2016 public accounts, the Public Accounts Committee (PAC) questioned the Regional Executive Officer (REO) of Region 2 on the use of some $250 million from the Region’s current appropriation for 2017 to finance the cost of several projects of a capital nature, without the requisite approval. The REO admitted to the breach but contended that through prudent management, the Region was able to effect savings which were used to carry out emergency works, including the construction of a bus shed, a health centre, two fences, a sitting area, and a landing in Pomeroon. (KN, 5 April 2018)
By Section 22 of the Fiscal Management and Accountability Act, the Minister of Finance may reallocate spending authority for a budget agency, subject to the following restrictions:
(a) appropriations may only be varied across programmes within the budget agency to which they relate;
(b) appropriations for current expenditures may be moved to appropriations for capital expenditures, but not the reverse;
(c) the amount of an appropriation for any programme may not be varied by more than ten per cent of the total amount appropriated for that programme; and
(d) no new appropriations can be created.
The Minister shall include all changes to appropriations made up to the end of the tenth month of the fiscal year in an appropriation amendment Bill to be presented to the National Assembly not later than the end of the eleventh month. Any variation of an appropriation, other than those referred to above, shall be authorised by a supplementary appropriation Act prior to the incurring of any expenditure.
Since the REO did not seek and obtain the Minister’s approval to undertake the works, he was obliged to return the unspent balance to the Consolidated Fund, as required by Sections 26 and 43 of the FMA Act. Over the years, the Auditor General’s reports have been replete with instances of unspent balances not being refunded, with little or no action being taken to ensure compliance with the law. For example, in his 2014 report, the Auditor General stated that amounts totalling $544.832 million involving 22 Ministries/Departments were not refunded to the Consolidated Fund of which $135.463 million represented 280 cheques that were on hand at the time of the audit. In his 2015 report, the Auditor General reported as follows:
The expenditure of the Government was overstated by a total of $2.538 billion in respect of sixteen Ministries/Departments/Regions due to breaches of Section 43 of the Fiscal Management and Accountability Act. Included in the above overstatement is the sum of $1.653 billion related to 1,784 cheques on hand at 31 December 2015. Of the cheques on hand, 946 amounting to $1.282 billion were in respect of the Ministry of Public Health. The overstatement also included the sum of $885.214M representing unspent balances on eleven Inter-Departmental Warrants issued to the Ministry of Public Health by the ten Administrative Regions, which were not credited to the respective Regions’ Appropriation Accounts.
Over the years, the practice of writing cheques close to or at year-end in order to exhaust budgetary allocations and to circumvent the requirement to refund unspent balances to the Consolidated Fund, has been a widespread feature, as successive reports of the Auditor General would reveal. This is not only a violation of the law but also a manipulation of the accounts and an overstatement of expenditure since value has not been received at the time. It can also result in serious irregularities being perpetrated often without detection. The matter involving the REO of Region 2 is therefore not an isolated but one that is widespread and engrained in the system.
Presentation of the PAC Report
Following the May 2015 national elections, the membership of the PAC changed, and by convention, the chairmanship is now held by a senior Opposition Member of Parliament. On 15 March 2018, the PAC presented its report to the National Assembly on the results of its examination of the public accounts for the years 2012, 2013 and 2014. The examination took place over an eight-month period from November 2015 to June 2016 and involved 12 hearings, an average four sittings per fiscal year. In contrast, the PAC’s examination of the public accounts for 2010 and 2011 took place over a 27-month from March 2012 to June 2014 at which 50 hearings were held, an average of 25 hearings per fiscal year. While we applaud the current PAC for its attempts to bring the examination of the public accounts up-to-date, we hope that its examination of the 2012-2014 public accounts did not lack the desired level of comprehensiveness, considering that the Chairman was a key Cabinet Minister of the previous Administration, and the accounts that were examined relate to the stewardship and accountability responsibilities of that Administration.
One recalls when financial reporting and the auditing of the public accounts were restored in 1992 after a hiatus of ten years, the PAC under the chairmanship of a senior member of the pre-1992 Cabinet fiercely challenged not only the validity of the accounts but also the report of the Auditor General. It even prodded Accounting Officers (now Heads of Budget Agency) to disagree with the Auditor General’s findings. The Auditor General was in effect placed on trial for the role he played in the restoration of public accountability and for delivering on his constitutional mandate. However, since the Auditor General’s report for 1993 was as critical as that of 1992, the PAC examination and reporting took quite a more conciliatory tone and was more supportive of the work of the Audit Office, as its reports for those years will bear out.
On the other hand, the post-1992/pre-2015 Administration used every opportunity to credit itself for restoring public accountability and for having annual audited accounts. Setting aside any debate as to the real architect for the restoration and how it was undertaken, the Government’s stewardship and accountability responsibilities do not cease with the issuance of the Auditor General’s report, as discussed below.
Public accountability cycle
The presentation of the PAC report to the Assembly is the penultimate stage in the public accountability cycle. That cycle begins with the presentation of the Estimates not later than three months into the fiscal year in question, followed by: (i) the execution of the budget; (ii) mid-year reporting within 60 days of the end of the mid-year; (iii) annual financial reporting within four months of the close of the fiscal year; (iv) external review by the Audit Office and reporting to the Legislature within five months of the receipt of the draft financial statements; (v) examination by the PAC and reporting back to the Legislature; and (vi) the tabling of the Treasury Memorandum in the Assembly setting out what actions the Government has taken or intends to take in relation to the findings and recommendations of the PAC. While there is no time limit for the PAC examination and reporting back to the Assembly, the Treasury Memorandum is due for presentation to the Assembly within 90 days of the tabling of the PAC report, in accordance with Standing Order 82(3) of the Assembly.
It is necessary for the public accountability cycle to be completed within one year of the close of the fiscal year to enable the Government to properly discharge its stewardship and accountability responsibilities. It will also enable legislators to use the results as an important reference point in their consideration of the national budget for the following year. In the private sector that cycle is usually completed well within six months of the close of the financial year culminating with the convening of the annual general meeting of shareholders. Timeliness is of the essence, and experience has shown that, in many instances, accountability delayed invariably leads to accountability denied.
In its report on the 2000-2001 public accounts, the PAC under the chairmanship of the late and well-respected Winston Murray emphasised that the accountability cycle could not be regarded as complete without the Government’s detailed response to the PAC’s findings and recommendations. This was in clear reference to the undue delay in preparing the Treasury Memorandum and tabling it the Assembly. The PAC further stated that this has resulted in the findings of the Auditor General continuing to repeat themselves year after year, with little effort being made by some Accounting Officers to correct the deficiencies relating to the operations of their Ministries and Departments. Concerned about the lengthy timeframe for the public accountability cycle to be completed, the PAC reiterated its previously stated recommendation:
The PAC wishes to restate its previous recommendation that the accountability cycle be revised in such a way that the entire process, including the issuing of the Treasury Memorandum, is completed within twelve (12) months of the close of the fiscal year. In this regard, the PAC proposes the following deadlines for completion of various aspects of the cycle:
In 2015, the Ministry of Finance developed a Budget Transparency Action Plan (BTAP) which included proposals for progressively advancing the accountability timeframe consistent with the recommendation by the PAC in its 2000-2001 report. An additional item has been included, that is, the approval of the Estimates before the commencement of the fiscal to which it relates, which action has already been completed.
We urge the PAC to continue its efforts to bring its examination of the public accounts up-to-date and to impress upon the Administration the importance of having all the actions contained in the BTAP undertaken with expedition, especially as they relate to the accountability timeframe. Until this is achieved, coupled with appropriate sanctions for violations, we are unable to assure ourselves that a strong and effective system of public accountability is in place to safeguard public funds and other resources of the State.
