By John Seeram
Operating Entities (Agencies) are required to produce periodic Financial Statements, invariably on a yearly basis, in accordance with a country’s existing laws, regulations, etc. With regards to the Government of Guyana (GOG), the Constitution and the Fiscal Management and Accountability Act (FMAA) of 2003 stipulate that the Financial Statements are to be produced by the relevant authorities, such as the Accountant General, and Heads of Budget Agencies, etc. Thereafter they are audited by the Auditor General.
These Financial Statements are required to comply with, among other things, international public sector accounting standards, international financial reporting standards, and international accounting standards. They are one of the primary means by which economic information about an Entity is communicated to interested users, such as the GOG, the Public Accounts Committee of Parliament, Cabinet, and International Aid Donors.
In reviewing these Annual Financial Statements (AFS), which have been embodied in the Auditor General’s Report for 2018, I have observed, subject to correction, that they are yet to attain the required standards, and the shortcomings (issues) should be addressed at the earliest opportunity. I have chosen two AFS to illustrate the state of affairs:
● The Statement of Current Assets And Liabilities (SCAL) of the Government of Guyana at 31-12-18.
● Financial Report of the Deposits Fund for the Year Ending 31-12-18.
This SCAL would normally comprise the total Financial Position (Balance Sheet) Statements of the Consolidated, Deposits, Contingencies and possibly Other Funds of the GOG.
Some apparent shortcomings (not a complete list) of the SCAL are:
1) The Old Consolidated Fund Bank Account No.400 and the Sugar Industry Fund Accounts are not current. The balance of $990m at 31-12-18 for the Sugar Industry Fund Deposits originated in the mid-1990s and are not closed each year but are carried forward. They are held in trust, of which the Finance Secretary is the Trustee. How could those accounts be current?
2) The Advances as shown in the Report of the Deposits Fund for the Year Ending 31-12-18 are not included in the Asset Portfolio of this Statement as an Accounts Receivable.
3) This Statement should not be ‘For the Year Ending’ but ‘As At 31-12-18’ since assets, liabilities and fund balances have been brought forward from year 2017.
4) The respective Funds’ balances are not shown on this Statement to complete the accounting equation Assets = Liabilities + Funds. (It should be mentioned that Government accounting is based on the principle of Fund Accounting.)
5) Appropriate action should now be taken to dispense with the Old Consolidated Account, which has been showing on this Statement for least 15 years.
6) More attention should be paid to providing adequate and fully edited Explanatory Notes to this Statement. Also, amounts of the respective accounts should be in agreement with those in the Notes to the Accounts.
7) This Statement will comprise the Financial Positions (Balance Sheets) of the respective Funds, hence, the use of the word ‘Consolidated’ should be included in its caption to read:
Government of Guyana
Cash Basis Consolidated Statement of Assets & Liabilities
As At 31 December 2018
On the Financial Report of the Deposits Fund which is a Fund established for non-budgetary transactions
8) The balances are carried forward from year to year, hence the caption Statement should not be ‘For The Fiscal Year Ending 31 December 2018’, but ‘As At 31 December 2018’.
9) The types of Advances and Deposits Accounts are not classified as Assets and Liabilities, respectively.
10) There is/are no cash/bank balance(s) for this Fund.
11) There is no Fund Balance, such as a surplus or a deficit at 31-12-18.
That being said, there is the urgent need for qualified and experienced staff to review all of the GOG’s Annual Financial Statements with the intention of improving and updating them to meet the International Standards requirements. This may possibly entail amendments to the respective Sections of the FMAA of 2003.
The time is long overdue for the GOG to move from the Cash Basis to the Accrual Basis of accounting in meeting the International Public Sector Accounting Standards. It is imperative that the AFSs include revenue and expenditure which are accrued at 31 December. In this respect, the true and fair financial position and its operations will be 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 has exceeded the Voted Expenditure Provision.
I am not aware that there is an official Annual Report on the Accounts and Financial Statements of GOG. Such a Report (if there isn’t one) should be issued by either the Office of the Accountant General or by the Finance Secretary, and be done in a professional manner.
In concluding, I wish to emphasis that the AFS, whether they be private, public or governmental, are the principal product of the accounting system (note the emphasis), which has to communicate to interested users information of the Entity’s (Agency’s) financial position, its performance, its cash balances, whether positive or negative, and significant changes in resources and obligations. These Statements summarise the many inputs in the accounting system, and put them in a form that is/will be useful to decision makers.
That being said, positive efforts should now be in train to review all of the GOG’s annual Financial Statements in order to improve and to comply with the respective International Standards’ Bodies, and also to meet with the current global best practices. And this should now be done for the 2020 Statements, followed by intensive on-the-job training of staff, commencing from the top position of Permanent Secretary.
