Last week, the Conference of Parties (COP 27) of the United Nations Framework Convention on Climate Change ended with a decision to create a “loss and damage” fund to assist poorer countries that are worst affected by global warming and climate change. However, many delegates believe that little progress was made on some other major goals, including stronger commitments to curb the use of fossil fuels and to limit warming to 1.5 degrees Celsius by the end of the century. According to the Chief Executive Officer of the World Resources Institute:
While progress on loss and damage was encouraging, it is disappointing that the decision mostly copy and pasted language from Glasgow [COP 26] about curbing emissions, rather than taking any significant new steps. It is mind-boggling that countries did not muster the courage to call for phasing down fossil fuels, which are the biggest driver of climate change.
UN Secretary-General Antonio Guterres added that while a fund for loss and damage is essential, it is not an answer if the climate crisis washes a small island state off the map, or turns an entire African country to desert. See https://ca.yahoo.com/news/cop27-latest-climate-envoys-haggle-024623230.html.
In our last article, we began a discussion of the 2021 Auditor General’s report on the public accounts of Guyana, which was presented recently to the National Assembly. The report along with the audited accounts were referred to the Public Accounts Committee (PAC) for detailed scrutiny and reporting back to the Assembly. The PAC’s role is to examine the audited public accounts and not the Auditor General’s report per se, as provided for under Standing Order 82 of the Standing Orders of the Assembly:
It shall be the duty of the Committee to examine the accounts showing the appropriation of the sums granted by the Assembly to meet Public Expenditure and such other accounts laid before the Assembly as the Assembly may refer to the Committee together with the Auditor General’s report thereon.
Normally, the PAC uses the Auditor General’s report as a convenient starting point. However, it is not precluded from examining other aspects of the public accounts which might not have been covered, or inadequately covered, by the Auditor General. It is an unnecessary and time-wasting effort for the Committee to devote all its energies to the exclusive examination, paragraph by paragraph, of the Auditor General’s report which is an extremely voluminous document. For example, the 2021 report contains 285 pages of narrative and 643 paragraphs, not to mention 397 pages of audited accounts. Additionally, a significant number of the findings are in the nature of internal audit findings; while some are not material to the proper presentation of the financial statements in compliance with the Fiscal Management and Accountability (FMA) Act, related regulations and circular instructions, which is the core mandate of the Auditor General.
The last report of the PAC was in respect of the combined fiscal years of 2012-2014 and was issued in July 2017. It is a useless and wasted exercise for the Committee to produce a report of findings and recommendations on the public accounts that are five years old since most of the recommendations would have been overtaken by time, and many of those who may have been fingered for the mismanagement of public resources and other irregularities may no longer be around for the necessary sanctions to be imposed against them. It is for these reasons that we have been advocating that the current PAC takes a two-pronged approach to dealing with its backlogged work: the full Committee scrutinizing the most recent audited public accounts, i.e. the 2021 accounts, with a sub-committee examining the backlogged years and reporting back to the main Committee. At the moment, there is much haggling at the PAC as to whether its scrutiny of the public accounts for the years 2019 and 2020 should take place in a combined manner, or separately.
The Ministry of Finance’s website has a document titled “Budget Transparency Action Plan” prepared in 2015 and approved for implementation in 2016. One of the items in the plan requires advancing the accountability cycle so that the entire cycle can be completed within 12 months of the close of the fiscal year, including PAC examination and reporting, and the issuing of the Treasury Memorandum setting out what actions the Government has taken or proposes to take in relation to the Committee’s findings and recommendations. See https://finance.gov.gy/wp-content/uploads/2021/08/budget_transparency_action_plan.pdf.
It should not be over-emphasised that public accountability does not end with the presentation of the Auditor General’s report to the Assembly. There are two important steps to be followed: (1) the timely scrutiny of the audited public accounts and reporting back to the Assembly; and (2) the issuing of a Treasury Memorandum. Additionally, the availability of the audited public accounts and the Auditor General’s report thereon, the PAC report and the Treasury Memorandum will assist legislators in no small measure in the consideration of the budgetary proposals for the next fiscal year. At the moment, these proposals are considered in isolation of any information as to how the resources allocated in the previous fiscal year have been expended with due regard to economy, efficiency and effectiveness and whether actual outputs, outcomes and impacts are commensurate with those intended.
In today’s article, we continue our discussion of the 2021 Auditor General’s report by examining the highlights of the report.
Overpayments to contractors and suppliers
There were 37 overpayments to contractors amounting to $52.996 million, of which sums totalling were recovered at the time of reporting. The outstanding amounts relate to four projects executed in Regions 7, 8 and 9. The budget agency’s explanations suggest that there has been some laxity in the monitoring of the execution of works and the acquisition of goods and services. For example, the ambulance acquired by Region 9 was still at the wharf at the time of the Auditor General’s report.
Contracts awarded to blacklisted contractor
The Regional Democratic Council of Region 9 awarded eight contracts valued at $106.830 million to a contractor who was blacklisted by the Public Procurement Commission (PPC). While this is a major violation, the report did not indicate whether the works were satisfactorily completed. The budget agency indicated that it would investigate the matter. However, it would be more appropriate for the PPC to do so.
Terminated contracts
Contracts for the re-construction of Imbaimadai Police Station for $25.994 million, the construction of primary school at Waramadong for $33.006 million and the rehabilitation of Lola Street, Cane Grove for $24.898 million were terminated because of poor performance by the respective contractors. The report, however, did not indicate what action was taken to complete the works and whether the works were re-budgeted to be completed in 2022.
Cheques on hand
At the time of reporting, there were 162 cheques valued at $623.404 million on hand at various Ministries, Departments and Regions. These cheques relate to 2021 transactions. According to the Auditor General, they should have been refunded to the Consolidated Fund. Actually, the cheques have become stale-dated and are no longer valid. They should therefore first be cancelled before refunds are made to the Consolidated Fund.
While there may be cases where contractors/suppliers will take some time before uplifting their cheques, the fact that after nine months into the close of the fiscal year they were still in the possession of the budget agencies raises two important questions: (1) Was value received in respect of these cheques? This seems unlikely, otherwise the cheques would have been uplifted and encashed or deposited in the contractors/suppliers bank accounts; and (2) Were these cheques drawn close to year-end, or in January or February 2022 and backdated to 2021 year-end in order to exhaust budgetary allocations, considering that all appropriations lapse at the end of the fiscal year and all unspent balances refunded to the Consolidated Fund?
To the extent that the cash basis of accounting continues to be used to record and report financial transactions of the Government, the above irregularities are likely to continue to take place. Indeed, the acceleration of expenditure in the last quarter of the fiscal year to exhaust budgetary allocations and the keeping cash books open way into February of the following year, have become the norm with no evidence of any sanctions against responsible for these violations. Readers may wish to refer to our articles of 8 and 15 August 2022 titled “How long more will it take for Guyana to implement the International Public Sector Accounting Standards?” for a detailed treatment of this matter. The following is worth restating:
Meanwhile, the misuse and abuse of the use of the cash basis of accounting will continue unabated. These include: delaying payments to avoid overrunning budgetary allocations; acceleration of transactions especially in the last quarter of the fiscal year to exhaust budgetary allocations; drawing cheques close to year-end to utilize the remaining balances although value has not been received at the time, resulting in an over-statement of expenditure; overpayments to contractors and suppliers for the provision of goods, services and the execution of works; and defective works performed.
Unpresented payment vouchers
A total of 665 payment vouchers valued at $3.061 billion were not presented for audit examination, 656 of which valued at $3.050 billion or 99.6 percent relate to Ministries. The Auditor General stated that as a result, there was a limitation in scope and that he could not ascertain whether value was received for the sums involved, and whether the funds were used for the purposes intended.
The highlights of the reports did not indicate which Ministries and Departments are involved, and one has to go through the laborious task of sifting through the report to ascertain this. As regards the Guyana Defence Force, based on sample checks carried out, the Auditor General identified 140 payment vouchers valued at $1.885 billion that were not presented for audit. The budget agency explained that all payments are made by the Sub-Treasury attached to the Force, which is part of the Ministry of Finance and that the related vouchers ought to have been in the possession of the Sub-Treasury. The report, however, did not indicate whether attempts were made to seek an explanation from the Sub-Treasury and whether alternative audit procedures could have been carried out to verify whether value was received in respect of these payments, for example, the physical verification of the works, or the receipt of items shown as having been purchased.
Cheque Order Vouchers
A number of Ministries, Departments and Regions continued to clear cheque order vouchers long after the stipulated timeframe. As at September 2022, a total of 1,120 cheque orders valued at $2.528 billion remained outstanding, of which 737 cheque orders valued at $1.929 billion relate to 2021. The Auditor General concluded that he could not determine whether the value was received for all sums expended.
For those who are unfamiliar with the term, cheque order vouchers relate to cheques drawn for the acquisition of goods and services for which value is yet to be received. They are a form of advance payment, and bills/receipts and other supporting documents are required to be submitted within 30 days of the issuing of the related cheques. It is also not clear whether alternative auditing procedures were adopted to verify whether value was received in respect of these payments.
To be continued
