Last week, we began to outline the various initiatives that Guyana has taken over the years to not only address the issue of corruption in the public sector but also enhance public financial management and accountability in general. So far, we have dealt with: (i) activation of the Public Accounts Committee (PAC) and the amendment to the Financial Administration and Audit (FAA) Act in 1993; (ii) passing of the Integrity Commission Act in 1997; (iii) 2001 constitutional amendment establishing the Public Procurement Commission; and (iv) passing of the Procurement Act 2003, Fiscal Management and Accountability (FMA) Act 2003 and the Audit Act 2004. In today’s article, we continue from where we left off last week.
Audit Act 2004 (cont’d)
The Act provides for the establishment of an independent Audit Office and the strengthening of Parliamentary oversight over its work. The following are key features, apart from those highlighted last week:
Engagement of Chartered Accountants to assist the Auditor General in discharging his/her mandate;
Extending the Auditor General’s mandate to undertake performance audits;
Providing the Auditor General with powers to inspect bank accounts of any person if there is reason to believe that moneys belonging to a public entity have been fraudulently or wrongfully paid into such person’s account; and to access premises for the purpose of obtaining documents or other information relating to the activities of a public entity; and
Requesting the Director of Public Prosecutions (DPP) and the Commissioner of Police to take appropriate action to prosecute the concerned official if the Auditor General believes that an offence was committed.
Since the Act was made operational some 17 years ago, only 12 performance audits were undertaken despite the fact that over the years, the Audit Office benefitted significantly from technical assistance to undertake such audits and to enhance its operational efficiency. It was not until 2010 that the first two performance audit reports were issued, followed by one in 2015, one in 2017, three in 2021 and five in 2022. The reports for the earlier years have not been examined by the PAC and therefore the desired impact would not have been achieved. As regards the inspection of bank accounts and referring matters to the DPP and the Police, the Auditor General is yet to conduct the type of forensic reviews that necessitate such actions.
Introduction of IFMAS in 2004
The Integrated Financial Management and Accounting System (IFMAS) is an IT budgeting and accounting system that manages spending, payment processing, budgeting and reporting for governments and other entities. IFMAS was introduced in Guyana in January 2004. It contains eight modules. However, two important modules – Purchasing, and Asset and Inventory – remain unimplemented.
Under the cash-based system of accounting, assets and inventories are not reflected in the financial reporting of the Government, and therefore the need to have in place a sound system for the proper accountability for these assets is of paramount importance.
AML/CFT Act 2009
In 2002, Guyana became a member of the Caribbean Financial Action Task Force (CFATF). In its first Mutual Evaluation Report (MER) of October 2006, the CFATF expressed concern about the absence of legislation on anti-money laundering and financing of terrorism. As a result, the Government tabled draft legislation in the Assembly in January 2007. It, however, took more than two years for the AML/CFT Act 2009 to be passed.
In its second MER of July 2011, the CFATF was very critical of the Act and recommended that it be overhauled to conform to the standard recommendations used to evaluate countries’ efforts to combat money laundering and terrorist financing. In May 2013, the Government tabled certain amendments to the Act and wanted an urgent passage of the amendments as presented, contending that they addressed all the concerns that the CFATF had raised. Amid concerns about the extent of money laundering and drug trafficking that appeared to prop up the economy, the Opposition felt that the opportunity should be taken to carry out a more rigorous and comprehensive review of the Act. This did not find favour with the Government, resulting in a stalemate that lasted for another two years.
Following the change in Administration in May 2015, fresh amendments to the Act were tabled in the Assembly based on the position the then Administration had taken while in Opposition. There were four subsequent amendments during the period January 2016-September 2018; while the last amendment was made in August 2022. With these amendments, Guyana is now poised to becoming a member of the Egmont Group that facilitates the sharing of information and knowledge, and cooperation among its 166 FIUs.
Access to Information Act 2011
Access to information on government programmes and activities is a fundamental right of all citizens. It is an essential element of every system of democracy and facilitates transparency and accountability, indeed good governance practices. The Access to Information Act was passed in the Assembly in September 2011. However, as of March 2013, the relevant Order to bring the Act into operation was not issued, resulting in the U.S. Government, the Organisation of American States and Transparency Institute Guyana Inc. expressing concern about the under delay. Faced with these pressures, the then President issued the Order on 10 July 2013. Five days later, he appointed a former two-term Attorney General under the PPP/C Administration as Commission of Information.
The Act sets out a practical regime of right to information for persons to secure access to information under the control of public authorities in order to promote transparency and accountability in the working of the Government and public authorities. A key provision relates to the presentation of an annual report to the Assembly setting out, among others:
Number of requests made to the Commissioner of Information;
Number of decisions that an applicant was not entitled to access information, citing the relevant provisions of the Act;
Number of applications for judicial review of decisions and the outcome of such reviews;
Number of complaints made to the Commissioner in respect of the operations of the Act and the nature of such complaints;
Number of notices served upon the Commissioner and the number of decisions by the Commissioner which were adverse to the person’s claim; and
Particulars of any disciplinary action taken in respect of the administration of the Act;
Unfortunately, no report has been presented to the Assembly to date, and no information is publicly available in relation to the activities of the Commissioner’s office. As a result, the effectiveness of the Act could not be determined.
FMA (Amendment) Act 2015
The FMA (Amendment) Act 2015 was passed, the purpose of which was to establish the financial independence of constitutional entities by providing for lump sum payments to be made to these entities. In this way, the entities were freed ‘from the automatic obligations of Budgetary Agencies and the discretionary powers exercised by the Minister of Finance over Budgetary Agencies, which obligations compromise their independence which they are intended to have as contemplated by the Constitution’.
Budget proposals of constitutional agencies were to be submitted prior to the commencement of the fiscal year to the Clerk of the Assembly who was to ensure that the proposals were submitted to the Assembly as presented, except for the Audit Office whose proposals are presented to the Assembly via the Chairperson of the PAC. For his part, the Minister was required to submit his comments and any recommendations, limited to the overall proposals rather than individual items, in sufficient time to enable the Assembly to consider them.
Once approved by Assembly, the allocations were to be included as subventions to constitutional agencies and could not be altered without the prior approval of the Assembly. In addition, disbursements were to be made as a lump sum by the end of the month following the month in which the appropriation was approved. This is unlike budget agencies where disbursements are made monthly based on allotments approved by the Minister. Constitutional agencies were also required to have separate financial reporting and audit, and the related reports were to be presented to the Assembly within six months of the close of the fiscal year. The only exception was the Audit Office which submits its audited accounts to the PAC. The implementation of the amendment took effect from 2016.
Of the 17 agencies involved, only the Judicial Service Commission was up to date in its financial reporting and audit; while there was no evidence that audit reports were issued for Guyana Elections Commission, Supreme Court of Judicature and the Ethnic Relations Commission. There was also no evidence that the audited accounts were presented to the Assembly. The amendments to the Act were a genuine attempt to give effect to the constitutional requirements relating to the financial independence of constitutional agencies.
Phased Implementation of IPSAS commencing 2016
Recognising the limitations of the cash basis of accounting, the Authorities decided to adopt the International Public Sector Accounting Standards (IPSAS) which are based on the accrual system of accounting. Phased implementation was to have commenced with effect from 2016. However, except for some training that had been undertaken, there was no further progress. According to the Auditor General further developments have been put on hold pending the upgrading of IFMAS, now IFMIS; while in the Minister of Finance’s budget speech for the last three years, there was no mention of IPSAS.
Petroleum Commission Bill 2017
In May 2017, the Petroleum Commission Bill was presented to the Assembly. It provides for the establishment of a Petroleum Commission ‘to monitor and regulate the efficient, safe, effective and environmentally responsible exploration, development and production of petroleum in Guyana’. In our article of 28 January 2018, we had stated that it was regrettable that this draft legislation was not brought into force, and the Commission operationalized, prior to the signing of the Petroleum Agreement with ExxonMobil’s subsidiaries. Had this been done, the Minister of Natural Resources could have benefitted from the much-needed expertise and guidance from the Commission’s board and its Commissioner.
The Bill was referred to a Special Select Committee for detailed scrutiny. However, to date there has been no further development.
Protected Disclosures Act 2018
A key provision of the Inter-American Convention Against Corruption relates to creating, maintaining and strengthening the system to protect public servants and private citizens who in good faith report acts of corruption to the relevant authorities. However, it took 22 years for legislation to be passed in the form of the Protected Disclosures Act 2018.
The main purpose of the Act is to: (i) combat corruption and other wrongdoings by encouraging and facilitating disclosures of improper conduct in the public and private sectors by persons acting in good faith and in the public interest; (ii) protect persons making those disclosures from detrimental action; and (iii) establish a Protected Disclosures Commission to receive, investigate or otherwise deal with disclosures of improper conduct.
After more than four years, the Act is yet to be operationalised via an Order from the Minister of Legal Affairs. As a result, there is no legal protection for persons who may have knowledge of acts of corruption and wrongdoing to come forward and report the matters to the relevant authorities.
NRF Act 2021
The Natural Resource Fund (NRF) Act was passed in the Assembly on 29 December 2021 without debate, after a chaotic scene erupted as Opposition Members of Parliament vehemently opposed the Bill being considered. The following day, the President assented to the Bill while the Minister of Finance signed the commencement Order the next day to bring the Act into operation. The main issue of contention was the repealing of the predecessor legislation of 2019 and replacing it with what they believe to be a lesser form of legislation that removes several safeguards against the abuse over the oil revenues accruing to the nation. Several civil society organisations and individuals have expressed similar concerns.
After its second reading, the Bill was not referred to a Special Select Committee for detailed consideration. Had this been done, it would have benefitted from the views of a wide cross-section of the population, and appropriate amendments made before the Bill was presented to the Assembly for its third reading and approval. However, the speed at which all aspects of the Act were executed was clear evidence that the Authorities were determined not to entertain any amendments to it.
In the predecessor legislation, there was provision for the establishment of a Macroeconomic Committee to advise on the maximum Economically Sustainable Amount and Fiscally Sustainable Amount that can be withdrawn from the Fund, taking into account past spending from the Fund; potential impact of future spending on Guyana’s competitiveness; economic growth especially in agriculture and manufacturing; and assessment of macroeconomic variables such as inflation, exchange rate, balance of payments and public debt. That provision has been replaced with a schedule showing the maximum amount to be withdrawn from the Fund in a fiscal year, with the Minister having the responsibility of deciding on the specific amount to be requested for approval by the Assembly.
Local Content Act 2021
The Local Content Act was passed in the Assembly on 29 December 2021 and received presidential assent two days later. Key objectives are:
To provide for the implementation of local content obligations by persons engaged in petroleum operations and related activities;
To give priority to Guyanese nationals and companies in the procurement of goods and services in the value chain of the petroleum operations;
To enable local capacity development;
To promote competitiveness and to encourage the creation of related industries to sustain social and economic development in Guyana; and
To provide for investigation, supervision, coordination, monitoring and evaluation of, and participation in, local content in Guyana.
The Act contains a schedule showing the minimum requirements for local content levels in relation to the procurement of goods and services as well as local capacity development. It also outlines the responsibilities of the subject Minister and provides for the establishment of a Secretariat as well as the maintenance of Local Content Registers.
FMA (Amendment) Act 2021
The amendments to the FMA Act were passed in the Assembly on 4 February 2021. In effect, they reinstate the status quo prior to the passing of the 2015 amendments as regards the preparation, submission and approval of the budgetary allocations of constitutional agencies as well as their financial reporting and audit. Once again, these agencies are treated as budget agencies.
The 2015 amendments were a genuine attempt to give effect to the constitutional requirements relating to the financial independence of these agencies. It is regrettable that the decision was taken to reverse the amendments. Judicial review was sought, and the Court ruled that the amendments neither violate the Constitution nor impinge on the independence of the constitutional agencies.
Conclusion
Despite political wrangling over the years, Guyana has made significant progress in having in place a strong legislative framework for dealing with corruption; mismanagement and abuse in the use of public resources; and money laundering and drug trafficking, among others. However, these measures are not enough: they need to be translated into real action plans, coupled with rigorous monitoring to ensure full and effective compliance with the various legislative provisions.
The best of systems are unlikely to achieve the desired results unless the key officials involved in overseeing their implementation are be appointed in a competitive and transparent manner based on professional and technical competence as well as proven track of performance, rather than on political or other considerations. The serious commitment and unwavering support of the Government and the Legislature are also a necessary prerequisite if real progress is to be achieved.
