After a much deserved two months’ break, we resume our column today by commencing a review of the Auditor General’s report on the audit of the public accounts of Guyana for the fiscal year ended 31 December 2022. The report was laid in the National Assembly last Monday.
Constitutional and legislative provisions
Article 223(3) of the Constitution as well as Section 28 of the Audit Act 2004 provide for the Auditor General to present his reports to the Speaker of the Assembly who shall cause them to be laid before the Assembly. The deadline for doing so is 30 September following the close of the fiscal year. The Constitution also defines the public accounts to include: (i) all central and local government bodies and entities; (ii) all bodies and entities in which the State has controlling interest; and (iii) all projects funded by way of loans or grants from any foreign State or organization.
The Financial Administration and Audit (FAA) Act, Chapter 73:01 of the Laws of Guyana was amended in 1993 to redefine the mandate of the Auditor General to include not only the audit of central government activities but also those of: (i) any statutory body being a public body or other authority administering public funds; and (ii) any public corporation, or corporate or incorporate body in which the controlling interest vests in the State, or any agency on behalf of the State, or in any other body established by or any other law for the time being in force or administering public funds or moneys. The amendment brought to an end a long-standing controversy, going back to the 1960s, over the extent of the Auditor General’s mandate. That mandate has been reinforced by the constitutional amendment of 2001 that now provides a clear definition of what constitutes the public accounts of Guyana, thanks to the efforts of Dr Rupert Roopnarine who was a member of the Constitutional Review Committee.
The audit section of FAA Act was repealed and replaced by the Audit Act 2004. Section 24 now outlines the duties of the Auditor General to include not only the auditing and reporting on the consolidated public accounts but also the accounts of all budget agencies, all local government bodies, all bodies and entities in which the State has a controlling interest; and all projects funded by way of loans or grants by any foreign State or organization.
Delay in the laying of the Auditor General’s report in the Assembly
The 2022 Auditor General’s report, although submitted to the Speaker within the statutory deadline of 30 September 2023, was not presented to the Legislature until three months later. Although the law is silent on the timeframe within which the report is to be presented, the expectation is that it will be done at the next sitting of the Assembly.
One of the reasons for the delay is that the report was presented to the Speaker at a time when the Assembly was in recess and therefore it could not have been laid until after 10 October 2023 when the Assembly came out of recess. This is compounded by the fact that, after the recess, the Assembly did not convene until 6 November 2023 at an extraordinary meeting to consider a parliamentary resolution on Venezuela’s claim to the Essequibo region of Guyana. The report could nevertheless have been presented at this meeting, considering that over the years there has been no discussion on the report which is referred to the Public Accounts Committee (PAC) for detailed scrutiny. It therefore means that the 2022 audited public accounts was not available for the benefit of legislators and the public at large until almost one year after the end of the fiscal year, which is an undesirable situation.
That apart, public accountability does not end with the availability of the audited public accounts and the Auditor General’s report thereon. The PAC has to carry out a detailed examination of these accounts using the latter as a convenient starting point. It has to summon accounting officers and other concerned officials to provide the necessary clarifications and explanations relative to the findings and recommendations of the Auditor General. After the PAC completes its examination, it issues its own report to the Assembly. The Government then has 90 days within which to table a Treasury Memorandum setting out what actions it has taken or proposes to take in relation to the finangs and recommenations of the PAC. In the circumstances, the findings and recommendations of the Auditor General should be regarded as preliminary. In some cases, there would be disagreements with the findings, as highlighted recently in the case of the Environmental Protection Agency; or the explanations might not have been forthcoming at the time of closure of the Auditor General’s report; or simply error on the part of the staff of the Audit Office.
The last report of the PAC was in respect of 2016. It was issued some six years later on 21 July 2022; while the related Treasury Memorandum was issued on 14 February 2023. The PAC is therefore five years in arrears in terms of its examination of the public accounts and reporting of the results to the Assembly. It also means that since 2016 there has not been full and complete accountability for the use of public resources. That apart, a review of successive reports of the Auditor General, going back to 1992, reveals that most of the findings keep repeating themselves year after year with little or no evidence of any action being taken to remedy the deficiencies identified. These include:
(a) Acceleration of expenditure in the last quarter of the year to exhaust budgetary allocations, facilitated by the use of the cash basis of accounting as opposed to the accrual-based system;
(b) Failure to pay over unspent balances into the Consolidated Fund, in clear violation of the Fiscal Management and Accountability (FMA) Act;
(c) Keeping the books of the Government well into the next year and drawing of cheques and backdating them to 31 December, also in violation of the FMA Act;
(d) Significant breaches in the Procurement Act, especially as regards the assessment of bids and the award of contracts;
(e) Defective works undertaken as well as undue delays in their execution;
(f) Overpayments to contractors and suppliers;
(g) Short delivery of goods and services;
(h) Expired drugs and medical supplies on hand as well as poor storage facilities; and
(i) The absence of vouchers and other supporting documents to verify the completeness, accuracy and validity of transactions.
Policy makers take delight in the fact that since 1992 the public accounts are audited annually, compared with the pre-1992 period, without pausing to reflect on the quality of such accounts and taking appropriate action to bring about improvements. In the private sector, the slightest qualification by the auditor of the accounts of an organization is likely to result in a shake-up of top management!
The accountability timeframe
The accountability cycle commences when the Ministry of Finance issues its budget circular around the middle of the year to the heads of budget agencies. This is to provide them with the necessary guidance in relation to their inputs to the budget process and to enable the Ministry to begin the process of crafting the national budget. Such guidance should normally be provided having regard to a Medium-Term Budget Framework (MTBF) and a Medium-Term Fiscal Framework (MTFF). However, these documents are yet to be developed. The International Financial Institutions have been consistent in their recommendations for such frameworks to be in place. As a result, the national budget is prepared in isolation of a strategic framework.
Once the necessary inputs are provided by the heads of budget agencies, the Ministry of Finance proceeds to develop the national budget around the beginning of the third quarter of the year after detailed discussions with key stakeholders, including the political opposition, the private sector, civil society and trade unions. However, over the years, there have been criticisms of the extent of such consultations.
The third stage is the presentation of the Estimates of Revenue and Expenditure to the Assembly within 90 days of the beginning of the fiscal year. The previous Administration had agreed that the national budget must be in place before the beginning of the fiscal year. As a result, the Estimates for the years 2017, 2018 and 2019 were presented to and approved by the Assembly before the beginning of the fiscal year. However, when the new Administration took over in 2020, this decision was reversed.
Once the Estimates are approved, the execution of the National Budget effectively begins. A Mid-year report is then presented to the Assembly within 60 days of the end of the half year. Previously, there was an End-of-Year report on the performance of the economy and on the budget execution but this is now incorporated in the Minister of Finance’s budget speech.
Within four months of the close of the fiscal year, the Accountant General and heads of budget agencies submit to the Auditor General draft financial statements constituting the public accounts, and appropriation and revenue accounts, respectively. The Auditor General has up to 30 September to audit these accounts and submit his report to the Speaker of the Assembly who in turn lays it in the Assembly.
Once the report is laid in the Assembly, it is referred to the PAC for detailed scrutiny of the audited accounts after which the PAC issues its own report to the Assembly. Unfortunately, there is no deadline for doing so. Finally, the Ministry of Finance is required to issue a Treasury Memorandum setting out what action it has taken or proposes to take in relation to the findings and recommendations of the PAC. This brings to an end the public accountability cycle.
Need for revision of the accountability timeframe
The above timeframes has been in place since Colonial times when the public accounts were maintained manually. With the rapid developments in information technology from the early 1990s onwards, and in order to ensure the timely completion of the accountability timeframe, the Authorities need to consider the following:
(a) Bringing forward the date for the submission of draft financial statements to the Auditor General to 28 February;
(b) The Auditor General to issue his report not later than 30 June. He had agreed to do so once he receives the draft financial statements by the deadline set out at (a);
(c) The PAC to commence its examination of the audited public accounts not later than 15 July and to issue its report not later than 31 August; and
(d) The Ministry of Finance to issue its Treasury Memorandum not later than 30 September.
Meanwhile, the Authorities should immediately commence the process of addressing the findings and recommendations of the Auditor General as contained in his latest report, and take appropriate action to bring about the much needed improvements. In this regard, it may be appropriate for the Ministry of Finance to set up a task force to undertake this important assignment. The Ministry should also take urgent measure to have in place a MTBF and MTFF, preferably before the 2025 budget cycle begins.
