In last week’s article, we discussed the proposed appointment of Assistant Commissioner of Police, Clifton Hicken, to the position of Commissioner of Police. Mr. Hicken was appointed to act as Commissioner of Police in March 2022 when he was 53 years old. He reached retirement age of 55 in July 2023 but continues to date in that position. We stated that Mr. Hicken should have proceeded on retirement in August 2023 and that the President was ill-advised when he extended his acting appointment beyond his retirement age. The President appears set to appoint Mr. Hicken substantively to the position of Commissioner of Police despite arguments that such an appointment would be unconstitutional.
The Attorney General has counter-argued that Mr. Hicken’s substantive position of Assistant Commissioner of Police is irrelevant because Article 232 of the Constitution states that “Commissioner of Police” means, ‘the officer, however styled, commanding the Police Force’. Our understanding is that Article 232 refers to a change in the designation of the head of the Police Force. In Canada, for example, the Commissioner of the RCMP the head of the Police Force while in the United Kingdom it is Chief Police Officer. The extension of the acting appointment of Mr. Hicken in no way changes the designation of “Commissioner of Police”. That apart, the President cannot unilaterally change this designation. It has to be done via legislation to this effect.
The Minister of Human Services and Social Security has rejected the Auditor General’s findings as contained in his 2023 report on the public accounts. She contended that the report on the Women’s Innovation and Investment Network programme is ‘riddled with flawed conclusions, inaccuracies and omissions’. Similar comments were made by the Ministry of Health in relation to expired drugs. On the face of it, the disagreement with the Auditor General is rather surprising, considering that the audit process requires that the findings and recommendations be discussed with and agreed on by the Accounting Officer before the final report is prepared.
The Auditor General has stated in Paragraph 9 of his report that: (i) the draft reports were provided to the heads of budget agencies, and the relevant sections were discussed with them as well as with the Finance Secretary and the Accountant General; and (ii) the responses of the heads of the budget agencies were incorporated into the respective sections of his report. It is, therefore, for the two Ministries to state whether the Auditor General has followed these procedures. Likewise, the Auditor General has a duty to provide the public with documentary evidence of the said procedures, as suggested in a recent Stabroek News editorial.
On several occasions, we had mentioned that the quality and comprehensiveness of the audit must not be sacrificed in the interest of meeting the statutory deadline for the issuance of the report. That apart, over the years, some Accounting Officers have paid passing interest in the findings of the Auditor General, knowing full well that they may not be around by the time the Public Accounts Committee (PAC) gets its act together. The PAC is some five years in arrears in its scrutiny of and reporting on the public accounts. Given this state of affairs, the Audit Office is under no pressure to rigorously follow the audit process.
Additionally, Section 27 of the Audit Act 2004 requires the Auditor General to include in his report the written responses of Accounting Officers in relation to his findings and recommendations:
At the conclusion of any audit, the Auditor General shall provide the relevant Head of a budget agency, or the governing body in the case of other public entities, with a draft report including findings and recommendations, and the Head of the budget agency or the governing body shall provide a written response to the Auditor General within thirty days, which response the Auditor General shall include in his report to be submitted for laying before the National Assembly.
Regrettably, since the passing of the Audit Act, this requirement has not been adhered to. In my time, i.e., before the Act came into force, the draft report of a Ministry, Department or Region was discussed with the Accounting Officer who, if he/she agreed with the findings and recommendations, signed the report. If there was disagreement, either my comment/observation was removed, or the Accounting Officer’s explanations were included in the report along with my comment/observation. Suffice it to state that a finding is not a finding unless it is discussed with the auditee and agreed on, along with the appropriate explanations by the Accounting Officer. Before demitted office at the end of 2004, I had introduced an “Analysis of Finding Worksheet” with columns showing the following: (1) Criteria – what should be i.e. what the law/regulation/established practice says; (2) Condition – what has happened i.e. any deviation from or non-adherence to the criteria; (3) Cause – reason for the deviation or non-adherence; (4) Effect – how significant is the deviation or non-adherence in terms of impact; (5) Explanation – Accounting Officer’s response to the Auditor General’s observation; (6) Conclusion – the actual audit finding; and (7) Recommendation – suggestion to remedy the deficiency. These are the key elements of a finding which must be reflected in the audit report in a well-crafted paragraph or two. It is not clear what the current position is as regards the use of the worksheet.
In today’s article, we begin a discussion of the 2023 audited public accounts and the Auditor General’s report thereon by the examining certification of these accounts.
Consolidated public accounts and the Auditor General’s opinions thereon
There are eleven sets of financial statements comprising the consolidated public accounts which are required to be prepared by the Minister of Finance and submitted to the Auditor General for audit and audit certification. These are:
End of Year Budget Outcome and Reconciliation Report.
Receipts and Payments of the Consolidated Fund.
Expenditure from the Consolidated Fund compared with the Estimates of Expenditure.
Expenditure of those services charged directly by law to the Consolidated Fund.
Receipts and Payments of the Contingencies Fund.
Financial Reports of the Deposit Fund.
Schedule of issuance and extinguishment of all loans.
Current Assets and Liabilities of the Government.
Schedule of Government Guarantees.
Statement of Contingent Liabilities.
Schedule of the Public Debt.
Statements (a) to (e) relate to the financial performance of the government for the year ended 31 December 2023 while the remaining six statements reflect the cumulative financial position as at the end of 2023, a distinction that continues to elude the Auditor General through either a lack of understanding of the issue, or carelessness/sloppiness. The two sets of statements should have been separated out for the purpose of issuing an opinion on them, using “for the year ended 31 December 2023” for those that relate to financial performance for the year, and “as at the year ended 31 December 2023” for the financial statements reflecting the financial status at year end. This distinction is fundamental to the audit of the financial statements of any organisation.
The Auditor General has given unqualified opinions i.e., a clean bill of health on nine statements i.e. (a) to (e), (g) and (i) to (k). The remaining two statements – Current Assets and Liabilities of the Government, and the Financial Report of the Deposit Fund – were given qualified opinions.
Revenue and appropriation accounts of heads of budget agencies
Heads of budget agencies, i.e. accounting Officers, are also required to submit to the Auditor General: (i) statements of Acourrding receipts and disbursements; and (ii) Appropriation Accounts of their Ministries, Departments and Regions. These number more than 200. The Auditor General has, however, not issued his opinions on these statements, which is a significant shortcoming in his work. In a previous article, we had suggested that each of these statements should be given an abbreviated version of the audit opinion, just below each statement. This suggestion continues to be ignored.
Extra-Budgetary Funds
Section 73 (2) of the FMA Act requires financial reports to be prepared for all extra-budgetary funds, as required by the enabling legislation establishing those Funds. The Auditor General has, however, indicated that there were no extra-budgetary funds whereas the Natural Resource Fund Act of 2021 establishes such a fund to record the receipts and withdrawals of petroleum revenues as well as to provide for its overall management, as set out in the Act. The Auditor General is also the appointed external auditor of the Fund.
Current assets and liabilities of the Government
We continue to point out, to no avail, the difference between “assets and liabilities” of the Government and “current assets and liabilities”. The former includes long-term assets and liabilities such as land, buildings, plant & machinery as well as long-term debts, such as outstanding loans. Unfortunately, the Government continues to use the outdated cash basis in its accounting and financial reporting, as opposed to accrual accounting. As a result, only cash and cash equivalents are recorded and reported on, to the exclusion of long-term assets, while long-term liabilities are reflected separately in the statement of the public debt. The Auditor General, however, continues to use the term “assets and liabilities of the Government”, which is very much misleading.
According to the Auditor General, the statement of assets and liabilities of the Government comprises mainly cash and bank balances and cash equivalents, as well as short and long-term liabilities usually in the form of advances from the bank by way of overdrafts as well as the issue of Treasury Bills. This statement is incorrect since overdrafts and Treasury Bills are not long-term liabilities. That apart, a review of the Auditor General’s comments on this statement indicates that there were no adverse findings that justify the issuance of a qualified opinion. A qualified opinion is one in which there are reservations or disagreements of a material nature that need to be brought to attention, but which does not affect the financial statement presentation, hence the use of the words “except for”. The Auditor General has stated that ‘[e]xcept for the effects of the matter…’. However, it is unclear what matter he is referring to. One wonders how the Minister of Finance feels about this opinion, considering that he has signed the statement.
The main item comprising current assets and liabilities of the Government is the Consolidated Fund account balance. As of 31 December 2023, this account reflected an overdraft of $112.461 billion, compared with a similar overdraft of $90.695 billion as the end of 2022. At the end of 2021, there was a positive balance of $4.424 billion. Additionally, short-term borrowing in the form of the issuance of Treasury Bills increased from $226.542 billion to $372.596 billion. By Section 57 (1) of the FMA Act, the Minister is authorized to borrow funds to: (i) meet cash shortfalls that may occur periodically during the execution of the annual budget; (ii) to fund investment and infrastructure projects undertaken by the Government; (iii) to finance a budget deficit; and (iv) to meet the objectives of monetary policy. The Minister is, however, required to repay any advances by way of overdraft before the close of the fiscal year.
Additionally, the FMA Act requires all unspent balances at the end of the year to be refunded to the Consolidated Fund. However, at the end of 2023, amounts totalling $65.764 billion were reflected in the bank accounts of Ministries, Departments and Regions.
As regards the implementation of the International Public Sector Accounting Standards, the Auditor General’s comments and the Ministry of Finance’s explanation remain substantially the same for the past seven years, reflecting little or no progress in the implementation of the accrual-based system of accounting and financial reporting.
Financial Report of the Deposit Fund
By Section 42 (1), the Minister may establish one or more Deposit Funds into which public moneys shall be paid pending repayment or payment for the purpose for which the moneys were deposited. The Deposit Account reflected an amount of $8.523 billion as deposits from the Dependants’ Pension Fund and the four Sugar Industry Welfare Funds. There is also a miscellaneous amount of $3.562 billion, the nature of which has not been explained in the Auditor General’s report. It is also not clear what the status of financial reporting and audit of the above bodies is.
The Deposit Fund also shows an amount of $15.665 billion as advances made at the end of 2023. The Auditor General noted that an amount of $8.650 billion relates to the Guyana Gold Board. This balance has been coming forward since 2012. A similar observation was made in respect of advances to statutory bodies totalling $1.554 billion, which amount has been coming forward since 2005. The Ministry’s explanation was that clearing of the advances is dependent on the outcome of matters still before the Courts.
To be continued –