The 2011 Auditor General’s Report: Office of the President

For the last four weeks, we took a break from reviewing the Auditor General’s report for 2011 to focus on a number of other issues. These include: (a) performance auditing in the light of a renewed mandate given to the Audit Office by the Audit Act 2004; (b) the National Insurance Scheme in view of the latest actuarial report; and (c) the truth about the restoration of public accountability because of a recent press release from the youth arm of the PPP.

So far, we have completed three articles on the Auditor General’s report. Today, we examine the Auditor General’s report on the Office of the President.

Overall comments
Total expenditure of the Office of the President for 2011 amounted to $5.749 billion. Considering the size of the expenditure, one would expect a significant portion of the Auditor General’s report to be devoted to the Office of the President.  However, the report for 2011 contained only twelve paragraphs, compared with 57 paragraphs in the 2004 report, with marked decline from 2006 onwards, as shown in the following table:

Year                No. of paragraphs
2004                    57
2005                    51
2006                    14
2007                      9
2008                      7
2009                      7
2010                      7
2011                     12

In addition, in 2003 there was a comprehensive evaluation of the operations of the Wildlife Division which was transferred to the Office of the President from the Ministry of Agriculture. Apart from the reported irregularities involving the export of dolphins and the misappropriation of some $50 million, the 2003 report had recommended that the Wildlife Division be transferred to the Environmental Protection Agency (EPA) in keeping with the requirements of the EPA Act. However, the Auditor General’s reports for 2004 through 2008 made only passing reference to the failure to act on this recommendation and to the absence of separate financial reporting of the Wildlife Division. For the last three years, that is, 2009 to 2011, even these two comments were dropped from the report. This leaves the reader in doubt as to whether the Wildlife Division had since been integrated with the EPA and whether any audit was undertaken of the Division. The EPA was last audited in 2009.

Current expenditure
The Office of the President had three programmes under current expenditure, namely Head Office Administration, Presidential Advisory (Cabinet), and Public Policy & Planning. Total expenditure amounted to $2.287 billion.

Expenditure on contracted employees, which accounted for $285.246 million or 87 per cent of the total employment costs, has generated considerable public controversy. However, there was no commentary from the Auditor General. During the last budget debate as well as the discussion on the financial papers presented in 2012, Members of Parliament sought and were provided with information about these employees. The concern relates mainly to the number and types of contracted employees, their professional backgrounds, and the level of emoluments they were receiving vis-à-vis general wage levels.

For 2012, the National Assembly did not approve of expenditure on contracted employees either in the original budget or by way of supplementary estimates. According to the Head of the Presidential Secretariat, the related expenditure continued to be met from advances from the Contingencies Fund. This represents a circumvention of Parliamentary authority to approve of expenditure for public services. It is also unclear how the Fund will be reimbursed since the National Assembly is unlikely to approve of the expenditure, unless there is a change of heart.  It would also be interesting to learn how the Auditor General will view this situation, especially as regards the criteria for drawing such moneys from the Contingencies Fund.

Subsidies and contributions to local organizations amounted to $1.060 billion. The Auditor General’s report did not give a complete breakdown of how this amount was distributed among the various government agencies. It did mention, however, that the Presidential Guard and Castellani House are not separate legal entities and the related expenditure should have been budgeted for and reflected under the various line items. The implication is that these two entities are not obliged to follow rules and procedures that are applicable to ministries and departments, especially as regards the recruitment and remuneration of staff members. Since they are not subject to separate reporting and audit, it is not clear whether the Audit Office went into the books of these entities to verify the expenditures incurred.

The report also indicated that several agencies under the Office of the President in receipt of subventions were significantly in arrears in financial reporting and audit, most notable being the IAST and the Government Information Agency.  Some of them were still to have their audited accounts laid in the National Assembly and therefore they have failed to report publicly on the accountability for funds appropriated to them. The above findings are not new and can be traced back to 2003 and earlier periods.

Other big-ticket items that did not attract any commentary from the Auditor General are: Training (including scholarships) – $373.160 million; and Other – $63.187 million. The latter is normally in the nature of miscellaneous expenses which could not be accommodated under the standard line items. In relation to the Public Policy and Planning Programme, such miscellaneous expenses accounted for 72 per of the total expenditure.

Expenditure on capital programmes
The approved allocation for capital programmes amounted to $4.963 billion of which sums totaling $3.462 billion were expended on 15 programmes. The unexpended amount of $1.501 billion relates mainly to information communication technology. Again, given the level of expenditure involved, the only comments from the Auditor General were in relation to Information Communication Technology; the Office and Residence of the President; and the maintenance of a contracts register.

Earlier reports of the Auditor General had covered each capital programme in terms of: (a) how much was allocated and for what purpose; (b) how much was expended, including details of the expenditure; (c) the results of physical verification of the works/services; and (d) any findings and recommendations. For example, one would have expected some commentary as to the reason why no expenditure was incurred in respect of the Land Use Master Plan for which the sum of $100 million was earmarked to be spent, and what impact this might have had on the operations of the Lands and Surveys Commission.

In relation to information communication technology, the report indicated that 27,000 laptops were acquired of which 9,133 were still on hand and that based on sample checks the distribution was done in accordance with the criteria set. It would have been helpful if the report had explained what those criteria were. The report also stated that 103 laptops were allegedly stolen from the premises and that the Police were investigating the matter.

Included in the expenditure on the Office and Residence of the President was the sum of $13.126 million shown as expended on the construction of a reception area and boardroom for the Ethnic Relations Commission. The Auditor General, however, noted that only the mobilization advance of $2.625 million was paid out by the end of the year and that three cheques for the remainder of the contract sum were drawn to be issued in 2012. This practice not only is a breach of the FMA Act which requires all unspent balances to be returned to the Consolidated Fund but also represents an over-statement of expenditure since value had not yet been received. It can also result in serious irregularities being incurred. The report also noted similar breaches in respect of nine other cheques valued at $6.484 million.

In addition, the report stated that the contracts register was not maintained for 2011, and minutes of the Department’s Tender Board were not kept. This is a serious matter since in the absence of these minutes, it would be difficult to determine on what basis the Office of the President awarded contracts.

As regards the Integrity Commission, there was no mention of the Government’s failure to appoint the members of the Commission to scrutinize the annual financial disclosures of politicians and bureaucrats. Needless to mention, a fully functioning Integrity Commission, staffed by competent and independent members, is indispensable to fighting corruption in government. This is not a policy matter from which the Auditor General may want to shy away. Rather, it is one of compliance with the Integrity Commission Act for which the non-appointment of the Commissioners is a serious violation.

NCN received $64.904 million, presumably to purchase equipment. However, there was no mention of the fraud that was uncovered early in the year. The last set of audited accounts of NCN was in respect of 2008, and the Auditor General’s report on these accounts indicated a lack of proper accountability for NCN’s assets. In the circumstances, one would have expected the Audit Office to trace the expenditure through NCN’s books to ensure that value was received for expenditure incurred. We will now have to wait some years down the road when NCN’s accounts are brought up to date to learn about this expenditure.

The Auditor General also reported on the status of financial reporting and audit in respect six entities in receipt of capital contributions, as follows:
Last set of audited accounts
GO-INVEST    2009
Environmental Protection Agency                                                             2009
National Parks Commission                                                             2007
Government Information Agency                                                             2006
Guyana Energy Agency                                                                           2007
Institute of Applied Science & Technology                                               2003

It is indeed a source of concern that the above agencies are allowed to be so significantly in arrears in terms of financial reporting. The concern is even greater when one considers that they are under the watch of Office of the President through which they secure their subventions to meet both operational and capital expenditure. It cannot be over-emphasised that the timeliness in financial reporting and audit is a pre-requisite towards proper accountability. The Office of the President should therefore set the example so that others can follow.