Auditor General’s report slams ministries over `dangerous’ textbook accounting

In some of its sternest language, the Auditor General’s report for 2010 flayed the Ministries of Education and Finance over a $110M textbook procurement deal which it said employed a strategy to defeat the controls of the Fiscal Management and Accountability (FMA) Act of 2003.

In its examination of the accounting for goods, the Report noted that the Education Ministry had, on the basis of sole sourcing, sought and obtained approval from the National Procurement and Tender Administration Board (NPTAB) to purchase $110M worth of textbooks from a local supplier. A similar arrangement had been worked out the previous year with the same supplier who was not named in the report.

The 2010 transaction exhibited features which the Auditor’s General’s report said constituted serious breaches and were dangerous.

According to the report, tabled in parliament last month, the NPTAB granted approval on December 29, 2010 for the textbooks deal. Thereafter, two cheques were drawn on the Consolidated Fund in relation to three vouchers. One cheque for $40M was written on December 31, 2010 but not paid until May 4, 2011. The other cheque was written on December 31, 2010 for $70.2M but not paid until September 20, 2011.

“As can be noted, payments took place four and eight months into the New Year, which confirms the use of a strategy to defeat the controls enunciated in the FMA Act, by the withdrawal of sums appropriated in one year and holding them for extended periods for spending during the life of another Appropriation Act”, the report noted.

It then also took aim at the Ministry of Finance. “It is even more disturbing that such a serious breach, is aided and abetted by the Ministry of Finance, through a process where stale dated cheques are extended for use at current dates. This was the case of the second cheque, which was updated on 9 June 2011”, the report declared.

While this case is different, it was breaches of rules governing the Contingency Fund and the repeated resort to supplementary financial papers which led to a showdown between the government and the opposition in Parliament last month. Several items on one of the financial papers were not approved and the other is to be revisited at an upcoming session of Parliament.

There were other features of the textbook transaction that the Auditor General’s report criticised. Following the payment of $70.2M on September 20, 2011, the report said that the supplier refunded the sum of $30.2M on a Scotiabank Manager’s cheque on the same day.

“Consequently it became apparent that the intention of the Ministry was to pay over only $40M, but was constrained by the sum written on the instrument on hand. Such dangerous accounting could only leave the Ministry, and Government as a whole, at risk. The situation was compounded by the fact that to date the Ministry has failed to repay the sum refunded by the supplier, to the Consolidated Fund”.

Further, the report pointed out that the contract executed with the supplier was dated May 4, 2011 even though approval had been granted by the NPTAB on December 29, 2010. “Given the date of the agreement for the supplies, the accounting methodology used to prepare cheques in the name of the supplier on 31 December 2010 was irregular”, the report said.

Following an examination of documents at the Ministry’s Book Distribution Unit, the report said that if the deliveries were to be accepted as being made under the 2010 orders, then the supplier was still to make good on books to the value of $62.4M. The report added that it was interesting to note that the period given for delivery was six months with an end date of October 31, 2011.

Some of the exact breaches were committed in the previous year, underlining a charge by the opposition that the ministries and central government are not paying heed to the findings and recommendations by the Auditor General’s report.

With the same supplier, and this time with a contract worth $230M, four cheques were drawn up on December 31, 2009. The first for $60M was paid on February 1, 2010; the second for $60M was paid on March 10, 2010, the third for $50M was paid on April 16, 2010 and the fourth for $60M was paid on June 11th, 2010.

The Auditor General’s report said that the approval of the NPTAB furnished by the Ministry did not provide details such as book titles, authors, quantities and values. However, the ministry presented two contracts and three book lists that gave details.

The report pointed out that the first contract for $185M was dated January 29, 2010 while the other contract for $40M was “surprisingly” dated 21 January 2011. “A contract was not yet entered into for supplies valued at $4.820M that would complete the order. Here again there was the essence of strange or irregular accounting in the drawing of cheques before the agreement was signed”, the report added.

These two instances with the same supplier in two different years and with several breaches of the FMAA are likely to raise further questions. Favoured suppliers across several ministries have been benefiting from large contracts even while in clear violation of the legislation enacted by the administration of former president Bharrat Jagdeo. In this particular case, the FMAA was assented to in 2003.

The role and decisions of the NPTAB are also likely to come under scrutiny. The opposition have been pressing for the setting up of the Public Procurement Commission which would have oversight of the NPTAB. This Commission had been designed by constitutional reform over a decade now but never established.

 

 

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