Last week, we began a discussion of our achievements on the public financial management front since we attained independence from Britain in 1966. There was a progressive deterioration at all levels of government so much so that by 1981 public accountability was brought to a standstill. Although the Hoyte Administration made genuine efforts to address the issue, its efforts were short-lived as a result of a change in administration in 1992. Public accountability was restored with effect from 1992 through the almost single-handed efforts of the Audit Office. Since then there has been annual financial reporting and audit of the public accounts and the laying of the reports in the national Assembly, though the quality is left much to be desired.
Today, we continue our discussion of public financial management in the post-independence period.
Re-activation of the Public Accounts Committee
The Public Accounts Committee (PAC) is a sub-committee of the National Assembly with the responsibility for reviewing the public accounts and the related reports of the Auditor General as well as all other accounts referred to it by the Assembly. Prior to 1992, the last report of the PAC was in respect of 1967 and was issued in 1984.
With the restoration of public accountability with effect from 1992 and the laying of the public accounts and the related report of the Auditor General, the PAC was re-activated. However, because the report was extremely critical of the Government’s management of the country’s finances, the PAC vigorously sought to challenge the legality and validity of the 1992 accounts on which the report was based, on the grounds that: (a) the accounts had to be presented as a whole and the omission of two important statements rendered them invalid; and (b) it was unprecedented to have financial reporting for a later year without the earlier years being reported on first.
The Chairmanship of the PAC was held by a senior Minister of the then previous Administration. The reality was that he was chairing a committee that was examining the Auditor General’s report covering a substantial part of the fiscal year for which his party was in government. Political expediency took precedence over the broader interest in that the Opposition members took an extremely defensive position and vigorously sought to discredit the Auditor General’s report. Instead of the Accountant General and accounting officers being asked to explain the deficiencies identified in the report, they were encouraged and prodded to disagree with the findings of the Auditor General. The 1992 PAC report captures the essence of what transpired:
“However, because of the apparent inadequacy of the statements provided him by the Accountant General and the Debt Management Unit, the Auditor General was unable to determine the true nature of the Public Debt of Guyana… the Auditor General was unable to verify the statement of outstanding loans or credits that had been guaranteed by the government, and the statement of outstanding loans and advances that had been made from the Consolidated Fund. On top of all of this, the Auditor General could not determine also what balances on deposit, at the end of 1992, were held by the Accountant General and what outstanding advances had been made. He could not even certify the current assets and liabilities of the Government.”
Despite these criticisms, the effort was a landmark achievement, ushering a new era in public accountability in Guyana. The Auditor General’s report for the fiscal years 1993 and 1994 were also presented to the Minister within the statutory deadline. In terms of content, they were as critical as that of 1992, especially with regard to the failure of the Government to submit two important statements. The 1993 PAC report, which was also finalized in the same month as that for 1992, took a dramatic change in tone:
“The Committee commends the Auditor General and his staff for preparing a report on the several statements and accounts submitted to their office. The Committee notes with approval that, because of the omission of two statements, the Auditor General has properly qualified the accounts and statements which the Minister of Finance has laid in Parliament. The Committee emphasizes most strongly that it does not wish to discourage the Auditor General from presenting and commenting on the reports that are made available to him. It urges, however, that it be always made clear that the reports do not represent the public accounts in their entirety, and that those accounts and reports are of crucial importance.”
With a change in chairmanship of the PAC, the Committee set aside partisan political interests, and was genuinely seen to be functioning in the national interest. At the conclusion of the PAC examination, the Audit Office was requested to draft its report, which was laid in the National Assembly in March 2000. Through the continuous efforts of the Audit Office to influence the Accountant General’s Department to prepare and submit the two outstanding statements, it was not until 1996 and 1999 respectively that they were eventually included in the public accounts. Complete and full financial reporting was therefore not achieved until seven years later.
There was, however, a progressive decline in terms of the timeliness of the PAC examination and reporting on the public accounts. While such examinations can be regarded as relatively timely for the years 1992 and 1993, the same cannot be said for subsequent years, and the initial momentum appeared to have waned. At the time of writing, the PAC’s report for 2010 -2014 remained outstanding.
In addition, a number of years were reported on together: 1995-1998 in October 2000; and 2000 -2001 in February 2006; and 2007-2008 in March 2014. This declining trend and combined reporting are quite a disappointment, given the earlier struggles, indeed battles, to restore public accountability.
Once the PAC issues its report on the public accounts, one would expect that a serious effort would be made to inform legislators and the public at large of the actions the Government took or intends to take in relation to the findings and recommendations of the PAC. This is normally done through the issue of a Treasury Memorandum, However, no such Memorandum was issued for the first seven years in the post-1992 period, that is, from 1992-1998. It was not until July 2005 that the first such Memorandum was issued on the 1999 public accounts. A further memorandum was issued in October 2006 covering the years 2000-2001.
With the resumption of annual financial reporting, one would have also expected to observe gradual improvements in government financial management. The fact that no Treasury Memorandum was issued for the first seven years would suggest that little or no attention was paid to the deficiencies identified in the Auditor General’s reports. It is not surprising therefore that a comparison of the Auditor General’s report for 1992 with that of 2014 revealed that most of the deficiencies highlighted remained uncorrected.
Financial Administration and Audit (Amendment) Act 1993
The background to the amendment relates to the then Minister of Finance’s attempts to restrict the work of the Audit Office to central and local government activities and to the allow for chartered accounting firms in public practice to audit the rest of the public sector. The Auditor General vigorously opposed this move, citing Article 223 of the Constitution which gave him the mandate to audit the public accounts of Guyana and all authorities of the Government. Indeed, it was inconsistent to the principles of public accountability for there to be State institutions, and State auditors were being denied the right to review their operations on behalf of the citizens of the country whose financial resources were used to fund most of them.
At that time, only one chartered accounting firm was auditing the public corporations, most of which were in serious financial difficulties. Concern was expressed that these entities were deteriorating financially, yet they were given “clean” audit reports. The auditors were also involved in consulting and taxation services for the same entities for which they were required to audit. Matters came to a head when the Auditor General was removed as the auditor of the Bank of Guyana, necessitating the intervention of the late President Cheddi Jagan who was a strong supporter of the State audit office. I continue to remember the words of the President at a meeting he called to discuss the stand-off: “When I was the Leader of the Opposition, I always wondered why was the Auditor General not involved in the audit of the public corporations. As a matter of policy, he must be involved, and if the law does not provide for this, it should be amended.” It was the shortest meeting I had witnessed.
The amendment to the FAA Act clarified the Auditor General’s mandate to include all entities in which controlling interest vests with the State. Provision was made for the Auditor General to engage the services of chartered accountants in public practice to audit on his behalf, and under his supervision, any of these entities, if he considered it desirable.
Once appointed, the chartered accountants were prohibited from undertaking consulting, accounting and taxation services for the entities for which there were appointed auditors, and they could not render auditing services for a particular entity for more than four consecutive years (later increased to six years). Because of this amendment, at least ten chartered accounting firms are now undertaking audits on behalf of the Auditor General. Ten years later, following the Enron and WorldCom accounting scandals, the Sarbanes-Oxley Act of 2004 was passed in the United States to, among others, provide for similar prohibition of auditors of publicly listed companies.
