The Audit Office of Guyana was established in 1884 as a Colonial Audit Department. In 1938, it was re-designated Colonial Audit Service, then Overseas Audit Service in 1954. The Financial Administration and Audit Ordinance of 1961 provided for the audit of the public accounts and for the duties and powers of the Director of Audit (now Auditor General). On the attainment of Independence in 1966, the Guyana Constitution was promulgated. Article 116 gave due recognition to the office and functions of the Auditor General. The 1961 Ordinance was also reconstituted as the Financial Administration and Audit (FAA) Act. Following the promulgation of the new Guyana Constitution in 1980, reference to the office and functions of the Auditor General is now found in Article 223.
(Amendment) Act of 1993
As far back as 1970, the then Auditor General, Mr. Patrick Farnum, held the view that “authorities of the Government” as reflected in Article 116 of the Constitution, included public corporations and other entities in which controlling interest vests with the State. Accordingly, he sought a legal opinion from the Attorney General, which opinion indicated that the relevant section of the Constitution did not directly bring within the authority of the Auditor General the audit of the accounts of those entities and that provision existed in the law where the Minister of Finance might require the Auditor General to audit such accounts. Despite this provision, most of the public corporations and other State-owned/controlled entities were audited by a private auditing firm without any involvement of the Auditor General.
In 1990, Mr. Farnum retired and his successor immediately sought to enforce the principle that wherever the State had controlling interest the State Audit Institution must be involved. However, attempts to do so were met with stout resistance from the Government whose lawyers advised that the Auditor General was seeking to extend his powers for which he did not have a legal mandate. This was at a time when the accounts of public corporations were given a “clean bill of health” despite the fact that most of the corporations were deteriorating financially. In addition, the Government had embarked on a massive privatization programme, and there were concerns about the haste in which some entities were being privatised. Accordingly, there were calls from various quarters for the Auditor General to be involved.
What followed is beyond the scope of this article. Suffice it to state that in 1993, the FAA Act was amended to vest with the Auditor General the responsibility for the audit of not only the public accounts but also the accounts of entities in which controlling interest vests in the State. However, if the Auditor General considered it desirable, he could contract the services of Chartered Accountants in public practice to audit any of the above accounts on his behalf. Once contracted, Chartered Accountants were precluded from rendering, accounting, taxation and consulting services for entities they were contracted to audit. They were also not eligible for re-appointment after serving as auditors for four consecutive years. In addition, the selection of the Chartered Accountants was done via competitive bidding and assessment by a committee comprising the Secretary to the Treasury, Governor of the Bank of Guyana, the Commissioner of Inland Revenue Department, the Head of Department of Management at the University of Guyana, and a representative of the Institute of Chartered Accountants (ICAG) not in public practice.
The auditing of foreign-funded projects, however, remained a contentious issue since the International Financial Institutions (IFIs) considered that the Audit Office was not independent enough to conduct these audits. However, the Inter-American Development was more flexible and agreed for the Audit Office to audit its programmes. A task manager for one of the IFIs boldly asserted that all he was interested in was for the audit to be completed by 30 April and for a clean audit opinion to be given! The Auditor General could not guarantee the latter while the former was dependent of the level of internal controls in place and the extent of tests that needed to be carried out. One recalls the Auditor General withdrawing his unqualified opinion on the financial statements of the Essequibo Road Project after irregularities were subsequently uncovered. He then launched an investigation into what became known as the “Stone Scam”. The funding agency carried out its own review, confirmed the Auditor General’s findings, and terminated the project.
Constitutional amendment of 2001
In July 1998, a Constitutional Review Commission was established under the Constitutional Reform Act of that year. Some of the Commissioners met with the Auditor General who outlined the key constraints affecting his office’s ability to effectively discharge the Auditor General’s mandate, including the absence of direct reporting to the Legislature; Government’s control over the Audit Office’s budget as well as staffing; and the lack of definition of what constitutes the public accounts. The Auditor General took the opportunity to refer to Article 118(2) of the Constitution which provided for him to be an advisor to the Cabinet Sub-Committee on Finance. He felt that such a provision presented a potential conflict of interest.
The 2001 constitutional amendments relating to the Auditor General and his office are as follows:
(a) The deletion of Article 118(2) relating to the Auditor General being an advisor to The Cabinet Sub-Committee on Finance;
(b) Insertion of Article 222A dealing with the financial autonomy of the Audit Office and six other constitutional bodies, including the Judiciary. The expenditures of these entities are to be financed as a direct charge on the Consolidated Fund, determined as a lump sum by way of an annual subvention approved by the National Assembly after review and approval of the entities’ budgets as part of determining the national budget. Each entity is required to manage its subvention in such a manner as it deems fit for the efficient discharge of its functions, subject to conformity with the financial practices and procedures approved by the National Assembly to ensure accountability;
(c) Amendment to Article 223(3) relating to reporting by the Auditor General. Prior to 2001, the Auditor General submitted his reports to the Minister of Finance who arranged for them to be laid in the National Assembly. While the Minister could in no way alter these reports, this practice placed the Auditor General in a situation where it would have inhibited his ability to be a critical as he would have liked to be in relation to his audit of the public accounts. The Auditor General now submits his reports to the Speaker of the Assembly;
(d) Insertion of Articles 223(5), 223(6) and 223(7) dealing with the supervision and functioning of the Audit Office. Audit independence is not an absolute concept, and while independence from the Executive is a prerequisite for the effective functioning of the Audit Office, there must be safeguards to avoid any possible abuse of authority. In this regard, the Auditor General proposed that, in exchange for greater independence from the Executive, the Audit Office be placed under parliamentary oversight via the Public Accounts Committee (PAC). Key elements of the proposal were: (i) the PAC’s approval of the Audit Office’s budget and annual work programme as well as the detailed rules and procedures governing the work of the Audit Office; (ii) ratification by the PAC of the appointment of senior officials of the Audit Office; (iii) the submission of quarterly progress reports to the PAC on the execution of the Audit Office’s annual work programme; and (iv) independent annual review of the Audit Office’s operations, including financial review, and reporting of the results to the PAC. These arrangements are now enshrined in the constitutional amendments; and
(e) Insertion of Article 223(8) relating to the definition of the public accounts which now includes: (i) all central and local government bodies and entities; (ii) all bodies in which the State has controlling interest; and (iii) all projects funded by way of loans or grants by a foreign state or organisation.
Except for (a) and (c), no action was taken to implement the above amendments until April 2006, following the passage of the Audit Act.
Audit Act of 2004
The Audit Act was passed in the National Assembly on 13 April 2004 and was assented to on 28 April 2004. However, it was not brought into operation until 27 April 2005. The two main changes brought about by the new legislation are:
(a) The Auditor General now has the legal mandate to undertake reviews to assess the extent to which an entity has utilized the resources at its disposal with due regard to economy, efficiency and effectiveness. This is a specialized area in government auditing known as performance or value-for-money auditing. Previously, this form of auditing was undertaken under the guise of “with due regard to the avoidance of waste and extravagance” provided for under the FAA Act, and the results were integrated with those of the financial audit. Earlier attempts to have performance auditing institutionalized did not gain support from the then Administration; and
(b) The Government may cause an additional audit to be undertaken by an auditor other than the Auditor General, where an agreement entered into with an IFI so dictates. The Minister of Finance may also request the PAC to cause an additional audit to be conducted by an auditor other than the Auditor General. The draft legislation prepared by the Audit Office did not contain these two provisions but were inserted by the Government. To date, neither provision was invoked.
Other provisions contained in the Act include: (i) the Auditor General making regulations to administer the Act; (ii) human resources management; (iii) responses to draft reports; (iii) power to inspect bank accounts; (iv) requests for prosecution; (v) funds of the Audit Office; and (vi) annual performance and financial report and the independent audit thereof. The draft legislation had included qualification requirements for the Auditor General, considering that the position is equivalent to that of the Chief Justice in terms of emoluments and other conditions of service. However, this did not find favour with the Government and were not included in the Act. Also rejected were eligibility criteria of professional qualified accountants within the Audit Office to be issued with practising certificates for the ICAG. In addition, the Auditor General had argued a case for restricting the tenure of office for the Auditor General to ten years in order to further strengthen his independence. However, his efforts were unsuccessful. As it now stands, once appointed, the Auditor General serves until age 65.
Since the passage of the Audit Act, there have been no further legislative changes governing the work of the Audit Office. Readers are directed to this columnist’s publication “Improving Public Accountability: The Guyana Experience 1985-2007” for a more detailed treatment of the topic, available at Amazon.com.