In our last two articles, we discussed Chapter 3 of the recently released Inter-American Development Bank (IDB) report entitled “Economic Institutions for a Resilient Caribbean” dealing with public financial management (PFM) with specific emphasis on Guyana. There is one matter that deserves some attention. It relates to the accounting and reporting framework that is used for processing government transactions. Guyana still uses the cash basis of accounting as opposed to the accrual basis. While the cash-based accounting system is simple to understand and operate, and assists legislators to monitor and control expenditure, it provides an incomplete complete picture of the financial operations of government. Several important components associated with financial reporting are not taken into account, including: (i) amounts accrued in terms of external parties’ indebtedness to the Government on the one hand, and the Government’s indebtedness, especially long-term debts, on the other hand, though a separate statement of the public debt is shown; (ii) movement in inventory balances, as all purchases are charged to final expenditure, thereby resulting in an inflation of expenditure; (iii) permanent or fixed assets, including infrastructure works, which if valued and placed in the Government’s balance sheet would be very significant; and (iv) the absence of consolidated financial reporting to reflect the results of operations and financial position of the entire public sector.
