The 2021 Auditor General’s Report on the Public Accounts (Part III)
This is the third in a series of articles on the 2021 Auditor General’s report on the public accounts. The first article dealt with the certification of the financial statements comprising the public accounts; while in last week’s article we began coverage of the highlights of the report. So far, we have dealt with the following: overpayments to contractors/suppliers; contracts awarded to a blacklisted contractor; terminated contracts; cheques on hand; unpresented payment vouchers; and cheque order vouchers. In today’s article, we continue our discussion of the highlights of the report.
As regards unpresented payment vouchers, the Auditor General stated that 665 payment vouchers valued at $3.061 billion were not presented for audit examination, 656 of which valued at $3.050 billion or 99.6 percent relate to Ministries. The Guyana Defence Force (GDF), which accounted for 140 unpresented vouchers valued at $1.885 billion, explained that all payments are made by the Sub-Treasury attached to the GDF, and that the related vouchers ought to have been in the possession of that department which, it is to be noted, is part of the Ministry of Finance and thus independent of the Force.
While we do not condone the absence of payment vouchers and related documents to substantiate the payments made, the Sub-Treasury would have ensured that the transactions were in order before processing payment. The Auditor General also has a full-time audit presence at the GDF, and his officers review transactions after payments are made almost on a daily basis. It therefore becomes less of a problem, compared with Ministries and Departments that process their own transactions. In addition, there was no evidence of any attempts made to seek an explanation from the SubTreasury, and of alternative audit procedures that could have been adopted to verify whether value was received in respect of these payments, for example, payment of wages and salaries, the physical verification of the works, and the receipt of items shown as having been purchased.
As regards the remaining 525 unpresented payment vouchers valued at $1.176 billion, we have examined the Auditor General’s report on individual Ministries, Departments and Regions and have found reference to only 110 other unpresented payment vouchers valued at $630.995 million: Office of the President – 24 for $7.601 million; Office of the Prime Minister – 82 for $618.706 million; and Ministry of Labour – four for $4.688 million. An explanation therefore appears necessary as regards the remaining vouchers, or whether a mistake has been made.
Procurement of drugs and medical supplies
The Ministry of Health received amounts totalling $3.153 billion from the ten Regions via 19 inter-departmental warrants for the procurement of drugs and medical supplies on the latter’s behalf. However, the records of the Material Management Unit of the Ministry showed that items valued at $5.981 billion were dispatched to the Regions. In addition, the Ministry did not provide the list of items in support of the amounts requested in the warrants, and there was no evidence of reconciliation of the items received by the Regions with the Ministry’s records.
The Ministry explained that the items dispatched to the Regions were based on warrants submitted and that the value of the warrants and the items dispatched did not always coincide. However, the Ministry’s response did not explain why there was such a significant difference between what the Regions paid for via the warrants and what they received. According to the Auditor General, seven Regions were over supplied with drugs and medical supplies valued at $3.266 billion; while the
remaining three Regions were short supplied by $439.167 million. In particular, the Ministry received a warrant for $920.5 million from Region 4 but drugs and medical supplies valued at $2.420 billion were delivered. A similar observation was made in respect of Region 10 which was over supplied by items valued at $1.224 billion.
An examination of the Auditor General’s report for Region 4 indicates that the Region received financial returns from the Ministry for amounts totalling $884.259 million; while the Drugs Dispatch Reports from the Materials Management Unit showed only $338.626M worth of items were dispatched. As regards Region 10, the warrant issued was for the sum of $120 million, and the related financial return indicated that the full sum was expended. However, the cost summary provided by the Materials Management Unit showed that $935.095 million in drugs and medical supplies were delivered to the Region, which was $815.095 million in excess of the amount shown in the warrant. As indicated above, the Auditor General stated in his report on the Ministry that the value of drugs and medical supplies delivered to the Region 10 was $1.344 billion.
The observations by the Auditor General in the preceding paragraph are inconsistent with those in his report on the Ministry of Health. Similar inconsistencies were noted in respect of some of the other Regions. The key question therefore is: Did the seven Regions actually receive an over-supply of drugs and medical supplies in the amount of $3.266 billion based on the Regions’ requests? If so, in all probability, the excess came would have from the inventory holdings at the Materials Management Unit at the Ministry. How was the Unit able to balance its inventory records with the physical balances. And what of the inventory records of the Regions? Do the Regions have appropriate storage facilities to prevent spoilage? And, would over-supply of drugs and medical supplies not pose the risk of items expiring?
In 2004, the Government had introduced the Integrated Financial Management Accounting System (IFMAS) which is a computerised system comprising eight modules. However, to date two important modules – Purchasing, and Assets and Inventory – are yet to be activated. In his report, the Auditor General indicated there was partial implementation of the latter but he did not state to what extent this was done. The other issue relates to the implementation of the accrual-based accounting system, as opposed to the present cashbased system which does not take into account fixed assets and inventory in the Government’s financial reporting system. These two matters have been dealt with in our previous columns.
Non-delivery of items
As of September 2022, items purchased and valued at $1.297 billion had not yet been received, of which amounts totalling $1.057 billion were in respect of five Ministries; while $239.635 relates to nine Regions. It would have been particularly helpful if the Auditor General had listed the entities involved in the Highlights of the Report to facilitate cross-checking with the individual reports on Ministries, Departments and Regions. In the absence of such a listing, one has to search the entire report to confirm the accuracy of the amount shown in the Highlights. For example, under Office of the Prime Minister, the Auditor General stated that ‘audit checks of Payment Voucher № 0200001563 for $79.074M revealed that items totalling $1.652M were not recorded in the store’s records of the Civil Defence Commission’. How is this possible?
The amount of $1.297 billion does not include $1.915 billion worth of drugs and medical supplies paid for by the Ministry of Health but had not yet been received, and for which bank guarantees were covered for only $9.294M. The Auditor General quite correctly stated that should the suppliers fail to honour their commitments for which they received payment, the Ministry could encounter difficulties recovering the amounts involved. However, his report on the Ministry indicated that items valued at $1.232 billion were not received, giving an unexplained difference of $683 million.
The Auditor General also indicated that the Ministry of Health made payments totalling $6.362 billion to the New GPC for the supply of drugs and medical supplies, representing 45.8 percent of the total payments made to 13 suppliers, excluding payments below $20 million. It would have been particularly helpful if he could have stated the basis on which the related contracts were awarded. Were they based on prequalification or direct tendering, and to what extent there was compliance with the requirements of the Procurement Act? Such information is necessary so that the public can be satisfied that the contracts awarded were above board.
Guyana Revenue Authority
A total of 87,267 self-employed persons, or approximately 76 percent of registrants, did not file income tax returns for the year 2021. Only 27,211 or 24% filed returns totalling $4.054 billion. The GRA explained that: (i) the list provided did not represent an accurate number of active taxpayers; (ii) preliminary data cleansing activity uncovered various categories of taxpayers that needed to be removed; and (iii) work was ongoing to remove taxpayers not required to file returns and this was ongoing. Having regard to the explanation given, did it make sense to highlight this matter in the Auditor General’s report when if fact there were other areas that perhaps were in greater need of highlighting? For example, one section of the print media referred to the tax exemptions totalling $266.774 billion granted to entities operating in the oil and gas sector. According to the Auditor General, this represents 97.09 percent of the total revenue collections. However, actual revenue collections amounted to $255.086 billion, and therefore the percentage should have been 104.6 percent and not 97.09 percent. Another area that could have been flagged was the level of vacancies in the Petroleum Revenue Department. Of the 67 authorised positions, only 31 were filled, representing 53.73 percent.
Purchase of drainage pumps
Amounts totalling $600.886 million were paid for the design, supply, installation and commissioning of nine fixed and three mobile high capacity drainage pumps and associated structures/equipment. However, ten of these pumps were undersized and were incapable of running over an extended period. A government technical team recommended the pumps be replaced. The Ministry of Agriculture’s response was that the project was incomplete despite the fact that the contract was awarded since June 2018.
Leguan Stelling
In September 2018, a contract was awarded for the rehabilitation of the Leguan Ferry Stelling in the sum of $413.259 million. In 2019, payments totalling $199.435M were made, and the estimated value of the works completed at the end of that year was $50.970M. In 2021, an additional sum of $151.316M was paid to the contractor. In March 2022, the contractor requested an increase of $168.058 million but the report did not indicate whether the Ministry of Works agreed to the increase. As of June 2022, the Ministry indicated that the contractor had a balance of $60.047M on the contract sum. The Auditor General stated that at the time of reporting he could not determine whether works were still ongoing, although the report contains three photographs showing that only piles were driven down.
Follow-up on implementation of recommendations
Of the 548 recommendations the Auditor General had made in his 2020 report, 397 or 72 percent were fully implemented; while there was partial implementation in respect of 92. This leaves 59 recommendations unimplemented. This area of the report will be addressed in a subsequent column.
To be continued