Despite strong constitutional, legislative and regulatory systems to fight corruption, meaningful progress continues to elude us. (Part III)
French President Nicolas Sarkozy was found guilty last Wednesday of illegal campaign financing in relation to his failed 2012 re-election bid. The court found that he spent 42.8 million euros for his presidential campaign while the maximum amount allowed in France at the time was 22.5 million euros. Sarkozy was given a oneyear prison sentence. In 2021, he was sentenced to three years in prison on corruption charges involving an attempt to bribe a judge in exchange for the release of certain information on a case. Sarkozy has also been charged over allegations that he had accepted money from Libya to fund his 2007 campaign. See: https://menafn.com/1107854032/French Ex-President Nicolas Sarkozy Found Guilty Of Illegal Campaign Financing | MENAFN.COM.
Last week, the Auditor General issued a press release stating that the last set of audited financial statements of the Guyana’s Teachers’ Union (GTU) was in respect of 1989. According to him, the release was in response to enquiries from the media, but he did not indicate which media houses requested the information. It is, however, unclear why he has chosen to go this route by informing the entire public rather than those agencies that have requested the information.
Considering the salary dispute between the Government and the GTU that has led to the current industrial action, one hopes that the Auditor General was instructed to issue the release, in which case adherence to such instruction would have impacted adversely on his much fought for independence from the Executive. Be that as it may, it would have been more appropriate for any release from the Audit Office to include not only the status of the audit of all 23 trade unions but also those of other non-central government bodies, such as the ten municipalities, the 70 Neighbourbood Democratic Councils, and the 61 statutory bodies. The Auditor General should also state how many of the draft financial statements of these entities are with his office awaiting to be audited, and how long this has been so.
The other issue relates to the monitoring mechanisms in place to ensure that all trade unions, and indeed all other non-central government agencies, are financially accountable through the availability of up-to-date audited financial statements. In the case of the trade unions, should this not be the responsibility of the Registrar of trade unions? And what of the Audit Office? Should notices not be sent out to delinquent unions reminding them of their responsibility to submit draft financial statements for audit? How is the Audit Office able to plan its work and allocate resources if it has no information on the submission of draft financial statements for audit in relation to non-central government agencies?
In today’s article, we continue our discussion of the various anti-corruption measures initiated over the years and what might have been the reasons for Guyana continuing to score poorly on the Corruption Perceptions Index.
Audit Office of Guyana (cont’d)
In last week’s article, we referred to Article 222(a) of the Constitution that provides for the financial independence of constitutional agencies, including the Audit Office. This involves the expenditures of these agencies to be a direct charge on the Consolidated Fund determined as a lump sum by way of an annual subvention approved by the Assembly after a review and approval of an entity’s budget as part of the determination of the national budget. Previously, only the emoluments of the holders of constitutional positions were a direct charge on the Consolidated Fund, while the entities themselves were considered budget agencies, with the National
Assembly approving their budgets on a line-by-line basis, as is the case of all Ministries, Departments and Regions.
After 14 years, an attempt was made to give effect to this 2001 constitutional amendment through the passing of the FMA (Amendment) Act of 2015. However, following a change in administration in 2020, the amendment was repealed and replaced by the FMA (Amendment) Act 2021 that restores constitutional agencies as budget agencies. In our article of 15 February 2021 under the caption “The FMA (Amendment) Act 2021: A negation of a genuine attempt to secure the financial autonomy of constitutional agencies”, we considered that the 2021 amendment a retrograde step and a disregard for Article 222(a) of the Constitution.
The main purpose of Audit Act 2004 is: (i) to set out the responsibilities and authority of the Auditor General; (ii) to strengthen parliamentary oversight over the work of his office; (iii) to provide for the establishment and administration of an independent Audit Office; and (iv) to regulate such other matters connected with or incidental to the independent auditing of the finances of Guyana. The Act replaces the audit section of the Financial Administration and Audit (FAA) Act, Chapter 73:01 of the laws of Guyana which had been in place since 1961, amended from time to time.
The last amendment was in 1993, extending the mandate of the Auditor General to the audit of all public corporations and all entities in which controlling interest vests in the State, thereby bring to an end nearly three decades of controversy over the extent of the mandate of the Auditor General.
At that time, the audits of public corporations were exclusively undertaken by a private auditing firm that was issuing in most cases clean audit reports even as most of these corporations were making significant losses and were deteriorating financially. It was the late President Cheddi Jagan who insisted that as a matter of policy, wherever the State had a controlling interest, the Auditor General must be involved; and if the law did not
provide for this, we must amend it. There was provision 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 the entities for which the Auditor General has a mandate. However, Chartered Accountants could not serve for more than six consecutive years and were precluded from rendering consulting and taxation services for entities for which they were contracted to audit. These provisions have been repeated in the Audit Act 2004.
It should be mentioned that State audit is significantly different from commercial type audits. While the latter focuses on the fair presentation of the financial statements, the latter goes beyond this and considers issues relating the economy, efficiency and effectiveness as well as outputs, outcomes and impacts. The Audit Act requires the Auditor General to conduct not only financial and compliance auditing but also performance or value-formoney auditing. In conducting the latter, the Auditor General is required to examine the extent to which a public entity is applying its resources and carrying out its activities economically, efficiently, and effectively and with due regard to ensuring effective internal management control. With effect from 2002, the National Industrial and Commercial Investments Ltd. (NICIL) began to intercept State revenues in the form of privitisation proceeds and dividends from public corporations and state-owned/controlled companies, instead of paying them over to the Consolidated Fund, as required by Article 217 of the Constitution. Over the period 2002 to 2014, some $26 billion were retained by NICIL and used to fund various projects as determined by NICIL’s board. In effect, NICIL was a parallel Treasury involved in extra-budgetary expenditure without the consent of the Assembly. The Lotto funds is another example where the proceeds of Guyana’s share of the lottery are retained to be used to finance various projects without parliamentary approval.
Fiscal Management and Accountability (FMA) Act 2003
The FMA Act 2003, which replaces the financial administration section of FAA Act, seeks to modernize the legislation governing public financial management.
Key features include: (i) the Minister of Finance to certify the consolidated financial statements constituting the public accounts; (ii) all appropriations are to lapse at the end of the fiscal year and all unspent balances to be returned to the consolidated fund; (iii) restrictions on the use of the Contingencies Fund to meet only urgent and unforeseen expenditure for which there is no provision or inadequate provision, and the related expenditure cannot be postponed without jeopardizing the public interest; and (iv) .
As regards (ii) and (iii), there have been significant violations over the years. There was evidence of the acceleration of expenditure in the last quarter of the year to exhaust budgetary allocations. In particular, cheques were drawn close to year-end, and in some cases after year-end and backdated to 31 December although value was not received at that date. This also meant that cash books are kept open well into the new year. In such a situation, all sorts of irregularities can be perpetuated. The abuse in the use of the Contingencies Fund has also been well documented.