Advances are not loans
Feb 06, 2017 , http://www.kaieteurnewsonline....ances-are-not-loans/
It is not unknown for a government ministry, department of corporation to grant advances to members of staff. The issuance of advances is a regular and common financial practice which has been employed for eons.
The granting of advances to staff is part of the routine financial transactions of running a government agency. The work of government would be seriously compromised if there were not systems in place to ensure that advances are paid to staff.
A government team has to go into the interior or rural Guyana to undertake work at short notice. Money has to be found to pay for the expenses associated with these outreaches. The team has to be given an advance to cover their expenses and unforeseen costs, all of which will be accounted for on their return.
There are numerous other cases in which advances may have to be made so as to facilitate the work of the government and its employees. Advances have to be made also for overseas travel or for hastily arranged events. Advances are therefore part of the legitimate work of government.
A practice has evolved over time, which is not necessarily covered by financial regulations, but which is also not necessarily illegal. There are staff members of government ministries, departments of corporations, who may have a financial emergency. They may, for example, need additional money or need money urgently and cannot wait on payday.
And so the practice has developed whereby staff members ask for an advance on their salaries. That is, they ask for a proportion of their forthcoming salary to be paid to them in advance to cover some emergency need.
The practice, from reports, has deteriorated and some advances for personal purposes, as distinct for advances concerned with government work, have become so large that they cannot be covered by one month’s salary.
Such advances can technically be regarded as a loan. It should be discouraged and it was discouraged under the PPP/C following criticisms made in the Annual Report of the Office of the Auditor General.
Advances made by public corporations are not subject to the normal scrutiny of the Office of the Auditor General. But advances made for work-related purposes should not generate hysteria. Concern, however, should be expressed if the advances are for personal use, since if the advances are greater than one’s month salary, they are technically interest-free loans.
Advances for personal purposes are deduced from the recipient’s salary at the end of the month. Accounts are thereby balanced. On the other hand, those who receive advances for work purposes have to give account for how those advances were spent.
This has been a problem as successive Annual Reports of the Auditor General reveal. There are large numbers of advances which remain un-cleared in the system. It gets worse each year.
But there are different strokes for different folks. The ordinary worker has to account for his advance. But a minister of the government does not have to do so. Advances are given to them for overseas travel.
The PPPC has been highly critical of this development, saying that the APNU+AFC coalition has exempted its ministers from having to clear advances for overseas travel.
A Board of Directors cannot waive the repayment of an advance. There is nothing like the repayment of an advance.
An advance does not have to be repaid; it has to be accounted for. What is waived is the accounting for any advances made. A corporation, for example, may decide that it is satisfied that an advance to a party has been utilized for the purposes for which it was intended and therefore it will waive the need for accounting for that advance.
There is undoubtedly a need for tightening the regulations concerning advances. The PPP/C had discontinued the practice of salary advances to workers. If it has been resumed, then any advance given should not be greater than the take-home pay of the recipient. This will avoid situations where advances are used as loans.
In the case of outstanding advances which are not accounted for and which we are told by the Auditor General, run each year in to hundreds of millions of dollars, it is suggested that if, after six months an advance is not cleared, then a surcharge should be issued against the salary of person to whom the advance was given.