Last week, we began a discussion of Guyana’s public financial management systems in both the pre-1992 and post-1992 periods. We noted that after a period of marked decline and deterioration during the 1970s and the early 1980s, some effort was made by the Hoyte Administration to reverse this trend. However, the effort was affected by the need to address the dire economic situation that was inherited. Nevertheless, it was a good start, only to be interrupted by the results of the 1992 elections.

We touched on financial management in the post-1992 period and considered that although public accountability was restored to some degree of respectability, the quality has once again gone into decline, especially over the last ten years. We also referred to the several reform initiatives that were undertaken and felt that the absence of the desired level of commitment and support was a constraining factor. We ventured to suggest that this was because the initiatives were the result of conditionalities insisted upon by the International Financial Institutions (IFIs) as a basis for the grant of debt relief for long outstanding loans and to access new loans and grants. They were not voluntary acts on our part. As we became the recipients of the full benefits of the generosity of our overseas creditors, we turn our backs at the initiatives. Experience has shown that imposed governance and accountability arrangements is likely to result in minimum compliance.

Today’s article is devoted to an assessment of the extent to which these initiatives were implemented and the resultant impact.

The Integrity Commission

The Integrity Commission was established in 1997 but it took two years for the first commissioners to be appointed regrettably from the religious community. It was an act of window-dressing as the Commissioners did not have the relevant background to properly scrutinise the annual declarations of income, and assets and liabilities of Ministers, Members of Parliament and senior public servants and to initiate investigations. Subsequent appointments were made without consultation with the Opposition Leader, as required by the Integrity Commission Act. This prompted a Court action and the subsequent resignation of the Chairman in 2006.

When one considers the lifestyles of some of the public officials who are required to make declarations to the Commission, and the enormous wealth they flaunt with impunity, one is hard-pressed to escape the conclusion that a well-resourced, fully-functioning and effective Commission is not in their best interest, hence the absence of a dedicated effort in this regard. With Guyana scoring so poorly on the Corruption Perceptions Index over the years, the effective enforcement of this key anti-corruption mechanism continues to evade us. This is more so considering that Guyana is a signatory to two international anti-corruption conventions – the Inter-American Convention against Corruption, and the United Nations Convention against Corruption.

Programme budgeting

The traditional approach to government budgeting is based on accountability for inputs, and to a large extent accountability for outcomes and impacts is ignored. When an ex post evaluation is carried out, it is usually found that budgetary allocations are exhausted but little is shown by way of results. Recognising the problem posed by this approach, especially for developing countries, there was shift the mid-1990s to preparing budgets on a programme basis that would ensure accountability for results rather than for inputs. This involves the allocation of resources based on functions and objectives, and results and outputs. Within each entity, a number of programmes are identified and these are supported by sub-programmes and activities, forming, as it were, a pyramid or hierarchical structure.

In 1998, the Government introduced programme budgeting. Although resources were allocated on a programme basis, there were no sub-programmes and activities. In addition, the programme performance statements by Ministries/Departments in support of their budgets contained merely brief bullet point statements of objectives, strategies, impacts, and indicators. There is no quantification of indicators of achievement nor is there reporting of actual performance. As a result, legislators and the public at large have no knowledge of the extent to which Ministries/ Departments are achieving their stated objectives, and what the actual outputs, outcomes, and impacts are.

The Public Procurement Commission

This column has been at pains to bemoan the fact that, despite the constitutional amendment of 2001, the Procurement Commission is yet to be established to ensure fairness and transparency in the award of contracts. This is due to the fact that the Cabinet does not want to relinquish its role in approving all major contracts and to allow for an independent and competent constitutional agency with reporting relations to the Legislature to provide the much-needed oversight of the procurement process. Given this situation, it is not surprising that contractors with close connections with those in authority are favoured in preference to those who would have been independently evaluated to be the most suited and capable to execute the works.

Numerous examples can be cited where questionable decisions were made under the watch of the Cabinet as regards the award of certain contracts. These include: the construction of the Skeldon Estate Modernisation Plant, Enmore Estate Packaging Plant, the Marriott Hotel, the Specialty Hospital, the Amaila Falls Access Road and Hydropower Project, the East Coast and East Bank roads, and the Leonora Synthetic Racetrack, not to mention the supply of drainage pumps and the procurement of drugs and medical supplies. In all of this, it is the taxpayer who has to foot the bill in respect of overpricing, inefficiency, substandard work, and in some cases overpayments. Various estimates of these additional costs have been proffered by knowledgeable persons. This column’s conservative estimate would be in the order of 20-25 per cent of the contract sums. With public procurement currently estimated at G$140 billion, this works out to a staggering G$28-$35 billion or 14-18 per cent of the national budget!

The Procurement Act 2003

The Act specifically states that until such time that the Commission is established, the National Procurement and Tender Administration Board (NPTAB) is responsible for carrying out the Commission’s functions. With the non-establishment of the Commission, for 14 years there has been no oversight of the work of the NPTAB whose members are appointed by the Minister of Finance with reporting relations to him. The NPTAB therefore lacks the much-needed independence to discharge its responsibilities. Other concerns which are inconsistent with the Act include:

Bias in the prequalification criteria for the supply of drugs and medical supplies to favour a local pharmaceutical company with close ties to the Administration;

Misapplication of the rules relating to sole sourcing;

Restriction in the bidding process to contractors/suppliers from countries from which the related loans are obtained, thereby discriminating on the grounds of nationality; Failure to notify unsuccessful bidders why they were not selected; and Non-activation of the Bid Protest Committee to address complaints.

Fiscal Management and Accountability Act 2003

Perhaps the greatest violation of the Act (as well as of the Constitution) is the requirement for all public revenues are paid over to the Consolidated Fund. The two examples come to mind: (a) the diversion of the proceeds from the sale of state assets and other investments as well as dividends received from state-owned/controlled entities into the coffers of NICIL; and (b) the retention by the Office of the President of Government’s share of the proceeds of the Guyana Lotteries. In addition, there were several instances where the Geology and Mines Commission transferred large sums of money to other state agencies instead of paying over such funds to the Consolidated Fund and to allow the Legislature, as opposed to the Executive, to decide on allocations to such bodies via the budget process.

One can cite expenditures incurred in the last three years without Parliamentary approval, as evidenced by the recent Court involving some $4.5 billion in the first half of 2014 as well as those incurred by NICIL using intercepted state revenues, especially as regards the construction of the Marriott Hotel. The abuse of the use of the Contingencies Fund also continues unabated. Other violations include the failure to promulgate accounting standards for government; and the absence of an organized system of internal audit.

The above represents serious violations that undermine the fundamental principles, indeed the foundation pillar, of public finance and administration.

Integrated Financial Management System (IFMAS)

IFMAS is “a comprehensive interlinked financial management and decision-making system that supports the efficient processing and storage of data and generation of reports, thereby complementing effective management and accountability.” It was introduced in January 2004 with the assistance of CIDA and support from the World Bank, the IDB and the IMF. IFMAS has seven modules. However, the Purchasing and Asset & Inventory modules are yet to be implemented.

It is inconceivable for IFMAS to function effectively without these two important modules being activated, especially when one considers that approximately 70 per cent of the national budget relates to public procurement. Do we really know the value of our assets and inventories and whether is proper accountability for them without such an integrated IT based system? In this day and age, can we really rely on a manual system to track our assets and inventories? The Minister’s statement that these two modules are only suited to mature economies must be dismissed with the greatest haste!

In our next column, we will discuss the creation of the Revenue Authority, the reforming of the Audit Office, and the Anti-Money Laundering Act 2009, before moving on to the proposed action plan for improvement.