The 2013 Auditor General’s Report has highlighted once again gross deficiencies in the financial management procedures and practices of Government. While these issues are not widespread across all agencies, there are crucial areas that need urgent attention.
So how do we move forward to address and eliminate the recurrence of such issues?
Internal audit and review: a significant revelation of the 2013 report has been the level of absence of robust systems of internal control and internal checks at all levels of our Government organizations. The occurrence of overpayments, lack of bank reconciliations and inadequate supporting documentation is unacceptable and should be improved upon as follows:
(a) use of pre-approved signing and authorization limits from most junior to most senior accounting officers/clerks in each department. This will ensure adequate oversight but also a clear basis for internal review of transactions completed; these limits will apply from petty cash transactions to major capital works disbursements;
(b) systematic review of a sample of actual transactions to ensure that all financial rules and procedures are being followed; it will involve tracing and testing the samples from initiation to completion of the transaction as it passes through each stage of the process and across each relevant employee desk; outcomes of these internal audits must be filed with the Permanent Secretaries within parent ministries and also with the Ministry of Finance;
(c) implementing better internal control systems that would allow for ease of detection of violation of any financial rule, for example, deadlines for completion of bank reconciliations –– ten days after period end; any improvements to internal controls must be married to the upgraded mechanisms for timely financial reporting.
Timely reporting: Government by its very nature, when we consider its physical buildings, many projects and other resources, is spread across all 166 square miles of our country. It is essential therefore that there exists mechanisms to facilitate timely submission of financial performance to Central Government administration, typically within the Ministry of Finance, through the Accountant General’s Office.
It is unacceptable that there are agencies, state enterprises and other projects that have not submitted accounts for as many years as they have existed, as in the case of the Boxing Board of Control, or as little as two to four years where financial statements have not been filed for, or audits completed for a multiplicity of entities, including schools, overseas missions and other state enterprises.
This cannot be allowed to continue indefinitely and may be addressed as follows:
(a) monthly financial reporting –– preparation and submission of monthly financial statements on an accruals basis to department/agency heads, with a quarterly submission of financial position to parent ministry and Accountant General;
(b) quarterly reports from ministries, departments and agencies should be reviewed and reconciled against disbursements and other data within the Treasury, Accountant General’s Office and Ministry of Finance;
(c) the reporting and audit periods should be standardized to Government’s financial year April to March annually to ease resources and the level of extra reconciliation required by varying reporting periods across the agencies and enterprises of Government;
(d) Completion of annual audits by the Audit Department and/or external auditors as required within three months of the end of the reporting period –– June 30, if all reporting periods are aligned to Government’s financial year.
Performance management systems: a strict performance management and incentive scheme should be formulated and implemented within the public service immediately to monitor and assess employee commitment to their job requirements. Additionally, for accounting and clerical officers, such performance appraisal should include assessment of employees’ adherence to the provisions of Government financial rules.
The irrelevant aspects of a disciplinary system suggested below must also be a comprehensive part of any performance management scheme that is implemented. A significant component at this juncture to achieving the reform we require to improve our public sector financial management, is employee motivation. The work ethic and attitude to the affairs of government by many officers is due largely in part to a demotivating environment.
Disciplinary and reformative action: with a robust financial management system and appropriate ongoing internal review and training, there must also be a clear disciplinary procedure for violations that occur, if we are to reduce the occurrence of the financial irregularities cited by the Auditor General in his report.
In order to reform our financial management, the time has clearly now come where clear penalties must be devised and communicated across departments as to how public officers regardless of position will be reprimanded or disciplined internally or even within our judicial system for serious breaches of the Financial Management And Audit Act (2007). Unfortunately a culture now prevails where there is no perception that offenders of the act will or can be called to account.
The historical permanence of public sector employment has not positively contributed to this and needs to be addressed. To my knowledge the act speaks to the process to be undertaken following the report of the Audit Office and I call for these processes to be followed as identified in the legislation.
There is no doubt that the Auditor General’s Report once again makes the case for urgent change to how our public sector finances are managed. The consequences of many of the irregularities have and will continue to restrict Government’s ability to fund and address other economic and social needs across our country.
The level of leakage of funds highlighted in the 2013 report taken in the context of increased taxation, fees and Government’s need for additional revenue generation is actually quite alarming and must be stemmed sooner rather than later. I concede that there are several areas to be addressed individually to make the system whole, but basic accountability, internal controls and sound financial reporting appear a sensible starting point to me.