“Sick state,” “troubling data” and “records are all over the place” to describe the accounting practices of the dismissed People’s National Movement (PNM) administration of the Tobago House of Assembly (THA) by Chief Secretary Farley Augustine highlights the urgent need for a thorough public expenditure review of the assembly, says economist Dr Vanus James.
The complaints are also eerie reminders of those issued by the Auditor General over the years, the most famous being the 2016 report that exposed the zipline fiasco, James cited.
In delivering a statement on the THA’s financial position at a recent plenary sitting in the Assembly Legislature, Augustine accused the former THA administration of not managing its liability portfolio over the past few years.
“We have to fix this. The portfolio of our liabilities isn’t being properly managed and the liabilities over a year old are difficult to ascertain, as records are all over the place, which leads to the question as to what measures were put in place to pay out these liabilities over time,” he had said.
Augustine had also claimed that within the new executive’s first month in office, a single contractor hit them with a bill for over $100 million.
He also reported an $8,551,287.20 million overdrawn position at the end of the fiscal for 2020.
The THA’s contingency account, Augustine also noted, stood at $3,920,322, while contingency expenditure was reported at over
$78 million, with an additional commitment of over $190,000 and unspent balances stood at $147 million.
According to James such remarks expose a greater picture.
“Taken together, these complaints amount to a strong case for a thorough THA public expenditure review. In this case, it seems that the review that is warranted, targeting the whole THA rather than one or two selected agencies,” he added.
Additionally, James advised, records should be available for a proper review to be conducted.
As specified by the Exchequer and Audit Act, the Finance Act, and by all related financial rules of the country, all Government accounting transactions must be properly recorded and folioed in files to action officers who spend Government funds, James cited, adding that all files must be properly kept in designated cabinets and vaults for easy retrieval and examination required.
Further, he said expenditures must also be analysed by specialist budget analysts to guide the efficient use of public funds and public assets.
And these budget analyses must also be properly recorded and filed for later conduct of accounting audits as mandated by law, and for analysis and use in decision-making regarding: plans for the public sector investment programme in the medium-term and long-term measures; and to guide response to future requests for financial allocations and releases to support programmes and projects, James emphasised.
He further explained that the public expenditure review does the same thing as a complementary external review process, noting that it differs from the budget analysis only with respect to its scope and the organised inclusion of all stakeholders.
“From his complaints, Chief Secretary Farley is clearly assuming like the rest of us, that public funds are budgeted and spent to deliver specific outcomes to the public, whether households, firms, or communities. We all want to know whether our funds were spent in accordance with our wishes, and if not, what should be done about it. A public expenditure review could deliver the answer,” James said, emphasising that it is designed to analyse the allocation and management of public expenditures to determine if the desired strategic budgetary outcomes of the government are being achieved.
“It is an integral part of outputs- and outcomes-based budgeting that Farley must surely be eyeing on behalf of the people of Tobago,” James said.
According to James, Farley seems “troubled” that the expenditures, especially those committed close to the December 6 election delivered none of the usual outcomes sought by Tobagonians - economic restructuring, export development, growth with price stability, creation of good jobs, and the like.
“He appears to be especially angry that procurement was based on political favouritism and that proper public debt management in Tobago was never of interest to his predecessors, leaving him with massive unexplained and poorly documented liabilities,” James noted.
Additionally, did the lack of proper procurement processes also promote fiscal ill-discipline, inefficiency and ineffectiveness in the THA?
According to James, inefficiency and lack of discipline typify projects that are not properly costed and that are activated by political procurement.
Was the aggregate level of THA spending and its true deficits and overdrafts, assessed on an accrual basis, consistent with a well-designed macroeconomic framework? Were expenditures in line with plans or arbitrary?
A tell-tale sign, James explained, is usually when expenditures deviate from plans by more than 10 per cent either way.
Also, did expensive private financing provided by political cronies dig Tobago’s economic grave while crowding out private-sector activities?
Saying the private sector in Tobago has been decimated over the past 21 years and the island’s economy with it, James also questioned whether the financing practices be a reason.
A properly done public expenditure review, James said, would also give the chief secretary information about the extent of transparency and accountability in the THA’s budget formulation and execution process.
“The issues of expenditure transparency and accountability have gained substantial prominence in recent years, as they are often necessary conditions to ensuring efficiency and equity in public spending.
“Beyond the matter of waste and inefficiency, the public expenditure review would also give Chief Secretary Farley important answers to the question of how to design plans to achieve faster progress towards the policy objectives of his new government. He would also learn about how to generate savings from year to year while achieving those objectives, if savings are possible at all,” James suggested.
And even though he cannot undo the past, Farley has many good options available to him going forward.
James suggested he could require the review team to look at specific agencies and activities, as well as to examine the THA’s expenditure management system and ask the team to undertake special in-depth studies of selected agencies, activities or business processes, like the Studley Park Quarry and the Capital of Paradise.
Further, James recommended that Farley could also get a detailed look at outcomes such as the incidence of benefits, the need for privatisation, the need to upgrade procurement procedures and the need to upgrade customer service.
“Importantly, to get to the bottom of the accounting sores he is complaining about, Farley could also seek a finding on whether it is prudent to build capacity in the divisions to undertake routine budget analysis and internal auditing, and to incorporate public expenditure reviews within their normal planning and implementation processes.
“Just as important, he could seek a finding on whether the time has come for the THA to move from cash-based accounting to accrual accounting for the better management of Tobago’s growing debt,” James further advised, adding that the recommendation to undertake a public expenditure review of the THA “amounts to a word to a wise man” such as Farley.