Commentary on the recently published Government of Anguilla 2012
Accounts
The latest Report on the Government’s Accounts by the Chief
Auditor of Anguilla has now been published.
You can download it from the Government of Anguilla’s website: http://www.gov.ai/documents/hoa/Government%20of%20Anguilla%20Accounts%202012.pdf. This Report relates to
the income and expenditure of the Government of Mr Hubert Hughes in the year
2012. It is over 75 pages long, but you
don’t need to read all of it. It is
sufficient to read his Summary Report on the first 13 pages to have a full
understanding of what a disaster zone the government’s accounts for 2012 appear
to be.
The Internal Audit Department must be
congratulated on the hard work they have obviously done. They have enabled the Chief Auditor to get
the 2012 Report out a mere six months after the 2011 Report was published in
November 2015. The 2011 Report was the
first report on Anguilla’s public accounts published in the nearly 50 years
that Anguilla has managed its own finances.[1] This is nothing short of remarkable. It took 50 years for the first set of public
accounts and auditor’s report to be published, and now the second one has been
put in the public domain in a matter of a few months.
As in his 2011 Report, the Chief Auditor’s
Certificate on the 2012 Report is a “qualified” one. The use of this word “qualified” by an
auditor is a serious matter. It indicates
that the opinion he expresses is not a clear or a clean one. In his Certificate at pages A, B and C of his
Report, he explains why his Certificate has to be a qualified one. I summarise his reasons below, in case you don’t
get a chance to read it for yourself.
The Consolidated Fund: All money received by or paid out by the
government of Anguilla is required by law to be paid into the Consolidated
Fund. The law is the Financial
Administration and Audit Act (the Act).
The purpose for this provision is obvious. If all money is paid into and paid out of one
account, it makes it easy for an auditor to check what money was received, and
what money was paid out. If the money is
paid into multiple accounts, or not deposited at all, it becomes impossible to
say with certainty what money was received.
Chaos will reign in the accounts.
The law requires that this not be done.
Role of House of Assembly: All money paid out on government expenses is
required to be authorised by the House of Assembly. The Assembly does this each year by approving
the estimates of government’s income and expenses in what is called the Appropriation
Act. Each government department puts
together its estimates for its income and expenses, and the Ministry of Finance
puts them all together in a budget called the Estimates. When the House of Assembly approves
government’s total income and expenditure, it passes the Appropriation Act. If, half-way through the year, a department
discovers it needs to increase its estimate of income, or of its expenses, it
puts together a request to the Assembly to approve this variation, and the
Assembly passes a Supplementary Appropriation Act. Without the approval of the Assembly, any
payment of public funds is illegal.
Contingency Warrants: The Minister of Finance is permitted in an
emergency to authorise a department to make a variation from the amount
approved, but he is expected by the Act to seek and obtain the approval of the
Assembly from time to time. Only the
Minister, not a public servant, can sign the authorisation varying the amount
approved for a particular purpose. General
Orders, the contract signed by every public servant in the employ of the
government, provides that if any Permanent Secretary authorises an expense or
payment that is not approved in an emergency by the Minister of Finance, or more
generally by the Assembly, he will be made to reimburse the public funds out of
his own pocket. This is all set out in
the law and in General Orders.
Chief Auditor’s Qualified Certificate: You don’t have to be an
accountant or even qualified as a book-keeper to understand what the Chief
Auditor is describing in his Qualified Certificate. What he sets out in his Summary Report at the
four pages marked H, I, J and K appears to show that the public service of
Anguilla treats the Consolidated Fund as a gigantic ‘slush fund’. One definition of ‘slush fund’ is “money earmarked for a loosely defined, but
legitimate, purpose that is instead surreptitiously used for an illegitimate
purpose.”
The Chief Auditor’s Certificate is qualified
for a number of reasons, all which he sets out.
In summary, some of the payments made by government departments, or
exemptions from payments that were supposed to be made by taxpayers, were not
legal. In his opinion, a number of matters
were not regular or in compliance with the legal requirements. These are some of them.
Company registrations: The Companies registration law sets out the
fee to be paid to government for forming a company. During 2012, government entered into
arrangements with certain company registration agents to form companies in bulk
at a discounted fee. These discounts
amounted to EC$2.3 million. However,
these discounts were not authorised by law.
They were illegal.
Reallocation warrants: The Minister of Finance is allowed by law to
reallocate surpluses enjoyed by a department to be spent even though in excess
of the amount authorised by the Assembly.
He does this by way of what is called a “reallocation warrant”. However, all reallocations issued in 2012
were authorised by the Permanent Secretary and not by the Minister. The reallocations made during 2012 were not
authorised in the manner required by the Act.
Not some of them, but all of them.
Tax revenue: He reports that the Government of Anguilla
has not been able to satisfy him that all payments due for property tax, the
interim stabilisation levy, or taxes on goods and services have been paid. So, government cannot show it has collected
all the tax revenue it is supposed to collect under existing legislation.
Advances: The law permits the Minister by an “advance warrant”
to authorise the Accountant General to make advances to a government department
from the Consolidated Fund. However,
advances made in 2012 were not authorised by the Minister. This practice of unauthorised advances continues
to be made despite our reading in the earlier report his warning that the
practice must stop.
Remissions: Once the Assembly has said what amount is to
be paid in tax, no government official may excuse a particular taxpayer from
paying the amount due. Any forgiveness
of a tax requires approval by the Assembly for it to be lawful. That is so basic that it should not need
emphasising far less repeating. But, yet
again, the Chief Auditor reports that Executive Council continues its practice
of selectively excusing certain taxpayers from payments due under the law. This amounts to ministers illegally granting
favours to selected taxpayers.
The Chief Auditor expresses a “qualified”
opinion on the government’s financial statements for the year 2012 for several
reasons. The illegal discounts,
unauthorised reallocations, incomplete records on property and other taxes,
unauthorised advances from the Consolidated Fund, and illegal approvals of
remissions, cause the Chief Auditor to find that the accounts are irregular or
not regular.
His opinion is “qualified” further because
government does not maintain adequate accounting records to support the
completeness, accuracy, and validity of advances, deposits, arrears of revenue,
remissions, and gifts made to government.
The question we all ask is whether his
report on the coming 2013 Accounts will show any significant improvement. Or, will the Consolidated Fund continue to be
nothing but a gigantic slush fund manipulated by senior public servants on a
whim?
[1] Government has recently put this
2011 Report up on its website, and it may be downloaded or read at: http://www.gov.ai/documents/hoa/Government%20of%20Anguilla%20Report%20and%20Accounts%20of%20the%20Consolidated%20Fund%202011%20New.pdf.
