Chang bidding to reform fiscal accountability attitude
Wants results oriented budgeting

By William Walker
Stabroek News
August 3, 2000


Secretary to the Treasury, Claude Chang is a man on a mission -perhaps impossible - to "turn around the whole attitude towards fiscal accountability within the government" by implementing the private sector concept of results oriented budgeting and introducing an ethic of customer service.

There is little doubt that Chang who was appointed in April on a one year contract, is highly qualified. Apart from a degree in economics and a masters degree in macro economics, he is a qualified accountant and has many years of high level experience including stints with the US National Exchange Carrier Association handling a $6B annual budget and as finance controller for the Barbados telephone company. He has also presented a state budget to the Pacific Island of Guam. Back home he spent two years from 1994 at GUYSUCO as group financial accountant. In 1998 he prepared a background paper for the African Development Bank Report entitled "Commercial Infrastructure in Africa: Potentials and Challenges."

But observers have noted that even with the appointment of the greatly experienced Chang, the centralisation of the Ministry of Finance under the Office of the President continues. They question whether Chang's appointment was genuinely intended to utilize his expertise or was a facade to appease the international community.

As it is, Chang presides over a Ministry which has been partially dismantled; the establishment of the Guyana Revenue Authority has taken away the supervision of the collection of taxes and customs duties, and the non-inclusion of the Office of Planning, formerly the State Planning Secretariat, under the Ministry's authority contradicts the rules and regulations established by the Ministry.

But the position still holds enormous responsibilities and is second only to the Head of the Presidential Secretariat in seniority in the ranks of the civil service. The job description includes wide ranging duties "to allocate and release public funds and monitor Government Ministries/Departments' current and capital expenditure .....maintenance of financial propriety and accountability across the Public Service ..Production of Central Government's Annual Budget and Annual Estimates of Public Sector Revenue and Expenditure... monitor and co-ordinate the government's economic development programme...secure international assistance financial and technical to facilitate economic development by negotiating funding and loan agreements with international financial agencies and governments.."

PAC hearings
Chang himself describes his role "as managing the financial affairs of the Ministry of Finance - indeed of the country "through the 3 divisions; the Accountant General's Office, the Office of the Budget and the Office of Management. He noted the position's authority to refuse to approve any release of funds to any government department for non-compliance, to levy surcharges and ultimately to remove Accounting Officers.

Chang's short address to the Accounting Officers at a Public Accounts Committee (PAC) meeting on Friday June 28 would have left not one of them doubting his intention that fiscal accountability was paramount and inviolable.

"It is clearly evident from the PAC hearings conducted over the last two months that with few exceptions there has been an almost total disregard for the established rules and regulations", he said, "....my instruction to you is comply with the law. It would be very wrong .....to construct a regime of non-compliance. There are penalties, severe in many cases.....With respect to bank overdrafts, officers run the risk of being surcharged to the extent of the interest paid or payable on such overdraft....the lack of adequate accounting staff is not an acceptable excuse ..." On procurement procedures: "In the absence of transparency, corruption is the presumed motive and you must decide whether or not you would like to be tarnished." Just to make sure they got the message loud and clear, Chang then read out the main instructions given to the officers at the time of their appointment. There will likely be long hours put in by some Accounting Officers to get their books in order!

Loopholes
Chang says he has already made some headway in reforming the system. He has closed loopholes related to contracts that were resulting in lost revenues to the government. Within the Ministry of Finance he has taken steps to improve employee morale and encourage employees to be more service oriented. Delays have been shortened in remission letters from three weeks to one, on imports for manufacturers and mining firms. He is planning for the ministry to prepare a budget in time for the end of the year as stipulated by law.

But the cumbersome bureaucracy of the public service seems to be there merely to justify its existence, he observes. "Even clerks seem to exercise the little power they have when giving to citizens, documents to which they have a right .... the title `public servant' means what it says; a duty to serve the people of the country and not to flash the status of the office."

Chang gives the example of a simple payment of a Ministry phone bill that requires it to be sent through a series of "ridiculous steps" over a maze of departments and desks. "Why take 39 steps to do something when it can be done in 4 or 5?" He dismisses accountability as a justification. In fact even with the arcane regulations, the Ministry has had to dismiss two employees recently from the Accountant General's Office for fraudulent practices.

The system of programme budgeting, he notes is a start on reforming the ministries into more efficient organisations based on private sector concepts. No longer are budgets approved on the previous year's expenditure, but must be justified by specific programmes and the intended results. Such budgeting evaluates a programme not on how much is spent but on what will be the output, the benefit. Along with what seems to be the in-built inertia, Chang worries that the institutional memory of many ministries too often resides in a few individuals who seem unwilling to share the information. This could only be mitigated by building up confidence to let individuals know that it is an attribute to pass on knowledge.

Ad hoc systems
Chang also warned against civil servants bent on political ambition and he hoped that by moving away from ad hoc management systems to more structured procedures, transparency will effectively eliminate any political posturing.

Chang deferred from commenting on issues outside his office because of his position but his opinions are well known through letters he sent for a number of years to Stabroek News prior to his appointment. In "Devaluation is a government policy mechanism, Depreciation is not", Chang suggests "that the value of the Guyana dollar is impacted more by GUYSUCO flowing its foreign currency earnings to the banking system (through the Bank of Guyana) and the level of imported consumer goods and capital flight than the theoretical construct of exchange rate economics."

Another letter addressed the causes of currency devaluation very simply: "to spend more foreign exchange one must earn an equal or greater amount. One way to achieve this is to retain a greater proportion of existing foreign exchange earnings through increasing local value added."

The PUC came in for scrutiny in another letter where he argues that the rate of return approach to the regulation of utilities is too costly and time consuming. "Indeed significant fluctuations in inflation and currency rates make a rate of return regime impracticable..." He argued instead for a price cap regulation which provides incentives to reduce costs through efficiency gains and thus promotes efficient use of resources.

Back in December 1998 Chang predicted that "advances in wireless technology have come a long way to rendering facility based local service telecommunications networks almost cost ineffective"

Chang was scathing over GT&T's defiance of the PUC accusing its senior officials of doing the bidding of transnationals as members of the "comprador bourgeoisie." "It is equally spurious to claim that having a monopoly for local service is essential for universal service."

An April 1999 letter is brutally frank about Guyana's prospects if the country continues to be politically unstable. Reasons for investor reluctance included "the structural bottlenecks inherent in the economy, smallness of the market, low income per capita, high external debt service costs ..low level of skills and the concentration of wealth in a few hands. Despite all these drawbacks Chang suggested "the embrace of democracy as the approach to political governance is an overriding investment consideration."

Chang went on to say that the tax base does need to be broadened and deepened and the rebuilding of the basic infrastructure."

On the subject of the power company months before its divestment he wrote: "It is essential that consumers be educated to understand the implications of compensatory cost covering tariffs.. ." He warned also that without political consensus on the amendments to the PUC Act, the deal would engender controversy.

The African Development Bank paper chronicled the reluctance of many African countries to privatise public sector industries such as telecommunications, railways, electricity and water systems. Africa's stance on privatisation through the late '80s and early '90s reflected a general belief that "state capitalism in the African context meant limiting foreign influence on economic integration at the national level." The paper quotes World Bank statistics that show because of multiple linkages of infrastructure, economic growth is positively or negatively impacted by the character and state of a country's infrastructure... a firm's operating costs and profitability are directly influenced by the quality and availability of the infrastructure."

Chang concludes that African countries have of late become more comfortable with the process of privatisation. "To their credit many African countries have risen to the challenge of reforming their economies to emphasize the private sector as the engine of growth and to accept, albeit gradually, the role of government as regulator rather than as provider of infrastructure services."

Observers note that the success or failure of Chang's mission will not depend on his abilities but rather the willingness of those around and above him to move away from political cronyism and slack fiscal practices, to embrace the professional principles of a modern public sector.


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