Audit Reveals Gusmao Gov't Finance Woes

TIMOR-LESTE NATIONAL PARLIAMENT

MEDIA RELEASE

Dili, 27 October 2009

The Gusmao de facto government's Minister for Finance, Ms Emilia Pires, stated to a parliamentary committee that she would not take any responsibility for budget implementation, blaming other ministries, which failed to spend budget monies for vital social and other infrastructure. ”This is another appalling piece of evidence of this Minister's incompetence and lack of responsibility for her legal duty," said a FRETILIN MP and Party Vice President Mr Arsenio Bano today.

Finance Minister Pires was named by the country's anti-corruption watchdog for abuse of power in relation to a government tender contract last year. She is also at the centre of a jobs-for-mates on huge salaries scandal, involving World Bank administered money.

Mr Bano was speaking to journalists after a hearing by the Parliamentary Economy, Finance and Anti-corruption Committee on the 2008 financial year audit. He said that the Minister confirmed that the claimed "reform policies" in public finance management of the Gusmao de facto government have failed abysmally.

"A key ministry, Social Solidarity, has according to the Minister's own report spent only 7.2% of their capital and development budget, and less than half of their minor capital budget, with an overall spending of 51% of their total budget.

"The Infrastructure Ministry only spent 12% of their capital and development budget and 20% of their minor capital budget, and a total of 16% of their overall budget for 2009. The Ministry of Tourism, Commerce and Industry spent only 7.1% of their capital and development budget. The Ministry of Agriculture, Forestry and Fisheries, has only spent 36.9% of its capital and development budget, only 3.6% of its minor capital budget and overall only 35.7% of their 2009 budget. Health spent a mere 27.5% of its capital and development budget, and only 18.7% of minor capital," said Mr Bano.

"These are the engine house ministries that move development along and that deliver most of the country's basic services. Yet the Minister did not accept any responsibility for this parlous public finance management. All this after such large amounts of donor assistance, such as the US$26 million Public Finance Management Capacity Building Project, to which countries like Australia have contributed, and which employed 'advisors' on salaries of hundreds of thousands of dollars each per year," said Bano.

The government's auditors, Deloitte Touche Tohmatsu Chartered Accountants from Darwin, stated that they were unable to ”obtain appropriate audit evidence to support the validity of salary and wages payments to certain employees as their contracts of employment were not available for us to inspect." The auditors could not obtain evidence ”to support the validity of pension payments," as well as being ”unable to attend cash counts and hence obtain sufficient appropriate audit evidence to support the validity of cash advances at year end."

The auditors'report also said they were "unable to review the prior year audit working papers and were not able to perform alternative audit procedures to enable us to form an opinion on the opening cash balance 31 December 2007, or on the adjustment of US$73,270,000 referred to in Note 7, regarding the accounts to prior years."

Mr Bano commented: ”These Audit qualifications are clear evidence of public finances being a shambles. There were never any such qualifications for all the audits undertaken prior to and including the 2006-2007 financial years. Why were the previous auditors' working audit documents not available to the current auditors? We know that the government had issues with the previous auditor being intransigent on their audit report for the transition six months 1 July to 31 December 2007. The Minister failed to explain why the current auditors can't say where these monies are. Just as she has failed to explain whether advances reported as missing last January have all been recovered. It seems from the auditors' report that they were not recovered," Mr Bano said.

The auditors' report qualified receipts amounting to US$817,000 and payments amounting to US$116,746,000 being post 31 December 2008 transactions." They say: "We were unable to satisfy ourselves as to the completeness of these receipts and payments as we have not audited all receipts and payments for the period 1 January 2009 to 30 June 2009 and we were unable to satisfy ourselves as to completeness through alternative audit procedures."

Mr Bano commented: ”Nearly US$200 million worth of transactions cannot be verified by the auditors. That is unacceptable in anyone's books. All this after the purported 'reform' too. It is a joke for this government to continue to paint the rosy picture it has been of public finances, or to try to blame others, such previous governments for their incompetence and corrupt elements. It's their doing and their incompetence," Bano said.

During questioning on the highly controversial sole sourcing of government public works projects, the so called "Referendum Package" of August 30 this year, the Minister expressly shifted responsibility for answering the myriad of questions and accusations raised by both the Opposition as well as government MPs to the Prime Minister himself. She evaded it totally.

"The US$34 million 'Referendum Package' was announced by the de facto Prime Minister after he dragged together unspent budget monies from varied ministries to spend on purportedly urgent infrastructure projects. There has been no tender, but contracts were coordinated by, and contractors from, handpicked businesspeople with close political and family ties to the de facto Prime Minister. It included an advance payment of 20% of the contract price before any works commenced. There have been allegations by civil society, business, and MPs from all parties, of over-pricing and phantom projects.

"We know that the Finance Minister herself was against the 'Referendum Package' from the outset. We hear she told the Prime Minister that it is was illegal and he responded as usual that he knew where the Dili prison was located. But it is a joke for the Finance Minister to say that it is the Prime Minister's responsibility to answer questions on it because she did not know. The law says she has to know, that she is the Minister responsible for implementing the state budget. It is her legal responsibility. She cannot just say,"it's not me, it's the others". If she is not happy with having to do so, then she should resign. We intend to hold her accountable whether she wants it or not," said Mr Bano.

"Now the Minister comes before the parliament and when questioned about the shambles that has become the 'Referendum Package', involving procurement of goods and services worth in excess of US$34 million, she simply diverts all questions and responsibility to the Prime Minister and other Ministers. She says that the atrociously low budget spending is because of other minister's management. Will she ever be held responsible for anything?" asked Bano.

"This 'Referendum Package' is a big disaster. It has been an irresponsible and illegal attempt by the de facto Prime Minister to spend, spend, spend, so that he does not have to face the embarrassment of having asked parliament for more than the government could handle, just as we had told them when they brought the budget to parliament for approval. It has totally disregarded procurement and public finance laws and regulations. This is totally unacceptable and we will be taking legal action," Bano warned.

ends

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