Tag: Constitution

Introduction
To begin today’s column I conclude with two of the provisions relating to supplementary appropriations in the Fiscal Management and Accountability Act 2003 (FMAA). The first is that except in circumstances of grave national emergency, there can be no more than five supplementary appropriation bills in any one year. Second, every appropriation of public moneys authorised by Parliament for a fiscal year lapses and ceases to have effect as at the end of that fiscal year. And just in case any official, minister, or the Audit Office needs reminding, section 38 of the FMAA repeats what is stated in section 21, ie, that all public moneys raised or received by the government must be credited fully and promptly to the Consolidated Fund. “Public moneys” is defined to mean all moneys belonging to the state, including tax and non-tax revenue collections authorised by law; grants to the government; budget agency receipts; moneys borrowed by the state or received through the issuance and sale of securities; and moneys received or collected for and on behalf of the state.

The Contingencies Fund
I now turn to the constitutional provision governing the Contingencies Fund. The position is that if Parliament decides to establish a Contingencies Fund, Article 220 permits it to do so by paying into it a specific amount, the quantum of which is determined and, therefore, limited by law in respect of any year. The article goes on to authorise the minister responsible for finance to make advances from that fund, if he is satisfied that there is an urgent need for expenditure for which no other provision exists.

Advances from the Contingencies Fund must be cleared by a supplementary estimate laid before the National Assembly as soon as practicable (see 4) below), thus replacing the amount so advanced. Section 41 of the FMAA gives effect to Article 220 by providing that:

1) The Contingencies Fund is limited to two per cent of the estimated annual expenditure of the previous financial year or such greater sum as the National Assembly may approve. It is fixed for each year, either by way of the formula or an act and the minister cannot increase it without parliamentary authority.

2) Only the Minister of Finance can authorise the release of moneys from the Contingencies Fund and must do so personally. Legally, not even the President can instruct the Minister of Finance when it comes to this fund.

3) By way of a drawing right, the minister may make an advance from the Contingencies Fund. The circumstances under which he can do so are severely limited – the overriding test is threefold: urgent, unavoidable and unforeseen. Further, he can use this fund only where no or inadequate sums had previously been appropriated, or where reallocation under the FMAA is not possible, or finally, where delay would cause injury to the public interest. He cannot use the fund to meet a promise by the President to do something or the other, or because he failed to budget properly, or because some budget agency was careless.

4) The Minister must report at the next sitting of the National Assembly all advances made out of the Contingencies Fund, specifying (a) the amounts advanced; (b) to whom the amounts were paid; and (c) the purpose of the advances.

5) On approving such advance, the National Assembly must pass a supplementary appropriation act covering the advance.

I reject what appears to be the government’s implicit assumption that Article 220 establishing the Contingency Fund somehow overrides the provisions of Articles 216-219 establishing the sanctity and unity of the Consolidated Fund, and providing an elaborate regime for expenditure of public funds. All that Article 220 does is to authorise Parliament to establish, if it wishes, a Contingencies Fund. The FMAA sets the limit on the sum of money to be paid into this fund and sets out the procedures governing the use and operation of the fund. The purpose of Article 220 is to convert the demand for money to be available for unforeseeable expenditure, which could be treated as a demand for loose or floating money, into a demand for a determinable amount of money for a specific purpose approved by law made by Parliament and by the constitution.

The purpose and combined effect of the constitutional provisions and the FMAA is that all expenditure, whether from the Consolidated Fund or its sub-fund the Contingencies Fund, must be by way of an appropriation act. This allows the National Assembly to retain control of public moneys while allowing the executive branch sufficient latitude to conduct governmental business. The limitation on the number of supplementary appropriation bills would seem designed to impose a form of financial discipline and order on the Ministry of Finance and budget agencies, in contrast to haphazard, guesswork financial management.

Against this constitutional and statutory background we can now consider the six Financial Papers presented to the National Assembly for 2009 for a total sum of $15,703 million. As we see from the table below, the amounts provided to clear advances from the Contingency Fund were $3,936 million while supplementary provisions amounted to $11,767 million. These were approved by way of Supplementary Appropriations Acts passed on August 25 and December 14, 2009 and January 14, 2010.

Table of Supplementary Appropriations in respect of 2009

Source: Acts and Financial Papers

1. While nothing new can be said about the failure to deposit the lotto funds into the Consolidated Fund, equally dangerously and unconstitutionally, the lotto funds are being used by the President to make payments. I have tried to ascertain the identity of the officials complicit in this illegality by trying several sources to ascertain the signatories to “account 3119.” Everyone is afraid to speak. It is no wonder that the government would not bring Freedom of Information legislation, despite the President’s commitment announced to the international press.

2. In financial paper No. 6, $1.6 billion is included as additional inflows for the Low Income Housing Programme Revolving Fund. A revolving fund can only be established under an appropriation act which specifies the purposes and draw-down limit. There is no indication when such a fund was created or its limits. No such fund appears to have existed at the beginning of 2009 and there is some mystery about its origin and operations.

3. There is some apparent misunderstanding between inflows which should be paid into the Consolidated Fund and the related expenditure which should be the subject of the appropriation act. Any money received has first to go into the Consolidated Fund. Its expenditure is an entirely different matter.

4. The Finance Minister fails consistently to bring to the next sitting of the National Assembly advances out of the Contingency Fund. As a result we have in Financial Paper #1, Contingency Fund payments for a period of six months. During that period, the National Assembly had met on more than two dozen occasions. But this is the Minister’s artful but deceptive way to circumvent the limit on the number of supplementary appropriation bills he can introduce.

5. The annual Budget never states the amount in the Contingencies Fund. While the Audit Office annually refers to the abuse of this fund, that office seems not to understand what is meant by “advances” in the context of the fund. It is meant to be an amount paid in advance of appropriation at the next sitting, not some prepayment for future expenditure.

6. Arguably most of the Contingency Fund expenditure does not meet the strict test of “urgent, unavoidable and unforeseen” set out in section 41 of the FMAA. The case of the $400 million to the GRDB as Subsidies and Contributions to Local Organisations is instructive.

7. The Contingency Fund seems routinely used to make expenditure for subsequent financial years. The Minister of Health admitted as much in the case of purchases of drugs from the New GPC.

8. Act 3 of 2010 is interesting. It indicates that the government spends moneys contrary to law, not only in respect of the Contingencies Fund but for non-urgent expenditure. And just reflect on the first paragraph of this column: that every appropriation of public moneys authorised by Parliament for a fiscal year lapses and ceases to have effect as at the end of that fiscal year. Seems to suggest that the appropriation lapsed even before the National Assembly approved it.

9. In Financial Paper 5 there is, under the Office of the President, an amount of $353 million for the installation of fibre optic cables and termination, as a Contingency Fund provision. The explanation, or justification, by no less than the President, that this is to introduce “e-government,” ie, electronic government, is as absurd and misinformed as it is wasteful.

A criticism of this less than half-baked and non-technical description needs a separate column, but consider that the same week the announcement was made, the President was unveiling an advanced, multi-billion dollar, technically tested scheme by GT&T! Nor does the payment meet the test of “urgent, unavoidable and unforeseen,” and the Minister should be held accountable for this illegality since the law imposes on him exclusive responsibility over the Consolidated Fund.

Leading on from the issue of responsibility, next week’s concluding part will look at who is responsible and who can be penalised, and offer some of the recommendations to improve the financial management of the public finances of the country.

Setting up of two funds
Occasioned by the walkout of the opposition from the National Assembly as it considered Supplementary Appropriation (No.3 of 2009) Bill 2010, for $8,245,758,278, some of which had already been spent (Contingencies) and to be spent (Supplementary Appropriations), I began an examination of the whole business of the constitution and the Fiscal Management and Accountability Act 2003 (FMAA). Together these provide the legal framework for the receipts and payments of public expenditure, and today I propose to examine the various provisions as a basis for consideration in the next part as to whether there is compliance with the constitution and the law in how the Minister of Finance treats with the Consolidated Fund and the Contingency Fund.

The constitution
The Consolidated Fund and the Contingency Fund are dealt with under Articles 216-219 and 220 respectively.

These five articles occur in Title 8 which is intituled simply ‘Finance.’ Together they deal with the establishment, funding and withdrawal of money from the Consolidated Fund or other public funds. For reminders, the Contingency Fund is not a separate fund but only a sub-fund of the Consolidated Fund.

The title of Article 220 is ‘Contingency Fund.’ It corresponds with the four articles on the Consolidated Fund and deals with the establishment of the Contingency Fund and its funding, which may be considered as one part, and withdrawing money out of it, which may be considered as the second and separate part of its provisions. One of the differences between the Consolidated Fund and the Contingency Fund is that while the constitution establishes the Consolidated Fund, Article 220 does not establish the Contingency Fund by its own provision, but leaves it to Parliament to decide whether or not it will establish the fund. “Parliament may by law establish” says the text of the article.

Because the Consolidated Fund is the repository of revenues or other moneys raised or received by Guyana and the source from which expenditure is made, the amount in this fund changes constantly. This is not the case with the Contingency Fund which has to be a specific amount, the quantum of which is determined, and therefore, limited by Parliament by law. We now look at those provisions in some detail.

Article 216 provides that “all revenues or other moneys raised or received by Guyana (not being revenues or other moneys that are payable, by or under an Act of Parliament, into some other fund established for any specific purpose or that may, by or under such an Act, be retained by the authority that received them for the purpose of defraying the expenses of that authority) shall be paid into and form one Consolidated Fund.”

This constitutional provision is systematically abused. It is now more than a decade since Auditor General Anand Goolsarran had cited the failure by the government to pay the government’s share of 24% of the proceeds of Guyana Lotteries to the Consolidated Fund, an assertion that has been repeated in every single annual report of the Audit Office. The 2007 report simply reminds Guyanese that no action was taken to pay over the amounts due to the Consolidated Fund but that such proceeds were paid into a special bank account No. 3119 and were used to meet public expenditure without parliamentary approval.

Watchdogs?
But instead of acting decisively on this matter the Audit Office accepts the inane response from the Ministry of Finance “that a policy decision is required on this matter, ” suggesting that the government or cabinet has some discretion on whether or not to comply with the constitution. Unfortunately, it is not only the Audit Office that bears responsibility for this sad state of affairs but so do the Public Accounts Committee and the National Assembly which are supposed to be our financial watchdogs. But so too does civil society, including those religious organisations which have accepted lotto funds for the construction of religious buildings.

While the lotto funds may be the most obvious and egregious case of violation when it comes to putting government revenues and receipts into the Consolidated Fund, it is not the only or obvious one. For example, the government with the cooperation of NICIL and the Privatisation Unit have been holding and spending public monies without the approval of the parliament and with no public oversight. That too runs into hundreds if not more than a billion dollars.

The Fiscal Management and Accountability Act 2003 which gives effect to the provisions of the constitution, provides that all budget agency receipts shall be credited to the Consolidated Fund. The agencies include the ministries, commissions, regions, the Guyana Defence Force and the Georgetown Public Hospital Corporation (GHPC). My understanding is that the money from the lottery company is paid to the Ministry of Finance making the decision not to place the lotto money into the Consolidated Fund both unconstitutional and unlawful. I particularly identify the GHPC because it too is guilty of such a breach which is done with the full knowledge of both the Ministers of Finance and Health. In an environment in which the rule of law prevailed, both these Ministers would be guilty of an indictable offence and liable on conviction to a fine of two million dollars and to imprisonment for three years. But Guyana has no such environment.

Now for expenditure
Article 217 restricts the withdrawal of moneys from the Consolidated Fund to one of three cases:

(a) to meet expenditure that is charged upon the fund by this constitution or by any Act of Parliament;
(b) where the issue of those moneys has been authorised by an Appropriation Act;
(c) where the issue of those moneys has been authorised under article 219.

Paragraph (3) of this article requires an Act of Parliament before any money can be withdrawn from any public fund other than the Consolidated Fund while paragraph (4) empowers Parliament to prescribe the manner in which withdrawals may be made from the Consolidated Fund or any other public fund.

Article 218 deals with the Appropriation Act to give effect to the National Budget as well as any supplementary estimates.

Article 219 which deals with the authorisation of expenditure before the annual Appropriation Act is passed, empowers parliament to make provision for the Finance Minister to authorise withdrawal from the Consolidated Fund of moneys to meet expenditure necessary to carry on the services of the Government of Guyana up to April 30 of the year, or until the Appropriation Act for that year.

The provisions governing such expenditure are contained in the Fiscal Management and Accountability Act 2003 to which for the moment I now turn.

Fiscal Management and Accountability Act 2003
If anyone has any problems with interpreting the relevant constitutional provisions, section 16 of the FMAA should remove any doubts. It provides very simply that there shall be no expenditure of public moneys except in accordance with Article 217 of the constitution. It does not stop there but goes on to set out detailed provisions in sections 17 (the statutory framework for the annual appropriation to authorise the expenditure set out in the budget); 18 (proscribing any expenditure of any budget agency receipt except by way of an appropriation); 22 (authority to vary annual appropriations); 23 (Appropriation Amendment Acts) and 24 (Supplementary Appropriation Acts).

We the ordinary citizens need not feel badly if this sounds a tad too complicated. Not only do we not bear the statutory responsibility for ensuring the act is complied with, but from all the evidence it seems that all the persons with responsibility for doing so are equally confused or simply do not care.

The Appropriation Bill presented under section 17 is required to conform to international standards, but what these are and whether they are applied in Guyana has never been addressed in any published document of which I am aware. With great respect to our ministers, accounting officers, staff of the National Audit Office and members of the Public Accounts Committee, I am not sure that they too are aware of what such standards are, let alone best practice.

Varying expenditure
Subject to laid down conditions, section 22 gives the minister the power to reallocate authorised spending among annual appropriations. The main conditions are that these be within the same budget agencies, that no capital allocation can be used for recurrent expenditure, a ten per cent limit and that no new appropriations can be created. Such changes are themselves subject to what is called an Appropriation Amendment Bill to be presented to the National Assembly no later than the end of the eleventh month of the current fiscal year.

Any variation other than the reallocation referred to in section 22 must be authorised by a Supplementary Appropriation Act prior to the incurring of any expenditure thereunder. As we noted last week, on the introduction of a Supplementary Appropriation Bill, the minister must present to the National Assembly the reasons for the proposed variations and provide a supplementary document describing the impact that the variations, if approved, will have on the financial plan outlined in the annual budget.

Neither the current Minister of Finance nor his predecessor has ever complied with the requirement to publish such a document. Again, one has to ask where is the National Assembly in all of this and whether the clerk and/or the speaker, the parliamentary opposition and the Public Accounts Committee ought not to do something about this persistent abuse. Dr. Ashni Singh gives the appearance of not being influenced by any law, professional or public opinion in terms of how, what and when he does anything. It is one of the failings of these types of legislation that they provide no automatic sanction for patent and systematic breaches. Nor do they lend themselves, without the availability of substantial private resources, to being responsive to legal sanctions.

Next week we will look at the Contingency Fund and close by examining the extent to which the cause of the walkout that sparked this series has any merit.