Category: Legislation

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The Amerindian Act 2006 has not yet been brought into force

A GINA release in early March 2008, reported that the Amerindian Act, 2006 passed on February 16, 2006 and assented to by the President on March 14, 2006 had “paved the way for Amerindians to empower themselves socially, economically and politically.” Further, and as a measure of its pride in the Act, the Ministry of Amerindian Affairs, under Ms Carolyn Rodrigues, expended considerable sums on the publication of user-friendly booklets for distribution to Amerindian communities. And as recently as August 19, 2010, PPP/C MP Norman Whittaker boasted that the PPP/C government had consistently followed the provisions of the 2006 Amerindian Act. When all things are considered, maybe Mr Whittaker was being more careful than anyone at that time thought.

The reason is that there is one small – to some significant – problem: Four years after its assent, the Act is yet to be brought into force. Effectively then, the 1951 Amerindian Act Cap: 29:01 described by Minister Rodrigues in 2005 as “outdated and not addressing the needs of Amerindian communities,” remains in force.

I find it hard to believe that this was any innocent oversight by the Amerindian-loving government, if there is such a thing. After all, for more than three years, there were three Amerindian MPs in the Cabinet. At every opportunity, whether it is in the “Cabinet Outreaches,” in the National Assembly, in national and international press conferences, and to the Norwegians, the government never ceased to showcase the Act as evidence of its respect for the rights of our indigenous peoples. Now it seems that all might be a deception, a sham and a façade, cynically disguised.

A possible reason why the Act has not been brought into force is that it creates an obligation on the Guyana Geology and Mines Commission (GGMC) to “transfer 20% of the royalties from mining activities to a fund designated by the Minister for the benefit of the Amerindian villages.”

The financial statements of the GGMC show that mining activities garnered more than eight and one half billion dollars since June 2006. The failure to bring the Act into force has, therefore, deprived Amerindian communities of approximately one point seven billion dollars ($1,700,000,000).

Maybe this is all innocent. Maybe it is a mere coincidence that during the same period, the GGMC has transferred one point eight billion dollars ($1,800,000,000) to NICIL.

This is Amerindian Month. It is a test of the sincerity of the government. The onus is on it to prove that it does not consider the Amerindians as naïve and gullible, ready to give up their legal right to $1.7 billion in return for a few outboard engines here, some chainsaws there, trips for its leaders to come to Georgetown to perform, or go on window-dressing trips to Norway.

This is a test too of the multiplicity of Amerindian organisations, politicians across parties and civil society activists. They should stand up and let the Amerindians know where they are on this latest blatant example of official deception. Silence is not an option.

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Amendments to NBS Act forced through the National Assembly – conclusion

Today I conclude my examination of the amendments to the New Building Society Limited Act passed by the National Assembly two Thursdays ago despite the arguments from the opposition members and the pleas from the members of the Society for consultations to take place. With the government’s overall majority in the National Assembly, passage became a formality.

In terms of building societies, Guyana is a unique animal. It does not have a generic Building Society Act like the UK, Jamaica and Trinidad. This country’s sole building society enjoys a huge monopoly and because the NBS is a creature of parliament, the government exerts over it an unchallenged and powerful influence. The government can amend the NBS Act at will, without any consultation with the members or the directorate of the Society. On the occasion of the NBS Amendment Bill 2010, the government indecently ignored the members and is proceeding to implement unilateral changes to the laws under which the members of the Society are forced to operate. It is hard to see how the changes will enhance governance and transparency in the Society, but we will wait and see.

I will continue my clause-by-clause examination of the amendments before looking at some of the general principles governing building societies’ legislation.

Clause 6
Several members have pointed out on more than occasion that the Society has been in breach of section 7 of the act which in its proviso restricts the amount of borrowings outstanding, whether by way of deposit or loan, to two-thirds of the amounts lent on mortgage. What the amendment does is allow for the two-thirds to be varied by the Bank of Guyana, conceivably to more than 100%. That would be reckless and against all the principles of financial structuring of a building society. Perhaps the architects of the amendment were more concerned about correcting a misunderstanding that has persisted over decades, and in the process, it seems that the object of the original provision was lost.

A building society has to ensure that of its total assets, there must be sufficient liquidity to enable it to meet its liabilities as they fall due. If a disproportionate amount is kept in mortgages and other long-term assets, it would be in danger of being unable to liquidate a sufficient amount to meet demands as they fell due. A building society is not like a limited liability company where there is a share capital which can only be withdrawn in narrow circumstances.

New Buildings Society
A fine balance therefore has to be maintained between short-term and long-term assets depending on the range and scale of the society’s business and the character and composition of its assets and liabilities. The UK legislation seeks to draw the line by providing that the assets held by the society to enable it to meet its liabilities as they arise should not exceed 33⅓% of its total assets and must be composed of assets of an authorised character, and no others (emphasis mine).

Unfortunately, in its haste to pass legislation, these fundamental considerations were completely overlooked. In the longer term, this could have serious repercussions for the NBS.

Clause 9
When I first saw the proposed amendment (a) to amend section 11 of the act, I thought it was either an editing or drafting mistake. Section 11 of the original act vested in the Board the management and affairs of the business of the Society. Deleting the word “management” and replacing it with the word “policies,” we have the position that the policies of the Society are vested in the board. That is as absurd as it gets, but clearly Minister Irfaan Ali did recognise that policies are not vested but are formulated by the Board and that yes, the management is vested in them for which proper discharge they are responsible. He would have saved us the comical justification if only he had familiarized himself with the corresponding provision in the Companies Act, 1991.

Section 59 of that act holds the director responsible for directing the management of the business and affairs of the company. Section 96 of the act imposes on the company’s directors, obligations to act honestly and in good faith with a view to the best interest of the company and to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

The NBS is a financial institution and one would expect its directors to have higher standards of obligations than those of the directors of the run-of-the-mill company. Sadly, the danger is that with existing mechanisms in place, the Society will have to wait a very long time before it is served by independent-minded directors.

Clause 10
This clause virtually abolishes the right of members to requisition a special meeting in the Society. Ever since the formation of the NBS in 1940, 10% of the membership or 50 members, whichever is less, could have requisitioned a special meeting, stating the object for which the meeting is being requisitioned. Under the amendment, such a meeting can only be called by 10% of the entire membership, currently estimated at 100,000 members, which means it would require 10,000 members to sign a requisition for such a meeting.

The government side made much of the fact that the size of the membership has grown since 1940 and the change is therefore justified by circumstances. They also argued that 10% is the percentage required for the requisitioning of a special meeting under the Companies Act. Such arguments are not only wrong but also ignore the importance of minority protection. Let us deal with the first argument. In the UK where some building societies have as many as a million members, 100 members can requisition a special meeting.

The Minister of Finance in arguing the case referred to section 135 of the Companies Act 1991 and was correct as far as the 10% was concerned. He did not, however, point out that in the case of the Companies Act it is 10% of the share capital. This is so fundamental that the Minister should have been more forthcoming with the facts. It is wrong and disingenuous to compare the Companies Act – which is explicitly excluded from application to the NBS – with the NBS Act. A more reasonable comparison would have been with the Co-operative Society Act Cap.88:01 since the NBS is a mutual, co-operative society formed under statute. Under the Co-operative Society Act twenty-five persons may requisition a special meeting.

Clause 14: Repeal of section 19 of the Principal Act
One of the most infamous amendments was the deletion of section 19 of the principal act which allowed 100 persons to apply to the minister to appoint an accountant or actuary to inspect the books or an inspector to examine into and report on the affairs of the Society. That right is now being completely removed. No one argued that because the NBS would now come under the Bank of Guyana the provision was superfluous. But since they were drawing comparisons with the Companies Act, they may have wished to consider that Section 496 of the Companies Act allows for an application by one person for the appointment of an Inspector. Or that section 506 allows for a single shareholder or debenture holder, or the Registrar to apply to the court for an investigation order.

Sections 496 and 506 apply to all companies including those financial institutions supervised by the Bank of Guyana under the Financial Institutions Act, so there really was no justification for the removal of section 19.

Clause 20: exclusion from taxes, reserve requirements
By virtue of clause 20, the NBS will not be subject to a reserve requirement. My understanding is that the basis for this exemption is that such a requirement would have carried up the cost of funds, an argument equally applicable to all financial institutions. Again I think this is short sighted and ill informed, since the reserve requirement helps to meet any suspected run on the financial institution and is the next best security for depositors. While exemptions from taxes are justified in the case of mutual entities, to give the NBS such carte blanche exemption from the reserve requirement applicable to deposit-taking financial institutions is to court bad management.

Conclusion
There was a need for the NBS Act to be modernised and amended and to enhance governance in the NBS. The existing rules which allow the directors to entrench themselves by the abuse of proxies, no age/term limits for directors, pensions paid to directors, and general corporate governance weaknesses would be considered inappropriate and unacceptable in the 21st century and dangerous in a financial institution. But these ills are not addressed. More importantly, it was necessary to silence the minority.

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Amendments to NBS Act forced through the National Assembly

Introduction
That the Government used its majority in the National Assembly to push through major amendments to the New Building Society Act was not surprising. That Messrs Winston Murray and Khemraj Ramjattan so persuasively argued the case for the PPP/C to reflect on the implications of a piece of legislation was commendable.

That a debate on a technical bill could descend into real gutter remarks was I am told, not unusual. What was disappointing and regrettable was the attitude of those on the government side, the little or no research reflected in their presentations and their failure to understand, or total disregard of, the co-operative nature of the NBS or what corporate governance means.

That the Governor of the central bank and one of his staff were in the Chamber suggests that they were invited by the Government. None of the directors of the NBS including its CEO made any appearance during the entire four or so hours it took before the vote.

Yet, even in the absence of an invitation, it would have been both necessary and helpful for the directors to attend the debate on what is, to date, one of the most fundamental changes to the Act under which they operate.

Their non-attendance did not surprise, as the directors have consistently belittled the contribution and views of their own members. They did not seem to be interested in the views of the legislators either.

Harlots and hypocrites
The exchanges in the National Assembly were peppered with negatives like “harlot”, “bullies”, “instigators” and “hypocrites” instead of capital adequacy, loan provisioning, corporate governance and minority protection. Those who referred to the Companies Act to support their case were at the same time economical about the provisions of the Act which they selectively chose some sections from while ignoring others. Their response to the suggestion that good governance, as does the Companies Act, seeks to protect the interest of the minority was that “the will of the majority must prevail.”

The self-styled NBS Concerned Members used almost every possible means and opportunity to engage the decision-makers and to advise caution. Once I received a copy of the Bill, I tried calling the Chairman of the Board Dr. Nanda Gopaul. His secretary wanted to know the reason for the call. I explained to her that I was calling on behalf of the members of the NBS and wanted to speak with him urgently on the proposed amendments. I never heard from her again. My attempt to contact by telephone former Chairman Moen McDoom, S.C. was similarly ignored while PPP/C General Secretary Donald Ramotar treated our correspondence with equal discourtesy.

The Secretary/Director of the NBS refused to meet with Cyril Walker and me when we took a requisition to him signed by scores of members for the calling of a special meeting. We tried to lobby the parliamentarians as they went into the National Assembly. Prime Minister Sam Hinds said we were too late. He seemed unaware of the fact that at the time of the debate, the Bill had not yet been published in the Official Gazette, as is required under the Standing Orders. Notwithstanding that this may not be part of the parliamentary procedures, I believe that the Speaker should have taken a stand on that basis.

Bullies and cowards
I also believe that the Speaker should have intervened when Minister Nadir who was labouring to make a constructive and informed contribution to the debate took the opportunity to attack “the accountant, attorney-at-law and social commentator” for trying to bully the NBS’s board. In an aside, the learned Attorney General typically rejoined “not social commentator, instigator”.

Many would say that it is they who were the bullies and cowards for attacking without naming a person knowing that the person could not reply there. It was a disgusting demonstration of the abuse of power which has come to characterise our national politics.
It did not strike the government benches as odd that they took offence at the factual identification of Drs. Prem Misir and Gobind Ganga, and Mr. Paul Bhim as directors of the Bank of Guyana but applauded when members of the NBS were repeatedly being described as “bullies’ and a “tiny minority”.

The party prevails
During the break one member of the ruling party volunteered to Mr. Walker and me that he recognised the validity of some of the opposition concerns and would recommend that the Bill be taken to a Select Committee. And one leading member of the government admitted that the amendments as drafted might be inappropriate to a building society. But when the time came to stand up and be counted, those views were forgotten.

The fact that members had used legal and proper means to have the amendments considered at a meeting of the NBS, and the strong and constructive arguments by the opposition, mattered for nothing.

So in the end, subject to presidential assent and publication in the Official Gazette the bill that brings the New Building Society under the Financial Institutions Act will also remove several rights which members of the Society have enjoyed for seventy years.
There may be some complications. What the members did by their requisition was to ask that there be prior consultation on proposed changes which fundamentally reduce their rights as members.

Effectively, they are asking that if there are to be changes to the rules under which they joined the NBS in the first place, and if the goal post on the field on which they have been playing, are to be moved, then at least they should be consulted.
Would the President now try to pre-empt the holding of the meeting by assenting to and publishing the Act, giving the directors an excuse that the requisition has been overtaken by events? And if he does, the Concerned Members would have to consider their own response.

The Bill
In their requisition the members drew to the attention of the Board that they have always advocated bringing the Society under the supervisory control of the Bank of Guyana. In welcoming this proposal they also noted that they supported the amendments introduced by at least twelve of the clauses in the Bill.

They did however express “serious concerns” with certain other proposals which they highlighted and discussed in their requisition. Here are some of the more significant concerns.

Clause 5 (2)
The members noted that having regard to the nature of the Society’s business, great care ought to be taken in the wholesale application of all the provisions and guidelines of the FIA. The Financial Institutions Act 1995 was designed for banking and other financial business, not co-operatives, credit unions and similar organisations. In Jamaica for example, while the Bank of Jamaica regulates all financial institutions including cooperative societies and building societies, in the case of building societies, they do so under specific legislation. The same is also true of Trinidad and Tobago.

Jamaica recognises the special and unique characteristics of building societies and has separate primary and subsidiary legislation governing such societies. So that in that country, there is The Building Societies Act, 1897 which was last amended in 2004 and there are The Bank of Jamaica (Building Societies) Regulations, 1995 (amended 2005) and The Building Societies (Licences) Regulations, 1995.

This is also true of Trinidad and Tobago and the UK where there is a Buildings Society Act under which building societies are formed and regulated.

We different
The approach taken in Guyana is to treat the NBS as an entrenched monopoly. Does this mean that if another group wanted to set up a building society it must do so by asking for it to be set up by legislation? Corporate law has moved away from charter companies and there is a generic companies act that sets out the legal framework for the incorporation of companies.

Members are concerned that there had been no statement from the directors on whether they had been consulted by the government and on the impact on the Society of the FIA and its several Supervision Guidelines. Members expressed the view that the operations of the NBS could adversely affect the Society. In this regard the Board may have wished to consult with the Bank of Guyana and the other entities subject to Supervision Guideline No 5 – Loan Portfolio Review, Classification, Provisioning and Other related Requirements as to its effect. And Supervision Guideline No 4 – Capital Adequacy Ratio would be similarly relevant.

It does not appear that transitional arrangements allowed in the new clause 7 A apply to loan provisioning and this could impact on the Society’s mode of operations and results for the current and future years.

To be continued

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Supplementary or contingency: same abuse – Part 3

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.

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Supplementary or contingency: same abuse – Part 2

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.