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January 1st, 2010Budget 2010: Looking back
February 7th, 2010Introduction
The Minister of Finance has announced that he would be presenting the country’s National Budget tomorrow February 8, 2010. This can be considered early, given that the law allows him to present the budget by March 31 of each year, while providing him with the money to run the business of government until the budget is passed. The relative timeliness of the 2010 National Budget is commendable. It is, however, in obvious contrast with his annually late presentation of the mid-year report which goes way, way, beyond the two month deadline, even though as this column has consistently pointed out, the report is routinely misdated. Hopefully, the Minister will tell Parliament how his ministry finds it possible to present the full year accounts five weeks after the end of the year but needs about twenty weeks to present the half-year report.
It is a matter of speculation whether the timing of the budget presentation has anything to do with the education the government would have received about the constitution and the law on the public finances of the country during a recent debate on supplementary funds and the Contingencies Fund, or to pre-empt the publication of another damning audit report on the use and abuse of public funds.
Constitutional deprivation
The Minister has shown that, certainly in relation to the National Budget, he has no time for Article 13 of the constitution which requires that citizens and their organisations be provided with opportunities to participate in the management and decision-making processes of the state and, more specifically, “on those areas of decision-making that directly affect their well-being.” Let us see whether any organisation, trade union, the ubiquitous and loquacious Private Sector Commission, the Guyana Manufacturers’ Association, the multiplicity of Chambers of Commerce, the Consumers’ Association and other private sector bodies will make even a murmur on this constitutional deprivation. If the budget, the principal policy instrument affecting every citizen not incidentally or singly, but in almost every aspect of her/his life is not considered appropriate for, not only consultation on, but meaningful participation in, then Article 13 should be repealed by any constitutional means necessary. If it is so considered, then it is time that this disdain be ended and the constitutional rights of citizens, and the corresponding duty of the government and its ministers, be respected and observed.
Today’s Business Page, barring a few minor comments, will not attempt a preview of the 2010 budget, but instead look back at some of the main issues Ram & McRae had raised in their Focus on the 2009 Budget, and offer a preview of some of the issues which the firm will be raising in its review of the 2010 one. Having examined three budgets and speeches from this once promising Minister, witnessed his utter lack of imagination and his passion for long and expensive spending lists, and been overcome by the tedium of increasingly partisan political rhetoric, I no longer expect much from Dr Singh’s budget speeches. That prevents any disappointment and allows for pleasant surprises.
The state of statistics
One thing I will certainly hope for and that is that the Minister will put to rest the confusion he and the Bank of Guyana caused when, in their respective half-year reports, one was reporting growth in the economy while the other reported a decline – both using the same source, the Bureau of Statistics. It will be fascinating to see what the Minister announces as the 2009 growth (decline) and inflation rates to be, which no doubt will be attributed to the same Bureau of Statistics. In this regard, the Minister will be ahead of the bureau, which up to three days ago had posted on its website inflation data only to September 30. It would be unfortunate if, soon after the Minister announces his number, the information on the website is updated. If it were, that would do little for the integrity, independence and professionalism of the bureau. If we cannot rely on the quality and integrity of the official statistics or the competence of the Audit Office, it is near impossible to engage in any meaningful analysis of or discussion on the country’s economy or finances.
Flood and drought
Last year, the Minister of Agriculture Robert Persaud, responding to public disquiet over the delay in addressing the flood problem, announced that the government was treating the construction of a $3B Hope Relief Channel as “a priority,” a decision that met with dismay from a number of professionals who raised several questions, including the source of the technical study and advice on which the multibillion dollar investment was being made. Even though the country is now experiencing a drought, the debate on the budget should at least answer those questions. For if the critics are right, then not only will we have wasted three billion dollars, but we will have lost valuable time and done little to remove the danger of a recurrence.
Focus 2009 constructed what the firm referred to as the expectation gap – the difference between the growth rate set out in the Economic Recovery Programme – 4% – and the actual growth rate. The Guyana economy performed better than many of the more open economies which are only now recovering from some steep declines. The Minister would of course, be reluctant and disappointed to announce that for the first time under his stewardship, the economy recorded a decline, particularly after projecting growth in real GDP of 4.7%. The graph will be updated in Focus 2010.
Oversized government
Last year Focus examined the explosion of the size of government, including the huge increases in the number of ministries, corresponding with a large growth in the number of statutory bodies. Space constraints do not allow for the table presented last year showing how from eleven ministries in 1992, the number has increased by 50% in 2009, with many of the ministries now having two ministers, dozens of ex-ministers, scores of advisors, and hundreds of contract employees. Budget Focus will tabulate some of the more shocking cases of contract employees, noting that the concern is not about the concept, as much as about the numbers and who some of those advisors are.
We recalled last year that the 2003 budget speech had reported that an IDB-financed Public Service Modernisation Programme was expected to be concluded and the consultant’s final report would be used as input into the design of a major modernisation project. We recommended that the IDB financed report be tabled and considered in the National Assembly and its recommendations critically reviewed with a view to implementation. That recommendation was clearly ignored by the government which seems more concerned to provide jobs for members of the ruling party, and increasingly their children.
Meanwhile the obviously over-financed IDB, the EU and others, continue to make further billions available for the government to spend, sometimes in the most wasteful manner, even as large segments of the population live in poverty.
The regulatory environment
In regulatory matters, last year belonged to Clico – the insurance company that represented perhaps the worst case of regulatory failure this country has ever witnessed. Focus 2009 identified and discussed the level of effectiveness of the multiple regulatory bodies, with most of them not equipped with adequate in-house, full-time analytical skills or legal expertise, and each operating well below what can be considered a moderate level of effectiveness. It recommended the establishment of a Financial Services Commission (FSC) under which is brought the supervisory functions of the Bank of Guyana, Securities Council and the Office of the Commissioner of Insurance. It further recommended that the Financial Intelligence Unit be placed within the Bank of Guyana or under the FSC.
Despite the colossal failure of the Office of the Commissioner of Insurance, the only action taken by the government in 2009 was to bring that office under the Bank of Guyana, which itself was at fault in Clico’s collapse. One particular statement by that unit, responding to a press statement about Clico, signalled an unacceptably harsh tone from an otherwise moderate institution.
Meanwhile the policy-holders and depositors of Clico find themselves in legal limbo even as the Bank of Guyana holds more than three billion dollars in funds available to pay them.
Other issues
Some of the other issues addressed in Focus 2009 were sugar, about which we continued to hear much almost throughout the year, debt management which has continued its inexorable rise during 2009 and for which Ram & McRae has recommended a statutory borrowing cap. Focus 2009 touched too on tax reform which has assumed the status of an annual, obligatory promise. The GRA recently announced that it had substantially exceeded its 2009 collections budget, even as the hugely expensive and much touted TRIPS was cheated to the tune of more than $300 million. I doubt whether the Minister would even bother to mention this, the largest single cash fraud ever to have been perpetrated on a state institution in Guyana.
2010
Focus 2010 will revisit, as appropriate, some of these matters but will look at others as well. It will examine in some detail the serial violations of the constitutional and legal provisions governing receipts and expenditure, supplementary appropriations, and the Contingencies Fund. We will look as well at the abuse of the contracts to undermine the self-undermined Public Service Commission, the abuse of the Public Corporations Act to divert proceeds of privatisation from the Consolidated Fund to the politically controlled NICIL, whose executive head is Mr Winston Brassington himself at the centre of the QAII deal, and who secured funds from NIS and NBS for the Berbice Bridge Company.
We will touch too, the debate on the LCDS that was probably the biggest issue in 2009, the limitations, conflicts and performance of the Audit Office, the allocation and distribution of the national sports budget, and take another look at the Companies Act 1991, and the Deeds Registry.
Supplementary or contingency: same abuse – Part 3
January 31st, 2010Introduction
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.
Supplementary or contingency: same abuse – Part 2
January 24th, 2010Setting 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.
The constitution continues to be flouted in respect of the presidential assent
January 22nd, 2010In a recent interview on Plain Talk, I asked the Prime Minister in his capacity as Leader of the National Assembly whether he was concerned about bills being passed by the National Assembly and not being assented to within the period (twenty-one days) required by the constitution. This problem first surfaced in a big way in 2006. The Prime Minister estimated these to be “about six.”
I knew that was not correct and visited the Parliament Office on Tuesday January 12, requesting an update on 2009 bills not assented to. I was asked to come back later in the day. After making several attempts to contact the person her supervisor told me that the information could not be made available to me.
In any case it was public knowledge that for 2006 ten bills lapsed because of presidential inaction and from records we maintain at Ram & McRae, I was aware that for 2009 only, twenty-six of forty bills had been published in the Official Gazette. What surprised me not a little is that after my enquiries there appeared a flurry of activities involving “the printers” and I wondered whether there was any mischief afoot, even though the Gazette in which the legislation is published had already had moved on to 2010.
It was a shock, but not a surprise, therefore, to receive this past Wednesday several Extraordinary Gazettes containing legislation that dates back, in some cases, several months.
This information provides clear evidence that the constitution continues to be flouted by the President with the tacit or expressed agreement, or neglect of the National Assembly. And even if we assume that the backdated publication is constitutional and legitimate, that leaves eight bills passed in 2009 by the National Assembly which the President has not dealt with in compliance with the constitution.
The implications are more than academic. To force public servants either directly or indirectly to engage in backdating any documents, let alone the Official Gazette, is to make corruption part of their work. Second, it is dangerous for the President to break the very constitution which he took an oath to uphold. Finally, an Act comes into operation on the date of publication. Those Acts published in predated Gazettes are therefore considered to be of retroactive effect, an equally dangerous issue.
Supplementary or contingency: Same abuse
January 17th, 2010Introduction
So often we hear time-worn sayings like ‘Chickens coming home to roost,’ ‘History repeating itself’ and ‘Forgetting the lessons of history,’ and we think they are just platitudes of no consequence. Yet the brouhaha in the National Assembly last Monday showed how some such things are not only more than idle talk, but rather powerful enough to have an after life.
The occasion for the war of words in the National Assembly was consideration of Supplementary Appropriation (No.3 of 2009) Bill 2010, for $8,245,758,278 as further and additional funding for various purposes, some of which had already been spent (Contingencies) and to be spent (Supplementary Appropriations).
On one side there were Prime Minister Sam Hinds, Housing Minister Irfan Ali and Health Minister Dr Leslie Ramsammy, three persons whose ministerial portfolios were significant would-be beneficiaries of the bulk of the supplementary funds. Over the other side were two attorneys-at-law, Opposition Members of Parliament Winston Murray (PNCR) and Khemraj Ramjattan (AFC), both of whom eventually left the arena in anger and frustration, threatening to take the fight elsewhere.
Déjà vu
To understand the exchanges one needs to delve a little bit into history, going back to the National Development Strategy which was adopted by the National Assembly a couple of years ago. Chapter 13 of that strategy dealing with Fiscal Policy and The Public Sector had this to say about the Contingency Fund which is so often confused – either by design or otherwise – with Supplementary Appropriations.
“Deficiencies in the Budget Process: Largely due to deficiencies in the budgetary process, the Contingencies Fund has been used to meet all kinds of expenditures, such as shortfalls in ministries’ provisions arising from basic miscalculations in estimates and unrealistic budget assumptions about exchange rate changes, inflation and spending patterns, and the introduction during the course of the year of new projects or programmes deemed ‘necessary’ or ‘relevant’ by a political or high-ranking technical functionary. Instead of being used for emergencies, such as a major breach in the sea defence system – the use intended by the National Assembly – the Contingency Fund now serves as a source of financing for unauthorised (by Parliament) and additional expenditures.”
More and more we have to admire, and owe a debt of gratitude to, the scores of persons who contributed to that document. Had we taken the NDS seriously we would long have been on an environmentally-conscious development trajectory rather than travelling to dictatorships like Iran to beg for money to sustain our economy.
The first walkout
The French have a wonderful way of expressing the English equivalent of “the more things change the more they remain the same.” And that introduces the second bit of history, this time in December 2003 when the Fiscal Management and Accountability Act 2003 came up for consideration in the National Assembly. The Stabroek News of December 16 of that year reported the PPP/C refusing a request from the Opposition PNCR to send the 87-clause bill to a select committee for detailed consideration. The Minister of Finance then was Mr Saisnarine Kowlessar and the reason he advanced for the government’s refusal of the request was that urgent passage was necessary to pave the way for debt relief of US$30 million from the World Bank and the IMF for the next twenty years. That explanation appears as strange as the request was sensible but then the National Assembly has never been the forum for the most sensible decisions or debate in Guyana.
Given no more than forty-eight hours to study and debate the bill, Mr Winston Murray, the PNC Shadow Finance Minister walked out in protest, allowing the overwhelming passage of the bill that may soon be at the centre of a legal action by the Alliance For Change. Ironically, the PPP/C may itself be a loser for not having read and understood what is clearly a complex and possibly badly worded piece of legislation. Indeed a statement given by Mr Robert Corbin, the PNCR leader on the recent exchange suggests that, at the very least, the act lends itself to continued misunderstanding in how billions of taxpayers’ funds are spent and accounted for. Over the next couple of weeks Business Page will examine some of the main provisions of the act, the principal objective of which is better transparency and accountability for the receipts and payments of the state in the Consolidated Fund which has as a sub-fund a Contingency Fund.
The Supplementary Appropriation
Section 24 of the FMAA requires that the variation of an appropriation other than reallocation of approved appropriations must be authorised by a supplementary appropriation act prior to the incurring of any expenditure. And that is where the experienced Prime Minister, the adventurous Health Minister and the green Housing Minister appear to have run into problems, confusing the supplementary funding with the kind of expenditure for which the Contingency Fund was specifically set up.
It seems too that the Finance Minister Dr Ashni Singh is also not sufficiently familiar with the act’s provisions on supplementary appropriations since he consistently fails to comply with the requirement that on the introduction of a supplementary appropriation bill, he is required to present to the National Assembly the reasons for the proposed variations and “a supplementary document describing the impact that the variations, if approved, will have on the financial plan outlined in the national budget.”
And before we go on perhaps it would be useful to note that Ram & McRae in Budget Focus 2008 had identified the absence of meaningful debate and real accounting for such additional funds.
Did it not strike our parliamentarians as odd that they should pass legislation that requires a request for $100 million in the budget to be subject to extensive scrutiny and debate but for an $8 billion supplementary request to be supported by only very limited information and subject only to questions and not a debate?
Cocking a snook at Parliament
Because of the supremacy of the constitution which empowers and regulates the raising of revenues and the incurring of expenditure by the government, we will also be looking at how the FMAA gives effect to and is circumscribed by the constitution. In researching for this column I found an interesting article by Indian Professor P.K. Tripathi and titled Lawless withdrawals from public funds: Cocking a snook at Parliament. It is apparent from that article that the application of responsible public accounting begins with the appreciation of a fundamental point about democracy and the rule of law.
As Tripathi points out, in a democracy the government must function both in respect of determination of its policies and the administration of those policies strictly under the control of the representatives of the people. The democratic process requires that no public monies can be spent without a grant made by the Parliament following a request by the government in the form of an Appropriation Bill or a Supplementary Appropriation Bill presented to the National Assembly specifying the purposes for which it plans to spend and the amounts of money it plans to spend on each of those purposes.
One exception for the prior approval of the National Assembly is in respect of monies out of the Contingencies Fund. I will look at the governing constitutional and statutory procedures next week, but for now it is not at all clear that those on the government side of the House, including the Prime Minister and Leader of the House Samuel Hinds and the Finance Minister Dr Ashni Singh, Dr Leslie Ramsammy and Mr Irfan Ali are familiar with those provisions. The two financial papers which were embodied in Supplementary Appropriation Bill #3 were in respect of both advances from the Contingency Fund and Supplementary Provisions for the year 2009. If we accept the position in the law that supplementary provision must be approved prior to expenditure it would seem beyond logic that one can be asking for supplementary provision for 2009 in 2010!
The New GPC again
Included in Financial Paper No. 5/2009 for $1.449 billion were amounts totalling $473 million for purchases of drugs mainly from the New Guyana Pharmaceutical Corporation towards which this government had earlier found itself acting illegally. Is history now repeating itself with breaches of the Contingency Fund being involved in payments made to the company between December 28 and 31 to procure drugs to last up to April 2010? What neither Dr Ramsammy nor Dr Ashni Singh told the National Assembly is when the drawing rights for these were requested, and issued in accordance with section 41 of the FMAA.
It may well turn out to be entirely ironic that one of the few amendments proposed by Mr Winston Murray and accepted by the government when the FMAA Bill was debated in 2003 may come back to haunt the government. And that is in relation to penalties for breaches.
The act makes it an indictable offence punishable on conviction to a fine of two million dollars and to imprisonment for three years for any official to knowingly permit any other person to contravene any provision of the act.
Maybe the Prime Minister sensed the rising temperature and not so implicit threats during the exchange in the National Assembly, taking refuge in the need to consult legally.
Those who have honed their political skills and owe their allegiance to the architects of the more permissive recent financial arrangements do not appear so compelled.
To be continued