The biggest budget ever – and more!

Five months after the passage of the largest budget ever, Minister of Finance Dr Ashni Singh has gone back to the National Assembly for an additional $6.3 billion for spending this year. Some sketchy information for this sum is contained in Financial Papers Nos 1 and 2, the first being a Supplementary Provision to replenish the Contingencies Fund to the tune of $1,978 million and the second a Supplementary Provision of $4.3 billion for additional spending. Today’s column looks at the information and questions whether they meet the statutory requirements governing such additional expenditure.

The law relating to such spending and approvals is contained in the constitution and in the Fiscal Management and Accountability Act 2003 (FMAA). There are two types of supplementary provisions permissible under the Act: those that come before the spending takes place and those that come after such spending and in which case would have been spent out of advances from the Contingencies Fund. If the nature of the expenditure does not qualify it for payment out of the Contingencies Fund, then any such payment would be unlawful, constitute an indictable offence and carry a maximum penalty of two million dollars and imprisonment of three years.

Law’s weakness
The weakness in the law is that the offence can only be committed by an “official,” which by definition does not include a minister. In other words, for purposes of the FMAA a minister seems to enjoy some form of immunity and any action may have to be brought for misfeasance in public office. The self-accounting ministries are like laws unto themselves and while by law the Permanent Secretary is the accounting officer, there is only one power in the ministry and that is the minister(s).

The general rule is that only a supplementary appropriation Bill can finally authorise an allocation for expenditure. The Act requires that on the introduction of a supplementary appropriation bill, the minister 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.” Papers Nos. 1 and 2 presented to the National Assembly do not seem to meet these requirements.

Contingencies Fund
The Contingencies Fund is a special fund for special purposes and is described as a sub-fund of the Consolidated Fund. Article 220 of the constitution permits the establishment of a Contingencies Fund by paying into it from the Consolidated Fund 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.

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 of Parliament and the minister cannot increase it without parliamentary authority. Advances from the Contingencies Fund must be cleared by a supplementary estimate laid before the National Assembly as soon as practicable, thus replacing the amount so advanced. Section 41 of the FMAA gives effect to Article 220 by providing the detailed procedures.

The overriding test for an advance from the Contingen-cies Fund is threefold: urgent, unavoidable and unforeseen. Further, the Minister 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 because he failed to budget properly, or because some budget agency was careless.

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.

Paper No 1: Spending from the Contingencies Fund
The following were the principal payments reportedly made out of the contingencies fund and for which replenishment was approved:

1. Provision for Japan’s earthquake recovery – $20M.

2. Payments to Linden municipality workers for the years 1999 to 2010 – $27.3M. After a period of eleven years this payment became urgent, unavoidable and unforeseen, in an election year.

3. $36 million for payments by the Ministry of Agriculture to farmers and households in Regions 2, 3, 4, 5 and 6 who were affected by the La Nina weather conditions. The sums were for the following organisations identified only by their acronyms: NAREI – $14M, GLDA – $6M, GMC – $5.9M and MMA – $10M. Like 2, this may also have an election element in it.

4. A further $10M appears to have been paid out to the same groups for the same purpose but under a Drainage and Irrigation Support project.

5. The Ministry of Agriculture again was allocated an additional $500M for consultancy services, drainage and irrigation works and procurement of four excavators for the Aurora land development project. In the absence of a project document and considerably greater details, it would be difficult to assess whether this sum is reasonable. What is equally troubling is that the sum would already have been spent and it should therefore have been subject to the strictest controls. Surely details should have included particulars on the tenders and each cost element should have been identified.

6. Other major sums include (a) $522M for rehabilitation of roads in Georgetown and Linden, (b) improvement of water supply in hinterland communities – $252M and (c) $280M to the Ministry of Education for computers in school laboratories.

Usage and abusage
Two things are clear from this. The contingencies fund continues to be used and abused in the most unlawful manner with practically no regard being paid to basic principles of financial management. It is not without some irony that it is the serial violators of the precepts of proper financial management and controls who continue to be provided with increasing sums of money to be spent without regard for the interest of the country’s taxpayers. While the Report of the Auditor General often makes adverse comments on the use of the Fund, it never deals with some of the most troubling questions that the public would wish to see answered. Hopefully the Public Accounts Committee will at some time insist that these be addressed.

GPL, losses and Amaila
Three billion, nine hundred million dollars has been requested and approved as a provision for a 15.6 megawatt plant at Kingston under the Electrification Programme. This is in addition to the sum of two billion eight hundred million voted under this programme in the 2011 budget, bringing the total to $6.7 billion. Guyanese have recently had to face blackouts with some frequency and severity and while the situation appears to have improved recently there are far too many reports of the losses sustained by consumers due to the poor quality of electricity.

The request for additional funds suggests that the state-owned Guyana Power and Light continues to rely on public funds for its capital programme, despite the high tariffs that consumers continue to bear. The company will remain tied to the national budget until it can curtail the theft of electricity which results in “line losses” of more than thirty per cent. While the company has been successful against many small consumers it has signally failed against the bigger thieves, among them businesses and persons who by no stretch of the imagination can be considered poor and therefore unable to afford. It is okay to go after persons in Sophia and Albouystown, but the theft by one business can cause more losses than fifty to one hundred households. Clearly more focus should be given to those groups in a way that does not allow the persons and their clever lawyers to free them to ‘Go and thieve some more.’

The other issue for GPL is of course how all the billions that are being pumped into the company fit into the longer term plans for electricity with Amaila hydro scheduled to come on stream in four to five years. This is not an idle comment since capital costs carry with them depreciation, and the fear must be that if and when the hydro is realised consumers will have to bear the depreciation costs not for one but two plants.

Public Works
The Ministry of Public Works and Communications gets another $400 million for Highway Improvement on the East Coast Demerara, on top of the $100 million voted earlier to make a four lane from Better Hope to Golden Grove. Now do we have any idea how much the whole project is going to cost and whether we are engaged in highway quality or highway robbery with the eye on the elections?

It is a safe bet that this is not the last supplementary we will see this year. It is after all, elections year, and the traditional splurge will be on – Norway or not. Opposition MPs and others need to do much more to protect us from the reckless spending by the government for which electoral defeat will be more than a political loss

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