Introduction
The accountability for the proceeds from the sale of state assets as well as dividends paid by state-owned/controlled companies has been the subject of fierce ongoing public debate among politicians and civil society. Some argue these are public funds which should be paid over to the Consolidated Fund. Others contend that there is no requirement by National Industrial and Commercial Investments Limited (NICIL) to pay over such funds since the company is a private one and its incorporation documents make no mention of transfer to the Consolidated Fund. The other issue relates to the incurrence of expenditure out of these proceeds without Parliamentary approval.
This article takes a closer look at the requirements of the Consolidated Fund to assist the general public to have a greater understanding of these two issues at hand.
What is the Consolidated Fund?
The Consolidated Fund is the single most important account of the country. It is this account into which all public revenues are deposited and out of which all public expenditures are met. It is in effect the citizens’ fund to be watched over by the elected representatives of the people, the National Assembly, although the management of the Fund is the responsibility of the Minister of Finance or his duly designated representative. It is for this reason that only Parliament can approve of expenditure out of this fund, and there are both constitutional and legislative safeguards to ensure that this is so. The account is held at the Bank of Guyana.
Constitution Requirements
Article 216 of the Constitution requires all revenues or other moneys raised or received by Guyana to be paid into the Consolidated Fund. The only exception is where an Act of Parliament permits: (a) payment into some other fund established for a specific purpose; or (b) funds to be retained by the authority receiving them for the purpose of defraying expenses of that authority. Examples of the latter are the Guyana Forestry Commission and the Geology and Mines Commission, although one would expect that accumulated surpluses not required to meet day-to-day operations, or a portion thereof, would be paid over to the Consolidated Fund, as determined by the respective boards.
NICIL was not created by a specific act of Parliament but was incorporated under the Companies Act. This Act regulates the formation and operations of companies in general, whether they state-owned/controlled or otherwise, and any activity listed in the incorporation documents that is inconsistent with any law or the Constitution would be null and void. The retention by NICIL of proceeds from the sale of state assets as well as dividends received therefore becomes a controversial issue.
Given this situation, should NICIL be considered a collecting agency, acting on behalf of the State, as is the case of the Guyana Revenue Authority that pays over to the Consolidated Fund on a daily basis all moneys received? It is true that NICIL pays over dividends to the Consolidated Fund based on the results of its own operations. But should the dividends received by NICIL from Guyoil and other state-owned/controlled companies not also be paid over gross to the Consolidated Fund?
The yearly National Estimates include two standard line items for revenue, namely “sale of assets” and “dividends and transfers”. However, over the years, no amount was budgeted to be collected from the sale of assets, indicating that Parliament did not approve of the sale of any state assets whether they were land, buildings or state-owned/controlled companies. This has happened as part of the operations of NICIL. Is this legal?
Articles 217(3) and 217(4) state that: (a) no moneys shall be withdrawn from any public fund other than the Consolidated Fund unless the issue of those moneys has been authorised by or under an Act or Parliament; and (b) Parliament may prescribe the manner in which withdrawals may be made from the Consolidated Fund or any other public fund. NICIL may not be regarded as a “public fund”, but given its retention and use of certain types of moneys that it receives, the situation becomes very complicated. Should Parliament sanction the use of the proceeds from the sale of state assets as well as dividends received by NICIL? What implications does all of this have for the National Budget which from all appearances would be incomplete without the major transactions of NICIL?
Fiscal Management and
Accountability (FMA) Act
The FMA Act repeats the same requirements of the Constitution. All public moneys are to be deposited into the Consolidated Fund, the exception being in relation to an Extra-budgetary Fund established for a specific purpose by an Act of Parliament. Public moneys are all moneys belonging to the State that are received or collected by officials in their official capacity or by any other person so authorised. Since the passing of the Act, no Extra-Budgetary Fund was created.
The Minister of Finance (or his duly delegated representative) is responsible for the management of the Consolidated Fund. This would include ensuring that: (a) all public moneys are speedily deposited into this account; (b) no payments are made except to meet expenditure authorized by the Constitution, any appropriation Act, or any other Act; and (c) the account is reconciled in a timely manner.
According to the latest report of the Auditor General, while the new Consolidated Fund bank account (opened in 2004) was reconciled regularly, it reflected an overdraft of $4.684 billion as at 31 December 2010. The old bank account was also overdrawn by $40.776 billion as at the same date and was not reconciled since 1988, giving a combined overdraft balance on the Consolidated Fund of $45.460 billion. Further analysis would be needed to explain this state of affairs.
The Act has the following to say for misuse of public funds:
A Minister or official shall not in any manner misuse, misapply, or improperly dispose of public moneys. If a loss of public moneys should occur and, at the time of that loss, a Minister or official has caused or contributed to that loss through misconduct or through deliberate or serious disregard of reasonable standards of care, that Minister or official shall be personally liable to the Government for the amount of the loss.
If a loss of public moneys should occur and, at the time of that loss, a Minister or official had nominal custody of such moneys, that Minister or official shall be personally liable to the Government for the amount of the loss.
Conclusion
The retention and use by NICIL of proceeds from the sale of state assets and dividends received will continue to have a direct effect on the work of Parliament whose primary responsibility it is for enforcing a fundamental principle in public finance as enshrined in Articles 216 and 217 of the Constitution. Given this, it would appear necessary for the operations of NICIL to be brought to a speedy closure, and a uniform system put in place to properly account for all public funds, and with the greatest degree of scrutiny by the elected representatives. This approach is likely to enhance the principles of good governance, transparency and greater accountability.
As regards the transactions undertaken to date by NICIL, and especially since the audited accounts of the entity beyond 2004 are not yet available, it is entirely appropriate for Parliamentarians to make legitimate enquiries about the funds NICIL has received over the years and how it has disposed of them.
