Last Monday, the Minister of Finance presented the 2015 Budget to the National Assembly in keeping with the requirements of Article 219 (3) of the Constitution. That sub-article provides for the Minister to authorise withdrawals from the Consolidated Fund to meet the cost of essential services of the Government for up to three months after the first sitting of the Assembly under the 11th Parliament. A statement of expenditure so authorised must be laid in the Assembly, and when it is approved, the expenditure is to be included under the appropriate heads in the Appropriation Bill.
It is therefore a precondition for the Minister to submit to the Assembly a statement of expenditure for the period 10 June to 31 August 2015 for its approval before the presentation of the Estimates of Revenue and Expenditure for 2015. This requirement might have been overlooked since there is no evidence that such a statement has been presented. One hopes that this oversight is corrected before the budget is approved to ensure conformity with Article 219 (3) of the Constitution.
The Minister’s budget speech lasted for about four hours and was very detailed. While this is understandable, given that it is the first budget of the new Administration and the desire to craft a budget within the framework of a 5-year plan, the presentation could be enhanced using available technologies. The use of PowerPoint is a very effective way of making presentations. Two screens – one at the back and the other at the front – could be set up in the Assembly and the key points of the Minister’s budget speech highlighted on the screen as he makes his presentation. In this way, the Minister is likely to indulge in less reading and to use the PowerPoint presentation to explain the contents of his speech. The attention of Members of Parliament and all those who were present (including this columnist) would have been more effectively captured. Visual presentation with lots of tables, charts and other features are generally preferable to complement the written presentation. It is acknowledged that this approach may be unprecedented in our Westminster system of government. However, it is worth the try, and if we succeed, we would create a good precedent for other countries to follow.
The general reaction to the budget as unfolded by the Minister in his budget speech has been is a good one, and there has been little criticism so far. The yet-to-be sworn in Opposition Leader commented that the effective date of 1 July 2015 for salary increases means that the increases are 50% of what was announced if they had been made retroactive from 1 January 2015, and that in this regard, public servants were misled. Consider an employee earning $100,000 per month getting a salary increase of 10% effective from 1 July 2015. While it is true that the quantum of his/her increase for 2015 of $60,000 will be the same as if he/she was given a 5% increase retroactive to January 2015, the employee’s carry forward salary into 2016 will be $110,000 and not $105,000. Which of the two options will the employee prefer?
It is regrettable that the political Opposition did not see it fit to attend this important session of the Assembly. It was an opportunity lost to demonstrate a serious commitment to the public interest, considering that the Opposition Members of Parliament are the elected representatives of 49% of those who voted in the 11 May 2015 elections. It is simply unacceptable for the Opposition to operate from its headquarters in Robb Street and to expect citizens to consider it a responsible and effective Opposition. In every democratic system of government, the Opposition provides the necessary checks and balances to hold the government accountable and this is done within the walls of the Legislature. One hopes that better judgment will prevail and that the Opposition Members will take their rightful place in the Assembly as the debate commences later today. Indeed, the debate will be an exercise in futility without the presence of the Opposition and will be against the grain of democratic norms and values. The Executive simply cannot debate its own budget!
Budget documents
Apart from the Minister’s speech, the budget documents are contained in three volumes. The first Volume is main part of the budget. It details the Estimates of Revenue and Expenditure in a structured way and contains four sections, namely: (a) a summary of current and capital requirements and forecasts of revenue for 2015; (b) details of current expenditure by agency; (c) details of capital expenditure by agency; and (d) macro-economic data in support of the budget, selected personnel-related data and the budgets of statutory bodies.
Volume II deals with the programmatic aspects of the budget. In 1998, the Government had introduced a system of programme-based budgeting in an attempt to place greater emphasis on the accountability for outputs and outcomes as well as on impact. It is a form of results-based budgeting which is the current practice among the more developed countries and international organisations. The United Nations has defined result-based budgeting as “a programme budget process in which: (a) programme formulation revolves around a set of predefined objectives and expected results; (b) expected results would justify resources requirements which are derived from and linked to outputs required to achieve such results; and (c) actual performance in achieving results is measured by objective performance indicators. (“Results-based budgeting”, Report of the Secretary-General, A/53/500, 15 October 1998).
While within each programme, sub-programme and activity, objectives are identified along with strategies to achieve the objectives as well as indicators of achievement, it is desirable for future budgets to reflect a more intensified effort at quantification of indicators so as to facilitate a more effective ex post fact review. In addition, there is no requirement for budget agencies to report back to the Assembly on a programmatic basis. This is perhaps one of the weaknesses in the Fiscal Management and Accountability (FMA) Act which needs to be rectified. The Minister has nevertheless indicated that this will become a new and enhanced aspect of the budget process. It is essential that this be done as quickly as possible so as to hold budget agencies and their respective Ministers accountable for actual outputs, outcomes and impacts via-a-vis those intended and detailed explanations provided for significant variances. Years ago, Ministries, Departments and Regions were required to prepare and submit annual reports to the Assembly. However, this practice appeared to have been abandoned.
Volume III provides specific details of each capital expenditure project by agency, mainly in relation to costs and specific sources of financing. Each project is described along with the related benefits. However, these could be enhanced if a more detailed description is given and if the benefits could be elaborated on in greater detail. In addition, the programmatic aspects shown under current expenditure are not reflected in the project profiles. Considering that capital expenditure is a significant portion of the national budget, it will be necessary for objectives of each project to be identified along with strategies to achieve them as well as indicators of achievement.
Subventions to local government organs, statutory bodies and constitutional agencies
Over the years there has been little or no financial accountability in respect of the 65 Neighbourhood Democratic Councils (NDCs) and the six municipalities, despite the fact that they are in receipt of a Government subvention. The majority of these entities are significantly in arrears in terms of financial reporting and audit, going back to decades. For example, as of August 2013, 18 NDCs, or 28%, have not had audited accounts since they were established in 1994. As regards the six municipalities, as of the same date, they were more than a decade in arrears terms of financial reporting and audit.
According to the Estimates for 2015, there are 51 statutory bodies and constitutional agencies. As in the case of local government organs, a significant number of the statutory bodies have not had audited accounts for more than five years, despite the fact that most of them are also in receipt of a Government subvention.
Given the above situation, it would be necessary for the new Administration to clamp down on this less-than-desirable state of financial accountability of these entities.
They should be given an ultimatum to bring their accounts up-to-date, failing which those responsible should be held personally liable for their failure to properly account for taxpayers’ money.
A number of constitutional agencies have been given financial autonomy. They should begin to take appropriate measures to have their financial accounting and reporting systems in conformity with international best practices. In this regard, these entities should enlist the services of the Audit Office to advise on the appropriate systems to be put in place. As soon as the financial year closes, they should prepare financial statements and submit them to the Auditor General, bearing in mind that the FMA Act requires all such agencies to have audited accounts within six months of the close of the financial year and for these audited accounts to be laid in the Assembly as soon as possible thereafter.
Parliamentarians have a duty to scrutinize the audited accounts of all statutory bodies and constitutional agencies, in addition to those of public enterprises. They must cease paying passing interest. The Public Accounts Committee also has a role to play to ensure proper financial accountability of all non-central government agencies.
So far, by choice, the PAC has restricted its examination to central government activities, and its last report was in respect of 2009 public accounts. The PAC therefore needs to accelerate its work on the public accounts for the years 2010-2013 while at the same time broaden its examination to include all agencies in which controlling interest vests in the State, be they Government-owned/controlled companies, statutory bodies or constitutional agencies.
Finally, a dedicated effort should be made to select from the list of Parliamentarians those with some expertise in public finance to serve on the PAC. Needless to mention, there can be no PAC to the extent that the Opposition Members of Parliament do not take up their seats in the Assembly, bearing in mind that the chairperson of the Committee has to be from the political Opposition.
