Last Monday, we began an examination of the three financial papers that the Minister of Finance presented to the National Assembly seeking approval by way of supplementary provision in the sum of $12.385 billion. However, because of space constraints, we were only able to cover Financial Paper 1/2003. Today, we discuss the remaining two papers.

 

Financial Paper 2/2013

This paper deals with payments from the Contingencies Fund for the period 13 August to 5 November 2013. Article 220(1) states that Parliament may make provision for the establishment of a Contingencies Fund and for authorising the minister to make advances from that fund if he is satisfied that there is an urgent20131014watch need for expenditure for which no other provision exists. In addition, in accordance with section 41(3) of the Fiscal Management and Accountability (FMA) Act, the minister may approve of an advance from the Contingencies Fund if he/she is satisfied that an “urgent, unavoidable and unforeseen need for expenditure has arisen – (a) for which no moneys have been appropriated or for which the sum appropriated is insufficient; (b) for which moneys cannot be reallocated as provided for under this Act; or (c) which cannot be deferred without injury to the public interest”.

The minister has made the following advances from the Contingencies Fund for the above-mentioned period and is seeking the Assembly’s approval for the expenditures incurred:

$’000

Commission of inquiry into Walter Rodney assassination                                                  48,000

Rental of building for Opposition Leader, including security services                 5,571

GuySuCo – supply of fertilizer and D & I works                                                   560,000

Supply of office materials for new police locations                                              15,000

Rental of additional building for police work                                                           1,535

Expenditure on polygraph examinations                                                                                   7,306

Training of SWAT Unit                                                                                   36,660

Expenditure on dietary supplies for prisons                                                     30,000

Acquisition of fire fighting vehicles & cleaning of Rupert Craig Highway       15,409

Maintenance of firefighting vehicles                                                              3,000

Increase in fees for registrars at the General Register Offices                          14,720

Additional costs under the Solid Waste Disposal Programme                         351,904

Rehabilitation of High Dependency Unit at the Georgetown Hospital             31,500

Provision for completion of Citizen Security Programme                               53,492

Machine readable passports software and upgrade                                        51,500

Acquisition of Metal Shark boats for anti-piracy operations                              36,000

 

TOTAL                                                                                                                        1,261,597

As can be seen, most of these payments did not satisfy the criteria established under section 43(3) of the FMA Act. They appeared to be routine expenditure which could have been dealt with by way of supplementary estimates prior to the Assembly going into recess, instead of recourse to the Contingencies Fund. They also reflected to a certain extent faulty initial budgeting by the concerned Ministries and Departments.

This abuse of the use of the Contingencies Fund is not a new phenomenon as successive reports of the Auditor General from 1992 through 2010 have reflected

comments to this effect. The report for 2012, however, took a much softer line when it stated that only seven advances totalling $95.661 million did not meet the eligible criteria defined by the FMA Act and that “there has been greater monitoring of advances issued resulting in a reduction in the number of advances not meeting the eligibility criteria”, a comment that was reflected also in the 2011 report. There was no indication as to what such “greater monitoring” entailed. As at 31 December 2012, there were uncleared advances totalling $615.660 million resulting from the Assembly declining to approve of amounts of $79.619 million and $536.041 million in advances made in 2011 and 2012 respectively.

In principle, the Contingencies Fund is to be used for emergency purposes only, for example, a natural disaster, such as the 2005 Floods. The Fund is only accessible if the nature of the emergency is such that it is not possible to convene the National Assembly for the purpose of approving the necessary funds to address the emergency. The reality of the situation over the years, however, is that it has been found to be an easier and more expedient proposition to make advances from the Contingencies Fund rather than seeking supplementary provisions with the attendant burden to justify the proposed expenditure upfront. Several months later, the related financial paper would be presented for approval, and the Assembly would go through the ritual of rubber-stamping the expenditure. The situation has, however, changed on 28 November 2011 with the new configuration of the National Assembly, as there is now greater scrutiny of the advances.

We are now in a quandary, and it is unclear how the Contingencies Fund will be replenished with the amount of uncleared advances as at 31 December 2012. The situation will be further compounded, should the Assembly decide to disapprove of all or part of the advances reflected in Financial Paper 2/2013. In addition, to the extent that advances made from the Contingencies Fund remain uncleared, the expenditure in the relevant financial statements comprising the public accounts would be understated, and the Fund will remain depleted.

 

Financial Paper 3/2012 – Supplementary Provision

This paper is requesting the Assembly to approve the sum of $7.738 billion representing anticipated shortfalls to meet expenditure for the rest of the year vis-à-vis the approved Estimates. The following are details:

$’000

Provision for support for GuySuCo and the Rice Dev. Board                   4,500,000

Maintenance of roads                                                                                         400,000

Maintenance of other infrastructure                                                               100,000

Projects and programmes in Amerindian communities                                500,000

Additional inflows for completion of bridges and structures                        400,000

Construction and rehabilitation of community roads                                1,000,000

Construction and supervision of Amaila access road                                    500,000

Provision for completion of the Citizen Security Programme                     337,985

TOTAL                                                                                                             7,737,985

 

Further examination of the paper indicated that it is a mere schedule and detailed information is lacking. Section 24(4) of the FMA Act states that the minister, when introducing a supplementary appropriation Bill, shall present to the 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. This was an issue of contention last year that prompted the Speaker to briefly suspend to sitting of the Assembly to allow all Members of Parliament to be provided with the relevant information. Regrettably, this requirement of the FMA Act continues to be ignored.

As regards GuySuCo, an amount of $560 million was advanced from the Contingencies Fund, as per Financial Paper 2/2013, to provide for the purchase of fertilizer and the execution of drainage and irrigation works. Financial Paper 3/2013 is now seeking an additional $4 billion. Given the current financial and operational difficulties of GuySuCo, the Assembly may wish to first consider when the corporation’s management structure, inclusive of the membership of the board, is appropriate to meet the enormous challenges ahead. A similar assessment should be carried out in respect of GPL of which the ubiquitous Winston Brassington is the chairman of the board. Both these entities over the years, instead of contributing to the Treasury, have become a severe burden and liability to the state, and hence the pockets of the overtaxed citizens of this country.

In relation to the completion of bridges and structures, the amount of $400 million represents direct disbursements by the funding agency. The Assembly’s approval is necessary to recognise the expenditure and bring to account the related transactions in the books of the country. The same is applicable to the Citizen Security Programme where the sum of $337.985 million is being requested. The voted provision for the Amaila Falls access road is $2.350 billion, and an additional $500 million is being requested. In the light of what happened with the Amaila Falls Hydro Project, the Assembly may wish to consider the benefits that are likely to accrue for the continuation of works on the access road, before giving its approval for the additional expenditure.

 

Conclusion

There are a number of issues that arise in reviewing the three financial papers. The first relates to the statement of excess expenditure incurred in anticipation that the 2013 budget would have been approved as presented, and whether any excess expenditure was incurred in the period after the budget was passed. The minister’s authority under Article 219(1) of the Constitution to the release of funds to meet expenditure pending the passing of the appropriation therefore has to be exercised with the greatest degree of prudence and caution. In particular, no release of funds should have been made for new capital expenditure until the National Assembly approves of such expenditure nor should the minister release funds over and above what the National Assembly has approved in the post-budget period. The way forward is for appropriate measures to be taken for the budget to be approved before the beginning of the financial year. This is in keeping with international best practices.

The use to the Contingencies Fund continues to be abused as most of the advances made were for routine expenditure. This could have been avoided through a combination of careful budgeting and monitoring of expenditure, and seeking supplementary provisions where it is considered necessary. The FMA Act sets out the criteria to be used before advances are made but these appeared to have been ignored.

The other matter relates to the amount of information that Members of Parliament need to enable them to understand the issues involved when considering financial papers. One suggestion is that every item the financial paper should be accompanied by an explanatory note as well as a reasonable breakdown of how the figure has been arrived at. This is in addition to Section 24(4) of the FMA Act requiring the minister to present certain information accompanying the financial papers, especially the impact on the financial plan outlined in the annual budget.

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