Financial Paper 1/2014 – Statement of Excess – and the threat of no confidence

We begin our discussion of Financial Paper 1/2014 that the Minister of Finance tabled in the National Assembly two Thursdays ago. The paper deals with a request for a supplementary estimate to cover excess expenditure totalling $4.554 billion incurred during the period 1 January to 16 June 2014. This sum represents part of the amount of $36.7 billion that the Assembly had declined to approve in the first place.

News reports have indicated that the combined Opposition is unlikely to approve the supplementary estimate and has threatened to table a motion of no confidence on the Government. The Government, however, contended that it did nothing differently in 2014, compared with 2012 and 2013, and that the Assembly had approved of most of the items contained in the related supplementary estimates.

 

Background to Financial Paper 1/2014

Last March, the Government presented a budget for $220 billion but after the Assembly’s deliberations, the budget was reduced to $183.3 billion. This is the third consecutive year that the Assembly amended the budget downwards because of certain concerns it had that remained unresolved. This time, however, the amendment had to take into account the ruling of the Chief Justice in relation to the 2012 budget cuts. That ruling stated that the Assembly could either approve or disapprove of the budget but not reduce it.

Accountability WatchThe Assembly considers the budget on a programme basis, and has interpreted the Chief Justice’s ruling to mean that it could disapprove of particular programmes, if the Government does not adequately address its concerns. Accordingly, the Assembly did not approve of six programmes. In so doing, however, essential services contained in these programmes were adversely affected.

The Administration was aware of the Assembly’s concerns about GINA and NCN, the Amaila Falls Hydro Project, the Specialty Hospital, and the Cheddi Jagan International Airport, Timehri because in the preceding two years the Assembly had voted down these items. It was a foregone conclusion that it would do so again, given that its concerns remained unresolved. The combined Opposition had pleaded with the Government to separate these items out so that the other items within the programmes could enjoy smooth passage. Regrettably, that plea was contemptuously thrown aside.

While his ruling may have contributed to the present dilemma, the Chief Justice did advise that in view of the new configuration of the Assembly and in order to overcome any disagreement, it would be appropriate for the Minister to rework the budget instead of the Assembly. Unfortunately, the Minister did not follow this advice and integrated the contentious items with those relating to essential services. The argument that this was exactly how the budget was presented in the past is no justification for a continuation of this practice in view of the Chief Justice’s ruling.

I had suggested that in order to restore the budget for the essential services affected by the Assembly’s decision, the Minister could make withdrawals from the Contingencies Fund until such time that the Assembly meets to consider a supplementary estimate covering the rest of the year. The combined Opposition had indicated that it would have no problem with such an estimate. Regrettably, the Minister followed neither of the two courses of action. Instead, he has authorized withdrawals from the Consolidated Fund to incur expenditure in cases where there was a specific non-approval for such expenditure by the Assembly. He has now presented a statement of excess expenditure and is requesting the very Assembly to approve of it.

The Minister’s action can be interpreted as one of disrespect and contempt for the Assembly, comprising members duly elected to represent the citizens of this country and of which he himself is an elected member. He appears to have elevated himself above the highest decision-making body in the land in the belief that it is his budget. Article 218 (1), however, specifically refers to “estimates of revenues and expenditure of Guyana”. The budget is therefore that of the country, with the Minister acting as merely a conduit for its presentation that could have been done by “any other Minister designated by the President”.

 Constitutional and Legislative Requirements

Article 217 (1) prohibits withdrawals from the Consolidated Fund except: (a) to meet expenditure charged directly upon the Fund by the Constitution or an Act of Parliament; (b) where the issue of moneys has been authorized by an Appropriation Act; or (c) where the issue has been authorized under Article 219. Article 219 (2) also makes reference to Article 218 (3).

Article 219 (1) permits the Minister to authorise withdrawals from the Consolidated Fund up to four months, pending the passing of the Appropriation Act. However, such withdrawals must be to meet only expenditure necessary to carry on the services of the Government. Section 36 of the FMA Act provides further guidance in that withdrawals on behalf any budget agency for each of the four months must not exceed one-twelfth of the amount expended in the preceding year, except for payment obligations under a multi-year contract. The Minister is, however, precluded from authorizing withdrawals if there was no appropriation in the preceding year.

In accordance with Article 218 (3), if the amount appropriated by an Appropriation Act for any purpose is insufficient or a need has arisen for expenditure for a purpose for which no amount has been appropriated by that Act, a supplementary estimate is required to be laid before the Assembly. If, on the other hand, moneys have been expended for any purpose in excess of the amount appropriated for that purpose by the Appropriation Act or for a purpose for which no amount has been appropriated by that Act, a statement of excess is required to be laid before the Assembly.

As an example, if $4 million was approved for the purchase of a vehicle but the actual cost was $4.025 million, one would not expect that the purchase would be delayed or cancelled because of the slight increase in cost. In such a situation, it is permissible to proceed with the acquisition and to seek covering approval at a later date. The over-expenditure of $25,000 is considered excess expenditure.

While Article 218 (3) envisages a second situation regarding excess expenditure where there has been no appropriation, in my years of experience as Auditor General, I cannot recall any instance of moneys being withdrawn from the Consolidated Fund for this purpose. The reason is simple: (a) there is recourse to the use of the Contingencies Fund, assuming all the criteria have been met regarding the urgency of the expenditure; or (b) there is provision for a supplementary estimate to be tabled in the Assembly seeking prior authorization of the expenditure. Besides, there was deep respect for the general principle that it is Parliament that controls the public purse and that no expenditure can be incurred without Parliamentary approval. The supremacy of Parliament in this regard was unquestioned.

The second part of Article 218 (3) may have been inserted to cater for some extreme circumstance, for example, a national disaster of great magnitude, where it is not possible to secure the ex ante approval of the Assembly, or recourse to the Contingencies Fund is not possible because it may have been exhausted.

Analysis of Financial Paper 1/2014

Financial Paper 1/2014 relates to excess expenditure for the period 1 January to 16 June 2014. Article 219 (1) is therefore not applicable since it refers to the first four months of the year. It would appear that the Minister has used the second part of Article 218 (3) to authorize withdrawals from the Consolidated Fund since there has been no appropriation.

One would have thought that the Minister would have used the provision contained in the first part of Article 218 (3) to seek ex ante authorization by way of supplementary estimate. If the Assembly turns down the request, so be it – expenditure will not be incurred. Why run the risk of authorising withdrawals from the Consolidated Fund when there is so much uncertainty as to whether the Assembly will approve of the related expenditure? Should the Assembly reject Financial Paper 1/2014 partially or in its entirety, will the Minister not be held liable for causing unauthorised expenditure to take place?

What the Minister should have done is to apply Article 219 (1) to authorize withdrawals from the Consolidated Fund for the first four months by following strictly the criteria set out in the said Article as well as in section 36 of the FMA Act. In this way, it is unlikely that there would have been excess expenditure.

To compound matters, the Minister has authorized withdrawals to 16 June 2014 to meet not only the cost of essential services affected by the Assembly’s non-approval of the six programmes but also other expenditure that the Assembly has specifically rejected. In all probability, he would have also done so for the remainder of June. It is also unclear what is likely to happen for the rest of the year since there is no indication so far that a supplementary estimate will be presented in the Assembly to provide for ex ante authorization.

 To be continued –

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