Court ruling on the statement of excess

Before dealing with today’s subject, we pause briefly to reflect on two recent news items. The first was the statement by the UNAIDS Country Director about the high cost of anti-retroviral drugs (ARVs) because procurement is being undertaken on an ad hoc emergency basis rather than on a planned basis.

The Public Procurement Commission mandated by the Constitution to provide oversight of the procurement process, is yet to be activated despite the lapse of 14 years. This is because of the Cabinet’s unwillingness to surrender its role of giving its “no objection” to the award of contracts of $15 million and over. Under this watch by the Cabinet, several large contracts that were awarded ran into serious difficulties, the latest being that of the Specialty Hospital which was terminated and for which the State is yet to recover US$4.2 million from the contractor. It was the same contractor who was handed another contract for US$4 million almost three years ago to supply 14 drainage pumps. However, to date we are yet to determine how many of these pumps have been delivered and whether they met the required specifications.

Since November 2013, advertisements were placed for the prequalification of suppliers of drugs and medical supplies for the period 2014-2017 but it was not until July 2014 that a decision was made. A local pharmaceutical company with close ties with the Administration, which has been the Government’s main supplier for almost a decade, was deemed the only supplier to have met the requirements. This column carried out a comprehensive assessment and concluded that the prequalification criteria were biased in favour of this supplier. Two of the unsuccessful bidders protested the results of the prequalification, one of whom has since sought judicial intervention. Since the Ministry of Health and the Georgetown Hospital need pharmaceutical supplies on a continuous basis, in all probability they would have acquired such supplies from the same company on an ad hoc emergency basis, as no contract has yet been awarded based on the prequalification exercise.

Accountability WatchThe second news item was the Court action brought in connection with the tax free salaries enjoyed by two members of the Judiciary to the exclusion of others. While the issue is one of equity and fairness, in principle all citizens, regardless of the positions they hold in society, must pay their fair share of taxes. In the interest of transparency, the Minister of Finance should publish the list of persons who are exempt from taxes on their income, including those who are employed on government projects financed by the international funding agencies. Perhaps, the local transparency body should take the matter up with the Commissioner of Information.

Court action on the unauthorized expenditure of $4.554 billion

In 2014, the National Assembly disapproved of $36.7 billion in the original budget that the Government had presented. The Minister, however, went ahead and authorized withdrawals from the Consolidated Fund of amounts totalling $4.554 billion to meet expenditure that the Assembly had specifically disallowed, resulting in excess expenditure being incurred. On 19 June 2014, he submitted to the Assembly Financial Paper 1/2014 seeking covering approval for this expenditure. In all probability, a similar amount would have been expended in the latter half of 2014, as explained below.

On 11 December 2014, the Opposition Leader sought the intervention of the Court for a declaration that the Minister’s action violated the Constitution and for a conservatory order to be granted to prevent the Minister from repeating such action.

The Chief Justice ruling

On 14 February 2015, the Chief Justice ruled that the Minister’s action was unconstitutional. This ruling is consistent with our assessment that the Minister’s interpretation of Article 218(3) of the Constitution was misplaced. This Article only covers a situation where it is found that expenditure was incurred for which there has been no appropriation. It contemplates no role of the Minister in proactively authorizing withdrawals from the Consolidated Fund. It is an after-the-event scenario where during the execution of the budget a discovery has been made of excess expenditure vis-à-vis the approved budget. In other words, the exercise is usually a year-end mop up one to align as far as possible actual expenditure with budgetary allocations. The Assembly has to sanction such expenditure first in order to trigger the Minister’s action, not before. The Minister’s action also breaches the fundamental principle of “no expenditure without appropriation” and would render him personally liable.

The Chief Justice, however, declined the Opposition Leader’s request for the grant of a conservatory order on the grounds that such spending took place in 2014 and any expenditure in 2015 is governed by specific constitutional provisions. There are only two circumstances in which the Minister can authorize withdrawals from the Consolidated Fund without prior parliamentary approval. The first is that pending the passing of the Appropriation Act, the Minister can authorise withdrawals for up to four months to meet the cost of essential services. Such withdrawals are restricted to one-twelfth of the previous year’s approved budget for each of the four months, and no withdrawals can be made for any new capital expenditure.

The second situation relates to the dissolution of Parliament and the holding of elections. The Minister can authorize withdrawals from the Consolidated Fund “for the purpose of meeting expenditure on the public services until the expiry of a period of three months commencing with the date on which the National Assembly first meets after that dissolution…” This provision is necessary to allow any new Administration formed as a result of the elections enough time to prepare and submit to the Assembly its budget for the fiscal year in question.

It is the view of this column that the Court could have issued a conservatory order to prevent the Minister from authorizing withdrawals from the Consolidated Fund, except in the two situations described above, for two main reasons. The first is that at least a similar amount of unauthorized expenditure would have been incurred in the latter half of 2014 for which the related financial paper is yet to be tabled in the Assembly. Such unauthorized expenditure is likely to continue in 2015. The 2012 “budget cuts” ruling restricted the Assembly’s role to either approving or disapproving the budget but not amending it. Accordingly, the Assembly did not approve of certain programmes with which it was unhappy and for which the Minister did not provide adequate explanations and justifications. However, because of the way the budget was constructed, the cost of certain essential services was affected. The Minister refused the combined Opposition’s request to separate out these items and to submit a supplementary estimate for the affected services. Had he done so, the issue of unauthorised excess expenditure would not have arisen. More importantly, there would have been no motion for a vote of no confidence on the Government; no prorogation of Parliament; and no announcement of the date for elections.

The second reason is that the Administration has declared that there will be no budget until after the elections of 11 May 2015. Allowing for the resolution of post-election administrative matters, the Assembly is unlikely to convene until 10 June 2015, the outer limit permitted by the Constitution. However, there is no provision for the Minister to access the Consolidated Fund to meet expenditure for the period 1 May to 10 June 2015. The only recourse will be for him to authorize withdrawals from the Contingencies Fund. This Fund has already been burdened with some $700 million in withdrawals which the Assembly declined to approve. In addition, an undisclosed amount would have been withdrawn in 2014, the details of which are yet to be submitted to the Assembly. Further, withdrawals are limited to not more than two per cent of the previous year’s approved budget.

Eleven months will have elapsed between the last session of the Assembly and the next session, i.e. from 10 July 2014 to 10 June 2015. There is also the possibility that the 2015 Appropriation Act will not be in place until September 2015, resulting in the Administration managing the affairs of the State without a budget in the first nine months of 2015. In these circumstances, it is necessary to put in place measures to avoid the abuse of spending authority that we have witnessed in 2014. Since there will be an extended period during which the Legislature will not be in session, only the Courts can intervene to offer protection against possible excesses by the Executive. Who else should citizens in general, and taxpayers in particular, look upon to protect the public purse and hence their interests?

To be continued –

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