Goolsarran calls for measures to end contingencies fund abuse

Abuse of the Contingen-cies Fund needs to be nipped in the bud by putting concrete measures in place, former Auditor-General Anand Goolsarran says.

He made the comments in his Accountability Watch column in Monday’s Stabroek News following the approval by the National Assembly last Thursday of two financial papers totalling $9.6 billion dollars spent during the last PPP/C administration. The two papers were presented by Finance Minister Winston Jordan.

The first financial paper covered an amount of $3.240 billion and relates to the replenishment of the Contingencies Fund based on advances authorised by the former Minister of Finance Ashni Singh during the more than three-year period from October 5, 2011 to December 31, 2014. The second financial paper related to excess expenditure totalling $6.471 billion incurred during the more than two and a half-year period from January 1, 2012 to July 16, 2014 on the authority of the former Minister.

Anand Goolsarran
Anand Goolsarran

“It is good that the new Administration is taking seriously the task of “cleaning up” the books of the Government and to have matters regularised in order to move forward without contamination with past issues that were left unresolved,” Goolsarran observed.

However, he said, the spending amounts to abuse/misuse of the Contingencies Fund and this can be traced back to the early 1990s. This abuse/misuse has been the subject of adverse comments in varying degrees from the Auditor General in almost every report since then, he wrote.

“It should be pointed out that the advances were used to incur public expenditure, and there was no act of misappropriation of funds. It is, however, a question of successive Ministers of Finance abusing their authority because of their ready access to the Contingencies Fund. Instead of going back to Parliament to request additional funding and to provide the necessary justifications for their requests, it was more expedient for them to resort to the use of the Contingencies Fund and to later seek supplementary estimates to regularise matters,” Goolsarran declared.

He said that successive Parliaments have been very lenient on their Ministers of Finance when it came to approving the related supplementary estimates to regularise the expenditure and to replenish the Contingencies Fund.

“Because of this, a chronic situation had developed over the years, culminating in the latest situation where the National Assembly on 30 December 2015 was faced with Financial Paper 01/2015 covering the staggering sum of $3.240 billion. Who is to blame? What form of sanctions will be imposed on the former Minister of Finance, given the magnitude of the amount involved,” the former AG questioned.

“When are we going to see a discontinuation of the practice of abuse/misuse in the use of the Contingency Fund, with the Assembly a helpless bystander rubberstamping the actions of the Minister,” he asked.

“True, the abuse in the use of the Contingencies is one of the reasons for the tabling of the motion of no confidence against the then Administration which precipitated the prorogation of Parliament, its subsequent dissolution and the holding of fresh elections. However, we need to nip the matter in the bud by having in place concrete measures to stop the abuse,” Goolsarran added.

In relation to Financial Paper 1, he noted that in accordance with Article 220 of the Constitution, the Minister of Finance is authorised to make advances from the Contingencies Fund if he/she is satisfied that an urgent need exists for expenditure for which no other provision exists.

He pointed out that the urgency of the expenditure is elaborated on by Section 41 of the Fiscal Management and Accountability (FMA) Act which provides for the Minister to approve of a Contingencies Fund advance if he is satisfied that an urgent, unavoidable and unforeseen need for expenditure has arisen for which no moneys were appropriated, or the sum appropriated is insufficient; moneys cannot be reallocated under the Act; and the expenditure cannot be deferred without injury to the public interest.

The circumstances under which advances can be made from the Contingencies Fund is akin to a natural disaster, such as a severe flood, an earthquake, or civil war, where it is not possible to convene Parliament for the purpose of approving the related expenditure, Goolsarran said.

He pointed out that none of this happened during the period in question and whilst there was no Parliament during the period November 10, 2014 to December 31, 2014 because of its prorogation, there was an approved budget for 2014.

“In other words, there was no justifiable reason for the granting of advances from the Contingencies Fund which is an emergency fund under the control of the Minister. The Minister has a duty not to abuse the authority vested in him by authorising advances from the Contingencies Fund to incur expenditure that are of a routine nature,” he declared.

He also noted that the total of the amounts permitted to be drawn from the Contingencies Fund cannot exceed two per cent of the estimated annual expenditure of the preceding year, as reflected in the National Estimates, or such greater sum as the National Assembly may approve.

“A review of the list of advances granted from the Contingencies Fund during the period in question indicates that most, if not all, of the advances did not satisfy the criteria for the grant of such advances,” he wrote.

In relation to Financial Paper 2, the former AG said it is a “tsunami in the context of public financial management.” He noted that it stemmed from a complicated constitutional issue that was the subject of two rulings by the Chief Justice: the 2012 budget cuts; and the $4.544 billion excess expenditure incurred in the first half of 2014.

He wrote that in accordance with Article 218 (3), if in respect of any financial year it is found that any 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 showing the amount spent shall be laid in the Assembly.

“It is important to note the words “if it is found.” In the context of this article, excess expenditure is a by-product of the operations of the budget where expenditure is inadvertently incurred in excess of the budgetary requirements. The discovery is based on a year-end “stocktaking exercise” involving the review of expenditure incurred against budgetary allocations. It follows that one cannot proactively or deliberately set out to incur excess expenditure and argue a case that the Constitution allows for this practice, as is the case giving rise to Financial Paper 2/2015,” Goolsarran declared.

While many may fault the ruling on the 2012 budget cuts case, the Chief Justice has made amends when he considered that the $4.544 billion excess expenditure that the then Minister of Finance had authorised, was a violation of the Constitution, he said.

“Little did we realise that such excess expenditure had also been incurred in 2012 and 2013. The combined total of the excess expenditure for the period 1 January 2012 to 16 June 2014 was $6.471 billion. Extrapolating, in all probability an additional $4 billion would have been expended during the period 17 June to 31 December 2014 for which the related statement of excess expenditure is yet to be presented to the Assembly. This will give a whopping $10.5 billion in excess expenditure vis-à-vis the approved budgets for the period 2012 to 2014,” Goolsarran wrote.

He said by Article 219 (2) of the Constitution, when the statement of excess is approved by the Assembly by resolution, that resolution becomes the authority for the issue of the sums in question from the Consolidated Fund. “These amounts are to be included in a Supplementary Appropria-tion Bill. Traditionally, a Supplementary Appropria-tion Act is the authority for withdrawing the related amounts from the Consolidated Fund. In the case of the excess expenditure in question, since the funds had already been withdrawn from the Fund, the Supplementary Appropriation Act represents the retroactive approval for the withdrawal and the authorisation of the expenditure already incurred. It does not trigger a further withdrawal from the Consolidated Fund,” he said.

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