Municipalities keeping unspent subvention funds

-PS tells PAC

There was approximately $60 million in unspent funds lying in special accounts across municipalities at the end of 2016, and a significant portion of that money is still unspent, according to Permanent Secretary (PS) of the Ministry of Communities Emile McGarrell, who said it was determined that the money did not have to be returned to the Consolidated Fund.

McGarrell’s revelation on Monday exposed weaknesses in the accounting structure between central government and the local democratic organs, and saw him at odds with Chairman of the Public Accounts Committee (PAC) Irfaan Ali on how unspent monies are to be treated at the end of the fiscal year.

In 2016, the government had paid out $401 million in Capital Subventions to Municipalities and Neighbourhood Democratic Councils. At the end of that year, all the funds were not spent, but the PAC heard at a hearing at the Parliament Chamber on Monday that a number of municipalities still retain those sums in their accounts.

The amounts captured in the Auditor General’s report have since been adjusted for some of the municipalities, as related by the PS, who was asked by Ali to give an update on the top entities in terms of the amount of funds they had retained.

The PS related that Mabaruma, which had retained $10.8 million at the end of 2016, now has only $4.7 million of that sum in its account. The Rose Hall Town Council, which the AG reported as having had a balance of $11.3 million, now has $8.9 million of its 2016 funds remaining and the Linden Town Council, as previously reported, registers $12.8 million, the same amount recorded by the AG in 2016.

“If they’re not utilised, central government funds have to be returned to the Consolidated Fund,” Ali stated, after McGarrell related that the money had not been returned.

Emile McGarrell

“That’s correct, sir, but…once disbursed into the accounts of the councils, it can only get out of the account of the council by resolution of the council only. And many of them sought to retain the resources. An initial indication was given to them that we would seek the approval for them to do that and that was not granted,” the PS responded, indicating that the denial came from the Financial Secretary.

“Then the Financial Secretary was acting in accordance with the law,” Ali stated.

McGarrell said that the Ministry has no authority to decide whether local organs retain funds at the end of the year and noted that this conclusion was made after discussions with the Attorney General and the Finance Ministry.

Although McGarrell had attempted on more than one occasion to relate to the committee what the ministry’s brief on the matter had been, Ali continuously interjected, thereby preventing him from sharing that information.

However, McGarrell cited Article 216 of the Constitution as being the basis for the conclusion met.

It states, “All revenues or other moneys raised or received by Guyana (not being revenues or other moneys that are payable, by or under an Act or Parliament, into some other fund established for any specific purpose or that may, by or under such an Act, be retained by the authority that received them for the purpose of defraying the expenses of that authority) shall be paid into and form one Consolidated Fund”.

The PS also pointed out that Section 43 of the Fiscal Management and Accountability Act (FMAA) comes equipped with an exception clause, which says that, “Except as otherwise provided in this Act or in any other law, at the end of each fiscal year, any unexpended balance of public moneys issued out of the Consolidated Fund shall be returned and surrendered to the Consolidated Fund.”

Ali stated that if what McGarrell was saying was true, there is no longer a need for money to be sent out in intervals, rather, entities can be provided with all the resources at the beginning of the year. The PS countered, saying that the Fiscal Transfers Act specifies how money should be disbursed, bringing Ali to state the PS could not “use two different laws conveniently” but McGarrell pointed out that while the law speaks to disbursement, it does not do the same for the return of money.

Ali resolved to do research on the matter before making a proclamation on the matter.

“So at this point in time, as we speak here today, local organs and entities, in accordance with the act’s advice are entitled to retain undisbursed sums in their account?” Ali questioned.

“That’s correct, sir,” McGarrell said

Late disbursements

In addition to the issue of municipalities being allowed to retain large sums of money, also highlighted at the meeting was the problem of capital projects not being completed by the local organs before the end of the fiscal year, partly due to funds being released late.

At least one Treasurer from the municipalities represented at the PAC on Monday indicated that they had received funds late in the year and so had not been able to complete the project.

In the case of the Anna Regina Municipality, the Treasurer related that the programme had not been approved by the ministry.

The PS, when asked by Ali earlier why the councils had been given additional funds in 2017 when the money they had received before was not spent, indicated that the ministry does not hold money belonging to those bodies.

In fact, he related that half of the monies are automatically released at the beginning of the year, and the rest after the entities would have satisfied certain requirements.

According to McGarrell, sometimes late disbursements are the result of these requirements not being satisfied, and other times, the delays are the fault of the procurement system. However, he assured that disbursement is always in keeping with the Fiscal Transfers Act.

Member of Parliament Juan Edghill continuously pressed the issue in attempts to find out what were the areas that suffered as a result of these projects not being completed, and queried how the ministry ensures the funds are spent in accordance with the programmes if there are no controls in place.

McGarrell had said that once programmes are approved and money is transferred to the account, total control lies with the council.

“Money is fungible PS, so you might not have expended [on] the works approved but since there are no controls from the ministry for the spending, the council could have spent this money on other things outside of the approved because there’s no controls or signing from the ministry…” Edghill suggested, before proceeding to ask whether the funds are being kept in general or special accounts.

The PS, at the time, had indicated that they were transferred to general accounts, but later, after the Linden Treasurer related to the Council that the municipality’s remaining funds were in a special account, McGarrell corrected his error, stating that the monies were in fact housed in a Special Account.

Ali had requested the PS to provide a report on all the disbursements to all the entities, the reasons why the sums were approved and the validation for any late releases.

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