On 2 August 2012, the Minister of Finance tabled two financial papers in the National Assembly requesting the Assembly to approve sums totaling $13.740 billion by way of supplementary estimates. Readers will recall that on 30 April 2012, the National Assembly approved of the Estimates of Expenditure for 2012 in the sum of approximately $172 billion against the Government’s original request of $192.8 billion, a reduction of $20.8 billion or 10 per cent. This prompted the Government to challenge the Assembly’s decision to reduce the budget on the ground that: (a) it was unconstitutional for the Assembly to do so; and (b) the Assembly could either approve the budget or reject it, but not reduce it.
In his preliminary ruling, the Chief Justice stated that the Minister of Finance could restore the budget for the Ethnic Relations Commission (ERC), a constitutional body whose expenditure is a direct charge on the Consolidated Fund. The National Assembly does not vote on expenditure that is a direct charge on the Consolidated Fund. Article 212(6) of the Constitution, however, states that the ERC “shall appoint a Chief Executive Officer, who shall serve as Secretary, and such other officers and employees as may be necessary for the efficient discharge of its functions, on such terms and conditions as may be determined by the Commission, save that the remuneration of the officers and employees shall be subject to the approval of the National Assembly”.
Financial Paper 1/2012 – Statement of Excess
Financial Paper 1 deals with a statement of excess totalling $1.572 billion. It is presented in accordance with Article 218(3) of the Constitution which reads as follows:
If in respect of any financial year it is found: (a) that the amount appropriated by the Appropriation Act for a purpose is insufficient or that a need has arisen for expenditure to a purpose for which no amount has been appropriated by that Act; or (b) that any moneys have been expended for any purpose in excess of the amount appropriated for that purpose by an Appropriation Act, a supplementary estimate or, as the case may be, a statement of excess showing the sums required or spent shall be laid before the Assembly by the Minister responsible for Finance or another Minister designated by the President.
The background to this paper is that, in accordance with Article 219 of the Constitution, the Minister is authorized to make withdrawals from the Consolidated Fund for up to four months, pending the passing of the Appropriation Act, to meet expenditure necessary to carry on the services of the Government. Since the Estimates for 2012 were passed on 30 April 2012, the Minister would have authorized withdrawals from the Consolidated Fund for the period January to April 2012.
Traditionally, such withdrawals are based on the previous year’s budget. For current expenditure, the Minister signs warrants for withdrawals from the Consolidated Fund, representing one-twelfth of that year’s budget for each of the four months. For capital expenditure, it is permissible for the Minister to make withdrawals for projects that are ongoing from the previous year since, for example, contractors have to be paid based on the value of measured works, and other operating project costs. It is not expected that withdrawals will be made for new capital expenditure such as acquisition of equipment since there is a financial risk involved, should the National Assembly decide not to approve of such expenditure. There was no information in the financial paper to indicate the basis used to withdraw funds from the Consolidated Fund for the period January to April 2012.
The National Assembly had approved a reduced budget for 2012. Some agencies were not provided with allocations or were given a one-dollar allocation e.g. ERC, GINA and NCN. To the extent that money was withdrawn from the Consolidated Fund to meet the expenditure of these agencies for the first four months of the year, this would have resulted in excess expenditure.
For agencies that were given reduced allocations, excess expenditure can only occur if such allocations are insufficient to meet expenditure for the first four months of the year. There is no mechanism that allows the Minister to authorize withdrawals from the Consolidated Fund beyond the four months in excess of what Parliament has approved. The statement of excess should therefore be in relation to these two situations only. However, at the 9 August 2012 sitting of the National Assembly, the Prime Minister indicated that the Statement of Excess covers the period January to June 2012. If this was indeed so, any excess expenditure incurred during the period May-June 2012 would not appear to be in conformity with the Law.
The following is a breakdown of the excess expenditure:
$’000
Provision of subsidy to GINA and NCN 211,570
Wages and salaries for contracted
employees at OP 22,614
Consultancies and legal fees in relation to
climate change 11,393
Subsidy to Guyana Power and Light Inc. 1,000,000
Subsidy to CANU, ERC, and State
Planning Secretariat 224,419
Minor works (OP) 21,631
Acquisition of equipment etc for
GINA and NCN 80,000
TOTAL 1,571,627
Further examination of the paper indicated that it was a mere schedule and detailed information was lacking. For example, under Office of the President, the paper only stated that the excess amount expended on contracted employees was $22.614 million against a voted provision of $146.959 million. There was no information about what the expenditure was as at 30 April 2012 to enable Parliamentarians and the general public to understand how the excess expenditure was arrived at.
Section 24(4) of the Fiscal Management and Accountability (FMA) Act states that the Minister, when introducing a supplementary appropriation Bill (which is what the Financial Papers are about), shall present to the National 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. The Minister, however, contended that he had provided addition information to APNU’s spokesperson on finance, Mr. Carl Greenidge, the day before the budget debate, copied to the Speaker, and that he had detailed discussion with the former on the two papers. Mr. Greenidge quite rightly pointed out that the Minister had not complied with the requirement of the Law since he still had an obligation to present to the entire National Assembly information on the impact on the annual budget, among others. This prompted the Speaker to suspend the proceedings temporarily to allow all Members of Parliament to be provided with a copy of the document and to give them some time to go through it.
The outcome of the debate on Financial Paper 1/2012 was that the National Assembly only approved of the subsidy of one billion dollars to GPL, leaving the balance of $571.627 million representing expenditure made from the Consolidated Fund which the National Assembly did not sanction.
It is not clear how this matter will be resolved. If there is evidence that withdrawals from the Consolidated Fund for current expenditure for the period January to April 2012 were in accordance with the traditional approach mentioned above i.e. one-twelfth of the previous year’s budget, then the Minister cannot be faulted. However, he should not have authorized issues from the Consolidated Fund in the sum of $80 million to meet new capital expenditure for GINA and NCN. Instead, he should have awaited the outcome of the deliberations on the 2012 budget in keeping with past practices.
As regards CANU and the State Planning Secretariat, these are not separate legal entities but are departments within the Ministry of Finance. Accordingly, they should not be in receipt of a subvention/subsidy. This matter was drawn to the attention of the National Assembly since the late 1990s (and not 2009 or 2010 as the National Assembly was led to believe). According to the 2000 Auditor General’s report, “the present arrangement facilitates the circumvention of the application of the Government’s pay scales as employees of these units enjoy enhanced compensation packages, instead of the approved Government rates”.
Financial Paper 2/2012 – Supplementary Provision
This paper requested the National Assembly to approve the sum of $12.168 billion representing anticipated shortfall to meet expenditure for the rest of the year vis-à-vis the approved Estimates. The Assembly did not approve of the following:
$’000
Wages and salaries of contracted employees (OP) 127,386
Consultancies and legal fees in relation to climate change 68,607
Re: GECOM – provision for meals for claims and objections etc. 27,000
Re: GECOM – distribution of ID cards, honoraria etc. 500,000
Minor works – OP 73,369
Ministry of Home Affairs – citizen security 429,000
TOTAL 1,225,362
Conclusion
As indicated above, the main issue relates to the statement of excess whereby expenditure was incurred in anticipation that the 2012 budget would have been approved, as presented. The Minister’s authority under Article 219(1) of the Constitution on 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. To overcome this problem, 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 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 on 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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