When corruption enters politics, the latter becomes contaminated. Definitions change, and loyalty to the King becomes the norm. The one who does not agree is branded a traitor. If truth does not side with the King, it becomes untruth…and politics buys every person who stands before it. Words like friendship and loyalty lose their meaning. The Treasury is used to buy those who could change opinion, and rebellion is suppressed with gold.
There are two types of politics. One is based on the Treasury while the other is based on truth. One serves the King’s personal interest; the other serves the nation. The aim of one is to be on the throne forever; the aim of the other is to remain in the hearts of the people…If truth is on your side, then religion will also side with you.
Mahabharata
Last week, I had indicated that we would continue our discussion on decision-making. However, in view of the Minister of Finance’s announcement that today is Budget Day, readers will bear with me if we were to revisit Guyana’s budget process.
Constitution requirements
Article 218 of the Constitution requires the Minister to prepare and lay before the National Assembly, estimates of the revenues and expenditure of Guyana within 90 days of commencement of the financial year. Once approved, an Appropriation Bill is introduced to provide for issues from the Consolidated Fund. There is provision for supplementary estimates if the original amounts are insufficient, or if a need arises for which no provision had been made. In rare occasions, where moneys have been expended in excess of the amount appropriated or for which no appropriation has been made, the Minister is required to present to the Assembly a statement of excesses for approval.
Article 219 authorises the Minister to make withdrawals from the Consolidated Fund for up to four months pending the passing of the Appropriation Act. Where Parliament is dissolved before any provision or sufficient provision is made, the Minister can make withdrawals from the Consolidated Fund up to three months. In both cases, a statement of expenditure so authorised is submitted to the Assembly as soon as practicable for approval.
Article 220 provides for the Minister to make advances from the Contingencies Fund, if he is satisfied that an urgent need arises for which no other provisions exists. Once an advance is made, a supplementary estimate is submitted to the Assembly as soon as practicable to replenish the Fund.
FMA Act and the budget process
The budget process starts with the Minister establishing the timetable for budget preparation six months in advance through issuance of a budget circular to budget agencies. Budget submissions are approved by concerned Ministers before they are forwarded to the Minister.
While the Constitution allows for the outer limit of 90 days of the commencement of the fiscal year for the presentation of the budget, the Act anticipates that the Minister will finalise and present the budget to the Assembly before the commencement of the fiscal year to which it refers. The latter is highly desirable not only from the perspective of good financial management practices but also to avoid the risk of incurring certain expenditures in the first four months of the year, only to realize subsequently that Parliament did not approve of them. This happened last year in respect of GINA and NCN as well as contracted employees in the Office of the President.
Section 16 of the Act states that there shall be no expenditure of public moneys except in accordance with Article 217 of the Constitution. That article reads as follows:
No money shall be withdrawn from the Consolidated Fund except – (a) to meet expenditure that is charged upon the Fund by this Constitution or by any Act of Parliament; or (b) where the issue of those moneys has been authorized by an Appropriation Act; or (c) where the issue of those moneys has been authorized under article 219.
Section 21 requires all budget agency receipts to be paid into the Consolidated Fund, and no expenditure out of such receipts is permitted except by an appropriation. This section also refers to a conditional appropriation whereby a budget agency is authorised to spend a specified sum of money, “conditional upon budget agency receipts earned by that budget agency and being credited to the Consolidated Fund”. In addition, no expenditure can be incurred based on a conditional appropriation unless there is a written agreement between the Minister and the concerned budget agency prior to the presentation of the National Estimates. One can easily consider the Wildlife Unit under the Office of the President as an example where conditional appropriations are applicable. A similar argument can be made of the Privatisation Unit that should not have been integrated with the operations of NICIL.
Once approved, appropriations may only be varied across programmes within a budget agency. However, appropriations for capital expenditure cannot be used to meet current expenditure. In addition, a variation for any programme cannot exceed 10 per cent of the appropriation for that programme. These are provided for under Section 22.
The Minister is to include all changes to appropriations up to the end of the tenth month in an appropriation amendment Bill not later than the eleventh month. Any variation of an appropriation, other than those variations permitted under Section 22, is to be authorised by a supplementary appropriation Act prior to the incurring of the expenditure. The Minister is also to provide reasons for proposed variations and indicate its impact on the original financial plan. No more than five supplementary appropriation Bills are allowed in any fiscal year, except for grave national emergency in which case a separate Bill is introduced.
Periodic drawdowns during the year are to be agreed by the Minister and cannot be varied without his approval. Heads of budget agencies are also to implement adequate internal controls to avoid allocation limits being exceeded. In addition, no contract for good/services is to be entered into unless there is sufficient unencumbered balance of appropriation available. All appropriations lapse at the end of the fiscal year and any unspent funds are to be returned to the Consolidated Fund.
Section 38 provides for all public moneys raised or received by the Government to be credited fully and promptly to the Consolidated Fund, except – (a) moneys credited to an Extra-budgetary Fund as stipulated in the enabling legislation establishing the fund; (b) moneys credited to a Deposit Fund; and (c) as stipulated in the Constitution. Since the passing of the Act in 2003, no extra-budgetary Fund has been established.
As provided for under section 41, the Contingencies Fund can only be used to meet urgent, unforeseen and unavoidable expenditure for which:
(a) No provision or insufficient provision exists;
(b) No reallocation is possible; or
(c) Expenditure cannot be postponed without injury to the public interest.
The total amount drawn must not exceed two per cent of the previous year’s approved revised annual estimates or such greater sum as the Assembly may approve. The Minister is to report at the next sitting of the Assembly for the purpose of approving a supplementary estimate to replenish the Fund.
Aftermath of the 2012 budget experience
Last year, we had the bitter experience where no compromise was reached in relation to the original budget. The Opposition-controlled Assembly wanted certain items of expenditure reduced or eliminated in the absence of adequate justification and/or explanations. The Government side stuck to its guns. It insisted that the Assembly could not alter the proposed budget but could only approve or disapprove of it. The Assembly, however, voted against certain proposed expenditure or approved lesser sums.
In his preliminary ruling, the Chief Justice quite rightly pronounced that it was wrong for the Assembly to alter the budget for the Ethnic Relations Commission which is a constitutional body whose budget is not subject to the approval of the Assembly. However, the Government side and the Opposition interpreted other aspects of the ruling differently. As a result, the Minister reportedly restored the original budget by authorizing advances from the Contingencies Fund. This action has serious implications in that it undermined the authority of Parliament to approve of public expenditure. The Minister would also be hard-pressed to justify whether the criteria outlined above for authorizing such advances have been met. In any event, the Assembly is unlikely to approve any supplementary estimate to clear such advances since it did not approve of the expenditure in the first place. It is therefore unclear how the Contingencies Fund will be replenished.
The Minister is like the Finance Director of a company, and the National Assembly, its Board. For example, the Manager (Finance) of the MMA/ADA is required to submit the Authority’s annual budget to the Board for its approval. If the Board was not happy with the proposed budget, he/she has to go back to the drawing board and rework the budget to the satisfaction of the Board. The same applies to the Government’s budget. I hope the Minister of Finance, who is an accountant by training, will appreciate this and avoid making the same mistakes twice. Life is about making compromises rather than taking hardened positions. There is also no substitute for humility, the display of goodwill and quiet competence, and being a servant leader in all these matters.
The intention of Article 218 is clear in that Parliament must approve of all revenues and expenditure of the country, regardless of whether they are proceeds from privatization, the sale of State assets or license fees payable by the Canadian Bank Note for the running of the Lottery. (My understanding of the Court ruling in relation to the latter is that the matter was thrown out on procedural and not substantive grounds.) It follows also that any expenditure from such revenues without Parliamentary approval is a violation of Article 218.
Since at least 70 per cent of public expenditure relates to the procurement of goods and services as well as the execution of works, it is important for Parliamentarians to demand the long awaited appointment of members of the Public Procurement Commission to oversee all government procurement and the functioning of the various tender boards. It is no secret that there is huge public dissatisfaction in the way contracts are awarded and the quality of works executed.
To be continued
