As a prelude to this article, two Saturdays ago would have been the date of my retirement as Auditor General, had I not chosen to demit office ten years earlier. My premature departure was due mainly to the Administration’s lack of support for my work, precipitated by its extremely hostile reactions to the results of my investigation into the illegal exportation of dolphins, an endangered species under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES).
A leading figure in the Office of the President was involved in what became known as the “Dolphin Scam” with the knowledge of another senior official who gave a written a “no objection” and who argued this did not constitute an approval. In a telephone call to me around the same time, the latter claimed that he had confirmed and reliable information that I was about to “disturb the peace of mind” of the Office of the President. He then exclaimed that they were “bracing for the onslaught”! When I protested to the highest level of the State, I was greeted with a barrage of public attacks and insults.
I recall my last day at work when I presented my 2003 report to the then Speaker of the National Assembly. On reflecting on my career and specifically the difficulties I had to endure during the preceding 15 years, I was so overcome by emotions that I was unable complete my presentation. This date heralded the beginning of the 2005 Great Floods which I referred to in one of my yet-to-be published writings as “the day the sky cried”. I feel at ease with myself about my decision to demit office as an act of defiance and a refusal to allow my independence and professionalism to be compromised in any way. At the same time, a feeling of sadness has engulfed me as I reflect on the state of public accountability ten years on.
Statement by the GGMC
On 30 January 2015, the Stabroek News disclosed that the Guyana Geology and Mines Commission (GGMC) entered into a loan agreement for $3 billion with the Central Housing and Planning Authority (CH&PA) for the latter to continue its housing development programme. There was no doubt that this was the result of the Administration’s decision not to have a budget until after elections as well as the need to accelerate housing development before the holding of such elections. Apart from the political advantage that the ruling party was seeking to gain from this arrangement, questions were raised about the legality of the agreement vis-à-vis the GGMC Act.
There was no prior public announcement of the agreement, and faced with a barrage of criticisms, mainly from the political Opposition, the two State agencies hastily issued a joint statement offering the following clarifications:
(a) The agreement was entered into based on a proposal from the CH&PA on 19 January 2015 for a loan to continue its development of the housing sector. The loan is to be repaid by 31 December 2015, and interest accrues at a rate of five per cent;
(b) The Board of GGMC felt that it was a good investment considering the rate of return vis-à-vis the 1.8 per cent offered by the commercial banks as well as considering that the loan has been guaranteed, presumably by the government;
(c) The agreement was in conformity with a recent Cabinet decision;
(d) There is no violation of the GGMC Act which permits the Commission to make loans out of its funds and resources in the performance of its functions;
(e) The Act provides the Commission with the latitude to carry out activities advantageous or convenient to the exercise of its functions;
(f) The agreement was not an isolated one as there were 32 other instances where monies totalling $8.388 billion were either transferred to or utilized in support of other agencies over the period 2012 – 2015, including $3 billion transferred to the Consolidated Fund; and
(g) For the period 2006-2011, transfers totalling $4.8 billion were made to the Consolidated Fund.
Analysis of the response
In order to assess whether the loan to the CH&PA is within the mandate of GGMC, we need to examine Sections 4 and 10 of the Act. Section 4 lists the following functions of GGMC:
(a) To promote interest in mining and mineral exploration, the development of the mining potential of Guyana, and the production, supply and sale of minerals and mineral products;
(b) To participate in and advise on the economic exploitation, beneficiation, utilization and marketing of the mineral resources of Guyana;
(c) To explore for mineral resources on land using all available techniques, including geology, geochemistry, geophysics and other remote sensing methods;
(d) To exploit the said mineral resources, when discovered, using all available mining techniques including surface and underground mining;
(e) To undertake research into optimum methods of exploring for, exploiting and utilizing minerals and mineral products of Guyana; and
(f) To carry on all activities, the carrying on of which appears to the Commission to be requisite, advantageous or convenient for or in connection with, the exercise of its functions.
In relation to GGMC’s authority to grant loans, Section 10 states that, subject to such conditions as it deems fit to impose in particular cases, the Commission, out of its funds and resources, may make loans in accordance with the provisions of the Act in the performance of its functions. All of the above functions relate exclusively to mining, and therefore any loan granted to an individual or an organization that is not involved in mining activities would violate Section 10, the key words being “in the performance of its functions”. GGMC cannot go off tangentially and makes loans unrelated to its activities or functions and claim compliance with the Act. Therefore, the $3 billion loan to the CH&PA to continue the Administration’s housing development programme sector is clearly inconsistent with GGMC’s mandate, notwithstanding the Cabinet’s approval of the arrangement. The Cabinet cannot make a decision that violates any law. This comment is also relevant to the US$100,000 that the Cabinet recently approved as a loan from GGMC to the Iwokrama Rainforest International Centre. The Commission attempted to justify its action under subsection 4(f) above. However, this subsection was clearly inserted to cater for any other situation in the context of mining not contemplated under subsections 4(1) to 4(e). It is difficult to see how a loan to the CH&PA falls within the category of an activity that is “requisite, advantageous and convenient for or in connection with, the exercise of its functions”.
As regards GGMC’s claim that the loan is a good investment, Section 8 states that the Commission may invest in securities, moneys standing to its credit, from time to time with the general or specific approval of the Minister. Needless to mention, the loan to the CH&PA is not in the nature of securities. CH&PA is a statutory body under the Ministry of Housing and Water which is a budget agency. Its financial resources are derived from internally generated revenue, and to the extent that there is a shortfall in revenue vis-à-vis operating expenditure, the difference is met from a subvention through the national budget. In 2014, CH&PA received a subvention of $150 million. In terms of infrastructure works, which is what the loan is about, these are specifically met from the capital expenditure budget approved by the National Assembly. The 2014 approved budget for infrastructure works relating to housing development was $4.638 billion, as follows:
$’000
Community infrastructure improvement project 484,000
Community roads improvement project 1,003,722
Infrastructure development and buildings 3,150,000
TOTAL 4,637,722
It must be emphasized that budget agencies, and by extension bodies falling under such agencies, receive their funding from the Central Government via the national budget. No such agency of the State ought to provide any form of financing, whether by way of a loan, a direct transfer or direct expenditure, to any other State agency, as this will not only undermine the budget process but also the authority of Parliament to approve of expenditure of that agency, not to mention the accounting chaos that such a practice will create. The related expenditure will not be captured in the public accounts and is therefore not subject to the scrutiny of the State Audit and reporting to the Legislature. Depending on the amounts involved, there will be an under-reporting of expenditure in the public accounts, and hence a significant gap in public accountability.
If agencies, such as the GGMC and the Guyana Forestry Commission, have surplus funds, it would be entirely appropriate for transfers to be made to the Consolidated Fund. With this pool of funds, the Legislature will be in a better position to approve of expenditure on government programmes and activities. In any event, if there is a deficiency of funding for such agencies, such deficiency is met by a charge to the Consolidated Fund. It follows that if these agencies have funds that are surplus to their requirements, after taking into account the need to maintain a reserve, such surplus should be transferred to the Consolidated Fund.
On a final note, the Accounting Officers of both the Ministry of Natural Resources and the Ministry of Housing were involved in the development of the loan agreement between the GGMC and the CH&PA. They ought to be aware of the implications of the agreement on public accountability. They could therefore be held personally liable, and so are directors of the boards of both agencies as well as their respective Ministers.
– To be continued –
