Last Friday, two news items caught my eyes. The first was the Chief Justice’s ruling that the Minister of Finance violated the Constitution by authorising withdrawals from the Consolidated Fund without parliamentary approval, thereby causing excess expenditure totalling $4.554 billion to be incurred during the first half of 2014. This ruling is consistent with the conclusions we had drawn in our column of 28 July 2014 that:
The Appropriation Act of 2014 did not provide for such expenditure, and the National Assembly had specifically disallowed the proposed expenditure during the consideration of the 2014 Estimates;
The Minister’s claim that Article 218 (3) of the Constitution allowed him to authorize withdrawals where there has been no appropriation was erroneous. This article only covers a situation where it is found that expenditure was incurred for which there has been no appropriation;
Article 218(3) contemplates no role of the Minister in proactively authorizing withdrawals from the Consolidated Fund. It is an after the event scenario where during the execution of the budget a discovery of excess expenditure has been made for which there was no provision. The Assembly has to sanction the expenditure first in order to trigger the Minister’s action, not before; and
The Minister’s action breaches the fundamental principle of “no expenditure without appropriation” as contained in Article 217 of the Constitution and Section 16 of the FMA Act. The Minister would therefore be personally liable under Sections 48, 49 and 85 of the FMA Act, should the Assembly disapprove of all or part of the excess expenditure.
The second item relates to a statement from the Guyana Bar Association that Parliament should have been dissolved not later than 10 February 2015. This statement is based on the interpretation of Article 69(1) which provides for the next session of Parliament to be held within four months of its dissolution. In addition, Article 61 specifically provides for elections to be held within three months after the dissolution of Parliament. With the announcement of 11 May 2015 as the date for the elections, the next session of Parliament has to commence not later than 10 June 2015. Four months earlier will put the date of dissolution at 10 February 2015.
There is, however, another dimension. The 10 November 2014 prorogation of Parliament cannot exceed six months, as provided for by Article 69(1). This means that the next session of Parliament must be held not later than 10 May 2015. Elections therefore have to be held at least one month earlier, that is, not later than 10 April 2015 to allow for, among others, the counting of ballots, announcement of the results, resolution of disputes, and the allocation of seats. This also means that the dissolution of Parliament should have taken place not later than 10 January 2015!
Recapitulation of last week’s article
We discussed the loan of $3 billion by the Guyana Geology and Mines Commission (GGMC) to the Central Housing and Planning Authority (CH&PA), which we felt violates Section 10 of the GGMC Act. This section permits the Commission to grant loans only in the performance of its functions. The Act lists six functions of the GGMC, all of which relate exclusively to mining activities. Needless to mention, the CH&PA is not in the mining business.
We also felt that the agreement entered into was an attempt to seek a political advantage to continue the Administration’s housing development programme in the run-up to the election, especially in view of its decision not to present the 2015 budget to the National Assembly until after the 11 May elections. Notwithstanding this, Article 219(2) allows the Minister of Finance to authorize withdrawals from the Consolidated Fund to meet the cost of essential services up to four months, pending the passing of the Appropriation Act. However, no new capital expenditure can be incurred, which essentially means there will be no funds for the CH&PA to commence any new works during the period January to April 2015. There is also no provision for withdrawals from the Consolidated Fund from 1 May 2015 until the convening of the Assembly which is not expected to take place until 10 June 2015.
If Parliament is dissolved before any or insufficient provision is made for carrying on the business of the Government, Article 219(3) provides for the Minister to authorize withdrawals from the Consolidated Fund until the expiry of three months commencing with the date on which the Assembly first meets after that dissolution. Although he has set a date for elections, the President is yet to dissolve Parliament. That apart, assuming that next session of Parliament takes place on 10 June 2015, funds will be available from this date to 10 September 2015 pending the approval of the 2015 budget. There will therefore be a funding gap from 1 May to 10 June 2015, which can be bridged via recourse to the Contingencies Fund. However, there are limitations as to amounts that can be drawn from this Fund, bearing in mind an undisclosed amount might have already been withdrawn, especially during the latter half of 2014. This is yet to obtain Parliamentary approval for replenishing the Fund.
GGMC’s expenditure on behalf of, and transfers to, other agencies
In an attempt to justify the loan to the CH&PA, GGMC disclosed that there were 32 other instances in the last three years where monies totalling $8.388 billion were either transferred to or utilized in support of other agencies. This was the period during which the Legislature was controlled by the combined Opposition, and in order to avoid parliamentary scrutiny for any proposed expenditure, it is evident that funds from the GGMC were used. GGMC therefore assumed the role of another parallel Treasury, and is therefore complicit in the Administration’s deliberate attempt to undermine the role of the Legislature to decide on budgetary allocations. It is relevant to note also that the only payments made prior to 2011 were to the Consolidated Fund where amounts totalling to $4.8 billion were transferred during the period 2006 -2011.
The circumvention of parliamentary approval to incur expenditure on government programmes and activities has the effect of not having the related expenditure captured in the public accounts. This will result in not only a significant under-reporting of expenditure but also the absence of an audit being performed on such expenditure. There is therefore an issue of the proper accountability of the funds transferred to other State agencies. From the schedule provided, as summarized below, it is also unclear whether certain expenditures were incurred by the GGMC per se and whether they were reflected in the accounts of GGMC.
Description Amount
$’000
Transfers to the Consolidated Fund 3,000,000
Transfer to the National Protected Areas Trust Fund 2,000,000
Transfers to Ministry of Public Works to undertaking of
road and other works 1,352,274
Rehabilitation works on roads and other structures 1,315,738
Funding of the restructuring of the EPA 480,000
Financial support to Iwokrama Rainforest 90,000
Procurement of the Continuous Operating Reference Station
for the implementation of eight stations to facilitate real time
GPS surveys for all agencies and Ministries 80,040
Transfer to the Office of the Prime Minister to improve electricity
supply at Mahdia, Port Kaituma, Mathews Ridge and Moruca 70,000
TOTAL 8,388,052
Transfers to the Consolidated Fund are entirely appropriate since the GGMC has recourse to the Fund in the event of a deficiency, as provided for by Sections 6(3) and 20(2). It follows that any accumulated surplus after retaining a reasonable amount as reserves should be transferred to the Consolidated Fund.
As regards transfers totalling $1.352 billion to the Ministry of Public Works, surely the Permanent Secretary ought to have been aware that only funds approved by the Legislature should be used to incur expenditure, as provided for under Article 217(3) of the Constitution. That sub-article states that “No moneys shall be withdrawn from any public fund other than the Consolidated Fund unless the issue of those moneys has been authorized by or under an Act of Parliament”. Similar observations can be made in respect of the Permanent Secretaries of the Office of the President (under which the Environment Protection Agency falls); and Office of the Prime Minister in respect of transfers made to improve electricity supply in the hinterland areas.
Conclusion
GGMC has acted improperly and in violation of Article 217(3) of the Constitution by transferring funds to other State agencies to meet expenditure, or to incur expenditure on behalf of other State agencies. This action undermines the authority of Parliament to approve of expenditure on government programmes and activities, especially during a period when the Administration’s budgets were being carefully scrutinized by the Opposition-controlled Legislature. GGMC’s action also calls into question the extent to which its board is allowed to function without interference from the political directorate. Or, were they handpicked loyalists following slavishly the orders of their masters?
GGMC needs to revert to what it did in the pre-2011 period. All funds surplus to its requirements, after retaining a reasonable amount as reserves, should be transferred to the Consolidated Fund to enable the Legislature to decide on budgetary allocations for government departments and agencies. Accounting officers also need to be careful in ensuring that Article 217(3) of the Constitution is upheld. The failure to do so can result in their being held personally liable.
