According to news reports, the Minister of Governance, Raphael Trotman, announced that the proceeds of the “Lotto Fund” will be paid directly into the Consolidated Fund and that the Minister of Finance would issue the relevant order soon. This is welcome news and a victory for public accountability after 20 years of struggle to get the Government to recognize that the proceeds are public revenues which have to be paid over to the Treasury and that no expenditure can be incurred without Parliamentary approval.
Historical background
In 1995, the Government of Guyana and the Canadian Bank Note (CBN) entered into an agreement for the latter to conduct a national lottery. CBN agreed to pay a licensee fee to the Government of 24 per cent of the gross revenue while the Government undertook not to permit another lottery of similar scope during the life of the agreement.
The fact that the agreement refers to a licensee fee clearly suggests that the proceeds are in the nature of public revenues, as defined by Article 216 of the Constitution. That article states that “All revenues or other moneys raised or received by Guyana (not being revenues or other moneys that are payable, by or under an Act of 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.
For the period 1996 to 2012, CBN paid over to the Government amounts totalling $4.022 billion. These were retained in a separate bank account under the control of the then Office of the President. In addition, during the same period, payments totalling $3.581 billion were made to meet various forms of expenditure without Parliamentary approval. Article 217 (3) of the Constitution states that “No moneys shall be withdrawn from any public fund other than Consolidated Fund unless the issue of those moneys has been authorised by or under an Act of Parliament”. In addition, in accordance with Article 217 (4), Parliament may prescribe the manner in which withdrawals may be made from the Consolidated Fund or any other public fund. It is evident that the use of the Lotto funds to meet expenditure without Parliamentary approval is a breach of Article 217 of the Constitution. In addition, the related expenditure would not be reflected in the public accounts, resulting in a significant under-reporting of expenditure.
Auditor General’s comments
over the years
The earliest comments of the Auditor General can be traced back to his 1998 report in which he stated that amounts totalling $754.25M were collected as proceeds from the Guyana Lotteries but were not paid in to the Consolidated Fund. He repeated his concern in his 1999 report and further stated that the incurrence of expenditure without Parliamentary approval via appropriations was a breach of the Law. In his 2000 report, the Auditor General referred to the discussion he had with the Government in which it was agreed that at the end of each year transfers would be made to the Consolidated Fund to the extent of funds utilised from the Lotto Fund. A corresponding supplementary estimate would then be passed in the National Assembly to ensure Parliamen-tary approval of the expenditure and the recording in the Public Accounts. In December 2001, an amount of $211.717M was transferred to the Consolidated Fund. However, no further transfers were made.
As at the end of 2012, amounts totalling $4.347 billion were received from CBN of which sums totaling $3.581 billion were expended. Although the Auditor General’s 2013 report has been tabled in the National Assembly, it is not available on the Audit Office’s website. However, it we were to extrapolate to 30 June 2015, amounts totalling at least $5 billion covering proceeds from the Lotto Funds were not paid over to the Consolidated Fund, of which sums totaling in excess of $4 billion were expended without Parliamentary approval.
In its report for 2000-2001, the comments of the Public Accounts Committee (PAC) on the matter reflected the sentiments of the Auditor General but in stronger terms. The PAC concluded that “This practice, apart from being a breach of Section 17 of the FAA Act as well as a usurpation of Parliamentary authority to incur expenditure, can and probably does lead to irregularities.”
The Auditor General’s reports for 2004 and 2005, however, made no mention of the Lotto Funds in terms of their retention and use without Parliamentary approval. Instead, it referred to the Cabinet decision of 1996 establishing the Guyana Lotteries Commission and requiring the Lotto Funds to be subject to separate financial reporting and audit. Needless to mention, a Cabinet decision cannot override the requirements of the Law or the Constitution.
Attorney General’s opinion
On 19 May 2010, the Attorney General issued the following concluding opinion to the Auditor General:
The Lotto Funds, as moneys credited to the Development Fund of Guyana are popularly described, have been exempted from deposit into the Consolidated Fund as is made crystal clear by ART 216. These funds are lawfully deposited in an Extra budgetary Fund called the Development Fund of Guyana established by the Government Lotteries Act CAP 80:07 since 1963. This fund is, however, subject to an audit by the Auditor General under the provisions of the Fiscal Management and Accountability Act 2003.
Since then, the Auditor General ceased raising any concern about the retention and use of the Lotto proceeds.
It is not true that the parenthesis in Article 216 exempts the Lotto proceeds for being deposited into the Consolidated Fund. Even if that were so, moneys can only “be retained by the authority that received them for the purpose of defraying the expenses of that Authority”. The payments made from the Lotto Fund are, however, totally unrelated to the operations of the Development Fund. Instead, they are in relation to public expenditure which should be met out of Appropriations. In addition, as regards the former Attorney General’s contention that the Development Fund is an extra-budgetary fund in the context of the Fiscal Management and Accountability Act 2003, Section 73 of the Act provides for the consolidated financial statements of the Government, i.e. the public accounts, to include the financial reports required by enabling legislation establishing those funds. Since the passing of the Act, the Government has not included any extra-budgetary funds in the public accounts, and the Auditor General has consistently reported that there are no extra-budgetary funds, his latest report being that of 2013.
The Government Lotteries Act was promulgated in 1963 to provide for the promotion and conduct of Government lotteries. In the 1960s, the Government was running a National Radio Bingo and therefore the Act would have been applicable to that arrangement. The proceeds from the sale of tickets could not have been deposited into the Consolidated Fund simply because expenses, such as prize money and administrative costs, had to be met. It was only the surplus that was required to be paid into the Development Fund of Guyana established by the Act, and the Act did not specify what the Fund was to be used for. Should a deficit be incurred, however, that deficit shall be made good from the Consolidated Fund. In any event, the proceeds from the Radio Bingo were barely enough to cover prize money and administrative costs.
The current arrangement, which came into force in 1995, is not a Government lottery but one conducted by CBN in exchange for a licensee fee. This is not the same as envisaged by the Lotteries Act of 1963. In particular, there are no expenses to be met, hence the requirement for the fee to be paid over to the Consolidated Fund. In the National Estimates, there is a budget line item under revenue for “Fees and Fines”.
The Lotteries Act defines Government lottery to mean a lottery organized and conducted by the Government Lotteries Control Committee. This committee was responsible for, among others, (a) fixing the number and price for the sale of tickets; (b) appointing agents to sell tickets; (c) fixing the number and value of the prizes to be apportioned; and (d) determining the time, place and the manner in which drawings are to take place for allotting prizes. The Cabinet decision of 1996 establishing the Guyana Lotteries Commission is, however, a different arrangement and involves none of the above. Rather, the Commission is required to manage the proceeds of the Lotto Funds and to recommend the projects to be undertaken using the proceeds.
The fact that the Auditor General audits the Lotto Funds as a separate exercise is hardly the issue. Rather, it is about adherence to legislative and constitutional requirements relating to public finance, without accounting chaos is likely to arise, not to mention the possibility of questionable expenditures and irregularities being incurred, as suggested by the PAC.
In the examination of the audited public accounts for 2010, the Chairman of the PAC told the Auditor General that he was not bound by the former Attorney General’s advice, since the Attorney General is government’s legal advisor and therefore had no place offering advice to an autonomous body such as the Auditor General’s Office. The Chairman further stated that the Auditor General should seek independent advice since the Attorney General’s advice constitutes a conflict of interest. It is not clear whether the Auditor General has sought such independent advice.
