It is legally, morally and ethically wrong to deny payments to suppliers or contractors who, in good faith, have supplied goods and services or have satisfactorily executed works… In the final analysis, it is the taxpaying public that must come to the rescue of meeting the financial obligations of the Project which, with careful planning, and a highest possible degree of competitiveness, transparency and accountability, would have resulted in significant cost savings.
The D’Urban Park Project is again in the news. This time, the Minister of Finance is reported to have stated that contractors would have to accept what was being offered and suffer losses. During the consideration of the 2017 Estimates, we learnt that suppliers and contractors were owed approximately $798 million and that the Government would transfer the sum of $500 million to Homestretch Development Inc (HDI) to assist in liquidating its debts. HDI was responsible for the execution of the Project.
The Minister indicated that the Government could not afford more, and that any aggrieved contractor was free to sue the company. This is an extraordinary statement that sets in train a dangerous precedent since the Government, through whatever mechanisms it chooses, can enter an agreement and refuse to honour its obligations. It is legally, morally and ethically wrong to deny payments to suppliers or contractors who, in good faith, have supplied goods and services, or have satisfactorily executed works. The Government must also accept that it has failed badly in the effective planning and execution of the Project and in ensuring that reasonable estimates of the associated costs were reflected in the National Budget, notwithstanding that some of the costs were met from private contributions in cash and in kind.
We also learnt that for the fiscal year ended 31 December 2016, the sum of $479 million was allocated to the Project. The Minister of Public Infrastructure has indicated that amounts totalling $27.7 million were received as cash donations while contributions in kind were $33.956 million. According to the Minister, these latter two figures have been supported by an audit report. The Auditor General has also reported that an amount of $36.599 million was expended on the Project from the Lotteries Account. This was despite the fact that in July 2015 the Minister of Governance had announced that the ‘Lotto’ proceeds would be paid directly into the Consolidated Fund and that the Minister of Finance would issue the relevant order. The total cost to the Project would therefore amount to $1.375 billion which does not include an undetermined value of goods and services that several State institutions might have also provided.
It would be of interest to learn who the auditor is and how was he/she appointed, considering that HDI was incorporated under the Companies Act 1991. Any such appointment must be in conformity with the Act which provides for a company’s auditor to be a member of the Institute of Chartered Accountants of Guyana and holding a practising certificate from that body. In addition, the auditor is to be appointed by shareholders at the first annual meeting of shareholders and at each subsequent annual meeting at which the audited accounts are to be laid. HDI is also required to file annual returns, including its audited accounts, with the Registrar of Companies. However, little is known of the company except for the names of two directors and its registered address which is a private residence.
Nor do we know whether the company is an entity in which controlling interest vests with the State since Sections 344-347 impose certain requirements for Government companies. A Government company is one in which not less than 51% of the paid-up share capital is held by the Government and includes a company which is a subsidiary of a Government company. In addition, the Constitution vests with the Auditor General the responsibility for the external auditing of all Government companies unless he has entered into contracting out arrangements with Chartered Accountants in public practice. Even so, the Auditor General retains overall responsibility.
It is indeed inconceivable that a non-Governmental company could be incorporated to execute a project that is essentially a Government-funded one built on State property, and which becomes a State asset upon completion. The D’Urban Park Project cannot be classified as a Public-Private Partnership which is “a long-term performance-based approach to procuring public infrastructure where the private sector assumes a major share of risks in terms of financing and construction, and ensuring effective performance of the infrastructure from design and planning, to long-tern maintenance”.
Applicability of the Procurement Act
The Procurement Act 2003 provides for the regulation of the procurement of goods, services and execution of works to promote competition among suppliers and contractors as well as fairness and transparency in the procurement process. It applies to all procurement by procurement entities. A procurement entity is defined as “the procurement entity of any ministry, department, agency or other unit, or any subdivision thereof, of the Government, that engages in procurement”. The Project initially fell under the Ministry of Education but was later transferred to the Ministry of Public Infrastructure. Therefore, the Procurement Act is applicable to the Project.
Section 24 of the Act requires public corporations and other bodies in which the controlling interest vests in the State to, subject to the approval of the National Procurement and Tender Administration Board (NPTAB), conduct procurement according to their own rules or regulations, except that to the extent that such rules or regulations conflict with the Procurement Act or its regulations, the Act and the regulations shall prevail. If HDI was incorporated as a Government company, it is obliged to follow the Procurement Act or its own rules which must be consistent with the Act. It is, however, not known whether competitive bidding procedures were followed in relation to the provision of goods/services and the execution of works, as required by the Act. If HDI is not a Government company, then a major anomaly exists.
Accountability for in-kind contributions
In accordance with the Stores Regulations, all gifts received shall be subject to normal storekeeping and stores accounting procedures and shall be recorded in a Gifts Register. The Head of budget agency shall furnish the Finance Secretary and the Auditor General with information relating to all gifts received from time to time. In addition, all gifts received are to be valued and recorded in the country’s accounts as miscellaneous revenue. The Auditor General is on record as having bemoaned the fact that over the years there has been widespread non-compliance with these requirements.
The D’Urban Park Project commenced around September 2015 but HDI was incorporated in January 2016 to continue the execution of the Project. In April 2016, the Government transferred the Project to the Ministry of Public Infrastructure. Therefore, the Project fell under the auspices of Central Government for a greater portion of its life, and therefore the Stores Regulations should have been followed. In any event, the fact that the Ministry was handed over statements indicating what amounts were received by way of in-kind contributions, should have triggered compliance with the Stores Regulations in terms of valuation and recording of such contributions in the public accounts.
Accountability for cash contributions
The Fiscal Management and Accountability (FMA) Act defines Government receipts to include “transfers to and grants and gifts received by the State”. The Act also defines public moneys as all moneys belonging to the State received or collected by officials in their official capacity or by any person authorised to receive or collect such moneys and without limitation include, among others: (a) grants to the Government; (b) budget agency receipts; (c) moneys received and collected on behalf of the State; and (d) moneys that are paid to or received or collected by an official pursuant to any law, trust or other agreement which moneys are to be disbursed for a purpose set out in that law, trust or agreement.
By Section 21 of the Act, all budget agency receipts shall be credited to the Consolidated Fund. This is reinforced by Section 38 which states that all moneys raised or received by the Government shall be credited fully and promptly to the Consolidated Fund. In addition, in accordance with Section 47, an official shall not enter into any agreement or arrangement for the receipt or custody of public moneys, other than the Government or an official, unless so authorised by the Minister of Finance. Further, by Section 16, there shall be no expenditure of public moneys except in accordance with Article 217 of the Constitution. That article states that no moneys shall be withdrawn from the Consolidated Fund except: (a) to meet expenditure that is charged upon the Fund by the Constitution or by any Act of Parliament; (b) where the issue of those moneys has been authorised by an Appropriation Act; or (c) where the issue of those moneys has been authorised by Article 219.
Liability for misuse, misapplication and improper disposal of public moneys and property
By Sections 48-49, a Minister or official shall not in any manner misuse, misapply, or improperly dispose of public moneys. If a loss of public moneys should occur and, at the time of that loss, a Minister or official has caused or contributed to that loss through misconduct or through deliberate or serious disregard of reasonable standards of care, that Minister or official shall be personally liable to the Government for the amount of the loss. Where the misconduct or disregard of the person is not the sole cause of the loss, the person shall be liable to pay only so much of the loss as is just and equitable having regard to the person’s share of the responsibility for the loss. If a loss of public moneys should occur and, at the time of that loss, a Minister or official had nominal custody of such moneys, that Minister or official shall be personally liable to the Government for the amount of the loss. A person’s liability is not terminated or avoided upon that person ceasing to be a Minister or official.
Section 75 of the Act provides for similar sanctions if a loss of public property should occur.
Conclusion
There can be no denying that, as in the case of the Sussex Street Pharmacy Bond, the Government has made quite a number missteps in the execution of the D’Urban Park Project. This was perhaps due to a lack of proper advice in terms of adherence to the relevant constitutional, legislative and regulatory requirements relating to the use of funds garnered for the Project. This Column therefore calls for the commissioning of a forensic audit of the Project.
In the final analysis, it is the taxpaying public that must come to the rescue of meeting the financial obligations of the Project which, with careful planning, and the highest degree of competitiveness, transparency and accountability, would have resulted in significant cost savings. The past cannot be undone but whatever happened in relation to the Project should serve as an important lesson for the avoidance of a repeat of the mistakes made.
