(Part II)
Last Friday, the APNU+AFC coalition rather belatedly launched its manifesto for the forthcoming general and regional elections. According to the presidential candidate, it is a contract or agreement with the people of Guyana for the delivery of government services for the next five years and beyond, and involves pursuing developmental projects in nine programmatic areas including energy, security and technology. This time, the coalition has been more cautious in its promise to the electorate, considering its highly ambitious plan it had presented in the run-up to the 2015 elections, as outlined in our article of 14 January 2019. Needless to mention, most of the elements of that plan remained largely unachieved.
Key elements of the 2020 manifesto are:
► Continuing the work of the Constitutional Reform Consultative Commission, including community consultations;
► Implementing the Natural Resource Fund Act and the recommendations of the 2017 Guyana EITI Report, amending the Petroleum (Exploration and Production) Act and the Public Procurement Act, reviewing the Integrity Commission Act and Access to Information Act, and strengthening SOCU and SARA.
► Implementing measures within the GRA to monitor the oil and gas sector, and establishing a natural gas terminal to reduce energy costs;
► Ensuring 100 percent renewable energy by 2030;
► Establishing a first class free education system to ensure quality education is provided from nursery to university levels for all citizens, including developing local ITC skills;
► Promoting women and gender equality;
► Introducing conditional cash transfers based on a feasibility or pilot study in areas such as nutritional support, housing, public transport and a single-parent support programme, day-care and elder-care services, adult remedial classes and training, stipends for students of technical institutes, nursing schools, School of Home Economics and the Guyana School of Agriculture;
► Allocating 20,000 house lots to families in need and in order to address the housing deficit;
► Enhancing hinterland development and preserving indigenous cultural identity; and
► Continue to implement public service reform based on the recommendations of the Harold Lutchman Commission of Inquiry;
In last week’s article, we highlighted several important constitutional and legislative provisions to safeguard the use of public funds and to facilitate monitoring and control of expenditure. The key provisions are as follows:
Withdrawal from the Consolidated Fund to meet expenditure without parliamentary approval, is prohibited;
All budgetary allocations approved by Parliament lapse and cease to have effect at the end of the fiscal year, and all unspent balances are to be returned to the Consolidated Fund;
Award of contracts without sufficient unencumbered balance available to facilitate payment, is prohibited;
Pending the approval of the National Budget, the Minister of Finance is authorized to make withdrawals from the Consolidated Fund to meet the cost of essential services up to four months from the beginning of the fiscal year. The monthly amounts involved for each budget agency are not to exceed one-twelfth of the amounts expended in the preceding year, except for obligations under multi-year contracts. However, the Minister is prohibited from authorizing withdrawal in relation to a subject matter or for a purpose for which there is no appropriation in the preceding year;
Where Parliament is dissolved and there is no provision or insufficient provision for carrying on the business of the Government, the Minister can authorize withdrawals from the Consolidated Fund to meet the cost of essential services up to three months commencing with the date on which the National Assembly meets after the dissolution; and
Where the Minister is satisfied that an urgent, unavoidable and unforeseen need for expenditure has arisen for which no moneys have been appropriated or for which the sum appropriated is insufficient, moneys cannot be reallocated, or the related expenditure cannot be deferred without injury to the public interest, he may approve a Contingencies Fund advance to meet such expenditure. The total amount to be advanced is not to exceed two percent of the estimated annual expenditure of the preceding fiscal year or such greater sum as the National Assembly may approve.
To the above, we might add that an official is prohibited from entering into a multi-year contract or arrangement for the supply of goods or the provision of services to the Government without the prior written authorisation of the Minister. Where such a contract is entered into, payment cannot be made without the existence of an appropriation in the fiscal year in which the payment falls due. This is provided for under Section 55 of the FMA Act.
Implications of the award of contracts close to year-end
As stated in last week’s article, on 30 December 2019, one day before the close of the fiscal year, a Cabinet sub-committee reportedly noted the award of 57 contracts, the majority of which relate to new infrastructure works and the procurement of items of a capital nature. This followed an earlier report that that on 23 December 2019 the sub-committee had noted the proposed award of 54 contracts.
Amid concerns that such a large number of contracts were awarded so close to year-end, a senior Government official stated that the funds to be used were provided for under the 2019 Estimates. However, given that the execution/completion of most, if not, all of these contracts will spill over to 2020, two key issues arise: (i) whether the awards have been deliberately made to exhaust budgetary allocations; (ii) whether there has been a circumvention of the requirement to refund all unspent balances to the Consolidated Fund.
It is understandable that there might have been a significant amount of unspent balances on the Government’s capital expenditure programme for 2019 as a result of restrictions in spending due to the 21 December 2018 no confidence vote. However, the law does not permit the retention of such balances to be used to honour payments on the contracts awarded close to year-end. When this happens, government books of account will have to be kept open well into the new fiscal year and payments backdated to 31 December 2019. These are serious violations which can lead to all sorts of irregularities – basis of the award of contracts not in keeping with the Public Procurement Act and its Regulations; goods and services not received, or short-supplied or of unsatisfactory quality; overpayments to suppliers/contractors; and defective works performed, among others.
No provision in the 2019 budget
Based on media reports, we had provided, under each Ministry/Department, a list of the main contracts awarded close to the 2019 year-end. In order to determine whether the related infrastructure works and the procurement of capital items were in fact reflected in the 2019 budget, we examined Volume III of the 2019 Estimates of Revenue and Expenditure. This document provides specific details, project by project, relating to the Government’s capital programme. Our examination indicates that while the majority of the works and procurement for which the contracts were awarded, were reflected in the 2019 budget, based on the sample we have chosen, we found no evidence that the following were included:
Ministry of Education: Construction Yarrowkabra Secondary School. The contract was awarded on 4 January 2020 to BK International in the sum of $827 million;
Ministry of the Presidency: Procurement of two new aluminum trailers and other accessories for the Guyana Defence Force, and the construction of an arms and ammunition depot at Base Camp Seweyo;
Ministry of Finance: Procurement of two body x-ray inspection system/scanner for the Guyana Revenue Authority;
Ministry of Agriculture: Procurement of one caterpillar hydraulic track-type bulldozer for the National Drainage and Irrigation Authority;
Ministry of Public Health: Procurement of electrocardiograph, anaesthesia machine, operation table, ultrasound machine, vital sign monitoring and sterilizer laboratory reagents for the Medical Laboratory at the Georgetown Public Hospital Corporation; and
Ministry of Communities: Construction of Abram Zuil Secondary School. The contract was reportedly awarded on 31 December 2019 to S&K Construction in the sum of $573 million.
Restriction of expenditure during dissolution of Parliament
The same day that the Cabinet noted the award of 57 contracts, the President by proclamation dissolved Parliament to facilitate the conduct of general and regional elections on 2 March 2020. However, during the intervening period, the Government can only access funds for essential services for up to three months. In particular, no new capital expenditure works are to be untaken and no new contracts entered into that have the effect of binding the State. This includes entering into loan agreements with international funding agencies which has implications for the public debt. It is unlikely that the Government would have used this provision because the period involved (January-March 2020) overlaps with that when no approved budget for 2020 is in place.
Restriction of expenditure in the absence of a budget
Given the absence of a budget for 2020, the Minister is authorized to access funds for up to four months to meet the cost of essential services. If by the end of April 2020, the National Assembly does not convene to approve the 2020 budget, there can be no withdrawals from the Consolidated fund to meet expenditure. In the circumstances, the Minister will have recourse to the Contingencies Fund up to the limit indicated above.
Sanctions for breaches in the FMA Act
The Constitution does not provide sanctions for any breaches in the financial provisions. However, by Sections 48 and 49 of the FMA Act, 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.
Conclusion
It is unfortunate that the Government has proceeded to enter into contracts for capital expenditure works and procurement of capital items in a period when the law only permits the incurrence of expenditure for meeting the cost of essential services. That apart, the incurrence of expenditure to exhaust budget allocation and the failure to refund all unspent balances at the end of 2019 are serious constitutional and legislative violations for which those responsible can be held liable.
The Government has itself to blame for this state of affairs. Regardless of how it felt about the events of the evening of 21 December 2018, it should have accepted in good faith the validity of no confidence vote. In this way, elections could have been held since March 2019, and there would not have been any need to restrict expenditure during the last nine months of 2019 and until such time that until a new Parliament is in place following the March 2020 elections. In the final analysis, it is sad to note that party interest takes precedence over the national interest. This is antithetical to democratic governance and the rule of law.