The awarding by the APNU+AFC government of major contracts close to year-end to exhaust budgetary allocations is a serious breach of financial laws, says former Auditor General Anand Goolsarran and he has warned that officials involved could be held liable.
In his Development Watch column in Monday’s Stabroek News, Goolsarran recalled that on 30 December 2019, one day before the close of the fiscal year, a Cabinet sub-committee 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 on 23 December 2019, the sub-committee had noted the proposed award of 54 contracts.
He noted that 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,” Goolsarran highlighted.
He said while 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, “the law does not permit the retention of such balances to be used to honour payments on the contracts awarded close to year-end.”
The former Auditor General highlighted that 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,” he wrote.
Goolsarran noted that checks of the 2019 Estimates of Revenue and Expenditure to determine whether the infrastructure works and the procurement of capital items related to the contracts awarded close to last year-end were reflected in the 2019 budget were done. He said that the checks indicate 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 chosen, no evidence was found that several projects were included.
Among these was the construction of the Yarrowkabra Secondary School with the Ministry of Education signing the $827 million contract with BK International on January 7. Bids for the project were opened on October 29 last year. Other projects that were similarly not included in the 2019 Estimates, according to Goolsarran, were the 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; the procurement of two body x-ray inspection system/scanners for the Guyana Revenue Authority; the procurement of one caterpillar hydraulic track-type bulldozer for the National Drainage and Irrigation Authority; the procurement of an 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 the construction of the Abram Zuil Secondary School. That contract was reportedly awarded on 31 December 2019 to S&K Construction in the sum of $573 million.
Goolsarran noted that the same day that Cabinet noted the award of 57 contracts, President David Granger 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,” he wrote.
Essential services
The former Auditor General pointed out that given the absence of a budget for 2020, the minister is authorised 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, Goolsarran explained.
He noted that while the Constitution does not provide sanctions for any breaches in the financial provisions, Sections 48 and 49 of the Fiscal Management and Accountability Act provides that 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,” Goolsarran highlighted.
“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,” he observed.
The former Auditor General said that 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,” he observed, while adding that the government has itself to blame for this state of affairs.
