The signatories to the 2016 Paris Accord on climate change agreed to limit ‘the increase in the global average temperature to well below 2.0°C above pre-industrial levels’ and to pursue ‘efforts to limit the temperature increase to 1.5°C above pre-industrial levels’. However, these targets are set to be overrun unless there is global mobilization on an unprecedented scale. This is according to the United Nations Environment Programme (UNEP), which has warned that the world is currently on track for temperature rises which could peak to a “catastrophic” 3.1°C by the end of this century. Reacting to UNEP report, the UN Secretary-General asserted that the world is ‘teetering on a planetary tightrope. Either leaders bridge the emissions gap, or we plunge headlong into climate disaster – with the poorest and most vulnerable suffering the most’.
In last week’s article, we began a discussion on the certification of the 2023 public accounts. We noted that the Auditor General gave a “clean bill of health” on nine out of the eleven sets of financial statements constituting the public accounts, while for the remaining two – Current Assets and Liabilities of the Government; and the Financial Report of the Deposit Fund – he issued a qualified opinion. The latter two sets of statements have already been dealt with in that article. In today’s article, we continue our discussion on the certification of the 2023 public accounts by examining the remaining sets of statements and the Auditor General’s opinion thereon.
End of Year Budget Outcome and Reconciliation Report
The Ministry of Finance is required to prepare an End of Year Budget Outcome and Reconciliation Report showing annual estimates and out-turn for revenues and expenditures (both capital and current), and a detailed explanation of any significant differences between annual estimates and out-turn, including: (i) the impact of movements in the underlying economic assumptions and parameters used in the preparation of the annual budget proposal; (ii) changes to revenue and expenditure policies during the fiscal year; and (iii) slippages, if any, in the delivery of the budget measures. The level of statistical detail presented in the Report must be consistent with, and not less than, the level of statistical detail contained in the Appropriation Act.
Revenue: Current revenue exceeded estimated amounts by 3.4 percent. Budgeted revenue was $578.5 billion while actual collections amounted to $598.4 billion. The increase in revenue collections was mainly due to an increase in internally generated revenue from all categories. This is not surprising, considering the significant increase in economic activities as a spin-off of the activities in oil and gas industry. On the other hand, capital revenue derived mainly from the proceeds of overseas borrowings as well as grants, fell short by 42.4 percent of the budgeted amount of $111.3 billion. Actual collections amounted to $64.1 billion. The Ministry in a note to the financial statement explained that this state of affairs was due mainly to ‘delays in implementation, in approval of project financing and in fulfilling precedent conditions to disbursement’.
Expenditure: According to the Report, of the amount of $394.1 billion budgeted for current expenditure, actual expenditure was $406.8 billion, resulting in an excess expenditure of $12.7 billion. However, the Supplementary Estimates approved by the National Assembly were not included, which would have resulted in a revised estimate of $416.4 billion. Taking this into account, an under-utilisation of $9.6 billion was recorded. It is unclear why the approved additional funding was not included in the Report and why the Auditor General did not comment on this apparent omission.
In terms of capital expenditure, sums totalling $387.8 billion were budgeted to be expended, comprising $103.9 billion and $283.9 billion from overseas loans and grants, and funds from the Treasury, respectively. The actual expenditure recorded was $421.8 billion, comprising loans and grants amounting to $50.1 billion and local financing of $371.9 billion. As indicated above, this significant shortfall of 51.8 percent in expenditure on foreign-funded projects was mainly due to, among others, delays in concluding the related agreements. As regards local financing, the actual expenditure represents a 31.0 percent increase compared with the amount budgeted. However, a note to the financial statement indicates that there were Supplementary Estimates as well as advances from the Contingency Fund amounting to $96.1 billion.
As of September 2024, there were 3,134 cheques valued at $2.463 billion still on hand, suggesting that they might have been drawn close to year-end, or early in the new year and backdated to 31 December 2023, in order to exhaust budgetary allocations. This is a breach of the Financial Management and Accountability (FMA) Act that requires all unspent balances at the end of the year to be refunded to the Consolidated Fund. Apart from this breach, expenditure has been overstated by the above amount since no value was received. A total of 81 of these cheques valued at $77.8 million relate to the years 2021 and 2022 and were in relation to the Ministry of Health and the Guyana Defence Force. Additionally, as of September 2024, there were 1,153 advance payments for the procurement of goods and services and the execution of works (cheque orders) valued at $3.237 billion remaining outstanding. A total of 530 advance payments valued at $1.627 billion were in relation to 2023, while the remaining 623 valued at $1.610 billion were for prior periods.
Despite the above discrepancies, the Auditor General gave a “clean bill of health” on the End of Year Budget Outcome and Reconciliation Report.
Receipts and Payments of the Consolidated Fund
Total receipts and payments of the Consolidated Fund amounted to $1.038 trillion and $1.059 trillion, respectively. The receipts comprised internally generate revenue – $390.0 billion; transfers from the Natural Resource Fund – $208.4 billion; proceeds from foreign loans and grants – $64.1 billion, and the issue of Treasury Bills – $375.9 billion. On the other hand, payments from the Consolidated Fund comprised current expenditure – $406.8 billion; capital expenditure – $421.8 billion; and redemption of Treasury Bills – $229.9 billion.
The opening balance of Consolidated Fund reflected an overdraft of $90.695 billion. Taking into account receipts and payments for the year 2023, the overdraft should increase by $21.0 billion to $111.695 billion. The actual overdraft on the Consolidated Fund at the end of 2023 was $112.461 billion, a difference of $766 million. A point to note is that the balance on bank accounts of Ministries and Departments at the end of 2023 was $65.764 billion. This amount should have been paid over to the Consolidated Fund in keeping with the requirements of the FMA Act.
Expenditure of the Consolidated Fund compared with the Estimates of Expenditure
The revised estimates for current expenditure (i.e., after taking into account Supplementary Estimates of $22.346 billion approved by the Assembly) amounted to $416.4 billion, while actual expenditure was $406.8 billion, giving an under-utilisation of the budget of $9.6 billion. In terms of capital expenditure, the revised estimate was $483.8 billion, while actual expenditure was $421.8 billion, resulting in an under-utilisation of budget of $62.1 billion. This gives an overall under-utilisation of $71.7 billion.
Statutory expenditures
These are expenditures that are a direct charge on the Consolidated Fund and are not voted for by the Assembly. Such expenditures include servicing and repayment of the Public Debt, emoluments of holders of constitutional offices, and pensions and gratuities of public officers. The total amount expended for 2023 was $54.248 billion, of which $36.832 billion relates to the servicing and repayment of the public debt.
Receipts and Payments of the Contingencies Fund
The Constitution provides for the establishment of a Contingencies Fund and for authorising the Minister responsible for finance to make advances from the Fund if he is satisfied that there is an urgent need for expenditure for which no other provision exists. This is elaborated by the FMA Act which provides for the following criteria to be met before an advance is issued: (i) an urgent, unavoidable and unforeseen need for the expenditure has arisen for which no funds have been appropriated or for which the sum appropriated is insufficient; (ii) no funds can be reallocated as provided for under the Act; or (iii) the expenditure cannot be deferred without injury to the public interest…”. The Minister is required to include all such advances up to the end of the tenth month of the fiscal year in an appropriation amendment Bill for the purpose of authorizing the expenditure and replenish the Fund.
For 2023, 23 advances amounting to $6.643 billion were made from the Contingencies Fund. These were all cleared by way of two Supplementary Estimates before the end of the year. The Auditor General did not, however, indicate whether the above criteria were met in respect of these advances.
– To be continued –
