If you take the character of any man, it really is but the aggregate of tendencies, the sum total of the bent of his mind; you will find that misery and happiness are equal factors in the formation of that character. Good and evil have an equal share in moulding character, and in some instances misery is a greater teacher than happiness. In studying the great characters the world has produced, I dare say, in the vast majority of cases, it would be found that it was misery that taught more than happiness, it was poverty that taught more than wealth, it was blows that brought out their inner fire more than praise.
Great occasions rouse even the lowest of human beings to some kind of greatness, but he alone is the really great man whose character is great always, the same wherever he be.
Swami Vivekananda
There has been quite a good deal of debate in the media about the President’s 5.30 a.m. meeting last Tuesday with Ministers of the Government, Permanent Secretaries, other senior public officials, and contractors. The meeting was held at his residence at the State House to discuss the delays in the execution of contracts for infrastructure development works. Notable absence from the meeting were representatives of the National Procurement and Tender Administration Board (NPTAB) and the Public Procurement Commission (PPC). The NPTAB approves all contracts in excess of $15 million, with the Cabinet offering no objections once all the procurement procedures have been followed, while the PPC plays a monitoring and investigative role in relation to public procurement matters. On several occasions, we had cause to bemoan the fact that the Head of the Project Cycle Management Division of the Ministry of Finance responsible for the monitoring of the execution of public infrastructure works, is also the Chair of the NPTAB. Both positions, it must be noted, are full-time positions. This practice has been in place since 2020 and was meant to be a temporary arrangement.
It is unfortunate that the President has chosen to berate publicly these officials, notwithstanding that several of them might have been guilty of a lack of effective monitoring of the works to ensure that they are completed within the specified timeframes and represent good value for money. Even the Minister of Finance – a former Guyana scholar and a Chartered Accountant with a PhD in accounting and finance – was not spared of the President’s tongue lashing.
In our view, the issue raised by the President should have been dealt with internally at the level of the Cabinet where Ministers, their Permanent Secretaries and other concerned officials are asked to explain why contracts are not executed as planned. Based on these explanations, appropriate disciplinary action is taken against those found wanting in the performance of their duties, including Ministers. The President has defended his action, contending that it represented openness and transparency. However, calling out the names of these officials, (including Ministers and Permanent Secretaries), requesting them to stand up, and berating them publicly, can hardly be considered as representing openness and transparency. Such action is at variance with the principles and practices of transformational leadership as well as servant leadership. It can only serve to demotivate these officials at a time when they need to be treated in a manner that enables them to rise to the highest level of potential in performing their duties. Transformational leadership is essentially about people and relationships that enables even ordinary employees to rise to the occasion and perform extraordinary feats!
If contractors are in default, the Procurement Act and related Regulations, the Fiscal Management and Accountability (FMA) Act and the obligations set out in their contracts should be enforced without compromise. The Procurement Suspension and Debarment Regulations 2019 provides for the PPC to debar or suspend contractors for the failure to honour the terms and conditions of their procurement contracts, based on requests from procuring entities or other persons. Additionally, by Section 4 of the Procurement (Amendment) Act 2019, all procuring entities are required to submit their procurement plans for the fiscal year to the PPC within three weeks of the approval of the Estimates. The form and content of the plans are to be determined by the Minister. It is, however, not clear to what extent there has been compliance with this requirement, and whether the PPC is monitoring submissions from the procuring entities.
All major procurement contracts have important clauses, such as, guarantee for the repayment of mobilization advances in the event contractors fail to commence works within the specified timeframes; penalties for unjustified time overruns; liquidated damages for specified breaches in the procurement contract; defects liability; and progress payments based on measured works as certified by the Engineer, less the deduction of percentage of the mobilization advance to ensure that the advance is fully recovered before the final certification of the works.
By Section 85 of the FMA Act, an official who – (a) falsifies any account, statement, receipt or other record issued or kept for the purposes of the Act, the Regulations, the Finance Circulars or any other instrument made under the Act; (b) conspires or colludes with any other person to defraud the State or make opportunity for any person to defraud the State; or (c) knowingly permits any other person to contravene any provision of the Act, is guilty of an indictable offence and liable on conviction to a fine of two million dollars and to imprisonment for three years
.Was the 2024 Budget an act of over-ambition?
In our article of 16 September 2024, we stated that the 2024 Estimates of Revenue and Expenditure showed as amount of $1.146 trillion appropriated to meet the cost of executing government programmes and activities, to which must be added, two Supplementary Estimates totalling $40.8 billion. This represents a two-fold increase, compared with the 2022 Estimates and an almost 50 percent increase over the 2023 Estimates.
Section 67 of the FMA Act requires the Minister to present to the National Assembly within 60 days after the end of the first half-year of each fiscal year a report on the year-to-date execution of the annual budget and the prospects for the remainder of that fiscal year. The Report is to include the following:
An update on the current macroeconomic and fiscal situation, a revised economic outlook
for the remainder of the fiscal year, and a statement of the projected impact that these trends are likely to have on the annual budget for the current fiscal year.
A comparison report on the out-turned current and capital expenditures and revenues with the estimates originally approved by the National Assembly with explanations of any significant variances.
A list of major fiscal risks for the remainder of the fiscal year, together with likely policy responses that the Government proposes to take to meet the expected circumstances.
The 2024 Mid-Year Report was issued on 28 August 2024 but was not presented to the Assembly until 10 October 2024. This was too late for the Legislature to consider the report and take appropriate action to bring actual performance in line with planned performance, or if this was not possible, to make appropriate adjustments to planned performance to more realistic levels. The Act is clear that the report must be presented to the Assembly not later than 30 August. While it is true that the Assembly goes into recess from 10 August to 9 October, the report should have been presented to the Legislature before it breaks for the recess.
Our review of the report indicates that amounts totalling $375.6 billion were expended in the first half of the year, representing an overall 32.8 percent achievement on the budget. Current expenditure was 42.8 percent, with amounts totalling $205.4 billion expended out of a total budgetary allocation of $479.7 billion. Capital expenditure was $162.9 billion, representing 24.5 percent of the total budgetary allocation of $666.2 billion. In our article of 16 September 2024, we pointed out that at this rate, by the end of the year, only two-thirds of the total budget will be executed.
Unfortunately, the Mid-Year Report focused more on the comparison of expenditure with the corresponding period last year rather than expenditure incurred against budgetary allocations, which is one of the three requirements set out in Section 67 of the Act. This is what the report stated:
Central Government expenditure amounted to $375.6 billion, a 30.8 percent increase over the corresponding period last year. Expenditure on the PSIP accounted for $162.9 billion, 38 percent higher than that of the comparable period last year. Significant investments were made in power generation, security, agriculture development and support services, and the upgrading of physical infrastructure including roads, housing, water, health and education facilities.
Non-interest current expenditure amounted to $205.4 billion, an increase of 24.8 percent over the corresponding period last year. Employment costs accounted for $54.6 billion, or 19.1 percent increase over the half year position in 2023. This was due to salary adjustments for teachers, Disciplined Services and the public service.
Had the focus been on a comparison of actual expenditure against budgetary allocations, the Authorities would have realized the low implementation rate of infrastructure development works and what remedial actions need to be taken. It would appear that the approval of the 2024 Estimates was an act of over-ambition and did not take into account the capacities and capabilities of Ministries, Departments and Regions to deliver performance commensurate with the Estimates. On several occasions in the past, we pointed to the inadequacy of staffing at the various Ministries/Departments/Regions, the lack of suitably qualified and trained personnel and the absence of internal audit departments in large Ministries, that continued to militate against an effective system of internal control and have contributed significantly over the years to the deterioration in financial management at both the ministerial and central levels.
We also stated that it has been the practice over the years for expenditure to be accelerated in the last quarter of the year to exhaust budgetary allocations. In particular, there was evidence of contracts being entered into in late December and in some cases on the last working day of December, and cash books being kept open well into the new year to facilitate the issuing of cheques. These are clear violations of the FMA Act that require, among others, all unspent balances on appropriations at the end of the fiscal year to be refunded to the Consolidated Fund. Because of these violations, all sorts of breaches and irregularities have occurred in the past, including significant breaches in the tendering procedures relating to the procurement of goods/services and the execution of works; defective work performed; overpayments to suppliers/contractors; and goods/services not delivered for which payments have been made.
According to the 2023 Auditor General’s report, there were 3,134 cheques valued at $2.463 billion still on hand as of September 2024, suggesting that these cheques 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. As a result, 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 at this date, 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 of these 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.
