Constitutional/legislative requirements
The Contingencies Fund was established by Article 223 of the Constitution authorising the Minister of Finance to make advances from the Fund if he/she is satisfied that there is an urgent need for expenditure for which no other provision exists. Where any advance is made, the Minister is required to present a Supplementary Estimate to enable the Assembly to authorize the replacement of the amount advanced and to increase the budgetary allocation(s) of the concerned Ministry, Department or Region by the said amount.
Section 41 of the Fiscal Management and Accountability (FMA) Act elaborates on the use of the Contingencies Fund. The Minister may approve of an advance from the Fund if he/she is satisfied that an urgent, unavoidable and unforeseen need for expenditure has arisen: (i) for which no funds have been appropriated, or for which the sum appropriated is insufficient; (ii) for which funds cannot be reallocated as provided for under the Act; or (iii) which cannot be deferred without injury to the public interest. The total of the amounts permitted to be drawn from the Fund cannot exceed two percent of the estimated annual expenditure of the last preceding fiscal year as shown in the annual budget proposal approved by the Assembly, or such greater sum as the Assembly may approve.
The Minister is required to report at the next sitting of the Assembly on all advances made from the Contingencies Fund since his/her previous report, which report must specify: (i) the amounts advanced; (ii) to whom the amounts were paid; and (iii) the purpose of the advances. When the Assembly approves the related Financial Paper, a Supplementary Appropriation Act is passed covering the amounts advanced.
Section 22 of the said Act authorises the Minister to reallocate funds among appropriations during the fiscal year to which the appropriations relate. However, the following restrictions apply:
Appropriations can only be varied across programmes within the budget agency to which they relate.
Appropriations for current expenditures can be moved to appropriations for capital expenditures, but appropriations for capital expenditures cannot be moved to appropriations for current expenditures.
The amount of an appropriation for any programme cannot be varied by more than ten per cent of the total amount appropriated for that programme in the applicable appropriation Act.
No new appropriations cannot be created.
The Minister must include all changes to appropriations made pursuant to the above, up to the end of the tenth month of the current fiscal year in an Appropriation Amendment Bill. This implies that no changes to appropriations can be made in the last two months of the year.
By Section 24, any variation of an appropriation, other than those referred to in Section 22, must be authorised by a Supplementary Appropriation Act prior to the incurrence of the related expenditure. The format for a Supplementary Appropriation Bill is to be the same as for an Appropriation Act. Supplementary Appropriation Acts must be numbered sequentially for each fiscal year.
When introducing a Supplementary Appropriation Bill, the Minister must present to the Assembly the reasons for the proposed variations and provide a supplementary document describing the impact that the variations, if approved, will have on the financial plan outlined in the annual budget. No more than five Supplementary Appropriation Bills must be presented to the Assembly in any given fiscal year, except in circumstances of grave national emergency, in which case an Emergency Appropriation Bill is presented to the Assembly.
Financial Paper 3 – Replenishment of advances from the Contingencies Fund
Financial Paper 3 relates to advances totalling $456.9 million made from the Contingencies Fund covering the period 7-22 November 2024. These advances were to meet the cost of security services for the Ministry of Education and Regions 1 and 6. Considering that Financial Paper No. 4 was tabled in the Assembly on 25 November, one wonders whether the expenditure could not have been delayed slightly so as to enable it to be included in that paper, instead of recourse to the use of the Contingencies Fund. Was the expenditure that urgent that it could not have been postponed without jeopardising the public interest? If that were the case, was it not possible for the Supplementary Estimate contained in Financial Paper 4 to have been tabled in the first week of November?
Financial Paper 4 – Direct Supplementary Estimate
Financial Paper 4 relates to additional funds needed to meet expenditure on government programmes and activities for the rest of the year. The amount involved is $84.074 billion, comprising $41.503 billion and $42.571 billion to meet current expenditure and capital expenditure, respectively. Taking this into account as well as the replenishment of the advances made from the Contingencies Fund as contained in Financial Paper No. 3, the revised budgetary allocation for 2024 is $1.272 trillion.
As indicated above, when introducing a Supplementary Appropriation Bill in the Assembly, the Minister must give reasons for the proposed variations and provide a supplementary document describing the impact that the variations, if approved, will have on the financial plan outlined in the annual budget. However, an examination of Financial Paper No. 4 indicates that no such supplementary document was presented, and the reasons given for the request for increased funds were somewhat brief. As a result, legislators were forced to ask probing questions from the relevant Ministers to ascertain the impact on the National Budget.
In our review of the 2024 Mid-Year Report, we stated 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. At this rate, by the end of the year, only two-thirds of the total budget will be executed unless measures are put in place to accelerate the execution of programmes and activities, especially as regards infrastructure development, without breaching the FMA Act.
We pointed out that in the past contracts were executed close to year-end; cash books were kept open well into the new year; and cheques drawn and backdated to 31 December to exhaust budgetary allocations although value was not received as of this date. This was in clear breach of Section 26 which requires all unspent balances at the end of the year to be surrendered to the Consolidated Fund. Because of this and other violations, all sorts of breaches and irregularities occurred, 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.
Tables I and II provide a summary of Financial Paper 4 of 2024 as it relates to both current and capital expenditure:
During the consideration of Financial Paper No.4 of 2024, several questions were raised as regards the cash grant, and the explanation provided was that the amount of $30.505 billion requested would provide for approximately 50 percent payout before the end of the year, with the remainder to be reflected in the 2025 Estimates. Considering the length of time it will take for the Estimates to be presented to and approved by the Assembly, disbursements of balance of the estimated $60 billion to eligible recipients are not likely to begin until February 2025.