Agencies Charged With Extra-Budgetary Funds1671 27 Jun, 2012
Mr. Greenidge: Mr. Speaker, I rise to address this motion which, as you have correctly indicated, is not unrelated to the one that went before and, hopefully, that will enable us to dispose of it expeditiously.
The issue of state-owned entities and the retention of revenues by those entities is one that has attracted a lot of attention. The Constitution, in effect, requires that if moneys are collected on behalf of the state they should be paid over. I will come to the specifics, but basically we are referring to agencies that are identified in the Fiscal Management and Accountability Act (FM&AA), section 39, for example, which speaks to Extra-budgetary Funds. If you will allow me, Mr. Speaker, I will quote a couple of sections from it. Section 39 (1) states:
“An Extra-budgetary Fund may be created by an Act, which legislation shall set out - ”
The items that follow indicate the individuals who would be responsible and handling arrangements. It also goes on to state that:
“Officials charged with the management of an Extra-budgetary Fund shall establish close co-operation and co-ordination with the Minister and share with the Minister all relevant information necessary or desirable to ensure adherence to the principle of consolidation of Government revenues and expenditures.”
It is the “consolidation of Government revenues and expenditures.”
It also, in subsection (3), requires the Minister…, and I quote:
“The Minister shall develop detailed procedures for achieving the co-operation and co-ordination referred to in subsection (2), particularly in connection with the preparation, execution and monitoring of the annual budget and the budget for each Extra-budgetary Fund.”
Finally, I would like to cite subsection (5) which states:
“Subject to any other law, the officials charged with the management of an Extra- budgetary Fund shall, with respect to that Fund –
(a) observe the accounting methodology and reporting format prescribed by the Minister;
(b) submit to the Minister and publish for general information quarterly reports on the financial operations of the Fund;
(c) make the accounts and records of the Fund available for independent audit by the Auditor General;”
It goes on to state some other obligations, but I just want it to be clear as to what it is we are addressing. I am not in receipt of an exhaustive list of extra-budgetary agencies established under the Act, but I would like to confine myself, even, to some broad principles about the operation of the funds.
It is important to say that the issue is significant because the sums involved are significant. During the period in question, if some individual agencies are taken, for example, the Guyana Lotteries Commission - we are speaking about between 1996 and 2006 - amounts totalling $95 billion were received. In relation to the Sugar Industry Labour Welfare Fund, for example, which is an agency that may not fall strictly under the title of the Act, had something of $1.451 billion shown as deposits held for investments on behalf of the Sugar Industry Labour Welfare Fund and the Rehabilitation Fund.
Since there are lots of agencies falling under this title, what tends to happen is that, in essence, there are almost rival centres of fiscal management. There is the Minister of Finance coordinating and is responsible for overall fiscal management. I am not saying that he does not have an input in the other agencies, but what there is at the same time is that a number of these agencies which have resources and are in a position to dispose of resources in a manner that may not necessarily be consistent with the overall rules and principles that he may have set out at the central level.
For these reasons, these Extra-budgetary Funds have been the subject of some controversy. They have also been the subject of advice from some of our international partners. I am aware, for example, that elsewhere there has been a tendency of the international agencies to urge governments to keep these Extra-budgetary Funds somewhere in the region of no less than one per cent of total expenditure and I saw suggestions that there are areas where there might be as high as three per cent. That is too high.
The multilateral financial institutions as part of assistance provided to Guyana in 2001, I think, recommended that the Government, and I quote:
“…reduce the amount of Extra-budgetary Funds and that in the short term it should reduce the number of special accounts where funds can be held outside of the Consolidated Fund.”
Just in case my colleagues attempt to divert by asking the source, it is called, Tracking Poverty, Reducing Expenditures – The Draft Assessment and Action Plan – October, 26, 2001. This is the report I have. I am not clear as to the extent to which the recommendation was implemented, but the point I am making is that the issue itself was important enough for the bank to recommend to the Government that these funds be reduced in terms of number and in terms of value. [An Hon. Member (Government): …inaudible …draft.] Well, whether it suffices review does not deny that that was what the draft had. Government could always amend the draft. It does not mean that the technician did not recommend this. Let not be topic antic about this.
Now, one of the problems is that, in relation to the funds, there is a certain lack of uniformity in the treatment of funds. Some of these agencies do not automatically pay over the resources they have to the Consolidated Fund. In a number of instances, the funds are not properly accounted for and in other instances the Government routinely ignores the recommendation of the Auditor General regarding the need to transfer the funds. In other cases - we dealt with that just now - NICIL claims that there is no obligation to pour over those funds.
In previous reports the Auditor General has highlighted the Ministry’s failure to pay over the twenty-four per cent of proceeds of the Government Lotteries Limited to the Consolidated Fund and, as I mentioned earlier, the GGMC has, in the past, been pressed to use its resources for zoos, roads, and so forth.
Now turning to the question of the difficulties, sometimes of seeing what is happening to these funds that lie outside of the Consolidated Fund… Looking at the Sugar Industry Labour Welfare Fund, the Sugar Industry Rehabilitation Fund and the Sugar Industry Price Stabilisation Fund, those Funds were last audited in 1996 and 1980 and 1980 respectively. The Auditor General reported in 2006 that it was not possible, therefore, to use the entities’ records as a basis for verifying their accuracy. I am speaking of relatively large amounts here of amounts that affect the welfare of a very important element of our constituency. The Auditor General, our financial adviser on these matters in respect of accounting, had problems knowing the exact status of the funds to verify whether they were there.
The last agency of this type I want to make mention to is the Dependent’s Pension Fund in which the last audited accounts were in 2004 and in connection to which the Auditor General said that he could not properly validate the figures provided.
In the case of the Guyana Lotteries Company, it transfers its surplus revenues to a separate account which is regarded by those who have looked at it, including the Auditor General, as not good practice. In this particular case the amounts in question are significant. There was, as I mentioned, $2.9 billion received from the fund between 1996 and 2006 and it was deposited into the 3119 Account. From that account, $2.875 billion was expended without coming to the Consolidated Fund, specifically on the instruction, it would appear, of the former President. So, $2.9 billion went into the account, $2.87 billion utilised on the basis of guidance, instructions, or whatever it might like to be called, from the Minister.
The use of these funds in this way was challenged on many occasions and subsequently it was the subject of, what I might call, an unsolicited opinion from the then Attorney General. (I see our colleague is not with us, so he would at least not get upset about that.) I believe that the action was intended to prevent the Auditor General from further reporting on the retention of the Lotto Funds and on its unauthorised use. The last reference I see to it was in the Auditor General’s Report in 2006 on pages 23 and 24.
Since this matter seems to serve as a pretext for others which are not paying over their moneys, let me just say that one could argue that the Auditor General had not requested any opinion and therefore he could still disregard it. Alternatively, he could have sought an independent opinion and if that opinion supported the view of the Auditor General, it would have been appropriate for the Auditor General to seek a judicial review of the matter, especially, because the Auditor General’s advice in these circumstances involve, what I would regard, as a conflict of interest, because he is both part of the executive and now he is giving advice to an agency that is meant to be monitoring the behaviour of the executive. That is something of a difficulty that seems to cast a shadow over the question of these accounts and given this different treatment, which I have outlined before, the retention of such accounts, the authorising of such accounts by the Minister, perhaps, should be revisited. The agencies are collecting funds on behalf of the state and so the moneys that are collected, which are net of their operational expenses, really, should be promptly paid over to the Consolidated Fund.
I mean if necessary they could establish a separate account for their own uses. The thing is that for the surplus funds, to the extent that they come to the Consolidated Fund, then they would be governed by a single principle governing their investment. Without them coming in that way, as I said, there is a situation in which one set of rules apply to one set of funds and a different set of investment rules apply to another investment priorities which are completely different from one entity to the next. This is not good planning or fiscal management practice. In any case the Constitution is clear on this matter. Article 217 (3) of the Constitution requires that the moneys be paid over. It states: “No moneys shall be withdrawn from any public fund other than the Consolidated Fund unless the issue of those moneys have been authorised by or under an Act of Parliament.”
In the case of NICIL, if I may just touch on that again, I am not sure that it has separate authorisation to do that. This is the heart of the problem.
In relation to the question of Extra-budgetary Funds, we are arguing that unless we know of all of the funds that Government takes in, and we can put them through the same tester, the same sieve and decide on the basic or standard criteria how they are to be used, we are going to be in a less than ideal position. The idea would be to have them come centrally so that they can first be devoted to those priorities that yield the highest returns.
When we come to consider issues of whether we can afford to pay for pensions, whether we can afford to pay for electricity subsidies, whether we can afford to pay salaries, we are seeing the full sum of resources that are available to the state, not a case of some resources being hidden even as access to those resources is used, for what I think the whole country would regard, as low priorities, whilst critical things affecting poverty and efficiencies are neglected. It is an important political reason.
For that reason, the motion calls upon the House to approve an arrangement that requires these entities that are in control of such funds, first of all, to ensure that they report on the funds in keeping with the Act, and I did read the relevant section, and also that the Minister lays a report on all these agencies and the state of their resources.
Finally, in the cases where the agencies have outstanding reports , financial or other, that they be immediately required to pay over the moneys they have into the Consolidated Fund, because they were given those powers in specific circumstances and it is appropriate that since they fail to meet the obligations associated with that freedom that it be curtailed.
I thank you very much Mr. Speaker. [Applause]
Mr. Greenidge (replying): Thank you very much, Mr. Speaker. I am happy to assure Minister Benn that his request that I reconsider the matter has been accepted. Having reconsidered it I will proceed to recommend the motion as I did before. In doing that I will offer to you the protection of the majority since it seems that you are under some pressure from the distinguished Attorney General and his most entertaining presentation.
Unfortunately, much of the premises that he based his argument on were premises with which we had no difficulty. Nobody is saying that all the funds, whatever accruing to the extra budgetary agencies must be transferred to the Consolidated Fund. Article 216 is very clear on this matter. In fact, line three speaks to it being retained by the authority that received them for purpose of defraying the expenses of that authority. So, that is really a non-issue. It is what might be called a straw-man; you put up something that is not at issue and pretend that that is the object of the operation.
The purpose of the motion is not to ensure that the Assembly reigns supreme; the purpose of the motion is to ensure that the executive adheres to the law, and that is the purpose of the other motions that have gone through. For all the Attorney General have been advising us, it is the same Attorney General that failed to advise his own side that the Auditor General should not have been on the Financial Management and Accountability Schedule, it is the same Attorney General that failed to advise the Minister that he could not have been given instructions about spending money until such time as his agency was defined as a budgetary agency. So, do not tell us that you know everything and that we are misunderstanding what is going on. It was 2012 in which the bad advice was given to the Minister. [Mrs. Backer: How about the elephant?] Well, I am not even coming to the elephant.
The legislation that this Attorney General and his colleagues regard as somehow flawed, let me just remind persons again that it is international partners who funded and forced the Government to adopt, because that is what happened. In order to get the funding for it, the MFIs forced the Government to adopt the legislation that now revels in the title Fiscal Management and Accountability Act. [Interruption] Well you say that very often Minister but it does not make it true. The same Governments have provided technical assistance to us and other that technical assistance they have called on us to reduce the number of extra budgetary agencies and the funds devoted to that title. In the last analysis, the proof of the pudding as it was is in the eating. That is the fact; others have recognised that this is a problem.
The issue in the end is that the agencies that the Minister has authorised to be extra budgetary agencies, it is his responsibility to know that know that. We cannot assume that he does not know. He has to deal with those agencies. He has given them the permission to be extra budgetary agencies and we are asking him to report on them. That is a responsibility that cannot be too onerous.
The point is that they have been given conditional status as extra budgetary agencies. Since they have failed to meet those requirements we are saying that they must hand over the monies. Again, I remind you, when I was starting over the sums in excess of their operational needs, I read section 39 which is very clear as regards the obligation of the Minister and of the agencies. They are supposed to provide two sets of accounts. Someone over there felt that I was reinterpreting. It says, “...submit to the Minister and publish for general information quarterly reports on the financial agreements.” If you go further on, it says, “...prepare an annual report”. I am not adding obligations; I am calling upon them to honour obligations that were the conditions under which their status was granted. I think in the light of all of that our colleagues in the exercise of their democratic rights have imposed on us by stretching out this debate so long when in fact there were no issues that they ought to have been challenging.
The Auditor General has reported in relation to a number of these agencies that they have failed to do what they are supposed to do. He has brought those reports to the Public Accounts Committee. When there was not a majority of one, the Government decided that that majority was good enough and they ignored the Auditor General. The majority of one will make sure that it is at least known what it is that is supposed to be done. Thank you. [Applause]
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