Farcical lack of control in public sector finance cost us dear

For more than four years, I’ve been expressing my concern about how the public purse has been managed.

My deepest concerns are highlighted and consolidated in the lately released Financial Statements of the Consolidated Fund March 31, 2012 .

The last part of Note 17 reads: “The limit for temporary loans established under this Act is 10% of annual budget estimates of expenditure approved by the House of Assembly for the financial year in which the borrowing takes place.

As the overdraft facilities described in Note 16 were for terms of less than fifteen months,these facilities could be classified as temporary loans, in which case the Government would not be in compliance with Section 2 of the Temporary Loans Act 1973.”

Layman’s language? Government can have temporary loans. However, these loans must not exceed ten per cent of the total expenditure set out in the Appropriations Act for that year. This is a financial control mechanism. It is the duty of the Ministry of Finance to see that this law is not breached.

What is the legal limit?

The Appropriations Act 2011 authorized the spending of $1,079,519,238. Ten percent of that is $107,951,923. In FY 2011/12, Government could not legally have atemporary loan (overdraft) in excess of $107.9 million dollars. The Civil Servant’s duty is to apply and abide by this law.

For FY2010/11, Appropriations Act 2010 authorized the spending of $1,202,265,114. Ten percent of that is $120,226,511.

On 31st March 2011, while limited by the Appropriations Act 2010, the Ministry reported an overdraft (temporary loan) of $120,720,014. Like driving at 40kph, this was a teeny-weeny breach ($493,503 over the limit). Not a major problem or big sin. But it is an over-run that good financial oversight and management should have avoided.

The horror story unfolds in Note 16. Here, the Financial Statements report that on 27th and 28th March 2012, the Ministry requested an Overdraft facility for a total $140 million [$50 million from BNTB, $90 million from HSBC]. 

That request for a $140 million temporary loan facility exceeds the legal limit imposed by either Appropriation Act. That request was $32 million in excess of the $107.9 million legal limit set in Appropriations Act 2011. It was $20 million in excess of the legal limit of $120.2 million set by the Appropriation Act 2010.

Whichever Appropriation Act you consider (2010 or 2011), that $140 million request would overstep the lawful powers granted to the Ministry of Finance.

Layman’s language? That request for a $140 million Overdraft Facility could lead to a clear and specific breaking of the law. The maximum that should lawfully and sensibly have been sought was $107.9 million. Speaking to the issue of temporary loan size, the Auditor General states: “… Government would not be in compliance…”

Rule-breaking is not new.High-level rule-breaking is not new. Five years ago, starting in March 2008, Government began scrambling for Overdrafts (temporary loans). By 31st March 2009, these temporary loans had rocketed up to $147,250,826.

Overdraft limit

Prior to 31st March 2009, under the Temporary Loans Act, 1973, Government’s legal overdraft limit was $15 million*. So on 31st March 2009, like a staggering ‘full hot’ drunk driver, Government was almost TEN times over its legal limit. **

Even on 1st April 2009, Government was still $37 million over its now higher limit of $110 million which was ten per cent of the $1,101.4 million in the Appropriations Act 2009.

Where does the buck stop?

In the Appropriations Act 2011, the House approved spending of $1,079 million for the year ending 31st March 2012. We finally learn — eleven months later — that Government actually spent $1,245 million. So we finally discover that Government overspent that appropriated amount by $166 million.

Who was responsible for that $166 million overspend? Who is accountable? Was anybody doing anything right? What controls really do exist?

It’s farcical.

*Between 1st October 2008 and 31st March 2009, Government had an over-limit Overdraft Facility. The Facility went from $11,500,000 in March 2008 to $111,500,000 in October 2008. The Facility climaxed at $207,500,000 in April 2009. The Overdraft itself was recorded as $147,250,826 on 31st March 2009. All this happened while the limit was $15 million.
**The current ten per cent limit came from an amendment that took effect on 1st April 2009.