THE USE OF THE CONTINGENCIES FUND IS PRESCRIBED BY LAW

Nov 25, 2013 Features / Columnists, Peeping Tom

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In previous columns, I had clarified many of the misgivings and misunderstandings that existed over the Fiscal Management and Accountability Act, specifically as these relate to the Contingencies Fund and the request for approval of supplementary provisions from the National Assembly. Some of these clarifications are worth repeating.
Article 221 of the Constitution of Guyana authorizes Parliament to create a Contingencies Fund to meet expenditure for which no provision exists. Section 41 of the Fiscal Management Accountability Act creates this Fund. The Constitution also provides that where expenditures are met through the Contingencies Fund that these should be accounted for via a Supplementary Provision.
The intention of the creation of the Contingencies Fund is for there to be a mechanism to meet expenditures for which no prior authorization exists.
Since expenditures may arise that are either not budgeted for, were unforeseen- either in nature and quantum- or are urgent and unavoidable, there obviously exists a need for a mechanism to meet such expenditures.
Contingencies Funds are necessary because budgeting is not an exact science. No government can be expected to predict with exact precision the amount of expenditure that it will be required during the fiscal year. Nor can any administration totally cover in its Budget the vast array of needs for which expenditure may subsequently arise.
Some of these needs may arise in the course of negotiations with foreign governments where agreements are reached which require some expenditure to be met immediately. The government during its Budget preparations at the start of the year may not have even imagined such an agreement and therefore any expenditure required to be covered by the government in pursuant to such an agreement would not have been provided for in the annual estimates. Another example is an emergency for which funds would be required but for which there is no appropriation.
It is instructive to note also that Section 41 of the FMMA provides for the Minister and not parliament to have the sole authority for the release of monies from the Consolidated Fund. The Contingencies Fund is a sub-fund of the Consolidated Fund.
Section 41(3) of the FMAA provides that where the Minister of Finance is satisfied that an urgent, unavoidable and unforeseen need for expenditure exists and where no monies have been appropriated, or where the amount appropriated is insufficient; where monies cannot be reallocated as provided for under the FMAA; and which cannot be deferred without injury to the public interest, releases can be made from the Contingencies Fund.
A number of summations can be made in respect to Section 41(3). First, the legality of the actions of the Minister of Finance is authorized by his compliance with this Section of the FMAA and not by subsequent passage of a Supplementary Provision covering the expenditure. If the latter were the case, then parliament by withholding passage of the Supplementary Provision, would effectively vitiate what would otherwise be deemed lawful under both the constitution and under Section 41 of the FMAA.
Secondly, the Minister is authorized to draw from the Contingencies Fund to where there is an urgent, unavoidable and unforeseen need to meet expenditures not provided for. This infers that it is not the purpose for which the funds are used which should be urgent, unavoidable or unforeseen but the actual need to meet the expenditure.
Thus, even if for example the government ought to have foreseen that there would have been an act or some event that required funding and therefore should have made financial provision for this in the Budget, the fact that no such provision was made or an insufficient provision was made does not disable the Minister from using monies from the Contingencies Fund, since the FMAA provides that once there  is an urgent, unavoidable and unforeseen need to meet expenditure that such expenditure can be met from the Contingencies Fund.
Those who therefore interpret “urgent, unavoidable and unforeseen” to mean that the purposes for which the funds were put ought to have been unpredictable are misinterpreting the proviso.
The opposition parties have in the past misguidedly negated approval of some of the expenditure met through authorization from the Contingencies Fund on the grounds that the purposes for which the funds were released were not urgent or emergencies and therefore ought to have been predicted by the government.
This line of reasoning is invalid because what needs to be urgent, unavoidable and unforeseen is not the activity for which the monies are required but the need for the funding itself. This distinction is made clearer by Section 41 (3) ( a) which provides for expenditure for which monies were allocated in the Budget but were not sufficient.
It is therefore obvious from this sub-section alone that when the FMAA speaks about urgent, unavoidable and unforeseen, it does not mean that the purposes for which the funds are to be utilized have to be unpredictable. Where there is an under-provision or no provision at all, the expenditure can be satisfied by resort to the Contingencies Fund.
This does not amount, however, to a carte blanche authorization for the Minister of Finance to use the Contingencies Fund to avoid parliamentary approval of public expenditure.
The opposition had in fact made this argument sometime ago in relation to the billion dollar supplementary provisions that the government often brought to the House for approval. They contended that the massive expenditure made from the Contingencies Fund was a means of circumventing the authority of the National Assembly.
They should reexamine the FMAA which itself protects against the risk of the Contingencies Fund being abused by limiting the amounts that can be expended without prior authorization to a two percent of the National Budget. In effect the Minister of Finance is limited to how much monies he can withdraw from the Contingencies Fund.

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