Over the past few years, several commentators, observers and analysts alike have been paying attention the overdraft balance on the Government Deposit Accounts held at the central bank. It is indeed an interesting monetary theme worthy of deeper examination and academic research to explain and simulate the macroeconomic implications. As mentioned last week, this author together with two other co-authors have taken up the mandate to examine the deeper implications of these outturns which will be done in a series of separate articles and then will be put together into a complete research paper eventually.
What is the Consolidated Fund?
Establishment of official Consolidated Fund
The Fiscal Management and Accountability Act states that “all public moneys received by the Government shall be credited fully and promptly to the Consolidated Fund, except –
(a) Moneys credited to an Extra-budgetary Fund as stipulated in the enabling legislation establishing that fund
(b) Moneys credited to a Deposit Fund
(c) As stipulated in the Constitution
Public moneys at the credit of the Consolidated Fund shall be kept in an account styled as the “Official Consolidated Fund Account” at the Bank of Guyana but may include deposits of public moneys held at any other bank as the Minister may direct.
The Consolidated Fund shall be managed by the Minister or by an official in the Ministry to whom the Minister has delegated that responsibility.
It is subject to any other law, resources allocated from any Extra-budgetary Fund for the purpose of financing Government social or economic development projects shall be included in the relevant investment plan and programmes of expenditure contained in the annual budget and such resources shall be processed through the Consolidated Fund.
The Minister may establish one or more Deposit Funds into which public moneys shall be paid pending repayment or payment for the purpose for which the moneys were deposited.
On the establishment of a Deposit Fund, the Minister shall notify the National Assembly of the Deposit Fund and shall specify—
(a) The source or sources of the moneys in the Deposit Fund
(b) The purpose or purposes for which moneys may be expended from the Deposit Fund
(c) The banking arrangements for the Deposit Fund
(d) The intended investment strategy for the moneys deposited in the Deposit Fund
Each Deposit Fund shall be managed and operated by the Ministry.
The key distinction between the Consolidated Fund and the Deposit Accounts are that: (1) there are in effect more than a single deposit fund established for the purpose of receiving monies for different purposes as the Minister may so direct. (This means that the signing bonus transaction would appear to be lawful; however, the Minister was legally bounded to report this, according to the Act, to the National Assembly and for the purpose thereto). While, the Consolidated Fund is operated more or less like the checking account of the Govt held at the central bank for the purpose of financing Government social or economic development projects shall be included in the relevant investment plan and programmes of expenditure contained in the annual budget and such resources shall be processed through the Consolidated Fund.
According to the Auditor General report, a new Consolidated Fund was established in 2004. The old Consolidated Fund Bank Account was not reconciled since February 1988. A cash book was reconstructed for the period 1989 to 2003 in order to aid the reconciliation of this account. However, despite attempts by the Accountant General’s Department to reconcile the monthly transactions on the account from January 1994, a proper reconciliation was still not done. In addition, the old Consolidated Fund continued to be overdrawn over the years. At the end of 1992, the overdraft on this account was $26.823 billion, compared with an overdraft of $44.434 billion at the end of 2003, a net increase of $17.611 billion. At the end of 2004, the overdraft of the old Fund was $45.550 billion. It should be noted that there was no activity in this account during the years 2006, 2007, 2010, 2011, 2012, 2015 and 2017. However, there were movements in the account during the years 2005, 2008, 2009, 2013 and 2014, with a closing overdraft of $46.776 billion as at 31 December 2017 (Audit report, 2017).
Ministry’s Response: The reconciliation of the old Consolidated Account has posed new challenges. Ministry of Finance explained that a request has been made for data from the Bank of Guyana from the year 1992. However, it appears that the Bank has difficulty in accessing the data from its records. In the absence of this data, the reconciliation exercise seems futile. There are also gaps in the accounting records of the Accountant General’s Department that will impede the smooth flow of a reconciliation process in the conventional manner (Audit report, 2017).
Next week the author shall examine the Consolidated Funds balances for the period 1995 – 2017.