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CRC: No To Rochamel – Type Guarantees

Constitutional Commission Report.

THE Constitutional Reform Commission has made conclusionn which in future will prevent the Prime Minister from entering into a guarantee and committing the country to financial obligations without the prior approval of Parliament.

The recommendation comes of the wake in the still highly controversial Rochamel guarantee of 1998 when the government guaranteed millions of dollars to facilitate the building of a hotel.

The Constitutional Commission report includes the following chapter on Financial Accountability:

Financial Accountability
(The Finance (Administration) Act)

In addition to the Constitution, the Commission was mandated to examine, study and make recommendations for amendments, reforms and changes to related laws, as are in the opinion of the Commission necessary and desirable for promoting good government in Saint Lucia, and in particular for strengthening the relevant Government machinery in order to ensure maximum transparency and strict accountability in the management of public funds, including appropriate sanctions for corruption. The Commission therefore felt it relevant and appropriate to examine the Finance (Administration) Act, (the Act).

The Commission noted that certain provisions of the Act had in recent times been the subject matter of litigation, judicial pronouncements and a Commission of Inquiry, all arising out of what has become commonly known as the “Rochamel Affair”. During its consultations the Commission heard a number of concerns and received a number of submissions on the subject of the management of public funds and holding those responsible for mismanagement accountable for their actions. The provisions of the Act also came up for discussion when submissions were made regarding the powers of the Prime Minister.

The Act deals with, inter alia, the control and management of public finance, payments into and from the Consolidated Fund, accounting for public monies, the authorisation of expenditure and public debt. The Act also provides for financial regulations and procurement and stores regulations to be made pursuant to the Act.

It is the responsibility of the Minister of Finance, (the Minister), to supervise the finances of the Government in order to ensure that a full account is made to the Parliament and for that purpose to have full responsibility for the management of the Consolidated Fund. The Minister is further mandated to give such directions and instructions as appear to him or her to be necessary or expedient for the advantage, economy and safety of public monies and public property.

The Act places on “the Director of Finance and Planning” (the Director), the responsibility to take all proper steps to ensure that any directions and instructions given by the Minister pursuant to the

Act, the Rules or Regulations are brought to the notice of all persons directly affected thereby and are complied with. The Director must certify all withdrawals made or authorised from the Consolidated Fund.

The Commission noted that there is currently no position referred to as Director of Finance and Planning. The Act states that this title refers to the public officer duly appointed by the Public Service Commission to hold the office of Director of Finance and Planning and who is directly responsible to the Minister for the Administration of the Ministry of Finance.

The Chief Accounting Officer is the Accountant General who is charged with performing a supervisory function with respect to the collection, expenditure and accounting for, public funds. Permanent Secretaries and public officers who are heads of department or who perform the duties of a head of department, are Accounting Officers who are answerable to the Public Accounts Committee of Parliament for the efficient management of and accounting for public funds entrusted to them as accounting officers.

Further, there were concerns that there is currently a Director of Finance and not a Director of Finance and Planning. More importantly, concern was expressed that the person holding the position of Director of Finance, and therefore charged with responsibility to see that the directions of the Minister are complied with, also holds the position of Permanent Secretary in the Ministry of Finance, and therefore is an Accounting Officer in that capacity, answerable to the Public Accounts Committee of Parliament for the efficient management of and accounting for public funds entrusted to him or her. There is a view that one person should not function in both capacities and the Act should be amended to make this clear. The Commission observed that there is some overlap in the functions of the Director of Finance and Planning as prescribed by the Act and that of the Permanent Secretary in the Ministry of Finance as prescribed by the Constitution and that the relevant provisions of the Act should be revisited.

The Act provides that, subject to the Constitution and except as otherwise provided therein, all revenues and other monies raised or received for the purposes of the Government, not being revenue or other monies which are payable by or under any enactment into some other fund established for a specific purpose, shall be paid into and form part of the Consolidated Fund. In this regard, the Commission has noted some public concern suggesting that this provision of the Act has not been complied with in recent times. However, the Commission was not able to determine the veracity of these suggestions or submissions.

The Accountant General is charged with preparing, certifying and submitting to the Director of Audit the accounts of Saint Lucia for the financial year showing the financial position of Saint Lucia on the last day of such financial year. These accounts are to be presented within three (3) months of the close of each financial year, unless the Minister grants an extension of time. Where an extension of time is so granted, the authorisation or direction is to be laid before Parliament at its next sitting.

The Act mandates the Director of Audit to submit to the Minister, not later than three (3) months from the date of receipt of certified copies of the financial statements from the Accountant General, those statements with his or her opinion on them. Section 84 of the Constitution outlines in greater detail the responsibilities of the Director of Audit and this we have discussed elsewhere in this Report. The Minister is mandated by the Act to lay a copy of every document submitted to him by the Director of Audit before Parliament at its next sitting following the date on which that document was received.

One of the greatest concerns of Saint Lucians as expressed in submissions, is the apparent power of the Minister to borrow or otherwise commit the resources of the State without prior approval from Parliament. The Act provides that the Minister may, by resolution of Parliament, borrow money from a bank or other financial institution by means of advances to an amount not exceeding in the aggregate the sum specified for that purpose in the resolution, to meet current requirements, and such resolution shall not have effect for any period exceeding 6 months. Additionally, the Minister may, by resolution of Parliament, borrow from any bank or other financial institution for any of the following: the capital or recurrent expenditure of Government; the purchase of securities issued by any Government or government agency; on-lending to any statutory body or public corporation; or making advances or payments to public officers as authorised by any enactment.

The Act further provides in Section 41 that a guarantee involving any financial liability is not binding upon Government unless that guarantee is given in accordance with an enactment or unless approved by resolution of Parliament. The interpretation and application of this section has been the subject of much public debate in recent times, especially when it became apparent from judicial pronouncements that it was possible for the Prime Minister to enter into a guarantee, and thereby commit the country to financial obligations, without the prior approval of Parliament.

The Commission reviewed the findings and recommendations of the Ramsahoye Report as to the adequacy of Sections 38, 39 and 41 of the Act and also considered the numerous submissions to the Commission on this matter. After due consideration, the Commission concluded that the recommendations of the Ramsahoye Commission of Inquiry with regards to the Act and financial accountability in general, should be adopted and implemented. In particular, the Commission concluded that every guarantee given by the Government of Saint Lucia, if not given under an enactment, be put before Parliament for prior approval by resolution with full details of the amount to be guaranteed and the object and reasons for giving of the guarantee.

The Commission is cognisant of the fact that Parliament has recently enacted legislation to implement some of the recommendations of the Ramsahoye Report and welcomes this move. The Commission received a submission that there should be a review of the Contingency Fund provision which allows the Minister to make advances from the Fund and then lay a supplementary estimate before the House after the fact, when he or she is satisfied that there has arisen an urgent and unforeseen need for expenditure. Whilst acknowledging the need for flexibility in these situations it was felt that there was a need to look at the methodology for assessing or creating the Fund as well as to safeguard against abuse of the provision. The Commission agreed with this submission.

There was a submission that the Act should contain provisions for the laying before Parliament of budgeted actuals as a methodology for accounting for expenditure incurred in the previous year. The Commission was of the view that such a practice would result in greater transparency and accountability regarding how the resources of the state are utilised.

Recommendations
With respect to Financial Accountability, the Commission recommends the following:
(187) The Act should be revised so as to clarify the respective roles of the Director of Finance and Planning and that of the Permanent Secretary in the Ministry of Finance.
(188) No one individual should function in the capacity of Director of Finance and Planning and that of Permanent Secretary in the Ministry of Finance simultaneously.
(189) The methodology for assessing or creating the Contingency Fund should be reviewed be reviewed so as to safeguard against abuse.
(190) The implementation of the recommendation of the Ramsahoye Report in respect to the
Act should continue.

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