Unspent N118b 2017 capital vote consequence of bad fiscal governance — Experts
• Development Makes Monitoring Of Allocation, Output Arduous-Official
• Failure To Utilise Borrowed Funds While Interest Accrues Irresponsible
• Retards Economic Growth • Finance Minister, AGF Maintain Sealed Lips
With a list of abandoned and delayed projects scattered all over the country, last month’s return of N118b to the Treasury of the Consolidated Revenue Fund (CRF) of the Federal Government by some of its Ministries, Departments and Agencies (MDAs), has further questioned the Federal Government’s transparency quotient.
This is heightened by the fact that the return only came to light after strident, repeated demands for explanation of capital vote expenditure for 2017 (which is still not ready), and only after the Auditor General of the Federation gave his verdict that poor bookkeeping, profligacy and gross abuse of extant financial regulations still characterised expenditure pattern in fiscal year 2016,
However, a director in the Ministry of Budget and National Planning, who prefers anonymity said the return of the huge sum is the direct outcome of the return to the envelope system of allocation to MDAs, (bulk allocation to MDAs, instead of project-specific releases adopted in the first two years of the current administration.)
On their part, fiscal governance experts are blaming alleged flagrant display of incompetence, indolence and unending tardiness causing late budget preparation and passage, as well as, unnecessary length of procurement processes, hence the return of N118b.
Besides, experts insist that it is a gross display of irresponsibility for the country to borrow huge funds in the name of capital expenditure items, with associated interest rates, only for the government to keep the fund idle, while the country groans under the burden of parlous infrastructure.
A breakdown of the unspent capital votes indicated that the largest chunk of N66.9b was returned by the Ministry of Power, Works and Housing; the sum of N22.8b from the Ministry of Commerce, Trade and Industry; N6.1b from the Office of the National Security Adviser, and the sum of N3.5b from the Federal Ministry of Health.
Also returned was the sum of N4.3b from the Federal Ministry of Finance; N3.5b from the Federal Ministry of Health; N1.8b from the Education Ministry; N1b from Water Resources Ministry and N3.5b from the Office of the Secretary to the Government of the Federation (SGF); among other agencies.
The director, in a chat with The Guardian declared that much of the unutilised funds represent allocations for the padded projects smuggled into the budget by members of the National Assembly without basic budgetary ingredients, such as feasibility studies, engineering designs and procurement requirements, which made execution impossible, but because of the envelope system of allocation, the releases were made to the MDAs.
At inception, following dwindling oil mineral revenue, the Federal Ministry of Finance and the Federal Ministry of Budget and National Planning abandoned the regular practice of bulk capital release allocation, which was done on a quarterly basis and adopted a prioritisation of project-specific releases to guard against spreading even and achieving less results.
Accordingly, the Cash Management Committee consisting of representatives of agencies in the two ministries were meeting at irregular intervals once funds accrued to the Federal Government CRF to decide on, which projects to fund.But all that is now in the past following rising oil prices leading to elevated revenue to the Federal Government, which has equally returned to bulk allocation to MDAs, including funds for projects not properly prepared for execution.
Said the official: “We have returned to this syndrome of huge unspent capital votes to the treasury because we have returned to the envelope system, where funds are released to the MDAs in bulk and no longer to specific projects. The development is also making it difficult for us to monitor allocation and output because the funds are no longer projects-specific. They can now settle for expenditure that they have evidence to easily retire since releases to them were not for specific projects.
“But what I suspect that resulted to the huge figure, particularly in the Ministry of Power, Works and Housing, as well as, in the ministries of water resources, health and education is the inability of these ministries to carry out the implementation of the smuggled projects, which did not follow due diligence by the executive, taking into account, basic conditions like feasibility studies, right of way, engineering designs and the likes. It’s in the two ministries that these constituency projects are situated. Definitely, it would be impossible to execute because there’s no way you can even progress to procurement when these basic conditions have not been fulfilled. But you can get details from the concerned MDAs, the Ministry of Finance and the Office of the Accountant General of the Federation. They are the right people to give you details. We even depend on the information they provide us before we go to the field for monitoring and evaluation,” the official further said.
Calls made to the mobile telephone lines of the Minister of Finance, Mrs. Kemi Adeosun, and the Accountant General of the Federation, Alhaji Ahmed Idris, for their comments on the development were not answered.Commenting on the return of unspent funds, Prof. of Finance and Capital Markets and Chair, Banking and Finance Department, Nasarawa State University Keffi, Uche Joe Uwaleke, said it was ridiculous that a problem of this nature is not usually associated with recurrent spending, as agencies strive to exhaust whatever is allocated to them.
“Unspent funds from capital projects retard economic growth and make government’s accounting less transparent since the funds are not originally captured in the following year’s budget. There is no guarantee that MDAs that return money to the coffers of the government are entitled to receive the same amount of money the following year, in addition to what was budgeted for that particular agency,” he said.
He deplored the lengthy procurement process that takes up to six months in some cases before a contract can be awarded, saying if the government is serious, this has to be looked into to reduce chances of having unspent funds by critical agencies of government that require them.
He also warned that the late release of funds for implementation of capital projects, although sometimes, caused by shortfall in expected revenue and delays in the government’s borrowing programme, would continue to hold the economy down.
“The way forward requires the amendment of the procurement Act, timely passage of appropriation bill and release of funds. This also stresses the need to diversify the revenue base of the government, especially ramping up tax revenue,” he added.
For the Executive Director of Abuja-based OJA Development Consult, Jide Ojo, it is ironical that the little money earmarked for capital projects is not expended in a 12-month budget cycle, necessitating the ugly scenario where money, which in the first place, is inadequate to fix infrastructure, is returned to the treasury as unspent funds.
“This smacks of incompetence, indolence and incapacity. Imagine the Ministry of Works, Power and Housing returning a whopping N66b when there is yawning infrastructural needs. In fact, many contractors are being owed huge sums of money. This is incredulous,” he said.
He called for a reduction of the “undue bureaucratic bottlenecks” in the country’s procurement process, so that getting the Bureau of Public Procurement certification will cease to be like a ‘camel passing through the eye of a needle.’“More professionals also need to be hired by the MDAs if they admit lacking some, to enable them fast-track the tendering, approval and award of contracts for capital projects,” he stated.
A lawyer and fiscal governance campaigner, Eze Onyekpere, is most concerned about whether such money was actually returned, as return of unspent fund would actually follow a proper channel, which is an official quarterly or yearly budget implementation reports.He said this administration’s challenge is not only about implementation or non-implementation of budgets, but non-transparency, as the last report on budget implementation came in the third quarter of 2017.
“The fact that money was available, but had to be returned, tells a lot of story about capacity and management issues. Coming at a time that the government is complaining of lack of resources to implement the budget, it is an unfortunate development, which needs to be investigated, especially to confirm reason(s) for the return of the monies.“I agree that money must not be spent simply because it was budgeted; I also agree that procurement challenges may hamper financial expenditure, particularly if the background technical studies and assessments have not been done before appropriation, but these happen when there are fundamental challenges with the budgeting process,” he said.