Recent publications in the local dailies have raised my interest in the capacity and organisation of the Ministry of Finance, particularly in the areas of accountability and spending. It first began when the MoF through its Debt and Expenditure Section published spending reports of the various agencies, ministries and organisations that have received and spent the tax payers’ money. I must first of all take my hat off to the Minister of Finance and the Government for this bold initiative and drive towards transparency and accountability.

However, the initiative has raised questions about the government’s accounting capabilities and the accuracy of the reports that were published. This was so serious that the Ministry through its Deputy Minister of Finance for Debt and Expenditure Management organised a two hour public meeting with the sole objective of explaining to the public how the reports were compiled. Apparently, many agencies disagreed with the accuracy of the government’s accounts, most claiming that they had not spent as much money as the published accounts showed, and the government seemed to concede that there were some accounting errors.

One of the issues raised bordered around claims of overspending in some agencies and ministries. The question that comes to mind is, is this possible? Could an agency or ministry spend more money (the tax payers’ money) than was appropriated or authorised in the enacted budget or some other law? If we were to draw inferences from the United States of America, such action would constitute what is referred to as an Anti-Deficiency Act violation under U.S. laws. Here’s what the Government Accountability Office (GAO), the U.S. equivalent of our General Auditing Commission (GAC), has to say about the Anti-Deficiency Act:

The Antideficiency Act is one of the major laws through which Congress exercises its constitutional control of the public purse. It evolved over a period of time in response to various abuses.

In its current form, the law prohibits:

• Making or authorizing an expenditure from, or creating or authorizing an obligation under, any appropriation or fund in excess of the amount available in the appropriation or fund unless authorized by law. 31 U.S.C. § 1341(a)(1)(A).

• Involving the government in any obligation to pay money before funds have been appropriated for that purpose, unless otherwise allowed by law. 31 U.S.C. § 1341(a)(1)(B).

• Making obligations or expenditures in excess of an apportionment or reapportionment, or in excess of the amount permitted by agency regulations. 31 U.S.C. § 1517(a).

The fiscal principles underlying the Antideficiency Act are really quite simple. Government officials may not make payments or commit the government to make payments at some future time for goods or services unless there is enough money in the "bank" to cover the cost in full. The "bank," of course, is the available appropriation.

Also, according to the U.S. Office of Management and Budget. Analytical Perspectives, Budget of the U.S. Government,Fiscal Year 2007 (Washington: GPO, 2006), Chart 26-1, p. 389.Government spending involves a multi-step process in which budget authority is enacted and obligated, and outlays are generated. Budget authority is enacted in law; it provides ministries and agencies the legal basis to incur obligations. Obligations, which reflect such activities as employing personnel, entering into contracts, and submitting purchase orders, establish financial liabilities of the government. Outlays are payments that liquidate these obligations.

Budget authority, which is provided in appropriations acts and direct spending legislation, establishes the specific amounts made available for obligation. In some instances, however, budget authority is indefinite, providing “such sums as may be necessary” to achieve certain purposes. Budget authority may be made available for obligation for a one-year, multi-year, or no-year period. One-year, or annual, budget authority is available for obligation only during a specific fiscal year, and any unobligated authority expires at the end of that fiscal year; multi-year authority is available for a period longer than one fiscal year; and no-year budget authority is available for an indefinite period.

According to GAO, government spending consists of two steps:

appropriation - The provision of funds, through an annual appropriations act or a permanent law or the annual budget, for ministries and agencies to make payments out of the Treasury (or MoF) for specified purposes.

authorization - A statutory provision that obligates funding for a program or agency. An authorization may be effective for one year, a fixed number of years, or an indefinite period. An authorization may be for a definite amount of money or for "such sums as may be necessary."

Drawing from my experience as a U.S. Government employee, the agencies receiving budget authority would obligate funds only after the budget allowances were communicated down to them from the U.S. treasury where fund accounts would have been set up for each appropriation or spending authorisation. Disbursements could only then be made once there was an obligation for those disbursements. Similarly, an obligation was only possible once there was a budget allowance under an appropriation. The budget allowance basically says, here’s the money for obligation and disbursements.

I have been asked before whether the fact that there was an appropriation meant the agencies concerned could begin spending money right away since after all, the expenditure or obligation had already been authorised by law. In Liberia, once the budget is passed, and there is an allotment in the budget for a particular ministry or agency, can that ministry or agency begin spending money right away, or begin obligating the government by issuing purchase orders and entering into contracts, after all, there is budget authority and “so the money will come”?

Budget authorities are derived from budgets, which are intended revenues and expenditures. The budget will show the government’s plan either for a balanced budget or an imbalanced budget (surplus or deficit). A balanced budget will show total planned expenditures to equal total planned revenue, whereas a budget surplus will show total planned expenditure falling short of total planned revenue. A budget deficit on the other hand will show total planned expenditure exceeding total planned revenue, in which case the shortfall will be funded by government borrowing or government’s surplus brought over from previous period(s).

During execution of the budget, the actual results may differ from the intended results. For instance, actual revenue may be lower or higher than planned revenue. Conversely, actual expenditure may be lower (but may not be higher- remember Anti-Deficiency Act?) than planned expenditure. Increases in spending are only made possible by supplementary appropriations or other legal instruments.

With this premise, it is important that fiscal authorities guide the timing of spending authorisations by allocating to agencies funds appropriated only after the revenue or resources intended to fund those expenditures become available. In the U.S. system, regardless of the fact that an appropriation exists, an agency may not begin obligating the government or incurring expenditures before those funds are made available to it. In Liberia, the Cash Management Committee (CMC) has the responsibility for ensuring that funds are available first before giving the green light to agencies and ministries to begin raising purchase orders or entering into contracts that obligate the government. Without this administrative procedure where CMC certifies funds availability, if an agency obligates the government prior to funds availability certification it would first lead to an increase in the national debt, a situation that is strictly within the purview of Treasury or the Ministry of Finance (who in turn derive their authority from the Legislature through the enacted budget or some other law). Second, it could lead to an overall budget deficit if projected revenue are not realised, a situation that is only acceptable when authorised by the Legislature through the enacted budget or some other legal instrument.

This partly explains why it is common to see agencies and ministries spending heavily in the latter part of the budget year since funding is not usually made available to them early, and when it is made available, it has to be carefully managed to avoid cost overruns, and nearing the end of the year when all or most of the funding is available, it has to be spent before the year ends as otherwise the agencies or ministries lose their allowances.

It is therefore incumbent on the government through the Ministry of Finance to ensure the right organisational structure and systems exist to promulgate sound funds control procedures. The Comptroller General of the United States or the United Kingdom for instance plays an important role in ensuring accountability and funds control. But in these countries, the Comptroller General is the Auditor General.

In Liberia, our Auditor General is not the same as the Comptroller General. The Comptroller General in Liberia reports to the Assistant Minister of Finance for Debt and Expenditure Management whereas the Auditor General reports to the Legislature. The Auditor General provides assurance to the Liberian people that their money is being spent wisely and accounted for properly. The Comptroller General of the Republic of Liberia is really a department head who does not even report directly to a deputy minister. He is a junior director assisting with disbursements. Accounting for disbursements is handled by the Bureau of General Accounting (BGA). The head of BGA, a Director, reports to the Assistant Minister for Debt and Expenditure Management.

The conclusion that is easy to draw from this structure, where the function of accounting is lowly positioned in the overall organisational hierarchy of the Ministry of Finance, is that accounting is not so important, but just one of those annoying tasks that has to be carried out somehow and by someone. How else can one explain the fact that the responsibility for accounting for how the people’s money has been spent is relegated not even to an assistant minister, but to a departmental head? Some may argue that it is actually the Deputy Minister for Debt and Expenditure Management who has this responsibility, but the fact of the matter is, there is a department headed by a director who reports to an assistant minister that prepares the accounts. But even if we were to accept the argument that the responsibility is ultimately with the Deputy Minister, it still leaves the counter argument that accounting is a highly specialist and professional role that needs the full undivided attention of its actors, including that of the Deputy Minister. In this case, it is not possible that the Deputy Minister can give his full undivided attention when he also has to manage disbursements and the national debt. This is why a junior Director is struggling with such a herculean task!

It has been reported a few times in the local dailies that our President would like to be known as the “Accountability President”. I also see MoF publications of Financial Outturns in the dailies periodically. Frankly, this is not a bad start. I believe a necessary step also is the reorganisation of the MoF. In my opinion, a good first step in this reorganisation process is the elevation of the Comptroller General to the level of a Deputy Minister reporting directly to the Minister proper.

BGA should also be overseen by the Comptroller General, thus relieving the Deputy Minister of Debt and Expenditure Management (DMD&EM) of the responsibility of accounting. Of course, the DMD&EM will continue to account for his/her activities, just like the Deputy Minister of Revenue accounts for his/her activities. BGA should however be collecting and reporting on information from the two sections and providing a complete consolidated report on inflows and outflows, rather than just outflows. The various Comptrollers at the different ministries and agencies should also report functionally to BGA.

This organisation will automatically create a check and balance system in MoF since those responsible for revenue collection and funds disbursements will have between them a function responsible for collating the information on their activities and reporting it to the public, rather than the information coming directly from them. Such an accounting will ensure better accountability and more reliable reporting since an independent function will be collecting, analysing and reporting financial information to the general public. The Comptroller General would also spend time managing the MoF’s relationship with the Auditor General and dealing with technical issues coming up in this relationship. This should therefore mean a Comptroller General who is a chartered or certified accountant, assisted by at least two chartered or certified accountants. Central to the newly organised function should be an automated bespoke accounting system that is approved by the Auditor General.

The Comptroller General should also be in a position to make value added contributions to the budget preparation process because his accounting reports will be matched against the budget to determine strict budgetary adherence.

Countries that emphasise accountability and talk about transparency or make noise about wanting to fight corruption cannot expect to be taken seriously until they take concrete and appropriate actions to demonstrate their resolve. Accountants are very important people in the drive for accountability. Relegating them to some obscure corner is going to bring out results that will cause embarrassments all the time and raise uncomfortable questions. I don’t believe the Comptroller General of the Republic of Liberia should report to a Deputy Minister, let alone an Assistant Minister. I believe the Comptroller General should report directly to the Minister of Finance. Good accounting for revenue and expenditure will be emphasized by accurate financial reports that are well prepared by appropriately qualified accounting professionals who are placed in centre stage.

Paul C. Collins, the author, is an Economics and Finance professional residing in Liberia. His previous articles can be found at the following links:

http://www.theperspective.org/articles/0808200603.html

and

http://www.theperspective.org/articles/0513200602.html

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