Liberia’s Finance Minister has warned government’s Ministries and Agencies against committing the administration to contractural obligations that are in excess of budgetary appropriations authorized by the National Legislature.
Minister Amara M. Konneh observed that obligating the government without proper observation of the established procurement processes has the propensity to engender wasteful spending, which he said, undermines government’s budgetary performance.
In a statement issued last week on the commitment of public funds, Mr. Konneh urged all public agencies including banks and financial institutions wishing to provide pre-financing to contractors, to strictly adhere to the Public Financial Management (PFM) Law and the Public Procurement and Concessions (PPCC) Act of Liberia.
“Our resources are rather scarce, and it is our utmost responsibility to pull together in driving the economy towards achieving a middle income economy by 2030. Towards this objective, the prudent application and management of public resources is our core responsibility and obligation, as it is critical to realization of this goal,” Konneh said.
He strongly warned banks and financial institutions wishing to provide pre-financing to contractors hired by ministries and agencies, of the legal requirements and its consequences. Punishment for violators of the PFM Law may be administrative or criminal depending on whether the infringement constitutes an infraction, a misdemeanor, or other higher crimes.
The Finance Minister also told our business desk last week that his statement is intended to call the attention of spending ministries and agencies to strictly abide by the policies prescribed by the government as they sign agreements with contractors to implement their respective projects.
Konneh emphasized his call on ministries and agencies to be mindful of their responsibilities and obligations as provided for under the PFM Law of 2009, the annual Budget Law, and the PPC Act of 2005 as amended in 2010.
The Minister also reminded spending agencies of the provision in Section 24 and sub-sections 1 to 5 of the 2009 PFM Law, which specifies the legal process by which, he declared, all ministries and spending agencies may enter into a contractual commitment on behalf of the government.
According to Sections 1,2, and 3 of the PFM Law, “all purchases of goods and services from suppliers, including capital investments, shall comply with the provisions prescribed in the PPCC Act of 2005 as amended and its enabling regulations; all contracts, including those established through the simplified Local Purchase Order (LPO) mechanism, shall be considered commitments of the government, and notwithstanding the provisions of the PPCC Act, multi-year procurement contracts will be subject to annual limits established in relevant budget line in the approved National Budget, amended from time to time through budgetary transfers and/or supplementary budget. No action shall be taken to abrogate such multi-year contractural obligations.”
The PFM Law notes “contracted amounts relating to future years will be subject to their adoption within the National Budget of that year. The provisions of multi-year contracts will be drafted in such a way as to reflect these restrictions.”
Accordingly, Count 10 of regulation No.3 of the PPCC Act states “the Ministry (Finance) shall take part in the negotiations and signings of contracts over US$250,000 and the contract shall be attested to by the Ministry of Justice.”
The Act when on to say “ministers and heads of budgetary institutions and agencies shall be responsible for maintaining an up-to-date record of contracts entered into and for ensuring that any multi-year contracts are fully reflected in the budget estimates approved by the Legislature for the years in which they will require funding.”
According to Section 5 of the PFM Law, “all contracts should as closely as possible be reflected in the annual procurement plan of the relevant ministry, institution or agency, as required by the PPCC Act.
Procurement plans for the different types of goods and services should be prepared in a manner consistent with the different categories of expenditures as contained in the Budget Act, and shall be submitted to the Minister of Finance as supporting evidence to their spending plans.”
The Finance Minister has, meanwhile, told potential contractors or suppliers of government that unless the provisions of the PFM Law and the PPCC Act are met, no payments will be made from the consolidated fund as contractual obligations to government.
“We are going to strictly adhere and enforce these policies in the coming year, so I am reproducing an extract of these sections as a reminder,” Konneh said urging public agencies and potential contractors or suppliers to make sure that they read both the PPCC and PFM Laws carefully before entering agreement with any government agencies.
The Minister also informed ministries and agencies to collect pocket copies of the PFM Act from the PFM Reforms Coordination Unit situated on the 4th Floor of the Ministry of Finance, for ease of reference. “A soft copy of the PFM Act can also be accessed from the Ministry of Finance’s website,” he stated.
Minister Konneh’s warning comes in the wake of the recent resignation of Liberia’s Procurement Chief, Madam Peggy Varley Meres, formally of the Public Procurement and Concession Commission (PPCC). She tendered in her resignation to Professor Willie Belleh, Jr, Chairman of PPCC on May 15, 2014.
Madam Meres noted in her resignation that as CEO of a major integrity institution on the frontline in the fight against corruption in Liberia, the past five years have been very challenging.
She had reportedly said in her resignation, “As you are aware, we have an underdeveloped private sector and the public sector is essentially the only game in town. This attracts all kinds of selfish interests and with that comes the risk of rent-seeking actors attempting to use public resources for personal gain.”
Madam Meres noted that the absence or weakness of institutional checks and balances leaves the country at the mercy of the personal morality of its actors; public procurement and concessions granting in Liberia, especially given our history about stability, and peace.