Fiscal risk project way behind schedule
A government consultancy evaluating and quantifying the main fiscal risks to the national budget, which was slated to run for four months, is now due to be completed in September this year, two years after it began.
The consultancy, 'The evaluation of and quantification of main fiscal risks and strengthening of the fiscal responsibility framework', began in August 2013 with support from the Inter-American Development Bank (IDB), the Ministry of Finance and Planning said.
Responding to recommendations made by Auditor General Pamela Monroe-Ellis, following her review of the 2015-16 Fiscal Policy Paper (FPP) tabled in Parliament in February, the Ministry said the consultancy was expected to be completed at the end of December 2013.
However, the consultant was not able to get all the information within the stipulated contract period, and the term of the consultancy was extended to October 2014.
According to the ministry, the consultant who was undertaking the project has moved on to other endeavours. Consequently, the IDB hired another consultant, in October 2014, to complete the project.
Monroe-Ellis noted that the ministry had stated its concern regarding public disclosure of market-sensitive assumptions.
"In that regard, I proposed that the ministry provides the Auditor General's Department with an addendum to the FPP, which provides the following information: scenario analysis, based on the perceived fiscal risks; quantification of the growth and cost savings measures, and the major assumption underlying the preparation of the FPP," she said.
"This will aid in the assessment of the variances between the fiscal targets and the outturns, as well as the explanations provided by the ministry," the auditor general said.
"The MoFP (Ministry of Finance and Planning) has failed to act upon my recommsendations pertaining to the provision of information on the perceived fiscal risk and quantification on the growth and cost-saving majors," Monroe-Ellis added.
In its response, the ministry said it continued to offer no objection to that recommendation. Seeking to clarify its position, it said the objective of the consultancy is to support the Government in better identifying, evaluating, quantifying and reporting its main fiscal risks for better public financial and fiscal management and economic planning.
It added that the project is now expected to be completed by September 2015 after which the information will be conveyed to the Auditor General's Department.
The ministry said that on completion of the project it expects to receive from the consultant a recommended framework for the evaluation of fiscal risks, inclusive of contingent liabilities related to public private partnerships, (PPPs) given that the Ministry will be required to do this within the enhanced fiscal governance framework.
Fiscal risk statement
In the December 2014 memorandum of economic and financial policies submitted to the International Monetary Fund, the Government said the budget for fiscal year 2015-16 would include a comprehensive and clear fiscal risk statement, covering all significant contingent liabilities including those related to public sector entities and PPPs.
The ministry said it is also expected to receive from the consultant a recommended framework for the evaluation of fiscal risks related to commercial public bodies that do not form part of the specified public sector.
In addition, it is expected to be advised on a mechanism to monitor and quantify fiscal risks that includes the establishment of a historical database of those main fiscal risks which the ministry can then update/build on in successive years.
The ministry said the information emanating from the consultancy will be reflected in the FPP for fiscal year 2016/17. Where the information is considered to be market sensitive, it will be included in an addendum to the FPP and, thereby, provided to the Auditor General's Department.
Monroe Ellis also suggested that in order to provide the Standing Finance Committee of Parliament with a report within the legislative timeframe, the ministry must provide the auditor general with a draft of the FPP before the report is tabled.
"It is neither practicable nor advisable to restrict the audit of a complex, sensitive and high-risk area to 10 days, without the requisite resources and support from the Ministry of Finance. This will have serious implications for the audit outcome and quality. I was not provided with a copy of the FPP until it was tabled on February 19, 2015," she said.
The ministry accepted that an approach would have to be developed to support the work of the auditor general in the review of the FPP, noting that the suggestion made by the auditor general would be explored.