Statement by the Minister of Finance on the Commitment of Public Funds

The Ministry of Finance has noted that some Ministries and Agencies may be committing the Government in Contractual obligations which are in excess of the appropriations authorized by the Legislature or without proper observation of the established procurement process, in contravention of the law.

The Minister for Finance would like to take this early opportunity to remind all Ministries and Agencies of their responsibilities and obligations as provided under the Public Financial Management Act of 2009 (PFM Act),  the annual Budget Law, and the Public Procurement and Concessions Act of 2005 (PPC Act) as amended in 2010.

Section 24 of the PFM Act, 2009, sub sections 1-5 specify the legal process by which all Ministries and Agencies may enter into a contractual commitment on behalf of the Government. Section 47 subsections 1-2 of the same Act make provisions for sanctions for an infringement of any sections of the Act. The PFM Regulations 2010 have also been published to clarify these sections. Section 40 of the PPC Act requires all procuring entities to undertake procurement planning each fiscal year.

I wish to also remind potential contractors/suppliers of Government that unless the provisions of the PFM Act and the PPC are met, no payments will be made from the consolidated fund as contractual obligations to government. Banks and financial institutions wishing to provide pre-financing to these contractors are also reminded of the legal requirements and its consequences.

I am reproducing below an extract of these sections here-below as a reminder. Ministries and agencies are also informed that they can 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 Website, www.mof.gov.lr. A soft copy of the PPC Act can be accessed from the Public Procurement and Concession Commission website, www.ppcc.gov.lr

Public Financial Management Act of 2009

Section 24. Contracts and Procurement

1. All purchases of goods and services from suppliers, including capital investments, shall comply with the provisions prescribed in the Public Procurement and Concessions Act of 2005 as amended and its enabling regulations.

2. All contracts, including those established through the simplified Local Purchase Order mechanism, shall be considered commitments of the government.

3. Notwithstanding the provisions of the Public Procurement and Concessions 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 contractual obligations. 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.

4. Count 10 of Regulation No.3 from the Public Procurement and Concessions Commission 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”. 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.

5. 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 Public Procurement and Concessions 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.

Section 47. Sanctions Regime

1. The infringement of any provision of this Act or its regulations is subject to sanctions as specified in the relevant and applicable administrative or criminal legislation.

2. The sanctions for the infringement of the provisions of this Act may be administrative or criminal sanctions depending on whether the infringement constitutes an infraction, a misdemeanor, or other higher crime.

Public Procurement and Concessions Act

Section 40. Procurement Planning

(1) All Procuring Entities shall undertake procurement planning, with a view to achieving maximum value for public expenditure and the other objects of this Act.

(2) For each fiscal year the Procurement Unit shall prepare a draft annual procurement plan for goods, works and services for use by the Procuring Entity in the Procuring Entity’s budgeting process. Upon budget approval, the Procurement Unit shall prepare an annual procurement plan for goods, works and services in accordance with the Procuring Entity’s approved programs and budget and furnish it to the Procurement Committee. The plan shall include.

(a) A brief description of each planned procurement contract;

(b) The estimated cost of each planned procurement contract;

(c) The procurement method to be used; and

(d) Processing steps and time schedules.

(3) After review and any revisions by the Procurement Committee, the Procurement Committee shall furnish a copy of the annual procurement plan to the Commission for approval.

(4) A Procuring Entity shall not divide a procurement order into parts or lower the estimated contract price of a procurement order to avoid the application of the procedures for public procurement prescribed in this Act. Such Actions if carried out shall constitute contravention of this Act.

(5) Each Procuring Entity, shall, on a quarterly basis and whenever it becomes necessary, review and update its procurement plans and notify the Commission in writing and the Minister of Finance of any material changes in its plan. An updated procurement plan shall accompany said notice to the Commission.

Section 138. Offenses Relating to Procurement

(1) Any person who contravenes any provision of this Act commits an offense and a person convicted by a Court of a violation of this Act shall, upon summary conviction, be liable to imprisonment for a period not exceeding five (5) years and or a fine not exceeding One Hundred Thousand United States Dollars (US$100,000.00). Violation of provisions of this Act may also constitute grounds for debarment.

(2) In addition to other offenses under this Act, the following shall constitute offenses under this Act:

(a) Entering or attempting to enter into a collusive agreement, whether enforceable or not, with any other bidder; and

(b) Directly or indirectly influencing in any manner or attempting to influence in any manner the procurement or Concession process to obtain an unfair advantage in the award of a procurement contract or concession applicant.

(3) The Commission may recommend for prosecution any person who in the view of the Commission has contravened in any material respect the provisions of this Act.

Conclusion

The Minister for Finance wishes to remind Ministries and Agencies that our country under the able leadership President Ellen Johnson Sirleaf has done well over the last eight years in restoring the economy to a path of inclusive growth and expansion. 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.