The controversy over the budget padding allegation rocking the House of Representatives has refused to go away. Lagos lawyer WAHAB SHITTU puts the issue in perspective
I have followed with keen interest the controversy surrounding the allegations and counter-allegations involving the removed Chairman of the Appropriation Committee of the House of Representatives on one hand and certain named principal officers of the House of Representatives on the other hand culminating in the public declaration by the Speaker of the House of Representatives, Hon. Yakubu Dogara that budget padding is not a crime known to law.
Expectedly, reactions have trailed Mr. Speaker’s public declaration and this intervention is meant to put matters in proper perspectives, reflecting the divergent positions taken on both sides of the divide and concluding with the issues that ought to be focused upon at the moment.
Open Mind
I observe that allegations and counter-allegations have been made and investigations on the veracity of same are ongoing. In the light of this development, the first point that I would make is to urge Nigerians and other interested party to maintain an open mind until we get to the bottom of the controversy. Secondly, it is also useful to urge that no one is entitled to pronounce guilty or innocent until the legal process including the investigative process are concluded and finalized. However, given the seeming lack of sufficient information on what budget padding means, it became necessary to undertake some measure of research with a view to promoting consciousness in this area and assist in the quality of the debate.
Conceptual Clarification
I begin my analysis with conceptual clarification. What is meant by padded? What is padding? What is budget padding? What are the incentives for budget padding? What consequences flow from budget padding and what are the ethical considerations involved in the process?
The word ‘padded’ is defined by Merriam Webster’s Collegiate Dictionary, Eleventh Edition is defined as ‘to furnish with a pad or padding … to expand or increase especially with needless, misleading or fraudulent matter…’ padding is the ‘material with which something is padded’.
Research Efforts
In my research, I stumbled on an article written on the subject area highlighting some of the issues raised above. Danielle DeLee in an article titled ‘What is padding the Budget’ made the following observations reproduced hereunder:
“Padding the budget is a practice that some people use in business when submitting a budget for approval. It artificially inflates the proposed budget in order to give the project room to expand or to cover unexpected costs. Many see budget padding as unethical, but its practitioners defend it on the grounds of practicality…padding the budget means making the budget proposal larger than the actual estimates for the project. This is done either by increasing a project’s expenses or decreasing its expected revenue. The goal of budget padding is to get an approval committee to grant an artificially high level of funding to the budget maker’s proposed project. There is some contention over the exact definition of padding; some contend that inflating expenses to take expected inflation into account is responsible foresight rather than padding, while others see any increase beyond current estimates as padding… First, they want to account for economic factors. This is true of budget increases that anticipate inflation or, in the case of international projects, fluctuations in exchange rates. Second, they want to avoid red tape. If an unexpected expense arises, the padding gives the project flexibility to cover it that is called slack or breathing room. Third, they want to make a favourable impression on their superiors. If they propose a larger budget and then outperform the budget, then the project team will be viewed favourably by the bosses. Finally, they fear budget cuts. Some budget padders fight against cuts that they see as unfair by anticipating them with an inflated proposal…In theory, projects should spend according to the accurate budget estimates so that padding would have no real effect. In practice, however, budget padding has concrete consequences. Projects with extra room in their budget tend to use it. Recurring projects, especially, spend money unnecessarily in order to use up their entire budgets. That way, the approval committee does not cut their budgets in the following year…Aside from the financial consequences; many people question the acceptability of budget padding because it is a deceptive practice. They say that it breeds a harmful corporate atmosphere. Budget padding’s defenders cite its widespread use as a justification of its acceptability. They also argue that unfair actions on the part of bosses, like budget cuts, force them into preemptive budget inflation”.
Constitutional Provisions
The above may have partly addressed the definition, incentives, consequences and ethical considerations of budget padding. However, the controversy still lingers whether in the context of our own circumstances budget padding constitutes a crime?
Section 81(1) of the constitution provides:
“The President shall cause to be prepared and laid before each House of the National Assembly at any time in each financial year estimates of the revenues and expenditure of the Federation for the next following financial year”.
The question that arises from the above is the ownership of the budget in terms of preparation? I have no difficulty in saying on the strength of the constitutional provisions above that the preparation of the budget is the responsibility of the Executive. This position is fortified by Section 81(2) of the constitution.
“The heads of expenditure contained in the estimates (other than expenditure charged upon the Consolidated Revenue Fund of the Federation by this Constitution) shall be included in a bill, to be known as an Appropriation Bill, providing for the issue from the Consolidated Revenue Fund of the sums necessary to meet that expenditure and the appropriation of those sums for the purposes specified therein”.
But whose responsibility is appropriation as opposed to the preparation of the budget. Again I have no difficulty in saying that appropriation is the responsibility of the National Assembly.
Scope of Budget Preparation
The next question that arises is what is the scope of preparation of the budget? What is the scope of the appropriation of the budget? The answers to these posers would determine whether budget padding constitutes a crime or not.
Given the definition of padding and the synonyms of same to include ‘insertion’ and ‘mutilation’ the question that naturally arises is whether the National Assembly in the guise of appropriation is entitled to insert estimates of projects not included in the budget preparation as laid before the National Assembly by the President.
Budget planning and preparation are (or should be) at the heart of good public expenditure management. To be fully effective public expenditure management systems require four forms of fiscal and financial discipline namely:
- Control of aggregate expenditure to ensure affordability; that is consistency with the macroeconomic constraints;
- Effective means for achieving a resource allocation that reflects expenditure policy priorities;
- Efficient delivery of public services (productive efficiency); and
- Minimisation of the financial costs of budgetary management (i.e. efficient budget execution and cash and debt management practices).
It is correct to say that budget preparation is the principal mechanisms for achieving items 1 and 2 while item 3 is an element of the budget preparation process of industrial countries and item 4 reflects budget execution and cash management.
In the budget preparation process the provisions of Fiscal Responsibility Act, 2007 is relevant providing with respect to annual budget for: a) annual budget to be derived from medium term expenditure framework; b) annual budget to be accompanied by certain documents; c) preparations of estimates of revenue and expenditure by corporations etc
Scope of Budget
Appropriation
What then is budget appropriation?
The Black’s Law Dictionary defines appropriation to mean ‘the exercise of control over property, a taking of possession…a legislative body’s act of setting aside a sum of money for public purpose…if the sum is earmarked for a precise or limited purpose, it is sometimes called a specific appropriation’. In broad terms, it means the designation by the government or an individual of the use to which a fund or money is to be applied. An appropriation bill is a proposal placed before the legislative arm of the government by one or a group of its members to earmark a particular portion of general revenue or treasury fund for the use of government objective.
Based on the above definition of the scope of budget preparation and appropriation, it is safe to conclude that while the executive retains the exclusive right to prepare the budget, the national assembly retains the right to appropriate funds for the budget proposals. In my view, in the course of appropriation, the national assembly is entitled to reduce or increase expenditure for projects earmarked for execution by the president in the budget preparation. But with such projects cover constituency projects initiated by the national assembly itself without reference to the executive? My answer in the light of constitutional provisions is NO. therefore, in the guise of appropriation the national assembly is not entitled to add its own projects to the budgetary estimate presented by the president if the national assembly is interested in any project, it may consult with the executive who may then add such projects to the budgetary estimate prepared by the president as part of the president’s developmental agenda for the country. This is so because the job of the national assembly is limited to lawmaking, representation and oversight responsibilities not project execution which is the terrain of the executive.
Budget Padding
– Whether a Crime?
It is in this context that budget padding may be understood particularly where there are insertions into the budget or mutilations of the budget without the consent of the owner of the document (the president) or with intent to betray the initial objectives of the budget preparation. However, padding of the budget may not be established except it is shown that the budgetary process is either broken, corrupted or compromised. This may have introduced the element of proof. What proof? First it is important to find out the motivation for such insertions i.e. whether designed to defeat the objectives of the budget as laid before the national assembly by the president. Secondly, it must be shown that the act of insertion or mutilation was actually carried out by the national assembly and the persons involved in the illegal insertions or mutilations of the budget. Thirdly, whether the acts complained of was successful? And the last ingredient is the benefit derived from the process by the beneficiaries. It will also be useful to determine whether the culprits carried out the exercise without the knowledge of the body of the National Assembly as a whole as such a scenario will confirm its illegality. Except it is shown that the select few acted in defiance of the majority of the National Assembly, it may be difficult for the national assembly to vote something and it is regarded as padding.
It is in this context that budget padding may be likened to corrupt practices similar in nature to such offences as abuse of office, attempt to embezzle, diversion and misappropriation of public funds, conspiracy to act corruptly and illicit enrichment – all of which offences are recognized under United Nations Convention against corruption to which Nigeria is a state party. Further, a clear scrutiny of legislations such as Corrupt Practices and Other Related Offences Act, Economic and Financial Crimes Establishment Act (EFCC) and Fiscal Responsibility Act respectively would reveal further offences that could come within the framework of budget padding.
The Focus
In the budgeting process, we have tended to focus on how much we earn and how quickly such earnings can be expended without really addressing the problem whether the funds appropriated are well utilized. The searchlight may have to be focused on efficient and effective utilization of resources appropriated during our many years of budgetary experience. This may be the key to unlocking this budget padding controversy.
The other issue is the degree of involvement of civil servants working in major Parastatals, Agencies and Federal Ministries in the so called budget padding without limiting the enquiry to the National Assembly alone if indeed truth is to be unraveled.
In summary, whether any offence is created would depend on the role of civil servants, individual members of the National Assembly, nature of projects appropriated for and whether such projects are actually executed and diversion of funds meant for such projects in previous years. Indeed anti-graft agencies have a lot of work to do and the starting point is to examine existing legal framework and enforce their provisions.
