REPORT OF THE AUDITOR-GENERAL ON THE PUBLIC ACCOUNTS OF GHANA (CONSOLIDATED FUND) FOR THE YEAR ENDED 31 DECEMBER 2006 TABLE OF CONTENTS Paragraph
Page
Transmittal Letter Introduction
1–7
1-2
Summary of significant findings and recommendations
8 – 39
2 – 10
Details of findings and recommendations
Management issues
40 – 157
11 – 35
Financial matters
158 – 244
35 – 53
Audit opinion
245 – 253
54 – 56
Acknowledgement
254
56
Controller and Accountant-General’s Report and Financial Statements
Auditor-General’s Report on the Public Accounts of Ghana (Consolidated Fund) for the year ended 31 December 2006
i
REPORT OF THE AUDITOR-GENERAL ON THE PUBLIC ACCOUNTS OF GHANA (CONSOLIDATED FUND) FOR THE YEAR ENDED 31 DECEMBER 2006 EXECUTIVE SUMMARY Management Issues Anomalies in pension payroll Limited review conducted indicated that duplicated pensioners’ identification numbers (i.e. Pensioners’ IDs), pensioners without identification numbers, pensioners without bank account particulars as well as female pensioners with male reference were contained in the CAGD 2006 Pensions Payroll. Designed controls embedded in the pension payment processes should have ordinarily worked to prevent these anomalies. The observed anomalies are thus indication that internal checks in pension payment processes were not complied with. 2.
Extensive investigation was thus suggested to CAGD Management to
determine the cause of these anomalies, establish whether double pension payments had taken place, retrieve any consequent double payments and apply sanctions as appropriate.
Over-payment of salaries to home-based staff of Ghana’s missions
3.
Home-based Staff of Ghana’s foreign missions were over-paid salaries
ranging between US$3,912 and US$5,784 in 2006, due to a 18% increase in salaries of the foreign service officers, instead of the 15% salary increase originally authorised by the President. 4.
I urge CAGD to incorporate the 15% authorised increase in the payrolls
prepared for the Ghana’s foreign missions, which should be the basis for salary
payment to the home-based staff. Additionally, the CAGD in collaboration with Ministry of Foreign Affairs, Regional Co-operation and NEPAD should determine salary payments made to the entire Missions’ home-based staff which were over and above the 15% authorised salary increase since July 2002. Where over-payments are observed, these should be recovered over a reasonable period of time from the affected home-based staff salaries. Over-payment of deposit account owners 5.
Overdrawn balances were observed on Deposit Accounts at the close of
2006. Non-submission of information on payroll-related deductions, payment to DCOs and/or inappropriate accounting for these dealings might have accounted for the overdrawn balances on the deposit accounts. I urge CAGD to maintain and reconcile deposit control account with individual DCO accounts and also investigate the overdrawn balances recorded on the deposit account. Delays in transferring accrued funds to the GETFund and National Health Insurance Fund 6.
I observed that 66.6% of funds that accrued to the GETFund in 2006 were
transferred to the Fund in the year. Also there were delayed transfers of accrued funds to the GETFund ranging from two weeks to three months in 2006. Similarly, SSNIT delayed between two to four months in transferring accrued funds into the National Health Insurance Levy Account (NHIL Account). Transfer of funds held on the NHIL Account to the National Health Insurance Fund (NHIF), the account which can be accessed by the National Health Insurance Commission to run the National Health Insurance Scheme, was also not regular in 2006. 7.
I advise VATS, MoFEP and CAGD to ensure the prompt and full transfer of
accrued funds to the GETFund. Similarly, SSNIT should adhere to the dictates of the NHI Act 650, by transferring the 2.5% on the 17.5% contribution made by SSNIT contributors on the preceding month basis. In default, SSNIT should be made to pay
appropriate penalty to the NHIF. Furthermore, MoFEP should ensure regular transfer from the NHIL account to NHIF, to facilitate the smooth running of the scheme. Management and reporting on GoG Equity Investment in local entities
8.
GoG equity investments in local entities continued to be reported in the Public
Accounts at original cost. Also dividends were consistently paid on 15 out of 97 of these equity investments between 2004 and 2006. I urge MoFEP to appoint administering authorities for all GoG equity investments and to monitor the administering authorities to ensure that the GoG equity investments perform.
Non-performing GoG investment in loans 9.
GoG investment in loans, amounting to ¢6,698.1 billion, was not performing
and its recoverability was in doubt. On the basis of financial prudence, I advise therefore that the loans should be re-stated in the 2006 Public Accounts Financial Statements to reflect their financial reality.
External Debt Stock 10.
Because of MoFEP non-recognition of short-term external financing for cocoa
purchases as part of Ghana’s external debt stock, differences in format for recording and reporting the external debt stock by BoG and MoFEP, non-comprehensive information flow among BoG, MoFEP and CAGD, particularly on debt disbursements, repayments and cancellations as well as absence of periodic reconciliation among the three institutions on the external debt stock, BoG and MoFEP maintained varying position on Ghana’s debt stock at the close of 2006. This anomaly prevented the determination of the financial position of GoG at the year-end. 11.
As a result, I advise that BoG, CAGD and MoFEP should adopt uniform basis
for the recording and reporting of Ghana’s external debt stock. Particularly, a unique key (i.e. debt identification numbers etc) be incorporated in the debt recording to facilitate reconciliation. Also periodic reconciliation on the country’s debt stock be undertaken among the BoG, CAGD and MoFEP. Furthermore, the three institutions should jointly resolve the difference of US$ 44.45 million in their position on Ghana’s external debt stock at the close of 2006.
External loan agreement and disbursement: non-communication to CAG and AG 12.
Contrary to Regulation 134 (4) of the FAR, L.I. 1802, MoFEP did not submit
copies of approved loan agreements to the Controller and Accountant General and Auditor-General. Additionally, the BoG did not copy CAGD with credit bank advices on receipt of external loan disbursements. I urge MoFEP to provide copies of approved loan agreements to all relevant stakeholders, including the CAG and A-G, to provide independent monitoring and reporting.
Misapplication of Internally Generated Fund (IGF) 13.
The Director-General of the Ghana Health Service (GHS) authorised the use
of IGF retained by health institutions to finance non-essential activities such as payment of allowances for entertainment and refreshment. I have advised MoFEP to collaborate with MDAs, with the view to issuing out guidelines to determine and regulate the use that retained IGFs may be put to.
Retention and use of IGF 14.
Various MDAs collected and used portions of their IGF amounting to ¢416.8
billion, in 2006, contrary to Article 176 (1a) and 178 of the 1992 Republic Constitution. I urge MoFEP and supervising ministries of MDAs to obtain presidential assent to the Ministries (Retention of Funds) Bill and also obtain retrospective approval of Parliament for the IGF retained and used by the MDAs.
Submission of monthly IGF reports by MDAs 15.
Some MDAs failed to submit monthly IGF reports to MoFEP, in
contravention of Regulation 19 (1) of FAR, L.I. 1802. This omission obscured information on total IGF collected, retained and disbursed, thus undermining planning, decision-making and also rendering the Public Accounts Financial Statements less-informative. I therefore advise strict compliance to the above quoted regulation by MDAs.
Non-receipt of information on tax revenue collections from district treasuries of CAGD 16.
Contrary to Regulation 15, FAR, 2004, L.I. 1802 and in spite of my
observation in the 2005 Report, tax revenue amounting to ¢23.57 trillion
collected and paid into the Consolidated Fund, were not receipted with treasury Counterfoil Receipts (TCRs) by respective CAGD district treasuries. Risk associated with this omission was that dishonoured cheques arising from the collections might not be independently identified and timely replaced. I urge that with the implementation of the Treasury Re-alignment Programme, the CAGD should liase with the revenue agencies of Government in order to ensure compliance with Regulation 15 of the L.I. 1802. I wish to reiterate that a similar observation was raised in my report on the 2005 Public Accounts. Management and reporting on other departmental advances and departmental revolving fund 17.
Periodic returns on departmental advances and revolving fund were not
submitted by MDAs to MoFEP and CAGD to update the two institutions, on the management of the funds. As observed in my report on the 2005 and 2006 Public Accounts, no supporting schedules were provided to substantiate the departmental devolving fund (¢9.91 billion) and other departmental advances (¢39.3 billion). I advised that balances comprising the departmental revolving fund and other departmental advances be investigated and established for financial reporting purposes. Periodic returns on the departmental revolving fund and other departmental advances be instituted, and these returns should be submitted by MDAs in receipt of these funds to MoFEP and CAGD, so that their reporting in the Public Accounts Financial Statements would reflect their status at year-end. Delays in discharging purchase considerations for divested SOEs 18.
Purchase considerations for a number of divested SOEs, divested between
1991 and 2005, were yet to be settled by various investors, including MDAs. Total outstanding purchase considerations on the divested SOEs amounted to ¢67,4 billion and DM150,000. Although no provision was made by the investing MDAs in their 2006 budgets for the discharge of the purchase considerations, there was an indication that provision was rather made for the refurbishment of the SOEs by some of the MDAs. Litigation at the courts on some of the SOEs divested was also partly to be blamed for the non-payment of the purchase considerations. I recommend that MDAs make budgetary provisions in subsequent years’ budgets to enable them discharge the
commitments on the SOEs. I also recommend that the courts should give priority hearing to cases on divested SOEs so as to make their timely settlement possible.
Payment of 17.5% SSF contributions in respect of personnel entitled to CAP 30 19.
No report or schedule, detailing personnel entitled to CAP 30, supported
payment of ¢19.9 billion made to BoG by CAGD in 2006. Additionally, the inclusion of 5% SSF Contribution deductions in the payroll of CAGD for personnel entitled to CAP 30 is irregular. Since the deductions are intended for Salaries and Pensions Accounts No. 01251-500-120-01 at the BoG, from which pensions for personnel entitled to CAP 30 are paid, the deductions must be described as such. As observed in my earlier report, I suggest that CAGD generate monthly report on the 17.5% SSF contributions to support the payments made to BoG.
Delays in effecting vehicle advance recoveries 20.
Generally, recovery of vehicle advances delayed for over eight months,
contrary to Regulation 113 (1) of L.I. 1802, which requires that the recovery from salary should commence from the next complete month after the month in which the advance was made. I urge close co-operation between the vehicle advance units of MoFEP and CAGD and related MDAs to ensure timely information on vehicle advances granted and their processing to ensure prompt recoveries.
Financial Issues Budget out-turn 21.
The out-turn for total receipts (i.e. Total revenue and net receipts from Debt)
in 2006 came to ¢42,205.9 billion and represented 95.85% of receipts budgeted for the year. The out-turn for expenditure, ¢34,887.7 billion, was also 89.74% of the budgeted provision, implying that planned programmes or activities were underfunded in 2006.
Operational results 22.
A deficit of revenue over expenditure of ¢5,328.9 billion was realised in 2006
compared to 2005 Surplus of ¢5,167.1 billion. This performance was attributed to decline in revenue generation, ¢30,664.6 billion (2005: ¢31,470.7 billion) and particularly a substantial increase in both Personal Emoluments and Transfers to Households, ¢13,627.0 billion (2005: ¢9,939.1 billion) as well as Expenditure on Investments, ¢6,101.4 billion (2005: ¢1,321.7 billion).
Revenue performance 23.
Grants, taxes on international trade, non-tax revenue and HIPC assistance
receipts, achieved delivery rate of between 100.2% and 139.3% of respective budgetary provisions, however, the other revenue sources namely, direct taxes, indirect taxes and multi-donor relief initiative (MDRI) under performed in 2006 relative to the budget. Delivery rates registered by the non-performing revenue sources ranged between 91.2% and 98.82%. The least performed revenue source was divestiture receipts which recorded 1.79%. Total revenue generated in 2006 amounting to ¢30,664.6 represented 27.3% of Gross Domestic Product, (¢112,320.3 billion), registered for the year. The ratio of total revenue to GDP for 2005 was 31.3%, showing that in 2006 relatively, less funds were derived through taxes and charges from resources generated through production of goods and services in the economy.
Expenditure control 24.
Personal emoluments and transfers to households as a ratio of total
revenue exceeded all other expenditures on item-by-item basis. This trend was also observed in 2005. Total expenditure on personal emoluments and related costs, administration, service and debt interest as a ratio of total revenue registered 70.1% (2005: 56.69%) for 2006. This meant that increasingly, more resources generated internally were employed in meeting the above expenditures, leaving limited funds for developmental purposes. Considering the current agitation for higher remuneration by various labour groups in the Public Sector, government should expedite action on a comprehensive
wages/salaries structure in order to keep expenditure within manageable limits. Also the decline in provision of funds for MDAs Service Activities should be curtailed to ensure that the MDAs perform as planned. Reporting IGF in public accounts and related financial statements 25.
Currently, the public accounts of Ghana and related financial statements
capture and report only portion of IGF not retained by MDAs generating them. The defect with this accounting policy is that it obscures the real capacity of Central Government to generate funds as well as levels of expenditure incurred by the MDAs from the retained IGF. To obviate this defect, it is advised that a new accounting policy, requiring the reporting in the public accounts of gross IGF as well as expenditures met from the retained IGF be adopted.
Delays in discharging GoG commitment on 12.5% SSF employers contribution to SSNIT 26.
GoG commitment on SSF employers’ contribution at the close of 2006 was
¢230.7 billion and this was not disclosed in the 2006 public accounts financial statements. There were also delays in 2006 in discharging GoG commitment on SSF Employer’s contributions to SSNIT. The delays attracted penalties in the year amounting to ¢122.9 billion. The penalties are a drain on the national kitty and therefore I advise prompt payment to avoid the penalties.
Inadequate disclosure of non-tax revenue 27.
Non-tax revenue reported in the 2006 financial statements did not disclose its
composition as would permit users of the statements to appreciate the performance of the various elements comprising the non-tax revenue. I thus urge appropriate disclosure.
Commitments on DACF, road arrears and non-road arrears not disclosed in financial statements 28.
Commitments of the Consolidated Fund to the District Assemblies Common
Fund (DACF), amounting to ¢233.8 billion and ¢53.9 billion for the 2005 and 2006 financial years respectively, were not disclosed in the respective public accounts
financial statements. Similarly, debts owed by GoG by way of road arrears and nonroad arrears at the close of 2006, amounting to ¢73.2 billion and ¢99.1 billion respectively, were also not disclosed in the 2005 Financial Statements. These omissions contravened Regulations 191 (a) of L.I. 1802, which enjoins CAG to compile a statement of financial assets and liabilities of the Consolidated Fund, annotated with qualifying information as would affect the significance of figures shown in the statement. Due compliance with the above quoted regulation is thus urged. Non-availability of records underpinning trust fund investment 29.
Trust Fund Investment of ¢47.4 billion reported in the 2006 public accounts
financial statement were without underlying records to permit their substantiation. The absence of the records impacted adversely on the reliability of valuation placed on the investments, and thus the truth and fairness of the financial statements.
Unreliable records for vehicle advances 30.
Records underlying vehicle advances, ¢34.7 billion, reported in the 2006
financial statements were not reliable, thus impacting on the truth and fairness of the financial statements. The unreliability of the records was traced to movement of personnel from one MDA to another. Again, I advise that monthly reconciliation of vehicle advance payments and recoveries should be instituted to facilitate detection of vehicle advance beneficiaries transferred from one MDA to another. MDAs transferring and receiving personnel should notify the advances unit, CAGD, about such movements so that vehicle advances records can be duly updated. The advances and IPPD Units, CAGD, should together determine those MDAs with inappropriate vehicle advance payments and recoveries, ascertain the cause of these anomalies and accordingly resolve them.
Qualification on financial statements of the Public Accounts of Ghana (Consolidated Fund) for the year ended 31 December 2006 31.
Once more, I qualified my opinion on the 2006 Public Accounts and related
financial statements on the “except for basis” because of the impact on the statements arising from the issues listed below:
i.
GoG investment in loans, amounting to ¢6,698.1 billion, was not performing and the loans’ recovery was in doubt.
ii.
Vehicle advances, other departmental advances, departmental revolving fund and trust fund investment, together amounting to ¢131.31 billion and reported as assets of the Consolidated Fund as at 31 December 2006, could not be substantiated because there were no related schedules or reliable records in respect of them.
iii.
An amount of ¢895.9 billion, together, owed by the Consolidated Fund to the GETFund, NHIF, SSNIT Fund and DACF at the close of 2006, were not accrued and disclosed in the 2006 Public Accounts financial statements, thus understating liabilities of the Consolidated Fund.
iv.
Cash balance of the Consolidated Fund, ¢1,168.4 billion at 31 December 2006 could not be validated because reconciled balances of bank accounts constituting the Consolidated Fund were not provided.
32.
I was therefore unable to form an opinion as to whether the financial
statements give a true and fair view of the financial position of the Government of Ghana as at 31 December 2006 and the results of its operations, cashflow and financial requirements for the year then ended. The accounts however, are in accordance with the stated accounting policies of the Government of Ghana.
DETAILED REPORT Introduction 33.
The Controller and Accountant-General (CAG) is mandated under sections
41(1)(b) and (2) and 44(1) of the Financial Administration Act, 2003 (Act 654), to prepare and submit to the Auditor-General for examination, the annual financial statements on the Public Accounts of Ghana. The financial statements comprised the following:
Statement of assets and liabilities (Balance Sheet).
Statement of revenue and expenditure.
Statement of receipts and payments.
Cashflow statement (discloses the results of cash transactions on the Consolidated Fund during the year).
Notes to the accounts.
Functional classification of expenditure by items and heads.
Summary of expenditure by heads and items.
Analysis of the position of public debts, grants, public loans funded from the Consolidated Fund, deposits, advances, equity investments, and HIPC funds.
Audit objective 34.
Section 15 of the Audit Service Act, 2000 (Act 584) requires that I examine
the statements and certify whether in my opinion, the statements present fairly financial information on the accounts, are consistent with statements of the preceding year, and are also in accordance with accounting policies of the Government as well as generally accepted accounting principles. I am also mandated to state any
reservation or make any comment that I consider necessary, and also report separately on my audit of ministries, departments and agencies (MDAs), whose accounts are consolidated in the financial statements of the central government.
Audit scope and methodology 35.
The audit covered all transactions/events undertaken by MDAs in 2006 and
impacting on the Consolidated Fund. The review of these transactions/events was effected taking into consideration, relevant provisions of the 1992 Ghana’s Republican Constitution, Financial Administration Act, Act 654, enabling enactments of statutory funds, other statutes and regulations. The audit was undertaken in two phases. The first phase involved the review of all MDAs’ dealings by branches and district offices of the Audit Service, whilst the second phase focused on processes followed by CAGD to capture the transactions/events into the public accounts and ultimately report on them in the report and financial statements on the public accounts. 36.
To satisfy the above objectives, the control environment within which the
transactions/events were effected was assessed. Inherent risks associated with significant transactions and events were also assessed with the aim of assessing the adequacy of management responses to these risks. On the basis of the outcome of these reviews, we evolved and executed audit procedures, which in my view were necessary to minimise audit risks. Systems underpinning material transaction streams and events were reviewed and depending upon the extent of reliability placed on a system, substantive tests as appropriate were undertaken. 37.
The outcomes of the above reviews were discussed with respective desk
officers and their supervising officers, whose views were considered in arriving at my conclusions. Observations derived from the reviews were communicated to desk officers and Deputy Controller and Accountant-General, Financial Management Service (DCAG/FMS) as well as other relevant parties through audit observation memoranda (AOMs). Where responses were obtained on the AOMs issued, these were duly evaluated and incorporated in this management report.
38.
I wish to state that the matters raised in this management report were the
significant issues noted during the audit. The audit was directed primarily at giving an opinion on the report and financial statements on the Public Accounts of Ghana for the year ended 31 December 2006. As a result, comments on systems and internal controls on this report may not be exhaustive. 39.
In pursuit of Section 15 of Act 584, my office has reviewed the annual
financial statements on the public accounts of Ghana for the year ended 31 December 2006. In compliance with section 44 (1) of the FAA and section 23 of the Audit Service Act, 2000, I hereby present my report and the financial statements for the year ended 31 December 2006.
The report focuses on significant management and
financial issues borne out of the review.
DETAILS OF FINDINGS Management Issues Anomalies in pensions payroll 40.
Our random sample review of the CAGD pension payroll revealed a number
of anomalies. The review, which covered October, November and December of 2006, indicated that there were:
Duplicated pensioners’ identification numbers (i.e. Pensioners’ IDs) on the pensions payroll.
41.
Pensioners without identification numbers on the payroll.
Pensioners without bank account particulars on the payroll.
Female pensioners with male reference on the payroll.
The table below portrays the summary of duplicated pensioners’ IDs found on
the payroll as well as pensioners without IDs: Month Oct, 06 Oct, 06 Oct, 06 Oct, 06 Oct, 06 Oct, 06 Oct, 06 Nov, 06 Nov, 06 Nov, 06 Nov, 06 Dec, 06 Dec, 06 Dec, 06 Dec, 06 Total
42.
Region Accra Ashanti Brong Ahafo Central Eastern Northern Volta Accra Ashanti BA Other Regions Accra Ashanti BA Other Regions
No. of Duplicated Pensioners’ IDs 4 2 2 4 2 2 6 2 2 26
No. of pensioners without ID 9 2 5 6 4 2 4 13 2 6 29 13 4 6 29 134
The outcome of the limited review revealed that there were 26 instances of
pensioners with duplicated pensioners’ IDs whilst 134 other pensioners were without IDs. As regards pensioners without bank accounts, it was observed that this anomaly was quite prevalent in all the regions, as more than 30,000 pensioners were found in the payroll without bank account particulars. 43.
The review also disclosed that 205 female pensioners in the Ashanti Region
had their names addressed with “Mr.” instead of Miss, Mrs or Ms. where appropriate. For example, I observed names like Mr. Acheampomaa Adwoa, Mr. Adwoa Yeboah, Mr. Effua Manu etc. 44.
The head of pension payments unit, CAGD, had been furnished with the
evidence on the above findings for his corrective action.
45.
Our evaluation of CAGD pension processes indicated that there were designed
controls embedded in the processes which ordinarily, should work to prevent the observed anomalies from taking place. For instance, pensioners’ unique IDs are automatically generated for all retired personnel after the payment of their respective gratuity, which is a one-time payment. Similarly, as a policy of the CAGD, payment of pensions had long been routed through the banks. As such, it was not ordinarily expected that the pension payroll would be able to effectively administer pension payments without the inclusion of particulars of pensioners’ bank accounts. 46.
Furthermore, for the duplicated pensioners’ IDs observed, their particulars
coincided almost in all respects – i.e. the pensioners’ IDs, names, ranks, banks and pension payable were invariably the same. These evidence point to double payments made to the affected pensioners.
47.
In my view, the above weaknesses observed were indication that
controls designed to operate over pension payments were not effective. Because of the significant numbers of pensioners paid from the national kitty, the anomalies noted could materially impact adversely on the liquid resources of the country. Personnel involved in the compilation and review of the pension payroll had evidently failed to exercise internal checks that are required of them. Recommendations 48.
Consequently, I recommend as follows:
i.
As the review undertaken is a limited one, CAGD management should carry out extensive investigation into the pension payroll preparation and review before pension payments, so that causative factors underpinning the anomalies observed are identified and addressed.
ii.
Upon the completion of the extensive investigation, double pension payments observed, if any, should be retrieved and those involved sanctioned.
iii.
Personnel involved in the preparation and review of the pension payroll should be asked to explain why disciplinary action should not be taken against them, for failing to exercise due internal checks.
Management response 49.
The Chief Treasury Officer (CTO), pensions payment section, explained
that the duplication in pensioner’s IDs came about as a result of some of its entry clerks not being conversant with the new system (IPPD 2). He asserted that as a result of this, it was agreed upon with the consultants on the system that only three staff members should in the interim handle that schedule so that proper supervision could be exercised on them. The over-payments noted have been triggered for recovery. 50.
As regards pensioners without bank account particulars, the CTO
admitted that this was a phenomenon and they were in consultation with Ghana Commercial Bank (GCB) managers to enable the pensioners to open account with their pensions. The CTO confessed that most data entry clerks did not check a drop down window to select the approved reference and that might have accounted for the inappropriate reference affixed to female pensioners. However, this anomaly was being corrected. Over-payment of salaries to home-based staff of Ghana’s foreign missions 51.
In June 2002, the then Minister of Foreign Affairs announced vide
circular SCR.SAL/RE/FS of 28 June 2002 that the President had endorsed the restoration of 15% of salaries of foreign service officers, which was slashed in February 1993. The restoration was to take effect from 1 July 2002. With this
announcement, it was expected that mechanised payrolls for Ghana’s foreign missions compiled by CAGD would reflect the increase in salaries, but up to the close of 2006, this was not observed. 52.
On account of the above apparent omission, Ghana’s foreign missions
were not paid on the basis of CAGD monthly-mechanised payrolls, but rather monthly manual payrolls compiled by the missions themselves. My review of a random sample of some missions (Lagos/Abuja, Pretoria, Paris, Copenhagen and Tokyo) payrolls for 2006 indicated that instead of the 15% authorised increase in salaries of the home-based staff, increases of rather 18% were effected by the missions. 53.
The missions non-compliance with the authorised 15% increase in
salaries led to over-payment of salaries to home-based staff ranging from US$3,912 to US$5,784 per staff in 2006. Time constraints would not permit review of actual salary payments effected to home-based staff since the announcement of the salary increase in 2002. However, it is thought that the pattern of salary payments to the missions’ staff would mirror that observed in 2006. 54.
When I inquired from CAGD why the 15% authorised increase in
salaries of home-based staff was not incorporated in the mechanised payrolls of the Missions, it was explained that such authorised increase should normally be communicated to the CAGD by MoFEP, which was not done. My inquiry on the issue at MoFEP appeared to indicate that the ministry did not know about the 15% authorised increase in salaries of home-based staff. Recommendations 55.
It was advised therefore that: i.
CAGD should incorporate the 15% increase in salaries of homebased staff on the mechanised payrolls of Ghana’s missions abroad.
ii.
Ghana’s Missions abroad should henceforth cease paying their home-based staff on the basis of payrolls prepared by the missions.
iii.
The CAGD in collaboration with Ministry of Foreign Affairs, Regional Co-operation and NEPAD should determine salary payments made to the entire missions’ home-based Staff which were over and above the 15% authorised salary increase since July 2002. Where over-payments are observed, these should be recovered over a reasonable period of time from the affected home-based staff salaries.
Management response 56.
No response has been received on the observation as at the time of
reporting. Overpayment to deduction code owners: disclosure of deposits 57.
inadequate presentation and
My review of deposits reported in the 2006 Public Accounts Financial
Statements indicated that detailed opening and closing balances were presented for the various owners of the deposit accounts (Deduction Code Owners – DCOs) in respect of third party deductions. The accounts of the DCOs showed no movements in the year – i.e. detailed information regarding funds accrued, as well as payments made, to the individual DCOs in 2006 were absent, implying that ledgers were not being maintained and updated as appropriate. 58.
Contrary to the above, I observed that the CAGD made total payments
of ¢352,431,550,632 to the DCOs in the year, far in excess of the total accrued funds of ¢81,204,950,976 to the DCOs, resulting in a deficit on deposits (¢271,226,599,656) as detailed below: Particulars
Amount
¢ Opening balance 1/1/2006
11,523,562,591
Add total receipts
69,681,388,385 81,204,950,976
Less total payments Deposits as at 31/12/06 59.
352,431,550,632 (271,226,599,656)
I observed that post IPPD 2 implementation challenges since July 2006
had led to the non-prompt payment of accrued funds to DCOs by the Payroll Processing Division of the CAGD, leading to a build up of outstanding balances. Ordinarily, this non-prompt payment to DCOs should have resulted instead in deposits being reported as liability of the Consolidated Fund. Consequently, I am of the view that he debit balance recorded on deposits had been occasioned by non-submission of information on payroll-related deductions and payments to DCOs by the payroll processing division to the main accounts and/or inappropriate accounting for these dealings. Recommendations 60.
I therefore urge management to: i.
maintain and update individual ledger accounts for the various DCOS;
ii.
reconcile DCOs accounts balances with the deposit control account and deposit bank account;
iii.
investigate the deficit on deposits in the Public Accounts; and
iv.
after investigation if the position on deposits as observed is accurate, the deficit should be disclosed as an asset in the Public Accounts.
Management response 61.
CAG accepted my recommendations and indicated that steps were being
taken to address the anomalies observed.
Delay in transferring accrued funds to the GETFund 62.
Section 4(2) of the GETFund Act 2000, Act 581, mandates the Value Added
Tax Service (VATS) to pay directly into the GETFund bank accounts, the proportion of revenue required to be paid within thirty (30) days of receipt of VAT revenue. 63.
My review indicated that the VATS in collaboration with the Ministry of
Finance and Economic Planning (MoFEP) determined monthly, the funds accrued to the GETFund. Releases to the GETFund were then authorised, approved and paid by MoFEP, CAGD and the BoG respectively. However, I observed that the accrued funds determined by VATS were not communicated to the Administrator of the GETFund. 64.
Of the ¢1,112,378,800,000 that accrued to the GETFund in 2006,
¢1,069,940,800,000 was transferred into the GETFund during the year. Out of the amount transferred in 2006, ¢329,598,000,000 was arrears relating to prior years. This meant that ¢740,342,800,000, representing 66.55% of 2006 accrued funds were paid into the GETFund in 2006. Funds thus owed the GETFund as at the close of 2006 was ¢407,846,000,000. This amount comprised outstanding payment for 2006, ¢372,036,000,000, and arrears for prior years, ¢35,810,000,000. The funds due the GETFund should have been disclosed as liability of the Consolidated Fund at the enddate. However, this was not evident in the 2006 Public Accounts Financial Statements.
65.
Also in 2006, MoFEP and CAGD delayed transfer of accrued funds into the
GETFund bank accounts for periods ranging from two (2) weeks to three (3) months. For instance, accrued funds for October and November 2006 were paid in January 2007.
66.
The delayed transfer of accrued funds to the GETFund bank accounts would
undermine the growth of the GETFund as well as programmes and projects the GETFund is used to finance. Additionally, the non-communication of monthly assessed accrued funds by VATS to the Administrator of GETFund, could obscure funds due the GETFund and possibly, non-payment of such funds. In my view, the shift of responsibility from VATS to MoFEP for transfer of the accrued funds, contrary to the provision contained in VATS enabling enactment, is to be blamed for the late transfers into the GETFund. This is because MoFEP, in the face of budgetary constraints, may prioritise national needs and thereby not effect transfer of accrued funds timely into the GETFund bank accounts.
Recommendations 67.
I advise therefore that:
i.
VATS in collaboration with MoFEP should determine monthly, accrued funds to the GETFund and thereafter, this should be duly communicated to the GETFund Administrator.
ii.
VATS and CAGD should ensure timely transfer of accrued funds into the GETFund in accordance with section 4 (2) of the GETFund Act, 2000, Act 581.
iii.
Funds due the GETFund at the close of 2006 should be disclosed as liability of the Consolidated Fund in the 2006 Public Accounts Financial Statements.
Management response 68.
No response has been received on the observation as at the time of reporting.
Delays in transferring funds into National Health Insurance Fund
69.
Payment into the National Health Insurance Fund (NHIF) is undertaken in two
phases. The first phase involves VAT collections being paid into the National Health Insurance Levy Account (NHIL Account) and SSNIT deduction of 2.5% on the 17.5% contributions by contributors into the Levy Account. The second phase, on the other hand, entails transfer of funds from the Levy Account into the NHIF by MoFEP and CAGD. It is only when the NHIF receives inflows that the National Health Insurance Commission can access it for purposes of running the National Health Insurance Scheme. 70.
Examination of SSNIT handling of SSF contributions and subsequent payment
into the NHIL account revealed that SSNIT kept the contributions and effected payment quarterly into the NHIL account. Funds due to the NHIL account in 2005 and 2006 and dates on which they were paid by SSNIT into the NHIL Account are presented below:
Amount due to NHIL Account SSNIT Payment date
71.
2005 4th Qtr ¢billion 56.048
2006 1st Qtr ¢billion 106.416
2006 2nd Qtr ¢billion 82.594
2006 3rd Qtr ¢billion 74.777
2006 4th Qtr ¢billion 145.909
3/3/06
24/5/06
10/8/06
20/11/06
20/2/07
Again, I noted that the transfers from the NHIL account into the NHIF were
not regular. As of January 2006, there was an accrued balance of ¢876,611,047,151 on the NHIL account that should have been transferred into the NHIF in prior periods. By November 2006, the total arrears owed to the NHIF by NHIL account had grown to ¢1,676,980,753,831.49, out of which ¢1,203,090,932,773 was transferred into the NHIF in December 2006 as follows:
Value Date
Payment into NHIF Amount (¢)
7 Dec 2006
101,086,000,000
19 Dec 2006
602,004,932,773
29 Dec 2006
500,000,000,000
Total
1,203,090,932,773
72.
Contrary to the above observation, section 78(2) of the National Health
Insurance (NHI) Act, 2003, Act 650, stipulates that “The Director-General of the SSNIT shall at the end of each month cause to be transferred to the Fund 2.5% of each person’s 17.5% Social Security Contributions for the preceding month”. Thus the timing of the above payments made by SSNIT into the NHIL account was delayed between two to four months. Similarly, there was no need for retention of accrued funds in the NHIL account, as by arrangement, that account only serves as a conduit for transfer into the NHIF. 73.
The non-adherence to the NHI Act provision regarding transfer of funds into
the NHIF and the inordinate delay noted in the movement of funds from the NHIL account to NHIF, could significantly deprive the National Health Insurance Commission (NHIC) of needed funds for the smooth running of the National Health Insurance Scheme. 74.
Additionally, my review disclosed that the inflows that hit the NHIL Account
in 2006 was ¢1,476,876,427,757, made up of NHI Levy from VAT collections, ¢1,157,038,616,444, and SSF contributions of ¢319,837,811,314 paid by SSNIT. This total payment into the NHIL account did not reflect the transfer payment (¢1,228,211,632,357) presented in the Public Accounts Financial Statements. In my view, this apparent disagreement could be blamed on absence of periodic reconciliation among SSNIT, CAGD, MoFEP and NHIC.
Recommendations 75.
I therefore advise that:
i.
SSNIT should adhere to the provisions of the NHI Act 650, by transferring the 2.5% on the 17.5% contribution made by SSNIT contributors on the preceding month basis. In default, SSNIT should be made to pay appropriate penalty to the NHIF.
ii.
MoFEP should ensure regular transfer from the NHIL account to NHIF, to facilitate the smooth running of the scheme.
iii.
SSNIT, MoFEP, CAGD and NHIC should periodically reconcile their records on accrued funds and transfers into the NHIL account and NHIF to stem the disagreement observed.
Management response 76.
CAGD indicated that it has noted my recommendations.
Management and reporting on GoG equity investment in local entities
77.
Total GoG equity investment in local entities reported in the 2006 Public
Accounts Financial Statements was ¢1,158,781,902,676. These equity investments are classified as follows:
Institution Public Boards & corporations Private companies Totals 78.
No. of institutions involved 40
Investment value (¢) as per accounts 150,879,692,431
57 97
1,007,902,210,245 1,158,781,902,676
As earlier observed in the Auditor-General’s Report on the 2005 Public
Accounts, GoG equity investment in local entities continued to be reported in the Public Accounts Financial Statements at the original costs at which they were acquired. The effect of this would be to understate GoG interest in these entities in the 2006 Financial Statements. 79.
I also noted that the extent of GoG equity holdings in the investee entities
were not disclosed in the note to the equity investments in the Financial Statements, thus obscuring information on the extent of GoG control in the entities. Additionally, examination of the schedule supporting the equity investments indicated that some investee entities contained in the schedule, were not in existence at the end of 2006. Instances of these are:
Bank for Housing and Construction
National Savings and Credit Bank
State Construction Corporation
State Fishing Corporation
Food Production Corporation
80.
Ghana Industrial Holding Corporation
Post and Telecommunication Corporation
State Hotels Corporation
My review further indicated that out of a total of 97 investee entities in which
GoG has equity investments, only 15 entities consistently paid dividends within the period 2004 - 2006. Total dividends received in 2006 was ¢74.39 billion. Because of absence of information on share value of the investee entities from which the dividends were received, it was not possible to determine the performance of the individual equity investments. Nevertheless, taking cognisance of the fact that only 15 out of the 97 investee entities paid returns consistently on GoG investments, I am of the view that performance of the GoG equity investments in 2006 was generally poor. Additionally, there were delays in the payment of dividends by the investee entities. The following table exemplifies this view: Dividend For 2002
Dividend Paid in 2004
Ghana Post Co. Ltd
2002
2004
225,000,000
Scanstyle Ltd
2002
2004
40,800,000
State Housing Co
2002
2004
400,000,000
Tema Development Corporation
2002
2004
894,061,000
Ghana Libya Arab Holding
2003
2005
US $354,600
Ghana Manganese Co. Ltd
2003
2005
130,785,600
Ghana Manganese Co. Ltd
2004
2006
US $245,956.23
Tema Development Corporation
2004
2006
1,000,000
Investee Entity Ghana Manganese Co. Ltd
81.
Amount of Dividend (¢) 153,700,000
Contrary to the situation observed above, Regulation 145(d) of the FAR, L.I.
1802 enjoins Administering Authorities for GoG investments to, among others:
i.
Report to the Minister of Finance and Economic Planning, any delay in declaration and payment of dividends; and
ii.
Any unsatisfactory features of the investee entities’ operations likely to endanger GoG investment.
82.
I did not sight evidence on the existence of Administering Authorities for the
GoG equity investments and neither was there indication that the responsibilities spelt out for Administering Authorities were being discharged. In my view, the nonappointment of Administering Authorities and non-discharge of their responsibilities are to be blamed for the relative poor performance of the GoG equity investments in the local entities. 83.
Also, the inclusion of non-existing investee entities in the schedule
underpinning the equity investments in the financial statements undermined the schedule’s reliability and thus the truth and fairness of the 2006 Public Accounts Financial Statements.
Recommendations 84.
On account of the foregoing, I recommend as follows:
i.
MoFEP should investigate the status of all investee entities in which GoG has equity investment with the view to determining the entities continued existence, GoG shareholdings and also the value at which they can be reported for financial purposes.
iii.
MoFEP should ensure that Administering Authorities are appointed for all GoG equity investments.
iii.
Periodic monitoring should be undertaken to ensure that these Administering Authorities duly discharge the responsibilities statutorily assigned to them.
Management response 85.
No response has been received on the observation as at the time of reporting.
GoG investment in loans reported in the Public Accounts Financial Statements 86.
GoG investment in loans was reported in the 2006 Public Accounts Financial
Statements at ¢6,698.1 billion. The composition of this asset is provided below.
General investments
2
Balance as at Dec. 2006 (¢) 9,219,796,554
Statutory Board & Corporations
67
3,439,314,527,114
Companies
70
1,866,461,092,534
Miscellaneous investments
252
1,298,244,328,358
Institutions
Other Government Total 87.
No. of Institutions Involved
2 391
84,825,554,789 6,698,065,299,349
The Auditor-General’s report on the 2005 Public Accounts observed that the
loans GoG had invested in were not performing and their recoverability were also in doubt. In response to this finding, MoFEP indicated that it had appointed debtcollecting agencies to pursue the recovery of the loans. 88.
My subsequent review indicated that total loans assigned by MoFEP to the
agencies to recover amounted to ¢131.98 billion and as at the close of 2006, ¢866.7 million had been recovered by the agencies. Recovery rate for the Loans assigned to the agencies thus stood at 0.66%. MoFEP’s own recovery efforts and that of the agencies together raked in total recoveries of ¢13.2 billion, representing 0.20% of GoG investment in the loans. Loans extended to Republics of Burkina Faso and Guinea (Conakry) remained outstanding at the close of 2006. 89.
The poor recovery rates noted above, in my view, are indication that the loans
are indeed not recoverable. On the basis of financial prudence, I am therefore of the opinion that the value at which the loans had been reported in the 2006 Public Accounts Financial Statements cannot be substantiated.
Recommendations
90.
On account of the foregoing and also the fact that the GoG investment in the
loans was quite material, I advise re-statement of the loans reported in the financial statements to reflect the financial reality.
Management response 91.
No response has been received on the observation as at the time of reporting.
Recording and Reporting Ghana’s External Debt Stock 92.
As part of our review of the Public Accounts of Ghana for the year ended 31
December 2006, we have examined Ghana’s External Debt Stock. The external debt position at 31 December 2006 as reported by both CAGD and ADMU, MoFEP was US$ 1,982.9 million (¢18,311.9 billion).
Just at the point of issuing the Draft
Auditor-General’s report on the 2006 Public Accounts, the BoG represented through a data submitted to this office that Ghana’s External debt stock at close of 2006 was US$ 3,303.4 million (¢30,507.7 billion). 93.
On account of the wide disparity between BoG and MoFEP as well as CAGD
positions on the external debt stock, a four-party group comprising, Audit Service, CAGD, MoFEP and BoG was constituted to determine the external debt stock at end of 2006. The group after having considered debt disbursements, repayments and debt cancellations came to the position that BoG external debt stock was US$2,572.66 million (¢23,758.82 billion) whereas that of MoFEP was US$ 2,131.29 million (¢19,682.72 billion), a difference of US$ 441.37 million (¢4,076.10 billion). 94.
In our view, the difference in the reconciled external debt position at the close
of 2006 recorded by BoG and MoFEP can be attributed to:
i.
Non-recognition by MoFEP of short-term external financing for cocoa purchases in its recording and reporting of the debt.
ii.
Differences in format for recording and reporting the external debt stock. For instance, whereas MoFEP records the debt on creditor-institution and line of credit basis, BoG reckons on creditor-institution basis alone.
iii.
Non-comprehensive information flow among BoG, MoFEP and CAGD, particularly debt disbursements, repayments and cancellations.
iv.
Absence of periodic reconciliation among BoG, CAGD and MoFEP on the external debt stock.
95.
The country’s external debt stock is an important factor in the determination of
its financial health. The anomaly observed prevented this determination.
Recommendations 96.
On account of the foregoing, we advise that:
i.
BoG, CAGD and MoFEP should adopt uniform basis for the recording and reporting of Ghana’s External debt stock. Particularly, a unique key (i.e. debt identification numbers etc) be incorporated in the debt recording to facilitate reconciliation.
ii.
Periodic reconciliation on the country’s debt stock be undertaken among the BoG, CAGD and MoFEP, so that the three institutions’ position on the debt stock would co-incide always.
iii.
The BoG, CAGD and MoFEP should jointly resolve the difference of US$ 441.37 million in their position on Ghana’s External debt stock at the close of 2006.
iv.
The short-term debt financing for cocoa purchases should be recognized as part of Ghana’s external debt stock, if existing at year-end.
Management response 97.
Response on the above observation is yet to be received.
External loan agreements and disbursements: non-communication to Controller and Accountant General and Auditor-General
98.
My review indicated that the MoFEP initiates and signs loan agreements with
various creditor institutions and agencies with the approval of Parliament. However, no copies of these loan agreements were submitted to the Controller and AccountantGeneral (CAG) and Auditor-General (AG). Additionally the Bank of Ghana (BoG) did not copy CAGD with credit bank advices on receipt of external loan disbursements. Information on disbursements of external loans was communicated periodically by MoFEP to the CAGD for update of its documentation. 99.
The situation observed above is contrary to regulation 134(4) Financial
Administration Regulations 2004, LI 1802, which stipulates that copy of approved agreement on loans shall be forwarded to the CAG and AG. Additionally, section 11(1) of the LI 1802, also mandates the CAG as the Chief Accounting Officer of government, to be responsible for public and trust monies payable into the Consolidated Fund and other funds. Non-communication of receipt of loan disbursements to the CAG is thus at variance with this requirement. 100.
In my view, the above situation observed undermines CAGD ability to
independently monitor and update its documentation on external inflows effectively, as CAGD is neither updated with bank credit advices on the external inflows as well as various loan agreements.
Recommendation 101.
I thus urge MoFEP to provide copies of external loan agreements to all
stakeholders, including the CAGD and AG. Additionally the BoG should provide copies of bank credit advice on external loans inflows to the CAGD for accurate reporting of the external public debt
Management response 102.
No response has yet been received on the observation.
Misapplication of IGF
103.
Ghana Health Service (GHS) circular No. GHS/DGS/G-23 of 23 March
2004 issued by the Director-General, stipulated the use of IGF within the health institutions as follows: i.
IGF is recommended for payment of casual staff mostly ward clerks, housekeepers and watchmen.
ii.
IGF may be used in engaging the services of nurses, doctors and other cadres of heath workers prior to being fully engaged as staff to cover period of recruitment.
iii.
IGF may be used for routine stationery, maintenance, office consumables and running cost of official vehicles.
iv.
IGF may be used as allowances paid to staff and for entertainment and refreshment.
v.
IGF should not be used for the purchase of vehicles, in the rare event; the approval must be sought from the Director-General of Ghana Health Service.
104.
Article 176 (2b) of the 1992 Republican Constitution and Section 6(2b)
of the FAA, Act 654, both authorise MDAs, where backed by Act of Parliament, to retain specific portions of their IGF in situations where the IGF are used for purposes of defraying expenses of their operations. Such expenses in my view, are those pertaining ostensibly to the operations of the MDAs - i.e. those activities if delayed or not implemented would impede attainment of MDAs objects. 105.
Critical study of the uses to which IGF may be applied in health
institutions, as directed by the GHS Director-General, suggests that the authorisation for use of the IGF in the following instances is not appropriate:
i.
Payment of casual staff mostly, ward clerks, housekeepers and watchmen.
ii. 106.
Payment for entertainment and refreshment.
The premises on which I disagreed with the above uses of the IGF are as
follows:
i.
Allocations are made in the GoG budget for the above expenses and therefore the blanket authorisation given to health institutions to meet them from the IGF would lead to abuse.
ii.
In the case of payment for casual staff
(i.e. ward clerks,
housekeepers and watchmen), a restriction should have been placed on its financing from the IGF – i.e. IGF may be used for such payments until such personnel are taken on in the GoG payroll. iii.
There are no safeguards for expenses met from IGF. Unlike MDAs’ allocations in GoG budget, which undergo thorough scrutiny, including reviews effected by the budgeted entity, supervising MDA, MoFEP as well as Parliamentary approval, the same cannot be said of allocations derived from a MDA’s IGF. As a result, one cannot rule out abuse of IGF.
Recommendations 107.
In the light of the foregoing, I advise that: i.
The use of IGF for purposes already provided for in the GoG budget should only be limited to situations where GoG budget allocations have not been made at all or proved inadequate. In the former situation, the use of the IGF should immediately be discontinued when funds under the GoG budget become available. For the latter situation, justification must be provided by MDA’s management for such use.
ii.
To make possible a clear-cut policy on use of IGF, MoFEP in collaboration with relevant MDAs, should issue out guidelines on the uses to which IGF may be put, to ensure efficient and effective use of all IGF permitted to be retained by MDAs for internal purposes.
Management response 108.
No response has been received on the observations as at the time of reporting.
Retention and use of IGF 109.
My review of Non-Tax Revenue (i.e. IGF) for 2006 revealed that the
MDAs listed below, collected, retained and used IGF amounting to ¢549.38 billion without due approval of Parliament: MDA National Council on Tertiary Education Ghana Immigration Service
49,855.82
Registrar-General's Department
44,431.52
Driver and Vehicle Licensing Authority
29,435.63
37 Military Hospital
24,429.68
Ministry of Water Resources, Works and Housing
7,931.06
Police Hospital
4,726.56
Ministry of Foreign Affairs
888.20
Prisons Service
691.64
Total
110.
Amt Retained (¢ million) 386,996.67
549,386.78
My review further revealed that some MDAs requested permission of
MoFEP to retain and use various percentages of their IGF. On the strength of these requests, MoFEP initiated the passage by Parliament of the Ministries (Retention of Funds) Bill on 14 December 2006. However, the bill is yet to receive Presidential assent and thus, effectively not a law to back the retention and use of the IGF by the above MDAs. 111.
In another instance, I observed in the case of Ministry of Water
Resources, Works and Housing that ¢4.05 billion IGF, realised from sale of
GoG land at North Ridge, was not paid into the Consolidated Fund. Instead, the funds realised was utilised in a project involving replacement of bungalows. 112.
The above situation observed contravened articles 176(1a) and 178 of
the 1992 Republican Constitution of Ghana as well as sections 6(1) and 9 of the FAA, Act 654. This is because the MDAs involved relied on administrative authorisation to retain and use the IGF for purposes of their operations.
Recommendations 113.
In recognition of the fact that the use of retained IGF facilitates
operations in some MDAs, I recommend that MDAs in contravention of the above quoted laws should: i.
Obtain retrospective approval of Parliament to cover their retention and use of the IGF.
ii.
Supervising Ministries of the contravening MDAs and MoFEP should work to procure the Presidential assent to the passed bill, so that the MDAs operations are rendered lawful.
iii.
Ministry of Water Resources, Works and Housing should channel all future proceeds from such land sales into designated Non-Tax Revenue Account and also provide for expenditures to be incurred on the bungalows replacement programme in the Ministry’s budget before embarking on the programme.
Management response 114.
As at the time of reporting no response have been received on the above
observations.
Submission of monthly IGF reports by MDAs
115.
Review of IGF returns, which MDAs are required to submit on monthly
basis to MoFEP, indicated that out of a sample of 14 MDAs selected, 10 MDAs fully submitted their IGF returns in 2006, whilst four partially did. The following shows the status of returns filed by the four defaulting MDAs. MDA
Months returns were not submitted
Forestry Commission
Jan – Sept, Dec
Ghana Broadcasting Corporation
Jan – Mar, Oct – Dec
6
Lands Commission (HQ)
Jan – Mar, July – Dec
9
Ministry of Fisheries
Jan, Feb, May, June
4
116.
No. of months 10
The FAR, 2004, L.I. 1802, Regulation 19(1) however enjoins a head of
department to fully disclose all Non-Tax Revenues collected, lodged or retained as part of the monthly report to the Minister of Finance and Economic Planning. Non-compliance with this Regulation is deemed financial indiscipline, which is sanctioned under Regulation 8, LI 1802. 117.
The effect of the above omission is that adequate information on IGF
collected, retained and disbursed is not made available for purposes of compiling the Public Accounts and related financial statements, thus undermining effective planning and decision-making as well as making the financial statements uninformative. Recommendation 118.
I therefore advised that section 8(1), LI 1802, be invoked on all MDAs
that fail to adhere to the dictates of regulation 19(1) of the FAR. Management response 119.
As at the time of reporting no response have been received on the
observation. Non-receipt of information on tax revenue collections from District Treasuries of CAGD
120.
Tax revenue amounting to ¢23.57 trillion, collected by the Revenue
Agencies of government in the year 2006, were not receipted with Treasury Counterfoil Receipt (TCR) by CAGD District Treasuries. As a result, CAGD records on tax revenue collections were obtained directly from monthly returns submitted to the CAGD by the Revenue Agency Governing Board (RAGB). The RAGB returns provide information on tax revenue collected and lodged, excluding information on taxes collected which later become dishonoured cheques and their subsequent replacement. 121.
The non-receipting of the tax revenue by the District Treasuries is at
variance with the dictates of regulation 15, FAR, 2004, L.I. 1802. This regulation requires any public officer who holds public and trust monies to issue official receipts for them and lodge same into the relevant public fund bank account within 24 hours of receipt. 122.
The non-capturing of the tax revenue collections by the District
Treasuries denies the CAGD independent source data on tax revenue collections, which serves as a check on the accuracy, completeness and validity of the monthly revenue returns submitted by the Revenue Agencies Governing Board to the CAGD. The absence of cash transcripts from the District Treasuries covering tax collections, also denies CAGD insight into existence of dishonoured cheques and extent and timeliness of their replacement. 123.
I wish to emphasise that a similar finding was raised in the 2005
Auditor-General report on the Public Account of Ghana. However, no action has been taken on the finding’s recommendation.
Recommendations 124.
I therefore advise again that: i.
With the
implementation
of
the Treasury Re-alignment
Programme, the CAGD should liaise with the Revenue Agencies
of Government in order to ensure compliance with regulation 15 of the L.I. 1802. ii.
CAGD revenue unit should undertake monthly reconciliation between the RAGB monthly return and schedule of tax revenue collections, compiled from the cash transcripts obtained from the District Treasuries. The objective for this pursuit is to determine timely replacement of dishonoured cheques, if any.
Management response 125.
CAGD contended that technology has defeated the purpose for issuance
of Treasury Counterfoil Receipts (TCRs). This is because the Revenue Agencies have instituted measures where lodgements are made direct to bank and transferred straight to the Consolidated Fund. CAGD cited GCNet System at Tema to buttress this viewpoint. This notwithstanding, CAGD management is consulting with the Revenue Agencies to determine at what point the TCRs should be issued. 126.
I concede that the mode of payment of taxes has changed considerably
with the introduction of the GCNet System by CEPS. However, the rationale for suggesting the receipting of taxes collected at the district levels is to ensure that the totality of taxes collected is captured at the source of generation so that cheques that subsequently become dishonoured would be independently determined by CAGD, that way the CAGD can pursue the cheques timely replacement. This oversight responsibility when exercised by CAGD, would complement those measures on replacement of dishonoured cheques pursued by the Revenue Agencies, thus ensuring the effectiveness of the measures. Management and reporting on other departmental advances and departmental revolving fund
127.
Departmental revolving fund and other departmental advances were
respectively reported in the 2006 Public Accounts Financial Statements as ¢9.91 billion and ¢39.3 billion. However, detailed schedules showing the make-up of the above items could not be provided to us to make their substantiation possible. 128.
As regards the departmental revolving fund, I observed that no periodic
returns were submitted by the MDAs in possession of the revolving funds to CAGD and MoFEP, to update the two institutions on the management of the revolving funds. Funds for loans/advances derived from the MDAs’ revolving funds and granted to staff of the MDAs attract a minimum of two percent interest per annum. Thus over time, growth of the MDAs’ revolving funds should be reasonably anticipated. For instance, based on the balances on the departmental revolving fund and other departmental advances at the close of 2006, total interest of approximately ¢983.91 million was expected to accrue on the Funds in 2006. The fact that the balances on the department revolving fund and other departmental advances remained constant at the close of both 2005 and 2006 was indication that the growth in these funds had not been incorporated in the 2006 Public Accounts Financial Statements. 129.
Additionally, I noted misstatements in the disclosures relative to departmental
revolving fund and staff advances. These are summarized below: Thrust Area Total staff advances Revolting Fund
130.
Item in Accounts ¢ 80,934,973,576
Amount in schedule ¢ 80,920,076,208
Variance ¢ 14,897,368
9,908,516,552
9,657,346,552
251,170,000
Comments Over-statement of balance stated in balance sheet Over-statement of balance stated in balance sheet
Contrary to the observation made above, sections 3 and 41(2a) of the FAA,
Act 654, vests the Controller and Accountant-General (CAG) with the responsibility to keep, render and publish statements of the Public Accounts in accordance with generally accepted accounting principles. To facilitate the discharge of these responsibilities, regulation 33 (1) FAR L.I. 1802, further vests the CAG with the authority to carry out inspections as the CAG considers necessary to ensure the integrity of internal control system operating in MDAs.
131.
On account of the foregoing, I am of the view that the departmental revolving
fund and other departmental advances presented in the 2006 Public Accounts Financial Statements could not be supported with empirical evidence, thus impacting adversely on the truth and fairness of the Financial Statements. 132.
It is instructive to note that the finding conveyed here on other departmental
advances coincided with that reported in the Auditor-General’s report on the 2005 Pubic Accounts. The fact that this finding has again been established in 2006 is an indication that measures suggested to rectify the anomaly had not been carried through.
Recommendations 133.
As a result, I recommend again that:
i.
Balances comprising the departmental revolving fund and other departmental advances be investigated and established for financial reporting purposes.
ii.
Periodic returns on the departmental revolving fund and other departmental advances be instituted, and these returns should be submitted by MDAs in receipt of these funds to MoFEP and CAGD, so that their reporting in the Public Accounts Financial Statements would reflect their status at year-end.
Management response 134.
CAGD contended that Departmental Advances and Revolving Fund are
one-off expenditures and not investments and therefore the accrued interest on the funds are for the MDAs. 135.
I maintain that funds given to MDAs as departmental advances and
revolving fund, which are appropriately captured in the Public Accounts as assets of Consolidated Fund, are GoG funds and must be treated as such.
Delay in discharging purchase consideration for divested SOEs 136.
My review of divested SOEs revealed that the purchase considerations
for a number of the SOEs purchased by various investors, including MDAs, were yet to be discharged. The SOEs had been divested between 1991 and 2005. Total purchase consideration outstanding on the divested SOEs amounted to ¢67,422,517,067.78 and DM150,000 as at the close of 2006. 137.
The MDAs that acquired some of the divested SOEs are Office of
Parliament, Ministry of Food and Agriculture and Ministry of Trade and Industry. I observed that although no provision was made by the investing MDAs in their 2006 budgets for the discharge of the purchase considerations, there was indication that provision was rather made for the refurbishment of the SOEs by some of the MDAs. Litigation and non-payment of landowners were also partly to be blamed for the inability of the various private investors to discharge the purchase considerations. 138.
Since some of the SOEs had been divested for a considerable period of
time, prevalence of the situation observed would undoubtedly impact adversely on the state of the SOEs divested, thus precluding any benefits being derived from the divested entities.
Recommendations 139.
On account of the foregoing, I advise as follows: i.
The judiciary should be sensitised to give priority hearing to all divestiture cases before it. This is intended to make timely settlement of all divestiture cases possible.
ii.
MDAs that had acquired divested SOEs should ensure that provision is made in their subsequent budgets to discharge their commitments on the SOEs.
Management response 140.
As at the time of reporting no response have been received on the
observations. Payment of 17.5% SSF contributions in respect of personnel entitled to CAP 30 141.
Personnel in the public sector entitled to CAP 30 make 5% SSF
Contributions which are augmented by GoG SSF Employers Contribution (12.5% SSF). These contributions are subsequently paid by CAGD into the Salaries and Pensions Accounts No. 01251-500-120-01 at the BoG. My review of these payments, which came to ¢19.9 billion in total in 2006, were without any reference to those entitled to CAP 30, though the number of GES and Civil Servants qualifying for CAP 30 accompanied the payments. 142.
In my view, the non-generation of a report detailing personnel entitled to
CAP 30 or the absence of reference of a sort to these personnel, offends regulations 39(2)(C), Financial Administration Regulations, LI 1802, which requires that transactions be properly authenticated to show amounts due and payable. Prevalence of the situation observed could be exploited to enable personnel who are not entitled to CAP 30 to benefit from the scheme. 143.
Additionally, the inclusion of 5% SSF Contribution deductions in the
payroll of CAGD for personnel entitled to CAP 30 is irregular. Since the deductions are ultimately intended for Salaries and Pensions Accounts No. 01251-500-120-01 at the BoG, from which pensions for personnel entitled to CAP 30 are paid, the deductions must be described as such in the CAGD payroll. 144.
It is worth noting that a similar observation was conveyed in the
Auditor-General’s report on the 2005 Public Accounts of Ghana. The finding
required that the details of personnel underpinning the 17.5% SSF contribution payments for 2005 be provided. These details are yet to be provided. Recommendation 145.
I urge again that the particulars of personnel entitled to CAP 30 be
generated monthly to corroborate the 17.5% SSF contribution payments to BoG. Also the 5% SSF Contribution deductions in CAGD payroll for personnel entitled to CAP 30 should be given appropriate narration. Management response 146.
CAGD asserted that compiling list of CAP 30 Civil Servants and GES
Staff would be difficult at the moment. The data was initially compiled and put on a computer, which was retrieved monthly and attached to payments made to SSNIT. However, the computer got crushed and was sent to the UK for the data to be retrieved. This has since not been done. In the interim, information on the number of monthly CAP 30 retirees are available and this is what is used in determining CAP 30 Officers contributions towards their retirement. Recoverability of advances/loans in the event of separation 147.
My review indicated that no Deed of Assignment was entered into
between beneficiaries of vehicle advances and GoG before payment of vehicle advances were effected, contrary to MoFEP directive that this requirement be complied with. The MoFEP directive would appear to have been derived from the dictates of regulation 99, Financial Administration Regulations, L. I. 1802, which stipulates that an advance of loan shall not be payable until an agreement specifying conditions and terms of recovery have been concluded between the borrower and GoG. 148.
My restricted review further revealed that repayment periods for 12
personnel of MDAs who had benefited from advances/loans ranged between six to 35 years. Considering the fact that outstanding advance/loan balances
against these personnel as at 1 January 2006 were relatively huge, recovery of the advances/loans are fixed at 20% of monthly basic salaries and Deed of Assignments had not been executed between the beneficiaries and GoG, the recovery of the outstanding loans would be very doubtful in the event of separation of the personnel from the MDAs, especially in situations where personnel’s terminal benefits are not enough to be offset against them. 149.
The two instances provided underneath exemplify my view of the non-
recoverability of the advances/loans in the in the absence of Deed of Assignment, in the event of separation.
1. 2.
150.
Name of staff
Staff ID
Mrs. Albertina Kometer Mr. Kwesi Armah
GOV 308023S GOV 565512K
Management unit
Reason for separation
Audit Service Council State
Death of Death
Outstanding amount on separation ¢
45,000,000 as at Dec. 2006 210,222,130 as from Sept. 2006
In my opinion, the non-compliance with the statutory requirement
regarding
management
of
advances/loans
could
render
advances/loans to personnel of MDAs unrecoverable.
portions
of
MDAs for which
advances/loans beneficiaries worked, have the responsibility to ensure that the Deed of Assignment is executed. The MDAs are thus to be blamed for the anomaly observed. Recommendations 151.
Consequently, I advise as follows: i.
MDAs for which advance/loans beneficiary works and CAGD should ensure that Deed of Assignments are executed before payment of advances/loans to beneficiaries.
ii.
MDAs whose personnel have benefited from advance/loans and have not completed their repayment should ensure that the
respective Deeds of Assignment are entered into between GoG and advance/loans beneficiaries.
Management response 152.
CAGD noted my recommendation and indicated that MDAs would be
reminded of their responsibilities. Also measures would be put in place to report recoveries at the Ministry level. Delays in effecting vehicle advance recoveries 153.
FAR 113 L.I. 1802 (1) states that advance recoveries from official
salaries shall commence from the salary of the next complete month after the month in which the advance was made. 154.
Review of vehicle advance recoveries for 2006 indicated that to a large
measure, the dictates of the above regulation were not complied with. Generally, I observed that recoveries for vehicle advances paid to personnel of MDAs between January and August 2006 commenced from October 2006 onwards, a delay of one to eight months, contrary to the above regulation. Additionally, of 30 personnel of MDAs selected at random for review as at 30 December 2006, seven personnel were not servicing at all their vehicle advances paid to them. Particulars of these personnel are furnished below: Name of Staff
MDA
PV No.
1. Charles Ansu-Mensah 2. Daniel Nii Addy 3. Edward Abankwa 4. Lincoln Agyeman 5. James Bannerman 6. Dr. Adu Kuma W. D. 7. Frances K. Agbemafo
Audit Service Audit Service CGAD CGAD Audit Service MOFA MOFA
0384136 0384209 0384111 0384109 0384118 0384441 0576470
155.
Date of Payment of Advance 21/07/06 02/08/06 07/07/06 07/07/06 13/07/06 13/09/06 28/09/06
Vehicle Advance (¢) 50,000,000 40,000,000 45,000,000 45,000,000 50,000,000 40,000,000 50,000,000
I view these delays in effecting the recoveries not healthy, because the
recoveries, when received, are recycled to finance additional advances to other
personnel of the MDAs. Non-collaboration among the MDAs the Vehicle Advance beneficiaries worked with, vehicle advances unit of MoFEP as well as the advances and IPPD Units of CAGD may be blamed for the situation observed. Recommendations 156.
Consequently, I recommend as follows:
i.
The MDAs the vehicle advance beneficiaries worked with and vehicle advances unit, MoFEP, should closely collaborate with the advances unit, CAGD, so as to ensure that information on vehicle advances granted are obtained at the earliest possible time.
ii.
CAGD advances unit should endeavour to send timely inputs on vehicle advance recoveries to the payroll processing unit, CAGD, for prompt recoveries to be effected.
Management response 157.
It was explained that the delays observed was an operational problem in that
total recovery from salary cannot exceed 50% of the beneficiaries’ basic salary in the new IPPD 2 system, thus impeding any excess deductions from going through. CAGD assured that measures are now in place to ensure that those who do not qualify as a result of the deductions from their salaries are not given the loan facility.
Financial Issues Budget out-turn Table comparing revenue realised with budget. 2006 Item
Budget ¢’ billion
2005 Actual ¢ billion
Budget ¢’ billion
Actual ¢ billion
Revenue
31,470.7
30,841.9
29,880.7
30,325.7
Net Proceeds from debt Total Receipts Expenditure Surplus/Deficit
12,561.5 44,032.2 38,972.9 5,059.3
12,647.1 43,489.0 34,908.4 8,580.6
5,853.9 35,734.6 34,618.9 1,115.7
4,727.5 35,053.3 27,824.6 7,228.7
Revenue comprises tax revenue, non-tax revenue, grants, HIPC receipts, multi-donor relief initiative receipts and divestiture receipts. 158.
Total Receipt, (comprising revenue and net proceeds from debt) of ¢43,489.0
billion (2005: ¢35.053.3 billion) were obtained in 2006, representing 98.8% of the ¢44,032.2 billion (2005: ¢35,734.1 billion) budgeted for the year. Total receipts outturn for 2005 was 98.09% of the receipts budgeted. The shortfall in receipts recorded for 2006 was mainly on account of non-attainment of budgeted revenue for the year. ¢31,470.7 billion was budgeted for collection in 2006 whereas ¢30,841.9 billion was realised. 159.
Over-all expenditure for 2006 was ¢34,908.4 billion, falling short of the
¢38.972.9 billion budgeted for the year. Actual expenditure as a ratio of budgeted expenditure for the year was 89.6%, indicating that planned programmes/activities were under-funded.
Operational results 160.
A deficit of revenue over expenditure of ¢4,066.5 billion was recorded for
2006 compared to a surplus of ¢5,167.1 billion registered for 2005. The decline in financial performance in 2006 was in part due to a fall in revenue generation in the year. 161.
Despite the decline in revenue generation, expenditure and transfer payments
into statutory funds made in 2006 witnessed quite a substantial increase from ¢25,158.7 billion in 2005 to ¢34,908.4 billion, a rise of 38.8%. Much of the increase in the outlays was attributable to personnel emoluments and related expenditures, ¢13,469.9 billion (2005: ¢9,939.1 billion) and investment, ¢6,101.4 billion (2005: ¢1,321.7 billion) and public debt interest, ¢4,156.8 billion (2005: ¢3,473.8 billion).
The rise in personal emolument and related costs was 35.5% over that for 2005 and represented the most significant increase among the items of expenditure in 2006. 162.
In 2006, inflows into the statutory funds namely, District Assemblies Common
Fund (DACF), Petroleum Related Fund, Road Fund, National Health Insurance Fund and Ghana Education Trust Fund witnessed a considerable increase (i.e. 62.7%), recording ¢4,295.3 billion (2005: ¢2,639.5 billion). The rise in the inflows was on account of more taxes collected in the year, which are earmarked for the statutory funds. 163.
The growth in expenditure on investments was healthy as ordinarily,
procurement of capital works and other assets cost more. However, the significant rise in personal emolument and related cost could prove over-burdening to the national kitty as a result of the sudden surge. Again, I advise that proactive measures be pursued to curtail the surge in that expenditure.
Revenue Performance Table of revenue performance in 2006 Budgeted ¢’ billion
Actual ¢’ billion
Variance ¢’ billion
Delivery Rate (%)
7,268.6
7,183.1
(85.5)
98.8
12,086.9
11,020.9
(1,066.0)
91.2
4,858.5
5,106.2
247.7
105.1
1,513.7
1,635.1
(127.3)
108.0
711.0
923.0
212.0
129.8
Grants
1,388.0
1,320.7
3.4
95.2
HIPC Assistance
1,205.4
1,678.1
473.4
139.3
2,103.6
1,968.8
(134.8)
93.59
335.0
6.0
(329.0)
1.79
Item Direct Taxes (i.e. PAYE, Self-Employed, Companies, Misc. Taxes) Indirect Taxes (i.e. Excise Duties, Petroleum Tax and VAT Collections Taxes on International Trade (i.e. Import & Export Duties) Other Tax Revenue Non- Tax Revenue
Multi-donor Relief Initiative Divestiture Receipts
Total
164.
31,470.7
30,841.9
(806.1)
97.44
With the exception of taxes on international trade, non-tax revenue and
HIPC assistance receipts, which achieved delivery rates of between 105.1% and 139.3% of the respective budgetary provision, all other revenue sources under-performed relative to the budget in 2006. HIPC assistance receipts registered a significant rise (i.e. 1,678.1 billion) in the year, representing 39.2% over the budget provision. Similarly, taxes on international trade (duties on imports and exports) also recorded a marginal rise (5.1%) over that budgeted for, registering ¢5,106.2 billion (2005: ¢4,858.5 billion). 165.
Delivery rates for grants, direct taxes, indirect taxes and multi-donor relief
initiative (MDRI) ranged between 91.2% and 98.82% of their respective 2006 budgetary provision. The least performed revenue source is divestiture receipts, which registered 1.79% (i.e. ¢6.0 billion) of the budgetary provision (i.e. ¢335 billion). This poor performance was on account of non-payment of purchase considerations for the divested SOEs in 2006. 166.
Of the direct taxes, which comprise PAYE, taxes on self-employed, companies
and miscellaneous taxes, only the target for PAYE (¢2,254.8 billion) was attained with delivery rate of 139.74%. Targets for indirect taxes made up of excise duties, petroleum tax and VAT collections were not attained, registering a rate of 91.8%. Over-all, delivery rate for all revenue sources budgeted for 2006 was 98.0%. 167.
The total revenue generated in 2006 represented 27.5% of gross domestic
product, ¢112,320.3 billion, registered for the year. The ratio of total revenue to GDP for 2005 was 31.3%, implying that in 2006 relatively, less funds were derived through taxes and charges from resources generated through production of goods and services within the economy.
Expenditure control 168.
Analysis of expenditures incurred in 2006, taking cognisance of expenditures
classified under contingency, HIPC, road arrears, non-road Arrears and multi-donor
relief initiative, indicated that the ratio of personal emoluments and expenditures on transfers to households to total revenue exceeded all the other classes of expenditure on item-by-item basis. The table presented below shows the Expenditures relative to budget estimates, expenditure attained in 2006 and total revenue.
Table of Expenditures relative to estimates and Total Revenue Narration
Revenue Total Revenue derived internally Ext. Inflows (i.e. Grants, HIPC & MDRI) Total Revenue (derived from Internal and External sources) Expenditures Personal Emoluments and Transfer to Households Ratio of Personal Emoluments and related Costs/Total Revenue (%) Administration Admin. Expend to Total Revenue (%) Service Service Expend to Total revenue (%) Investment Investment Expenditure/Total Revenue (%) External Debt Interest External Debt Interest to Total Revenue (%) Domestic Debt interest Domestic Debt interest to Total Revenue (%) Total Debt interest/ Total Revenue (%) Total PE, Admin, Service Expend & Debt Interest to Total Revenue
169.
Budget (¢ billion)
Reported Figure (¢ billion) 2006
26,773.7
25,874.3
4,697.0
Del. rate (%)
Budget (¢ billion)
Reported Figure (¢ billion) 2005
96.6
24,263.30
27,122.95
111.8
4,967.6
105.8
5,618.00
3,202.85
57.0
31,470.7
30,841.9
98.0
29,881.3
30,325.8
101.5
11,067.5
13,469.9
121.7
9,302.10
9,963.99
107.1
43.7
Del. rate (%)
32.9
2,186.1
2,888.5 9.4
132.1
1,514.85
2,399.76 7.9
158.4
1,138.2
1,290.6 4.2
113.4
839.05
1,355.56 4.5
161.6
5,399.5
6,049.5
112.0
1,321.73
2,790.22
211.1
19.6 938.1
924.4
9.2 98.5
1,005.6
3.0 3,261.5
3,232.4 10.5
851.3
154.3
2.8 99.1
2,555.0
2,622.5 8.7
13.5
11.5
70.8
56.7
67.5
The analysis revealed that 43.7% (2005: 32.86%) of total revenue was
employed in meeting outlays on personal emoluments and transfers to households, whereas expenditure on administration activities registered a marginal rise (i.e. 9.4%; 2005: 7.9%) in terms of total revenue. However, expenditure on service activities relative to total revenue recorded a slight slump (i.e. 4.2%; 2005: 4.5%) in the year. 2005 expenditure on service activities, ¢1,355.6 billion, exceeded both the budgeted
provision and actual expenditure for 2006, implying that lesser resources were provided to MDAs for service activities in 2006. 170.
With greater portion of total revenue employed in paying debt interest (i.e.
13.5%; 2005: 11.5%), ratio of expenditure on personal emolument, administration, service, and debt interest to total revenue registered 70.8% (2005: 56.7%), indicating that increasingly, more resources were utilised in meeting these classes of expenditure. Contrary to the situation observed in 2005, 2006 witnessed a significant rise in investment expenditure. The investment expenditure of ¢6,101.4 billion recorded in the year represented 19.6% (2005: 9.2%) of total revenue. This is a healthy development and it is suggested that subsequent years should witness planned similar increases in the investment expenditure in the GoG budget, so that Ghana’s stock of capital assets would expand, thus delivering higher standards of living for her citizenry.
171.
Admittedly, the agitation for higher remuneration in the public sector in
2006 accounted for the rise in resources used in paying for personal emoluments and related costs in the year. As a result, I again advise that proactive measures be employed to curtail this rise in the Expenditure. Also decline in provision of funds for MDAs Service Activities should be curtailed to ensure that the MDAs perform as planned.
Financial position 172.
Net debt of GoG (i.e. the difference between liabilities and financial
assets of the Consolidated Fund) stood at ¢55,645.8 billion (2004: ¢76,145.7 billion) as at the close of 2005, indicating a decline of 26.9%. This decline was largely attributed to significant drop (35.2%) in external debt which as at the end of 2005 was ¢39,120.6 billion (2004: ¢60,385.8 billion). The drop in external debt was on account of debt forgiveness under the HIPC initiative.
173.
Net debt as a ration of gross domestic product (GDP) at the close of
2005 was 57.36% (2004: 95.42%), indicating a considerable drop (38.06%) in resources relative to the GDP required to service both domestic and foreign debts. The GDP recorded for 2005 was ¢97,018.0 billion (2004: ¢79,803.7 billion). Reference the 2006 budget statement and economic policy of GoG. 174.
Financial assets of the Consolidated Fund stood at ¢3,477.5 billion
(2004: ¢1,650.3 billion) at the close of 2005. the uncertainty surrounding recovery of loans make them non-performing assets of the Consolidated Fund. Also, a significant portion (92.25%) of Consolidated Fund investments were in equities of Public Boards and Corporations and companies as at the close of 2005. Majority of these entities have poor dividends payment record. Liquidity and solvency 175.
On account of the foregoing, availability of liquid resources to meet
financial commitments of GoG mainly depended on revenue generated annually outside the portfolio of assets of the Consolidated Fund. The ratio of debt interest to total revenue and GDP, which registered 11.45% (2002: 14.85%) and 3.6% (2004: 4.6%) respectively in 2005, could be indication that GoG was relatively liquid in the short-term in meeting debt charges as they fall due. 176.
However, the ratio of net debt to GDP, which recorded 57.36% (2004:
95.42) in 2005, though registered a favourably considerable decline in the year, it would still appear significant and thus impacted adversely on GoG solvency. In this connection, the failure of financial assets of the Consolidated Fund to provide periodic income to GoG is not healthy. Proactive measures should be taken to transform investments (both loans and equity investments) into reality performing assets. Reporting IGF in the public accounts and related financial statements
177.
Currently, IGF not retained by MDAs which generate them are reported
in the revenue and expenditure statement of the public accounts. The demerit of this accounting policy is that the portion of the IGF retained by the MDAs are not reported as part of the public accounts. Also excluded from the public accounts are the expenditures the retained IGF are used for. 178.
The defect with the above accounting policy is that it obscures the real
capacity of central government to generate funds and also levels of expenditures made by the MDAs. This is because all these information are not included in the Public Accounts and thus the related financial statements. 179.
To obviate the above defect, it is my considered view that the gross IGF
obtained by the MDAs as well as the expenditures the retained IGF are used for, be reported in the Public Accounts and related financial statements. It may be noted that the net effect of this suggested accounting treatment leaves the Public Accounts with the un-retained portion of the IGF payable into the Consolidated Fund, which reflects the financial reality. 180.
The already existing reporting requirement for IGF under Regulation 19(1) of
the FAR, 2004, L.I. 1802 is, in my view, adequate as it duly provides information on gross IGF and amounts retained therefrom. What is thus required to implement the above suggestion is the rigid enforcement of the regulation requiring MDAs to report on their respective IGF as well as passage of journal entries at the level of the CAGD, recognising the gross IGF and expenditures met therefrom.
Recommendation 181.
On account of the arguments advanced above, I therefore advised that the
following measures be implemented to make the Public Accounts and related Financial Statements more informative:
i.
The gross IGF obtained by the MDAs as well as the expenditures the retained IGF are used for, be reported in the public accounts and related financial statements HE H
ii.
Journal Vouchers be raised at the level of CAGD to incorporate the gross IGF and expenditures met from the retained IGF in the public accounts and related financial statements.
iii.
The dictates of the FAR 2004, LI 1802, be rigidly enforced to ensure that the MDAs report on their IGF to MoFEP and CAGD without fail.
Management response 182.
CAGD made reference to article 176 of the 1992 Constitution and 41
(1b) of FAA, Act 654 and contended that retained IGF is not part of the Consolidated. 183.
I concede that retained IGF on the basis of the existing laws of Ghana is
not part of the Consolidated Fund. However, the accounting policy suggested has the merit of providing comprehensive information needed for planning and decision-making. On that score, I again advise that the policy be considered for adoption. 12.5% SSF Employer’s Contribution: delays in payment and inadequate disclosure in Public Accounts Financial Statements 184.
GoG commitment on 12.5% SSF employer’s contribution in 2006 amounted to
¢1,188.4 billion. ¢957.7 billion was discharged in the year, leaving ¢230.7 billion as accrued charges at the close of the year. Of the 957.7 billion paid in 2006, ¢284.1 billion was 2005 commitment. 185.
I observed also that there were delays in discharging GoG commitment on
SSF employer’s contributions to SSNIT. The delay in paying GoG commitments had been attracting penalties and in 2006, total amount paid in respect of penalties came to ¢122.9 billion. Besides the penalties, which is an uncalled for drain on the Consolidated Fund, the delays could also impact adversely on the growth of both the national health insurance fund and SSNIT fund, used for running the national health insurance scheme and meeting gratuities and pensions of contributors respectively.
186.
Furthermore, I noted that though there was GoG commitment on SSF
contributions at the close of 2005 and 2006, these were not accrued in the public accounts financial statements for the respective periods in accordance with regulation 191(a) of the FAR, thus understating expenditures and liabilities of the Consolidated Fund.
Recommendation 187.
Consequently, I suggested that:
i.
MOFEP should ensure the due discharge of SSF employer’s contribution through adequate budgeting and subsequent release of funds for both Personnel Emoluments and related SSF contribution payable, to avoid payment of penalty.
ii.
Funds owed SSNIT at the close of 2006 by way of SSF employer’s contributions, ¢230.7 billion, should be accrued in the 2006 public accounts financial statements. Similarly, 2005 12.5% SSF GoG commitment should be addressed through a prior-year adjustment.
Management response 188.
No response has been received on the observation as at the time of
reporting.
Inadequate disclosure of non-tax revenue 189.
Non-tax revenue reported in the 2006 public accounts financial
statements was underpinned by a note analysing it under the following three broad headings: Non-Tax Revenue
¢
Fees and charges
507,758,810,000
Interest and profits
202,821,920,000
Other non-tax
212,414,470,000
Total
922,995,200,000
190.
However, under Section 29 of the FAA, Act 654, and “Administrative
Instructions for Transitional Arrangements for the Implementation of the FAA” issued
by
the
Minister
of
Finance
and
Economic
Planning
vide
MoFEP/FAA/FAR/01 of 20 January 2004, budgeting and reporting for non-tax revenue should be on the lines presented below:
Fines, penalties and forfeitures
Sales of goods and services, including those procured through the use of GoG assets.
191.
Rent of GoG lands and buildings/facilities.
Fees and charges.
Licences.
Interest on loans and GoG investments.
Dividends.
Miscellaneous – such as donations, contributions etc.
My
review
indicated
that
dividend
receipts
amounting
to
¢219,473,729,157.06 (SOEs/Joint Ventures -¢149,798,513,357.06; SOEs ¢69,675,215,800.00) were not disclosed in the draft 2006 public accounts financial statements for the appreciation of users of the statements. 192.
Contemporary accounting standards
require that representations
contained in financial statements should be complemented by disclosures so as to enhance the statements’ understandability. Therefore the non-disclosure of the dividend receipts besides contravening the directive of the Minister of Finance and Economic Planning is also not in keeping with contemporary accounting standards.
Recommendation 193.
I therefore advised that the disclosure on non-tax revenue in the public
accounts financial statements should be on the lines directed by the Minister. On this basis, I recommend that the dividend receipts of ¢219.5 billion omitted in the 2006 public accounts financial statements be incorporated. Management response 194.
CAGD has noticed the inadequacy in the disclosure of non-tax revenue.
CAGD thus assured that with its embarkation of the treasury Re-alignment, adequate disclosures would be received from the MDAs and reflected in the Public Accounts and related financial statements.
Inadequate disclosure of funds transferred to District Assemblies Common Fund 195.
Annual commitments to the DACF, amounting to ¢53.9 billion for five
years running, was recognised in 2002. In 2006, ¢1,281 billion was paid into the District Assemblies Common Fund (DACF). This payment included 2005 last quarter arrears of ¢179.943 billion and 2002 arrears due in 2005 of ¢53.9 billion. My review indicated that these arrears, though were established liabilities of the Consolidated Fund as at the close of 2005, they were not disclosed as such in the 2005 public accounts financial statements. Similarly, the Consolidated Fund commitment of ¢53.9 billion to the DACF at 2006 yearend was neither disclosed. The details of the above payment made in 2006 are presented underneath:
Period 2006 2005 Last quarter 2002 Arrears due in 2005
Payments made (¢)
¢
179,943,000,000 53,900,000,000
in
233,843,000,000 2006 Allocations: 1st Quarter
304,989,000,000
2nd Quarter
218,561,000,000
3rd Quarter
261,377,000,000
4th Quarter
261,945,000,000 1,046,872,000,000
Total as per financial statements
196.
1,280,715,000,000
The 2006 Public Accounts financial statements incorporated the total
payments of ¢1,281 billion effected in 2006, creating a misleading impression that the whole payments into the DACF related solely to 2006. 197.
Contemporary accounting standards require that material items reported
in financial statements should include disclosures as would affect evaluation or decisions. This view is consistent with section 41(2) of the FAA, Act 654, which stipulates that the Public Accounts and related financial statements “shall be prepared in accordance with generally accepted accounting principles as well as instructions issued by the Controller and Accountant-General in consultation with the Auditor-General”. Recommendation 198.
On the basis of the above, I advise that the 2006 four quarters’ payments into
the DACF, amounting to ¢1,047 billion, should be recognised in the 2006 revenue and expenditure statement, with the remaining ¢233.843 billion payment effected in 2006 treated as a prior-year adjustment in the General Revenue Account. The 2006 Public Accounts Financial Statements should also disclose the last remaining commitment of ¢53.9 billion to the DACF.
Management response
199.
CAGD indicated that the public accounts are prepared on cash
accounting basis. Therefore, receipts are matched with expenditures as they are incurred within the financial year. On this basis therefore, CAGD cannot treat the previous year’s receipts during the reporting period as prior-years’ adjustment. For clarity purposes, CAGD indicated that it could disclose the 2002 and 2005 fiscal years arrears as amounts paid in 2006. 200.
It is my view that the key legal provision worth focusing on in the
compilation of the public accounts is section 41(2) of the FAA, Act 654. This requires the public accounts to be compiled on generally accepted accounting principles. On the basis of this stipulation, I am of the view that the modified cash basis of accounting which permitted the inclusion of exchange differences in the accounts should equally allow the inclusion of accrued liabilities of the Consolidated Fund. Failure to do so would amount to understating the liabilities of the Consolidated Fund. Non-disclosure of road arrears and non-road arrears in Public accounts financial statements 201.
Regulation 191(a) of the financial administration regulations, 2004, L.I. 1802
enjoins the Controller and Accountant-General to submit a statement of the financial assets and liabilities of the Consolidated Fund at the close of the year annotated with qualifying information as may affect the significance of figures shown in the statement. 202.
My examination indicated that in 2006, payments for road-arrears and non-
road arrears amounting to ¢73,247,014,157 and ¢99,109,114,296 respectively were effected. However, these payments which at the close of 2005 were liabilities of the Consolidated Fund, were not disclosed in the 2005 public accounts financial statements. As is ordinarily expected, road arrears and non-road arrears would in all probability exist at 31 December 2006 but again, these have neither been incorporated in the 2006 public accounts financial statements, contrary to the above quoted regulation.
203.
The effect of the above omission is to understate the obligations of the
Consolidated Fund as of 31 December 2006.
Recommendation 204.
I recommend that:
i.
The CAGD should recognise and incorporate in the public accounts
financial
statements,
all
obligations
of
the
Consolidated Fund, including road arrears and non-road arrears. ii.
Accordingly, road arrears and non-road arrears at the close of 2006 should be determined and reported in the 2006 public accounts financial statements
Management response 205.
CAG indicated that the Road Arrears and Non-Road Arrears are “payment out
of an account and not a liability”.
206.
I however maintain that road arrears and non-road arrears are indeed
established liabilities of the Consolidated Fund at year-end and in accordance with regulation 191(a) of the FAR, CAGD aught to recognize and incorporate them in the public accounts and related financial statements. Non-preparation of bank reconciliation statements in respect of domestic debt monitoring, redemption and interest payments, grants, deposits and other key bank accounts 207.
Best practice requires that accounting systems incorporate detailed
control arrangements to ensure the integrity of financial statements. Control measures such as monthly bank reconciliation statements are therefore normally incorporated in accounting systems, prepared, reviewed and outstanding items identified in bank reconciliation statements appropriately addressed.
208.
My review however indicated that although the Controller and
Accountant-General’s Department had a reconciliation unit, it prepared bank reconciliation statements for a limited number of bank accounts making up the public accounts. No bank reconciliation statements were prepared in respect of domestic debt monitoring, redemption and interest payments, deposits, Grants and other bank accounts. 209.
Furthermore, for the external debt redemption and interest payments
bank accounts in respect of which bank reconciliation statements were prepared, these covered the period January to August 2006, whilst the period September to December 2006 were not prepared. Additionally, an outstanding item identified in the bank reconciliation statements was not promptly and adequately addressed. For example, ¢1,777,747 identified as a wrong debit and wrong credit in the principal account and interest payments account respectively for January 2006 was not resolved as at 31 December 2006. 210.
In my view, the situation observed above was indication that there was
unclear understanding by staff of the policy regarding which office(s) had authority and responsibility for the preparation and review of the bank reconciliation statements. Equally unclear was desk office(s) to which outstanding items in the bank reconciliation statements prepared should be reported to, for their attention and appropriate resolution for ultimate reporting to the main accounts unit. Recommendation 211.
Consequently, I advise management to: i.
Determine which office(s) have responsibility for the preparation of bank reconciliation statements for the various bank accounts making up the public accounts.
ii.
Ensure the timely preparation and review of monthly bank reconciliation statements as well as the prompt investigation and resolution of outstanding items identified.
Management response 212.
CAGD management accepted my recommendation and has identified schedule
officers to address the omission. 12.5% SSF employer’s contribution: delays in payment and inadequate disclosure in public accounts financial statements 213.
GoG committed on 12.5% SSF employer’s contribution in 2006 amounted to
¢1,188.4 billion. ¢957.7 billion was discharged in the year, leaving ¢230.7 billion as accrued charges at the close of the year. Of the ¢957.7 billion paid in 2006, ¢284.1 billion was 2005 commitment. 214.
I observed also that there were delays in discharging GoG commitment on
SSF employer’s contributions to SSNIT. The delay in paying GoG commitments had been attracting penalties and in 2006, total amount paid in respect of penalties came to ¢122.9 billion. Besides the penalties, which is an uncalled for has a drain on the Consolidated Fund, the delays could also impact adversely on the growth of the national health insurance fund and SSNIT fund, used for meeting gratuities and pensions of contributors. 215.
Furthermore, I noted that though there was GoG commitment of SSF
contributions at the close of 2005 and 2006, these were not accrued in the public accounts financial statements for the respective periods, thus understating expenditures and liabilities of the Consolidated Fund. Recommendation 216.
Consequently, I suggest that: i.
MoFEP should ensure the due discharge of SSF employer’s contribution through adequate budgeting and subsequent release of funds for both personal emoluments and related SSF contribution payable, to avoid payment of penalty.
ii.
Funds owed to SSNIT at the close of 2006 by way of SSF employer’s contributions should be accrued in the 2006 public accounts financial statements.
Similarly, 2005 SSF GoG commitment should be
addressed through a prior-year adjustment. Management response 217.
No response has been received on the observation as at the time of reporting.
Non-availability of records underpinning trust fund investment balance reported in public accounts financial statements 218.
The 2006 Public Accounts Financial Statements reported Trust Fund
investments of ¢47.4 billion as in 2004 and 2005. My review indicated that no accounting records were maintained by the PDI section, CAGD, on the Trust Fund investments to permit substantiation of the investment balances. The audit could not also establish any returns received on the investments or the Administering Authorities for the investments. 219.
The absence of Administering Authorities for, and underlying records on, the
Trust Fund investments and the fact that the balances on these investments had remained the same as well in the 2004 and 2005 Public Accounts financial statements could be indication that inherent risk associated with the Trust Fund investment might be high. The lack of adequate information on the Trust Fund investments on the 2006 financial statements contribute in rendering them not true and fair.
220.
It is interesting to note that the Auditor-General’s report on the 2005
Public Accounts financial statements conveyed this very finding and recommended measures to address the omission. The recommended measures are yet to be implemented.
Recommendations 221.
Once more, I recommend that:
i.
CAGD should determine the Administering Authorities for the Trust Fund investments and determine as well, the status of the Trust Fund investments.
ii.
On the basis of the above determination, CAGD should determine the valuation for Trust Fund investments for the Public Accounts financial statements.
Management response 222.
CAGD contended that its Section – PDI – kept records on all Trust Fund
Investments. The Department indicated that it is determining the value of companies in which the Trust Fund Investments are held so that the Investments can appropriately be valued for financial reporting purposes.
Inadequate records for vehicle advances balance reported in Public Accounts financial statements 223.
Seven MDAs, which prior to 1 Jan 2006 had received no vehicle advances,
were reported as having over-paid their vehicle advances to the tune of ¢49,029,336. Similarly, recoveries amounting in total to ¢72,243,331 were also reported to have been effected from vehicle advance beneficiaries in these MDAs in 2006, though no vehicle advance payments were made to the MDAs. Particulars of the MDAs and their supposed indebtedness are presented below: MDA 1. Dept. of Community Development. 2. Dept of Cooperatives 3. Dept of Social Welfare 4. Ghana Nat. Commission on Culture 5. Metrological Service Dept 6. National Commission on Culture 7. Scholarship Secretariat Total
224.
Veh. Advance as of 1 Jan. 2006 (¢) 7,139,407 12,472,087 11,910,562 1,283,301 6,636,353 9,077,064 410,562 48,929,336
Veh. Advance Payments in 2006
Recoveries in 2006 (¢)
0 0 0 0 0 0 0 0
13,895,134 14,680,093 14,511,898 7,285,567 15,116,213 5,433,667 1,320,649 72,243,221
I also observed that eight MDAs, which according to the records, had a
total outstanding vehicle advance of ¢96,564,609 as at 1 January 2006, and which no further advance payments were made to in 2006, a total of ¢942,573,669 was indicated as recovered from them in the year under review. Furthermore, one MDA which received in 2006 vehicle advance payments of
¢228,000,000 and whose indebtedness as of 1 January 2006 was ¢81,201,517, Recoveries amounting to ¢534,600,412 were also reported to have been made in 2006. The above details are presented below: MDA 1. Ghana Highway Authority 2. Information Service Dept 3. Labour Dept 4. Land Commission Secretariat 5. Legal Aid Board 6. Copyright Administration 7. Council of State (Members) 8. Dept of Parks & Gardens Total
225.
Veh. Advance as of 1 Jan. 2006 (¢) 22,160,277 25,221,321 22,329,729 7,789,999
Payments
Recoveries in 2006 (¢)
0 0 0 0
33,667,825 82,123,007 25,558,182 14,324,859
15,994,487 3,068,796 0
0 0 0
19,261,429 4,063,661 758,744,000
0 96,564,609
0 0
4,830,706 942,573,669
The above situations observed were indications that records underpinning
vehicle advances were not reliable and thus vehicle advances reported in the 2006 Public Accounts financial statements cannot be substantiated.
226.
The effect of this omission is that Vehicle Advances granted to
personnel of MDAs might be unknown and thus stand the risk of non-recovery. I observed that transfer of vehicle advance beneficiaries within the MDAs and non-communication of this information to the advances unit, CAGD, is to be blamed for the situation found. 227.
It is worth noting that a similar observation on the vehicle advances was
made and conveyed in the 2005 Auditor-General report on the Public Accounts of Ghana. The observation suggested a number of measures to remedy the situation. The finding conveyed by this report is indication that the suggested measures had not been implemented. Recommendations 228.
I recommend as a result that: i.
Monthly reconciliation of vehicle advance payments and recoveries should be instituted to facilitate detection of vehicle advance beneficiaries transferred from one MDA to others.
ii.
MDAs transferring and receiving personnel should notify the advances unit, CAGD, about such movements so that vehicle advances records can be duly updated.
iii.
The advances and IPPD units, CAGD, should together determine those MDAs with inappropriate vehicle advance payments and recoveries, ascertain the cause of these anomalies and accordingly resolve them.
Management response 229.
CAGD has noted the observation and the advances unit has commenced the
monthly reconciliation. Further to this, henceforth deductions on vehicle advances will be done on ministry basis instead of the cost centre. Cash reported in Public Accounts financial statements 230.
The cash figure presented in the 2006 Public Accounts financial statements
was supported with a schedule that underpinned the cashflow statement of the Public Accounts. The schedule is as follows:
Cash inflows Balance brought forward as at 1/1/06 Recovery of advances External counterpart fund receipts Trust fund receipts Issue of treasury bills Recovery of domestic loans and Investments External loan receipts
¢ (4,565,265,681,289) 7,224,250,888.00 1,504,409,657,119.00 69,025,565,280.00 24,942,391,780,000.00 12,275,859,186.00 1,350,978,922,617.00
Cash outflows Payment of advances
22,909,991,258.00
External counterpart fund payments
1,391,419,264,450.00
Trust fund payments
350,549,384,082.00
Repayment of external debts
2,219,561,891,575.00
Redemption of treasury bills
14,194,997,154,000.00
Balance carried forward as at 31/12/06 231.
1,168,384,334,961
The above schedule supporting the cashflow statement was made up of
cumulative balances of accounts, which are required to be corroborated by respective bank statements maintained as part of the Consolidated Fund. These bank statements with reconciled balances were not made available to us to make possible, substantiation of the reported cash.
My review neither sighted regular monthly
reconciliation of accounts constituting the Consolidated Fund, though there was evidence that Bank of Ghana submitted these statements to CAGD. 232.
In pursuit of alternative approach to validating the reported cash, I sought from
both BoG and CAGD, bank statements of accounts of inflows and outflows of the Consolidated Fund and their respective balances making up the cash. Despite the fact that persistent requests were made for these information, no response has so far been received. 233.
Section 191 of the FAR LI 1802 however, requires the Controller and
Accountant General to support the Public Accounts with notes and other qualifying information as may affect the significance of figures shown in the financial statements. 234.
In my view, the inherent risk associated with the cash reported could be high
in the absence of the bank accounts and their respective reconciled balances constituting the Consolidated Fund. This view is supported by the fact that, for instance a significant amount of ¢22,915,000,000, being payment for outstanding stated capital in Ghana Libya-Arab Holding Co. Ltd. Executed on 9 August 2006, which featured in MoFEP Trail of signed releases report of 17 April 2007, was not captured in the 2006 Public Accounts.
235.
Considering the materiality of the cash reported in the 2006 Public Accounts
particularly, the movement from a deficit of ¢4,565,265,681,289 in the year 2005 to a credit balance of ¢1,168,384,334,963 at the close of 2006, assurance is required that all transactions affecting the Consolidated Fund in 2006 had been accurately and validly reported in the Public Accounts. This assurance has so far not been derived from the reviews undertaken. I was therefore unable to substantiate the reported cash. 236.
It is instructive to note that a similar finding on the cash reported in 2005
Public Accounts financial statements was made in the respective Auditor-General’s report. The observation made there is indication that the recommendation conveyed in the Auditor-General’s report on the reported cash was yet to be implemented. Recommendations 237.
I would therefore advise that the following information be provided to make
possible, the substantiation of the cash reported: i.
Bank statements of accounts of inflows and outflows of the Consolidated Fund and their respective reconciled balances making up the cash reported; or
ii.
Reconciled bank statements of those items constituting the schedule underpinning the cashflow statement of the 2006 Public Accounts.
Status of implementation of previous audit findings 238.
This segment of the report furnishes in brief, the status of
implementation of findings raised in the Auditor-General’s report on the 2005 Public Accounts of Ghana. Performance report 239.
A performance report, identifying the key outcomes (social, economic,
environmental) that the Government is seeking to achieve and developing a suite of performance indicators, that best measure progress towards those outcomes was recommended to be produced annually, either together with the Consolidated Fund Accounts Report or shortly thereafter. Evidence on implementation of this recommendation is yet to be sighted.
Non-performing loans funded from the Consolidated Fund 240.
Significant portions of the loans financed from the Consolidated Fund and
amounting to ¢6,698.1 billion (2004: ¢6,695.0 billion) at the close of 2005, were nonperforming and therefore, there was uncertainty about the loans’ recovery.
My
subsequent review indicated that recovery efforts made in 2006 yielded limited results. Ref. Para. 82 to 87.
Accruals basis of accounting 241.
The CAG continued in 2006 to prepare the Public Accounts and related
financial statements on modified cash basis.
On the basis of the requirement of
Regulation 186, FAR, LI 1802, which stipulate that the Public Accounts be compiled generally on the basis of accrual accounting, the existing basis of preparing the accounts cannot be justified. I advised that a consultative committee, made of staff of CAGD and Audit Service, be constituted to prepare guidelines for the preparation of the Public Accounts on the basis of accrual accounting.
Annual statement of Ministries, Departments and Agencies 242.
In 2006, MDAs again defaulted in preparing the accounts on their respective
institutions, contrary to regulation 190 of L.I. 1802. The MDAs’ default was due to absence of a departmental accounting manual to guide them in the preparation.
Signing of financial statements by CAG and MoFEP 243.
The 2005 Auditor-General’s report on the Public Accounts of Ghana
recommended that both CAG and Minister, MoFEP should signed the Public Accounts report as proof of ownership. Evidence of implementation of this suggestion is yet to be sighted.
Accounting policy for project loans 244.
Existing accounting treatment for project loans did not adequately satisfy the
requirement of section 18 of the Loans Act, 1970, Act 335. It was recommended therefore that the reporting of project loans be undertaken to a level where the
substance of the loans can be appreciated by users of the financial statements of the Public Accounts. This recommendation has not been implemented.
Valuation attributed to equity investments in public entities 245.
Valuations attributed to GoG equity investments in wholly owned public
entities were solely based on the original costs of the equity investments despite growth in the public entities over time, thus understating GoG worth in the entities in the Public Accounts financial statements. I therefore, suggested that net assets basis be adopted for reporting the GoG equity investments, as that would fairly portray the worth of GoG in the wholly owned public entities. This recommendation has not been implemented. Reference: Para. 73 to 81.
Non-receipting of tax revenues by district treasuries of Controller and Accountant-General’s Department (CAGD) 246.
Receipting of tax revenue collection was generally not done at the district
treasuries, contrary to the requirement under regulation 15, Financial Administration Regulations (FAR), 2004, LI 1802. As a result dishonoured cheques may not be independently identified and redeemed. Due compliance with the FAR requirement was therefore advised. This recommendation has not been implemented. Reference: Para. 116 to 122.
Unsubstantiated cash balance 247.
Reconciled bank account balances of the Consolidated Fund, making up the
total cash balance of ¢4,565,265,681,289 (Credit) reported in the 2005 Public Accounts Financial Statements, were not available for review. I was thus unable to substantiate the cash balance. To obviate anomaly, it was recommended therefore that bank accounts constituting the Consolidated Fund be clearly determined in accordance with the provisions of the Financial Administration Act (FAA), Act 654, and also all balances on bank accounts should be reconciled before reporting in the Public Accounts Financial Statements. The Cash position of the Consolidated Fund has been re-stated on the basis of balances on accounts constituting the Consolidated Fund as at close of 2006.
Inadequate records maintained on vehicle advances 248.
Records on vehicle advances showed that payments to and recoveries from
MDAs were not reconciled. Some transactions appeared to result in over-recoveries or recoveries from MDAs, which had not received any payments.
Monthly
reconciliation of Vehicle Advances and recoveries were suggested to make possible, more reliable reporting. This measure had not been implemented. Reference: Para. 202 to 208.
Unreliable records on loan-debtors 249.
Loans financed from the Consolidated Fund and reported as outstanding from
companies, public boards and corporations, individuals and other institutions, were not adequately supported by records of the CAGD and MoFEP. I was therefore unable to confirm the total loan balance of ¢6,710.3 billion due to non-disclosure of the nature of the debts and uncertainty about their recovery. Periodic reconciliation between CAGD and MoFEP and appropriate disclosure of the status of the loans in the financial statements was thus recommended. This recommendation has not been effected. Reference: Para. 82 to 87.
Other departmental advances not substantiated 250.
The financial statements on the Public Accounts of Ghana for the year ended
31 December 2005 reported total advances (i.e. assets) of ¢66.7 billion out of which ¢39.3 billion (58.9%) described as other departmental advances, was not supported by a schedule substantiating it. Again, other departmental advances remained the same without any supporting schedule in 2004. The recommendation that balances and transactions comprising the Advances be investigated and duly accounted for in the Public Accounts had not been implemented. Reference: Para. 123 to 130.
OPINION OF THE AUDITOR-GENERAL ON THE FINANCIAL STATEMENTS OF THE PUBLIC ACCOUNTS OF GHANA (CONSOLIDATED FUND) FOR THE YEAR ENDED 31 DECEMBER 2006 251.
I have audited the Statement of the Financial Assets and Liabilities of the
Consolidated Fund as of 31 December 2006 and the Summary Statement of the receipts into and payments from the Consolidated Fund, Statement of Revenue and
Expenditure and Cashflow Statement for the year then ended shown on pages ----to ---. 252.
These statements have been prepared under the historical cost convention on
the basis of the accounting policies set out on pages --- of the report and the financial statements of the Controller and Accountant-General.
Responsibility of the Controller and Accountant-General 253.
Section 41 of the FAA requires the CAG to draw up and sign the annual
statements on the public accounts and lay such statements, together with his annual report on the public accounts, before Parliament.
Responsibility of the Auditor-General 254.
Article 187 (2) of the 1992 Constitution, Section 44(1) of FAA and Section 11
of the Audit Service Act 2000, (Act 584) require the Auditor-General to audit and report on the public accounts of Ghana. It is, therefore, the responsibility of the Auditor-General to express an independent opinion on the financial statements of the public accounts of Ghana. 255.
I give my opinion as to whether proper books of account have been maintained
by the CAG and whether the financial statements are in agreement therewith and comply with the requirements of the FAA and present fairly, the financial position of the Government of Ghana as at 31 December 2006 and whether the results of its operations, cashflow and financial requirements for the year then ended are in accordance with the stated accounting policies of the Government of Ghana and comply with the relevant legislation. I also report whether in all material respects the income and expenditure have been applied for the purposes intended by Parliament and whether the financial transactions conform to the authorities, which govern them. Additionally, I also report if the CAG has not maintained proper accounting records or if I have not received all the information and explanations I require for the audit.
Basis of opinion
256.
I conducted the audit in accordance with generally accepted auditing standards
and the auditing standards of the International Organisation of Supreme Audit Institutions (INTOSAI). An audit includes examination, on a test basis, of evidence relevant to the amounts, disclosures and regularity of financial transactions included in the financial statements. It also includes an assessment of the significant estimates and judgements made by the CAG in the preparation of the financial statements, and of whether the accounting policies are disclosed. 257.
I planned and performed my audit so as to obtain all the information and
explanations which I considered necessary to provide me with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatements, whether caused by error, fraud or any other irregularity and that, in all material respect, the expenditure and income have been applied to the purposes intended by Parliament, and the financial transactions conform to the authorities which govern them. In forming my opinion, I also evaluated the overall adequacy of the presentation of information in the financial statements. I believe that my audit provides a reasonable basis for the audit opinion.
Opinion i.
GoG Investment in loans amounting to ¢6,698.1 billion was not performing and the loans’ recovery was in doubt;
ii.
Vehicle advances, other departmental advances and departmental revolving fund, together amounting to ¢83.91 billion and reported as assets of the Consolidated Fund as at 31 December 2006, could not be substantiated because there were no related schedules or reliable records underpinning them; and
iii.
¢895.9 billion, together owed by the Consolidated Fund to the GETFund, NHIF, SSNIT Fund and DACF at the close of 2006, were not accrued and disclosed in the 2006 Public Accounts financial statements.
iv.
Cash balances of the Consolidated Fund, ¢1,168.4 billion at 31 December 2006 could not be validated because reconciled balances of bank accounts constituting the Consolidated Fund were not provided.
i.
In my opinion, because of the significant uncertainties attaching to the matters listed above, I was unable to form an opinion as to whether the financial statements give a true and fair view of the financial position of the Government of Ghana as at 31 December 2006 and the results of its operations, cashflow and financial requirements for the year then ended.
The accounts however, are in accordance with the stated
accounting policies of the Government of Ghana.
Acknowledgement 258.
I acknowledge the cooperation and assistance provided to the Audit Service by
the MoFEP, CAGD and Heads of MDAs during the audit. Once more, I also acknowledge the efforts and commitment of my staff in conducting the audit and reporting before the constitutional deadline.
EDWARD DUA AGYEMAN AUDITOR-GENERAL June 2007
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