Business News of 2013-12-12

MDAs exceed 2012 budget by GH¢1.23 billion

The Auditor-General’s (A-G’s) report on Ghana’s Consolidated Fund for 2012 has confirmed one major contributory factor to high government spending — overspending of budgets by ministries, departments and agencies (MDAs).

According to the report, which was presented to Parliament in June this year, the actual expenditure of some MDAs was in excess of what was approved in the 2012 budget by GH¢1.23 billion.

The report revealed that the goods and services and assets expenditure of 17 MDAs, totalling GH¢2,155,845,054, exceeded their revised budget of GH¢921,408,338 by GH¢1,234,436,716, representing an adverse variance of 134 per cent.

In the view of the A-G’s Department, the excess expenditure of GH¢1,234,436,716, which was committed in 2012, affected the cash flow position of government and culminated in outstanding liabilities of GH¢592,812,032 as of the end of the financial year.

The report highlights the outcomes of the financial statements, which comprise mainly the balance sheet, revenue and expenditure statement, receipts and payments statements, cash flow statement and the supporting schedules, with a view to expressing an opinion on the accounts.

According to the report, contrary to provisions in the Federal Acquisition Regulation (FAR), which is meant to provide uniform policies and procedures for acquisition, it was noted that eight departments failed to account for non-taxable revenue (NTR) collections and lodgement from their regional and district offices.

GH¢5.8 million NTR not paid into Consolidated Fund

Additionally, the report found that some MDAs continued to act in breach of Regulation 17 of the FAR and failed to pay NTR of GH¢5,757,381.46 collected by eight institutions in 2012 into the Consolidated Fund.

There was also a failure to deduct income tax and SSNIT contributions from the gross emoluments of US$7.8 million paid to foreign missions staff in 2012, although the officers on the payroll did not enjoy any tax exemptions, contrary to Regulation 296 of the FAR, 2004 and Section 5 of Act 592.

Wrongful deductions, wrongful treatment of foreign investment expenditure

The report also pointed out wrongful deductions totalling GH¢512,781.29 from the payroll of government employees.

“Some third party institutions (TPIs) which had not been approved by management had been captured on the payroll database and government employee deductions totalling GH¢512,781.29 were made on their behalf during the year,” it stated.

Tied to that was the observation by the report of poor maintenance of third party records on the payroll system, which resulted in undue deductions of Government of Ghana (GoG) employees’ emoluments.

It perceived that the Integrated Personnel and Payroll Database (IPPD) system did not maintain proper accounts for government employees for ease of reconciliation with the TPIs and also noted instances when TPI customers (GoG employees) were over deducted in favour of the TPIs due to the failure to define the end date for deductions.

During the year under review, it was also noted that although total external loan receipts of GH¢2,567,734,441 were not fully utilised by various government project implementing agencies, the aggregate receipt was written off under the expenditure item, foreign-financed investments.

That was considered a fundamental error that distorted the true state of affairs.

The ineffective management of loans and poor collaboration among the MoFEP, the Controller and Accountant-General’s Department (CAGD) and the Bank of Ghana (BoG) in the management of the loan facilities was also identified as a major loophole by the report.

Ineffective Treasury management, Merchant Bank loan management

Losses and non-payment of various amounts into the Consolidated Fund were identified, as the BoG applied interest charge on the monthly overdrawn balance of the treasury main account between January and November 2012, resulting in a total interest cost of GH¢347,352,885.93 against the Consolidated Fund and the non-payment of divestiture receipts of GH¢8,327,554.50 collected by the Divestiture Implementation Committee (DIC) between 2010 and 2011.

The report also found that the MoFEP failed to demand regular reports from the Merchant Bank to enable the ministry to assess the bank’s performance in the recovery of a DANIDA Public Sector Development Programme loan facility which was also not disclosed in the Public Accounts.

According to the report, a review of fund allocations in respect of five oil liftings (fifth to ninth liftings) in 2012 showed that MoFEP, in line with the Petroleum Management Act, allocated as Annual Budget Funding Amount (ABFA) US$286.55 million out of a total petroleum receipt of US$541,623,740.

Recommendations

Among several recommendations made in the report to correct the anomalies detected were the establishment of appropriate controls to ensure that the interests of government employees were protected and a proper monitoring of accounts and prompt lodging of all NTR collections from respective regional and district offices into the Consolidated Fund.

It also urged the MoFEP to strengthen its oversight responsibility over heads of departments, institute an effective control mechanism to ensure that all collections were properly accounted for and promptly paid into the Consolidated Fund and, together with the CAGD, ensure that the unpaid NTR of GH¢5,757,381.46 was transferred into the Consolidated Fund account without any further delay.