PIAC accuses Finance Ministry of lying about petroleum revenue spending

The Public Interest and Accountability Committee (PIAC) has accused the Finance Ministry of lying about its spending of the country’s petroleum revenues.

The Ministry programmed an amount of GH¢1.55 billion for spending in 2018, equalling 70 percent of net petroleum revenues, and from 2017, there was an un-utilised ABFA of GH¢403.74 million (now GH¢440.84 million due to exchange rate gains), which according to the Ministry of Finance was being held in the Treasury Single Account (TSA), and would be brought forward to 2018.

By this calculation, the amount that should have been programmed for spending in 2018 should be GH¢1.99billion, PIAC said in a Press Release Friday.

The GH¢1.55 billion which the Ministry claims is its programmed ABFA expenditure for 2018 apart from representing 70 percent net petroleum revenues, complies with Section 18(1) of the PRMA regarding the allocation of petroleum revenues.

It therefore means the programmed amount is exclusive of the GH¢403 million (now GH¢440 million as a result of exchange rate gains) outstanding balance from 2017.

The Ministry of Finance confirmed this in a meeting held with PIAC on April 18 at which meeting it explained that because the 2018 budget was presented in September 2017 and Public Interest and Accountability Committee (PIAC) the GH¢403 million had been approved by Parliament for spending in that year, it couldn’t have been included in the 2018 budget for Parliamentary approval.

The Ministry again, confirmed that, the GH¢440 million outstanding balance from 2017 was therefore not part of the approved expenditures for 2018 under the Appropriation Act for that year.

The Ministry indicated that the unspent amount will need to be brought forward into the 2019 budget for Parliamentary approval (under the 2019 Appropriation Act) before it could be spent.

“Yet in detailing out the programmed expenditure in respect of the GH¢1.55 billion, the Ministry included the GH¢440 million balance from 2017,” PIAC observed in Friday Press Release, describing the Ministry’s explanation to PIAC and, by extension, to the Ghanaian public as “unsatisfactory and misleading, to the extent that it creates the impression that the GH¢440 million unspent amount from 2017 has been duly accounted for.”

Below is the full release

Public Interest and Accountability Committee (PIAC)

Press Release 2 May, 2019 STATEMENT ON THE RELEASE OF A SUPPLEMENTARY EXPENDITURE ANALYSIS TO THE COMMITTEE’S 2018 SEMI-ANNUAL REPORT

The Public Interest and Accountability Committee (PIAC) has released a supplementary analysis to its 2018 Semi-annual Report on the management of petroleum revenues on its website www.piacghana.org. This supplementary report has become necessary as data for the analysis was submitted three months after the statutory publication date, and so could not be included in the substantive report.

As indicated in the statement to release the substantive 2018 Semi-annual Report, PIAC on 17 July 2018 made its initial data request to the Minister of Finance, for revenue and expenditure data. The Ministry in response provided only the revenue data, leaving out the expenditure component. After several verbal reminders to the Ministry, the Committee followed up with a letter dated 4 October 2018 reminding the Minister that, his delay in providing the requested data had caused PIAC to slip on the deadline for filing its semi-annual report, and urged him to treat the matter with utmost urgency. This reminder also went unheeded.

The following are the highlights of findings and recommendations from the supplementary expenditure analysis to the 2018 half-year report:

Key Findings:

An amount of GH¢1.55 billion was programmed for spending in 2018. This equalled 70 percent of net petroleum revenues. From 2017, there was an un-utilised ABFA of GH¢403.74 million (now GH¢440.84 million due to exchange rate gains), which according to the Ministry of Finance was being held in the Treasury Single Account (TSA), and would be brought forward to 2018. By this calculation, the amount that should have been programmed for spending in 2018 should be GH¢1.99billion.

The GH¢1.55 billion which the Ministry claims is its programmed ABFA expenditure for 2018, represents 70 percent net petroleum revenues and complies with Section 18(1) of the PRMA regarding the allocation of petroleum revenues.

It therefore means the programmed amount is exclusive of the GH¢403 million (now GH¢440 million as a result of exchange rate gains) outstanding balance from 2017. The Ministry indeed, confirmed this in a meeting held with PIAC on April 18 at which meeting it explained that because the 2018 budget was presented in September 2017 and the GH¢403 million had been approved by Parliament for spending in that year, it couldn’t have been included in the 2018 budget for Parliamentary approval.

The Ministry again, confirmed that, the GH¢440 million outstanding balance from 2017 was therefore not part of the approved expenditures for 2018 under the Appropriation Act for that year.

The Ministry indicated that the unspent amount will need to be brought forward into the 2019 budget for Parliamentary approval (under the 2019 Appropriation Act) before it could be spent.

Yet in detailing out the programmed expenditure in respect of the GH¢1.55 billion, the Ministry included the GH¢440 million balance from 2017.

The Ministry’s explanation to PIAC and, by extension, to the Ghanaian public is unsatisfactory and misleading, to the extent that it creates the impression that the GH¢440 million unspent amount from 2017 has been duly accounted for.

As regards allocations of the ABFA, the Ministry itself acknowledges that “The allocations were made in line with Section 21 (4) of the PRMA which requires the allocation of not more than 30 percent of ABFA receipts for Goods and Services Expenditure, and at least 70 percent of ABFA receipts to fund capital expenditure”. This assertion settles a running dispute between PIAC and the Ministry as to the interpretation of Section 21(4) of the PRMA.

PIAC notes that the programmed ABFA complied with Section 21(4) of the PRMA – 30 percent expenditure on Goods and Services, and 70 percent expenditure under Capital Expenditure – inspite of the Ministry’s earlier disagreement with the Committee on the interpretation of the Section.

Programmed funding to Agriculture in 2018 increased by a massive 61.19 percent, compared to 2017.

The Kojokrom-Tarkwa railway rehabilitation project received substantial allocations. PIAC’s visit to the projects confirmed good progress. The Anomabo Fisheries College on the contrary, witnessed slow progress as a result of paltry release of funds.

Recommendations:

If as the Ministry claims, the unspent ABFA amount from 2017 will require Parliamentary approval before being spent, then PIAC advises the Ministry to expunge the amount fromits programmed expenditure for 2018.

The Committee commits to work with the Ministry to properly account for the unspent amount and the outcome shall be made public in subsequent report(s)

The Committee encourages the Ministry to ensure that going forward, its programmed and actual expenditure continue to comply with Section 21(4) of the PRMA, which requires 70 percent expenditure on public investments and 30 percent on goods and services.

PIAC commends the government for the increased allocation to the Agriculture Priority Area in 2018, especially in developing the needed infrastructure to support the sector. While we encourage this development, we would also recommend that attention be paid to activities that support direct production.

Funding to ABFA projects should be sustained in adequate amounts to ensure timely completion. This will help to avoid the huge cost overruns that have been associated with the delay in execution of many ABFA-funded projects, particularly road projects.

Going forward, PIAC expects timely submission of data by stakeholder institutions to help the Committee meet statutory deadlines and avoid the need for supplementary reports.

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Dr. Steve Manteaw

Chairman, PIAC