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Auditor General's Special Report: Procurement matters arising

Johnson Akuamoah Asiedu1 Johnson Akuamoah Asiedu, Auditor-General

Thu, 23 Feb 2023 Source: Naa Ayeley Komey

Key Takeaways

• The Auditor General is required by law to publish the reports on public accounts that it submits to Parliament

• Public Officers in breach of procurement laws are personally liable to both criminal and quasi-criminal penalties

• Failure to withhold tax required by law makes a person liable to pay the tax that should have been withheld in the same manner and at the same time as tax that is withheld

• A supplier under a government contract who seeks payment in advance for goods to be supplied, is required to procure a guarantee for the entire period of the contract

• Properties leased for isolation centres can be acquired and converted into income-generating ventures for the Ministry of Health

• The Ministry of Finance can appoint special advisors to problematic ministries who fail to withhold tax or pay excess of advance payments contrary to procurement laws

• Auditor-General Reports are important because they are key for good public governance: they provide oversight, insight and foresight to government.


At the dawn of 2023, Ghanaians were greeted with the Auditor General’s special report on the government’s COVID-19 expenditure for the period March 2020 to June 2022 (“Report”). The Auditor-General acted on this authority as enshrined in the Audit Service Act, 2000 (Act 584) to publish the Report.

According to the Report, the total amount of money raised to deal with the pandemic was about Nineteen Billion cedis (GHS 19,112,318,205.12). Out of this amount, approximately Two Billion cedis (GHS 1,978,551,137.46) was raised in 2021 and about Seven Hundred and Five Hundred Million cedis (GHS 753,319,842.66) raised between January 2022 and June 2022. The sources of the funds included:

• Contingency Fund;

• The World Bank Group;

• The International Monetary Fund (IMF);

• The African Development Bank (AfDB);

• The European Union and;

• Proceeds from the sale of Bank of Ghana COVID-19 Bonds for the 2020, 2021 and 2022 fiscal years.

The purpose of the funds raised was twofold:

• To finance the Coronavirus Alleviation Programme; and

• The implementation of the Ghana COVID-19 Emergency Preparedness and Response Plan.

Generally, procurement of public projects (covering goods, services and works) in Ghana is governed by two (2) major laws, namely the Public Procurement Act, 2003 (Act 663) as amended and the Public Private Partnership Act, 2020 (Act 1039). The choice of which law applies to a specific transaction or project depends on the specific nature of the procurement arrangement.

Act 663 applies to the procurement of goods, works and services financed in whole or in part from public funds; the disposal of public stores, vehicles and equipment; procurement with public funds including loans procured by government, grants, foreign aid and internally generated funds.

All government agencies, institutions, and establishments in which the government has a majority interest are mandated to comply with the Act.

This will include all the entities featured in the Report namely: the Ministry of Finance; Ministry of Health; National Food Buffer Stock Company; Ministry of Gender, Children and Social Protection; Ministry of Local Government and Rural Development.

In case, you haven’t had time to read the Report, this article discusses some procurement issues arising from some key findings of the Report considering the procurement laws of Ghana, particularly; the Procurement Act of 2003 (Act 663 as amended), the Public Finance Management Act, 2016 (Act 921 as amended), the Public Financial Management Regulations, 2019 (L.I 2386); the Public Private Partnership Act, 2020 (Act 1039), the Income Tax Act, 2015 (Act 896) and other relevant legislation.

The discussion is summarised under the following headings:

1. Payments to Service Providers Outside GIFMIS;

2. Failure to Withhold Tax;

3. Variation of Contract Without Approval;

4. Finance Lease Agreement;

5. Payment of Advances Beyond Threshold;

6. Single Source Procurement without PPA approval; and

7. Breaches of Supplier Contractual Obligations.

1. Payments to Service Providers Outside GIFMIS

The Report indicated that a total amount of about Five Hundred and Forty million cedis (GHS543,058,709.13) in payment vouchers were processed and paid without going through the GIFMIS system.

The Ghana Integrated Financial Management Information System (GIFMIS) was established by a law (i.e. Public Financial Management Regulations, 2019 (L.I. 2378)) to serve as the main electronic platform for government’s expenditure administration. All entities that use public funds including the Consolidated Fund and others, are required to use GIFMISS.

The possible punishments for a public officer who issues purchase orders outside the GIFMIS are as follows:

a. a prison term of between 6 months and 2 years under Act 663;

b. a fine of GHS3,000 or both a term of imprisonment and a fine under Act 663;

c. dismissal, demotion or suspension for any liability to the government as a result of the contravention under LI 2348; or

d. criminal liability for causing financial loss to the state under section 179A(3)(a) of the Criminal and Other Offences Act, 1960 (Act 29).

2. Failure to Withhold Tax

The Report indicated that the Ministry of Finance failed to withhold tax amounting to about One Million Seven Hundred and Fifty Thousand cedis (GHS1,754,156.25) to a private entity for the provision of work platforms.

According to the Income Tax, 2015 (Act 896) a person who pays a fee for the supply of services to an entity located in Ghana is required to withhold a specified percentage of the fee as tax. When a person fails to withhold the tax required, that person will pay the tax that should have been withheld.

In this case, it is the Ministry of Finance that failed to withhold the tax. Ordinarily, one would assume that the Ministry of Finance itself, as a government agency, should be exempted from paying the amount which should have been withheld as tax.

However, there is a proper procedure for exempting entities like a ministry in the Exemptions Act, 2022 (Act 1083). Act 1083 requires the government entity to apply for the tax exemption. The application is approved by Cabinet along with other procedures before the exemption is granted.

The possible liabilities for a public officer who fails to collect moneys due to the Government, are as follows:

a. a prison term of between 6 months and 5 years under Act 921;

b. a fine of GHS30,000 or both a term of imprisonment and a fine under Act 921;

c. payment of the amount of deficit in public funds where the Minister of Finance upon inquiry finds the public officer acted negligently;

d. criminal liability for causing financial loss to the state under section 179A(3)(a) of the Criminal and Other Offences Act, 1960 (Act 29).

3. Variation of Contract Without Approval

According to the Report, the Ministry of Health increased the cost of five (5) contracts by approximately Four Million cedis (GHS4,017,000) without the approval of the Central Tender Review Committee.

Under Act 663, where a contract that went through the Tender Review Board is to be altered, the public officer responsible for the variation has to inform the Tender Review Board of any proposed variation order that will amount to an increase in the original contract price by more than 10%.

The law does not give the legal implications of variations that are not compliant with law. However, apart from the personal liability imposed by Act 921 for such breaches as explained under section 2 above, under Act 663, a person who is found liable for breach of Act 663 can be made to pay a fine of GHS 12,000 or be imprisoned for a term of at most, five (5) years or both.

4. Finance Lease Agreement

It was found that the Ministry of Health incurred an additional cost of about Twenty Million Three Hundred and Eighty-Two Thousand cedis (GHS20,382,247.70) for remodelling when it was discovered that a 25-year Finance Lease Agreement valued at GHS 15,265,000 for the lease of buildings to be converted into holding and isolation centres could not serve the purpose for which they were leased.

Under Section 69 of Act 921, the Minister of Finance is the only entity authorised to enter into finance lease agreements on behalf of Government subject to parliamentary approval. The Act also requires the Public Debt Management Office to conduct a cost assessment before the finance lease agreement is signed.

A review of the finance lease process showed that the lease amount was paid to the holder of the properties without recourse to the Minister of Finance and financial assessment by the Debt Management Unit.

The additional cost incurred on the leased properties exceeded the total value of the lease agreement itself. The Report recommended that the Ministry acquire the properties to mitigate the losses already incurred. This is laudable.

Alternatively, I recommend that the government renegotiate the lease agreement or acquire the properties and convert them into income generating ventures for government.

5. Payment of Advances Beyond Threshold

Regulation 113 of L.I. 2378 provides that, an advance payment of a covered entity for goods, services and civil work must meet the following requirements:

• the advance payment itself must take the form of a written contract;

• the amount of the advance payment must not be more than fifteen percent (15%) of the total price to be paid under the contract; and

• the supplier of the goods must get a guarantee covering the period of the contract on payment of damages in the event of non-performance of the contractual obligation of the supplier under the contract.

The Report outlined ten (10) suppliers and service providers who were contracted to supply medical and personal protective equipment. According to the Report, these suppliers were paid advances of about Twenty-Seven million, Nine Hundred and Fifty-Five Thousand US dollars (US$27,955,702.07) and approximately Nine million, Nine Hundred and Eleven Thousand Ghana Cedis (GHS9,911,601.75) which is beyond the 15% legal threshold. There is also no mention of the guarantee required by law.

Where there is non-compliance with procedure such as in seen in this case, LI 2378 requires the Minister of Finance to do the following:

• Require defaulting entity to submit a plan for corrective actions to regularise the mishaps;

• Publish the fact of the violation and the name of the officer in charge in the media;

• Appoint a person(s) to undertake investigation of the defaulting entity;

• Appoint a special advisor for the defaulting entity; or

• Appoint a person to take over the financial management of the defaulting entity.

The Minister of Finance can call for the Minister of Health to submit a plan for ensuring the supplier obtains the necessary guarantee and suspend any further advance payments in respect of the relevant contract(s).

The Attorney General also has the option to prosecute the defaulting officer(s) under section 96 (1) (c) of Act 921 as explained in section 2 above.

6. Single Source Procurement Without PPA Approval

The Report indicated that the Ministry of Health signed four (4) contracts for the supply of PPEs at a cost of about Nine million, Two Hundred and Eighty Thousand Ghana Cedis (GHS9,280,300.00) through single-source procurement without the approval of the Board of the Public Procurement Authority.

Ordinarily, procurement under Act 663 involves an open competitive tender process for the procurement of goods of services paid for with public funds. However, the Act makes an exception where procurement of goods or services is required on an urgent basis either through a single source procurement or a restricted tender arrangement.

According to Act 663, single-source procurement can be done with the approval of the Board of the Procurement Authority where there is an urgent need for the goods, works or services and engaging in tender proceedings or any other method of procurement is impractical due to unforeseeable circumstances giving rise to the urgency.

So where an entity or individual procures goods or services under a single source arrangement without the board approval the following penalties can apply:

• a fine of about GHS12,000 or a term of imprisonment of five years or both under Act 663;

• a fine of about GHS30,000 or a term of imprisonment of at most five years or both under Act 921.

In addition to the above, the Minister of Finance has the discretion to do any of the following:

• publish the violation and the name of the officer responsible for the approval of the payment,

• suspend or annul the transaction,

• appoint a special advisory to the defaulting entity, or

• appoint a person to take over the financial management of the defaulting entity.

7. Breaches of Supplier Contractual Obligations

This section of the article will analyse two main contracts under which there was full or part payment of goods that have not been delivered by the supplier.

a. Contract for Supply of Vaccines

The Report indicated that the Ministry of Health paid an amount of about One Hundred and Twenty Million, One Hundred and Ninety-Two Thousand US dollars (USD120,192,379.80) to UNICEF/AVAT for the supply of vaccines.

Only 5,109,600 doses of vaccines, valued at Thirty-Eight Thousand Three Hundred and Twenty-Two US dollars (USD 38, 322, 000) (representing about 31%) of the amount paid, was actually delivered. The Report recommended that the Ministry of Health renegotiate the contract with UNICEF/ AVAST.

b. Contract for the Supply of Ambulances

The Report indicated that in December 2021, the Ministry of Health entered into a contract for the supply of 26 Toyota Hiace Deluxe Ambulances valued at about Four Million US dollars (US$4,049,460.12) out of which Six Hundred and about Seven Thousand Four Hundred US dollars (US$607,419.02) was paid by September 2022 to be delivered by 15 January 2022.

However, the ambulances remained undelivered as of November 2022. The supply date was extended to March 2023. The Report recommended that the Ministry ensure that the ambulances are delivered on or before the expiry of the extension period.

Under Ghana’s Sale of Goods Act, 1962 (Act 137) where a party to a contract pays for the supply of goods and the goods supplied do not amount to the value paid, the buyer is entitled to demand the supply to the rest of the goods or seek monetary compensation for breach of contract.

The Attorney General has the option to pursue an action for damages accruing to the government for failure to deliver if the ambulances are not delivered by March 2023.

Under the contract for vaccines, the goods in question are perishable. They are vaccines with a definite expiry date after which they cannot be administered.

I recommend that the Ministry of Health negotiate for the supply of fresh vaccines to be supplied in instalments and at such times that align with the Ministry’s vaccine disbursement calendar.


Since 1954 when the office of the Director of Audit of the Audit Service of Ghana was change to the Auditor General, under the then 1954 Constitution, the Auditor General of Ghana has published several reports.

The usual tendency of much public uproar in the wake of the publication which fades a few weeks thereafter has characterised the publication of each report.

This should not be the case because public sector auditing is actually a cornerstone of good public sector governance. The Auditor-General’s reports provide unbiased assessments of whether public resources are responsibly and effectively managed incompliance with law to achieve the intended results.

In fact, the Auditor-General’s reports should help government achieve its threefold responsibility of oversight, insight and foresight. Oversight, because the reports show whether government entities are doing what they are supposed to do and help to detect and deter public corruption.

Insight, because they assist decision-makers by providing an independent assessment of government programs, policies, operations, and results and foresight, because they identify trends and emerging challenges.

The Auditor-General reports provide useful historical information for present-day decision making which will affect our future. We should all be interested, not just for a short period.

Columnist: Naa Ayeley Komey
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