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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
T A B L E OF C ON T E N T S
1. PEOPLE MET ................................................................................................................... 4
2. LIST OF ACRONYMS ....................................................................................................... 6
3. EXECUTIVE SUMMARY ................................................................................................... 8
3.1. BACKGROUND 8
3.2. COVERAGE 9
3.3. OBJECTIVES OF THE AUDIT 12
3.4. ACKNOWLEDGEMENTS 12
3.5. FINANCIAL IMPLEMENTATION OF THE PROGRAMME 12
3.6. DESCRIPTION & CRITICAL ANALYSIS OF FINANCIAL AND ADMINISTRATIVE
PROCEDURES AND OF THEIR APPLICATION 13
3.6.1. REGULATIONS, SITUATION: 13
3.6.2. EXPENDITURE 13
3.6.3. TECHNICAL ASSISTANCE 15
3.6.4. CONCLUSIONS ON BUDGET MANAGEMENT 16
3.7. AUDIT – MAIN FINDINGS 16
3.7.1. SCOPE OF THE AUDIT 16
3.7.2. SUMMARY OF THE AUDITED EXPENDITURES 16
3.7.3. IRREGULARITIES RELATED TO CALL FOR TENDER 18
3.7.4. IRREGULARITIES CONCERNING THE QUALITY OF THE EXPENDITURES 18
3.7.5. THE PARTICULAR CASE OF THE WEST AFRICAN EXAMINATION COUNCIL 19
3.7.6. THE USE OF STOP PAYMENT ORDERS. 20
3.7.7. SUMMARY TABLE OF THE AUDIT REPORTS 21
3.8. POINTS OF CLARIFICATION 22
3.9. RECOMMENDATIONS 25
4. DESCRIPTION AND CRITICAL ANALYSIS OF FINANCIAL AND ADMINISTRATIVE
PROCEDURES AND OF THEIR APPLICATION .................................................................28
4.1. ORGANISATIONAL AND POLICY BACKGROUND ELEMENTS 28
4.1.1. GHANA- A BRIEF OUTLINE 28
4.1.2. THE ADMINISTRATIVE STRUCTURE OF GOG 29
4.1.3. THE MINISTRY OF FINANCE 30
4.1.4. THE MINISTRY OF HEALTH 31
4.1.5. THE MINISTRY OF EDUCATION 32
4.2. GOG REVENUE DETERMINATION AND BUDGET PREPARATION 33
4.2.1. SOURCE OF REVENUE 33
4.2.2. BUDGET PREPARATION 33
4.3. REGULATIONS GOVERNING GOG EXPENDITURE UNDER THE BUDGET 35
4.3.1. THE WARRANT 35
4.3.2. FINANCIAL ENCUMBRANCES 36
4.3.3. DRAWING LIMITS 36
4.3.4. REALLOCATIONS 37
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
4.3.5. ACCOUNTING AND REPORTING 37
4.3.6. END OF YEAR COMPLETION 38
4.4. REGULATIONS GOVERNING GOG PROCUREMENT 38
4.4.1. PUBLIC SUPPLIES AND EQUIPMENT 38
4.4.2. THE GHANA SUPPLY COMMISSION 40
4.4.3. AD-HOC PURCHASES 42
4.4.4. AUDIT 42
4.5. CRITICAL ANALYSIS OF THE BUDGETARY FRAMEWORK AND PROCEDURES 44
4.5.1. REVENUE 44
4.5.2. BUDGET PREPARATION 46
4.5.3. EXPENDITURE RELEASES AND REGULATIONS 48
4.6. TECHNICAL ASSISTANCE 66
4.6.1. FOR THE FINANCIAL MONITORING OF CPF 66
4.6.2. IN THE MINISTRY OF FINANCE 66
4.6.3. IN THE MINISTRY OF HEALTH 66
4.6.4. AT THE MINISTRY OF EDUCATION 66
5. ANALYSIS OF CPF MANAGEMENT MODALITIES AND OF THE RESPECT OF
CONTRACTUAL PROVISIONS ...........................................................................................68
5.1. BANKING MECHANISMS 68
5.1.1. COUNTERPART FUND MANAGEMENT 68
5.1.2. UTILISATION OF CPF FUNDS 1996 (GIP IV) 69
5.1.3. UTILISATION OF CPF FUNDS 1998 (GIP V) 70
5.1.4. UTILISATION OF CPF FUNDS 1999 (SASP VI) 70
5.1.5. THE MECHANICS OF DISBURSEMENT OUT OF THE COUNTERPART FUNDS 71
5.1.6. EXCHANGE RATES 71
5.1.7. CHANGE OF BANK ACCOUNT NUMBER 72
5.1.8. SECURITY ISSUES 72
5.1.9. VALUE OF FUNDS 73
5.1.10. BANK CHARGES 73
5.2. FULFILMENT OF CONDITIONALITIES 73
5.2.1. GIP IV 74
5.2.2. GIP V 74
5.2.3. SASP VI 75
5.2.4. GENERAL COMMENT: 77
6. AUDIT OF THE TARGETED EXPENDITURES ...............................................................78
6.1. SCOPE OF THE AUDIT 78
6.1.1. SUPPORTED EXPENDITURES 78
6.1.2. RANGE OF THE AUDIT 79
6.1.3. VOLUMES AUDITED 80
6.2. SUMMARY OF FINDINGS 81
6.2.1. ANOMALIES CONCERNING THE CALL FOR TENDER 81
6.2.2. ANOMALIES CONCERNING THE QUALITY OF THE EXPENDITURES 82
6.2.3. THE PARTICULAR CASE OF THE WEST AFRICAN EXAMINATION COUNCIL 83
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
6.2.4. PROCEDURES FLAWS - MINISTRY OF EDUCATION 4TH QUARTER PARALLEL PROCEDURE
– THE USE OF STOP PAYMENT ORDERS. 83
6.2.5. SUMMARY TABLE 83
6.3. DETAILED PRESENTATION OF THE AUDIT FINDINGS 86
6.3.1. GOG DEBT REDUCTION AND FUNDING OF LOCAL COMPONENT OF EDF PROJECTS 86
6.3.2. RECURRENT EXPENDITURES 86
6.3.3. THE CASE OF THE GSC 96
6.3.4. ANOMALIES CONCERNING THE QUALITY OF THE EXPENDITURES 98
6.3.5. THE PARTICULAR CASE OF THE WEST AFRICAN EXAMINATION COUNCIL 99
6.3.6. PROCEDURES FLAWS - MINISTRY OF EDUCATION 4TH QUARTER PARALLEL PROCEDURE
– THE USE OF STOP PAYMENT ORDERS 105
6.3.7. AUDIT VISIT IN EDUCATION WAREHOUSES 113
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
1. PEOPLE MET
The mission met the following officials in the course of their work:
European Commission
Mr Guy Samzun, SCR
Mr Charles Brooks, Head of Delegation, Delegation of the European Commission in Ghana
Mr Alessandro Mariani, Principal Secretary – Economic Advisor, Delegation of the European Commission in
Ghana
Ministry of Finance
Mr Emmanuel Martey, Special Adviser to the Minister
Mr E. Osei Prempeh, Principal Economic Officer
Mr Joseph Chognuru, Economic Officer (NAO FED)
Ministry of Finance, Controller & Accountant-General‟s Department
Mr Tuffour, Controller and Accountant-General
Mr A. K. Kufe, Director
Ministry of Finance, Controller & Accountant-General‟s Department, Treasury offices
Mr Achadi, Chief Treasury officer, Treasury Office for Health
Mrs Amoako-Atta, Deputy Chief Treasury Officer, Treasury Office for Health
Mr J.K. Burndam, Chief Treasury officer, Treasury Office for Education
Pufmarp office
Mr Joseph K. Adda, Project Manager
Ministry of Health
Mr Patrick Nomo, Financial Controller
Mr Alex Nartey, Chief Accountant
Mr Sam Boateng, Director of Supplies & Procurement
Ministry of Education
Mr Yow Dwomoh, Former Director, now TA for EC at Policy planning
Mr John Obeng-Asamoah, Director, Administration & Finance
Mrs Margaret Andan, Director of Supplies, Supplies and Logistics Division
Mr Ben B. Cronze, Acting Deputy Director, Supplies and Logistics Division
Ministry of Education, Ghana Education Service
Mr Anaman, Acting Chief Accountant, Directorate for Administration and Finance
Mr Yiriyelleh, Director, Administration & Finance
Mr M.K. Danquah, Acting Chief, GES Internal Control
Mr Charles Antwi Konadu, Principal Internal Auditor, GES Internal Control
Mr George Appiah-Yeboah, Internal Auditor, GES Internal Control
Mr Donatus Akane Amobire, Internal Auditor, GES Internal Control
Mr , Chief, Internal Audit, Ministry of Health
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
Ghana Audit Service
Mr Osei Tutu Prempeh, Auditor-General
Mr T.A.K. Quartey, Deputy Auditor-General, Director Central Government Audit dept.
Ms Felicia J. Mensah, Deputy Auditor-General, Director Commercial Audit dept.
Mr S. Adnamoah-Addo, Director Public Accounts Committee
Mr E. B. Lamptey, Director Policy, Research, Monitoring & Evaluation
Mrs Abigail A. Pentsil, Auditor, Education
Mr J. S. Mensah, Auditor, Health
Bank of Ghana
Mr Frederick France, Head, Treasury Department
Mrs Elly Ohene-Adu, Deputy Chief Manager, Treasury Department
Mr Benjamin R. Cudjoe, Manager, Treasury Department
Mr Pat Atta Capoku, Manager, Government Accounts Unit
Ghana Supply Commission
Mr Rene V. Ankumiah, Chief Accountant
Mr Bernard Asante, Chief Purchasing Manager
Pantang Hospital
Mr Joseph Kotie-Nkansah, Supply Director
Mr Ashford Goku, Accountant
Department for International Development
Malcolm Watson
Leo Kabeh
Greyson Clark (Bannock Consulting)
West African Examination Council
Mrs Lydia Kpodo, Head of National Office
Mr E.L. Otoo Director of Administration
Rev. John A. Adotey Ag. of Test Administration
Mr Mike Affanu-Binah, Ag. Head Finance
Price Waterhouse Coopers
Mr Steve Nartey, Senior Manager
Mr Abu, Assistant Manager
GNTC Warehouse
Mr. S.Y. Kumi Senior, Storekeeper
Mr. Kwame Adjepong, Storekeeper
Mr. Charles Hammond, Storekeeper
PREP Warehouse
Mr. Kwame Owusu-Ansah, Warehouse Supervisor
Mr. S.G. Adams, Storekeeper
Mr. G. Domee, Forklift Operator
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
2. LIST OF ACRONYMS
ATF Accounting, Treasury and Financial Reporting Rules and Instructions (MoH)
BMC Budget Management Centre
CA-G Controller and Accountant-General
CRF Consolidated Revenue Fund
DAF Director of Administration and Finance
CPF Counterpart Funds
DfiD Department for International Development
DG Director General
DMS Director of Medical Services
EC European Commission
EU European Union
FAR Financial Administration Regulations 1979 LI (1234)
FE Financial Encumbrance
FPMU Funds and Procurement Management Unit of the Ministry of Education
FY Financial Year
GAS Ghana Audit Service
GASB Ghana Audit Service Bill
GES Ghana Education Service
GESDR Ghana Education Service Division Requirement
GHC Ghanaian Cedi
GIP General Import Programme
GoG Government of Ghana
GSC Ghana Supply Commission
HoD Head of Department
ICB International Competitive Bidding
IDA International Development Agency
IGF Internally Generated Funds
JIM Joint Implementation Memorandum
LPO Local Purchase Order
MDA Ministries, Departments and Agencies
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
MoE Ministry of Education
MoF Ministry of Finance
MoH Ministry of Health
MTEF Medium Term Economic Framework
NCB National Competitive Bidding
PMU Project Management Unit of the Ministry of Health
PPM Procurement Procedure Manual of the Ministry of Health
PUFMARP Public Finance Management and Administration Reform Project
PV Payment Voucher
SASP Structural Adjustment Support Programme
SRA Store Receipt Advice
TA Technical Assistance
T&T Travel and Transport
IGF Internally Generated Funds
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
3. EXECUTIVE SUMMARY
3.1. BACKGROUND
The Government of Ghana has been undergoing structural reform under successive adjustment
programmes for almost two decades, supported by the Bretton Woods Institutions and the international
donor community. Following remarkable progress in bringing the macro-economic environment under
control, the Government is currently focusing on improving public sector performance particularly in
terms of the efficiency, accountability and transparency of financial management.
In 1995, 1996 and 1999, the European Commission provided three grants from the European
Development Fund for a total value of 57,8 million Euros in support of the Government of Ghana‟s
reform efforts. The local currency counterpart of the EC balance of payments support was targeted at
covering budgeted expenditure in health and education, and non-budgeted financing of micro-projects
and of the local component of EDF-financed projects for financial years 1996, 1998 and 1999.
Standard conditions for receiving this support were, among others: the satisfactory implementation of
the economic reform programme set out in the Policy Framework Programmes, improvements in
budgetary programming and management, the consolidation of financial and administrative reform in the
Ministries of Health and Education (including improvements in the ratio between wage and non-wage
recurrent expenditure). More specific conditions in particular years were related to the strengthening of
the Ghana Audit Service and to progress on resolving the problem of road sector arrears.
The audit team was commissioned by the European Commission to carry out a systems and financial
audit of expenditure carried out by the Government of Ghana under items targeted by counterpart funds.
A team of six auditors visited Ghana from the 24th of January to the 20th of February 2000, concentrating
on Accra where the Treasury offices for central government, the Region of Greater Accra and the
District of Accra were audited. The Regions of Volta and the district of Ho were also examined. During
the time it was in Ghana, the audit team met representatives from the Ministries of Finance, Health and
Education, the Bank of Ghana, the Ghana Audit Service, the Ghana Supply Commission, the Delegation
of the European Commission, Pantang Psychiatric Hospital, PUFMARP and Price Waterhouse
Coopers.
A provisional Audit Report was submitted to the Government of Ghana for review and for an opportunity
to respond with comments and observations. Specifically, detailed responses were received from the
ministries of Health and Education. The West African Examinations Council also submitted comments,
which were considered along with the rest of the ministry of Education‟s comments. Further, the
Delegation offered a few contributions to be considered in the preparation of the final report.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
The final report was prepared after a careful review of all of the comments, observations and
suggestions. Each was considered in light of the major conclusions of the Audit and also with respect to
any required revisions of the valuation of ineligibility determinations. None of the substantive
conclusions originally arrived at required modification. However, with respect to the valuation of the
ineligibility amounts a minor downward revision of approximately 2% was found necessary. This has
been fully addressed in the final Audit Report.
3.2. COVERAGE
The audit covers Government of Ghana‟s budgetary and extra-budgetary expenditure, targeted by
counterpart funds generated by the following EC Structural Adjustment Programmes:
a) - FA 5567/GH – 7 ACP GH 35/36, for 21.4 million Euros, referred to in this audit as “GIP IV”. The
European Commission took the Financing Decision in 1995. The Joint Implementation Memorandum
between the EC and the Government of Ghana was signed on 16 August 1996. Of this amount 100.000
Euros were earmarked for technical assistance. The rest of the foreign exchange was disbursed in one
tranche.
b) - FA 5697/GH – 7 ACP GH 48 was approved in 1996, for 15 million Euros, with 14.9 million Euros for
the GIP and 100.000 Euros for technical assistance, referred to as “GIP V”. The International Monetary
Fund suspended its backing of Ghana‟s adjustment process from April 1997 to March 1998, which is
reflected in an equivalent pause in EC support. The JIM was signed following this interruption on 1 st
October 1998.
c) - FA 6088/GH – 8 ACP GH 5 was approved in 1999 for a total of 21.4 million Euros. It is referred to
as “SASP VI” (of which only 50% has been disbursed to date). Of this amount 400.000 Euros were
earmarked for technical assistance, and the JIM was signed on 8 September 1999. The Financial
Agreement had originally expired on the 31st December 1999 but has been extended until September
2000 to allow for delays in the fulfilment of the conditionality clauses contained therein.
The precise terms of agreement between the European Commission and the Government of
Ghana on the technical arrangements for the use of such counterpart funds, are set forth in a Joint
Implementation Memorandum (JIM) for each of these three programmes. JIMs cover the modalities for
the release, targeting and monitoring of CPF and the sectors covered, mainly health and primary
education:
The JIM for GIP IV specifies that 85 % of counterpart funds will be destined for the following
budget lines in the 1996 Budget, covering a percentage of the total spending on that budget line
(called rate of protection):
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
Budget item Title Rate of protection
Ministry of Education
140 Ministry of Education 48%
141-13 GES – Basic Education 81%
142 GES - Schools and regional services 50%
143 GES – Special services (handicapped) 100%
Ministry of Health
160 Ministry of Health 34%
160-05 HQ Supply stores and Drug MGMT 100%
161-03 Accra Mental Hospital 85%
161-04 Pantang Mental Hospital 85%
161-05 Ankaful 85%
162 Regional Health Service 100%
163 District Health Service 100%
Within these lines, the EC covered:
I. Travelling expenditure
II. General expenditure
III. Maintenance, repairs and removals
IV. Other current expenditure
The rest of the counterpart funds (15%) was allocated to microprojects in various sectors which
may or may not have been included in the budget.
The JIM for GIP IV foresaw the following allocation of the GHC 38,387,168,000 generated in the
1998 Budget:
Budget item Title Rate of protection
Ministry of Education
141-13 GES Basic Education 87%
142-2 GES Primary Education 87%
142-3 GES Junior & Secondary Education 85%
143 GES Special Services 100%
Ministry of Health
163 Psychiatric Hospitals 92%
164-2 Regional Hospitals 50%
165 District Health Services 86%
As a residual of GHC 14,300,000,000 CPF was available from previous programmes, its utilisation
is also programmed in the JIM. Other applications included a contribution to the reduction of
Government debt with the Bank of Ghana (18% of the total) and the funding of the local cost
contribution of EDF-financed activities (11.8%).
The JIM for SASP VI specifies that funds will be disbursed as direct budgetary aid. For the first
time, there is the obligation to avoid their utilisation in any extra-budgetary expenditure. They
cover about 1.4% of Ghana‟s discretionary (non-interest) expenditure or less than 1% of total
expenditure and are distributed as follows (1999 Budget):
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
Ministry of Education
141-13 GES Basic Education 72%
142-2 GES Primary Education 72%
142-3 GES Junior & Secondary Education 72%
143 GES Special Services 100%
Ministry of Health
163 Psychiatric Hospitals 94%
164-2 Regional Hospitals 94%
165 District Health Services 100%
Within these lines, the following expenditures were targeted:
1. Administration
2. Services.
Comments on the evolution of targeting:
Progressively, as one programme followed the former, the EC decided to concentrate targeting on the
basis of three fundamental principles:
Fewer budget lines for a greater impact and a more concentrated effect
An increased targeting on basic education and health expenditure
An increased targeting on expenditure at the decentralised level.
As a result, fewer budget lines were targeted, and a greater concentration on small and decentralised
expenditure achieved (away from central government expenditure and towards the districts and
regions). Within these lines, the EC has always covered expenditure for:
Travelling expenditures
General expenditure
Maintenance, repairs and removal
Other current expenditure
Generally, the JIMs specify, among others that:
“the management and utilisation of the CPF will be determined within the framework of the annual
budget process (…);
None of the grants will be used to finance extra-budgetary expenditure;
{and will be used} to protect the non-wage recurrent expenditure (administration and services)” for
health and education from any reduction which could arise;
The Government of Ghana will practice prudent financial management and expenditure control, and
use all reasonable opportunities so as to mobilise additional revenue;
Increased co-ordination with other donors, in particular those involved in improving public financial
management, shall be pursued to ensure that the effectiveness and impact of the use of counterpart
funds are maximised;
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
3.3. OBJECTIVES OF THE AUDIT
The terms of reference issued by the European Commission for this audit provided the framework for
the mission‟s operations, according to the principles laid down hereafter:
To carry out a critical analysis of the budget process and of the control of the financing
procedures established between the EC, the Ministry of Finance and the technical departments
concerned, as well as that of the respect of the budgetary procedures and of the arrangements
defined in the Financing Agreements;
Basing their assessment on the supporting documents, to check that the accounting,
administrative and financial management procedures in force in Ghana are applied correctly, and
to appreciate their effectiveness and usefulness under the current programme as well as for
future supports;
To assess the follow-up system (financial, accounting and achievements) that has been set up;
To analyse the terms of reference of technical assistance set up by the various donors within the
financial services of the State and more particularly in the sectors which are involved in the
implementation of the EC support programme for structural adjustment;
To make recommendations for the proper implementation of EC budget support in the targeted
sectors and, if necessary, at the global level.
3.4. ACKNOWLEDGEMENTS
The audit team wishes to thank the officials of the Government of Ghana and the Delegation of the
European Commission in Accra, who assisted the mission and gave it free access to all the information
necessary for the purposes of the audit.
3.5. FINANCIAL IMPLEMENTATION OF THE PROGRAMME
The different conventions defining the expenditures supported by the EC as part of the Structural
Adjustment Programme in Ghana are listed in point 1 of the present document. The table hereafter
displays a summary of the implementation situation:
Programmes Total Amount (millions Euros)
N° Date GIP AT Disbursed Balance
5567/GH - 7 ACP GH 36/36 GIP IV 16/08/96 21,40 0,10 21,30
5697/GH - 7 ACP GH 48 GIP V 01/10/98 15,00 0,10 14,90
6088/GH - 8 ACP GH 05 SASP VI 08/09/99 21,40 0,40 10,50 10,50
Total 57,80 0,60 46,70 10,50
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
The disbursed instalments generated the following GHC resources:
Programmes Disbursed CPF generated in millions GHC
Mio Euros Disbursed Utilised Balance
5567/GH - 7 ACP GH 36/36 GIP IV 21,3 43 103 43 103 0
5697/GH - 7 ACP GH 48 GIP V 14,9 38 387
Pending amounts coming from other programmes 18 064
Sub-Total 56 451 34 311 22 140
6088/GH - 8 ACP GH 05 SASP VI 10,5 28 562 28 562 0
46,7 128 116 105 976 22 140
The GHC 22 140 million balance corresponds to the bank balance on 31/12/99, and is mainly justified
by the second tranche of the GIP V programme (GHC 16,187,168,000), not yet disbursed.
3.6. DESCRIPTION & CRITICAL ANALYSIS OF FINANCIAL AND ADMINISTRATIVE PROCEDURES
AND OF THEIR APPLICATION
3.6.1. Regulations, situation:
The 1979 Financial Administration Regulations LI (1234) and Decree SMCD (221), which set the
guidelines for the management of public funds, (budgeting, disbursements, accounting, procurement,
auditing) have not been substantially revised since that date. Additionally, individual ministries have not
developed internal regulations to supplement or update the FAR, except for recent efforts at the Ministry
of Health (which has issued Accounting, Treasury, and Financial Reporting Rules and Instructions).
Impact: Many of the original regulations are meaningless in today‟s context. As a case in point the,
procurement monetary thresholds are meaningless given current prices. Since so many of the
regulations cannot be complied with it undermines the authority of the document. The upshot of this is
that there has evolved ad hoc procedures that are hardly standardised and mostly not understood. Civil
servants are often no longer aware of the original rules. Knowledge of any official regulatory
environment is limited. Application of consistent rules is even more severely limited. As a consequence,
in order to fill this vacuum, authority has eventually ended up concentrated in the hands of senior
management; this in turn has led to the institutionalisation of unofficial “codes of conduct” characterised,
for the most part, by ad hoc procedures absent of carefully integrated checks and balances.
3.6.2. Expenditure
the Budget
The Appropriations Bill (the Budget as voted by Parliament) is usually approved in March, although the
financial year is from January to December.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
This is partly due to the late collection and pooling of tax revenue, and arrival of donor funds, resulting in
a delayed determination of total revenue and thus of potential expenditure ceilings.
Releases
The Ministry of Finance, concerned by possible inflationary pressures, would appear to delay the
implementation of the budget as much as possible, by withholding Financial Encumbrances (spending
authorisations), and delaying transfers between the Bank of Ghana and Treasury office accounts. The
delays experienced by spending officers in receiving their expenditure authorisations impede timely
expenditure management. Ministries, Departments and Agencies (MDAs) at the moment, are not able to
prepare cash-flow estimates, limiting the capacity of Government to manage its short-term borrowing
requirements.
Impact: This situation leads to the administration functioning on an interim budget and credit system for
the first quarter, and a rush to spend the bulk of allocations in the 3 rd and 4th quarters. FE authorisations
do not reach the lower echelons of the administration (e.g. district level) before March.
Purchasing and procurement
The normal expenditure cycle as described by officials, and partially reflected in the rules, is the
following:
1. The spending officer‟s Head of Department writes a Memorandum to the Director General.
2. There are three methods by which a supplier is chosen: a) single sourcing: the purchase is made
directly from one supplier (authorised only occasionally in clearly specified cases); b) shopping: officers
are required to obtain at least three alternative quotations (pro forma). Above a certain threshold and
according to the FAR, supplies have to be obtained through the Ghana Supply Commission, who carries
out open, or restricted, international, national, and regional tenders.
3. Next, the Local Purchase Order (LPO) is prepared by the relevant accountant and signed by either
the Director General or the Director for Administration and Finance, and confirmed by the Treasury. A
firm order is then sent to the supplier.
4. When the supplier delivers the goods, he presents a Way Bill to the storekeeper who issues an SRA
(Store Receipt Advice- Services Received Advice). For maintenance or construction contracts, the Head
of Department issues a Certificate of Completion. The Internal Control unit also signs the SRA following
a physical inspection.
5. Then, the supplier provides an invoice for goods procured/services rendered.
6. The spending officer will then prepare a Payment Voucher, attaching the LPO, the quotations, the
Firm order, the Way Bill, the SRA, and the invoice. The Treasury officer then approves the payment
and the cashier prepares the cheque.
Actual situation:
Thresholds for procurement have not been updated since 1979. There are no documented procedures
to guide the activities of the purchasing committees at the regional and district levels, or in hospitals,
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
schools and other administrative units. Specific internal guidelines have not been issued in ministries to
guide purchasing staff. This regulatory vacuum is acknowledged in various Government publications.
Decisions seem therefore left to discretion of officials and of management.
Although this is prohibited by the FAR, Ministries have begun to increasingly purchase on credit, to
avoid having to wait until the official communication of availability of funds.
Impact: This situation leaves officials confused about the rules they are supposed to apply/ verify. In the
best of cases, rules are bent to allow the administration to function properly; but the door is open to
abuse at all levels. Auditors and controllers cannot properly verify the correct implementation of
procedures if these are not clearly set out, and their authority to block dubious purchases is diminished.
There are two main parallel procedures:
- The „Emergency‟ procedure, whereby single sourcing is used outside allowed circumstances.
- The „Stop-order‟ procedure: To avoid losing uncommitted funds at the end of the budget year, and
following a joint departmental meeting, procedures are bypassed by finalising all documents before
actual delivery.
Accounting and reporting
Ministries, departments and agencies staffs are rarely trained in basic accounting and financial
management, and only exceptionally are there any qualified accountants. The Ministry of Health has
developed detailed internal regulations only recently. Financial data is still treated manually. Inadequate
staffing levels also translate into a poor quality of reporting.
Accounts containing IGF are opened by MDAs in commercial banks against regulations, and cannot be
monitored correctly by the Ministry of Finance and Treasury.
Reliable asset registers are generally absent.
Controls and Audit
Ministries have internal audit units, which are answerable to senior management of their own ministry
and have thus limited independence in preventing irregularities.
The Ghana Audit Service is currently unable to fulfil its constitutional obligations adequately.
3.6.3. Technical assistance
Technical assistance financed by the EC has concentrated so far on long-term support to the Ministry of
Education‟s macro budgetary planning and management capacity. Short-term TA has also helped
monitor the use of CPF. Given the findings of the mission, the role and the scope of the TAs may be
reviewed by the EC accordingly.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
3.6.4. Conclusions on budget management
The lack of a coherent regulatory environment, that obviously affects transparency and accountability,
has created confusion and the potential for abuse at all levels. The Public Finance Management Reform
Programme (PUFMARP) has articulated a coherent and comprehensive reform strategy framework, and
many of the „macro‟ problems outlined above could be significantly addressed by the Programme, but
with substantial delays. Progress with PUFMARP has been notable but mainly in the area of budgetary
planning and programming (MTEF).
3.7. AUDIT – MAIN FINDINGS
3.7.1. Scope of the audit
For each budgetary period controlled (1996, 1998 and 1999), the targeted expenditures concerned
health and education sectors. In 1996 and 1998 some local EDF components and specified payments
such as the GoG‟s reduction of debt were considered as well.
The allocation per sector (Health and Education) was as follows:
EU allocation Expenditures (in 000 000 GHC)
Counterpart Funds 1996 1998 1999
Budget Rate(a) Targeted Budget Rate Targeted Budget Rate Targeted
Ministry of Education 24 498.7 59% 14 500.1 19 516.8 87% 17 000.0 37 329.3 74% 27 452.3
Ministry of Health 29 179.1 75% 22 000.0 25 046.3 80% 20 000.0 26 570.0 98% 26 104.3
Grand Total 53 677.8 75% 36 500.1 44 563.1 80% 37 000.0 63 899.3 98% 53 556.6
(a) 'Rate' means the percentage of EC funds allocated per targeted lines
In the administrative organisation of Ghana, the expenditures vouchers are not centralised but are kept
by the Treasury agencies in the regions and districts where the payments were made.
For the Ministries of Education and Health, the mission controlled the Treasuries covering:
The central level (expenditures of the Central Directorates of the Ministries)
The Greater Accra Region and its Districts
Controls were also performed at the Ho District Treasury of the Volta Region.
3.7.2. Summary of the audited expenditures
a) – GoG debt reduction and funding of local component of EDF projects
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
Table 4b Billions GHC & Millions Euros
Year / Ministry Disbursed Audited
GHC Euros GHC Euros % / Disb
GoG debt reduction 9 500 3,69 9 500 3,69 100%
EDF projects 9 213 3,58 6 780 2,63 73,6%
Grand Total 18 713 7,26 16 280 6,32 87,0%
The conversion of the GHC to Euros was calculated on the basis of the 1998 rates that is to say
GHC 2 576.32 for 1 Euro
The audit on the above does not call for any particular remarks.
b) – Health and Education Budgetary Support
Ministry Disbursed Audited Ineligible
GHC Euros GHC Euros %/Disb GHC Euros %/Audit
Education 1996 14 500 7,17 4 816 2,38 33,2% 2 953 1,46 61,3%
Education 1998 10 200 3,96 6 385 2,48 62,6% 3 090 1,20 48,4%
Education 1999 13 921 5,12 8 242 3,03 59,2% 3 865 1,42 46,9%
Total Education 38 621 16,24 19 443 7,89 50,3% 9 908 4,08 51,0%
Health 1996 22 001 10,87 9 506 4,70 43,2% 2 661 1,31 28,0%
Health 1998 12 000 4,66 5 270 2,05 43,9% 1 637 0,64 31,1%
Health 1999 14 641 5,38 4 617 1,70 31,5% 381 0,14 8,3%
Total Health 48 642 20,91 19 393 8,44 39,9% 4 679 2,09 24,1%
Health & Education
36 501 18,0 14 322 7,1 39,2% 5 614 2,8 39,2%
1996
Health & Education
22 200 8,6 11 655 4,5 52,5% 4 727 1,8 40,6%
1997
Health & Education
28 562 10,5 12 859 4,7 45,0% 4 246 1,6 33,0%
1998
Grand Total 87 263 37,2 38 836 16,3 44,5% 14 587 6,2 37,6%
During the audit on expenditures files, the assignment pointed out a number of anomalies and
deficiencies, which mainly concern 1) the call for tender, 2) the quality of the expenditures and 3) the
use of “parallel” procedures.
Additionally, some particular expenditures, those made by the West African Examination Council
(WAEC) to organise the Basic Education Certificate Examination (BECE) call for a specific comment.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
3.7.3. Irregularities related to call for tender
As already mentioned, Ghana does not have current detailed regulations in the public expenditure
procedures providing for calls for tender. Nevertheless, the common use and practice established
require a call for tender. The tender procedures range from a simple comparison of 3 pro forma invoices
– which constitutes the simplest form, but is also considered as the minimum required – to national and
international calls for tender managed directly by the Ministries or by specialised public services such as
the Project Management Unit (PMU) or the Ghana Supply Commission (GSC).
The table below sums up the data related to the non-respect of call for tender as pointed out by the
auditors for the recurrent expenditure. This is to say that the auditors have also controlled whether these
unofficial procedures have actually been applied.
Education Health Grand Total
1996 1998 1999 Total 1996 1998 1999 Total 1996 1998 1999 Total
Dossier 88 13 19 120 16 75 1 92 104 88 20 212
Amount 133 662 187 753 39 689 361 104 180 010 494 920 13 312 688 242 313 672 682 673 53 001 1 049 346
On top of these amounts, the GHC 2,046,723,736 relating to the tenders managed by the GSC
represents a total which is ineligible for EC assistance.
The call for tender is a particularly important element for the auditors, as it is essential for expenditure
quality control, not only at the Technical Ministries‟ level but also at the Ministry of Finance‟s level.
Indeed, the effectively applied call for tender, whatever its specific terms (shopping on the basis of three
pro forma or call for tender), allows the State to purchase with the guarantee of the best possible
conditions in terms of cost, delivery time and quality. Giving up on a strict and effective call for tender
would mean that the Administration deprives itself of a great part of its control over a rational
implementation of the Budget.
Additionally, the more the elements of the tender procedure are circumvented or ignored, the more the
internal controls (Internal Audit Unit) and external controls (Ghana Audit Service) become meaningless
and ineffective. The process then merely pays lips service to control and does not achieve a rational
and efficient application of funds. The procedure becomes a simple list of formal steps in the
expenditure process.
3.7.4. Irregularities concerning the quality of the expenditures
These irregularities essentially concern:
- The expenditures based on documents that cannot be considered as vouchers of their own: 1)
expenditures estimates, 2) expenses repayments bearing no signature of the final beneficiaries, 3)
non probative invoices (especially hand written bills for commodities).
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
- Expenditures made without any real call for tender: 1) issuing of « poor quality » pro forma with little
or no probative value and 2) issuing of forged pro formas.
- The lack of documents: 1) pro forma, 2) Local Purchase Order (LPO) and 3) Store Receipt Advice
(SRA).
- Non-respect of the administrative documents sequence: 1) pro forma date subsequent to the SRA,
2) LPO date subsequent to the SRA and 3) LPO date subsequent to the Waybill.
On this particular point the auditors would like to stress that the consequences of the irregularities
observed in the expenditures files and described above, entail more than their mere disqualification.
Indeed we are not looking at a mere breach of procedures.
Thus, the auditors have reported a nearly systematic use of pro forma invoices instead of final invoices,
on the grounds of the findings arising from the sample they audited. It is fairly easy to acknowledge,
even if you disregard those pro forma that are of poor quality or even forged, that the documents cannot
be considered as reliable vouchers and that, consequently, they are very likely not recorded in the
suppliers‟ books. This is a particularly serious observation for 1999 expenditures in respect of the Value
Added Tax (VAT) laws introduced that require the use of a VAT invoice for most of the expenditures
reviewed.
Through this practice, the Administration creates an opportunity for tax evasion and thus a loss of
domestic revenues. This is all the more obvious in 1999, for which year the auditors reported the almost
total absence of special VAT invoices: the Administration takes absolutely no guarantee as to whether
its suppliers actually pay the due amounts regarding VAT.
More generally, the auditors also observe that the Administration keeps appealing very often to the
informal sector vendors and that this allows her to justify a certain free-and-easy attitude as to
procedure implementation. This attitude breeds risks, especially because if the Administration does not
abide by the procedures it has set up. It depreciates them. Further, it is unlikely that such sourcing
represents the most price efficient procurement. Moreover, it tends to give permanence to the informal
aspects of the economy.
3.7.5. The particular case of The West African Examination Council
The Government of Ghana participates in the financing of the global budget (national part and
international part) by transferring annual grants (budgetary line 140 – 01; this line was targeted by the
EC only for year 1996).
Additionally, the GoG entrusts the WAEC with the organisation of the Basic Education Certificate
Examination (BECE). This service is specifically invoiced and charged to one of the budgetary lines
supported by the EC (143-13 GES-Basic Education; this line was targeted by the EC in each of the
three years in review, namely 1996, 1998 and 1999).
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
Every year, on the grounds of an estimation of the number of candidates to the BECE for the following
year, the WAEC evaluates the global cost of the exam organisation (fixed costs and variable costs,
exclusive of WAEC wages costs). On the basis of these estimates, an average cost per candidate is
fixed.
The auditors investigated, on a sample basis, the justification of the organising cost of the BECE
charged to the State. The points mainly highlighted concern over-budgeting problems.
The auditors consider that the budget was on average over-budgeted and over-billed by approximately
30% for each year, which leads to the rejection of GHC 2,863 millions (1.13 million Euros). The value of
this estimate of the non-eligible part of the support is indicative, and a complete financial audit of the
various components of cost would allow a more precise analysis of the actual costs. Such an audit
would provide the WAEC an opportunity to fully justify its charges. Further, the evaluation could then be
used as the basis for the future WAEC services calculation.
The upshot of this is that the European Commission would then be in a position to clearly assess
whether its funding was appropriately utilised.
3.7.6. The use of Stop Payment Orders.
The "emergency" dimension of expenditures in the 4th Quarter, as being a result of the Ministry of
Finance providing very little funding in the first three quarters and dumping the major part of the year‟s
budget allocation in the fourth quarter, leads to the use of stop payments orders.
Even if it is understandable on an economic viewpoint, the procedure is illegal and has never been
endorsed or agreed by the EC.
Briefly, the 4th Quarter Parallel Procedure means:
Developing a list of recommended vendors (single source) and setting prices for
supplies.
Preparing LPOs, SRAs and PVs all dated the same day in some cases to facilitate the
preparation of cheques. Note that these forged SRAs are signed by the Director of Supplies
and Logistics, an auditor from the Internal Control Unit, Ministry of Education and an auditor
from the Internal Audit Department, the Comptroller and Accountant Generals Department.
Maintaining these files separate from the normally processed PVs in the Accounts
Office rather than in the Treasury, and preparing checks made out to the vendor ahead of
the delivery of supplies by the Chief of Treasury and placing a stop order payment on
purchase and maintaining a separate file for these in the accounts office.
It might be argued that there is nothing intrinsically problematic with introducing alternate methods to
address emergency circumstances. What is alarming, however, is the falsification of documentation and
other irregularities that are routinely included in the implementation of the 4 th Quarter Parallel
Procedure.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
The 4th Quarter Parallel Procedure is a method, which may lead to abuse, and to a complete break
down in the system of control.
For this reason the entire 4th Quarter Allocation of Counterpart Funds to the Ministry of Education (GHC
2,040 millions or Euros 0.75 millions) ought to be rejected by the auditors, notwithstanding what the EC
position could be on this sensitive issue.
3.7.7. Summary table of the audit reports
The table hereafter displays a comparison between the CPF disbursed, the audited amounts and the
amounts considered as ineligible by the auditors; in addition, this table gives extrapolated ineligible
figures, calculated by applying the rate of ineligibility of the audited amounts to the disbursed amounts.
Ministry Disbursed Audited Ineligible Extrapolation
GHC Euros GHC Euros %/Disb GHC Euros %/Audit GHC Euros
Education 1996 14 500 7,17 4 816 2,38 33,2% 2 953 1,46 61,3% 2 953 1,46
Education 1998 10 200 3,96 6 385 2,48 62,6% 3 090 1,20 48,4% 4 832 1,88
Education 1999 13 921 5,12 8 242 3,03 59,2% 3 865 1,42 46,9% 3 865 1,42
Total Education 38 621 16,24 19 443 7,89 50,3% 9 908 4,08 51.0% 11 650 4,76
Health 1996 22 001 10,87 9 506 4,70 43,2% 2 661 1,31 28,0% 6 727 3,32
Health 1998 12 000 4,66 5 270 2,05 43,9% 1 637 0,64 31,1% 3 728 1,45
Health 1999 14 641 5,38 4 617 1,70 31,5% 381 0,14 8,3% 1 921 0,71
Total Health 48 642 20,91 19 393 8,44 39,9% 4 679 2,09 24,1% 12 376 5,48
Health & Educ. 1996 36 501 18,0 14 322 7,1 39,2% 5 614 2,8 39,2% 9 680 4,78
Health & Educ. 1998 22 200 8,6 11 655 4,5 52,5% 4 727 1,8 40,6% 8 560 3,32
Health & Educ. 1999 28 562 10,5 12 859 4,7 45,0% 4 246 1,6 33,0% 5 786 2,13
Total 87 263 37,2 38 836 16,3 44,5% 14 587 6,2 37,6% 24 026 10,23
Total WAEC (*) 10 860 4,3 10 860 4,3 100% 2 863 1,13 26,4% 2 863 1,13
Total less WAEC 76 403 32,9 27 976 12,0 36,6% 11 724 5,07 41,9% 21 163 9,10
(*) particular case where are suggested further investigations, the result of which will determine EC position.
a) - Concerning the ineligibility rate, the auditor observes that the average rate for the two Ministries
over the 3 years is 37.6%. However this average rate does not reflect the important differences that
exist between the two Ministries:
- In the case of Education, a steady degradation of the expenditures files quality; the ineligibility
rate for the sole recurrent expenditures goes up from 42.3% in 1996 to 45.7% in 1998 and 72.3% in
1999 (see table § 6.2.5);
- In the case of Health, on the contrary, the improvement of the expenditures files quality has
to be highlighted, as the ineligibility rate concerning the recurrent expenditures goes down from
32.5% in 1996, to 31.5% in 1998 and to 15.4% in 1999.
b) - Concerning the extrapolation (see table 6.2.5.), the amounts extrapolated were obtained by applying
the ineligibility rates defined by the audit to the global amount used. As mentioned further in the report,
the division of the sectors into sub-paragraphs makes it possible to avoid applying a global rate for the
calculation of the extrapolation with no distinction.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
Concerning the Education sector for the fiscal year 96' and 99', the extrapolation method for recurrent
expenditures was not applicable, due to the limited audit sample: 8.8 % 'audited' out of the global
amount disbursed (929 millions GHC compared to 10 613 millions GHC) for 96', 14 % for 99' (922
millions GHC compared to 6 601 millions GHC). Theoretically, all expenditures files of the targeted lines
were submitted to the auditors, yet we suggest that part of those vouchers can have escaped the audit,
due to their not being transmitted in an exhaustive way. The only way to check this exhaustively would
have been to compare the level of budgetary execution of the targeted lines with the total audited
amount per concerned budgetary line.
3.8. POINTS OF CLARIFICATION
After a careful assessment of all of the comments, suggestions and contributions received (including a
technical meeting with WAEC) no substantive conclusions of the provisional Audit Report require
modification. However, it is clear that the report would benefit by making some clarifications pertaining
to the issues raised by the commentary. In this section we consider the main comments and take the
opportunity to further clarify some of the arguments and conclusions of the Audit Report. The Auditors
believe that this will assist the Government of Ghana in taking advantage of the findings of the Audit
Report to dramatically curb losses and increase significantly the efficient application of funds to such
critical development areas as health and education.
Comments by the Ministry of Health
It bodes well with regards to expecting improvement that the Ministry of Health recognises many of the
weaknesses in its financial management and procurement procedures. Indeed, as highlighted in this
Audit Report, the Ministry has been quite active in attempting to improve upon the financial
management and the implementation of procurement reforms. There is some evidence to indicate,
coming out of the audit study, that there has been progress made. Such progress is illustrated in the
improvement in the quality of expenditure files from year to year, as well as when the percentages of
ineligibility are compared with the Ministry of Education. However, there is an alarming dimension that is
revealed by this audit that ought not to be ignored. Important issues to consider are:
The quantum of ineligible expenditures assessed
The extent of systemic laxity and circumvention of regulation
The consistency in the nature and kind of problems discovered from year to year
There is a clear message that it is not enough to focus on procedures without ensuring that controls are
stringently adhered to. It is important that one is not lulled into a sense that all is well just because
efforts are being directed at reform. There must be an aggressive and concerted effort at eliminating the
problems highlighted. These include such problems as the call for tender, not insisting on VAT invoices,
not ensuring effective price competition etc.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
It is suggested, by the Ministry of Health, that there may be little value contributed by further audits of
past periods to the resolution of the financial management weaknesses. This suggestion begs the
question – what can be more useful than highlighting the precise areas of weakness and measuring the
quantum of loss? It has been the intent of the present effort to provide the GoG :
a) A comprehensive valuation of the quantum of ineligibility and loss, and
b) An insight into instances and the extent to which lapses of financial management responsibility
occur..
It is our hope that the MoH would be thus provided additional opportunity to review the residual general
systemic issues that need to inform the ongoing efforts in the area of financial management and
procurement.
Comments by the Ministry of Education
It is significant that the Ministry of Education is aware of “… [the] procurement irregularities and weak
financial control system within the entire spectrum of the educational system”. It is vitally important that
such awareness does not foster a culture condoning such systemic irregularity. It appears that the
ineligibility rates ranging from 42.3% in 1996 through 45.7% in 1998 to 72.3% in 1999 are considered
high. It ought to concern the administration and suggests adopting aggressive action in curbing the
losses and the abuse. Unfortunately, the comments received seem to suggest that Ministry interprets
these findings as merely a consequence of some misconception by the auditors. Questions to consider
are: How do misconceptions explain:
The considerably better Ministry of Health results for which the same ineligibility criteria
were applied?
The consistent occurrence of forged pro formas
The stop order cheque method, which according to the ministry‟s comment “can hardly
be considered an effective procurement procedure with workable controls”
The falsification of SRAs and other crucial control documentation in the 4th Quarter
Parallel process.
The Auditors would like to point out that emergency procedures, such as called for in the last quarter of
the year due to the delays in the receipt of funds, might in practice require minor deviations from the
standard procedures for procurement to facilitate the smooth operations of the ministry. It is further
acknowledged, that an emergency procedure, may sacrifice a degree of control in the interest of
prudence. However, it must be stated that the falsification of documentation cannot ever be justified.
The co-opting of internal auditors, warehouse staff and even outside vendors to participate in this
falsification process is one that completely undermines the foundation of sound financial management
and question‟s the validity of the entire procedure.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
This practice invites fraud and abuse, not only under emergency circumstances but also even during the
rest of the year. It was easily verifiable form the inspection of expenditure files during this period the
alarming level of abuse. This report provides many examples of this. This is a particularly serious
problem. It ought not to be swept under the rug.
We welcome the Ministry‟s stated intent to improve upon its financial management. The Ministry has
indicated some of the specific steps that it is undertaking to improve upon their financial management
systems and procurement procedures. This must be encouraged.
Comments by the West African Examinations Council
There are five main issues of concern raised by the West African Examinations Council‟s comments.
Clarification of the five issues with regards to the protection of the interest of the Government of Ghana
in achieving fair value for the subsidy of the BECE - a budget item targeted by the EU structural
adjustment support program in 1996, 1998 and 1999, is necessary. These are:
1. Determination of Fair Price and Auditing Authority: The basis for arriving at a negotiated
examination fee for the BECE is an important issue. There is no question that political as well
as regional educational standardization considerations compel the Ministry of Education to
enter into a negotiation with the WAEC on a sole source basis. There is no difficulty there.
However, in lieu of price competition, it is imperative that there be a comprehensive cost
break down delineating accurately all of the cost components that go to make up the
examination fee, and that such cost break down must be transparent to the Ministry of
Education. Further, the cost breakdown and any price negotiation process must be subject to
Audit. An argument that the economic context in Ghana, a depreciating currency and high
inflation, leads to some difficulty in determining precise costs, is an argument for a clearer
cost breakdown and more transparency and not a basis for arbitrariness by qualitatively
explaining significant cost discrepancies by inflation and currency depreciation. There are
standardized methods for incorporating these cost impacts. They must be applied.
2. The Candidature The determination of the number of candidates that are entitled to take the
exam is dictated by the number of final year students. The Ministry of Education provides
such figures and this figure should be the basis for determining cost. The Ministry of
Education‟s candidature submissions obligate the WAEC to provide for that figure and should
so be billed. Given these considerations a cost calculation based upon the per-unit-cost
multiplied by the candidature is acceptable. A revision of the calculations made in the
provisional Audit Report have been adjusted accordingly.
3. Over budgeting of Direct Cost Items: The provisional Audit Report indicates that there has
been a practice of charging the Ministry of Education considerably higher than amounts
invoiced for a number of Direct Cost items. The finding was as much as 5 times the cost and
so constitutes an alarming discrepancy. The discrepancy, as high as 400%, could not be
satisfactorily justified. As verbally explained by WAEC, justifications of those discrepancies
should be found from, first the exchange rate when payment is issued and second from
associated additional costs (ie demurrhage charges, computers costs, storage etc.) the detail
of which is not made explicit in the breakdown of costs. The Auditors point out that even
limited by only inferred estimates, no amount of reasonable associated cost loaders would
explain a cost factor loading of 400%.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
4. Contingency Rates: Contingency cost allowance arises out of the imprecision of cost
estimating a priori. In the case of the West African Examinations Council, and organization
that has extensive experience with organizing exams in Ghana and other countries, there can
be little justification for a high contingency component. There is even less reason to increase
the contingency component from one year to the next (10% 1998 to 12.5% 1999) – greater
experience over time would imply a better appreciation of cost dynamics, improved cost
estimates and therefore lower cost uncertainty. The upshot of this should be less of a
contingency component. It is important not to confuse inflation effects, currency depreciation
and spurious financing charges as elements of contingency. The estimates entered for
currency depreciation and inflation must be supported by published data. There is no
justification to be arbitrary about any of these cost components. We believe 10% to be
excessive for the specific cost allowance titled Contingency.
5. Year to year price Variations : The dramatic price variations from year to year are much
higher than the inflation rates or currency depreciation in the same period. It is a clear
indicator that the pricing is not substantially cost based but includes an unacceptably high
arbitrary component. Given the sole-source nature of the service procurement it is important,
for an Audit Report, to indicate all of the elements that point to a substantial deviation from a
cost basis.
3.9. RECOMMENDATIONS
1. The revision and implementation of new administrative and financial regulations should be
given top priority by the government and by donors. Developing a new framework may take time,
and personnel must then be trained at all levels of government. This would imply training at the
district level administrations nation-wide, not just at headquarters. The mission would strongly
support progress in this domain. Procurement ceilings could be updated annually as an annex to
the Appropriations bill.
The efforts made by the Ministry of Health should not only serve as an inspiration for the other
ministries, but also be used as the basis for government-wide regulations. Standard procedures
should be adopted and any differences in procedures across ministries should be avoided as much
as possible, so that the same standards apply for the same types of expenditures across MDAs.
2. The independence of the officials (Internal Audit Units) detached from the Controller and
Accountant-General’s Department needs to be strengthened, particularly as regards stronger
guidance on their role. Clear incentives must be given to them to point out irregularities, but without
clear indications from the CAGD and from Ministry management that irregularities will not be
tolerated, it is also difficult to expect these units to take a firm stance against deviant procedural
behaviour. Reform in this area, however, cannot be divorced from the imperatives of setting clear
rules against which controllers can verify the operations of their colleagues.
More extensive and improved national coverage of MDAs by internal control units can be achieved.
An appropriate system design (in-house or roaming) will ensure such improvement.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
Eventually, taking into account the weaknesses reported concerning the real independence of those
two control units, the auditor suggests that first the role of each one of those units be clearly defined
(for instance, ex-ante and ex-post audit verification), and second that their role be strengthened
mainly thanks to the regular issuance of audit reports presented to their hierarchy.
3. Staff strengthening
The report underlines that district and regional offices submit expenditure returns with substantial
delays and in different formats. Reporting is also neither timely nor accurate, and at the end of the
year the budget is never reported.
Some of these problems are due to staff shortages or to the fact that accounting personnel is
sometimes not trained on internal procedures. In this context, the auditors suggest that the
Controller and Accountant General should provide training on accounting and financial matters to
the MDAs.
4. Technical assistance financed by the EC has concentrated so far on long-term support to the
Ministry of Education‟s macro budgetary planning and management capacity. Short-term TA has
also helped monitor the use of CPF. Nevertheless, given the findings of this mission it is
recommended to strengthen TA for the updating of internal regulations on financial and
administration issues within the PUFMARP. To ensure a close surveillance on the „micro‟
management of Government expenditure, while also developing better practice through training, the
EC should also consider the use of TA within GAS.
5. Improvement of the reporting system of the EU targeting budgetary lines.
The auditors want to point out two main issues:
On the one hand, the reports issued by consultants mainly contain numbered data compilations,
presented according to several classification criteria, but do not allow a judgement on the
regularity of the expenditures supported by the EC and,
On the other hand, the disbursements of instalments become effective when issuing those
reports.
In this context, the auditors suggest that the reporting work be completed by punctual audits allowing
to be sure of the regularity of the supported expenditures.
The auditors also suggest that the work done as part of the proposed additional audits should be
based on the irregularities reported during this mission; these audits would be aimed in particular at
excluding all the expenditures that would not have respected the national rules as for public
expenditure implementation.
The auditors observe that the Technical Assistance settled in the Education sector should give more
attention to this type of preoccupation, in compliance with its Terms of Reference.
Eventually, the auditor recommends that a complete audit of the WAEC be implemented in order to
allow an enlarged control of this unit and to make sure that the European funds are used in an
optimal way.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
6. Improvement of the expenditure process itself.
While waiting for the implementation of a new regulation of the expenditure applicable for all the
public expenditures of all the ministerial departments, punctual actions can be set up. They should
mainly concern the sensitisation of all the expenditure process actors on the following points:
Respect of the call for tender, whatever the expenditure method (shopping, restricted or large
call for tender);
Importance of the vouchers; in particular:
- Pro forma with the necessary details so as to identify and differentiate the bidders correctly,
- Final invoices distinct from the pro forma,
- Documents actually probative (no hand written invoices, no costs estimates, etc…).
Rules reminder as for VAT.
7. Provisions that have to be implemented in order to go on with the programme in the
Education sector
The report highlights the importance of the degradation, in terms of quality, of the expenditure for
this sector. Therefore, the continuation of EC support seems to us to be linked to the
implementation of a very strict control mechanism with the aim of accepting expenditures with no
irregularities only.
As such, the mission recommends that the Education sector, in looking for improvements
concerning the public expenditure process, be able to draw its inspiration largely from the methods
implemented by the Health sector with the support of the donors.
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4. DESCRIPTION AND CRITICAL ANALYSIS OF FINANCIAL
AND ADMINISTRATIVE PROCEDURES AND OF THEIR APPLICATION
4.1. ORGANISATIONAL AND POLICY BACKGROUND ELEMENTS
The following precisions are useful in understanding the organisational framework of the Government of
Ghana, especially as concerns its impact on the preparation and execution of the budget.
4.1.1. Ghana- a brief outline
Ghana is a low-income country, with a population of about 16 million, located on the west coast of
Africa. Per capita income in 1992 was $450 (World Bank Atlas method). Average life expectancy is 55
years and the literacy rate is 60 percent.
Ghana achieved its independence in 1957 and was ruled by a succession of civilian and military
regimes. In 1992, a new constitution was approved by referendum and multiparty presidential and
parliamentary elections were held. The current President of the elected civilian regime is Flight
Lieutenant Jerry Rawlings.
Ghana is well endowed with a broad range of natural resources such as arable land, forests, and
sizeable deposits of gold, diamonds, bauxite, and manganese, as well as a considerable capacity of
hydroelectric power. The economy has traditionally depended to a high degree on primary (agricultural
as well as mineral) production and exports. Exports of gold, cocoa, and timber still account for the bulk
of total merchandise exports, with respective shares of 29 percent, 31 percent, and 13 percent.
The agricultural sector, inclusive of forestry and fishing, remains the dominant sector, employing some
two-thirds of the labour force and accounting for nearly half of total gross domestic production (GDP).
Agricultural production, which is primarily small scale, is concentrated in cocoa and staple food crops.
Services comprise the second largest sector in the economy, accounting for an increasing share in GDP
(37 percent in 1993), while the industrial sector accounts for the remaining 16 percent.
Under the Economic Recovery Program (ERP) begun in 1983, reform efforts have focused on
stabilisation. Average annual GDP growth over the following decade was nearly 5 percent.
This recovery was supported by substantial aid from the IMF, World Bank, and other donors. Good
progress was made, in normalising the exchange rate, in pricing, and in trade policy reform. There
remains a substantial agenda of reform to be undertaken in public sector management and civil service
reform, public enterprise divestiture, and in creating an enabling environment for private sector
development. The weakest aspect of the economic recovery has been the low private savings and
investment rates, which need to increase substantially to sustain growth in the medium term.
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A few key indicators 1998 1999 2000
Total GDP (billion US $) 7.82 7.8 8.12
Real GDP growth (% change) 6.1 3.2 5.4
GDP/capita US $ 415 402 407
Inflation (% change) 19.2 13.2 14.8
Government budget balance (million US $) -320 -352 -411
Ghana is divided into 10 regions (subdivided into 110 districts):
Greater Accra Upper West
Ashanti Central
Brong Ahafo Northern
Western Upper East
Volta Eastern
The currency is the Cedi (GHC).
4.1.2. The administrative structure of GoG
A Consultative Assembly was charged to draw up a draft constitution to establish a fourth republic,
finalised following a national referendum on April 28, 1992. The Constitution entered into force on
January 7, 1993, to found the Fourth Republic and provide a charter for republican democratic
government based on the concept of power sharing (a system of checks and balances, with power
shared between a president, a unicameral parliament, a council of state, and an independent judiciary).
It incorporates provisions and institutions drawn from British and American constitutional models and
establishes a multi-party democracy.
Executive authority is established in the Office of the Presidency, together with his Council of State. The
President is Head of State, Head of Government, and Commander in Chief of the armed forces, and is
elected by universal suffrage for a maximum of two four-year terms. According to the Constitution, more
than half of the presidentially appointed ministers of state must be appointed from among members of
Parliament.
Legislative functions are vested in Parliament, which consists of a unicameral 200-member body plus
the Speaker. Members of Parliament are popularly elected by universal adult suffrage for terms of four
years.
The structure and the power of the judiciary are independent of the two other branches of government.
The Supreme Court has broad powers of judicial review. It is authorised by the Constitution to rule on
the constitutionality of any legislation or executive action at the request of any aggrieved citizen. The
hierarchy of courts derives largely from British juridical forms.
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The hierarchy, called the Superior Court of Judicature, is composed of the Supreme Court of Ghana, the
Court of Appeal, the High Court of Justice, regional tribunals, and such lower courts or tribunals as
Parliament may establish. The courts have jurisdiction over all civil and criminal matters.
The President appoints a Vice-President and nominates a Council of Ministers, subject to approval by
the Parliament. The Constitution also provides for two advisory bodies to the President: a 25-member
Council of State, composed mainly of regional representatives and presidential nominees, and a 20-
member National Security Council, chaired by the Vice-President.
Ten Regional Ministers, one for each region, are each assisted by a regional co-ordinating council.
There are 110 administrative districts, each having a District Assembly, which is headed by a District
Chief Executive. Regional colleges, which comprise representatives selected by the District Assemblies
and by regional Houses of Chiefs, elect a number of representatives to the Council of State.
Administrative decentralisation has modified the governmental structure of Ghana: ministries have
branches in the regions and at district level, known as local administrations. These do not depend
administratively or financially from local government, but are sub-entities of central government.
Regional and district administrations negotiate an annual budget with headquarters, which they are
responsible for implementing. The Budget Management Centres (BMC) are the administrative units
responsible for handling a particular budgetary allocation at headquarters and in Regional and District
Administrations. They prepare their own spending plans (which may, however, be modified at
headquarters during the budget preparation process) and are given an annual budgetary allocation,
which they manage with a certain latitude. Their autonomy to change expenditure allocations within their
assigned envelope is limited except for transferring funds among certain administrative headings, unless
they obtain previous authorisation from the relevant Minister and/or the Finance Minister, depending on
the nature of the expenditure.
Some Heads of District for the Ministry of Education are allowed to make decisions on recruitment and
reassignment of teachers; otherwise, for all other ministries personnel policy is determined at
headquarters, and similarly, salary and emoluments are decided and managed at the Central level.
The Controller and Accountant-General‟s Department in the Ministry of Finance is also decentralised,
with Regional and District offices matching the decentralised line ministries‟ administrations and
handling payments at the local level.
4.1.3. The Ministry of Finance
The MoF is headed by the Minister of Finance. Two departments of particular relevance to this study
are:
The Budget Directorate;
The Controller and Accountant-General‟s Department, also commonly referred to as the
Treasury. Officials in this department are known as Treasury officials.
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Ministry of Finance
Budget Directorate Controller and
Accountant-General's
Department
Regional Treasury Offices
District Treasury Offices
4.1.4. The Ministry of health
The organisational structure of the Ministry of Health is the following:
Ministry of Health
Director of Medical Services
(acting Director General)
Central Medical Stores Psychiatric Hospitals
General Admin Policy Planning Internal Audit Directorate for Supplies Public Health
& Finance M&E (established 1997) ....
Chief accountant Procurement unit
Regional Health Administrations
District Health Administrations
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Policy:
A new and broad-based approach to the Health sector setting out the role of the MoH, the donors and
other stakeholders is reflected in the Medium Term Health Strategy issued in 1995. The significance of
this new orientation from the financial management point of view is that the MTHS attempts to leave
behind a project-driven environment, often encouraged by Ghana‟s external partners, with its
concomitant separate financial management policies and procedures. The maintenance of only one set
of books per budget management centres within the service should result in greater efficiency.
Donors have, since 1996, been asked to collectively pool their financing into a Health fund, and tune
their objectives with the MoH-designed programme of health service delivery. The Ghana Health
Service has also been established, although it was not yet operational at the time of the mission. The
GHS will be the implementing arm of the MoH, and its relationship will be one of “subvented
organisation”, with its own financial management.
4.1.5. The Ministry of Education
The Ministry of Education is subdivided into three departments and agencies:
1. The Ghana Education Service, which is the main education agency responsible for primary,
junior secondary and secondary education, absorbing 84% of the Education budget.
2. The Tertiary Education Council, in charge of university and polytechnic education, training
and research (15%)
3. The Non-Formal Education department (1%).
Ministry of Education
Ghana Education Tertiary Education Non-Formal
Service Council Education
Policy:
The Ministry of Education‟s main objectives for the period covered by the audit have been the
continuation of reforms in the sector aimed at improving the access of population to education at all
levels, but in particular primary education; improving teaching standards, physical infrastructure, and
education management and financing. The Government has continued to give priority to achieving Free
Compulsory and Universal Basic Education (FCUBE).
The Ministry of Education has made great strides in attempting to reduce the share of salaries in
recurrent expenditure, moving from 95% to 87% during the period 1996-99 and thus freeing a greater
share of resources for non-wage expenditure. The EC has assisted this process by the provision of
specialist technical assistance in the field of cost analysis.
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4.2. GOG REVENUE DETERMINATION AND BUDGET PREPARATION
The Government of Ghana has three main sources of revenue. The levels of revenue determine the
level of Government income available for the preparation of the budget; the pace of collection is one of
the determinants of the timing of spending.
4.2.1. Source of revenue
The Government of Ghana draws it revenue from four main sources:
Government funds
Donor grants,
Loans,
Internally generated funds (line ministries‟ own receipts from sales of services and other
products). IGF are collected:
o within the Ministry of Education via the sale of materials such as textbooks and
teaching aids bought in bulk at central level, and thus sold cheaper to students than
under market conditions. Receipts are collected by schools and used to purchase these
items from the Ministry;
o within the Ministry of Health, via user fees, the sale of drugs and other sources.
4.2.2. Budget preparation
The Government of Ghana‟s financial year commences from January to December. The Budget, usually
approved in March of the same year, can be completed by a Supplementary Budget.
The Financial Administration Regulations of 1979 LI1 (1234) set the guidelines for the preparation of the
Budget and for the allocation of the different responsibilities within Government for carrying out this
process. The Senior Principal Secretary in the Ministry of Finance is the chief authority responsible for
the preparation, publication and control of the national budget.
He issues instructions concerning:
the form of budgetary document and statements
the classification of budgetary transactions
information to be submitted in support of budgetary proposals by heads of department
procedures to be followed in preparing, submitting and implementing budget plans
1 Legal Instrument
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Mof issues Budget circular
Ministry of Finance
Line Ministry Line Ministry
Regional departments
District departments
The initial stages for the preparation of the draft Budget estimates should normally begin a year in
advance of submission to the Parliament. In reality, the required processes are still not fully in place for
the time being, therefore MoF issues the budget Circular, sent to all Ministries and agencies, end of
June. It contains:
I. The macro-economic framework and forecasts
II. Estimates of total revenue and expenditure. Expenditure is divided into:
Non-discretionary expenditure, on which line ministries do not have a say:
interest payments, transfers to households and other statutory expenditure
Discretionary expenditure, divided into:
Salary and
Non-salary expenditure (administration, services, investment)
Budget management centres transmit estimates upwards
Ministry of Finance
Line Ministry Line Ministry
Regional departments
District departments
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Line Ministries have prepared their own estimates before the Budget Circular is issued. The Budget
Management Centres in decentralised administrations (Regional, District) and the agencies have
submitted their own estimates and have transmitted them to the next level up to Headquarters for
consolidation. Under the MTEF, BMCs have been given responsibility for the following recurrent budget
items:
III. Administrative expenses
IV. Services expenses
V. Investment expenses
They do not however, have a say on Personal emoluments.
When they receive the Budget Circular, Ministries and agencies compare their own estimates with the
financial targets contained therein, make the necessary adaptations and submit their proposals to the
MoF.
Assuming that Parliamentary approval has been granted for the Revenue section of the Budget,
Hearings begin. Line Ministries and agencies negotiate their allocations with the MoF based on target
financial ceilings, mission statements and technical objectives;
The draft Budget is sent to Parliament before the end of the year (December 31 st is the official
deadline).
Parliament committees debate the contents with the Ministries and other relevant institutions and
Parliament reaches a decision by March/April.
4.3. REGULATIONS GOVERNING GOG EXPENDITURE UNDER THE BUDGET
According to the Financial Administration Regulations of 1979, currently in force, the following
procedures must be applied.
4.3.1. The Warrant
When the Parliament has approved the Budget, authority to disburse funds to meet expenditure belongs
to the Controller and Accountant General: he signs a Warrant under the authority of the Government.
Where the budget is not approved by the first working day of the financial year (it is common practice for
the Budget to be approved by Parliament in March) existing services and continuing projects are
financed by a Provisional Warrant for an amount not exceeding one-quarter of the Budget total. The
Provisional Warrant cannot be used as authority for the introduction of new services or the execution of
new projects. In practice, any planned but substantial capital investment is put on hold until the interim
phase is over and the final budget is approved.
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Once the Budget is approved, a General Warrant is issued, replacing the authority of the Provisional
Warrant. The Controller and Accountant-General notify all Treasury Officers and departments by
circular.
4.3.2. Financial Encumbrances
Financial Encumbrances (FE) are Government of Ghana‟s financial commitments for the execution of
planned expenditure for services and investment. The process starts with the Budget Director of the
Ministry of Finance writing a letter of instruction to line Ministries for the preparation of spending
allocations (commitments), and copied to all decentralised administration directors for all line Ministries.
Central and decentralised budget management centres then submit expenditure requests (proposals for
spending for each quarter) for vetting by the Chief Treasury Officer at headquarters. The approved
estimates are then sent back to central and regional Ministry officers. These last from two weeks to a
month to determine allocations to districts, programme-by-programme and item-by-item.
Heads of Department apply for specific FEs, authorising them to enact spending on their designated
budget headings. The Budget indicates, for each and every item of expenditure, the head of department
responsible for its management. HoDs are thus Vote Holders: they are responsible for the budget vote
allocated to them and must officially delegate authority to manage expenditure items to specific
departmental spending officers.
Approved budgets must be recorded in a Departmental Vote Book by a designated member of the
Accounts department, and must be supported by a Memorandum Journal Voucher prepared by that
staff, and approved by the Head of the Finance Office. The allocation of each item and sub-item to a
spending officer must be documented.
FEs detail allocations earmarked for each item of expenditure, on which sub-item allocations are listed.
The FE establishes a limit to the amount of funds that may be expended by the spending officer and the
account classification specified determines the application of funds. Vote holding BMCs are responsible
for advising spending BMCs of their portion of the GoG budget through the issuance of an FE, approved
by the certifying and paying Treasury Officer, who distributes certified copies as follows:
Original: kept by the Treasury Officer
Duplicate: to the vote controller
Triplicate: to the spending officer
4.3.3. Drawing limits
When Financial Encumbrances are signed by the relevant Treasury officers, these approve the release
of funds only up to the following drawing limits (spending ceilings):
1st quarter: 25% of the annual amount
2nd quarter: up to 50%
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3rd quarter: up to 75%
4th quarter: up to, and not over 100%.
These percentages are general guidelines, set every year in the MTEF. Cash flows permitting, funds
may be released earlier. Drawing limits are effectively spending restrictions imposed by the Controller
and Accountant-General‟s Department on spending officers. Until they receive drawing limits, no
expenditure can be initiated or approved. Thus, after waiting for approved FE advises, spending officers
have to wait until a drawing limit has been duly issued by the district Treasury official. Spending officers
have to take this segmented cash flow into account when they prepare their spending plans for the
financial year.
Unspent FEs from the first quarter can be carried over to the second quarter, in addition to the second
quarter FE.
Spending officers can apply for, and are allowed where possible and necessary, special expenditure
authorisations over and above drawing limits and approved allocations.
4.3.4. Reallocations
Spending officers are not allowed to divert funds from one item to another, unless they are allowed by
the Director General to proceed to what is called a “virement”. Reallocations of the provisions for sub-
heads, items or sub-items in the budget within the ambit of a single head, can be made by utilising
savings under one classification to provide for expenditure under another, without affecting the total
funds to be disbursed under the head. This procedure is authorised for non-wages recurrent
expenditure only. The Controller and Accountant General must be notified.
4.3.5. Accounting and reporting
Accounts must be kept according to the classifications used in the budget. No financial business can be
transacted until the Controller and Accountant-General has assigned an account number.
A head of department designated to be vote controller keeps accounts to show:
Funds placed at his disposal by warrants
Commitments against those funds by Financial Encumbrances
Payments authorised against these.
At the end of each month, the Treasury Office responsible for disbursement on behalf of a spending
officer, shall forward a statement of the total expenditure for the month, which the spending officer will
reconcile with his own records (reconciliation)
Vouchers pertaining to departmental accounts shall be held by the Treasury Officer.
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If vouchers are presented after the cash accounts have been closed, but before the public accounts
have been closed, the Treasury Officer concerned may authorise adjustment of the advance account.
Each head of department should forward a statement of budgetary transactions for his department to
the next administrative level (district region ministry headquarters Finance Ministry) no later
than 10 working days after the end of each month.
The Ministry of Finance issues quarterly reports on the actual level of expenditures.
Accounts opened by MDAs in commercial banks outside regulations governing GoG accounts cannot
be monitored correctly by the Ministry of Finance and Treasury; efforts are underway to ensure that they
are transferred to Bank of Ghana and operations correctly accounted for. These reforms have been
initiated recently since the MoF has realised that up to 10% of revenue available to some ministries is of
IGF origin and entirely unaccounted for.
4.3.6. End of year completion
Heads of departments are required to ensure that their subordinates complete the year‟s financial
business before the closing of the FY, and in particular to settle all payments due for goods and services
rendered to Government. Within ten days of the closing of each FY, a head of department shall prepare
and submit to the Senior Principal Secretary a statement of all commitments entered into but
undischarged before the end of the FY, together with an explanation of the reasons why they have not
been cleared. Where the Senior Principal Secretary is satisfied that the undischarged commitments may
be properly carried forward, and that the balances of the previous year‟s appropriation are available to
finance their discharge, he shall include such undischarged commitments in the following year‟s budget.
4.4. REGULATIONS GOVERNING GOG PROCUREMENT
4.4.1. Public Supplies and Equipment
The purchasing and procurement of public supplies, goods, services and works are still governed by the
provisions of the 1979 Financial Administrative Regulations, currently in force. Upon reading the FAR, it
is obvious that many of the rules contained therein have never been applied or updated.
Articles 651, 652 & 653 declare that the Senior Principal Secretary is the chief authority relating to the
procurement and use of public supplies and equipment, assisted by the Director of Supply who is
responsible for the general supervision of the provisioning, procurement, control, storage, care,
distribution and accounting of Government supplies, stores, materials, equipment and other movable
property.
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The Director of Supply:
is Chief advisor to Government and head of department on supply and materials management
approves all departmental instructions relating to the above
promotes efficient supply and materials management in all GoG departments.
Considering that a Director of Supply has never been named, the above articles can be deemed
irrelevant. It is however interesting to note that, in the absence of this Director of Supplies, there does
not seem to be an understanding of which government official should be responsible for determining
new regulation in this area.
In the daily course of public financial management, heads of department may not place orders or
contracts for goods and services until such time as appropriations have been made and funds released
to them (Article 48). Article 667 specifies that each Head of Department is required to draw up a supply
and equipment schedule for his department in the course of preparing his annual estimates (i.e.: the
preparation of his budgetary requirements for the year ahead).
Ministries are in effect supposed to draw up a Purchasing Plan for the year ahead, based on the
activities they have set out in the Budget estimates (or the MTEF since 1998). This facilitates planning,
saves time, simplifies procedures and allows for greater bulk buying. The Director of Supplies (also
head of the Procurement Unit or Procurement Committee) is the focal point for this process: he receives
the different departments‟ requirements, previously authorised by the Director General, the Director for
Administration and Finance, and the Chief Accountant. A plan for the twelve months ahead is then
mapped out by the Director of Supplies with regard to the forecast calendar of availability of funds
(based on the FEs and the corresponding spending limits). Depending on their financial size, some
purchases cannot be incurred until the end of the second quarter, when the Treasury has confirmed the
reception of the second allocation of Government revenue.
In principle, if a department has not foreseen a particular purchase in the Plan, it must again receive
prior approval from the Director General, who himself, must consult his minister, the DAF and the chief
accountant, if the decision has a serious financial implication for the ministry.
Purchases that are not needed for immediate use are stocked at the central and local governmental
Stores. To collect an item from the store, an official must make an Internal Requisition approved by his
department. Supplies that are meant for distribution to the local administrations and agencies will be
delivered to them on the basis of a yearly schedule agreed beforehand; when leaving the store a Stores
Issues Voucher will be issued by the Storekeeper and sent to the Supplies Unit at central ministry level.
Articles 670 and 674 of he FAR specify that supplies for the use of Government Departments shall be
obtained from the following sources:
- by indent on the Ghana Supply Commission
- by requisition on common user stocks held in designated Government departments
- by departmental purchase from any other supplier.
The Ghana Supply Commission is the principal procurement agent of Government and, except as
provided for in these regulations, supplies and equipment required for departmental use must be
obtained by indent on the Commission.
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The only exceptions to this rule are the following (Article 676):
“A Head of Department, or any spending officer appointed by him, may authorise the purchase of
supplies and equipment in the following circumstances:
a) where items have been listed in approved supply and equipment schedules as procurable by
departmental purchase;
b) where items have been unscheduled because the aggregate annual purchase by the department is
less than GHC 500;
c) where the Ghana Supply Commission has, under a contractual arrangement, designated certain
suppliers and the price to be paid;
d) where the Ghana Supply Commission or the common user stockholder, as the case may be, has
issued a certificate that a specific order cannot be fulfilled within a period of 30 days;
e) where the head of department has authorised an emergency purchase under regulation 687.
Such departmental purchases shall be subject to the instructions laid down in the next following
section”.
Most importantly, Article 689 specifies that “Departmental purchases under these regulations are not
subject to a formal tender procedure, but the purchasing officer shall, where practicable, obtain
alternative quotations from different suppliers and shall make his purchase from the most favourable
source”. There is therefore a curious dissonance between the use of the word “procurement” in the
initial articles 651-653, and the fact that it is no longer mentioned until article 689 where it is dismissed.
Either it is intended in the larger meaning of procuring goods and services as in, to obtain them; or it is
implied that procurement regulations will be determined by the Ghana Supply Commission as main
procurement agent.
4.4.2. The Ghana Supply Commission
The GSC operates under Law (PNDCL2 n° 245) of 23 October 1990. It is a centralised government
procurement agency responsible for its own funding, which it derives from levying a fee for its services
from user ministries (it does not receive any grants or subsidies from Government). Officially it is only
responsible for all governmental procurement of goods and supplies (no legal instruments in Ghana
specify the rules governing the procurement of works and services). Its use is foreseen whether the
funding is of Government or donor origin. The only possibility of exemptions is foreseen by Law n°245
upon explicit authorisation of the Secretary of the Minister of Finance and published in the Gazette. The
Law also requires that procurement orders be only carried out by the GSC if the sums required for the
payment of the supply have been authorised under the relevant budget.
Article 655 states that “ it is the responsibility of the Controller and Accountant-General to ensure that:
- payments are made only for purchases in accordance with these regulations and any instructions
laid down by the Director of Supply;
2 Provisional National Defence Council Law
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- departmental Accounting Instructions include adequate provision for the financial control of
purchasing;
- in consultation with the Director of Supply, there is proper integration of financial and supply
accounts.”
Procurement, in the FAR, is therefore for the most part the explicit and entire responsibility of the Ghana
Supply Commission. The law established its functions as involving:
- The selection of vendor
- The arrangements for payment
- The monitoring of the inspection and shipping
- The clearing and forwarding of the goods purchased to the MDA.
a) - User ministries transmit their procurement requests to GSC, with the exact specifications required.
Depending on the amounts, GSC proceeds to:
- international competitive bidding, the preferred method as the quantities involved in most central-
level supplies either require a purchase abroad or can be obtained cheaper on international
markets;
- national competitive bidding;
- restricted competitive bidding.
GSC, since its inception, has based its Procurement Manual on World Bank guidelines; it thus follows
World Bank directives on procurement ceilings:
above GHC 20 million: GSC proceeds to International Competitive Bidding and charges 4% of
the total value of the contract for its services;
under GHC 20 million: it resorts to either National Competitive Bidding or Restricted Bidding,
and charges 2%. Companies selected for the restricted bidding procedure must be registered
with the GSC, which keeps records on the quality of their products, their financial position, legal
standing etc… The GSC roster contains currently data on approximately 2.000 firms, and is
updated every three years following a public call for registration. If there are no suppliers for a
particular good then an ICB will be issued.
The GSC is authorised to revise the limits above in consultation with the Minister of Finance.
b) - the opening of tenders is carried out publicly by the GSC in conjunction with the user department;
c) - the evaluation of bid is carried out by GSC only, and the results transmitted to the user department,
if required with the appropriate samples, for approval; the user ministries sends back a Memo signifying
its approval;
d) - the final choice results in a contract for the supplier, with delivery requested at the Central Store of
the user ministry; with clearance, insurance and local transport provided by GSC but with costs to be
borne by the user (and not included in the contract value);
e) - If the procurement is made for a purchase to be financed under donor funds, the contractor supplies
the goods and receives payment, as the funding is already committed and secure. If GoG funds are
used, the user ministry has to obtain a guarantee on a specific bank account securing the funds for
payment of the contract and allowing the GSC to issue a letter of credit;
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f) - Once the goods are delivered, GSC makes the appropriate controls on the delivery, stamps the way
bill provided by the supplier, finalises the SRA for transmission to the Treasury, which can then pay the
supplier.
Even though it charges a fee for its services, it claims that the prices it is able to order on the market are
preferential to those quoted to ministries, as the GSC never accepts delivery on credit (it only concludes
contracts with suppliers once funds are available). There are delays inherent in using the GSC as it is
often swamped by a large quantity of requests relative to its capacity, and is not able to process these in
a timely fashion.
4.4.3. Ad-hoc purchases
Procurement is not needed in the following cases, irrespective of the financial or quantitative amounts
involved; the procedure is then referred to as „sole sourcing‟:
if the good or service is proprietary: a certain book whose rights belong to a specific publisher,
a medicine produced only by a certain pharmaceuticals company (most non-generic drugs), a
piece of equipment manufactured by one supplier and/or spare parts for equipment already
purchased;
for repeat orders of the same good;
and if, for national purchases, there is only one importer for the good or one provider for the
service (such utilities, communications…).
In the case of a small purchase, not foreseen in the Plan but within the spending limits of its allocated
funds, the spending department should still consult the DAF, the relevant accountant and the
Procurement Unit. He is then normally allowed to proceed to what is called the “shopping” procedure,
whereby three suppliers are invited to provide pro forma (or quotations) for a particular order.
4.4.4. Audit
There are three units within Government of Ghana which possess the word „audit‟ in their denomination.
Only one out of the three, the Ghana Audit Service, carries out ex-post audit verifications of systems,
procedures and accounts. The other two are to be found within ministries.
a) - Internal audit units composed of officials detached from the Controller and Accountant-General‟s
Department to the Ministries, who are answerable to the C&A-G and thus the Minister of Finance. They
have, in principle, a certain degree of independence from the officials working alongside them in their
ministry and whose work they check. The mandate of IAUs is clearly defined by the Controller and
Accountant-General, and is identical across ministries. IAUs, as representatives of the Controller and
Accountant-General:
are the custodians of public money;
ensure that there are appropriate guidelines concerning financial policy and that they are
followed
ensure that accounts are properly kept
ensure the full accounting of public money collected (eg internally generated funds)
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b) - Internal Control Units composed of officials from the same Ministry the unit is in, who are
answerable to their Director-General and thus to their Minister. As from 1999 they are officially known as
„Internal Control Units‟. The mandate of ICUs is established by their ministry, and will reflect the different
specific administrative and financial rules and regulations followed by the ministry. Mostly they apply
checks at different points of the expenditure cycle to ensure that the correct procedures have been
followed. They will also carry out market surveys to be able to judge the prices of purchases made by
the different departments.
Both types of unit do not primarily carry out ex-post audit functions. Unlike the Ghana Audit Service,
they do not produce public reports nor do they systematically audit Government accounts and
expenditure. The nature of their work consists more in controlling that the correct administrative and
financial procedures are followed in the ministries, by means of controls at certain points of the
expenditure chain.
If they find any anomalies, they will point these out to the officials concerned; if the matter is still not
solved, they will report to their relevant hierarchical superiors. They also have freedom to investigate
any matter which is brought to their attention (by their minister or superiors, colleagues, MPs, the
general public) or any wrongdoing they might suspect at any level of the administration, whether central
or local. Some ex-post controls are however made by both types of unit, notably on the verification of
stocks delivered, works undertaken or services supplied to Government ministries, departments or
agencies. Their reports are sent to both the technical line minister and the Minister of Finance.
c) - The Ghana Audit Service
The Ghana Audit Service is the Supreme Audit Institution in Ghana, and is constitutionally independent,
but effectively depends on the Ministry of Finance for the determination and approval of its operating
budget. The Auditor-General has the authority and obligation to examine and certify public accounts and
the accounts of all public offices (including the courts, central and local government, universities, public
institutions, public corporations, traditional councils etc….), and must be given access to all books,
records, returns and other documents relating or relevant to those accounts. It can avail itself of
assistance from private audit firms. Reports are submitted to Parliament within twelve months of the end
of the preceding financial year, and draw attention to irregularities. It is the duty of every head of
department to review the outcome of the budgetary operations under his control in light of the report‟s
results.
The GAS employs over 1300 staff, of which approximately 700 auditors, distributed over 84 branch
offices covering the country (10 regional, 35 district, 16 Accra, 3 commercial and one special audit
offices). A full annual audit is made by the GAS for the Health sector due to the important contribution of
donor funds to the budget of MoH.
Presently the GAS cannot fulfil its constitutional obligations, in particular as refers to the annual
reporting on all the institutions detailed above and in accordance with internationally recognised audit
standards (currently it does not use sampling techniques, or INTOSAI standards). It also has to ensure
that it keeps up with all the reforms instigated in the different departments in the framework of
PUFMARP. Internal training is insufficient, the GAS severely lacks information technology instruments,
and planning is also weak in terms of workload and of human resource management.
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The preceding overview of the procedural setting of the Government of Ghana‟s activities in relation to
the budget masks an uneven application of these rules and regulations. The reality within the Ministries
analysed by this audit highlights the obsoleteness of many of these rules, and the lack of effort both in
updating the procedural framework, and in ensuring that the staff receives clear and mandatory
instructions on proper management of public funds.
4.5. CRITICAL ANALYSIS OF THE BUDGETARY FRAMEWORK AND PROCEDURES
The following analysis sets out:
Aspects related to the timing and preparation of the budget, and their impact on spending;
the state of the application of regulations at the time of EC financing;
the eventual alternative procedures developed in response to a weak regulatory framework
or weak management;
the potential or actual risks inherent to problematic aspects of budgetary preparation and
implementation, and to the development of parallel procedures;
reforms envisaged or underway, and their possible impact on the identified problems.
A number of clearly articulated suggestions for reform in all the problematic areas the mission has
identified are presented in the documents relating to the PUFMARP programme. It is composed of the
following eight elements: budget preparation, budget implementation, accounting, cash management,
aid and debt management, revenue management, audit, and procurement. The design of some
components may be outdated since the original analysis was made around January 1997, and many
elements have since remained unenforced.
4.5.1. Revenue
a) - Internally Generated Revenue
IGF are not channelled through the Government of Ghana Consolidated Revenue Fund but remain in
the originating Ministry‟s accounts for spending during the subsequent year. These accounts are
supposed to be, by law, official Government of Ghana accounts held at the Bank of Ghana. They should
also be opened with approval of the Accountant & Controller-General (the ultimate custodian of
government accounts); its contents reported to the A&C-G who can audit them at leisure. In reality,
however, MDAs place them on normal accounts opened in commercial banks. In that way they do not
have to account for IGF to the Government. Ministries are not willing to report IGF as:
they fear that these funds will be taken away from them;
IGF serve as a convenient financial buffer during cash-flow crises
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disbursements out of the Consolidated Revenue Fund have to be authorised by the Treasury;
spending IGF out of a normal commercial bank account, managed directly by the MDA is easier
and faster;
Risks:
- the Ministry of Finance does not control part of the Government‟s available finance, both in terms of
revenue and of expenditure. IGF can account for a substantial amount of a Ministry‟s disposable
revenue (up to 10% for the Ministry of Health, or 20 billion GHC, and rising every year).
- it is not unfrequent for MDAs to invest surplus IGF for the acquisition of Treasury bonds, on which
interest is earned at the government‟s expense. Ironically, the government may concomitantly
borrow to finance that ministry‟s expenditure
- because the C&A-G does not have the capacity to control IGF, parallel procedures may be used by
the spending ministries.
Reform:
The Controller and Accountant General‟s office has initiated reform to ensure that these practices will
come to an end by registering all GoG accounts at the Bank of Ghana, and auditing them together with
all other expenditure. There are efforts to increasingly account for IGF. However, ministries are resisting
this reform and until appropriate mechanisms are in place to ensure correct accounting and reporting at
all decentralised levels of GoG, the MoF may not even be able to assess whether all IGF have been
brought under its control.
Recommendations
The Ministry of Finance however must be careful not to create a disincentive for ministries to earn IGF
by pooling them with other government money, and redistributing them away from the originating
ministry.
The MoF must thus strike a careful balance between recording the IGF, maybe recovering some, whilst
creating incentives for ministries to collect IGF.
b) - Role of the Bank of Ghana in managing the Government of Ghana‟s cash flow
The Bank of Ghana is committed to maintaining its strict fiscal policy of not permitting the Ghana
Government to overdraw its accounts. The Bank of Ghana provides the Ministry of Finance with daily
positions on the accounts it administers. Through the weekly auction of Treasury Bills it does provide a
mechanism of the issuance of short-term credit to the Ghana Government to overcome short-term cash
deficits. Fluctuations in revenues are monitored closely as a basis for modelling revenue streams and
consequently providing a basis for the Government of Ghana to better manage cash flow. Specifically,
the schedule for setting weekly Treasury Bill volume targets is informed by the seasonality of
Government receipts and the quarterly peaking nature of Internal Revenue Tax receipts. The Bank of
Ghana concedes that it probably ought to co-ordinate more closely in a realistic assessment of the
receipt of grants and loans in order to achieve a more responsive schedule of arranging short-term
credits.
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Problem:
The erratic nature of the Government of Ghana cash flows is having profound negative impact upon the
budgetary expenditure management. There are consequences that affect the adherence to expenditure
controls, vendor pricing and delivery of service.
Reform:
No progress has been made in the MDA cash requirement planning component of the PUFMARP;
which would undoubtedly be useful for MDAs to increase their capacity to manage their needs in a
timely manner throughout the fiscal year.
The EC has already assured the BOG that it would co-operate in any efforts to improve co-operation
between the Ministry of Finance and the BoG relating to assessing the conditions and progress of the
release of grants.
The EC representative pointed out that the BOG is a signatory of the Joint Implementation
Memorandum. While these could not always be scheduled by date, a better understanding of the
conditions for draw down of funds by the Ministry of Finance and a closer monitoring of the Ministry of
Finance progress in meeting the required conditions would lead to better pro forma cash flow profiles.
The consequence of an improvement in the pro forma profile would lead to a more effective and fiscally
sound short-term credit program that would impact positively the levelling of Government of Ghana cash
flows.
4.5.2. Budget preparation
a) - The type of Budget
Before 1998, budgeting was incremental and mainly concerned with salaries. Only a limited analysis of
goals, policy and priority application, and outputs was applied. Accountability was weak, as budgets
were not linked to activities or to individual budget managers. The budget made a clear distinction
between recurrent and investment expenditure.
Reform:
The Government of Ghana is implementing far-reaching reforms in budget management through the
Public Finance Management Reform Programme (PUFMARP), and although some of its components
have experienced delays, overall the impression is one of progress and involvement. Under the aegis of
the PUFMARP, the Medium Term Expenditure Framework has become the new instrument for
Budgetary planning. A three-year rolling plan mechanism, the MTEF is a composite instrument
integrating recurrent and investment expenditure, donor and GoG revenue, and allowing for improved
advance forecasting. The preparation of MTEF is done, among others, with the assistance of a Logical
Framework approach. The MTEF format has been introduced in all Ministries, which are now reorienting
their analysis on activities and outcome to be able to fully adopt the format over the next budgetary
preparation exercises. Under the MTEF, districts will be given allocations, which will comprise
administration, services and investment expenditure.
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The Ministry of Health is clearly ahead in budgeting and expenditure management reform and setting
the lead for the other ministries. MoH is now in a position to present expenditure proposals in output-
related programme terms, matching objectives to outputs, and outputs to activities.
This progress should increase accountability for outputs, and therefore, as a direct consequence, for
financial management as opposed to administration. Fiscal management and discipline are also set to
improve with the medium-term fiscal framework. The Ministry of Education, under the MTEF programme
and with additional assistance from technical assistance financed by the EC under the structural
adjustment support programmes, has been able to reduce the ratio of salaries to expenditure.
b) - The timing of the Appropriations bill
The budget is prepared, presented to Parliament (31 st December) and approved (usually in April for the
same year) late in the year. The different explanations given by government officials are that:
the late approval and transfer of funds from donors, combined with a late collection and pooling of tax
revenue, delays the quantification of revenue and thus of potential budget ceilings, making it difficult to
finalise preparations;
delays in the budget preparation process compound this problem;
constitutionally, the date for the presentation of the budget to Parliament is the 31 st December;
protocol considerations impede the beginning of discussions in Parliament before the President‟s
address, normally scheduled for the beginning of February.
Consequence:
This situation is a hindrance for proper financial planning and management, as it leads to the
administration functioning on an interim budget and credit system for the first quarter, and a rush to
spend the bulk of allocations in the 3rd and 4th quarters. Funds are thus released by the Ministry of
Finance for expenditure as they come in to Government accounts. But although the Ministry of Finance
grants interim spending authorisations (interim FEs), it communicates them to line Ministry
headquarters. Before these authorisations reach the lower echelons of the administration down to
district level, it is usually March. The actual result is thus that actual spending is done late in the year
and precipitously. The consequent delayed reporting on actual expenditure to ministry headquarters
from decentralised levels upwards results in late availability of national budgetary implementation
figures. This, combined with the closure of budgetary expenditure at the end of the year, limits the
capacity of the line ministries and of the Ministry of Finance to correct possible overshooting on time.
Both the consolidation of revenue accounts and the finalisation of spending estimates are delayed as a
consequence.
Reform:
Both donors and the local CPF financial monitoring technical assistance have articulated clear
recommendations to the government that an earlier approval of the budget would solve many issues
regarding the financial implementation of the budget, and GoG is aware of these recommendations. It
seems therefore that for the moment being GoG prefers the current system or is unable to carry out
reform at this stage.
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Recommendations:
In addition to an earlier preparation, submission, discussion and approval of the budget, the
Government of Ghana may need assistance with revenue management. This needs to be ascertained
with greater precision and the possibilities of addressing it within PUFMARP identified.
4.5.3. Expenditure releases and regulations
4.5.3.1 Release of funds
For the reasons outlined above, it appears that more often than not, FEs and drawing limits are
belatedly communicated towards the end of the quarter. On many occasions drawing limits imposed are
far below the approved estimate.
These delays are reflected in the half-year sectoral expenditure accounts, which show significant under
spending. For example, for the year 1998 in the Health sector, at the end of the first quarter expenditure
was 5.5% of the total budget, increasing to 22.3% at the end of the second, to 50.5% at the end of the
third and 93% at the end the fourth. Financial encumbrances are released late at the level of the
Ministry of Finance.
Consequence:
The delays experienced by spending officers in receiving their expenditure authorisations impede timely
expenditure management. As detailed below, the end of year spending rush causes and facilitates the
adoption of “special” measures flouting regulations.
The advance system of purchasing combined with a lack of storage capacity at central and local levels
of the administration can have other damaging effects, such as when an order is placed with the
supplier in advance, but the delivery requested at a later stage. At the time of delivery (say some
months later), inflationary pressures will cause the supplier to be unable to provide the required quantity
of goods at the same price as was previously agreed. Frequently, the MDAs find that they either have to
pay a higher price for the agreed supply or that they receive an inferior purchase (in quality or quantity)
than stipulated.
Recommendations:
The Ministry of Finance, should have the capacity to access information on financial matters from MDAs
in a speedier and more thorough fashion to ensure a proper management of the Government of
Ghana‟s fiscal position.
4.5.3.2 Internal administrative and financial rules and regulations
A revision of the 1979 FAR is long overdue, and the lack of ministerial initiative in this field is worrying.
At the time being, among Government of Ghana staff, there is clearly great confusion about what the
official rules on spending are.
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Except for the Ministry of Health, there is a lack of responsibility at management level in the ministries to
address the absence of clear rules at national level by developing firm and clear rules. Most officials are
well meaning and professional, but it is too much to ask of any individual that he takes upon himself to
ensure that an entire process to which he contributes, but which is globally outside his individual control,
is transparent and unquestionable. It is difficult to follow the rules or check that rules are followed if one
is unsure of what the rules exactly are. The system is so unclear and decision-making so arbitrary that it
is open to abuse almost under every angle.
a) - Accounting and reporting
GOG Funds:
District and regional offices submit expenditure returns with substantial delays and in different formats.
Reporting is also neither timely nor accurate, and at the end of the year the budget is never reported.
Staffing levels and training are inadequate. Sub-item virements are frequently carried out by local
authorities but records did not produce evidence of the appropriate authority given to carry them out.
There is also evidence that virements are done more liberally for expenditure carried out with Internally
Generated Funds, and that shortfalls for expenditure to be sourced from GoG revenue are made up with
IGF revenue. Copies of payment vouchers paid by the Treasury officers in the districts are not returned
to the budget management centres in the local administrations, which are therefore not advised of the
actual payments carried out by the Treasury.
Consequence:
The quality of reporting is poor, and consolidation time-consuming. The Ghana Audit Service‟s audit of
the MoH for the year 1998 published in 1999 (see reference) records an improvement when compared
to 1997 in the general application of administrative and financial procedures, especially in bookkeeping
and financial reporting. It also commends the Ministry for what it perceives as being a pro-active attitude
in the development of regulations and their application, especially the introduction of the Accounting,
Treasury and Financial Reporting Rules and Instructions (ATF) at the Ministry of Health, which it is
hoped could be replicated in the other ministries.
Transfers allow for a greater flexibility at local level to manage expenditure which can only be welcomed
if the proper control mechanisms are in place to ensure that there is no incentive for abuse.
BMCs cannot reconcile correctly their records with the amounts declared as paid by the Treasury.
Recommendations:
Some of these problems are due to staff shortages or to the fact that accounting personnel is
sometimes not trained on internal procedures. The Controller and Accountant General should provide
training on accounting and financial matters to the MDAs.
Personnel who are found to repeatedly ignore procedures or fail to record information appropriately
should be sanctioned (there were no cases of disciplinary sanctions on BMC personnel recorded by the
GAS) or removed. A virements journal recording transactions and appropriate authorisations should be
kept.
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Donor funding
The GAS report for the Ministry of Health explains that certain donor requirements are causing
disruption in the capacity of the Budget Management Centres to keep appropriate records of
expenditure. In 1998 the Division for Accounting and Finance developed a Programme Accounts Facility
at headquarters and regional level to help track earmarked funds provided by donors to support
specified programme activities. Donors providing earmarked funds for projects usually require original
receipts, payment vouchers etc to be returned to them to account for funds released.
Consequence:
The Treasury and BMCs need to ensure that copies of payment files are adequately kept; this, however,
is not the case due to confusion between the two institutions as to whom should be responsible for this.
BMCs usually state that supporting documents are sent at the next level of administration but that could
not be confirmed by the report. As a result, control over donor programme accounts cannot be
effectively managed by most BMCs.
b) - Purchasing and procurement
The lack of application of the FAR extends to this area. The provisions contained therein are either
outdated or have never been implemented. To the exception of the Ministry of Health, which has
recently (progressively, since 1997) made great strides in developing and applying clear, detailed and
binding internal administrative and financial regulations to fill this regulatory vacuum, the situation is
confusing and anarchic. Other MDAs have not elaborated specific internal rules and regulations, as is
expected of them in the FAR.
The Ghana Supply Commission, which, in the absence of a modification to the Law, is still the
government‟s official procurement agency to be used by all MDAs, has slowly been losing customers
since 1996. Due to the following reasons, it is being gradually replaced by the introduction of
procurement units within individual ministerial services:
Donors have pressed for the reinforcement of purchasing capacities in key ministries, such as
Health and Education, which manage important flows of external funds. The GSC and internal
Supply and Logistics divisions have increasingly been bypassed to the benefit of these
additional project management units. Donors have also attempted to introduce a level of
competition into the market for procurement, such as the PMUs at the Ministry of Health and
Education are encouraged to supervise the management of purchases for donor-assisted
projects (whether imputed to donor funds or to GoG matching funds) effectively carried out by a
private procurement agency whose services were contracted following a tender (the GSC,
however, complains that it was not able to participate to this tender as it is a public agency).
The Supply and Logistics divisions are left to purchase administrative supplies for headquarters.
The Ministry of Finance recently allowed the possibility of exceptions to the use of the GSC;
whilst apparently meant for politically sensitive supplies (defence, intelligence…), ministries
have seized the chance to bring the control of the purchasing process closer to their central
level. They are also able to secure deliveries of goods and services locally on credit, so as to
avoid having to wait until the official communication of availability of funds. Ministries explain
that most international companies would not accept such terms;
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Ministries accuse the GSC of inefficiency, delays, costliness and incapacity to ensure that the
correct quality and quantity of items required are delivered.
Concerning the decentralised purchasing procedures, there is no documentation to guide the activities
of the purchasing committees at the regional and district levels, or in hospitals, schools and other
administrative units (referred to as „sub-districts‟). Decentralised MDAs (district assemblies and
educational institutions are particularly mentioned by the Law) are allowed to use GSC, but never have
appeared to do so.
Reform:
Policy documents outline the need to decentralise procurement, whereby only international tenders or
tenders needed for expenditure related to the central level would be kept at central level, while all other
necessities could be procured closer to where they are needed. The lack of clear rules (except in the
Ministry of Health) and efficiency reasons are however cited as reasons to delay this reform.
Consequence:
The mission has been able to identify a “standard” procedure, loosely based on the FAR instructions,
which has become the norm in most ministries. The following steps can be deemed to constitute the
norm, and should be respected when purchasing public goods, services or equipment through either the
procurement or the shopping methods.
The spending officer desires either to make a purchase foreseen in the annual purchasing plan, in which
case he proceeds directly to step 2. If he needs to make an unforeseen purchase, he needs to obtain:
STEP 1 The Memorandum
The spending officer‟s Head of Department writes a Memorandum to the Director General (Director of
Medical Services for MoH), or, as applicable, head of decentralised administration, head of
hospital/training institution etc... containing an explanation on the nature and justification of the
proposed acquisition. The Director for Administration and Finance checks the budgetary allocation and
the existence of the FE, and determines the corresponding account with assistance from the Chief
Accountant. Each of these officials apposes his signature on the Memo.
STEP 2
The Selection
The expenditure having been justified, the choice of a contractor will be made by either the shopping or
the procurement methods.
Shopping: the obtention of three quotations (pro forma) from alternative suppliers by the
spending officer: he has to attach them to the payment voucher after signature by the Head of
Department confirming the choice of supplier.
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Procurement: international, national, regional, district tender: open, or via selective tendering
also called restricted tendering
In the case of maintenance contracts only (small repairs authorised under the CPF targeted
administration budget lines) a contract is drawn up between the MDA and the contractor. In all other
instances, services, goods and equipment are supplied on the basis of the LPO and no contractual
arrangement is concluded.
STEP 3
The order
Once a decision has been made on the supplier either through the shopping or the procurement
method, a confirmation of order (Local Purchase Order LPO) is sent to the supplier. The LPO is
prepared by the relevant accountant in the Ministry or decentralised administration and signed by
either the Director General (Director for Medical Services at the MoH) or the Director for
Administration and Finance. It contains all relevant information on the services/goods/works to be
supplied, the expected completion or delivery date, the quality standards to be met (official product
certification if relevant), and prices. For goods and services, it serves as the official contractual legal
document and is binding on both the supplier and the contractor.
STEP 4 The delivery
The supplier delivers the goods or services on the basis of the LPO he has been sent. Three
documents are produced at this stage: two by the supplier, the Way bill and the final invoice, and one
by the Administration.
The Waybill: This document states the delivery. It is established by the supplier and details the
goods or services provided. The Way bill is, above all, a justification: 1) vis-à-vis the authorities
(police, customs), for transporting the goods and 2) vis-à-vis the official stores‟ security services
to be able to enter the ministerial precinct. The Way bill, when countersigned by the authority
receiving the goods, also constitutes proof of delivery.
The Invoice: Following or during the delivery, the supplier will provide an invoice for goods
procured/services rendered, stating that he has or will acquit VAT payments (Year 1999).
The SRA: When the supplier delivers the goods, the storekeeper - who is responsible for
receiving all goods for a ministry whether they have been obtained by shopping or by
procurement - checks that the delivery corresponds to the order. At the larger stores (such as
the MoH‟s Central Medical Store) the SRA is also signed by the security guard. For
maintenance or construction contracts, the Head of Department issues a Certificate of
Completion. Internal Audit and Internal Control also have to sign the SRA once they have
carried out a physical inspection of the delivery and have ensured that it met the LPO‟s
specifications.
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STEP 5
The Preparation of Payment
The spending officer requiring a purchase can then prepare a Payment Voucher (PV). PVs are orders
for disbursement to the Treasury officer by the spending officer and should contain the following
accounting details:
the authority governing payment
accounts classification and number
full particulars of the transactions such as dates, numbers, quantities, rates and
references to supporting documents such as special authorities, purchase orders,
invoices so that it can be checked without reference to any other document;
account to be paid in both words and figures
name of the payee
Four copies should be prepared each being marked as original or duplicate. All supporting documents
should be attached to it. Disbursements are approved by the Treasury officer only on the original
payment voucher. All payment vouchers are recorded in a payment journal by the spending officer in
the sequence in which they are authorised.
If a payment voucher is found to be in order, it shall be countersigned by the Treasury Officer and
referred to the Cashier for the preparation of the cheque.
The original of the passed payment voucher is retained by the Treasury Officer, and copies returned to
the spending officer who is responsible for notifying the payee to collect the amount due from the
Treasury Office.
STEP 6
The payment
The Treasury officer approves the payment and the cashier prepares the cheque. He is supposed to
copy the approved payment voucher and send this copy back to the line Ministry for its records.
4.5.3.3 Detailed analysis : Ministry of Education
Unlike the Ministry of Health, the MoE has not developed specific internal financial and administrative
regulations; it relies entirely on the 1979 FAR and Decree for guidance on such matters.
The procurement system of the MoE is centralised in Accra and involves
the Ministry of Education: manages purchases for its own needs
the Ghana Education Service supply and logistics division (SLD), manages purchases for the
GES.
The Project Management Unit: manages purchases and procurement for donor-funded
expenditure of a capital nature and destined for particular projects, and for corresponding GoG
project matching funds;
the Ghana Supply Commission.
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Regional and district educational establishments carry out their own purchases for ad-hoc ordinary
supplies (light bulbs, cleaning materials, furniture, stationery…) , minor repairs and spare parts, services
(utilities: water, electricity, telephone, mail) and events (end of year certificate distribution events, fairs)
and such. As in the MoH, the GES centralises the procurement requirements of all BMCs with regard to
Establishment Supplies, which are bulk orders for standard necessities across schools such as chalk,
textbooks, exercise books, report cards etc...
These are consolidated then into an annual plan by the Supply and Logistics Division (SLD), which
checks requests against budgetary allocations for consistency, then issues the plan, now denominated
“GES Division Requirement”. The GESDR is submitted to the procurement committee for approval. The
procurement committee is composed of all the Divisional heads, the deputy director for Finance and
Administration as the chairman, who must confirm that sufficient funds are available for the purchases.
The Director-General must give provisional approval regarding each procurement, then the GESDR can
be sent to the Minister for a final green light.
The following officious procedure (there are no official documents reflecting this method, but it is applied
consistently by staff and receives management approval) is applied:
above GHC 500 million: the purchase requires an international competitive bidding procedure
and is handled by the FPMU ;
Between GHC 100 and 500 million: the SLD proceeds to restricted tender with companies
drawn from a list of registered suppliers. The goods to be purchased require shopping or
tendering; one of the unit/agencies listed above will request bids from between three and six
suppliers, which are presented to the Minister;
Under GHC 100 million, the shopping method is used (three to six suppliers are invited to
quote).
Printing services, whatever their value, are handled by the MoE, and since 1999, also the purchase of
exercise books under decision of the Minister of Education (both are by nature best purchased locally).
All items purchased are collected at the Central Store for stocking and distribution throughout the
country. All items received into the store must be cleared and approved by the storekeeper who issues
the Store Receipt Advice, makes the appropriate entry in the Tally card and the corresponding Stores
ledger.
At the Ministry of Education, there should be verification by both the Internal Control unit and by the
Internal Audit unit:
after the firm order has been issued,
and following the delivery of goods or the reception of services: both units should carry out an
assessment to ensure that the goods have arrived or the services supplied according to the
required specifications. The Director of Supply and Logistics also said she carries out her own
visit to the Store.
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The Ghana Education Service has embarked upon a process of decentralised management. Under this
process, District managers determine their expenditure priorities within overall sectoral policy, hold
substantial budgets and have accountability for service implementation and performance. Budgets at
local level will increasingly include staff costs, direct service expenditure, including textbooks, provision
for staff and pupil development, maintenance, utilities, furniture and infrastructure development.
Previous high levels of centralisation and a lack of experience in handling complex budgets mean that
lengthy training processes for budget managers are a necessity.
Reform:
DFID has attempted to set up a programme of assistance in the field of Development of Auditing and
Control processes. There have been notable delays in starting this programme, due to changes in
senior management at the Ministry and subsequent negotiations. The programme, now back on track, is
supposed to review issues related to the quality of the internal audit service, propose reforms and
capacity building in this area. Three consultants will soon be in place and it is expected that they will
have produced their assessment within three months.
4.5.3.4 Detailed analysis: Ministry of Health
The Ministry of Health has developed its own internal regulations detailed in the Accounting, Treasury,
and Financial Reporting Rules and Instructions based the Public Accounting Systems as legislated in
the 1979 FAR.
Accounting and Financial Management Procedures
The Ministry of Health has taken a number of initiatives to set out internal financial management rules
with detail and precision. An “Accounting, Treasury and Financial Reporting Rules and Instructions”
(ATF) booklet was issued on 1st October 1997, the first of its kind, attempts to explicit the necessary
regulations to ensure that:
expenditures are valid, recorded accurately, and based on adequate supporting documentation;
financial reports are prepared accurately;
approved budgets are not exceeded.
According to government policy on the creation of the Ghana Health Service, the GHS cannot be given
subvented status until the MoH can provide reasonable assurance to internal and external stakeholders
that the GHS can manage health service delivery in an environment that is conducive to effective
internal controls. The Medium Term Health Strategy and the ATF booklet are the first step to define and
communicate clearly, in an organisational perspective, the policies, levels of management and authority,
roles and responsibilities. The ATF booklet was specifically drafted in response to donors‟ concerns
about the need clear regulations to ensure efficient and accountable management of financing pooled
into the Health fund.
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Procurement
Indeed, the introduction to the new Procurement Procedure Manual published by the MoH in September
1999, indicates that “a national legal framework for public procurement is not yet in place. There are
plans to draft a comprehensive National Public Procurement Code for Ghana.”
And “the current legal framework for public procurement is minimal and not entirely consistent”. In the
Preface the Minister of Health declares: “With the publication of the PPM the Ministry of Health has
taken the lead in the improvement of procurement practices in the public environment in Ghana. We
encourage other sectors where public funds are being used (…) to make use of this manual.”
The manual further states, reflecting the opinions of other officials met in the course of this audit, that
only two legal instruments in force before the Manual was published were:
the FAR
the GSC law
Procurement responsibilities
In theory, responsibility for procurement at the regional and district level lies with the Regional and
District Health Administrations. Procurement Committees should have been formed in each of governing
bodies at local level (regions and districts, and for Health: hospitals, training institutions), whose tasks
are to approve yearly procurement plans, endorse purchases beforehand whether in or outside the plan,
endorse tender documents, open tender bids, make decisions on awards. These are sometimes
replaced by the Regional Health Management Teams. These RHMTs usually conduct periodic „needs
assessments‟ for all the sub-district. Supplies are usually procured from the Central Medical Stores
(CMS) and Regional Medical Stores. Where this is not possible, the District Director of Health Services
has to issue a Certificate of Unavailability and standard procurement methods should be applied
(national or restricted competitive bidding) but sole sourcing is the most commonly used method.
In the case of Health, the PPM has not yet been distributed to decentralised levels; in the case of
education, supposed members of the decentralised procurement committees are often not aware of
their required presence in such committees nor that they should have been formed. In practice,
therefore, formal procurement remains centralised at headquarters, while contracts and supplies at local
level, and for small amounts, are awarded locally.
Procurement thresholds
Procurement thresholds agreed with the Donors, have been operational since 1997. It is suggested that
they be reviewed every two years, ensuring thus that the figures are regularly updated to take inflation
into account. The PPM further warns that “in no way is the frequency of procurement to be changed in
order to meet the limits of the thresholds”.
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Level Civil Works Services Goods
Mode Limit USD Mode Limit USD Mode Limit USD
District Price comparison < 6 000 Direct hiring < 6 000 Shopping < 6 000
Region Price comparison < 50 000 Direct hiring < 50 000 Shopping < 50 000
NCB < 1 000 000 QCBS < 1 000 000 NCB < 300 000
National Price comparison < 50 000 Direct hiring < 75 000 Shopping < 50 000
NCB < 2 000 000 NCB > or = 75 000 NCB < 300 000
ICB > or = 2 000 000 ICB > or = 3 00 000
NCB/ICB: National/International Competitive Bidding
QCBS: Quality and Cost-based Selection
The MoH plans to make available their Procurement Manual to all regional and district level BMCs, to
train personnel and enforce its application by July 2000, when the goal is to have at least one trained
officer in each BMC. In principle Procurement Units have been set up at all levels, and a system of third
party ex-post reviewing and auditing of tenders will be established.
Basis for the new regulations
The Manual was drafted following one of the principal conclusions of the Medium Term Health Sector
Strategy 1997-2001, which identified procurement as one of the key areas for capacity-building, and is
binding. The PPM places the concept of “value for money” at its core.
The PPM explicitly makes “extensive reference to World Bank procedures”, and this because “their
procedures are acceptable to most donors and are regularly used and accepted by most of the major
funding institutions”. No regulations have been established yet for the procurement of works and
services, but an Estate Management Unit was recently created within the Procurement Unit of MoH
headquarters which will be responsible for drafting a set of rules for works. Until then World Bank
Standard Bidding Documents and guidelines will apply.
Discussions with the Director of Supplies of the MoH clarified that even though the PPM‟s origin owes
significantly to co-operations with donors and to answering their concerns, it applies equally to
expenditure funded by Government of Ghana revenue, donor finance and MoH internally-generated
revenue.
Annual procurement plans of the MoH are agreed with donors. A positive conclusion of a Dutch
technical assistant at MoH is that unit prices for supplies purchased by MoH as a result of its tenders
are inferior to standard International Development Agency (IDA) prices.
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Rules governing expenditure under budget allocations earmarked by the EC
Through counterpart fund targeting, EC financing has essentially covered non-wage recurrent expenditure. As
spelt out in the introductory chapter dealing with JIMs, the budget lines secured by EC counterpart funds have
essentially covered the following types of expenditure, both in the Health and Education sectors, known as
items 2 to 5:
I. Item 1: travel and transport for officials sent on mission (running and maintenance of official
vehicles, per diem, fuel, meals and other outlays);
II. Item 2: general expenditure: services, supplies an ad-hoc items for the ordinary running of the
institution or office (stationery, utilities - electricity, water, telephone, mail services and other similar
services; training; sanitation and cleaning materials, furniture…);
III. Item 3: minor repairs, maintenance and restructuring for buildings, small service contracts, spare
parts…;
IV. Item 4: Supplies and Stores: consumables, establishment supplies (standard goods & equipment
requirements for running recurrent programmes within the ministries; for education: books,
textbooks, chalk, report cards etc…; for health: drugs, chemicals).
For the most part (items 1-4) such expenditure leads to a multitude of small contracts or purchases for a value of
GHC 5-10 million, distributed across institutions (schools, hospitals) or departments across the country (naturally,
not all expenditure under these headings requires tendering or procurement). Exceptions are expenditure carried
out through the Ghana Supply Commission in 1996, and national orders for standardised items to be distributed
across Ghana and purchased in bulk by the ministries‟ headquarters (item 4).
According to the type of expenditure under these categories, spending officers are required to apply different
types of procedures:
1. Regulations for expenditure under item 1:
Official vehicles are serviced by motor companies on credit, as the government is deemed to be a creditworthy
customer. The shopping method is supposed to be used.
T &T (travel and transport allowance) : when travelling for work inside Ghana, ordinary civil servants and other
ministerial officials receive a set per diem covering travel, accommodation, meals and other necessities, which
they are free to spend accordingly. They do not have to justify it with supporting documents. For travel outside the
country, the ticket is purchased by the Chief Financial officer. Officials of Director level or above have their hotel
fees reimbursed on an ad-hoc basis. Detailed rules are contained in the internal guidelines for each ministry.
Normally officials apply after the trip is made and individually, for reimbursement to their divisional director, who
sends a Memorandum requesting individual or group reimbursements directly to the Director of Administration and
Finance or to the Director-General (depending on the amount). A payment voucher is then prepared by the
divisional accountant (sub-official of the DAF) for the attention of the Treasury office, who issues a cheque. For
individual cases, the officer concerns collects the cheque and cashes it. For group repayments, the divisional
accountant cashes the cheque for the total amount, then invites the officials to present themselves to collect their
repayment at his office. They must appose their signature next to their name on the list after collecting the money;
when the list has been completed, a duplicate is made to the intention of the Treasury office while another is kept
by the accountant.
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2. Regulations for expenditure under item 2:
Stationery is purchased by procurement or shopping. The payment for the supply of utility services is made by spending
officers at the end of the month or quarter, upon receipt of relevant bills. The bill is attached to a payment voucher
prepared by the spending department, verified by the relevant accountant, and sent to the Treasury for payment.
Training expenditure is supposed to be delayed until other essential activities have been carried out under limited funds.
Ministries are often able to contract for training services in private institutions on credit; contract is often made by direct
agreement with the supplier. They may also use the Ghana Institute for Management and Public Administration, a public
institution by means of inter-governmental department credits. Payments are made when funds are available at the
Treasury.
3. Expenditure under item 3: The shopping method is supposed to be used.
Risks:
The abandonment of the GSC
As outlined above, the absence of an updated and detailed regulatory framework, the increasing
bypassing of the GSC has caused confusion and introduced arbitrary rules. In the face of this, ministries
have resorted to organising their own internal purchasing units. If the Ministry of Health has managed to
organise progressively and efficiently this shift, however, other ministries do not necessarily have the
capacity in terms of personnel and training to internalise procurement services in a transparent and
effective fashion. The situation at the Ministry of Education seems particularly worrying; the head of the
purchasing department admitted she was often bypassed by the Director General or the Minister, and
even technical staff seemingly made use of her department on a voluntary basis.
Confusion at ministry level
The figures contained in Article 683 of the FAR are utterly outdated in terms of financial ceilings (GHC
100 today = 0,028 US$), and the regulations ambiguous. The Controller and Accountant –General‟s
office has not revised them since 1979, line Ministries do not operate any official thresholds for
procurement. An international consultancy firm carried out a Procurement Audit in 1998, covering the
Ministry of Health and concentrating on procedures (the value for money angle was not looked into).
The main finding was indeed that “hardly any written procedures are available”, and that “sole sourcing
is a common procurement method”. Officials tend to justify this by explaining that for items frequently
bought, awareness of prices and satisfaction with one particular supplier can justify resorting to the
same company without the need for quotations.
GAS also reports that the purchasing procedures and purchasing committees had almost completely
broken down in almost all BMCs. Stores records, purchasing and control tend to be centred around one
officer in many cases. The PCL report also claims that “in some sub-districts there were no health
management teams to oversee procurement activities to ensure efficiency and accountability”. PCL also
notes that “duties were not properly segregated as required by best financial management practices”.
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Decisions in this field are left to officials‟ own discretion, in consultation with management, but are rarely
formalised and issued as internal directives or other consultable document. When interviewed, officials
in the lower ranks, and sometimes even in posts such as Financial controller, are unable to describe
with precision to, or to refer to official documentation on, the method they would use for purchasing an
item or service; the explanation given is that “if small purchases need to be made, such as one
computer or a chair or any similar small acquisition, then the officer can either go directly ahead and
purchase, or obtain quotations. If a large purchase needs to be made, then one needs to include it in
the annual purchasing plan or would apply to the Director of Supplies on an ad-hoc basis.” No official
ceilings were mentioned, and officials would quote varying figures that they would assume to be a
“reasonable” ceiling. All officials, however, are aware that ceilings are contained in the FAR, but that
they are out of date. The D-G and Minister have the final and definite say in matters related to
purchasing, by usually validating any internal purchasing decision,.
In practice, it therefore seems that the Director-General and the Minister have wide latitude to accept or
not the recommendations of the Supply and Logistics units and Procurement committees. In the
absence of clear regulations, the approval of the D-G or Minister and deferral of decision responsibilities
to him, can reassure the official that he is operating with management‟s blessing. On the other hand, the
situation leaves the door open to abuse at all levels. The following parallel procedures used at
Headquarters (central ministries), are an example of this.
According to the FAR, emergency procedures are allowed only in situations of genuine emergency.
Faced with a late arrival of funds at the end of the year, with the concomitant spending rush initiated by
the different budget management centres, and other supposedly extraordinary situations (which in
practice happen very regularly), officials in the financial, accounting, control and supply divisions apply
what they call „Emergency‟ and „Stop-order‟ procedures:
Example 1: the Emergency procedure
In the case of emergency purchasing, the Director of Supplies and Logistics is told by the spending
departments with authorisation of the Director General to proceed to an accelerated procedure
consisting of bypassing traditional shopping or even tendering procedures, and requesting the supply of
goods or services by a specific supplier. Suppliers contacted via this method are often registered on a
list of „approved‟ suppliers, i.e. firms who have satisfactorily provided services in the past, and whose
prices are known. Although this is the formal explanation given, the obtention of such a registration is
not a formal process and officials were not able to provide thorough documentation on which companies
had obtained this status and how. They are simply referred to as companies with whom officials have
worked in the past, are known to them, provide good service and last but not least, supply on credit.
Example 2: the Stop-order procedure
The Stop-order procedure is applied following a joint departmental meeting (Divisional Directors -
including the Director for Administration and Finance and the Supplies and Logistics Director -, the
Director General) and the subsequent briefing of the Minister (we were unable to find written memos
documenting these sorts of decision). Around September/October, officials often realise that due to the
end-of-year accumulation of purchasing needs and availability of funds, it will be technically difficult to
carry out all forecast spending according to procedure. According to budgetary procedures, if the funds
allocated for specific budget line expenditure are not committed before the end of the year, they are lost,
and purchases will have to be carried forward onto next year‟s budget.
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A rapid commitment of funds can only be achieved by bypassing some steps of the normal procedure
detailed above, as follows:
Treasury if informed by means of a Memo signed by the Supplies and Logistics Division and
the Minister that x amount of funds on a specific account must be blocked;
the LPO is issued and a copy sent to the supplier so that he may begin to organise the delivery
as soon as possible;
the Payment voucher is prepared, processed (signed by all the relevant departments: Head of
Department, Accountant, DAF, Director-General, Internal Control, Internal Audit), and sent to
the Treasury;
the SRA is prepared in advance, but not dated;
the Treasury prepares the cheque and releases it to the Chief Accountant, who collects it and
stores it (to ensure that no payment is carried out until the delivery has been made), keeping
appropriate records;
when the supplier has delivered the goods or services, the SRA is signed and backdated so
that it appears to have been correctly prepared before the cheque has been issued by the
Treasury; the Chief Accountant copies the SRA and sends it to the Treasury for completion of
the file;
the supplier can then retrieve the cheque from the Chief Accountant.
This procedure is known as the Stop-order (or stop-cheque) procedure as up until 1998, the cheque
would be issued by the Treasury and held there, with a proviso that it must not be cashed (the „stop‟
order) until the SRA was duly signed. The Chief Accountant roughly estimated that GHC 2-3 billion of
recurrent expenditure and up to 10 billion investment expenditure is processed in this way.
The lack of management direction and strict enforcement of procedures, however, has other impacts at
all levels of operations. The audit carried out during the mission highlighted the following problems:
Lack of adherence to supporting documentation:
The purchase initiation memo is often not included
There are often instances of only one pro forma submitted (sole sourcing)
The SRA is often signed before delivery of goods (Education 4th quarter)
There is often no Waybill included
There is often no invoice. The pro forma invoice serves as the only commercial transaction
document.
The majority of purchase transaction files do not include a legally required VAT Invoice
The selection of Vendors is not based on clear guidelines and thresholds
There is widespread falsification of competing quotations
There are no independent effective market price surveys. It is clear that there is high price
inefficiency
A significant proportion of funds spent on T&T is based upon the reimbursement of a
director without supporting documents that the final recipient was other than the reimbursed
Director.
There are also a significant number of purchases that reflect a reimbursement of a director
rather than a direct payment to the vendor
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Control weaknesses
weak establishment of Delivery of Service or Goods (SRA)
No stock taking reports available
No reconciliation reports of requisitions to store ledgers provided
No reconciliation reports of SRAs with store ledgers
Other serious breaches observed
The first quarter formalisation of entering into credit arrangements with vendors (Volta
Region – Ministry of Education)
The non availability of signatures indicating the final recipient in T & T payments (Ho
Ministry of Health over 160 million GHC)
Management of deliveries to the warehouses and management of supplies stored at the
warehouses is a particular problem. Greater detail is given in annex …. With a case study
of the warehouses of the Ministry of Education, and of Pantang Hospital for the Ministry of
Health.
Reform:
Regulatory documents have been designed and implemented at the Ministry of Health, but even there,
only recently. Revision of the legislation should have been a component of PUFMARP (although it has
been allocated a secondary degree of priority relative to budget reforms) but progress has been slow or
inexistent. No activity on the Procurement component of PUFMARP can be registered. A stakeholders‟
workshop have been planned for some time as the cornerstone of reform in this area, as well as the
recruitment of a consultant to build upon the various studies which have been carried out in this area.
His mandate would be to develop a new procurement system, code and law, develop an electronic
pricing database, a register of firms, and train government personnel. The PUFMARP Steering
Committee has apparently been unable to reach agreement on the terms of reference for this
consultant.
Recommendation:
The revision and implementation of new administrative and financial regulations should be given priority
by the government and by donors, especially in the light of this report. Developing a new framework
may take time, and personnel must be then trained at all levels of government and in local
administrations nation-wide, not just at headquarters. The mission would strongly support progress in
this domain. Procurement ceilings could be updated annually as an annex to the Appropriations bill, so
that the entire legislation wouldn‟t have to be modified annually in response to fluctuations in the value
of the Cedi. They could also be set in foreign currency.
The efforts made by the Ministry of Health could not only serve as inspiration for the other ministries, but
set the basis for government-wide regulations. Differentials in procedures across ministries should be
avoided as much as possible, so that the same standards apply for the same types of expenditures
across MDAs.
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4.5.3.5 Internal controls and Audit
The independence of the internal control and internal audit units is potentially fragile if they were to be
faced with irregularities committed by management, unless the relevant minister is ready to defend the
position of the internal control unit. Ministers and the CAGD do not seem to take a great interest in their
work, and as outlined above, co-operation from ministry senior in ministries in bypassing correct
procedure proves that the controllers‟ hands are tied.
The declaration of the Controller and Accountant-General himself to the mission, that parallel
procedures are acceptable in ministries when faced with payment delays from the Ministry of Finance
invalidates the controllers‟ mission from the start. After all, he is the guardian of the application of
procedures throughout the administration.
Independent Internal Audit functions within MDAs outside headquarters are even more limited. The
Auditor-General has delegated responsibility for this to the CAG-D but the current levels are insufficient.
The Ghana Audit Service is currently unable to fulfil its constitutional obligations in terms of the spread
and the quality of auditing. Low productivity and insufficient organisational performance are other
weaknesses of GAS. Only 1% of GAS professional staff is certified accountants.
Consequence:
The effectiveness of the Internal Audit and Internal Control units in ensuring a transparent purchasing
process is compounded by the fact that both only intervene once the supplier has been chosen (by
whatever method has been applied). They have no say on how decisions on purchasing and
procurement were carried out; they can only make spot checks to verify a supplier if they are suspicious,
or point out seeming irregularities in pricing. The independence of these units being close to nil, at the
moment being, they do not serve as useful a purpose as they could.
Reform:
No specific reform is currently envisaged for the internal audit and control units. The DFID report (see
section above on the Ministry of Education) could provide interesting avenues for reform which could be
co-ordinated with the EC.
Legislative reform at the level of the GAS is embodied in the Ghana Audit Service Bill, currently under
discussion in Parliament since July 1998, and which should be shortly approved. Two limitations of the
GAS will be addressed by the Bill : its dependence from the Ministry of Finance for financial matters and
from the Head of the Civil Service for personnel matters; and the fact that contractors could challenge it
in court. The GASB will also endorse a clear mandate for the GAS to carry out performance audits, in
line with the ambitions of the MTEF. Reform on strengthening the GAS has been supported by the EC
for the last two years, under the PUFMARP external audit component (EDF project n° GH/784/98 and
7020/000), particularly as regards the development of methods, skills, expertise, management training
and information technology to carry out financial and performance audits. The Swedish National Audit
Office has finally won the contract within this project to assist the GAS in reforming, after substantial
delays. They are now expected to commence their work soon on the financial audit, performance audit,
information technology, management and administration components.
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Recommendation:
The independence of the officials detached from the Controller and Accountant-General‟s Department
needs to be strengthened, particularly as regards stronger guidance on their role. Clear incentives be
given to them to point out irregularities but without clear indications from the CAGD and from Ministry
management that irregularities will not be tolerated, it is also difficult to expect these units to take a firm
stance against deviant procedural behaviour. Reform in this area, however, cannot be divorced from the
imperatives of setting clear rules against which controllers can verify the operations of their colleagues.
Better national coverage of MDAs by internal control units should also be ensured by designing an
appropriate system (in-house or roaming).
Particular recommendations on the Education sector:
The Internal Control and Internal Audit units provide simultaneous checks at the same stages of the
expenditure cycle at the Ministry of Education. Although they are carried out by officials answering to
different institutions, and therefore providing an additional layer of controls, some officials feel that a
duplication of efforts occurs, involving delays. Rather than recommending the elimination of either of
these institutions‟ controls, it is suggested that the controls they carry out be either reduced to one stage
of the cycle, following delivery.
In 1998 the Ministry of Education decided to establish School Management Committees composed of
representatives from school management and the student body, parents … which could serve as a
further control mechanism, reviewing among others matters related to the administration of the school. It
is recommended that their establishment be encouraged by the European Commission as they can
provide a forum for beneficiaries of the education service to voice their opinion, on among others, the
respect of procedure and of correct financial administration.
4.5.3.6 General conclusion on critical analysis of the budgetary framework and procedures
The Government of Ghana has, by not addressing the financial and administrative regulatory framework
situation, allowed matters to degenerate within ministries.
Even when staff has made an effort to work in an honest and accountable manner, pressures from all
sides and the absence of a guiding framework, to fall back upon and to put forward as a shield against
such influences has taken its toll. To compound this situation, there is no official figure, whether in
management or outside (such as an ombudsman or other mediator) for a civil servant to turn to and
defend him should he want to denounce any irregularities. Rightly or wrongly, staff perceives senior
management to act in a lax manner concerning respect for procedures. The effect is one of
demoralisation and acceptance from civil servants, which cannot in turn be expected to maintain high
ethical standards. Units whose supposed mission is to audit and check procedures cannot fulfil their role
either, because they are not sure what rules they are auditing or checking against.
In the best of cases, rules are bent in the best interests of the administration, for the officials to feel
there are able to carry out their functions as best as possible under very difficult circumstances (late
arrival of funds, for example), and one can sense the genuine effort made by everyone involved in the
expenditure cycle to ensure that at some critical moments of the financial year the whole machine does
not grind to a halt. In the worst-case scenario, there are possibilities for abuse at all levels.
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Reforms:
Reforms on updating the procedural framework
There are reforms under way in the Government of Ghana in many areas to address shortcomings in
the budgetary, financial and administrative regulations themselves, their application and in the general
organisation of services and how they communicate with each other. BPEMS (Budgeting and Public
Expenditure Management System) is a component of PUFMARP focusing on the computerisation of all
aspects related to budgeting and the management of public expenditure; this element of the programme
can obviously not be divorced from progress on updating regulatory reform.
Following delays due to the under-budgeting of IT requirements, t is expected that BPEMS activities will
begin this year. PUFMARP management is however planning to begin the design and installation of
software before a full review of procedures and their legislative acceptance is concluded, in the hope of
providing an impetus for these reforms in the absence of government action. Considering that a
subsequent invalidation by government of the financial and accounting practices encoded in the BPEMS
could wipe out all the work done in this area, it is strongly recommended that political and practical
impetus be given by the European Commission and other donors concerned on reforming the regulatory
environment. PUFMARP management has indeed confirmed that they would strongly welcome
technical assistance in this area.
Progress on PUFMARP:
Many of elements of PUFMARP have indeed remained shelved while others have progressed more
rapidly than originally envisaged, due to a reallocation of priorities, a revision of the costs of some
components which has led to their interruption, the desire for intensive stakeholder consultation in some
initiatives, the stronger feasibility of progress in some areas than others, and maybe excessively
ambitious initial goals. Resource inadequacy is also a problem.
To conclude, the five pillars of a transparent and efficient public finance management:
Clear, divulged and applied rules and procedures;
A working system of checks and balances;
Swift reforms where problems have been identified;
Penalties exist and are applied for transgressors,
Clear segregation of duties and responsibilities,
do not seem to have solid foundations at the moment in Ghana. The Government, however, has
declared on many occasions that it will not tolerate corruption and mismanagement. Its willingness to
act swiftly and decisively to reinstall clear legislation and regulations and strong management is
essential to carry out this vision into practice and re-establish the confidence of Ghanaians in their
government and civil service.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
4.6. TECHNICAL ASSISTANCE
4.6.1. For the financial monitoring of CPF
Short-term contracts were concluded with:
Price Waterhouse for the financial monitoring of GoG/EU counterpart fund budgetary support to
the Ministry of Education for 1998
PCL for the same work on Health for 1998
Crown Agents
4.6.2. In the Ministry of Finance
The mission is not aware of any technical assistance provided by donors within the Ministry of Finance.
4.6.3. In the Ministry of Health
Technical assistance for the MoH has been provided collectively by donors with financing drawn from
the joint donor fund.
Studies have been carried out with the benefit of this technical assistance in the following fields and by
the following firms:
Procurement procedures (Proconsult – 1999 - ended)
Certification of Budget Management Centres (1999 – underway)
Training of accountants
Assistance to the Ghana Audit Service‟s annual report on the Ministry of Health (Bonsu &
Associates)
Monitoring of health performance indicators (contract just signed)
4.6.4. At the Ministry of Education
Both the EC and the Department for International Development (DfID) of the United Kingdom have
financed technical assistance within MoE. The EC has concentrated its efforts on supporting reform on
financial and administrative matters within that ministry; DfID has focused on the GES (see above,
special section on the Ministry of Education).
The EC has financed two technical assistants at the Policy Planning, Budgets, Monitoring and
Evaluation unit (PPBME). Both provided assistance on budgetary reform matters (the former was
instrumental in assisting MoE improve their capacity for cost analysis, allowing them to move away from
incremental budgeting towards a more analytical approach; the latter has worked with PPBM on other
aspects of budgetary planning). Their terms of reference place their work within the framework of
PUFMARP reform, especially MTEF-related innovations, and are co-ordinated with DFiD.
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Ghana - EU Structural Adjustment Support Audit
- Mr Dwomo, a Ghanaian national and former director (retired) of PPBME, has been twice under
contract with the Ministry of Education under EC financing: from end 1998 to end 1999, and
currently (contract signed on 1 Jan. 2000 for one year). He is posted as Strategic and Resource
Planning Advisor, and his terms of reference cover various areas of institutional strengthening,
notably:
Policy and expenditure analysis, strategic planning;
Resource management reform, particularly the elaboration of sectoral Strategic Plans, and
budgeting under MTEF;
Fundamental expenditure scrutiny
Compilation and reviewing of education sector laws
CPF monitoring
- Mr Penrose‟ third contract for the continuation of his assignment has just been approved by GoG
following substantial delays. He will work on a part-time non-resident basis (5 visits of 20 days). His
terms of reference place his intervention in the framework of PUFMARP and FCUBE (Free
Compulsory Universal Basic Education programme), both emphasising the need for a more efficient
planning and financial management. He is responsible for assisting the MoE in:
The elaboration of long-term strategic and corporate plans
Designing and implementing improved systems of budgeting, monitoring and evaluation;
preparing annual budgets and work programmes; co-ordinating and monitoring budgetary
preparation (MTEF);
Improving resource management at all levels;
Setting up, staffing and identifying training programmes of budget and planning units in all
agencies under the MoE and for the PPBME;
Decentralising education finance and budget;
Comments: there appears to be appropriate co-ordination between the EC and DfID, as both work on
similar matters within the organic structure of the MoE.
It is nevertheless surprising that, although the technical assistants‟ terms of reference include a level of
supervision on CPF-related activities and budget implementation monitoring, they have not raised the
issue of lack of regulations. The EC has earmarked 600.000 Euros under the Structural Adjustment
Support Programme for the year 2000, for technical assistance in the budgetary field.
Recommendations. Technical assistance financed by the EC has concentrated so far on long-term
support to the Ministry of Education‟s macro budgetary planning and management capacity. Short-term
TA has also helped monitor the use of CPF. Nevertheless, given the findings of this mission it is
recommended to strengthen TA for the updating of internal regulations on financial and administration
issues within the PUFMARP.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
5. ANALYSIS OF CPF MANAGEMENT MODALITIES AND OF THE RESPECT OF
CONTRACTUAL PROVISIONS
5.1. BANKING MECHANISMS
5.1.1. Counterpart Fund Management
The Counterpart Funds are held with the Bank of Ghana in account number 01-256-400190-01. As is
the case with all Government of Ghana accounts held by the Bank of Ghana, this account is not bearing
interest. Also no charges or fees are applied to the administration of the account. Counterpart Funds are
held in Cedis and are generated upon the receipt of EU funds. The exchange rate governing the
conversion to Cedis is dictated by the terms of the Joint Implementation Memorandum (JIM). The
exchange from Euros to Cedis is to be made at the rate quoted in the EU for the month of the transfer.
The Counterpart Funds account does not receive funds exclusively from the EU Grants Budgetary
Support Program. In addition to the funds generated by the EU grants, and the refunds under earlier
ECC Grant GIP programs, there have been other funds lodged into account 01-256-400190-01 in the
period August 1996 through December 1999.
Transfer of ECU542225 IRO PRIN
SIP 1988 Fertiliser Component
Transfer from EEC CPF (Budget Support)
Transfer from WERADEP
CAL Merchant Bank CHQ 001124 – Deposit
Refund from Embassy of Spain
Refund MTCE-EU Delegate/EC GH (Kamphil Arbitration.)
$36,434@2310.73 Paid B/O GHAPOHA
Min of Lands and Forestry
Pmt Order No 041/98 CPF July 7, 1998
Balance of Account Transfer from Ghana Commercial Bank B/P
ECOBANK B/P 125858 Transfer from Ghana Ports and Harbours Authority
GCB Twifo Oil Palm Project
Barclays Bank of Ghana Cheque Deposit
By Order Ghana Ports and Harbours Authority
ECO Bank Cheque Deposit
The upshot of the inclusion of other funds not directly related to the EU budgetary Support grants is that
a direct matching of disbursements out of the account to specific activities dictated by the terms of the
Joint Implementation Memoranda cannot be ascertained.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
The Bank of Ghana is responsible for the provision of the Cedi equivalent to the EU Budgetary Support
grants provided under GIP IV for support of the 1996 Budget, GIP V for the support of the 1998 Budget
and SASP VI for the 1999 Budget.
In the period under review (August 1996 to December 1999) no incidences of balance discrepancies or
funds transfer errors were detected. The accounts reconciled correctly for each month. For the most
part the account was administered in a satisfactory manner. The errors of note in the period audited
were:
Error in description of the application of funds in one entry on a bank statement.
The use of an exchange rate different to the rate agreed to in the Joint Implementation
Memorandum on two occasions. On both occasions, however, the Bank of Ghana made
appropriate adjustments immediately after receiving query letters from the European
Delegation.
The passing through of two Payment Orders with duplicate payment order numbers.
However, the auditors point out that the numbers are done manually on each new payment
order. It is clear that the clerk or accountant who prepared the payment order made an error
with the number. The payments though were to different recipients. The point is that the
Bank of Ghana claims that the payment order number is one of the security checks that
they make. But they failed to see the problem so it cannot be a very good security check.
Eventually, there was no evidence of abuse in the review that we made.
The disbursement of funds out of the Counterpart Funds account is governed by the terms of the Joint
Implementation Memoranda. In particular for the period covered 1996, 1998 and 1999.
5.1.2. Utilisation of CPF Funds 1996 (GIP IV)
Health and Education Budgetary Support
Funds used for Monitoring and Evaluation
Funds Used to pay for Audit of Counterpart Funds Account
Funding of the local component of EDF financed project activities
Unutilised funds at the end of the financial year are to be paid directly to the consolidated
Fund for domestic debt reduction
A total amount of GHC 36,500,000,000 of the 43,103,319,000 of counterpart funds generated was used
for Health and Education Budgetary support. This represents 84.7% of the total Counterpart Funds
generated. The funds were disbursed in two tranches. The first tranche was disbursed immediately
upon receipt of the EU grant in August of 1996. The first tranche was in the amount of GHC
18,250,000,000. This was transferred directly to the Government of Ghana‟s Consolidated Revenue
Account held by the Bank of Ghana. The second tranche, as dictated by the terms of the Joint
Implementation Memorandum was disbursed only after completion of the Monitoring and Evaluation
Studies completed by PAB Development Consultants and Egala, Atitso and Associates. These studies
were submitted in May 1997 and the second tranche disbursement was effected of June 1997.
The Counterpart Funds Account was never audited as stipulated in the Joint Implementation
Memorandum.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
There were no unutilised funds out of the 1996 Health and Education Budgetary support program. The
counterpart funds not used directly for budget support was applied to funding the local component of
EDF financed project activities.
5.1.3. Utilisation of CPF Funds 1998 (GIP V)
Health and Education Budgetary Support
Funds used for Monitoring and Evaluation
Funds Used to pay for Audit of Counterpart Funds Account
Funding of the local component of EDF financed project activities
Unutilised funds at the end of the financial year are to be paid directly to the consolidated
Fund for domestic debt reduction
The counterpart Funds generated under the GIP V program totalled GHC 38,387,168,000. This was
generated in September of 1998. The first tranche transferred to the Government of Ghana was in the
amount of 22,200,000,000. This represents 57.8% of the total CPF funds generated. The balance of the
fund has not been disbursed as of this date. As per the terms of the JIM the second disbursement is
subject to the completion of the monitoring and evaluation studies.
These were completed in February 2000. The delay in completion arose because the contracts to
perform the studies were not awarded until August of 1999. The long delay in the award of the contract
was because of some disagreement between the EC Delegation and the Ministry of Finance in the
consideration of new consultants and the tendering process.
The present audit fulfils the requirements stipulated in the Joint Implementation Memorandum. At the
time of this audit the funds allocated under GIP V had not been fully allocated. Authorisation of the
second tranche for the Ministries of Health and Education was being withheld subject to the outcome of
this audit.
5.1.4. Utilisation of CPF Funds 1999 (SASP VI)
Health and Education Budgetary Support
Funds used for Monitoring and Evaluation
Funds Used to pay for Audit of Counterpart Funds Account
Funding of the local component of EDF financed project activities
Unutilised funds at the end of the financial year are to be paid directly to the consolidated
Fund for domestic debt reduction
In August of 1999 GHC 28,562,055,116.70 was generated from a partial disbursement of an EU grant
for Health and Education Budgetary Support. Two months later in October 0f 1999 funds were
disbursed out of the Counterpart Funds to the Consolidated Revenue account of the Government of
Ghana. The disbursement out of the CPF account represents the total tranche of EU grant deposited.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
The EU grant deposited however represents a partial disbursement of the total grant awarded. The
decision to make only a partial grant was based upon the potential avalanche of runaway expenses
being played out in the Roads and Transport sector. The Government of Ghana has been requested to
cancel all contracts in the road sector and to pay off the outstanding unpaid bills that are estimated at
$60 million accruing an interest of 35% per annum. At this point the Government has agreed to cancel
contracts when the projects are 50% complete
5.1.5. The Mechanics of Disbursement out of the Counterpart Funds
A disbursement is effected by an application from the National Authorising Secretariat based upon the
purpose falling under one of the utilisation of CPF categories. A Payment Order that is sequentially
numbered is prepared by the Delegation. It is then submitted to the National Authorising Officer for
signature. On return the EC Delegate then endorses it. Subsequently, it is submitted to the Bank of
Ghana to effect fund transfer. The Payment Order includes the date, the name and address of the
recipient of the fund, the bank details to effect transfer by the Bank of Ghana, the signature block for the
National Authorising Officer and a signature block for the endorsement by the EC delegate.
The National Authorising Officer appends a signature, date of signature as well as an official stamp. The
EC Delegate appends a signature, date of signature and an official stamp. Upon the submission of the
Payment Order the EC Delegate forwards an independent notification letter to the recipient of the
transfer that payment has been endorsed and ordered for payment.
Upon disbursement of the fund amount indicated in the Payment Order the Bank of Ghana provides a
payment notice to the National Authorising Office and the EC Delegate confirming the recipient, amount
and date of the transfer of funds out of the Counterpart Funds.
A condition for the second disbursement of CPF funds to the Government of Ghana through the
Consolidated Revenue account held by the Bank of Ghana, is the completion of an independent
Monitoring and Evaluation Study on the budgetary and expenditure procedures of the targeted non
wage recurrent budgetary line items under the Ministries of Health and Education. The payment of these
studies is from the Counterpart Funds.
In 1996 the monitoring and evaluation studies were performed by Egala, Atitso and Associates for the
Ministry of Health and PAB Development Consultants for the Ministry of Education. In 1998 PCL
Consultants performed the Monitoring and Evaluation Study for the Ministry of Health.
PriceWaterHouseCoopers performed the study for the Ministry of Education.
5.1.6. Exchange Rates
On two occasions the Bank of Ghana initially provided the Cedi fund equivalent at an exchange rate
different from the agreed rates spelled out in the Joint Implementation Agreements. On both occasions,
however, the Bank of Ghana made appropriate adjustments after receiving query letters from the
European Delegation. The Bank of Ghana attributed these to clerical error and explained that these
errors were not manifestations of an exception to standard operational procedure for exchange rate
application that caused specific operational difficulties for the Bank of Ghana.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
The Bank of Ghana requested that future notifications of EU grant transfers include the correct
exchange rate under the JIM agreements.
5.1.7. Change of Bank Account Number
In October 1997 the BOG bank account number for the Counterpart Fund was changed from 222130-
0572 to 01-256-400190-01. The transition did not affect balances or the frequency of the issuance of
bank statements. This change was necessitated by the introduction of new banking software in 1997.
The Bank of Ghana converted to Bank Master. This software has wide utilisation in Banks across
English speaking West Africa. No observable impact was made by the change in account number, note
is merely made here of the occurrence.
5.1.8. Security Issues
Security is an important concern in the administering of the counterpart funds. First of all the balances
maintained in these accounts are high sometimes having exceeded GHC 50 Billion. The majority of
funds transferred have been to the Consolidated Revenue Account. However, a number of transfers
have been made to commercial accounts.
The mechanism for the transfer of funds out of the Counterpart Funds account is by the issuance of a
sequentially numbered Payment Order which are signed and stamped by the National Authorizing
Officer and endorsed and stamped by the European Union Head of Delegation. The format of the
payment order is a laser printed memo form with a date, payment order number, recipient, description of
use of funds and two signature boxes. The sequential payment order numbers are typed in at the time
of preparation.
The BOG has stated that the security on the settlement of payment orders has two components based
upon:
1. The visual inspection of the signatures, and
2. A check of the payment order number.
While there were no irregular transfers out of the account in the period audited (August 1996 to
December 2000) there were two occasions when duplicate payment numbers were utilised. Neither
occurrence triggered a query by bank security. This in spite of its stated monitoring of payment order
number sequences as a security mechanism.
It is important to the Bank of Ghana that there be comfort and confidence in its security methods in
administering the account. To this end it stated that it was open to suggestion on the improvement of
security on the account. The Bank of Ghana indicated that it would not be averse to maintaining a list of
fund transfer codes that would be provided to the EC Delegation to be incorporated in the issuance of
payment orders for an additional level of security. This it agrees would add a level of security to the
administering of the account.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
The Bank of Ghana issues a payment notice to the EC Delegation with each funds transfer executed on
the Counterpart Funds account. Further, bank statements are submitted by the Bank of Ghana to the
EC Delegation on a monthly basis. Consequently the precise status of the account can be monitored
and account reconciliation achieved on a monthly basis.
5.1.9. Value of Funds
The Cedi lost value against the Euro approximately 50% through the year of 1999. This of course raises
concerns about the loss of value on the counterpart funds and the consequent dilution of the protection
intent of the support of the targeted budget lines. Discussion with the Bank of Ghana officials indicated
that no interest could be applied to a Government account.
No indexing to the Euro either or some other such scheme can be applied to these funds nor is there
any other mechanism for loss against value that can be applied. Consequently any concerns for loss
against value will have to be addressed by the tranching of grants in closer synchrony with the
anticipated disbursement of Counterpart Funds.
5.1.10. Bank Charges
The Bank of Ghana indicated that it does not apply bank charges or Cost of Turnover fees on any of the
Government of Ghana accounts and does not foresee any introduction of charges in the future on the
Counterpart Funds account.
5.2. FULFILMENT OF CONDITIONALITIES
The release of tranches of Structural Adjustment Support programmes are linked to specific
conditionalities detailed in the Financial Agreements concluded between the Government of Ghana and
the European Commission. A standard requirement for benefiting from EC structural adjustment support
is that the Government‟s programme of macro-economic reforms, agreed with the IMF and World Bank,
be on track. The objective of this study is not to provide an evaluation of the Government‟s performance
in this area, nor in any other that is not in direct relation to budgetary procedures and issues. The
analysis below will thus only cover the specific conditions relating to counterpart fund management,
budgetary ratios, the Ghana Audit Service, and arrears in the road sector.
The conditionalities for releases under GIPs IV and V are similar and cover Government commitments
in the following areas:
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Ghana - EU Structural Adjustment Support Audit
5.2.1. GIP IV
1. Overall conditions:
o The satisfactory implementation of the economic reform programme set out in the
Policy Framework Programme for 1995-97
o Consult with the Commission on the formulation, financing and monitoring of policies in
sectors to be supported by the allocation of counterpart funds;
o Associating the Commission generally in macro-economic policy reflections and
particularly in reviews of public expenditures;
o Informing the Commission on progress in the public expenditure review process;
2. no specific conditions for the release of the first tranche but for the signature of the JIM;
3. release of the second tranche on condition of a satisfactory review of budget
implementation in relation to priority health and education programmes, viewed in the
context of overall budget performance.
Additionally, it is stated that the sale of the foreign exchange component of the programme will be
monitored and evaluated by a consultancy firm on a continuous basis; and a final evaluation and
financial audit will be undertaken at the end of the programme by an independent consultant.
Fulfilment:
The Commission, together with other donors, has a good level of policy dialogue with the Government in
the field of Health. The Ministry of Health initiated in 1997 its first Medium Term Health Strategy for the
following five years, with in-built institutional mechanisms for donor consultation. High levels of mutual
trust and understanding seem to exist between the Ministry of Health and donor counterparts. The
situation, as observed by the mission, is less substantial in the education sector with regard to
mechanisms for collaboration. The presence of long-term technical assistance (although there have
been recent hiccups in this area) nevertheless allows for a good degree of dialogue.
Public expenditure reviews are regularly carried out by the Government of Ghana, which is certainly
more advanced in this area than other African countries. The Bretton Woods Institutions, observing this
process, seem to be satisfied with the quality and results achieved.
5.2.2. GIP V
In addition to the conditions set under GIP IV, the GIP V Financing Agreement contains references to:
1. the respect of indicative structural benchmarks for divestiture;
2. the presentation of in the September 1996 draft public expenditure estimates for the 1997
budget, of figures for non-wage recurrent expenditure on primary health and basic education
which are at least as high in real terms as those in the budget estimates for 1996. Evidence of
improvement in planning and implementing these programmes had also to be presented to the
EC;
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Ghana - EU Structural Adjustment Support Audit
3. GoG informing the EC of its position on the modalities of further cocoa sector deregulation by
end October 1996;
4. GoG offering for sale a majority of the shares in the National Investment Bank according to the
ongoing divestiture programme.
Fulfilment:
(condition 2) Rates of increase for non-wage recurrent expenditure in education were well above the
rate of inflation (59% in 1995, 45.6% in 1996, 27.9% in 1997); within this sector, the share of non-wage
recurrent expenditure rose by 21.6% in real terms in 1997. The condition was deemed to be met.
For health, there was a decrease of about 10% in real terms compensated, according to a Delegation
hypothesis, by a rise in internally generated funds used essentially to cover non-wage recurrent
expenditure, and by a rise in this expenditure at district and local level (where spending focuses mainly
on primary health). The condition was deemed to be met; the mission can accept that, but with the
proviso that carrying out an in-depth analysis of the status of compliance with this condition would have
required additional time.
Comments: The only comments would be on the source of the data used to assess compliance with
these figures, which are Government documents presenting sometimes inaccuracies, as underlined by
the EC Delegation itself in its reports to headquarters. As a proposal for consideration, IMF
computations could possibly be used to provide a second comparative basis on which to base the
analysis.
5.2.3. SASP VI
SASP VI conditionality has been developed to complement in an organic fashion the EC‟s direct EDF-
funded involvement in projects covering areas related to the concerns of the Structural Adjustment
programme.
Conditions for the release of the first tranche and appraisal of their fulfilment:
1. Non-wage recurrent outlays on basic education, and primary & preventive health
GoG must make observable relative (rise should match the rise of the overall budgets for Health
and Education within the global budget) and absolute improvements in the non-wage recurrent
expenditure ratio in the Health and Education sectors for the 1999 Budget, also required under
PUFMARP and the Policy Framework Programme. In the case of the first tranche, evidence of this
should be available through an analysis of the Health and Education Budgets
Fulfilment: Non-wage recurrent outlays in the basic education sector rose again in 1998 above the
inflation rate and above previous estimates, although by a very small amount. The overall situation
in health was also deemed to have improved (taking IGF and donor funds into account). Again, the
mission was not able to provide a counter analysis in this area, but can agree with the delegation‟s
findings.
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Ghana - EU Structural Adjustment Support Audit
2. Performance audits:
The EC has been supporting the chapter of the multi-donor Public Finance Management Reform
Programme (PUFMARP) dealing with increased effectiveness in the audit of public accounts, and
the introduction of performance auditing of spending ministries and agencies.
The EC focuses on the Ghana Audit Service and on it obtaining sufficiently firm legislative authority
to carry out performance audits on one hand, and of financial and administrative autonomy. This
focus is reflected in its support for the GAS by means of both an EDF-financed institutional capacity
building project (GH/784/98 and GH/7020/000) for a total value of 4,8 million Euros, and of
supportive conditionality in the Structural Adjustment Programme.
Fulfilment: The Draft Bill on reform in the Ghana Audit Service is still under discussion in
Parliament. It seems as though a final decision is expected very soon, and the GAS has accepted
all amendments requested. The body of the text has remained close to the original design. While
the condition for the disbursement of the first tranche was the first step of the drawing up and
submission of legislative proposals to empower the Ghana Audit Service, the disbursement of the
second tranche is contingent upon the final step of actual implementation of such empowering
legislature.
3. Road Sector Arrears:
The EC is, together with the World Bank, one of Ghana‟s main partners in the Road sector. Arrears
in contracts for road construction accumulated since 1995 reflect the widespread failure of the
Government of Ghana to ensure proper financial commitment of funds before entering into contracts
with suppliers of goods and services. Donors have requested of the Government the drafting of an
Action plan to remedy the causes of payment arrears, including the introduction of procedure for
analysing and authorising expenditure commitments in the light of budgeted expenditure ceilings,
and to avoid such occurrences in the future. While not explicitly withheld, the undisbursed Technical
Assistance component of the GIP (EUR 250 000) was a result of the fact that Danida, another donor
partner active in the road sector, could offer more timely support.
Fulfilment: although the Government has adopted a specific action plan to deal with the arrears in
the road sector (condition for the release of the first tranche), since then the situation has further
degenerated with arrears continuing to accumulate while the contracts have not been terminated.
4. Condition for the release of the second tranche:
Following protracted negotiations with the Government on the choice of firm to be contracted, the
financial monitoring study on expenditure was carried out with the first tranche of 1998. It is
intended, subject to the findings of this Audit Report, that the monitoring studies will be assigned in
March for first tranche of 1999. The intended March assignment is to allow for the completion of this
Audit Report to fully inform the Delegation to make a prudent decision on any further disbursement.
This has delayed the release of the second tranche, which remains undisbursed to this date.
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5.2.4. General comment:
Although financial monitoring and reporting on the use of counterpart funds has been carried out since
1997, and although the terms of reference of the contracts for the provision of such studies did not
specifically foresee a full audit of those funds, in the light of the results of this report, it is highly
recommended that the EC carry out more in-depth audits of targeted budget lines. It is indeed surprising
that the qualified firms of auditors who reported to the EC on the quantity, quality and impact of
spending under the targeted budget lines did not note the extent of the irregularities which have been
observed by this mission. There are only passing remarks on some cases of abnormalities; but no
indications to the Commission that the volume of these abnormalities should require a full audit. The
European Commission was therefore under the impression that matters did not need to be investigated
further. This casts some doubts as to the thoroughness of their work.
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Ghana - EU Structural Adjustment Support Audit
6. AUDIT OF THE TARGETED EXPENDITURES
6.1. SCOPE OF THE AUDIT
6.1.1. Supported expenditures
For each budgetary period examined (1996, 1998 and 1999), the targeted expenditures mainly
concerned the health and education sectors. In 1996 and 1998 some local EDF components and
payments as the GoG‟s reduction of debt were concerned as well.
a) - Health and education sectors
As described in point 3.2 of this report, the types of expenditures supported concerned: Travelling
expenditure; General expenditure ; Maintenance, repairs and removals; Other current expenditure.
The allocation by budgetary line was as follows:
EU allocation Expenditures (in 000 000 GHC)
Counterpart Funds 1996 1998 1999
Budget Rate Targeted Budget Rate Targeted Budget Rate Targeted
140 - Ministry of Education 1 495,7 48% 725,3
141 - GES-Basic Education 6 923,9 81% 5 608,3 10 881,3 87% 9 466,9 9 109,0 72% 6 558,5
142 - GES-School & Reg. 15 825,1 50% 7 912,5 8 094,5 86% 6 992,4 27 586,7 73% 20 260,2
Services
143 - GES-Special Services 254,0 100% 254,0 541,0 100% 540,7 633,6 100% 633,6
Total Education 24 498,7 59% 14 500,1 19 516,8 87% 17 000,0 37 329,3 74% 27 452,3
160 - Ministry of Health 12 466,4 54% 6 752,3
163 - Psychiatric Hospitals 4 326,2 66% 2 861,2 3 375,0 92% 3 089,7 4 803,6 94% 4 515,4
164 - Regional Health 5 249,0 100% 5 249,0 4 796,9 50% 2 398,4 2 959,4 94% 2 781,8
Services
165 - District Health Services 7 137,5 100% 7 137,5 16 874,4 86% 14 511,9 18 807,0 100% 18 807,1
Total Health 29 179,1 75% 22 000,0 25 046,3 80% 20 000,0 26 570,0 98% 26 104,3
Grand Total 53 677,8 68% 36 500,1 44 563,1 83% 37 000,0 63 899,3 84% 53 556,6
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Remark : if not specifically mentioned, all the data in the present report is based on the exchange rates
used at the time of the CFP constitution (for all conversion of GHC into Euros), as it is:
- In 1996 : 2 023,63 (June 96)
- In 1998 : 2 576,32 (August 98)
- In 1999 : 2 720,20 (August 99)
b) - GoG debt reduction and funding of local component of EDF projects
In 1996 and 1998 residual CPF were available from previous programmes, their use is also
programmed in the JIMs. Other uses included a contribution to the reduction of Government debt with
the Bank of Ghana and the funding of the local cost contribution to EDF-financed activities.
The allocation was as follows:
1996 1998 Total
Year / Ministry Targeted Targeted Targeted
GHC Euros GHC Euros GHC Euros
GoG debt reduction 0 0,00 9 500 3,69 9 500 3,69
EDF projects 6 401 3,16 6 187 2,40 12 588 4,89
Grand Total 6 401 3,16 15 687 6,09 22 088 8,57
6.1.2. Range of the audit
In the administrative organisation of Ghana, the expenditures vouchers are not centralised but are kept
by the Treasure agencies in the regions and districts that made the payments.
As for the Ministries of Education and Health, the assignment audited the Treasuries covering:
. The central level (expenditures of the Central Directions of the Ministries)
. The region of the Greater Accra and its Districts
. Controls were made as well at the Ho District Treasury of the Volta Region.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
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6.1.3. Volumes audited
a) – Health and education sectors
Year Ministry Disbursed Audited
GHC Euros GHC Euros % / Util
1996 Education 10 613 5,24 929 0,46 8,8%
GSC Tender 2 047 1,01 2 047 1,01 100%
Educ. WAEC 1 840 0,91 1 840 0,91 100%
Sub-Total 1996 14 500 7,17 4 816 2,38 33,2%
1998 Education 5 190 2,01 1 375 0,53 26,5%
Univ. Electric. 1 270 0,49 1 270 0,49 100%
Educ. WAEC 3 740 1,45 3 740 1,45 100%
Sub-Total 1998 10 200 3,96 6 385 2,48 62,6%
1999 Education 6 601 2,43 922 0,34 14,0%
Educ. WAEC 5 280 1,94 5 280 1,94 100%
4th Quarter Expenses 2 040 0,75 2 040 0,75 100%
Sub-Total 1999 13 921 5,12 8 242 3,03 59,2%
Total Education 38 621 16,24 19 443 7,89 50,3%
1996 Health 20 672 10 8 177 4,04 39,6%
Transfert (Komfo Hosp) 1 329 0,66 1 329 0,66 100%
Sub-Total 1996 22 001 10,87 9 506 4,70 43,2%
1998 Health 12 000 4,66 5 270 2,05 43,9%
1999 Health 12 504 4,60 2 480 0,91 19,8%
Transfert to Regions 2 137 0,79 2 137 0,79 100,0%
Sub-Total 1999 14 641 5,38 4 617 1,70 31,5%
Total Health 48 642 20,91 19 393 8,44 39,9%
1996 Health & Education 36 501 18,0 14 322 7,1 39,2%
1998 Health & Education 22 200 8,6 11 655 4,5 52,5%
1999 Health & Education 28 562 10,5 12 859 4,7 45,0%
Grand Total 87 263 37,2 38 836 16,3 44,5%
The breakdown of the audited volume in files number is summed up in the table bellow:
Year Health Education Total
1996 796 447 1 243
1998 556 249 805
1999 495 151 646
Total 1 847 847 2 694
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
Remark: the decrease of the number of files between 1996 and 1999 can be explained for a great part
by the fact that after 1996, the 140 – Ministry of Education line and 160 – Ministry of Health line were no
longer targeted.
The auditors consider that the sample audited is representative, not only because of the number of files
(nearly 2,700), but also because of the amount involved (44.5% of the amounts disbursed, with 50.3%
for Education and 39.9% for Health). Consequently, we think that our remarks and conclusions have a
general implication that can apply to the whole of the expenditures supported by the EC.
b) - GoG debt reduction and funding of local component of EDF projects
Billions GHC & Millions Euros
Year / Ministry Disbursed Audited
GHC Euros GHC Euros % / Disb
GoG debt reduction 9 500 3,69 9 500 3,69 100%
EDF projects 9 213 3,58 6 780 2,63 73,6%
Grand Total 18 713 7,26 16 280 6,32 87,0%
The conversion of the GHC to Euros was done on the basis of the 1998 rates
that is to say GHC 2 576.32 for 1 Euro
6.2. SUMMARY OF FINDINGS
During the audit on expenditures files, the assignment pointed out a number of anomalies and
deficiencies. Those mainly concern 1) the call for tender, 2) the quality of the expenditures and 3) the
specific expenditures made by the West African Examination Council (WAEC) to organise the Basic
Education Certificate Examination (BECE).
Additionally, the use of “parallel” procedures call for a specific comment.
6.2.1. Anomalies concerning the call for tender
As it has already been mentioned, Ghana does not currently have a specific, final and general text on
the procedure relating to calls for tender as part of the public expenditure procedure. Nevertheless, the
common use and practice established require a call for tender. The tender forms range from a simple
comparison of 3 pro forma invoices – which constitutes the simplest form, but is also considered as the
minimum required – to national and international calls for tender organised directly by the Ministries or
by specialised public organisations such as the Project Management Unit (PMU) or the Ghana Supply
Commission (GSC).
The mission pointed out a number of anomalies, not only in the simplified procedure (presentation of 3
pro forma) but also when resorting to a specialised organisation, such as the GSC, these anomalies are
summed up hereafter.
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a) General case
The most frequent case encountered for the recurrent expenditures is that of the 3 pro forma procedure.
We would like to point out the numerous deficiencies observed in this procedure. Those can be
classified in two categories:
- On the one hand, the issue of “poor quality” pro forma, whose probative value is weak or possibly
nil: identification often partial of the supplier by manual or stamped mentions, nearly systematic lack
of legal identification elements, unreadable item title, etc… This poor quality of the pro forma is a
deficiency that is all the more important as in nearly all the cases examined by the auditor, the
suppliers do not issue a final invoice: the pro forma of the chosen supplier is used as a final invoice.
For the year 1999, this translates in particular into a lack of VAT invoices, despite it being
compulsory for registered companies.
- On the other hand, the issue of forged pro forma: for the same order, the 3 pro forma are issued by
one and only supplier or by “linked” companies (identical PO boxes, same presentation and same
writing, etc..). It is worth noting that deletions and overprints aimed at dissimulating the similarities
between the documents have also been reported by the auditors.
In the first case, the auditors judged the eligibility of the documents submitted case by case; they did not
make the “poor quality” of the documents a reason for systematic rejection.
In the second case, as the suppliers' purpose to circumvent the tender procedure was obvious, the
expenditures concerned were judged ineligible.
b) The case of the GSC
The assignment led controls in a 1996 call for tender managed by the GSC on behalf of the Ministry of
Education, on a targeted budget line.
This call for tender was split in 10 lots relating to various equipment, from pedagogical equipment to
tools supply (machete, hoe, etc…), the total amount was of GHC 2,046,723,736 (1.011 Million Euro).
The examination of the tender file clearly shows a will to favour one company against the others, and
irregular practices of such importance that they have lead us to suggest rejecting the entire market.
6.2.2. Anomalies concerning the quality of the expenditures
Some expenditures files are based on documents that can not be considered as proper justifications.
The main types of anomalies are as follows:
- Expenditures justified not by invoices but by cost estimates;
- Lack of a pay list in the case of expenses transfer (medical, travelling etc…);
- Lack of documents: Local Purchase Order, Store Receipt Advice;
- „Manual‟ water, electricity and phone bills;
- Dates incompatibilities with regard to the procedures.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
6.2.3. The particular case of The West African Examination Council
The Government of Ghana participates in the financing of the global budget of the WAEC.
Additionally, the GoG entrusts the WAEC with the organisation of the Basic Education Certificate
Examination (BECE). This service is specifically invoiced and charged to one of the budgetary lines
supported by the EC (143-13 GES-Basic Education).
The audit assignment investigated on the justification of the organising cost of the BECE charged to the
State. The points stressed out mainly concern over-budgeting problems, which lead the auditors to
consider that the budget was on average overvalued and over-invoiced by 30% for each year.
As a result, we suggest a rejection of GHC 2,863 millions (1.13 million Euros). Detailed explanations are
given below (§ 6.3.5).
6.2.4. Procedures flaws - Ministry of Education 4th Quarter Parallel Procedure – the use of Stop
Payment Orders.
The rationalisation stated for deviating from the normal procurement and expenditure procedures in the
fourth quarter is the pressure to spend all of the funds allocated before year end. If not the funds are
returned to the Treasury and the ministry loses the funding. This parallel procurement procedure is
perceived and justified by the officials as an emergency procedure. The "emergency" dimension of
expenditures in the 4th Quarter, it is argued, being a result of the Ministry of Finance providing very little
funding in the first three quarters and then dumping the major part of the year‟s budget allocation in the
fourth quarter.
The 4th Quarter Parallel Procedure is a method that may lead to abuse, and a complete break down in
the system of control. It is a procedure that affects the budget lines that are supported by the EU
Counterpart Funds. The 4th Quarter Parallel procedure shows that there are a number of violations of
controls. Most perturbing are the falsification of documentation and the collusion of the most critical
elements of internal control – the internal auditors.
For this reason the entire 4th Quarter Allocation of Counterpart Funds to the Ministry of Education (GHC
2,040 millions or Euros 0.75 millions) ought to be rejected by the auditors, notwithstanding what the EC
position could be on this sensitive issue.
6.2.5. Summary table
The table hereafter sums up, by sectors, and for each of the years under review, the amounts
disbursed, the audited amounts and the amounts judged ineligible by the auditors. Additionally, it
proposes an extrapolation of the ineligibility rate to the total of the disbursed amounts.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
a) Concerning the amounts disbursed and audited, they were discussed in point 5.1.3. above.
b) Concerning the amounts judged ineligible by the auditors: the detailed elements that justify the
ineligibility are described hereafter in point 6.3. Yet the auditors point out the following:
The Education expenditures : they were divided in sub-paragraphs in order to isolate the
recurrent expenditures on the one hand and the particular expenditures on the other hand (the
organisation of the BECE by the WAEC for the 3 years), the particular cases (GSC tender in
1996 and University Electricity in 1998) and the case of the so-called Stop Order procedure (4th
quarter Expenses in 1999).
These divisions are justified first by the different nature of the expenditures but also by the
necessity to distinguish the ineligibility rates (as well as their use for the extrapolations – cf.
hereafter, point c -). Indeed, the average annual ineligibility rates for this sector seem to be
stable with 63.1% in 1996, 52.2% in 1998 and 50.3% in 1999 (54.1% over those three years). In
fact these averages take into account rates that are very different by nature. In that way the GSC
Tender and expenditures made by the Stop-Order procedure are ineligible up to 100%; the
expenditures as for the WAEC (organisation of the BECE) are ineligible up to 30% as an average
over the 3 years. On the contrary the recurrent expenditures show ineligibility rates that are not
only important, but also displays a sensible degradation: 42.3% in 1996, 45.7% in 1996 and
72.3% in 1999.
The Health expenditures have been divided in recurrent expenditures and Transfer. This division
does not owe to the different nature of the expenditures but to the fact that they are linked to
funds transfers from the central level to the regions. They were isolated because they set a
specific risk of being taken twice into account. Indeed, these funds transferred towards the
regions are going to be used for health sector expenditures (medicine, small medical material,
etc…). The auditors were only given a verbal assurance that if they had been taken twice into
account, this would be quickly detected and corrected rapidly. During their investigations, the
auditors did not get the possibility to gather the necessary elements to confirm or infirm this
position. These expenditures related to transfers were therefore considered as eligible.
Hence, the average annual rate of the Health sector expenditures should indeed be taken into
account. It shows a clear improvement between 1996 and 1999 (recurrent expenditures): the
ineligibility dropped from 32.5% in 1996 to 15.4% in 1999. This improvement probably comes
from the reforms led by the Administration in this sector, with the help of the Donors. And as a
special example, the implementation of the Medium Term Health Sector Strategy 1997 – 2001
and the introduction (in September 1999, but “actually” applied since 1997) of the Procurement
Procedure Manual published, certainly contributed to this improvement.
c) Concerning the extrapolations
The amounts extrapolated were obtained by applying the ineligibility rates defined by the audit to the
global amount used. As mentioned above, the division of the sectors into sub-paragraphs makes it
possible to avoid applying a global rate for the calculation of the extrapolation with no distinction.
For Education for instance, it makes it possible for the expenditures judged ineligible up to 100% not to
interfere in the extrapolation. In the same way, concerning the expenditures related to the WAEC,
isolating this expenditure allows to limit the ineligibility up to the amount determined by the audit.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
Year Ministry Disbursed Audited Ineligible Extrapolation
GHC Euros GHC Euros % / Util GHC Euros % / Audit GHC Euros
1996 Education 10 613 5,24 929 0,46 8,8% 393 0,19 42,3% 393 0,19
GSC Tender 2 047 1,01 2 047 1,01 100% 2 047 1,01 100% 2 047 1,01
Educ. WAEC 1 840 0,91 1 840 0,91 100% 513 0,25 27,9% 513 0,25
Sub-Total 1996 14 500 7,17 4 816 2,38 33,2% 2 953 1,46 61,3% 2 953 1,46
1998 Education 5 190 2,01 1 375 0,53 26,5% 628 0,24 45,7% 2 370 0,92
Univ. Electric. 1 270 0,49 1 270 0,49 100% 1 270 0,49 100% 1 270 0,49
Educ. WAEC 3 740 1,45 3 740 1,45 100% 1 192 0,46 31,9% 1 192 0,46
Sub-Total 1998 10 200 3,96 6 385 2,48 62,6% 3 090 1,19 48,4% 4 832 1,87
1999 Education 6 601 2,43 922 0,34 14,0% 667 0,25 72,3% 667 0,25
Educ. WAEC 5 280 1,94 5 280 1,94 100% 1 158 0,42 21,9% 1 158 0,42
4th Quarter Expenses 2 040 0,75 2 040 0,75 100% 2 040 0,75 100% 2 040 0,75
Sub-Total 1999 13 921 5,12 8 242 3,03 59,2% 3 865 1,42 46,9% 3 865 1,42
Total Education 38 621 16,24 19 443 7,89 50,3% 9 908 4,07 51,0% 11 650 4,75
1996 Health 20 672 10,22 8 177 4,04 39,6% 2 661 1,31 32,5% 6 727 3,32
Transferred (Komfo Hosp) 1 329 0,66 1 329 0,66 100% 0 0,00 0,0% 0 0,00
Sub-Total 1996 22 001 10,87 9 506 4,70 43,2% 2 661 1,31 28,0% 6 727 3,32
1998 Health 12 000 4,66 5 270 2,05 43,9% 1 637 0,64 31,1% 3 728 1,45
1999 Health 12 504 4,60 2 480 0,91 19,8% 381 0,14 15,4% 1 921 0,71
Transfer to Regions 2 137 0,79 2 137 0,79 100,0% 0 0,00 0,0% 0 0,00
Sub-Total 1999 14 641 5,38 4 617 1,70 31,5% 381 0,14 8,3% 1 921 0,71
Total Health 48 642 20,91 19 393 8,44 39,9% 4 679 2,09 24,1% 12 376 5,48
1996 Health & Education 36 501 18,0 14 322 7,1 39,2% 5 614 2,8 39,2% 9 680 4,78
1998 Health & Education 22 200 8,6 11 655 4,5 52,5% 4 727 1,8 40,6% 8 560 3,32
1999 Health & Education 28 562 10,5 12 859 4,7 45,0% 4 246 1,6 33,0% 5 786 2,13
Grand Total 87 263 37,2 38 836 16,3 44,5% 14 587 6,2 37,6% 24 026 10,23
Total WAEC 10 860 4,3 10 860 4,3 100% 2 863 1,13 26,4% 2 863 1,13
Grand Total less WAEC 76 403 32,9 27 976 12,0 36,6% 11 724 5,07 41,9% 21 163 9,10
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
6.3. DETAILED PRESENTATION OF THE AUDIT FINDINGS
6.3.1. GoG debt reduction and funding of local component of EDF projects
GoG debt reduction. A payment of GHC 9 500 000 000 (Meuros 3,69) was made from the CPF
Account under the Structural Adjustment General Import Programme (GIP V) 1998 to the Bank
of Ghana 91-Day Treasury Bill Monitoring Account No. 011360014000. The transfer was made
by Payment Order No 024/99/CPF dated July 7, 1999. The transfer was reflected in the bank
statement on 19th July 1999. Payment to this account effectively reduces the Bank of Ghana
holdings of discounted Treasury Bills.
Local component of EDF projects. The audit tasks consisted in examining the content of the
existing audit reports concerning the projects and to make sure they were relevant.
The audit works on those two types of expenditures do not call for any particular remarks on our part.
6.3.2. Recurrent expenditures
6.3.2.1 Nature of the audits performed
The public expenditure implementation procedure was largely described in Chapter IV of the report. On
the basis of this analysis, the auditors defined the expenditure analysis and validation criteria comprising
the following main check points:
- Checking the expenditures‟ eligibility regarding contractual provisions (Financing agreements, Joint
Implementation Memorandum),
- Checking the implementation of the essential procedure steps,
- Presence and conformity of the main expenditures vouchers and,
- The probative character of the expenditures vouchers.
These inspections were mainly aimed at verifying that the procedure was abided by and therefore that
the essential vouchers were present in each file. Especially:
a) Presence of a document (Memo), certifying that the expenditure was authorised; the auditors took
the following aspects into account:
- The memo is not compulsory in the cases where the expenditure is included in the annual
purchasing plan,
- The hierarchical position of the signatory is linked to the importance of the expenditure (concerning
this, cf. remark 1 hereafter).
Consequently, in terms of audit the lack of this document is seen as an anomaly (except for the above
mentioned exception) but it can‟t in itself lead to the ineligibility of the expenditure.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
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b) Presence of three pro forma invoices from three different suppliers. These three pro forma prove
that a call for tender was launched. The files with no pro forma or of such inadequate quality as to
fail to prove the existence of an actual call for tender were considered ineligible.
However, with regard to this principle, the auditors controlled and assessed each expenditure file case
by case. This way, for some particular expenditures (urgent car repairs, “immediate” purchase of
stationary in very small quantities and for very small amounts, technical specificity of the goods to
purchase and/or maintain, etc…), the absence of tender observed was not considered to be a reason
for ineligibility.
c) Presence of the Local Purchase Order (LPO). It is on the ground of the LPO that the supplier is
invited to provide his service. The LPO has to be dated and signed. It is a compulsory document, if
it is not present, it almost always leads to rejecting the file.
d) Presence of the Waybill. This document corresponds to the “Delivery note”, which lists the goods
delivered. The Waybill is a proof of delivery by the supplier. The auditors reported the absence of
this document in most cases. Yet it was not made a reason for rejection insofar as the SRA (cf.
hereafter) also is a proof of delivery.
e) Presence of the final invoice. Here again, the auditors reported the almost systematic absence of
this document. Indeed, it is a common factor in the current Ghana procedure that the supplier‟s pro
forma be used as the final invoice.
Taking this practice into account, the auditor did not consider the absence of the final invoice to be a
sufficient reason for the ineligibility. Yet the auditors would like to point out that the absence of a
final invoice is a major anomaly not only for the company but also for the Administration (cf. General
Remark n°2 hereafter).
f) Presence of the Supply Receipt Advice (SRA). It proves that the service was indeed provided by the
supplier. This document gets a probative value thanks to the variety of the visas (presence of
several services). The concerned Administration agents append these visas in order to certify that
the goods were actually delivered or the services actually provided. Therefore the SRA is not only
compulsory, but it also has a special importance due to the nature of the event it is supposed to
certify (materiality). Its absence entails the ineligibility of the file.
g) Presence of the Payment Voucher (PV). This document reports the payment made to the supplier.
h) Inspection of the amounts. Besides checking the consistency between the amounts displayed on
the different vouchers issued for a same expenditure, the auditors also checked some of the prices
when this was possible. Yet, with no official market price list, this verification could only be based on
the information collected during the audit and/or during the consultations held with the officials
encountered by the auditors.
i) Dates control. The procedure requires the vouchers listed above to be displayed in the following
order: Memo, LPO, pro forma, Waybill, Invoice, SRA, PV. Should this order not be respected, there
is grounds for the expenditure to be rejected when it shows inconsistency and therefore non respect
of the procedure. For instance if an SRA is filed previously to the LPO.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
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General Remark n°1: Most of the documents inspected bore stamps and signatures : six for the PV, six
for the LPO and three for the SRA. Given first, the large number of the signatories and second, the large
number of files, it was not possible to check one by one the validity of the signatures. Therefore, only
the presence of visas and stamps was checked.
General Remark n°2: the consequences of the absence or « poor quality » of the document in the
expenditure files often entail more than their mere disqualification. Particularly, concerning the
observations made above in paragraphs b) and d), related to the problems deriving from the pro forma
(quality, probative value) and their use in place of the final invoices (which are most often missing), the
auditors would like to point out the following points:
The accountancy of the companies is kept on the grounds of invoice issuance, and not on that of
the pro forma. Pro forma have no value in terms of book-keeping and therefore are not
accounted for. This means that by admitting pro forma as vouchers for the expenditure files, the
Administration allows some of its suppliers‟ operations not to be taken into consideration and
therefore, creates an opportunity for tax evasion.
Additionally, the mission reported that the special VAT invoices, as set forth in the legal
framework, were nearly always missing. Yet these bills are compulsory for the companies
registered and listed during the setting up of the VAT procedure. This absence of VAT invoices in
the 1999 files means particularly:
- That the Administration still often works with companies that are not listed for VAT, and thus
goes on dealing with the informal sector frequently, with the risks involved in such
transactions (cf. above pro forma quality), services reliability, goods tracking, etc…
- That when it works with companies listed in the VAT system, it does not take any
guarantees as to whether those have actually paid VAT.
Those two points tend to show, first, that the Administration does not commit itself enough to
abiding by the procedures it has set up itself, thus incurring the risk of lessening their value, and
second that it tends to perpetuate the informal aspects of the economy.
6.3.2.2 Typology of the anomalies encountered
On the grounds of the above listed elements, the auditors worked out a typology of the irregularities
encountered and whose presence in a file lead to the ineligibility of the expenditure. These irregularities
can be grouped in 5 large categories: expense eligibility, expense support, procedure documentation,
inconsistency of date and other failure.
The table hereafter sums up the features of each of those categories.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
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Ineligibility case Comments
R1 Expense Eligibility expenses out of UE target
R2 Expense Support
R21 Estimates lack of invoice ; expense justified by estimates
R22 Lack of benef. Sign lack of beneficiaries acknowledgement of receipt of funds
R3 Documentation Procedures
R31 PF failure no competition ; PF invoices issued by same provider
R32 Lack of PF no competition ; lack PF invoices
R33 Lack of LPO LPO : basic in procedure documentation
R34 Manual invoice and lack of receipt commodities manual invoices ; lack of receipt
R35 Lack of SRA SRA : basic in procedure documentation
R36 Other other failure in procedure documentation
R4 Inconsistency of date
R41 PF date > LPO or SRA date non respect of date sequence
R42 LPO date > SRA date non respect of date sequence
R43 LPO date > Waybill date non respect of date sequence
R44 Other other cases in inconsistency in date
R5 Other Failure other case of rejection
Six tables are attached to the report. Appendix 15 to 17 correspond to the Education sector, appendix
18 to 20 correspond to the Health sector. The six tables reflect the audit work performed on the files, but
only those with irregularities are shown in these tables. The five ineligibility cases explained above are
represented in the table, with 5 columns. When concerned, the appropriated column is crossed.
These tables are based on the auditing of the 2 694 files (cf. table summing up the breakdown of the
audited volume in files number page 75), from which those presenting irregularities have been
extracted. An exhaustive display of the 2 694 audited files would have taken too much space.
6.3.2.3 Expense eligibility (R1)
A number of expenditures are not considered as being part of the target defined by the JIM:
- either because the nature of the expenditure (alcohol, weapons, etc…) makes it ineligible
with regard to the negative lists. The auditors reported no instance of this type of ineligibility;
- or because the type of expenditure is not targeted.
This second type of ineligibility cases observed generally arises from the expenditure “shifting” from one
budgetary line to another. This means that the Administration meets the expenditure with a budgetary
line that is not the one that ought to be used.
Several examples of this type were reported, particularly, that of the payment in 1998, of an electricity
bill amounting to GHC 1,270 millions for the University. This expenditure was charged to the
141,133,001 GES Basic Education budgetary line.
In the field of health, see also payments of drugs to Central Medical Stores by « paying hospitals » on
behalf of « non-paying hospitals » : MOH PVs # 0079213 (06/96 : 43,5 M Cedis), # 081572 (12/96 : 61,9
M Cedis), # 087272 (12/98 : 90,5 M Cedis).
(cf. appendix 1)
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
Summary table: number of files and amounts (in GHC thousands).
R1 Education Health Grand Total
1996 1998 1999 Total 1996 1998 1999 Total 1996 1998 1999 Total
Dossier 9 25 34 54 24 21 99 63 24 46 133
Amount 102 077 300 333 402 410 887 547 188 199 87 214 1 162 960 989 624 188 199 387 547 1 565 370
6.3.2.4 Expense support (R2)
Some expenditures files are based on documents that cannot in themselves be considered as reliable
vouchers. Two specific categories of this type of anomalies were reported:
a) – Estimates (R21). For the organisation of a number of events (conferences, etc…), the
estimated costs (rooms renting, lunches, refreshments, accomodation, etc…) are paid to the
person in charge of the organisation of the event. This payment is made without the issue of
real vouchers. In particular, the auditors note that the forecasted expenditures schedules are
briefly described and not based on pro forma invoices issued by services providers (hotel
keepers, restaurant owners, conveyors etc…). What‟s more, eventually, the final invoices of
these suppliers are not enclosed in the expenditures file either.
Payments made in those conditions are absolutely not secured insofar as the Administration does not
provide for any means of control:
- either of the validity of the costs involved,
- or of the actual use of the funds for the planned purpose.
Examples of this type of anomalies are given in appendix 2; the case of PV n°036672 has to be pointed
out: the estimate that served as a basis for payment is manually corrected, which creates an additional
doubt on the evaluation terms validity of the costs displayed.
Summary table: number of files and amounts (in GHC thousands).
R21 Education Health Grand Total
1996 1998 1999 Total 1996 1998 1999 Total 1996 1998 1999 Total
Dossier 10 3 4 17 1 1 10 4 4 18
Amount 24 231 39 935 37 341 101 507 1 050 1 050 24 231 40 985 37 341 102 557
b-) – Lack of pay list (R22). This case is very frequent for the medical care repayments expenditures
and travelling expenses: the payment is made to an executive (Department Manager, School Director,
Cashier, etc…) who then has to pay back the sums to the beneficiaries. In this procedure the
expenditure file must contain a nominative list signed by the beneficiaries. The consultant indeed
reported the existence of files regularly made up this way.
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Still, he also reported a large number of cases where the expenditure file does not mention any
nominative list, signed by the final beneficiaries. For these files, there is therefore no proof that the final
beneficiaries have really received the entire amount they were entitled to. The auditors judged those
expenditure files ineligible.
Examples of this type of anomalies are given in appendix 3.
Summary table: number of files and amounts (GHC thousands)
R22 Education Health Grand Total
1996 1998 1999 Total 1996 1998 1999 Total 1996 1998 1999 Total
Dossier 35 77 63 175 3 5 8 38 82 63 183
Amount 14 350 299 591 368 884 682 825 6 154 12 210 18 364 20 504 311 801 368 884 701 189
6.3.2.5 Documentation Procedure (R3)
This point concerns the expenditure files in which the vouchers are either not presented, or contain
serious enough anomalies to justify the ineligibility.
a) – Quality of the pro forma (R31). As already mentioned, the tender procedure most frequently
applied for the recurrent expenditures is that of the 3 pro forma. The auditors want to stress out the
numerous flaws observed in this procedure. Those can be divided into two large categories:
On the one hand, the issuance of « poor quality » pro forma, whose probative value is small or
even nil, especially concerning the supplier‟s identification:
- documents using paginated sheets taken from “ordinary” notepads, onto which the
company name is simply hand written or applied with an ink stamp,
- absence of postal address.
The auditors note that very often, those suppliers do not mention the usual commercial
identification on the documents (acronym and/or logo, telephone and fax number, company
name, etc…) hence they don‟t seem to be willing to stand out against competition. This is quite
surprising considering that it is a call for tender situation.
The poor quality of the pro forma invoices is a flaw that is all the more serious as in nearly every
case checked by the auditor, the suppliers do not issue a final invoice. Indeed, the chosen
supplier‟s pro forma is used as the final invoice. For the year 1999, this translates in particular in
the lack of VAT invoices, yet this is compulsory for the registered companies.
Nevertheless, as already mentioned above, (cf. 6.3.2.1.), the auditors examined the
admissibility of the documents issued on a case by case basis; they did not make the
documents “poor quality” a reason for systematic rejection.
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On the other hand, the issuing of forged pro forma: for the same order, the three pro forma are
issued by the one and only supplier or by « linked » companies (identical PO boxes, same
presentation and same writing, etc…). It is worth noting that deletions and overprints aimed at
dissimulating the similarities between the documents have also been reported by the auditors.
In this case, the suppliers‟ intention to circumvent the tender procedure is obvious and the
expenditures concerned were judged ineligible.
Examples of this type of anomalies are given in appendix 4.
Summary table: number of files and amounts (GHC thousands).
R31 Education Health Grand Total
1996 1998 1999 Total 1996 1998 1999 Total 1996 1998 1999 Total
Dossier 50 12 8 70 15 53 1 69 65 65 9 139
Amount 67 999 155 753 7 102 230 854 172 023 292 318 13 312 477 653 240 022 448 071 20 414 708 507
b) – Complete lack of pro forma (R32). This is another case of non tender. The files containing this
anomaly were judged ineligible.
Summary table: number of files and amounts (GHC thousands).
R32 Education Health Grand Total
1996 1998 1999 Total 1996 1998 1999 Total 1996 1998 1999 Total
Dossier 38 1 11 50 1 22 23 39 23 11 73
Amount 65 663 32 000 32 587 130 250 7 987 202 602 210 589 73 650 234 602 32 587 340 839
c) – Absence of Local Purchase Order (R33). This document is essential. It proves that the
Administration has a commitment to the supplier. Its absence is considered to be a reason for rejection.
Summary table: number of files and amounts (GHC thousands).
R33 Education Health Grand Total
1996 1998 1999 Total 1996 1998 1999 Total 1996 1998 1999 Total
Dossier 9 28 37 7 1 8 16 1 28 45
Amount 57 018 313 197 370 215 501 483 1 050 502 533 558 501 1 050 313 197 872 748
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d) – Commodities invoices (water, electricity, telephone) not probative (R34). The auditor reported
that the service providers (Ghana Water & Sewerage, Electricity Co of Ghana, P&T Telecom) issue
computer made invoices mentioning clearly the consumer‟s identification (name, address, meter or call
number), and the consumption levels (index, unit breakdown).
Nevertheless, some of the expenditure files are supported only by hand written invoices and onto which
only the amount payable and the name of the client are mentioned. Neither the consumption levels, nor
the invoicing periods are mentioned. These documents do not bare any stamps, not even identification
or signature by a manager on those documents. Moreover, in those reported cases, there is never any
receipt signed by the beneficiary in the file.
Taking into consideration such invoices entails the risk of paying services that possibly were not under
the Administration‟s responsibility or that might have never even existed.
Examples of this type of anomalies are given in appendix 5.
Summary table: number of files and amounts (GHC thousands).
R34 Education Health Grand Total
1996 1998 1999 Total 1996 1998 1999 Total 1996 1998 1999 Total
Dossier 21 3 24 1 16 17 22 16 3 41
Amount 38 800 28 222 67 022 10 000 90 671 100 671 48 800 90 671 28 222 167 693
e) – Lack of Store - or Service - Receipt Advice (R35). This document allows the Administration to
ascertain the actual execution of the service or of the actual delivery of the goods. The absence of this
document not only makes it impossible to make sure the delivery was made or the service was
provided, but it also makes it impossible to determine whether the expenditure has any relation with the
order contained in the file.
Summary table: number of files and amounts (GHC thousands).
R35 Education Health Grand Total
1996 1998 1999 Total 1996 1998 1999 Total 1996 1998 1999 Total
Dossier 15 7 28 50 7 2 2 11 22 9 30 61
Amount 54 964 260 478 330 519 645 961 501 483 4 320 5 393 511 196 556 447 264 798 335 912 1 157 157
f) –Other cases of procedures flaws (R36).
Among the procedures flaws cases not mentioned above, we have for instance found:
Files in which there is only the PV and no other voucher. In particular, this is the case of PVs
n°072336, 072337, 072334, 072338;
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Files for which the same signatory is found on the LPO and on the SRA; this is the case for PV
n°027006 justified by two hand written Ghana Water & Sewerage Corp bills, which do not mention
any supplier‟s identification; the same person signs the LPO as Prepared and Authorised and the
SRA as Audit/Stores Verifier (cf. appendix 6).
Summary table: number of files and amounts (GHC thousands).
R36 Education Health Grand Total
1996 1998 1999 Total 1996 1998 1999 Total 1996 1998 1999 Total
Dossier 4 2 3 9 4 1 3 8 8 3 6 17
Amount 1 916 9 000 24 051 34 967 483 2 500 33 515 36 498 2 399 11 500 57 566 71 465
6.3.2.6 Inconsistencies relating to dates (R4)
As required by the public expenditure implementation procedure currently in force in Ghana, the
auditors remind the normal chronological sequence which should theoretically be followed by the
expenditure vouchers: Memo, LPO, pro forma invoice, Waybill, Invoice, SRA, PV.
The following cases, which translate in a non exhaustive way the dates irregularities encountered and
illustrate the nature of the problems brought about by breaking loose from the logical sequence contains
(Cf. examples in appendix 7):
a) – Pro forma date subsequent to the SRA (R41). This situation shows a minima an administrative
regularisation and/or the lack of tender but also affects the probative value of the SRA.
Summary table: number of files and amounts (GHC thousands):
R41 Education Health Grand Total
1996 1998 1999 Total 1996 1998 1999 Total 1996 1998 1999 Total
Dossier 1 1 2 3 5 0 2 4 6
Amount 876 876 4 796 13 340 18 136 0 4 796 14 216 19 012
b) – LPO date subsequent to the SRA (R42). As in the above case, this situation shows an
administrative regularisation but also affects the probative value of the SRA.
Summary table: number of files and amounts (GHC thousands).
R42 Education Health Grand Total
1996 1998 1999 Total 1996 1998 1999 Total 1996 1998 1999 Total
Dossier 3 4 7 20 8 8 36 23 8 12 43
Amount 32 858 60 972 93 830 495 414 35 696 43 210 574 320 528 272 35 696 104 182 668 150
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c) – LPO date subsequent to the Waybill (R43). The cases in which the Waybill is present are rare.
Still, when there is a Waybill, the existence of a subsequent LPO proves the administrative
regularisation of the file.
Summary table: number of files and amounts (GHC thousands).
R43 Education Health Grand Total
1996 1998 1999 Total 1996 1998 1999 Total 1996 1998 1999 Total
Dossier 24 11 35 232 120 32 384 256 120 43 419
Amount 58 811 98 780 157 591 1 497 472 975 621 173 110 2 646 203 1 556 283 975 621 271 890 2 803 794
d) – Other cases of dates inconsistency (R44). One of the most frequent cases is that of the issuing
of the main expenditure supporting documents on the same day (LPO, pro forma, SRA). These cases
were estimated by the auditors in terms of feasibility of the operation. In this way such a date agreement
can be tolerated, for instance for the acquisition of small quantities of office stationary; On the other
hand, it cannot be tolerated for the order of a high number of pre-printed forms for instance.
Summary table: number of files and amounts (GHC thousands).
R44 Education Health Grand Total
1996 1998 1999 Total 1996 1998 1999 Total 1996 1998 1999 Total
Dossier 6 6 2 2 2 0 6 8
Amount 52 183 52 183 289 972 289 972 289 972 0 52 183 342 155
6.3.2.7 Other failure (R5)
The auditors put into this category the expenditures anomalies whose characteristics were not exactly
those entering in the above mentioned categories.
For instance (cf. appendix 8):
PV n°027690 for which the vouchers are insufficient, or for which the beneficiary is not clearly
identified and in which the proximity of dates (memo = 25.06.96; LPO = 25.09.96; SRA = 26.09.96;
PV = 30.09.96), given the nature of the service, is the hallmark of administrative regularisation.
PV n°87971, for which the documents mention different amounts and quantities (manual
corrections).
Among the other cases, PVs n°29969, 29946, 29955 and 29978 correspond to commodities
invoices to Mr. SUWAK E K, charged to the State School for Deaf budgetary line.
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Summary table: number of files and amounts (GHC thousands).
R5 Education Health Grand Total
1996 1998 1999 Total 1996 1998 1999 Total 1996 1998 1999 Total
Dossier 4 5 1 10 3 3 4 8 1 13
Amount 8 097 385 152 8 634 3 200 3 200 8 097 3 585 152 11 834
6.3.2.8 Ho District
Two mission auditors went to the District of HO in the Volta Region, with two internal auditors of both
Health & Education Ministries.
After a meeting, in the Ministries‟ Regional offices, with the Chief Accountant for Education and the
Medical Officer for Health, during which detailed sequences with adequate supporting documents for
expenditure payment procedure were described to the auditors, the auditors went to the District
Treasury Office to review a sample of Payment Vouchers‟ files.
Two special features must be highlighted:
- in Regions others than Great Accra, expenditure payments are not made in a central (Regional)
Treasury Office but in each District Treasury Office;
- in a District Treasury Office, expenditure payments are made for all the Ministries; which means
that, for a given period, PVs for all Ministries are combined.
For both Ministries of Health and Education, the sample reviewed was made of PVs dated 12/96, 12/98,
10, 11 and 12/99. The auditors review around 50 PVs for a total of about GHC 300 millions.
The major findings are of same type as the ones found in Great Accra Region (see hereafter).
However, 2 additional supporting documents were systematically attached to each PV :
1) a Cheque order form, displaying all data of the cheque payment issued to the beneficiary,
2) a Payment receipt, duly dated and signed by the beneficiary.
6.3.3. The case of the GSC
The GSC began operations in 1969. The rationale for existence was to ensure professionalism in
Government procurement. It was believed that the consolidation of procurement would introduce value
for money.
In a nutshell its mandate was to procure and deliver to the warehouses of all Government Ministries,
Departments, Agencies and Public Corporations. The Financial Administration Regulations 1979 specify
that all purchases above ¢500.00 are to be made by the Ghana Supply Commission except in specific
circumstances (Art 676 of the FAR) where the Ghana Supply Commission is unable to make the
purchase in which case the purchase can be made by the line ministry. The function of the Ghana
Supply Commission involved:
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The selection of vendor
The arrangement for payment
The monitoring of the inspection and shipping
The clearing and forwarding
The line ministry is informed of the selection of vendor. In the case of tenders, the line ministry provides
an observer for the opening of bids. The Ghana Supply commission is responsible for the evaluation,
ranking and selection of bids. If the line ministry is unhappy with the selection it must argue its case in
writing to the Ministry of Finance. In practice no ministry has successfully protested the selection of a
vendor by the GSC.
The mission led controls in a 1996 call for tender managed by the GSC on behalf of the Ministry of
Education, on a targeted budget line.
This call for tender was split in 10 lots relating to various equipment, from pedagogical equipment to
tools supply (machete, hoe, etc…), the total amount being GHC 2,046,723,736 (1.011 Meuros).
The table hereafter sums up the contents of the 10 lots :
Lots Amount
Lot 1 Special learning aids 68 148 610
Lot 2 Laboratory chemical 26 750 773
Lot 3 Science equipment 25 006 607
Lot 4 Stationery items 185 083 066
Lot 5 Life skills/Vocational skill materials 39 885 173
Lot 6 Office equipment 128 438 587
Lot 7 Cutlass 363 091 140
Lot 8 Digging hoe 123 651 695
Lot 9 Grey baft 1 027 906 000
Lot 10 Miscellaneous 58 762 085
Total 2 046 723 736
(cf. appendix 9)
This operation calls for the following remarks:
Intervention, on lots 1, 2, and 6 of the ANDOMART Company, further to the initial assignee
deficiency reported by the GSC. Lot 6 particularly (GHC 128.4 millions) is most explicit: a local
tender, organised further to the failure of the initial assignee, brings into competition 4 companies:
ANDOMART, ILLINDOH Ent, PHILLIMART and CALTEC TRADING. Besides the fact that this
second tender does not call for companies that initially competed (for instance the 2nd, 3 rd and 4rth
positioned bidders of the tender), the pro forma invoices presented by each of these companies
clearly demonstrate that they are but one and only company.
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The photocopies of these documents are enclosed in appendix 10. Their control shows that the 4
pro forma and the enclosed letters were not sent by 4 different companies, but are all of the same
origin. The similarities they display in their general presentation cannot be a mere chance: identical
typography, identical fonts, same format ; it is also worth noting that only the Andomart pro forma is
on paper with a pre-printed heading; whilst the 3 other pro forma were prepared by using the same
word processor software. Eventually, the fact that only the Andomart pro forma mentions a mail
reference (our Ref. EKA/GSC/98) tends to show that for the other suppliers no particular answer
was expected.
In each of the cases examined, the delivery made by ANDOMART concerns the initial cancelled
deal, but for a number of items which differs greatly from the quantities provided for in the call for
tender (4 out of 18 for lot 2, 4 out of 16 for lot 6) and with higher or even outrageous prices (from 1.5
to 25.4 times higher than the initial prices).
Moreover, lot 9, with an amount of GHC 1,027,906,000, was won by the KARLPATRICK company,
which is obviously linked to ANDOMART. Indeed in the documents for the preparation of the call for
tender, the "Bid and Price Schedule" presented by KARLPATRICK is signed by Mr. Charles ADJEI
as manager et by Mr. EK ANDOH as witness; the "Bid and Price Schedule" issued by ANDOMART
is signed by Mr. EK ANDOH as manager and by Mr. Charles ADJEI as witness. It is also worth
noting that KARLPATRICK‟s address is either PO Box 17564, either PO Box 12247, depending on
the document where it is written; the PO Box 17564 also is that of the NEW LIFELINE
ENTERPRISE which participated, as well as ANDOMART, in one of the calls for tender launched in
1997 by the GSC (see appendix 11).
Eventually, the ANDOMART “Group”, either directly or through linked companies, won more than
half of the global amount of the markets (GHC 1,251,243,970 out of GHC 2,046,733,766, that is to
say 61 %).
Additionally, the mission reported the division of two other lots (n°7 and n°8: machetes purchase)
between several companies when no objective reasons justify this decision. Moreover the
assignees‟ choices were made in contradiction with the results of the technical study required by the
GSC itself.
Conclusion on the GSC: the examination of the tender file clearly shows a will to favour one
company against the others, and irregular practices so important that they lead us to propose
the rejection of the entire market.
6.3.4. Anomalies concerning the quality of the expenditures
Some expenditures files are based on documents that can not be taken alone as vouchers. Two specific
categories of this type of anomalies can be pointed out:
- The expenditures justified not by invoices but by cost estimates;
- The lack of a pay list in the case of expenses transfer (medical, travelling etc…).
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The payments made in those conditions are not made safe at all insofar as the Administration does not
provide itself with any means of control either on cost estimates, or on actual expenditures.
The auditors also reported some cases of partial or complete lacks of administrative documents such as
the Local Purchase Order (LPO) and/or the Store (or Service) Receipt Advice (SRA).
The particular case of hand-written water, electricity, and phone bills has to be mentioned as well.
Indeed, the auditor reported that some of the expenditures files are based only on hand written invoices
and onto which only the total amount and the client‟s name are mentioned. Neither the consumption
levels, nor the invoicing periods are mentioned, there is no stamp, not even an identification or signature
from a manager on those documents. Moreover, in the reported cases, no duly signed receipt by the
payee can be found in the file.
Taking into account such invoices means taking the risk of paying services that may have never even
been provided. Indeed, the suppliers of those services (Ghana Water & Sewerage, Electricity Co of
Ghana, P&T Telecom) issue computerised invoices clearly referring to the client‟s identity (name,
address, call number), the consumption rates (index, unit breakdown).
Eventually, we reported dates inconsistencies with regard to the procedure. For instance a pro forma
date subsequent to the SRA shows, at least, an administrative regularisation and/or a lack of
competition but also cancels the convincing value of the SRA. This also occurs in other reported cases,
such as: date of the LPO subsequent to the SRA; date of the LPO subsequent to the Waybill.
Other cases of dates incoherence were reported. One of the most usual ones is that of similar date of
visa on the main expenditures support documents (LPO, pro forma, SRA).
6.3.5. The particular case of The West African Examination Council
The West African Examination Council (WAEC) is a multinational organisation to which the English
speaking countries of West Africa adhere. The role of the WAEC is to organise, maintain the standards
of and supervise examinations in the member countries. The objective is to maintain a diploma
equivalence guarantee between the member countries.
The Government of Ghana participates in the financing of the global budget (both the national and
international components) by transferring annual grants (budgetary line 140 – 01; this line has been
targeted by the EC only for the year 1996).
Additionally, the GoG entrusts the WAEC with the organisation of the Basic Education Certificate
Examination (BECE). This service is specifically invoiced and charged to one of the budgetary lines
supported by the EC (143-13 GES-Basic Education).
The EC‟s financial participation in the WAEC budget, with respect to the period under review in this
audit was by way of both the subvention (140-01) received by WAEC in the year 1996, and the BECE
subsidy (141-13) for the years 1996, 1998 and 1999.
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There are some issues of audit principle that require clarification in addressing the special case of the
WAEC. First of all it should be noted that given the nature of the services provided the Ministry of
Education by WAEC, there is not and cannot be pricing competition. The services are procured on a
sole-source basis. As a consequence of this, price negotiations between the Ministry of Education and
the WAEC must be based upon comprehensive and fully transparent costs. A comprehensive cost
breakdown will include direct costs, allocated cost and some estimated costs. Such estimated costs
might be introduced through the impacts of inflation and currency depreciation. Without price
competition the only fair basis for the Ministry of Education to evaluate a price would be by evaluating
the cost components that are the basis for that price.
Further, it defines a clear structure for effective audit. The WAEC has to provide the GoG all the
component cost elements that make up the services cost. The GoG has no other means of controlling
this cost.
This ought to be the principle adhered to in the case of the BECE subsidies. Indeed, the ministry of
Education always achieves a price reduction by deciding upon a price lower than the WAEC proposal.
However, the costs submitted by the WAEC are often aggregated and lumped together in such a way as
to make difficult a comprehensive cost review. The costing must be more segregated, more
comprehensive and structured in order to minimise the level of arbitrariness in the pricing negotiation
process.
In practice the voucher documents provided by the WAEC are only estimates. Once the grant, which is
calculated from this estimate is given to the WAEC, there is never a submission of the actual costs and
a reconciliation between estimated and actual cost. The WAEC does not provide an accounting of the
use of funds.
An effective breakdown of actual costs would permit:
A meaningful comparison of cost components from year to year
An opportunity for market comparisons of direct cost elements
An opportunity to compare with published data such factors as inflation and currency
depreciation
An opportunity for the WAEC to address differences such as increases between
estimated numbers of candidates and actual numbers. The WAEC indicates that the
effective number of candidates over estimated was in excess by about 4.5% in the
years 1996 and 1998.
A clear basis for Audit, and
A reduced opportunity for abuse
In lieu of any pricing competition it is imperative that the costing and price negotiation process be
approached will due diligence.
There is second principle of audit that should be clarified. While it is true that WAEC is a completely
independent institution and merely a client of the Ministry of Education and so may not be subject to
audit by a donor, the basis for price negotiation and the cost breakdown is fully subject to audit. There is
no ambiguity on this point. The BECE subsidy is subject to audit. In the case of the subvention it may be
argued that there is not a right of audit.
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However, to provide comfort to a fund donor, albeit an indirect one, it would be particularly helpful to
facilitate an audit of the budget items addressed under the subvention.
The WAEC presents annual audited financial statements to the Government of Ghana. However, such
audited statements do not specifically address pricing nor the efficient application of funds to a specific
target. An audited financial statement ought not to be construed as satisfying the function of ensuring
fair pricing to a particular client, nor assessing the effective targeting of funds.
The level of financial support under the subvention (140-01) and BECE subsidy (141-13) by the
Government of Ghana are summarised below. These amounts are inclusive of the EC contributions.
The table below sums up the amounts paid to the WAEC during the 3 years examined (EC support
included):
Table 4d GHC billions, Euros millions
Year Subvention (140- 01) BECE ( 141 - 13) Total
GHC Euros GHC Euros GHC Euros
1996 1 933 0,96 1 840 0,91 3 773 1,86
1998 5 584 2,17 3 740 1,45 9 324 3,62
1999 6 445 2,37 5 280 1,94 11 725 4,31
Total 13 962 5,49 10 860 4,30 24 822 9,79
The method for arriving at a unit price for the BECE is as follows: Every year the WAEC, on the basis of
an estimate of the number of candidates to the BECE for the following year, evaluates the global cost of
the exam organisation (fixed costs and variable costs, exclusive of WAEC wage costs). On the basis of
the so defined budget, an average cost per candidate is determined.
The evaluation of the service cost by the WAEC is made as follows:
a) - Estimation of the global cost of the service by expenditures lines so defined:
1 Cost of printing question papers 10 Collection of marked scripts
2 Cost of examination stationery 11 Supervision & invigilation
3 Computer stationery 12 Inspection of centres
4 Packing of question papers 13 Photocopying of scripts
5 Certificates 14 Hire of rooms
6 Computer maintenance 15 Co-ordination meetings
7 Briefing course 16 Conference marking
8 Distribution of stationery 17 Award sub committee meeting
9 Distribution of question paper 18 Maintenance/repairs of exams vehicles
(cf. appendix 12)
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b) – To these specific items were added:
- A contingency percentage: 10% in 1996 and 1998; 12,5% in 1999;
- A participation cost to the Endowment Fund levy. The participation to this fund is a statutory
clause. It was GHC 50 millions in 1996, GHC 77 millions in 1998 and GHC 72 millions in
1999.
c) – The global amount thus obtained is divided by the number of candidates planned in order to define
a cost per candidate. This cost per candidate is proposed to the Ministry of Education which:
- Decides of a final cost (generally less than that proposed by the WAEC);
- Sets the partition of the cost between the share supported by the State and that which is
supported by the candidates themselves.
d) – On the basis of the unit cost set above, the WAEC invoices the MoE for a global amount calculated
by multiplying the unit cost by the number of candidates to which are added the registration fees of the
BECE candidates to the above school level. (Senior Secondary School).
On this basis, the table underneath sums up, for each of the budgetary years concerned by the audit,
the amounts granted by the State to the WAEC.
Year Cost per Candidates Number of Amount paid
WAEC GOG Supported Supported Applic. forms candidates by GoG
estimates approved by GOG by candidates select. into SSS
1996 14 000 12 000 8 000 4 000 1 200 200 000 1 840 000 000
1998 25 000 20 000 15 000 5 000 2 000 220 000 3 740 000 000
1999 40 000 30 000 20 000 10 000 2 000 240 000 5 280 000 000
Total 10 860 000 000
The payments concerning these different years were made according to the following provisions:
Year Cheque Deposit Value Euro Amount
Date Ch. N° GHC Amount
1996 10/05/96 0228066 1 000 000 000 494 161,48
12/06/96 0228428 840 000 000 415 095,64
Total 1 840 000 000 909 257,13
1998 08/04/98 033134 900 000 000 349 335,49
18/05/98 033597 1 350 000 000 524 003,23
04/09/99 587915 1 490 000 000 578 344,31
Total 3 740 000 000 1 451 683,02
1999 09/07/99 590481 5 280 000 000 1 941 033,75
Grand Total 10 860 000 000 4 301 973,90
The auditors controlled the justification of the organising cost of the BECE charged to the State. The
points highlighted are described hereafter, and mainly concern over-budgeting problems.
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Concerning the evaluation of the budget itself.
The auditor pointed out significant discrepancies between the prices really paid by the WAEC and the
price used for the evaluation of the unitary cost per candidate. A few examples are summed up in the
table below:
Suppliers Items Date Prices in GBP Amount paid in GHC
WAEC GoG (x) coef
Smith & Ouzman Ltd Objective Answer Sheets nov-99 0,01038 * 48 250 5,21
Smith & Ouzman Ltd BECE Entry forms nov-99 0,01636 * 76 500 6,61
Smith & Ouzman Ltd Statement of result nov-99 0,01186 * 55 300 5,47
PR International Sellotape nov-98 1,73 ** 8 014 12 000 1,50
Various suppliers Answer booklet nov-99 350 800 2,29
* = including estimated sea freight cost ** = including cost & freight to Kotoka Airport
(cf. appendix 13)
On average the multiplier factor applied to the purchases for the global cost evaluation of organising the
BECE is 5. This seems to be excessive especially if we consider that the WAEC is a granted
organisation. Even if we assume some omitted associated costs, these costs could not be justified to a
loading factor of 400%.
The mission also points out:
- Some item prices increase noticeably from one year to the other. The average increase is 71.9%
from 1998 to 1999 with particularly: Cost of examination stationery + 102,4%; Supervision and
invigilation + 140,1%; Award sub-committee meeting + 118,3% and eventually Co-ordination
meeting + 338,8%. These price increases are alarming when placed within the context of
reported inflation and currency depreciation figures. Inflation figures for 1998 and 1999 were
16.2% and 13.8% respectively. Given that there was a currency depreciation in 1998 of 4.1%,
and a currency depreciation of 33% in 1999 most of which occurred in the fourth quarter. It
becomes hard to see how an average increase in cost increase of 71.9% can thus be justified.
(Reference: The State of the Ghanaian Economy in 1999, The Institute of Statistical, Social and Economic Research
(ISSER), University of Ghana Legon).
- The rates of Contingency applied – from 10 % in 1996 and 1998 to 12,5 % in 1999 – sound
excessive. A contingency cost allowance arises out of the imprecision of cost estimating a priori.
In the case of the West African Examinations Council, and organization that has extensive
experience with organizing exams in Ghana and other countries, there can be little justification for
a high contingency component. There is even less reason to increase the contingency
component from one year to the next – greater experience would justify better appreciation of
cost dynamics, improved cost estimates and therefore lower cost uncertainty and less
requirement for a contingency component. It should be noted that inflation, currency depreciation
and spurious financing charges are better dealt with specific cost components relating to those
cost contributions.
Additionally, it is worth noting that this item increased by 111.4% from 1998 to 1999 (1998: GHC
513 million, 1999: GHC 1 084,7 million).
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The estimates entered for currency depreciation and inflation could be supported by published
data. There is no justification to be arbitrary about the cost components. We believe 5% to be
appropriate for the specific cost allowances titled Contingency particularly with regard to the
WAEC experience, the WAEC having organised a great number of exams not only in Ghana but
also in the other member countries for many years and because the cost elements (number of
centres, number of subjects, needs for equipment, etc…) are perfectly determined. A limitation of
that rate to 5% (a generally accepted standard as for projects, a much higher uncertainty
scenario than the annual organisation of exams) would have meant a GHC 128.3 Millions
adjustment in 1996; a GHC 256.5 millions adjustment in 1998 and 650.8 millions in 1999, that is
to say an estimated global saving of GHC 1,035.6.
Conclusions on the WAEC
An appreciation of the real cost of the WAEC services with respect to the BECE is difficult due to the
method of evaluation of the budgetary grant which is allocated to it. During the four meetings (February
2000) with the WAEC, the auditors encountered some difficulties in obtaining some information, the
reason given was being that the object of the auditors was to audit the State expenditures but not the
WAEC itself. Thus the auditors were unable to analyse the budgets and financial statements of the
establishment for the years under review. Such an analysis would have allowed a better understanding
of the financial relations between the GoG and the WAEC, particularly concerning the real cost of some
of the services. We reiterate that the auditors have focused the audit on the subsidy charges since they
pertain to a sole sourcing scenario and involve a cost based price negotiation between the Ministry of
Education and the WAEC.
Further, it is important that the WAEC provide a more comprehensive cost breakdown that reflects the
actual costs incurred without resorting to aggregation and the lumping of costs. This can only introduce
a high measure of arbitrariness to price negotiations and hampers greatly any audit reviews. The
argument that the pricing context is one of high inflation and high currency depreciation is one that only
amplifies the need for comprehensive and accurate costing. It is fully appreciated that some (certainly
not all) components would require some cost estimating such as those components that are affected by
inflation. There are however, standard methods for evaluating such estimates with the use of published
historical data.
The auditors think this point is essential insofar as the GoG has no alternative to the WAEC, when
organising the BECE. Therefore the GoG cannot make cost comparisons with the market.
In this context, the only possibility for the GoG to judge the validity of the evaluation of the BECE
performance is on the one hand, the knowledge of the cost elements making up this budget (outside
provisions of service costs, WAEC margin, etc…) and on the other hand, the budget negotiation.
Concerning the BECE part, the auditors, on the basis on the few elements examined and verbal
explanations obtained, are unable to revise the substantive conclusions of the provisional report, and
thus consider that the service was over valued on an average of 30% for each of these years. This
evaluation was performed by studying again the BECE budgets prepared by the WAEC. Out of the 17
costs items, those that contain only or for a major part staff costs and / or allowances (living allowance,
travelling expenses, etc…) were not analysed. On the other hand the items that contained either
exclusively or for their major part external purchase costs were recalculated by reducing the average
multiplying factor reported (5). Additionally, the Contingencies were lowered to 5%.
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As a result, we propose to reject GHC 2,863 millions (1.13 million Euros), thus allocated: GHC 513
millions in 1996, GHC 1,192 in 1998 and GHC 1,158 in 1999. The value of this estimate of the non-
eligible part of the support is indicative, and a complete financial audit of the various components of cost
would allow a more precise analysis of the actual costs. Such an audit would provide the WAEC an
opportunity to fully justify its charges. Further, the evaluation could then be used as the basis for the
future WAEC services calculation.
The upshot of this is that the European Commission would then be in a position to clearly assess
whether its funding was appropriately utilised.
6.3.6. Procedures flaws - Ministry of Education 4th Quarter Parallel Procedure – the use of Stop
Payment Orders
The rationalisation stated for deviating from the normal procurement and expenditure procedures in the
fourth quarter is the pressure to spend all of the funds allocated before year end. If not the funds are
returned to the Treasury and the ministry loses the funding. This parallel procurement procedure is
perceived and justified by the officials as an emergency procedure. The „emergency‟ dimension of
expenditures in the 4th Quarter, it is argued, is a result of the Ministry of Finance providing very little
funding in the first three quarters and then dumping the major part of the year‟s budget allocation in the
fourth quarter.
As might be expected this is not documented. What information arrived, was constructed from
accounting document control ledgers, warehouse internal documents, bank statements and stop orders.
It was not possible to confirm that this procedure was not applied in other quarters. The mission did not
cover its application in 1996 and 1998. It should be noted, however, that the accounts office reports
variations on this procedure that were in effect in 1998.
Briefly, the 4th Quarter Parallel Procedure involves:
Developing a list of recommended vendors (sole source) and setting prices for supplies.
Preparing LPOs, SRAs and PVs all dated the same day in some cases to facilitate the
preparation of cheques. Note that these falsified SRAs are signed by the Director of
Supplies and Logistics, an auditor from the Internal Control Unit, Ministry of Education and
an auditor from the Internal Audit Department, the Comptroller and Accountant General
Department.
Maintaining these files separate from the normally processed PVs in the Accounts Office
rather than in the Treasury.
Preparing Checks made out to the vendor ahead of the delivery of supplies by the Chief of
Treasury.
Placing a stop order payment on purchase and maintaining a separate file for these in the
accounts office.
Authorising payment by the Finance and Administration Director making a notation on the
stop order payment memo.
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Right from the offset, it should be pointed out that the 4th Quarter Parallel Procedure involves the
collusion of both the Ministry of Education and the Comptroller and Accountant Generals Department
Officials. The parallel procedure is developed and operated by the Supplies and Logistics Division, the
Finance and Administration Division, the Accounts office, the Internal Control Unit (Audit 1) and the
Warehouse personnel within the Ministry of Education. In the Comptroller and Accountant Generals
Department the Chief of Treasury and the Internal Audit Department (referred to as Audit 2) are involved
in operating this procedure.
It might be argued that there is nothing intrinsically problematic with introducing alternate methods to
address emergency circumstances. What is alarming is the falsification of documentation and other
irregularities that are routinely included in the implementation of the 4 th Quarter Parallel Procedure.
Further, the procedure is prone to abuse and procurement inefficiency. Indeed an analysis of the
December 1999 expenditures clearly illustrates many of the difficulties that might be expected by the
implementation of such a procedure. Other issues worth noting include:
Instruction to storekeepers to falsify dates on Stores Receipt Advice entries
Instruction to vendors not to date waybills.
Segregation of payment voucher files processed using the 4th Quarter Parallel procedure
and storage of the files in the accounts department.
The lack of effective price competition mechanisms.
Ineffective controls on payment conditioned on confirmed delivery of supplies.
Occasional receipt of payment by the vendor prior to delivery of supplies.
a) – Description of the procedure (cf. appendix 14)
For the 4th Quarter Parallel Procedure procurement the Ministry of Education‟s Procurement Committee
sit to meet on deciding the supplies, prices and vendors for the spending of the 4 th Quarter Funds
allocated. Given that fixed prices are evident for supplies such as wax crayons, white chalk, coloured
chalk and exercise books, irrespective of specific supplier, it is apparent that prices are negotiated. A
Recommended Supplies list is made up and submitted to the Director of Supplies and Logistics. The
Recommended List includes item, vendor and price.
As of 1999 a total payment of all the supplies required is requested from the Treasury as a transfer to
the Director General‟ (GES-Main) account is made. Payments for the supplies are made then directly
out of this account.
On the basis of the Recommended List Local Purchase Orders are prepared and sent to the vendors.
The prepared LPO‟s are checked by Audit 1 and Audit 2. Primarily these checks are limited to arithmetic
errors. They are then submitted to the treasury. Firm Orders are prepared then for submission to the
vendors. The LPO and Firm Order are sent to the supplier. The firm order includes specifications and
terms of delivery. Copies are sent to the warehouses. These Firm Orders serve as notice of the
expected arrival of the delivery of goods to the storekeepers.
To facilitate the preparation of the Payment Voucher, the Stores Receipt Advice is prepared with the
signatures of the storekeeper, an auditor from Audit 1, an auditor from Audit 2 and the Director of
Supplies and Logistics. The Payment Voucher is prepared and dated prior to the end of the year. The
file produced thus is kept separately.
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Stop Payment Orders are prepared for each dossier. The Stop Payment Order is signed by the Chief
Internal Auditor and the Chief Treasury Officer. The stop payment Orders are maintained in a file in the
accounts office. The Stop Payment Orders are not attached to the procurement dossier.
When a delivery is made the vendor has his waybill signed by the store keeper.
For the parallel process at the end of 1999 the store keepers were instructed to make the waybills for
30/12/99 no matter the actual delivery date. There was no separate document to indicate that the
delivery was actually made at the GNTC warehouse. In the case of the PREP warehouse a separate
record of actual deliveries was kept in a Stores Requisition Voucher Book. But this was on the initiative
of the warehouse supervisor.
When the last shipment is made to fill an order, the vendor picks up auditors from both Audit 1 and Audit
2 in Accra and brings them to the warehouse to inspect. In practice, it turns out very often that the Audit
inspection occurs a day after the delivery is complete. The waybill is stamped and signed by both
auditors. We note that the waybill, to conform with the previously prepared SRA either has no date at
this point or is back dated to be consistent with the date shown on the SRA.
With the stamped waybill the vendor can now seek a Cheque Release Request. This is merely a
notation signed and dated on the Stop Payment Order Memo. The vendor then submits it to the
Treasury for a copy of the backdated SRA.
With the backdated SRA the vendor requests payment from the Accounts Office. The Accounts Office
issues a cheque to the vendor who signs for it in the cheque control register and provides a receipt.
b) – Warehouse deliveries
The Ministry of Education has 3 warehouses. There are two in Tema, the PREP warehouse, which
stores primary school supplies, and the GNTC warehouse where JSS and SSS supplies are kept.
Recently all chalk is being stored in the GNTC warehouse and all exercise books in the PREP
warehouse irrespective of their application to Primary, JSS or SSS education.
There is another warehouse in the Industrial Area, Accra where equipment and tools are kept. The
stationery supplies are kept at the ministry‟s headquarters.
c)- Investigation into the 4th quarter parallel procedure : December 1999 procurement
There was not complete nor enthusiastic co-operation in disclosing all the documentation pertaining to
the 4th Quarter Parallel Procedure. However, there was enough information developed from
complementary sources to achieve a clear picture of the scope of the procedure and some of the
problems associated with its practice.
The sources of information used for developing an insight into the implementation of the 4th Quarter
Parallel Procedure included:
- The Ledger of Service Activity Payments and Basic Education Payments
- The Cheque Collection Register
- The Stop Order Payments File
- GES – Main Account Bank Statements - December 1999, January 2000
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- Treasury Account Bank Statements - December 1999, January 2000
- Warehouse Records (GNTC and PREP)
- Partial series of payment vouchers (Accounts Department)
- Partial series of Payment Vouchers (Chief of Treasury)
For the month of December 1999, the total expenditure that was made utilising the 4th Quarter Parallel
Procedure totalled approximately GHC 16.6 Billions for that month. This is the amount that was
transferred to the GES-Main Account with the Bank of Ghana from which the payments are to be made.
We note that some of the payments may be made directly out of the Treasury Account so the precise
amount cannot be determined.
A number of problems were observed for the transactions investigated in December. These include:
Evidence of ineffective price competition
Improper allocation of expenditures to budget line items
Over GHC 12 Billions was processed on 30th December, 1999 that means with the LPO,
PV, SRA and Waybills purported to be issued on that date.
Sole sourcing
Payment received by vendor prior to the delivery being made
No stop orders were made on a number of procurement transactions
A number of Cheques were paid without Cheque Release Requests
A number of Purchase Vouchers were dated prior to the date on the Stores Receipt Advise.
In the following sections we expand upon each of these violation categories that were observed in the
transactions for the month of December, 1999.
c) – Evidence of ineffective price competition
A review of the schedule indicates that all of the purchases of exercise books were at the exact same
price irrespective of vendor or of volume. The case was made that the price was set at the price of the
lowest quotation in cases such as these, however, no documentation to support the negotiation of price
to the lowest offer could be provided. There was no indication that there was some price consideration
for higher volumes supplied. Orders for 500,000 exercise books are priced the same as orders for
250,000 books.
The same price in-elasticity was observed for chalk, coloured chalk and wax crayons. The wide variety
of suppliers providing the items at the same price is a clear indication that price competition was not
factored into the procurement process.
In the table below is listed the vendors who received purchase orders for the supply of exercise books in
the month of December 1999.
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Vendor Item Price
Ahamano Enterprise 250,000 Exercise Books 95,000,000
Community Service Ltd 500,000 Exercise Books 190,000,000
Achesco Press Ltd 500,000 Exercise Books 190,000,000
Litho Press Ltd 250,000 Exercise Books 95,000,000
Best Times Press Ltd 250,000 Exercise Books 95,000,000
Benediction Printing Press 250,000 Exercise Books 95,000,000
Sub-Saharan Publishers 250,000 Exercise Books 95,000,000
Gibrine Publishing Company 500,000 Exercise Books 190,000,000
Wrenco Ltd 500,000 Exercise Books 190,000,000
Black Mask Ltd 250,000 Exercise Books 95,000,000
Fessibey Ltd 500,000 Exercise Books 190,000,000
Graceland P Line Ltd 500,000 Exercise Books 190,000,000
Venus Printing Press Ltd 500,000 Exercise Books 190,000,000
Kobe Publications 500,000 Exercise Books 190,000,000
Dante-Kyem Printing 250,000 Exercise Books 95,000,000
Raka Press Ltd 500,000 Exercise Books 190,000,000
Prominent Printing Press 500,000 Exercise Books 190,000,000
Paramount Printing Works 250,000 Exercise Books 95,000,000
Samko Trade Entreprise 250,000 Exercise Books 95,000,000
Safeway Printing Works Ltd 500,000 Exercise Books 190,000,000
Bestas Press Ltd 500,000 Exercise Books 190,000,000
Yasarko Printing Works 500,000 Exercise Books 190,000,000
Livog Ltd 500,000 Exercise Books 190,000,000
Libasia Press 250,000 Exercise Books 95,000,000
Primmond Ltd 250,000 Exercise Books 95,000,000
Pelican Press Ltd 250,000 Exercise Books 95,000,000
Erisaac Press 500,000 Exercise Books 190,000,000
Kanbros Press 250,000 Exercise Books 95,000,000
Print Care 250,000 Exercise Books 95,000,000
Rotimex Ltd 250,000 Exercise Books 95,000,000
There is other direct evidence that the 4th Quarter Parallel Procedure does not emphasise price
competition. An independent market survey was made of pricing of printer ribbons and cartridges for
comparison with an order made by the Procurement Committee of the Ministry of Education. The
Ministry of Education selection resulted in a price of GHC 59 million versus a comparison of GHC 33
million. This would correspond to a savings of 79% (discrepancy of GHC 26 million, compared to the
normal cost, i.e. GHC 33 million), a very significant savings indeed.
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In the table below is a summary of the comparisons.
Vendor Item Price
Ministry of Charlie Foster 220 Panasonic KP 165 Ribbon
Education Enterprise Cartridge, 110 Canon Ink BC 20 59,400,000
Cartridges
Independent Fortune 2000 Ltd 220 Panasonic KP 165 Ribbon 33,000,000
Comparison Cartridge, 110 Canon Ink BC 20
d) – Improper allocation of expenditure to budget lines items
Except for two instances all purchases under the 4 th Quarter Parallel Procedure were allocated to the
Budget line head 141 and sub-head 01. This corresponds to GES Headquarters services General
Administration and Finance. This budget line item is not supported by the allocation of EU Counterpart
Funds for Education. There are only two instances that are allocated to a head number 141 and a sub-
head 13, which corresponds to Basic Education which is supported by the allocation of EU Counterpart
Funds for Education. At first glance it would seem that the 4 th Quarter Parallel Procedure does not
significantly affect the budget lines focused upon in this Audit. A more careful gleaning of the item
descriptions clearly indicate that many of the items should be allocated to Basic Education, Primary
Education and Junior Secondary Education which do fall under the EU Counterpart Funds support
programme for education. Some examples are shown in the Table below.
Head Sub Vendor Item Price
141 010 Amabook Ltd JSS Science Text Books 19,950,000
141 010 Unimax Publishers Library Books for Basic Schools
11,250,000
141 010 Sam-Woode Ltd SWL Junior Dictionaries for Basic
Schools 11,400,000
141 010 Pentacom Ltd 1,000,000 Packets of Wax Crayons
660,000,000
141 010 Pearl of the East Publication Text Books for Basic Schools
24,255,000
141 010 Safeway Printing Works Ltd 500,000 Exercise Books
190,000,000
141 010 Yetoda Publishing Text Books for Basic Schools
8,550,000
e) – Same date indicated on the LPO, SRA, Waybill and Purchase voucher : the falsification of
documentation
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It may be possible to envisage an occasional emergency circumstance where the purchase order is
prepared and the firm order is also prepared after a check on the availability of funds by the Treasury,
and then delivered to the vendor. The vendor delivers the items to the warehouse; the storekeeper and
staff from two different audit units check them. The SRA is presented to the Director of Supplies and
Logistics for approval and signature. The Accountant prepares a purchase voucher, which is signed by
the spending officer, the two audit units and the Chief Treasury Officer all on the same day. When there
are over a hundred transactions representing over GHC 12 Billion of purchases, it is a clear indication
that there is some falsification of documentation. Interviews with the Internal Control Unit revealed that
they are instructed to make falsified entries on the SRAs and PVs. The justification is that it will facilitate
drawing down on Ministry Funds before the end of the year so as not to have it returned to the treasury.
Further, the storekeepers pointed out that they are under instructions to falsify the dates on the
documentation. It was also revealed that the vendors are to submit Waybills and Invoices without dates
so that the parallel procedure can be implemented.
Of course the whole approach raises serious questions about introducing improper procedures in which
there is collusion between so many different key elements of the control system. The problem is made
even more egregious by the collusion of the vendors. It is clear that the Commission cannot support any
programmes whose method of implementation involves such blatant overriding of controls. Further, the
Commission cannot condone or be associated with a falsification procedure.
Payment received by vendor prior to the delivery
Given the description of the procedure it is subject to transactions falling through the cracks and also to
abuse. The stop order cheque method as implemented can hardly be considered an effective
procurement procedure with workable controls. Through the falsification of the SRA, there is no reliable
documentation that clearly demonstrates the status of delivery to the warehouse. Specifically we noted
that Anyan Brothers had been given payment on the 8 th of February 2000 for the delivery of 250,000
Exercise Books. The warehouse earmarked for the receipt of exercise books, the PREP Warehouse in
Tema, had not received any exercise books from the vendor as of 17th February 2000.
A number of procurement transactions had no stop orders
The Stop Orders are not attached to the Purchase Voucher and does not form a requirement of the
expenditure dossier. For this reason it is not that simple to determine if a Payment Stop Order has been
issued for a particular transaction. For each case the file has to be searched, if not found then it is
assumed that there is no stop order. There were a number of instances in the month of transactions
looked at that did not have a stop order.
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These are summed up in the Table below.
PV Date PV No. Vendor Item Stop Order
28/12/99 335900 Motifs Enterprise Ltd. 15 Manual Typewriters, 3 IBM Electric No Stop Order
Typewriters
28/12/99 335898 Plans Planning Ltd Stationery No Stop Order
28/12/99 235876 JK Bonsu Enterprise Two Computers and Stationery No Stop Order
28/12/99 335899 Aliemma Enterprise 700 Reams A3 Copier Paper No Stop Order
30/12/99 336332 Jeyin Enterprise Assorted Items - Part Payment No Stop Order
30/12/99 336347 Director GES DI 10 day Wkshp Regional and District No Stop Order
Accountants
30/12/99 336370 Aliemma Enterprise 710 A3 copier paper No Stop Order
30/12/99 336374 Getbona Construction 4 Filing Cabinets and Stationery No Stop Order
30/12/99 337033 F. Fakta Company Ltd Stationery No Stop Order
30/12/99 337033 F. Fakta Company Ltd Stationery No Stop Order
30/12/99 336691 Marketing World Ltd 1,000,000 packets Wax Crayons No Stop Order
30/12/99 336383 Charlie Foster Enterprise 220 Panasonic KP 165 Ribbon Cartridge, No Stop Order
110 Canon Ink BC 20 Cartridges
30/12/99 336565 Director General GES Advance for Regional/District 1st & 2nd No Stop Order
Qtr Service Activity
30/12/99 336397 Achesco Press Ltd Stationery No Stop Order
30/12/99 336579 Jeyin Enterprise Gas Kilns - Final Payment No Stop Order
30/12/99 75329 Domidak Enterprise Stationery No Stop Order
30/12/99 75328 Starhold Ghana Ltd Stationery No Stop Order
21/12/99 75167 Damas Educational Service Library Books No Stop Order
30/12/99 75198 Damas Educational Service Library Books for Basic Schools No Stop Order
21/12/99 75159 MES Equipment Library Books No Stop Order
24/12/99 75151 F Reimmer Book Services Library Books No Stop Order
24/12/99 75178 Mary Boateng Enterprises Stationery No Stop Order
24/12/99 75179 Interventra Ltd 4,375 Digging Hoes - Partial Payment No Stop Order
07/12/99 75173 Interventra Ltd 5000 Digging Hoes - Partial Payment No Stop Order
28/12/99 75180 Amoabooks Publications Library Books No Stop Order
29/12/99 75186 Sanfod Africa Ltd 180,504 White Chalk,300,000 Coloured No Stop Order
chalk and 1600000 Wax Crayons
30/12/99 75160 Lynn's Bookshop & Stationery Library Books No Stop Order
08/11/99 75156 Office Products Education & Library Books No Stop Order
Electronic Sysytems
30/12/99 75193 Sedco Publishing Library Books No Stop Order
30/12/99 75197 Community Service Ltd Digging Hoes - Final Payment No Stop Order
17/11/99 75164 Pearl of the East Publication Text Books for Basic Schools No Stop Order
30/12/99 75163 Safe West Ghana Ltd Library Books No Stop Order
30/12/99 75169 Alicats Enterprise Digging Hoes No Stop Order
A number of cheques were paid without cheque release requests
Another revealing illustration of how poor the controls are effected for the 4 th Quarter Parallel Procedure
is how few Cheque Release Requests are made and signed for before a payment is issued. There were
33 payments that were made for the month of transactions investigated. Only ten stop order requests
were made on the same sample of transaction.
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Conclusion and Recommendations
The 4th Quarter Parallel Procedure is a recipe for abuse and a complete break down of controls. It is a
procedure that affects the budget lines that are supported by the EU Counterpart Funds so is an issue
that must be considered with urgency. The 4th Quarter Parallel procedure shows that there are a
number of violations of controls. Most perturbing are the falsification of documentation and the collusion
of the most critical elements of internal control – the internal auditors. The Commission cannot afford to
be associated with this kind of practice. It cannot support programs whose mechanisms of funding
involve unethical practices.
For this reason the entire 4th Quarter Allocation of Counterpart Funds to the Ministry of Education ought
to be rejected. The partners must be discouraged from continuing these practices.
The Total annual allocation to the Ministry of Education for 1999 was 27,452,327. The 4th Quarter
allocation being 25% is 6,863,082. Since 50% was actually disbursed the amount rejected must be
adjusted for that, and limited to the EC funds disbursed, i.e. GHC 2 040 million.
6.3.7. Audit visit in education warehouses
6.3.7.1 Introduction
On Thursday February 17, 2000 a site visit was made to two of the Ministry of Education Warehouses.
There are three main warehouses that serve the national procurement. There are two in Tema located
35 kilometres away from the offices of the Ministry of Education in Accra. These two warehouses are
referred to as the PREP warehouse and the GNTC warehouse respectively. The PREP warehouse is
used to store all of the Primary Schools supplies purchased on a national scale. The GNTC warehouse,
considerable larger, is used to store both Junior Secondary School (JSS) and Senior Secondary School
(SSS) supplies. There is an exception to be made as far as such categorisation goes. As of the year
2000, all Chalk irrespective of its allocation to primary, junior or secondary schools is stored in the
GNTC warehouse. All exercise books are to be stored in the PREP warehouse.
While the brief of this Audit is limited to the Budget years 1996, 1998 and 1999 the 4 th Quarter Parallel
Procedure used for procurement in the Ministry of Education required a review of the receipt of goods
into warehouses in the first two months of the year 2000.
The third warehouse, which was not visited as part of this audit, is located in Accra approximately 10
Kilometres from the offices of the Ministry of Education. It is used to store equipment and implements
primarily.
Of the two warehouses visited there is a fairly dramatic distinction between how each is organised and
run. The PREP warehouse has its supplies much more neatly arranged. The warehouse staff much
better articulated procedures and could provide documentation that was obviously much better kept
than in the case of the GNTC warehouse. In the opinion of the warehouse supervisor this is a direct
result of the PREP warehouse (Primary Education Project) having been handed over after the
completion of and internationally funded project. The staff was originally on salaries set by the project at
much higher rates than Ministry of Education staff.
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They were trained on inventory management systems developed by the project consultants. The staff
have been absorbed by the Ministry of Education now, but the consequences of their separate histories
are still clearly apparent.
6.3.7.2 The GNTC Warehouse
The GNTC warehouse is managed by a team led by three store keepers.
The warehouse is a large warehouse owned by the Ghana National Trading Corporation, a state owned
corporation. There are a number of containers that are used for storage that are kept outside of the
warehouse. There are also containers kept inside of the warehouse that are used for storage. There
was evidence that a number of containers had been moved from inside the warehouse. These 20‟
containers, it was said, are being deployed to the districts to serve as warehouses.
The GNTC warehouse is used for storing JSS and SSS supplies. Originally the SSS supplies were
stored in a separate warehouse also located in Tema. The SSS warehouse burnt down in 1995 and
since then SSS supplies have been stored in the JSS Warehouse as well.
Fire Protection at the GNTC Warehouse
The warehouse staff have very little awareness of fire hazards, potential combustion genesis and good
fire safety practices. There are very poor fire protection facilities at the GNTC warehouse. There were
only four fire extinguishers which were eventually located behind piles of supplies. There was no
programme of regular checks of the fire extinguishers with requirement for refill if necessary. There are
no smoke detectors located in the warehouse . There was no fire hydrant that could be identified close
to the warehouse.
The lax attitude to fire safety and protection is particularly serious because of the high volumes of
combustible materials that are stored within the warehouse. The fire potential ought to be much more
seriously addressed especially since there has already been a fire experienced in a Ministry of
Education warehouse as recently as 1995.
Security at the GNTC Warehouse
Security is provided by a private security firm, Securicor, that gives 24 hour service. Securicor has been
providing service since 1993. A call for the security guard at 10:30 am indicated a man without uniform
who complained that it was too hot to wear his uniform. Little comfort was derived from a discussing with
him his security responsibilities and obligations.
Physical Organisation of Supplies
The warehouse had supplies arranged poorly. The supplies are kept on palettes placed on the floor.
There is some shelving but these are not utilised.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
There were a number of old and damaged supplies scattered about the warehouse. There are no stack
identifying labels that indicate supplier, and quantities. Given that the supplies are not suited to storing
on shelving, there is no practicable way of placing BIN cards directly next to supplies for spot checks
and ready updates. In lieu of this a summary placard might serve as basis for spot checks and fast
appraisal of the general status of supplies.
The packing and receipt of deliveries of supplies is facilitated by a fork lift. The fork lift is a Hyster 300
and was reported to be in good working condition.
Delivery of Goods
The description by senior officials of the Ministry of Education of the process of deliveries of goods to
the warehouse differs substantially from the actual practice. The description by the Internal Control Unit
referred to as Audit 1 portrays an on site presence at the time of deliveries made by vendors of the
representatives of Audit 1 and Audit 2 who are the internal auditors provided by the Comptroller and
Accountant Generals Department.
Their description outlines:
A physical inspection of randomly selected samples, and a careful determination that such
samples meet specification spelt out in the Firm Order Memo
Where the delivered supplies include science education chemicals and specialised
equipment, in-house technical personnel are relied upon
A careful Physical count of the quantities delivered
The signing of the vendors waybill
This process it was outlined is gone through independently by three separate inspection and control
elements of management.
1. The Store Keepers
2. The Audit 1 Representative
3. The Audit 2 Representative
If the delivery is satisfactory for each of the control elements, then the Tally cards are immediately
updated, the Stores Ledger is updated and the Stores Receipt Advise is prepared and signed by the
Store Keeper, Audit 1 and Audit 2. Not as a component of inspection and check, but to ascertain that
the SRA has been properly filled signed and stamped, the Director of Stores and Logistics appends her
signature to the completed SRA.
The actual circumstance pertaining to delivery at the GNTC Warehouse is quite different.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
The warehouse storekeepers first receive the delivery. The storekeepers rarely sample the goods for a
check against the quality specification. It is unlikely that they are qualified to make quality specification
checks on most items. Their check is limited to a physical count. The supplies are transferred into the
warehouse and arranged in stacks on palettes. If satisfactory the vendor‟s waybill is signed and
stamped by the storekeeper. For the 4th Quarter parallel process for 1999 investigated as part of the
mission scope, the store keepers were instructed to make the waybills for 30/12/99 no matter the actual
delivery date. There was no document to indicate that the delivery was actually made.
Usually within a day, the vendor will bring representatives of both Audit 1 and Audit 2 to the warehouse
from their offices in Accra. They will then make a check of goods that have already been transferred to
the warehouse. If there has been a mix up with previous supplies there will be no way of ascertaining
that. Again the checks are for the most part limited to a quantity count. If the check is deemed
satisfactory by both Audit 1 and Audit 2 and SRA is prepared and signed by the three signatories. The
vendor‟s waybill is also signed and stamped.
The SRA book is sent to the office of the Ministry of Education for signature by the Director of Supplies
and Logistics. As it turns out this book is more often in Accra than in Tema. For example, the SRA book
on 17th February had been sent to the Director of Supplies and Logistics for signatures and the Audit 1
group for signatures. One consequence of this is that often the document of immediate signature is just
the vendor‟s waybill. The SRA may actually be filled a day or a couple of days after the delivery. The
stores ledger is not maintained at the warehouse but rather at the Ministry. How accurately it reflects
deliveries and distributions in and out of the warehouse is anybody‟s guess.
The only record of entries into the SRA book maintained at the warehouse is an incomplete file of
triplicate sheets of SRA entries maintained in a file by the at the warehouse by the storekeepers.
When the SRA is at the head office the storekeepers use the company‟s waybill as the document of
receipt confirmation with a transfer to the SRA book at a later time.
The intent is that all deliveries are always notified ahead of time by the vendor, this would enable the
internal auditors to be present at the time of delivery. This does not always happen. On the day of the
visit, 17th February 2000, 2 deliveries were being made to the GNTC warehouse and 1 delivery to the
PREP warehouse. At neither warehouse were Audit 1 nor Audit 2 personnel present.
The only practical indication of a schedule of deliveries is that Storekeepers maintain copies of the firm
order. They use this as an indication of what deliveries to expect. This is hardly a substitute for a
schedule of deliveries in which a proper inspection and checking team with all the elements of controls
can be readied.
When supplies are delivered they pull up the firm order to check the quantity and item against the
waybill. In the case of technical and or scientific equipment, the supplier gives notice of delivery date
and a technical team from the headquarters is requested to be present at the arrival for inspection and
ascertaining that the delivery meets specification. When the goods are delivered they are counted and
visually inspected. If inspection is passed it is entered into the SRA book with one signature of the
storekeeper. Then it is entered into the Tally Card. The tally cards are kept at a front desk.
Once this is done the supplies are kept apart from the main stock. When the internal auditors arrive,
possibly the following day, they then check the supplies and append their signature to the SRA.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
The Distribution of Goods from the GNTC Warehouse
Distribution memos with a signature authorise the distribution of supplies. These distribution memos are
signed on each page by the Director of Stores and Logistics. The pages are not numbered and can
easily be replaced at a later time without detection. There is no formal requisition book with sequentially
numbered pre-printed numbers. The authorising signature is the Director of Supplies and Logistics.
When the distributions are made they are recorded on to the Tally cards.
The store keepers receive hand-written notes with the drivers names who will be picking up the supplies
for distribution. There is no documentation that governs the transfer of goods to the driver, nor the
drivers delivery to the district. The only documentation is a Stores Receipt Voucher by the District
Supplies Officer to indicate receipt. A copy of which is sent back to the originating warehouse.
Notes on The 4th Quarter Parallel Process
The claim is made by the storekeepers that the actual delivery record in the parallel system is based
upon the waybill. It was stated that Energy Ventures had supplied the chalk on the 3rd of February,
2000. However, an inspection of the documentation showed the waybill was not dated and the store
keepers signature was also not dated.
The only reflection available as a document of the actual receipt of goods is an incomplete exercise
book which is maintained by the storekeepers of the date of actual deliveries
6.3.7.3 The PREP Warehouse
The PREP warehouse is managed by a team led by three store keepers.
The warehouse keys are kept by Mr. Adams. A spare set of keys are kept by the Director of Supplies
and Logistics at the offices of the Ministry in Accra.
The warehouse supplies are generally neatly stacked and organised. The warehouse supplies are
placed on palettes that are on the floor. The organisation is generally as per delivery.
The PREP warehouse is used for storing primary education supplies. As of the beginning of this year it
has been designated as the warehouse where all exercise books will be stored.
Fire Protection at the PREP Warehouse
There are considerably better fire protection facilities at the PREP warehouse than at the GNTC
warehouse. The staff are much more aware of potential fire hazards and have a more rational approach
to the location of fire extinguishers.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
The Warehouse is protected by a system of smoke detectors. There are seven fire extinguishers kept in
the office. There is a fire hydrant located 5 meters away from the front of the building.
Fire protection must be maintained as an important management priority because of the high level of
combustible materials maintained within the warehouse.
Security at the PREP Warehouse
Security is provided by a private security firm, Securicor, that gives 24 hour service. Securicor has been
providing service since 1993. There was a break in to the warehouse in 1992 when GES watchmen
were used for security. Since hiring Securicor there have been no break-ins.
The Securicor security guard was in uniform and was actively involved in overseeing the delivery of
goods into the warehouse. Their security responsibilities include maintaining a log of all supplies
entering and leaving the warehouse. An inspection of the log book indicated neat and regular entries of
activities at the warehouse. The log included entries of both deliveries into and distribution out of the
warehouse. The quantities of supplies are counted and the waybills numbers noted.
The Physical Organisation of Supplies ate the PREP Warehouse
The supplies were generally neatly stacked on palettes placed on the floor. There were however no
stack identifying labels that indicate item, quantity and supplier.
Given that the supplies are not suited to storing on shelving, there is no practicable way of placing BIN
cards directly next to supplies for spot checks and ready updates. In lieu of this a summary placard
might serve as basis for spot checks and fast appraisal of the general status of supplies.
The packing and receipt of deliveries of supplies is facilitated by a fork lift. The fork lift is a Hyster 300
and was reported to be in good working condition. It was in use at the time of the site visit.
Deliveries of Goods into the PREP Warehouse
Again there is a marked discrepancy between the description of deliveries at the warehouse by senior
ministry officials and the practice from day to day at the warehouse.
Advance notice of the deliveries are provided with copies of firm orders which note quantity and
specification. This provides schedule of items to be received. When items are received sample checks
are made of the items. This to ascertain that they conform to the specification of the item on the firm
order.
Items are received into warehouse. The goods are always delivered with a waybill. The storekeeper
signs the waybill and maintains a copy in warehouse file. A stores receipt voucher is prepared for the
supplier. Original SRV to supplier, duplicate to head office and triplicate copy is kept in the files of the
warehouse. Upon completion of delivery the supplier brings the internal and external auditors from
Accra to verify the delivery.
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Groupement 2AC Associés Audit et Conseil - Transtec - Deloitte & Touche Spain
Ghana - EU Structural Adjustment Support Audit
The verification involves a physical count of the items. They also check the waybill, the SRV entry and
the Tally Card. If all is OK then the SRA is prepared and both Audit 1 and Audit 2 sign, the storekeeper
and the Director of Supplies and Logistics signs. The SRA book is taken typically by the internal auditors
for signing.
All exercise books should be delivered to the PREP warehouse. The chalk (apart from the Sanfod
delivery at the end of last year) should be delivered to the GNTC warehouse. The non receipt of Anyan
Printing Press to PREP warehouse may be significant.
Distribution
The distribution schedule is prepared by the DS&L and signed by the DS&L. This schedule is the final
authorisation for distributing. The truck driver obtains a hand-written chit signed and dated by the
Deputy DS&L which authorises the receipt of supplies from the warehouse for distribution. Store Issues
Vouchers are prepared by the storekeeper in response to the Driver‟s chits in conjunction with the
previously prepared distribution schedule. The SIV is signed and dated by the Storekeeper and the
warehouse supervisor. Upon receipt by the district, the storekeeper and the district logistics officer sign
the Stores Issue Voucher. Recently the district directors are also requested to sign.
4th Quarter Parallel Process
Instructions were given by internal audit that the SRA‟s should be dated 30 th December 1999 even
though the deliveries had not yet been made. The Warehouse supervisor maintains records of delivery
on the SRVs which is a reflection of actual deliveries.
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