Background To Ghana's Public Financial Management System
Public financial management includes the activities that relate
financial resources available to the government to results: allocation
of funds, accounting and reporting, cash flow management, asset
management, debt management, internal controls, procurement and
financial statements. Restructuring these range of activities is an
integral part of the efforts of government to move Ghana away from
poverty and to promote economic prosperity.
- Weak budget formulation and implementation system.
- Weak monitoring and evaluation of the use of financial resources.
- Poor data generation and dissemination.
- Poor flow of information between the Bank of Ghana (BoG), Ministry
of Finance (MOF) and Controller and Accountant General's Department
- Deficiencies in accounting and auditing, especially internal auditing.
- Weak compliance with financial regulations.
- Obsolete public financial management laws and regulations.
- Too many government accounts.
- The lack of awareness among Ministry staff that they have to
account for their financial activities. Many in the Civil Service do
not consider any form of financial management as part of their scope of
This vision rests on the belief that effective public financial management system:
- Is essential to providing reliable financial information to deter fraud, waste and abuse of public resources.
- Is essential for effective macroeconomic management.
- Is essential to consolidating and sustaining the country's democratic process.
- Is a pre-condition for the implementation of the Government's
decentralisation agenda, as embedded in the 1992 Constitution.
It is evident from the above list
that public financial management is part of the problem in our efforts
to bring public resources and public spending into line. As the
government is being called on to guide the economy, manage diverse
activities and provide stability to a large part of the population, the
public financial management system is inadequate. The demand on us is
no longer the diagnosis or listing of these problems, but rather the
necessity to prioritise an action plan. From this necessity has emerged
a new vision of government. That is, financial management in the public
- Enable the government to make informed decisions on the allocation of its scarce financial resources.
- Ensure that financial plans are implemented according to government decisions and expectations.
- Ensure that all relevant guidelines and regulations are used
correctly in order to secure acceptable accountability of and
transparency in the use of public funds.
- In the area of revenue mobilisation and management, the government
wants to Improve managerial and operational efficiency in tax
- Lower collection costs
- Generate improved tax statistics.
- Generate a tax policy process.
Budgeting and Expenditure Management
In the area of budgeting and expenditure management, the government wants to:
- Improve Planning and Budget formulation.
- Set realistic and achievable spending ceilings.
- Improve spending prioritisation.
- Monitor commitments and disbursements and
- Ensure accurate and timely information flows among the appropriate government institutions.
Our managerial and operational efficiencies in all these areas are necessary in order to
- Minimise incidences of misreporting,
- Give good account of the use of financial resources and
- Enhance our ability to deliver good fiscal management and sound policy environment for growth and development.
Some Policy Initiatives:
Revenue Management Measures
- Recovery of Loans owed to Government.
- Establishing of the Revenue Agencies Governing Board.
- Formed a National Tax audit Team.
- Appointed Games Commissioner to regulate the business of lottery and betting.
Expenditure Management Measure
- Enhancing the capacity to track poverty reducing expenditures.
- Established a coding structure to enable classification of transactions for HIPC account.
- Introduced a rigorous system of Quarterly Expenditure Ceiling to control new commitments.
These interim measures have yielded some
improvements in ensuring that expenditures stay within targets, that
Ministries, Department and Agencies (MDAs) are developing a better
appreciation for the need to prioritise their spending if they are to
stay within their ceilings. That is not all.
Wage Bill - Ghost names: The government has also
turned attention to the problem of ghost names on public expenditure
payroll. We are combining the efforts of the Controller and Accountant
General Department (CAGD), MDAs, Auditor-General (AG) and Serious Fraud
Office (SFO) to tackle this public sector scourge.
The government established the Economic Policy
Coordinating Committee (EPCC), comprising officials from the Ministry
of Finance, CAGD, the revenue Agencies and the Bank of Ghana. The EPCC
has worked tirelessly to ensure timely
- Monitoring of revenue and expenditure trends.
- Monitoring of the deviations from targets.
- Flow of information between CAGD, BOG and MOF.
Publich Procurement Reform
procurement accounts for 50-70 per cent of imports and about 80 per
cent of government expenditure. Therefore any improvement in the public
procurement system has a direct beneficial effect on the economy. To
supplement the financial administration law and regulations, Government
embarked upon a public procurement reform as an integral part of the
wider Public Financial Management Reform Programme (PUFMARP). The
purposes of the public procurement reforms are:
- To establish a national procurement system to guide the use of
state funds for procurement of goods, works and services, as well as
disposal of stores and equipment.
- To eliminate the various shortcomings in the public procurement
process by providing a comprehensive procurement law and standard
tender documents supported by relevant institutional and administrative
structures and an oversight body.
The new legal framework is to ensure that public
procurement is conducted with due attention to economy and efficiency
and value for money. The proposed law will apply to all public and
private entities that use public resources for their procurement. The
draft legislation on procurement is ready for Cabinet for
A Public Procurement Board shall be established
under the law to oversee the management of public procurement and to
create the interface between the private and public sectors of the
Other On-Going Measures
- Development of automated Budget and Public Expenditure Management System (BPEMS).
- Revisions of Financial Administration Decree (FAD) and Regulations
(FAR) (1979) have been completed and awaiting Cabinet and Parliamentary
- New legislation on procurement is awaiting Cabinet and Parliamentary approval.
- Medium-Term Expenditure Framework (MTEF) budgeting system - to move from line items to activity-based budgeting.
- Chart of Accounts to provide common classification for budgeting and accounting.
- the public sector.
Very important components of public financial management reform programme have lagged behind; including, major aspects of;
- Revenue Agencies Reform - CEPS, IRS and VAT Secretariat,
- Budget Formulation,
- Audit Reform,
- Procurement procedures,
- Cash Management Reform and overall Treasury Management and
- Aid and Debt Management.
- Improve tax administration - tax assessment, collection, auditing, and record keeping.
- Ensure closer alignment between objectives of the GPRS and the
allocation of budgetary resources. Strengthen budgeting preparation,
setting targets and achievable spending ceilings under the Budget
Preparation and Expenditure Management System (BPEMS) currently in its
pilot phase of development.
- Improve expenditure monitoring and control
- Improve data gathering, sharing and informational flows in commitments, accruals and cash payments
- Improve informational flows between MOF, CAGD, BOG, MEPRC and provide adequate and timely fiscal reporting
Several of these are on-going as sub-systems or the components of the Public Financial Management Reform Programme (PUFMA)
Proposed Area for Donor Intention
basic requirements in our attempts to strengthen planning, budgeting
and expenditure monitoring and control include the following: Ministry
- Technical assistance are required to accelerate organisational
reforms within the Ministry of Finance, including the establishment of
Tax Policy Unit, Non-Tax Revenue Unit, Budget Development.
- These changes will also require that we re-direct and re-train
existing staff to ensure more operationally competent personnel with
new or upgraded skills developed through refresher courses and with
technical assistance, for example, through attachment of experts.
- Capacity building for Procurement Reform. Reforms call for a major
investment in training and skills. New skill awareness of the available
options on the market, quality and currency of the goods, works and
services to be procured will be needed.
- Establishment of Treasury Unit and Improvements in Cash Management.
- Assistance to set up a Treasury unit within the Ministry of Finance.
- Further assistance in the design of government cash management system.
- Technical assistance in revenue projections and overall fiscal
projections within the Ministry of Finance and the Bank of Ghana.
Controller and Accountant General Department
- Recruitment of qualified accountants, training of existing staff on
modern accounting procedures, provision of equipment and logistics for
- Audit Services: Capacity development of Ghana Audit Service and internal audit through training and logistical support.
- Principal requirements to improve the operational efficiency of tax departments include:
- Assistance in the design of a modernised tax system.
- Assistance in computerisation of the tax systems.
- Assistance to implement interfaces between tax departments. Implementation of Fiscal Decentralization
- Assistance to the design of financial management systems at the local government level.
- Assistance to the development of interface between the BPEMS and the financial management systems of local governments.
- Assistance for financial management capacity building at the local government level.
We believe that on-going activities and proposed
activities will help in our vision to building the capacity for
efficient planning, budget formulation, expenditure monitoring and
control and putting in place the institutional infrastructure that will
ensure satisfactory flow of information between MDAs. Improvements in
public financial management will show up in accuracy and punctuality of