Public financial management in crisis — IEA
A Senior Research Fellow of the Institute of Economic Affairs (IEA), Dr Michael Ofori-Mensah, has described the country’s public financial management as being in a state of permanent crisis.
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He said a culture of embezzlement had taken over in some sections of the public sector.
Dr Ofori-Mensah noted that evidence from audit reports confirms that the perennial financial irregularities are a substantial drain on public finances and paints a gloomy picture for the country’s long-term economic development.
He made these observations when he presentaed a paper titled, “Tackling Ghana’s permanent crises requires collective action.”
Dr Ofori-Mensah stated that the Auditor-General’s reports were both predictable and gloomy, adding that year-on-year, identical cases of misappropriation of public funds were documented, often within the same public institutions.
Indeed, over the past weeks, there’s been a renewed focus on audit reports with the President and minister of finance separately restating government’s commitment to prosecute those identified in audit reports.
The Auditor-General had also been in the firing line with some civic groups demanding that he initiates the prosecution of those identified in the reports over the last 11 years.
“It is important to highlight that the Auditor-General’s enforcement powers, as stated in Article 187 (7) (b) of the Constitution, grants the office power to ‘surcharge’ - effectively the authority to disallow any expense and charge individuals ‘responsible for incurring or authorising [that] expenditure’. The power of the Auditor-General is thus limited as the implementation of remedial measures falls on a range of institutions.”
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Dr Ofori- Mensah said Ghana has elaborate legislation to ensure sound public financial management, adding the recurrent financial irregularities are, partly, the result of a failure to implement laws, weak public institutions and lax internal controls, hence the current focus on prosecution, whilst critical to accountability, is not enough to stem the scale of irregularities.
He said effective institutional checks and balances to prevent abuse of public resources, implementing the laws on the statute books and ensuring that procedures and processes are followed are crucial.
“This has not been a focal point of the recent debate. Indeed, until the fundamental issue of institutional weaknesses are addressed, the financial irregularities in the public sector will persist. Of the most urgent actions required, four stand out,” he said.
He said one of the deep-rooted governance problems Ghana faces is the lack of effective public financial management.
“Weak internal controls in public institutions accounts for a significant number of financial irregularities. Effective enforcement of remedial measures will require a collective approach with Parliament conducting enhanced oversight; the Judiciary taking steps to educate the public on the FAC, as well as ensuring cases which come before the courts are dealt with expeditiously; the Executive providing the Audit Service with adequate resources and also compelling ARICs to fulfil their statutory duties.
“The Auditor-General, too, will have to do more to fulfil his constitutional obligations. Whilst demands on the public purse are inevitably great, an investment in institutions to stem financial irregularities will provide Ghanaians with significant dividends. It’s time for our political leaders to seize the initiative and take action to improve public financial management.”
Under the section, Audit Report Implementation Committees (ARICs) - the intra-departmental units in public offices - are charged with enforcing the Auditor-General’s recommendations. However, they are non-existent in a significant number of public institutions.
Consequently, the recommendations from external and internal audits to address institutional lapses are not implemented.
Dr Ofori-Mensah said addressing these failings should be a priority, explaining that measures such as withholding allocations meant for public offices, which have not established ARICs, or failed to implement audit recommendations, should be considered.
He said the financial and technical capacity of Parliament needs to be strengthened, since the 1992 Constitution requires audit reports to be presented to Parliament for scrutiny.
He said the House is also empowered to recommend necessary corrective action, however recurrence of identical financial malpractices, indicates that Parliament’s response has been ineffective.