Ghana’s Ministry of Finance (and subsidiary agencies) has emerged as the most fiscally reckless MDA on an annual basis and also over the six years between 2015 and 2020, according to the latest IMANI – OXFAM Fiscal Recklessness Index 2020 Project.

According to the report, the Ministry of Finance had the highest combined Fiscal Recklessness Score (FRS) of 0.8797. IMANI Africa explained that two key irregularities accounted for the trend observed at the Finance Ministry: tax irregularities and cash irregularities.

The report stated that the Finance Ministry is responsible for 99.63% (GHS9.10 billion) of the combined GHS9.12 billion tax irregularities reported from 2015 to 2020. Likewise, the Finance Ministry accounted for 80.10% (GHS2.35 billion) of the combined GHS2.93 billion cash irregularities from 2015 to 2020 — “this trend remains the same on a normalized data basis”, the authors remarked.

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Following the Finance Ministry was the Ministry of Health as the second most fiscally reckless institution, with an FRS of 0.1007 over the period covered by the report. However, IMANI Africa indicated that the Health Ministry overtook the Finance Ministry as the most fiscally reckless MDA in 2020 (FRS: 0.5510 vs 0.3384 for the finance ministry).

The third, fourth and fifth most fiscally reckless MDAs over the six years were the Ministry of Roads & Highways (FRS: 0.0284), Ministry of Employment (FRS: 0.0184), and Ministry of Foreign Affairs (FRS: 0.091).

A total of GHS13.9 billion financial irregularities recorded between 2015 to 2020

Overall, financial irregularities covering stores/procurement, cash, tax, payroll, rent, and contract irregularities by Ministries, Departments and Agencies (MDAs) in Ghana amounted to GHS13.9 billion between 2015 and 2020, according to the report.

Cumulatively, the total financial irregularities represent about 3.64% of 2020 GDP and an average of 0.52% of yearly GDP over the five-year analysis period, the report highlighted. The highest financial irregularities occurred in 2018 (GHS5.2 billion), representing more than a third of the overall financial irregularities of the MDAs, and double the average financial irregularities of MDAs.

“The analysis of fiscal indiscipline of MDAs clearly shows that tax and cash management are the main sources of fiscal recklessness among the MDAs in the last five years — tax and cash irregularities constituted an average of 83% of the composite of financial irregularities. The financial irregularities over the period were largely driven by high tax irregularities (GHS 9.13 billion; 65.49%) caused by the failure of the Ghana Revenue Authority (GRA) to collect taxes due to the state and enforce compliance”.
IMANI – OXFAM

Besides the tax irregularities, cash irregularities also constituted a significant proportion of the total financial irregularities uncovered by the Fiscal Recklessness Index 2020 Project.

A total of GHS2.9 billion, representing about 21.4% of the total irregularities, was recorded between 2015 and 2020. IMANI Africa explained that the cash irregularities were largely driven by unapproved disbursement of funds, unapproved transfer of funds, and delays in the lodgment of public funds into the respective public accounts.

Other relatively smaller irregularities comprised debts, loans & advances (GHS1.20 billion; 8.58%), contracts (GHS387 million; 2.78%), stores/procurement (GHS136 million; 0.98%); rent (GHS85 million; 0.61%) and payroll irregularities (GHS14.6 million; 0.10%).

Laws and regulations over the years to improve public finances

The report acknowledged that Ghana has enacted various laws and regulations over the years to improve public finances and service delivery.

“Despite these laws and regulations and accounting and auditing standards, political economy issues (the country’s underlying political settlements regime) continue to hamper the effective implementation of PFM systems, resulting in the regular occurrence of financial irregularities. This includes over politicization of government function and the lack of independence of state institutions coupled with weak corporate governance in the public sector”.
IMANI – OXFAM

According to IMANI Africa, the Auditor-General, through the annual audit report, is able to disallow and surcharge officials for specific unaccounted expenditures.

“However, the execution of the disallowance and surcharge mandate is, in our view, not enough unless this is followed by additional processes such as prosecutorial action that lead to the refund of misapplied State monies”.
IMANI – OXFAM

The report recommended that the Auditor-General must rigorously apply the disallowance and surcharge powers given to it under Article 187 (7) (b) of the 1992 Constitution. It also urged the Attorney General to further enforce punitive measures against persons/individuals found to have committed irregularities without delay.

The report analyzed the Auditor-General’s report of Ministries, Departments and Agencies (MDAs) in Ghana from 2015 to 2020 to reveal the fiscal recklessness of public institutions vis-à-vis the public financial management (PFM) safeguards.

To carry out this task, a Fiscal Recklessness Index (FRI) was developed that effectively tries to measure the extent of fiscal discipline or otherwise of an MDA using the Auditor-General’s report. This was complemented by qualitative analysis involving interviews with some selected stakeholders involved in PFM in Ghana.