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IMANI Launches Fiscal Recklessness Index, MDAs Losses GHS 4.9 Billion

Evans Junior Owuby Evans Junior Owu
October 23, 2024
Reading Time: 7 mins read
Evans Junior Owuby Evans Junior Owu
in General News
0
IMANI Launches Fiscal Recklessness Index, MDAs Losses GHS 4.9 Billion

The IMANI Centre for Policy and Education has released its latest Fiscal Recklessness Index, which revealed alarming levels of financial mismanagement among Ministries, Departments, and Agencies (MDAs) in Ghana.

The report, covering the period between 2021 and 2023, identified GHS 4.9 billion in financial irregularities, a figure that highlights a significant lack of fiscal discipline within the public sector.

From 2021 to 2023, MDAs recorded a total of GHS 4.9 billion in financial irregularities. This according to the policy think-tank is nearly double the combined budget allocated to the Ministry of Gender, Children, and Social Protection during the same period, a stark indicator of the extent of financial wastage.

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“If you try to juxtapose to GDP for each of the years the total financial irregularities of GHS 4.9000000000 is about 2.63% of our GDP in 2023, which is very significant because between 2021 and 2023 if you look at how much we spend on a ministry like Ministry of Gender, Children and Social Protection because this is the institution at the centre of the country’s poverty reduction.

“How much we spend on that ministry is just an average of about 0.5% of GDP per year between 2021 and 2023 if you are spending 0.5% of GDP on the Ministry of Gender, meanwhile, the financial irregularities of your MDAs is almost 2.6 3% of your 2023 GDP and between 2021 and 2023 over those 3 years every year financial irregularities is about 0.7 per cent of our GDP. That is how much we are bleeding”.

IMANI’s Fiscal Recklessness Index Report, 2024

This trend according to IMANI paints a grim picture of the financial haemorrhaging within the public sector, further evidenced by the fact that government oversights and mismanagement continue to persist despite reforms aimed at enhancing fiscal responsibility.

Tax Irregularities Dominate

One of the most glaring issues uncovered in the report is the prevalence of tax irregularities, which made up the bulk of the GHS 4.9 billion. A staggering GHS 4.4 billion of this amount was attributed to uncollected taxes.

These tax irregularities are rooted in a number of failures within the tax system, including businesses collecting Value Added Tax (VAT) from customers but failing to remit these funds to the government.

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IMANI’s analysis revealed that, in 2021 alone, 10 state institutions owed nearly GHS 1.25 billion in taxes, while GHS 361 million in VAT collected by traders had not been paid to the state.

“Businesses that have been issued VAT receipts collect the VAT, but they don’t give it to the government. Also, several state agencies owe taxes and are not paying. For example in 2021 about 10 state institutions owed almost GHS 1.25 billion in taxes that they had not paid and we had almost about GHS 361 million VAT traders had not paid to the government and these are VAT that you and I have paid at the business level, but government is still yet to receive it”. 

IMANI’s Fiscal Recklessness Index Report, 2024

Oil marketing companies were also flagged for failing to pay their taxes on time, with debts frequently rescheduled without being settled.

This, IMANI noted not only points to weak tax enforcement but also demonstrates the failure of government agencies to recover revenues that could otherwise have been channeled into other critical sectors.

Cash Irregularities and Embezzlement

Beyond tax irregularities, cash irregularities were also significant. These include cash transactions that lacked proper documentation or were misappropriated.

The IAMNI’s report noted that according to the Auditor-General’s report submitted to Parliament, fraudulent withdrawals and embezzlement have become more prominent.

“If you look at cash irregularities, in 2021 at the Department of Urban Roads, a particular finance officer was able to withdraw illegally or fraudulently about GHS 1.5 million, and this is what has been validated by the auditor general report submitted to Parliament in which the Public Accounts Committee have sat on it. So if we’re seriously committed to fiscal discipline, some of these things would never, have happened”.

IMANI’s Fiscal Recklessness Index Report, 2024

These findings, IMANI noted raise serious concerns about the integrity of Ghana’s financial management systems, especially since several MDAs have been uploaded onto the Ghana Integrated Financial Management Information System (GIFMIS).

This growing trend of embezzlement comes at a time when the government has committed to fiscal reforms and transparency, further complicating efforts to restore trust in public financial management.

Legislative Violations and Payroll Fraud

IMANI’s report also highlighted widespread violations of the Public Financial Management (PFM) Act, particularly around loans and advances.

These loans are meant to be logged on the GIFMIS platform to ensure traceability, yet many advances remain uncollected.

Additionally, the report disclosed that payroll fraud continues to plague the public sector, with unearned salaries being paid to individuals who are no longer employed or who have been transferred from their posts.

Dennis Asare
Dennis Asare, Senior Research Associate · IMANI Center for Policy and Education, Presenter of IMANI’s Fiscal Recklessness Index Report

Comparison with Previous Years

While the total amount of financial irregularities has decreased compared to the previous Fiscal Recklessness Index, which covered 2015 to 2020 and recorded GHS 13.9 billion in financial losses, IMANI cautioned that the downward trend may be deceptive.

According to the report, financial irregularities saw a marked decrease during the middle of the 2021 to 2023 period, likely due to fiscal discipline measures introduced during the COVID-19 pandemic.

However, this discipline was short-lived, as the report notes a resurgence in irregularities beginning in 2021.

“And we also look at the average year-on-year growth and over the 5-year period. That is between 2015 and 2020. The average year-on-year group, growth of the financial irregularities was over 100%, which means that the seems to, like, be growing in leaps and bounds. But even though at some point in time, they decline, largely in terms of composite sum, they are very significant.

“And just in the last 3 years, the year-on-year growth is around 18%, which means that we’ve started another positive growth of incurring financial irregularities again within a period where we are implementing a new public financial management reform program. So what is happening at the institutional level?”

IMANI’s Fiscal Recklessness Index Report, 2024

Institutional Failures and Weak Compliance

Moreover, the Fiscal Recklessness Index exposed the systemic weaknesses within Ghana’s institutional structures.

Despite the creation of revenue assurance and compliance enforcement teams within the Ministry of Finance, IMANI noted that financial irregularities—particularly tax-related ones—have persisted.

“For example, in 2021, the Ministry of Finance awarded contracts for conference facilities of almost GHS 1,200,000 without using any of the procurement methods in our procurement act, and it went through, and this is reported by the Audit-General.

“And so we compare the 2 periods, but what is staggering here is that it does appear that the irregularities have shrunk in the other typologies, and now the irregularities are highly concentrated around taxes”.

IMANI’s Fiscal Recklessness Index Report, 2024

This, IMANI insisted is as a result of a failure to enforce compliance with tax laws and a broader issue of weak internal audit systems.

IMANI argued that if internal audits were functioning effectively, issues such as wrongful public procurement and cash irregularities would have been flagged long before they reached the external audit stage.

IMANI’s latest Fiscal Recklessness Index serves as a stark reminder of the deep-seated fiscal indiscipline within Ghana’s public sector.

The significant financial losses reported between 2021 and 2023 underscore the need for urgent reforms in tax enforcement, financial management, and institutional accountability.

The Fiscal Recklessness Index is a call to action for policymakers, civil society, and the public to hold MDAs accountable and to demand stronger oversight and compliance mechanisms that ensure financial discipline and transparency in public sector management.

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