REGULATORY FRAMEWORK OF PUBLIC SECTOR ACCOUNTING IN GHANA
This chapter will explain the legal and regulatory framework under-pining Public sector accounting.
The regulatory framework of public sector accounting, The regulations and acts as well as directives and circulars about managing public resources or fund make up the totality of regulatory framework. The regulatory framework aims to make sure that pubic organizations manage their finances in ways that are efficient, effective and economical.
The legal framework that regulated public sector financial operations in Ghana includes:
- The 1992 constitution
2. The financial administration act (2003) act 654
3. The financial administration regulation (2004) LI 1802
4. The internal revenue Act
5. The Bank of Ghana Act
6.The District Assembly Common fund Act
7. Procurement agency Act (2003) Act 663
8. Audit service Act (2000) Act 584
9. Internal audit agency Act (2003) Act 658
Any other regulation that Parliament may enact from time to time
It has become almost a maxim or a cardinal principle in every state that before any institution in the stat an obtain government recognition or funding, if necessary, it must be shrouded in government legality, quasi-legality or some government regulations. As such almost every institution of the government is covered by laws and regulations.
Laws are enabling acts, but regulations which emanate to recognize that almost all start institutions have stewards, which could either be an individual or a group who are clothed with authority by the government to perform their duties .
some steward have budgets funded by the state, some others have authority to levy fees, taxes or some kind of revenue of their own. Still, some, engage in trading or service activities to obtain funds for running their organization.
Ministers of state, heads of departments, the board of directors and chief executives of various state institutions are all stewards of the government. By law, they are expected to account for their stewardship to government through=h financial and management reporting.
It must also be recognized that all tasks of government invariably translate into budgetary and financial transactions. The public and the government alike think of the financial dimensions of governmental decisions.
Public sector accounting, to a large extent, is expected to provide both financial and quantitative analysis to the public and to the government to reflect the sensitivity of the ordinary citizen of the `country.
It is also expected to provide flexibility in governemtn accounting policies by anticipating the likely shape of institutional programmes that would emerge due to stable or unstable financial outlays.
In this regard, public sector accounting procedures must be strictly implemented to prevent the risk or likelihood of institutional failures.
Therefore, the regulatory framework provided by governemtn has cheks and point of access to government financial resources.
It also has many guardians or financial stewards at different points of the financial system. there are also several laws and instructions enacted and developed over time for purpose of control
ROLE OF REGULATORY AUTHORITIES
EXECUTIVE (Office of the president/cabinet)
Decisions on government policies with regard to financial outlays are taken by the office of the president together with the cabinet representing the executive arm of government.
In the course of making decisions with financial implications, the president and cabinet exercise careful control about appropriations.
This is because whatever decisions are taken at that level must be approved by parliament. Executive control of governemtn finances is therefore very crucial and critical especially with the view not to overburden the taxpayer, and at the same time exercise careful commitments acceptable to the legislature
According to the rules in the 1992 constitution, no revenue shall be levied or expenditure incurred excepts as authorized by parliament. It is imperative therefore for the executive to obtain parliamentary consent, both to raise money (revenue) and to spend it (disbursements).
Parliamentary financial control is exercised in three different phases, namely appropriation, audit and review by public account committee.
Before parliament approves the utilization of public fund it follows certain basic rules of financial control, namely:
- Appropriate budget authority; that is, expenditure is authorized in the approved estimates or by law, or by the ministry of finance and officer in control or accountable for the use of such public money is indicated.
- Appropriate budget period; that is expenditure has been authorized within the specified financial year or period.
- Appropriated budget classification, that is, account codes, and other classification are provided that are proper and correct.
- Appropriate budget reallocation approved by the ministry of finance
- Value for money; that is the due economy will be exercised in the use of the funds;
- Payments and for purposes for which they are intended.
- Documents supporting expenditure are valid and appropriate
- Relevant rules and regulations pertaining to the expenditure will be adhered to
- Expenditure will be subject to internal and external audit scrutiny
In satisfying itself that the rules on the appropriation of public funds are followed parliament has the power to approve the appointment of the auditor general to examine both the accounts of the executive arm of government and also to assist it to ascertain that rules governing procedures on expenditure and principles of public sector accounting have been applied.
The auditor general is also obliged to report to parliament any non-adherence to the law and also draw the attention of parliament to instances of wasteful expenditures, losses, malfeasance, etc
Review by the public accounts committee
The public accounts committee does a thorough study of the audited accounts of the government which is submitted to its office. It examines breaches of the law or wasted, and summons MDA’s and MMDA’s to account for their stewardship
THE MINISTRY OF FINANCE (MOF)
The ministry of finance has the overall responsibility as an overseer ministry for financial management in the country.
The MOF also has oversight responsibilities over public corporations with regard to how their financial affairs are conducted.
In the pursuit of financial management functions, the ministry of finance is empowered by the law to make regulations or give orders in respect of all or any of the following:
- The collection, management and administration of, and the accounting for public and trust monies;
- The maintenance of records of the property of government:
- Subject to the provisions of any enactment, any purpose necessary for the efficient administration of public finance:
- Anything which is required or authorized to be made by regulations or orders
- The minister is required to approve of all memoranda requiring the appropriation of public monies before they are submitted to parliament, indicating the financial implications relating to the appropriation. The minister may, by regulations approved by parliament, authorize the reallocation of expenditure with the ambit of a departments appropriation.
- The minister may by regulations approve by parliament, delegate his powers of reallocation to any principal officer, head of ministry or department who shall exercise those powers personally
- Subject to the provisions of the state property and contract Act, 1960(C.A.6), with the prior approval of parliament, the minister may by legislative instrument make regulations or orders with respect to all or any of the following matters
- The conditions under which contracts may be entered into and
- The security to be given in the name of the government to secure the due performance of contracts
- The minister also has the authority to cause investment of public monies on behalf of the government in the purchase of securities and manage such investment
- The minister may also appoint officers to examine departmental records accounts and procedures relating to government stores and to verify stocks and to report to him thereon. Such officers shall have access to records, subject to the same limitations, as provided for the CAG and his staff under.
The minister of finance is required to give direction to the controller and accountant general to:
- Provide accounting and other services in connection with the collection and accounting of public and trust money by any governemtn department, and
- Examine the collection and accounting practices applied in such department and report thereon to him.
(ii) Regulatory Role of Controller and Accountant-General
In exercising his functions the controller and accountant general performs the following financial control duties
- Relating each spending departments requirements to the economic resources estimated to be available, and the total claims on them
- Keeping public expenditure within total resources for the year
- Advising departments on economic and financial policy, via treasury circulars
- Controlling government expenditures through co-ordination and monitoring operations of MDA’s and MMDA’s
- Considering matters covered by the reports of the public accounts committee of parliament and co-operating to improve financial control
- Initiating programmes to improve financial management, including the provision and guidance on changes in practices needed to promote improvements, in the public sector accounting
In his capacity as the Chief Accounting Officer, the CAG is also required to
- Be the chief adviser to the minister of finance and the government and heads of departments on accountancy matters
- Approve all department accounting instructions
The CAG is the head of the accounting class, and he is responsible for :
- The design, management and operation of public sector accounting systems
- The provision of financial and accounting services for governemtn departments. He/she is also responsible for the training and posting of its officers either to his own department or to other departments of the public service. Therefore his own department or to other departments of the public service. Therefore requests and for the posting of Accounting Class staff to any departments are to be addressed by the head of the department directly to the CAG
The Controller has the authority to reject any request for payment if he is of the opinion that such payment:
- Would not be a lawful charge against the appropriation
- Would result in an expenditure in excess of the appropriation or
- Would so reduce the balance available in the appropriation that it would not be sufficient to mee the commitments charged against it.
Public Accounts and Other Government Accounts
The documents and records pertaining to public and trust monies received into, held in and paid from consolidated fund constitute the public accounts and the law entrust these into the care of the CAG.
Monthy and Annual Statement of Public Accounts
The CAG is expected to draw up and sign a monthly statement of the public account and publish such statement in the Ghana Gazette
Additionally, the CAG is expected to draw up and sign on annual statement fo the Auditor General and to the chairman of the public accounts committee three months after the end of the financial year
Regulatory Role of the Auditor-General
The Auditor-General is appointed by the government in consultation with the council of state in accordance with Article 70(1B) of the constitution. He could be relived his position by the president on grounds of stated misbehaviour, incompetence and incapacitation of mind or body after observing the process of removal.
He is responsible for the audit of the public accounts
Other powers of the Auditor General
Under Article 187(7b) of the constitution, the Auditor General has the power to disallow any item of expenditure which is contrary to law and to a surcharge:
- The amount of any expenditure disallowed pon the person responsible for incurring or authorizing that expenditure or
- Any sum which has not been duly brought into account upon the person by whom the sum ought to have been brought into account or
- The amount of any loss or deficiency upon any person by whose negligence or misconduct the loss or deficiency has been incurred.
Regulatory role of Heads of MDA’s and MMDA’s
Heads of MDA’s
- Manage and operate the MDA’s accounting systems, so as to ensure the accountability of all officers transacting such business and facilitate the efficient discharge of such business
- Ensure that the departments accounting system has been approved by the CAG in consultation with the Auditor General
- Secure the efficient and effective use of appropriations under departmental control within the ambit of government policy, and in compliance with enactment regulations or instructions issued under the authority of any enactment
- Secure the duly and proper collection of government revenue collectable by the department within the terms of any enactment, or of instructions issued or approved by the Controller and Accountant Genera
- Requisition, commit, order, received and make payments for the department and in accordance with these regulations and any other enactment
- Receive and order the disbursement of any trust monies for which the head of the department has been appointed as administering authority by or under any enactment or agreement
- Manage and reconcile the bank accounts authorized for the department by the controller and accountant general
- Preserve in good order and secure the economical use of all equipment and stores used by the department
- Transact any other financial business for which the head of the department is made responsible, by under any enactment in accordance with the requirement of such authority or instruction issued or approved by the minister
- Prepare monthly accounts in a form prescribed and for time periods set by the CAG in the accounting manual and prepare sign and submit within three months after the end of the year, to the minister, the Auditor General and the CAGD annual departmental accounts in the form prescribed by CAGD in consultation with the Auditor General
- Answer such questions as are arisen by the auditor general in respect of the financial transactions and account of the department and
- Appear before the public accounts committee to make such explanations as required by the committee in respect of the annual departmental accounts.
The Financial Administration Act, 2003 (Act 654)
- The Act defines clearly the powers and responsibilities of financial stewards (individual officeholders) and their precise roles. It defines the central players in the financial administration of the country, the assignment of responsibilities, their functions and roles. This includes the duties of the controller and accountant general.
- Its establishes the conditions for the control and management of public funds
- It establishes the consolidated fund, the central mechanism for the control of public finance, outlining the principles by which funds are collected into the consolidated fund, kept and disbursed
- It establishes the modalities for the collection of revenue.
- It establishes budgetary control over public finances related to revenue and expenditure, and to receipts and payments. For example, it outlines government borrowing and lending, transactions in trust monies and any other transactions occurring within the consolidated fund.
- It describes the conditions under which appropriations are made. Government expenditure is subject to annual legislative appropriation.
- It establishes the mechanism by which the controller and accountant general ensures that payments from appropriations are lawfully made. No payment must be made except in a manner provided by law. Specific enactments may give continuing authority for payments such as charged expenditure.
- It’s established principles under which government accounts are managed and kept, the preparation of government accountability and the reporting of final accounts of the government.
- It describes the management and accountability of government stores.
- It outlines the establishment and operations of revolving funds.
- It established the audit of government accounts and those of statutory boards and corporation
- Its describes principles for financial control of statutory boards and corporation.
- It describes the conditions for liability, offences and penalties and the establishment of Financial Administration Tribunal.
Audit Service Act,2000 (Act 584) Major Provisions
The sections described below cover the most important areas that readers must know.
Section 11 – Audit of Account Generally
- The public accounts of Ghana and of all public offices, including the courts, the central and local government administrations, of the universities and public institutions of like nature, of any public corporation or other body or organization established by an Act of parliament shall be audited and reported on by the Auditor-General.
- For the purpose of subsection (1), the Auditor-General or any person authorized or appointed for the purpose by the auditor general shall have access to all books, records, returns and other documents including documents in computerized and electronic form relating to or relevant to those accounts.
- The public accounts of Ghana and of all persons and persons and institutions referred to in subsections (1) including computerized financial and accounting systems and electronic transactions shall be kept in such form as the auditor general shall approve and shall be subject to review by the auditor general.
- An internal auditor of an organization or body to which subsection (1) applies shall submit a copy of each report issued as a result of internal audit work carried out of the auditor general.
- All financial and accounting systems in respect of the accounts provided under subsection (1) shall be subject to prior approval of the auditor general, and any change in any such system shall be notified to the auditor general and shall be subject to prior approval before implementation.
- Any head of a public institution or other body subject to auditing by the auditor general who fails to comply with subsection (5) is liable to be surcharged with the cost of any loss occasioned by defective or deficient in internal controls of auditing.
Section 12 – Audit of Foreign Exchange Transactions
- The Bank of Ghana shall, not later than three months
- After the end of the first six months of its financial year and
- After the end of its financial year, submit to the auditor general for audit, a statement of its foreign exchange receipts and payments or transfers in and outside Ghana.
- The Auditor-General shall, not later than three months after the submission of the statement referred to in section (1) submit his report to parliament on the statement.
Section 13 – Examination of Accounts
The auditor general shall examine in such manner as he thinks necessary the public and other government accounts and shall ascertain whether in his opinion:
- The accounts have been properly kept,
- All public monies have been fully accounted for, and rules and procedures applicable are sufficient to secure an effective check on the assessment, collection and proper allocation of the revenue:
- Monies have been expended for the purpose for which they were appropriated and the expenditures have been made as authorized;
- Essential records are maintained and the rules and procedures applied are sufficient to safeguard and control public property; and
- Programmed and activities have been undertaken with due regard to economy, efficiency and effectiveness in relation to the resources utilized and results achieved.
Section 14 – Auditing of Statutory Corporation
- Om respect of the accounts of a statutory corporation, a state enterprise or a public commercial institution operating under its own enactment, the auditor general or any person appointed by him shall upon the examination of the accounts of the body or institution, express his opinion as to whether the accounts present fairly financial information in accordance with the applicable statutory provisions, stated accounting policies of the government, and is in accordance with generally accepted accounting standards and essentially consistent with that of the preceding year.
- The auditor general or any person appointed by the auditor-general to audit the accounts of statutory corporations shall in addition to the audit report draw attention to the following:
- The profitability, liquidity, stability and solvency of the corporation, and also the performance of the shares of the corporation on the capital market, where relevant;
- Whether there was a delay in the payment of the government portion of any declared dividend, if any, into the consolidated fund;
- Any significant cases of fraud or losses and the underlying causes;
- The internal control weakness noted; and
- The general corporate performance indicating:
a. Achievement against set targets and objectives;
b. and whether the finances of the body have been conducted with due regard to economy, efficiency and effectiveness having regard to the resources utilized.
Section 15 – Examination on receipt of controller and accountant generals report on public accounts
The auditor general shall, upon receipt of the annual statements of public accounts as required, by the Financial Administration Act, 2003 (ACT 654) examine the statement and certify whether in his opinion the statements presented are fair and financial information on the accounts, are in accordance with accounting policies of the government, and consistent with statements of the preceding year in accordance with best international practices, and may state such reservation or comment that he considers necessary.
Section 16 – Submission of the special audit report to parliament
The auditor general may in addition to the audit of public accounts, carry out in the public interest such special audits or reviews as he considers necessary and shall submit reports on the audits or review undertaken by him to parliament.
Section 17 – Disallowance and surcharge b auditor – General
- The auditor – General shall specify to the appropriate head of department or institution the amount due from any person upon whom he has made a surcharge or disallowance and the reasons for the surcharge or disallowance.
- A sum specified by the auditor general to be due from any person shall be paid by that person to the department or instituting as the case may be, within 60 days after it has been so specified.
- A person aggrieved by a disallowance or surcharge made by the auditor general may appeal to the high court not later than the expiration of days prescribed in subsection (2).
- In accordance with Article 187(10) the rule of court committee may, by constitutional instrument, make the rule of court for the purpose of subsection (3) of this section.
- Any sum which lawfully due under this section shall, on civil proceedings taken by the head of the department in a court be recoverable as a civil debt and where the person surcharged is in receipt of remunerating from government or any institution, the remuneration shall be attached to the extent of the sum lawfully due.
- In any proceeding for the recovery of that sum, a certificate sighed by the auditor general shall be prima facie evidence of the facts certified.
- The Auditor-General may with the prior approval of parliament revoke any surcharge made under this section.
Section 18 – independence and powers of the auditor general
- In the performance of his functions under this Act any law, the auditor general
- Shall not be subject to the direction or control of any other person or authority;
- May disallow any item of expenditure which is contrary to law and surcharge
- The amount of any expenditure disallowed upon the person responsible for incurring or authorizing the expenditure
- Any sum which has not been duly brought into account, upon the person by whom the sum ought to have been brought into account; or
- The amount of any loss or deficiency, upon any person by whose negligence or misconduct the loss or deficiency has been incurred.
- Paragraph (a) of subsection (1) shall not preclude the president, acting in accordance with the advice of the council of state, from requesting the Auditor General in the public interest to audit, at any particular time, the accounts of any such body or organization as is referred to in section 11(1)
Section 19 – Submission of Auditor-General’s Report to parliament
- The auditor general shall, within six months after the end of the immediately preceding financial year to which each of the accounts mentioned in this part relates, submit his report to parliament and shall, in the report, draw attention to any irregularities in the accounts audited and to any other matter which in his opinion ought to be brought to the notice of parliament.
- Without limiting the scope of subsection (1), the auditor general in his report to parliament on the public accounts shall draw attention to any case in which he has observed that:
- An officer or employee of Government has willfully or negligently omitted to collect or receive any public money due to the Government;
- Any public money was not duly accounted for and paid into the consolidated fund or other designated public account;
- An appropriation was exceeded or was applied for a purpose or in a manner not authorized by law;
- Expenditure was not authorized or properly vouched for or certified;
- There has been a deficiency through fraud, default or mistake of any person;
- Applicable internal control and management measures are inefficient or ineffective;
- The use or custody of property, money, stamps, securities, equipment, stores, trust money, trust property, or other assets has occurred in a manner detrimental to the state;
- Resources have not been used with due regard to economy, efficiency and effectiveness in relation to the results attained;
- In the public interest, the matter should be brought to the notice of parliament.
Section 21 – Debate by the parliament of the Auditor-Generals reports
Parliament shall debate reports of the auditor general on the public accounts of Ghana, the statement of foreign exchange receipts and payments of the Bank of Ghana, and other special audits, and shall appoint when necessary, in the public interest, committees to deal with any matters arising from the report
Section 22 – audit of accounts by Auditor-General or as requested by parliament
The Auditor-General may whenever parliament so requests and may, of his own motion, inquire into and report on any matter relating to:
- The financial affairs of the government or public property; and
- Any person or organization in receipt of financial aid from the government or in respect of who financial aid the government is sought.
Section 23 – Publication of Reports
- The Auditor-General shall publish his reports on the public accounts of Ghana and the statement of foreign exchange receipts and payments of the bank of Ghana as soon as the reports have been presented to the speaker to be laid before parliament.
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