Review Public Financial Management system to check overspending – EGP

Review Public Financial Management system to check overspending
Senior Lecturer at the Department of Finance-University of Ghana Business School(UGBS), Dr. Vera Fiador

A new report by the Economic Governance Platform (EGP) has called for reforms in Ghana’s Public Financial Management (PFM) system to prevent the overspending and budget overruns which have resulted in huge debts.

The report, titled ‘Public Expenditure and Financial Accountability Report 2006-2018’, revealed that financial indiscipline among government agencies and state institutions resulted in the country incurring debts running into billions of cedis.

The challenge, according to the report, was due to inefficiencies in the PFM system to deliver on the budgetary outcomes of fiscal discipline, strategic resource allocation and efficient service delivery.

The report highlighted that weaknesses still remain in the areas of budget credibility, predictability and control for budget execution, integrity of government financial information and external scrutiny, as well as audit among several others.

It recommended that Ghana’s PFM system is not strong and rigorous enough to check and block overspending and misuse of state resources, hence it must be reviewed and strengthened to protect the public purse.

Coordinator of the EGP, Mr. Felix Ankrah

Analysis of the report

Providing more details of the report at a roundtable discussion in Accra, a Senior Lecturer at the Department of Finance-University of Ghana Business School (UGBS), Dr. Vera Fiador, said there is need to have a clear cut-out definition of expenditure arrears, and a systematic and consistent mechanism for monitoring and measuring such expenditure arrears.

She is of the view that risk analysis prepared by internal audit units should focus equally on compliance risks and efficiency and effectiveness of the internal control systems of state agencies.

“There should be a consolidation of central and sub-national fiscal data for the general government sector; thus, the two levels should use the same classification systems to prevent delayed information to MMDAs on their allocations,” she suggested.

Dr. Fiador stressed that many of the challenges in misappropriation of state funds and overspending can be addressed through a timeous provision of the Controller & Accountant General’s Department reports to the public.

She added that in conducting the budget documentation, comprehensive information should be provided on the main macroeconomic assumptions behind the budget estimates: the analyses of the fiscal deficit, the composition of deficit financing and detailed analyses of the domestic and external debt stock, as well as statements of government’s financial assets.

“The statement of the financial assets should include receivables such as information on the previous year’s outturns with individual MDAs’ estimates; the current year’s revised estimates with the individual MDAs’ estimates, detailed analyses of the expenditure allocations and revenue implications of new policy proposals, among others,” she said.

Time-lag in the report

Reacting to a question on the time-lag of the report, the Coordinator of EGP, Mr. Felix Ankrah, said while there’s a possibility of lag effects in some cases, the decline in performance and substantial fiscal risks posed by several of the indicators are red-flags that require some further attention before definitive actions can be taken.

He explained that the Public Expenditure and Financial Accountability report focuses more on form than function, hence failure in form without failure in function still records low scores.

“In general, the PEFA framework was not designed to indicate why indicators score poorly but only suggest broad areas which might require more attention in the form of specific diagnostics,” she said.

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