The last International Monetary Fund (IMF) Report on the Observance of Standards and Codes (ROSC) for Fiscal Transparency was carried out for Ghana in 2004. This report concluded that Ghana's has made significant progress in improving fiscal transparency and meets the IMF's Code in several areas. However, important shortcomings remain in the area of budget documentation, consolidation of budget spending and internal and external audits. In the same year, the World Bank conducted a Country Financial Accountability Assessment, which also noted recent improvements, particularly in the area of legislation and regulation, but added that Ghana fell short in the areas of implementation and compliance. According to the World Bank report, some of the problem can be attributed to insufficient resources and management practices to implement a complex system of reforms. According to the Open Budget Index for 2006, Ghana scores 42%, earning it the designation of "some openness." Of the seven budget documents tracked by the project, Ghana produces five, only two of which are made publicly available.

General Overview

In 2004, the International Monetary Fund (IMF) published a Report on the Observance of Standards and Codes (ROSC) for Ghana's Fiscal Policy Transparency, in which it concluded that Ghana had been working to improve its transparency. Among the reforms thus far enacted were enhancements to both the legislative and regulatory frameworks and improved procedures for financial management. Passage of the Financial Administration Act of 2003 and the implementation of a better system for recording arrearages and expenditure commitments are two improvements cited by the IMF, as well as the 2004 institution of a formal internal audit agency and an expansion of the scope of the annual budget statement data.

In the 2006 Open Budget Index prepared by Vitus A. Azeem for the International Budget Project's Open Budget Initiative, Ghana scored 42%, leading Azeem to describe Ghana as offering "some" openness. Of the seven budget documents tracked by the project, Ghana does not provide either a Citizen's Budget or a Year-End Report. Of the remaining five documents, Ghana produces and makes publicly available both the Executive's Budget Proposal and a Mid-Year Review. It produces a Pre-Budget Statement, In-Year Reports, and an Auditor's Report, but does not disclose these to the public. Of the publicly available reports, the Index scored the Executive's Budget Proposal as achieving only 64% openness and states that the Mid-Year Report is deficient in important details. No public disclosure has been made as to whether the recommendations on the Auditor's report have been implemented.

According to the ROSC, the fiscal roles and responsibilities of the various branches of Ghana's government are well defined and supported by a solid legal and administrative foundation covering the preparation and execution of the budget. The ROSC noted that the budget includes a discussion of its principle underlying assumptions and offers an overview of its objectives and the measures to be employed in its implementation. In addition, the data provided in the budget "are presented on a gross basis, classified by institution and economic and functional category" (p. 1). However, the ROSC did note a number of significant shortcomings in Ghana's fiscal transparency. Both general and central government budget data is incomplete, and much spending is inconsistently reported or done off-budget or through funds that are not subject to consolidation with central government data. Regardless of the institution of a new internal audit body, both internal and external audits are problematic. Oversight is therefore poor. Finally, the implementation of regulations tends to restrict activity on the part of the private sector. As a result of these issues, the IMF's ROSC recommended that Ghanaian authorities recommit to achieving improvements in these areas. The ROSC specifically called for improvements in the "coverage, timeliness, and managerial orientation of fiscal reports" (p. 1). It also considers it key that greater attention be paid to improving standards of data quality and consistency. Attention should once again be paid to improving audit capacity (both internally and externally), increasing the amount of information published regarding quasi-fiscal activities, simplification of the Medium Term Expenditure Framework employed in the budget process, and recalibrating the budget cycle.

The Country Financial Accountability Assessment (CFAA) conducted by the World Bank in 2004 shared the IMF ROSC's assessment that Ghana had improved its accountability and transparency but that much remains to be done. Implementation has been ineffective, in part because there are insufficient resources and management of the reform process. The World Bank called upon the Ghanaian government to impose safeguards on its accountability system in order to ensure the effective use of public resources. In the 2007 Article IV Consultations with the IMF, it was remarked that Ghana was looking at the potential for an era of accelerated growth and could achieve middle-income status within a decade. This was credited, in part, to recent structural reforms and stabilization programs. According to the report, "Good economic policies have earned Ghana massive external debt relief and financial support from development partners and have increased the interest of investors both at home and abroad" (p. 8). Of special concern, according to this report, is the right-sizing of the public service sector, which was deemed to be too large.

The IMF's 2007 Article IV consultation report recognized that, in the area of data provision and dissemination, Ghana has much work to do. While data is adequate to meet the IMF's needs for surveillance, it remains deficient in the areas of quality and timeliness, and dissemination of information to the public remains inadequate. The report noted that The Bank of Ghana's relatively recent provision, on its website, of the Monthly Monetary Policy Committee Statement, a variety of other statistical releases, and the monthly monetary series covering the period of 2001 to 2006 represents an improvement in this area. To date, the most recent International Finance Statistics data on government finances are for the year 1998, and for national accounts they date back to 1997. Data reported for inclusion in the Government Finance Statistics Yearbook are for 2004. These data, however, are incomplete. The first data posted to the IMF General Data Dissemination Standard (GDDS) website were provided in 2005, and have yet to be updated. The 2007 report also noted that the presentation of price indices was flawed and that technical assistance has been provided to Ghana by the Fund to help resolve these difficulties. Other improvements are being undertaken by the Ghana Statistics Service (GSS). These include bringing the national accounts base year up to 2002 and improving the service's sources and methods, which the IMF consultants found to be outdated. According to the report, the GSS plans to produce quarterly GDP estimates.

The Controller Accountant General Department (CAGD) has improved its compilation and reporting of fiscal data. Timeliness has improved to some extent, but there remains a reliability problem, according to the 2007 IMF report. This is due in part to discrepancies between the reporting conventions of the CAGD and those used by the Bank of Ghana. A committee has been formed by the government to inquire into these problems. The government has also created a new, automated Budget and Public Expenditure Management System (BPEMS) that covers all ministries, agencies, and departments. However, the IMF 2007 report found that the classification system employed by the BPEMS is not yet aligned with the requirements of the Government Finance Statistics Manual of 2001, and reports that a technical assistance mission has been working with Ghana since 2006 to redress this shortcoming.

The Principles

Clarity of roles and responsibilities.

EN

The Ghanaian Constitution of 1992 sets out the definition of the government sector in broad terms, establishing an elected President, his cabinet of ministers, a national council, a parliament (unicameral), and an independent judiciary. For the purposes of fiscal policy and reporting, the government bodies include the central government, local governments, and the Social Security and National Insurance Trust. The Constitution also defines the functions of the government, at both the central and local levels, within the fiscal process. At the local level, it establishes the District Assemblies Common Fund, which is allocated at least 5% of overall government revenues. In addition, the Local Government Act of 1993 establishes the Metropolitan, Municipal, and District Assemblies (MMDAs), which conduct local-level fiscal policy and are authorized to levy fees and other charges to raise funds.

The Constitution allocates to parliament the right to approve taxes and government loans, including borrowing from external sources. It also approves any government withdrawals from the Consolidated Fund, which holds the income received from all revenue sources, including loans and grants, except for certain Constitutionally defined exceptions. The Constitution also requires that the president prepare an annual draft budget for submission to parliament no later than one month prior to the end of the fiscal year. At the time of the ROSC's publication in 2004, the clarification of the legal and administrative framework used in fiscal policy was still ongoing. The Financial Administration Act (FAA) was passed in 2003, and other legislation was being strengthened. The FAA specifically addressed the preparation, approval, and execution processes of the annual budget, and dealt with issues related to procurement, accounting, and auditing, as well. The FAA clarifies the budgetary role of the Ministry of Finance and Economic Planning, the tax agencies, and the customs and excise services. It also establishes accountability for the collection and use of public revenues. The Civil Service Law of 1993 addresses corruption, assigns responsibilities and rights of members of the civil service sector, and sets forth hiring, promotion, and firing policies. Along with the Constitution, the Civil Service Law contributes to the creation of a rudimentary public service code of conduct, and, according to the ROSC, each of the revenue services has produced a more detailed code of conduct for its employees.

Open budget processes

ID

The classification system used in preparing the annual budget was deemed by the IMF 2004 ROSC as meeting international standards only partially. The ROSC acknowledged that Ghana has made some improvements, however, including the provision of information regarding performance, the current situation, and future expectations. Ghana employs a medium-term (three-year) framework to come up with fiscal estimates; and budget classifications are moving toward a closer adherence to international standards. In the preparation of the budget, there has been some progress toward the use of expenditure-performance concepts. However, the data still suffers from deficiencies in both coverage and reliability. The ROSC judged that the employment of the medium-term framework has enhanced Ghana's ability to present budget forecasts.

According to the ROSC, Ghana's medium-term expenditure framework is largely an outgrowth of its Poverty Reduction Strategy. It was implemented in 1999 but met with little initial success, due to economic problems that led to shortfalls in revenues vis-à-vis projections. The government's response to the situation further contributed to a loss of credibility for the framework. The ROSC further reported that framework implementation in the budget, which involved the adoption of new classifications, were initially done piecemeal, resulting in a mismatch in reporting between the budget documents and the chart of accounts. It was hoped that, with economic improvements occurring in 2001, this situation would be resolved, but at the time of the ROSC report, there had been only limited success in this regard.

The government's budget statement largely follows the IMF's Government Financial Statistics Manual (1986 edition) in its presentation of government fiscal operations. According to the ROSC, however, the budget does not provide information beyond the central government's activities. Instead, data regarding the budgets of the local governments are submitted to the local legislatures, and copies are provided to the MFEP. Only aggregate budget transfers to local assemblies are provided to the central government, and the ROSC notes that these offer only a partial statement of local fiscal operations, given that not all local initiatives rely on central government funds. The problems this causes to fiscal transparency are exacerbated by the central government's move toward decentralization. Nonetheless, the ROSC deemed that Ghanaian budget documentation is reasonably transparent and moderately comprehensive, at least at the level of central government fiscal activities and future planning. The ROSC acknowledges that the government recognizes the need to improve budget preparation and reporting, but notes that progress over the short-term is likely to be limited. One area of ongoing difficulty is the fact that the modeling and assumptions used to produce fiscal forecasts are not described in detail in the budget document. The ROSC adds that the budget does not include analyses of the sensitivity of its estimates to changes in economic conditions. Alternative scenarios are not explored, although the budget does broadly acknowledge the possibility of variations in such elements as the price of oil or the exchange rate.

Ghana's procurement system is only weakly supported by legislation and enforcement, and the ROSC found it to lack both transparency and accountability. With the 2003 enactment of the Public Procurement Act, new requirements for clarity and comprehensiveness in procurement were set in place. The Act specifically calls for greater transparency and competition among bidders, better record keeping, and stronger enforcement mechanisms. It also calls for the creation of a mechanism by which grievances may be addressed. Ghana has also taken steps to strengthen its internal audit units, adding both staffing and resources, through the Internal Audit Agency Act of 2003. This Act calls for a centralized agency to be set up to effect improvements in the overall internal audit system and provide quality assurance at both the central and local level.

The FAA establishes a clear set of fiscal reporting rules, lays out a schedule for the submission of the government's monthly and final accounts, and authorizes the parliament to request interim reports from the Accountant General. According to the ROSC, however, reporting is not done in a timely manner, but are, rather, subject to significant delays. As to budget content, the ROSC found that the summary table included therein "intends to capture all expenditures financed by Government of Ghana funds, donor resources and internally generated funds. It distinguishes such statutory payments as debt service, transfers to households, subsidies for utility companies and Tema Oil Refinery and transfers earmarked for the statutory funds... from discretionary payments" (p. 10). However, the ROSC cautioned that fiscal transparency remains inadequate in a variety of areas. Incomplete fiscal reporting by the general and central government remains an issue, particularly with regard to the under- or non-reporting of spending financed by internal or donor funds. The auditing function, both external and external, remains inadequate, and implementation of budget-related legislation has been seen to be detrimental to the activities of the private sector. Equally significant according to the IMF's 2007 Article IV Consultation report, is the fact that fiscal activities on the local government level are excluded from the annual budget.

In the 2006 Open Budget Index prepared by Vitus A. Azeem for the International Budget Project's Open Budget Initiative, Ghana scored 42%, leading Azeem to describe Ghana as offering "some" openness. Of the seven budget documents tracked by the project, Ghana does not provide either a Citizen's Budget or a Year-End Report. Of the remaining five documents, Ghana produces and makes publicly available both the Executive's Budget Proposal and a Mid-Year Review. It produces a Pre-Budget Statement, In-Year Reports, and an Auditor's Report, but does not disclose these to the public. Of the publicly available reports, the Index scored the Executive's Budget Proposal as achieving only 64% openness and states that the Mid-Year Report is deficient in important details. No public disclosure has been made as to whether recommendations on the Auditor's report have been implemented.

Public availability of information.

ID

In the 2006 Open Budget Index prepared by Vitus A. Azeem for the International Budget Project's Open Budget Initiative, Ghana scored 42%, leading Azeem to describe Ghana as offering "some" openness. Of the seven budget documents tracked by the project, Ghana does not provide either a Citizen's Budget or a Year-End Report. Of the remaining five documents, Ghana produces and makes publicly available both the Executive's Budget Proposal and a Mid-Year Review. It produces a Pre-Budget Statement, In-Year Reports, and an Auditor's Report, but does not disclose these to the public. Of the publicly available reports, the Index scored the Executive's Budget Proposal as achieving only 64% openness and states that the Mid-Year Report is deficient in important details. No public disclosure is made as to whether recommendations on the Auditor's report are implemented.

Ghana is not a subscriber to the IMF's Special Data Dissemination Standard (SDDS), but participates in the Fund's General Data Dissemination System (GDDS). Both the IMF GDDS website and the ROSC disclose that the budget includes coverage of most of the fiscal activities of the central government. The ROSC terms the coverage of new fiscal policy and of economic and financial performance as "comprehensive." In addition, the Ghanaian budget provides "summary tables of macroeconomic performance and forecasts and main fiscal aggregates, as well as matrix-form tables of discretionary expenditures funded by domestic general revenues... and foreign donor funds" (p. 10). These data are classified according to organizational and economic criteria. The level of detail in the summary table includes distinctions among expenditures according to the source of their financing: government, donors, and internally generated. It distinguishes between statutory and discretionary payments. Details regarding the breakdown of discretionary expenditures are included in the budget appropriation bill each year.

However, the ROSC notes that the budget execution reports provide only limited data coverage, and they are subject to publication delays. Monthly and final reporting on budget execution is the responsibility of the Controller Accountant General's Department (CAGD). However, the ROSC notes that such reports cover only a restricted subset of accounts. They excludes at least a portion of expenditures financed by foreign agencies, and do not distinguish between funding sourced by the Government of Ghana and funding sourced by foreign donors. The ROSC adds that "in spite of the requirements of the Financial Administration Act (FAA), Article 6 (3), the disclosure of internally generated funds continues to be partial" (p. 10).

Local government operations are excluded from budget documents, according to the IMF's 2004 ROSC. Instead, the district assemblies produce their own annual budgets and expenditure reports, as well as audits of their annual accounts, per the provisions of the Local Government Act. However, the ROSC notes that the preparation of these documents is neither comprehensive nor timely, and they are not publicly available. On the other hand, district assembly common fund aggregate transfers must be approved by the parliament and documented for public access. These transfers are of funds that go to the MMDAs for infrastructural improvements. In addition, local ministerial, departmental, and agency units are required to provide spending reports that cover the assembly-level expenditures for operational costs. In all, the ROSC concludes that Ghana does provide substantial fiscal information, but notes that this information is scattered across individual public agencies and is often not made a part of the formal budget documents.

The ROSC reports that information on the gross government debt is made available, but government asset reporting is neither timely nor adequately detailed. Such data is provided in the aggregate in the CAGD's final accounts, with assets categorized according to the following criteria: cash, advances, loans, and investments. The breakdown on liabilities is according to short-, medium-, and long-term debt, trusts, and loans from foreign sources.

While Ghanaian law sets out the required schedule for budget preparation and publication, as well as for other fiscal reporting, the ROSC found that the schedule is "not fully observed in practice" (p. 12). Parliament is legally mandated to receive the budget by the end of November, but this is a limited presentation that includes only estimates of revenues and expenditures. The actual budget statement is presented after the fiscal year has actually begun. The FAA requires monthly fiscal reports, which the CAGD is required to prepare within 15 days following the month in question. However, the ROSC found that this requirement is often not observed. In fact, monthly statements are published on an unannounced, irregular basis. This problem of timeliness, as well as of data quality, is also apparent in Ghana's reporting to the IMF. Although the IMF's 2007 Article IV Consultations report termed this data to be "adequate for program monitoring and surveillance purposes" (p. 55), it noted that public dissemination of fiscal information is deficient. The report did note that the Bank of Ghana's website has helped improve the situation, through the online publication of the Monetary Policy Committee Statement, as well as other statistical documents. Ghana last reported government finance data for inclusion in "International Financial Statistics" was from 1998, and its last report of national accounts data was in 1997. Ghana does not include balance-of-payments data in this reporting. Finally, the 2007 IMF report noted that Ghana's latest data update for reporting in the "Government Finance Statistics Yearbook (GFSY) were data from 2004.

Independent assurances of integrity.

EN

While the 2003 passage of the Internal Audit Agency Act created a new audit framework, its effectiveness needs to be strengthened. According to the IMF's 2004 ROSC, the Ghanaian government should seek out the assistance of research institutes to improve the assumptions it uses in the budget, and should encourage outside scrutiny of the data it provides to the public. The ROSC further encourages the government to improve the quality of data it receives from all sources, take steps to improve its audit capacity, both internally and externally, and expand coverage to include both quasi-fiscal and contingent liability data. Some attempts toward improving the quality of fiscal data have been undertaken. Monthly reports on budget implementation are compiled by the CAGD, although the 2007 IMF Article IV Consultations found that these are not sufficiently detailed. In addition, the 2007 IMF report found that the GSS releases its data (census, survey) only after long delays.

The 2004 ROSC found that both accounting and reporting procedures have undergone improvement, in part through the opening of ministerial accounts in the Bank of Ghana to cover all expenditures other than salaries. Constitutional provisions establish the office of an operationally independent Auditor General. This is a presidentially appointed office, selected with the consultation of the Council of State. The Constitution establishes the terms of the Auditor General's tenure and conditions of removal. According to the Constitution, the Auditor General examines the accounts of the courts, the central and local governments, all public institutions (including universities), public corporations, and traditional councils. The Auditor General may demand access to all relevant documents and must report annually to the parliament no later than 6 months prior to the end of the fiscal year in question. However, at the time of the 2004 ROSC, the Auditor General's office was running a significant backlog. In addition to the Auditor General, the Constitution also created the Ghana Audit Service (regulated by the Audit Service Act of 2000) and the Audit Services Board. The Audit Services Board is charged with establishing the terms of service for the audit staff, but at present, according to the ROSC, that staff is currently insufficient to its task. The ROSC notes that, "currently, there are delays of 2-3 years and longer for submitting to Parliament some audit reports" (p. 23).

The ROSC also reported that, at the time of its report, there was as yet no external scrutiny carried out regarding the models and assumptions that underlay the budget document, and that parliament is not given access to detailed justifications for forecasts that extend beyond the upcoming fiscal year. The Statistical Service Law of 1985 created the Ghana Statistical Service, which assures independence, at least legislatively. The head of the GSS is a government appointee, and the Service itself is governed by a board of directors who are also appointed by the government. The overall mission of the GSS, according to this law, is to promote effective statistical research and the use of statistics, and to make judgments as to which data is to be made available to the public.