Govt implements accrual accounting but prioritises CAPEX over road arrears for 2017 Q1
The Minister of Finance, Mr Seth Terkper, has defended its decision to allocate GH¢1.2 billion for capital expenditure (CAPEX) for the first quarter of 2017 without making any provision for road arrears.
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Mr Terpker said the government had resorted to accrual accounting which mandated it to record accounting transactions in the period within which they occur, instead of the period in which the cash flows related to them took place.
“The reason why we have not made provision for road arrears in the budget is that we are making distinction between pipeline projects and completed projects and this phenomenon is derived from our accrual accounting principle,” Mr Terkper said in response to a question on the floor of Parliament.
That, according to the minister, meant that in the preparation of the budget, the country’s budget was shifting from cash accounting to the accrual accounting concept.
“Mr Speaker, we have a contract data base in which we track contracts that have been awarded and are in the pipeline. So the definition of arrears means that certificates that have accumulated and had not been paid for besides the cash flow,”he said.
The tendency of accumulating newer certificates which government would not be able to pay informed the decision not to make provision for road financing, he said.
Mr Terkper indicated that the government had decided to finance road construction through a long-term borrowing approach.
“This is because it is not strategic to put capital expenditure as significant as road financing on the budget and think that you will be able to finance it, while you can borrow on a long term to finance it,” he said.
Minority concern
The Minority recently accused the government of spending GH¢598.6 million from the Consolidated Fund and a further GH¢407.3 million from the Road Fund on road projects within the first seven months of this year but still owes contractors GH¢184.6 million in addition to an outstanding road project bill of GH¢501.2 million.
They contended that instead of funds from the Road Fund being used to finance road projects, they were rather being used to finance heavy projects that do not come under road construction, creating a funding gap of 50 per cent.
The Road Fund is sustained from fuel levies, vehicle registration fees, road-user fees, road or bridge tolls, ferry tolls and international transit fees.
With the passage of the Energy Sector Levy Bill in December, 2015, as well as the over 1,000 per cent increment in road tolls, the fund is expected to accrue GH¢1.2 billion by the end of December, this year.
Govt making provision to pay arrears
Mr Terkper explained that one of the reasons behind the country’s debt increase in recent times was because of the new model for financing the construction of roads.
He stressed that the government was determined to bring to an end the unresolved issues with regard to the payment of road arrears in the country.
But he indicated that the government was making other provisions to pay 2016 arrears owed contractors of all government projects.
Parliament approves
Parliament approved the appropriation of up to GH¢10.99 billion to finance critical government expenditures for the first quarter of 2017. The provision covers estimates for the first quarter expenditure on essentials and other statutory payments.
The expenditure categories cover compensation of employees, goods and services, capital expenditure, interest payment, grants to other government units, non-road arrears, tax refunds and amortisation.
The approval followed a request by Mr Terkper to Parliament to approve expenditure in advance of appropriation from January to March, 2017.
By this approval, the government is authorised to spend from the Consolidated Fund and other public funds to meet its urgent and statutory expenses for the first quarter of 2017, pending the approval of a substantive Appropriations Act for the 2017 financial year.
The request by the minister of finance was in line with Article 180 of the 1992 Constitution.