A-G’s audit, its compliance with Financial Management Rules: A Critical Evaluation
In March 2020, there was “public furore” and outrage in Parliament following revelations by the Administrator of the Ghana Education Trust Fund (GETFund) that the Auditor-General (A-G) presented a budget of GH¢350,000 budget for ‘fieldwork and logistical costs’ to enable him to conduct the audit of GETFund’s accounts from 2012 to 2016. The Administrator also expressed “grave disappointment” with the work performed and asserted that it was a “poor job with little professional touch … which must not be tolerated by any auditing firm.”
On October 3, 2022, the President directed the Director-General of SIGA to work with the A-G “to drill down the causes of the infractions, identify the persons responsible and make the necessary recommendations as prescribed by law, and gave the Director General of SIGA and the A-G four weeks to submit a report on that to the Chief of Staff (Myjoyonline.com October 3, 2022). This directive was after a group called Citizens’ Coalition, which is made up of notable members of civil society, media and the legal fraternity, petitioned the A-G in September 2022 to apply his surcharge and disallowance powers granted by Article 187(7) of the 1992 Constitution to retrieve over GH¢17 billion of financial irregularities reported in the 2021 financial year.
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Bleak picture
Unfortunately, the outcomes of various appeal cases against surcharges and disallowances following the A-G’s implementation of the seminal Supreme Court’s ruling in Occupy Ghana versus Auditor-General paints a bleak picture of lost opportunity against the bloated national expectation of recovery of misappropriated resources. This may be a reflection of the absence of substance in the amounts reported as irregular, and the ineffectiveness and efficiency of the Auditor-General and the Audit Services. This report will reveal the anomalies and reveal the overstatement of irregularities in the A-Gs report of Public Accounts of Ghana – Public Boards, Corporations and Other Institutions.
Frustrations
It also appears that there are worrying frustrations in the appointment of external auditors for State Owned Companies (SOEs) by the A-G with adverse implications on the SOEs’ financial reporting compliance requirements under the Companies Act 2019 (Act 992) and Public Financial Management Act 2016 (Act 921). According to the A-G, there are “unforeseen delays in the procurement process for appointing auditors under the Public Procurement Act” and “a level of misconception among certain SOEs as LLCs [Limited Liability Companies] concerning the Auditor General’s mandate to audit them, notable among them VALCO and Tema Oil Refinery (TOR)” (2018 SOR). He adds that “the mandate of the Auditor-General is not affected by the status of some SOEs as LLCs.”
The A-G’s position may reflect a confusion between his mandate under article 187(2) of the Constitution to audit public accounts for Parliament and the statutory requirement for auditing for under Companies the Act 2019.
As Emile Woolf explains, “‘private’ [in this case government] audit is undertaken at the behest of an interested party (e.g. a sole trader) or parties (e.g. parties in a partnership), with a determined scope of audit. A ‘statutory’ audit, on the other hand, arises under the Companies Act as a result of which it has become a statutory obligation for the accounts of every limited company to be audited” (Woolf, 1986). The scope of the statutory audit is largely determined by the governing legislation, which the directors, shareholders, or even the auditors of the client company have no authority to vary in any way.
Furthermore, a review of the 2020 State Ownership Report (SOR) indicates that in addition to the audit of most public corporations, the Auditor-General currently audits at least eight (8) large SOEs including Electricity Company of Ghana Ltd, BOST, Ghana Water Company Ltd, and Graphic Communications Group Ltd and charge amounts similar to previous audit fees that are described as ‘budget for incidentals.’ Interestingly, the Audit Service requests the SOEs to pay specified amounts for incidentals into an account designated “Director of Audit, Finance & Administration” with the Bank of Ghana. Arguably, a charge for incidentals or fees by the Audit Service contravenes article 187(11) and (14) of the 1992 Constitution and section 26 of the Audit Service Act, 2000 (Act 584) which state that all salaries and allowances, and the administrative expenses of the office of the Auditor-General payable to or in respect of persons serving in the Audit Service shall be a charge on the Consolidated Fund.
This report will reveal the errors in the 2018 and 2019 financial statements of a selected SOE audited by in 2020 and 2021.
Audit
Importantly, regulation 204 of the Public Financial Management Regulations, 2019 L.I. 2378, clearly states that the annual financial statements of a Public Corporation or a State Owned Enterprise shall be audited by an external auditor licensed under the Chartered Accountants Act 1963 (Act 170) and appointed by the Auditor General and in accordance with International Standards on Auditing. The above issues concerning the Office of the Auditor-General and corporate governance, raise important questions on possible breaches of the Constitution, the Public Financial Management Regulations and the Companies Act 2019.
This article explores the A-G’s mandate, State Ownership Reports and the relevant public financial management laws as well as matters arising and provide recommendations to incite a national debate for corrective actions. Auditor General’s Constitutional and Legal mandate for the audit of Public Accounts Article 187 (2) of the 1992 Constitution and section 11 of the Audit Service Act 2000(Act 584) stipulate that the public accounts of Ghana and 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 organisation established by the Act of Parliament shall be audited and reported on by the Auditor-General. Article 187(5) continues that the A-G shall submit his report to Parliament within six months after the end of the immediately preceding financial year, drawing attention to any irregularities in the accounts audited and to any matter which in his opinion ought to be brought to the notice of Parliament for its debate and dealing with matters arising. Section 84 of Public Financial Management Act 2016 (Act 921) echoes that the A-G shall, within six months after the end of each financial year, examine and audit the public accounts submitted under the Act in accordance with article 187 of the Constitution and the Audit Service Act, 2000 (Act 584). Article 184(2,3,4) and Section 12 of Act 584 also require the A-G to audit the Bank of Ghana’s statement of foreign exchange receipts and payments or transfers in and outside Ghana and submit his report within three months to Parliament for its debate and the appointment of a committee to deal with matters arising.
In order to safeguard the independence of the Auditor-General, Article 187 (11) and (14) of the 1992 Constitution and section 26 of the Audit Service Act, 2000 (Act 584) provide that the salaries and allowances, and the administrative expenses of the office of the Auditor-General including all salaries, allowances, gratuities and pensions payable to or in respect of persons serving in the Audit Service shall be a charge on the Consolidated Fund.
Issuance of Surcharge, disallowances
Importantly, following the Supreme Court’s ruling on Occupy Ghana Vrs Attorney General [2017], public expectation has been elevated on the A-G’s mandate provided under Article 187(7)(b) and Section 17 of Act 584 to “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.” In the above Supreme Court ruling, the judges stated that, “we are also of the view that, the Auditor-General is expected to name the persons who commit irregularities etc, under Article 187 (7) (b) and Section 17 of Act 584 respectively, recover the amounts from them and thereafter those persons be made to face appropriate punishment. That should be the way forward” (Occupy Ghana V Attorney General).
However, article 187(9) allows a person aggrieved by a disallowance or surcharge made by the A-G to appeal to
To be cont’d