REPORT OF THE AUDITOR-GENERAL ON THE ACCOUNTS OF DISTRICT ASSEMBLIES FOR THE THREE FINANCIAL YEARS ENDED 31 DECEMBER 2007 TABLE OF CONTENTS

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1 REPORT OF THE AUDITOR-GENERAL ON THE ACCOUNTS OF DISTRICT ASSEMBLIES FOR THE THREE FINANCIAL YEARS ENDED 31 DECEMBER 2007 TABLE OF CONTENTS Transmittal letter Paragraph Page ii-v PART I Mandate, Scope and Audit Objectives PART II Summary of Findings and Recommendations PART III DETAILS OF FINDINGS AND RECOMMENDATIONS Financial Reporting Management Issues Cash Management Procurement/Store Payroll Contract Management Statutory Deductions Arrears of Revenue Report of the Auditor-General on the accounts of District Assemblies for the three financial years ended 31 December i

2 APPENDICES Status of Annual Accounts and Statements Appendix A Revenue Performance Appendix B 1 Expenditure Performance Appendix B 2 Operational Results Appendix C Assets & Liabilities by Districts Appendix D Summary of Irregularities by Regions Appendix E Summary of Irregularities by Districts Appendix F Report of the Auditor-General on the accounts of District Assemblies for the three financial years ended 31 December ii

3 TRANSMITTAL LETTER Ref. No. AG.01/109/Vol.2/22 Office of the Auditor- General Ministries Block O Box M 96 Accra Tel: (0302) Fax (0302) September 2010 Dear Madam Speaker, REPORT OF THE AUDITOR-GENERAL ON THE ACCOUNTS OF DISTRICT ASSEMBLIES FOR THE THREE FINANCIAL YEARS ENDED 31 DECEMBER 2007 I have the honour to forward to you to be laid before Parliament, my report on District Assemblies covering the three financial year periods 2005 to 2007 as required by Article 187(5) of the Constitution. Significant findings and recommendations which were made from routine audits conducted under my direction during the three years period were consolidated for the compilation of this report. The initial findings were, however, conveyed to the respective Assemblies in management letters issued on the audits and their responses obtained. Report of the Auditor-General on the accounts of District Assemblies for the three financial years ended 31 December iii

4 Unresolved and outstanding issues in the management letters which are of material relevance and concern to my office have formed the basis for the contents of this report. I wish to state that the accounting records of some of the audited Assemblies were in arrears. As a result, their expected financial statements for the period under review could not be prepared and submitted for validation by my office. However, the financial operations and related activities of these Assemblies were subjected to interim audits and issues arising from these audits are embodied in this report. Generally, this report portrays persistent internal control weaknesses and management inefficiencies which had been issues of concern and commentary in my previous report. These deficiencies have continued to be the major causes of irregularities and lapses in the management of the affairs of the Assemblies. Among these lapses and irregularities commented on are acts of misappropriation and misapplication of revenue, unpresented value books, unrecovered loans and advances and unsubstantiated payments. Other operational lapses noted were unsupplied and unrecorded stores and fuel, unclaimed/unearned salaries, contract, procurement, store and tax irregularities. The financial values of these irregularities are Report of the Auditor-General on the accounts of District Assemblies for the three financial years ended 31 December iv

5 computed in excess of GH 10 million. These excluded revenues collected with over 1,722 revenue collection books which were wrongfully retained by Revenue Collectors and were therefore not accounted for. The anomalies and lapses were the results of low level of commitment towards the enforcement of audit recommendations and the blatant refusal by managements of District Assemblies and their Finance and Administration (F & A) Subcommittees to comply with the financial management provisions in the Financial Memoranda. I also noted the failure by Assemblies to establish effective and viable Audit Report Implementation Committees (ARICs) and Internal Audit Units, in violation of the laws which require the establishment of such internal control mechanisms; a situation which contributed to the flagrant failure to take remedial actions on my reports. As an antidote to eradicate or reduce the spate of irregularities and lapses that have in the past characterised the operations of Assemblies, I reiterate my previous advise that desk officers for respective Assemblies should be appointed within the Ministry to monitor both internal and external audit reports and all other internal monitoring and evaluation reports on financial management matters. Reports on such monitoring and evaluation exercises should then be compiled and Report of the Auditor-General on the accounts of District Assemblies for the three financial years ended 31 December v

6 submitted periodically to the Minister through the ARICs for follow up actions. I would also urge the Ministry (MLGRD) to periodically organise seminars, in- service-training and workshops on the regulatory framework for District Assemblies to improve the efficiency and compliance by officials and operatives of the Assemblies. My office is willing to assist the Ministry in this regard. Timely preparation of accounts and prompt submission of financial statements and subsequent audits and validation of such statements are currently key triggers for budgetary support to District Assemblies under the DDF/FOAT arrangements signed between the Government of Ghana and Development Partners. It is therefore imperative that the Ministry strengthens its monitoring and supervisory role over the Assemblies to ensure the timely submission of the financial statements of all District Assemblies for audits to secure access to the planned budgetary support under the DDF/FOAT facility. I would like to express my appreciation to Chief Executives of the various Assemblies and their staff for their co-operation and assistance during the audits. Report of the Auditor-General on the accounts of District Assemblies for the three financial years ended 31 December vi

7 I also acknowledge the invaluable contribution made by my staff towards the production of this report. Yours faithfully AUDITOR-GENERAL THE RT. HON. SPEAKER OFFICE OF PARLIAMENT PARLIAMENT HOUSE ACCRA Report of the Auditor-General on the accounts of District Assemblies for the three financial years ended 31 December vii

8 REPORT OF THE AUDITOR-GENERAL ON THE ACCOUNTS OF DISTRICT ASSEMBLIES FOR THE THREE FINANCIAL YEARS ENDED 31 DECEMBER 2007 Introduction PART I MANDATE, SCOPE AND OBJECTIVES The Audit Service, in accordance with Articles 187(2) and 253 of the 1992 Constitution, and Section 121 of the Local Government Act, (Act 462) has audited the accounts of the 138 District Assemblies covering three financial years, January 2005 to 31 December Management letters and annual reports arising from the audits which formed the basis of this report have been discussed with the District Assemblies and formally communicated to them for their comments and necessary actions. Responses received, where deemed appropriate, have been included in my report. Scope and audit objectives 3. The audit was guided by Section 13 of the Audit Service Act, 2000 (Act 584) and the auditing standards of the International Supreme Audit Institutions (INTOSAI). Section 13 of the Act requires me to examine, as I think fit, the accounts of audited bodies including District Assemblies to ascertain whether in my opinion: 1

9 the accounts have been properly kept; all public monies collected have been fully accounted for and rules, regulations and procedures are sufficient to provide effective check on the assessment, collection and proper allocation of revenue; monies have been expended for the purposes for which they were appropriated and expenditures made as authorised; essential records are maintained and the rules and procedures applied are sufficient to safeguard and control the Assemblies assets; and programmes and activities of the Assemblies have been undertaken with due regard to economy, efficiency and effectiveness in relation to the resources utilised and results achieved. 4. The audit also ascertained the extent of compliance with applicable laws and regulations including the Financial Administration Act of 2003 (Act 654), Financial Administration Regulation 2004 (L. I. 1802), the Financial Memoranda for District Assemblies and the Public Procurement Act, (PPA) 2003 (Act 663). 2

10 PART II SUMMARY OF FINDINGS AND RECOMMENDATIONS Introduction 5. The District Assemblies, as noted in my previous reports continued to disregard policies and laid down procedures established under existing regulations for the administration of the financial affairs of the Assemblies. This led to persistent recurrence of irregularities noted in my previous report, which have not been followed up for redress at the Assemblies and ministerial levels. 6. Auditing issues including financial irregularities and noncompliance with existing laws and regulations have, in this report, been organised according to thematic subjects, under which cases affecting the District Assemblies have been commented upon. Arrears of accounts 7. Out of 138 Assemblies, 112 failed to prepare and submit to my office on schedule their annual accounts for 2005 to 2007, in violation of Sections 77 and 78 of Part VII of the Financial Memoranda for District Assemblies. Appendix A to the report provides the state of arrears in the preparation and submission of the financial statements as at 31 March

11 8. The accounts of the defaulting Assemblies were eventually prepared with assistance of the Head Office of the Controller and Accountant General who set up special teams to help the Assemblies to update their accounts in the latter parts of DANIDA provided financial support for the exercise. The prepared accounts were then validated by my office which accounted for the unusual delay in the issuance of my current report. 9. While effective supervision and performance monitoring at the District Assembly level have generally been recommended by my office as a solution to this perennial problem, I wish to add that the Ministry itself should get involved by introducing oversight policies and measures including sanctions, to ensure due compliance with the deadline for the preparation and submission of the accounts by all the Assemblies. Misappropriation of revenue - GH 1.1 million 10. The failure by District/Municipal/Metropolitan Finance Officers to supervise and monitor the performance of Accounting Officers and Revenue Collectors as stipulated under Sections 1 and 2 of Part VIII of the Financial Memoranda, resulted in the misappropriation of revenue of GH 1,147,184 in 52 District Assemblies. 4

12 11. The amounts misappropriated should be recovered with interest and the Finance Officers involved sanctioned for negligence of duty. Direct disbursement from revenue - GH 259, Contrary to Section 31 of Part VIII of the Financial Memoranda, 12 District Assemblies disbursed a total of GH 259,183 from revenue collections without first accounting and banking the collections. This practice increased the risk of misappropriation, unauthorised borrowing from revenue for private purposes and other cash irregularities. I once again recommend adherence to the provisions of the Financial Memoranda, and the strengthening of controls over revenue and expenditure. Un-presented value books 13. Revenue Collectors in 22 Assemblies failed to present miscellaneous value books with a face value of GH 146, for audit. Furthermore, 1,722 General Counterfoil Receipt Books (GCRs) with no fixed value meant for the collection of various types of revenue were not presented for audit by 30 District Assemblies. Revenue collected with these books and being retained by the Collectors could therefore not be determined. 14. I once again recommend that the Assemblies take appropriate measures to retrieve all the value books and monies collected with 5

13 those books. The Finance Officers involved should be sanctioned for non-performance of their statutory duties. Unrecovered loans/advances/unretired imprest GH 1.0 million 15. Outstanding loans, advances, unretired imprests and accumulated rent of GH 106,833.5 were recorded in 66 Assemblies, indicating lack of effective performance of the monitoring and supervisory functions placed on management and the F&A Sub- Committees of the Assemblies. 16. To ease cash flow problems of the Assemblies, I recommend that managements of the Assemblies should adopt a more purposeful approach to their duties as enshrined in the Financial Memoranda of District Assemblies. 17. The F&A Sub-Committees should, in this respect perform their quarterly financial monitoring duties specified under Section 2(b) of Part 1 of the Financial Memoranda, to ensure timely recovery of advances. Unsubstantiated payments - GH 3.9 million 18. Unsubstantiated payments amounting to GH 3,880,902 were made by 57 District Assemblies contrary to the provisions of the Financial Memoranda, which require all payments to be substantiated 6

14 and supported with invoices, receipts and other relevant documents. The authenticity of the payments could therefore not be validated. 19. To avoid double payments, manipulations and other improprieties, which unpresented and unauthorised payment vouchers, as well as the non attachment of paid invoices, receipts and related documents to payment vouchers can generate, all Assemblies should be reminded by the Ministry to ensure due compliance with the Financial Memoranda. The amounts involved in the unsubstantiated payments should be recovered from the Authorising Officers if no tangible evidences are provided to support the validity and authenticity of the payments. Unsupplied stores-gh 25, Advance payments in respect of the supply of stores valued at GH 25,730 were made by the management of four Assemblies who failed to ensure delivery of the orders. I urge the Assemblies to pursue delivery of the outstanding items or recover the amounts involved. Unrecorded stores - GH 1.5 million 21. Stores worth GH 1,503,425, including fuel component of GH 310,155 were not recorded in the books of account of 52 Assemblies before they were used, contrary to Sections 18 and 24 of the Financial Memoranda for MMDAs. The non-recording of store purchases before their use is one of the methods used in covering up 7

15 non-delivery, theft and misuse of stores, as stressed in my previous reports. The Assemblies should provide evidence of usage of these stores, failing which the officers involved should be sanctioned or surcharged. I further advise the Assemblies to comply with the provisions of the FMDA on stores management. Unearned salaries - GH 79, Delays in the deletion of names of separated staff from Government payroll resulted in payments of unearned salaries totalling GH 79,664 in 18 Assemblies. 23. I recommend regular payroll reviews and timely deletion of names of separated staff by management and the Controller and Accountant-General so as to reduce the risk of payment of unearned salaries. Contract irregularities - GH 1 million 24. Contract irregularities totalling GH 1,082,100 were noted in 28 Assemblies as a result of non-adherence to the provisions of the Public Procurement Act (Act 663). These include award of contracts without approval by Tender Committees, contract payments without certificates, unauthorised revision of contract sums, payment of contingency without justification, overpayment of contract sums, payment of mobilisation advance without surety bond and failure to sign contract agreements. 8

16 25. These acts are without doubt the cause of increased costs in Government procurement, and need to be curtailed. I urge MLGRD to request the Assemblies to comply with the procurement and contract regulations to ensure judicious, economic and efficient use of public funds. Outstanding statutory deductions - GH 908, As a result of the failure of 43 Assemblies to adhere to the tax laws of the country, withholding taxes amounting to GH 908,546 were either collected and retained by the Assemblies or were not deducted from payments made to suppliers, thereby depriving the Consolidated Fund of the cash inflows. I urge the Assemblies to pursue the recovery of all taxes due and, in the future, ensure full compliance with the provisions of existing laws on all statutory deductions. Arrears of revenue-gh 102, Property owners in three Assemblies were indebted to the Assemblies in the sum of GH 10,469 as at 31 December, We recommended to their management to recover the outstanding amounts from the property owners and ensure that all property rate due the Assemblies are collected on the due dates to enable the Assemblies generate sufficient revenue for their development programmes. 9

17 PART III DETAILS OF FINDINGS AND RECOMMENDATIONS FINANCIAL REPORTING State of accounts 28. Part VII Sections 77 and 78 of the Financial Memoranda require District Assemblies to submit six copies of their annual accounts and statements to the Auditor General by 31 March following the close of the financial year to which they relate. However, many District Assemblies failed to comply with this requirement. As provided in Appendix A attached, out of the 138 Assemblies, 114 had as at 31 March 2008 not submitted their annual accounts and statements up to 31 December 2007, in violation of Part VII Section 78 of the Financial Memoranda. 29. The Assemblies continued to face challenges in the preparation and submission of annual financial statements for validation by the Audit Service. As at 31 March 2008, the 114 Assemblies that had not submitted their financial statements for validation had recorded arrears for periods ranging between one and eight years. Some of the defaulting Assemblies were only able to submit their financial statements for validation after a DANIDA funded special exercise which was conducted between September and 31 December 2008, updated the accounts. Consequently this report covers a total of

18 District Assemblies whose prepared accounts up to 31 December 2007 were submitted for audit validation. 30. The status of arrears of the 114 District Assemblies as at 31 March 2008 are provided in Appendix A and presented below on regional basis: Table 1: Arrears of account up to 31 December 2007 as at 31 March 2008 Region No. of District Assemblies No. of Districts that submitted 2007 accounts No. of Districts which failed to submit accounts up to 31 December 2007 Ashanti Brong Ahafo Central 13 NIL 13 Eastern 17 NIL 17 Greater Accra 6 NIL 6 Northern Upper East 8 NIL 8 Upper West Volta 16 NIL 16 Western 12 NIL 12 Total We attributed the arrears of accounts mainly to failure by managements of the defaulting Assemblies to ensure that District Finance Officers (DFOs) prepared and submitted annual accounts and 11

19 statements on schedule as required by the Financial Memoranda. Also, lack of capacity of Assemblies accounting staff to prepare financial statements and the practice of DFOs leaving arrears of work behind at their former stations while on postings elsewhere accounted for the unfavourable situation. 32. We further observed that draft accounts submitted for validation often contained several errors and mis-statements with figures not supported by entries in the underlying books of account. These resulted in undue delays in rectifying the errors for certification by the Audit Service. 33. We therefore advised DFOs to be more meticulous and to scrutinise the financial statements before they are submitted for validation. The Assemblies have also been advised to develop the capacities of the accounting staff or employ qualified accounting personnel. 34. In this regard, the F & A Sub-Committees of the Assemblies should not escape blame for their failure to monitor and demand for review, the financial statements as stated in Part I of the Financial Memoranda for District Assemblies. 35. We urged managements of the Assemblies to put pressure on their DFOs to perform their duties within the deadlines stipulated by 12

20 the Financial Memoranda. We will also impress upon the F & A Sub- Committees of the Assemblies to start inspecting monthly, the financial records of the Assemblies to ensure that they are always upto-date, as required by the Financial Memoranda. Revenue performance 36. The District Assemblies derived their revenues and other incomes from their traditional sources which include rates, lands, licenses, fees and fines, rents and income from investments. Other incomes include grants from the Central Government, District Assemblies Common Fund (DACF), Ghana Aids Fund, HIPC and Donor funds. 37. The 112 Assemblies which submitted their annual accounts for the period 2005 to 2007 collected a total revenue of GH 475,923, as against a budgeted figure of GH 473,854, The details, on regional basis, are provided in table 2 below: 13

21 Table 2: Estimates and Actual Revenues to 2007 Revenue performance: 2005 to 2007 Region/Year Budgeted Actual Variance Ashanti ,761, ,100, ,338, ,396, ,632, ,763, ,939, ,501, ,438, B/Ahafo ,021, ,151, ,869, ,728, ,635, ,906, ,873, ,358, , Central ,957, ,885, , ,206, ,559, , ,939, ,090, ,849, Eastern ,729, ,908, , ,483, ,704, ,220, ,941, ,798, (143,217.92) Gt. Accra ,341, ,577, , ,956, ,318, ,637, ,263, ,028, ,234,

22 Northern ,499, ,873, , ,326, ,021, ,694, ,806, ,637,608,23 1,831, Upper East ,152, ,793, , ,641, ,622, , ,644, ,811, ,167, Upper West ,579, ,299, ,280, , ,014, , ,085, ,833, ,252, Volta ,253, ,439, ,186, ,752, ,582, , ,062, ,263, ,201, Western ,757, ,431, ,325, ,232, ,777, ,544,641, ,467, ,269, ,801, Total 473,854, ,923, (2,069,171.27) 38. Part I Section I of the Financial Memoranda for District Assemblies (FMDA) requires F&A Sub-Committees of Assemblies to periodically ascertain among other duties, whether: 15

23 i. revenue is being collected in accordance with the approved estimates and if not to conduct immediate investigations; and ii. rates are being regularly paid and take any action necessary if they are not. Our audits, however, disclosed that these responsibilities were not being efficiently and effectively performed by the F&A Sub- Committees of the Assemblies. 39. We noted that the Assemblies, during the period under review, continued to rely mainly on grants especially the DACF with little improvement in internal revenue generation. The IGF component of the 112 Assemblies whose accounts were validated by this office were found to constitute only 17.18% of their total revenue. The level of performance in internal revenue generation of the Assemblies is provided on regional basis below: Table 3: Total revenue and IGF component to 2007 Region Total Revenue IGF Percentage (%) Ashanti 92,233, ,932, Brong Ahafo 47,146, ,808, Central 22,534, ,563,155, Eastern 46,411, ,003,

24 Greater Accra 67,924, ,038, Northern 38,532, ,755, Upper East 32,227, ,444, Upper West 32,148, ,403, Volta 43,286, ,480, Western 53,478, ,352, Total 475,923, ,781, Details of the revenue collection performance of each Assembly are provided in Appendix (B1) to this report. 41. The continued poor performance in revenue collection by the Assemblies is attributable to the following: i. revenue projections which are based on unreliable data on rateable persons and properties; ii. lukewarm attitude towards revenue collection by Revenue Collectors; and iii. absence of effective monitoring of the performance of individual Revenue Collectors against targets set for them. 42. We advised the managements of the District Assemblies to address these lapses in order to improve upon revenue collection and increase the level of funding for development projects from internally generated funds. 17

25 Expenditure performance 43. During the three-year period under consideration, the Assemblies did not exercise adequate control over expenditure, as total expenditure exceeded estimated limits. Out of an overall estimated expenditure of GH 465,005, the total actual expenditure of the Assemblies amounted to GH 474,376, which resulted in excess expenditure of GH 9,370, The breakdown has been provided below on regional basis. District by district analysis is provided in Appendix B (2) attached to the report. Estimated expenditure/actual 2005 to 2007 Region Estimated Actual Expenditure Difference Ashanti 80,186, ,655, (13,469,530.33) B/Ahafo 54,265, ,012, ,252, Central 22,522, ,105, , Eastern 43,557, ,130, (2,573,263.54) G/Accra 81,215, ,105, ,110, Northern 29,357, ,972, (8,615,304.97) U/East 27,939, ,235, (4,296,325.28) U/West 42,232, ,015, ,217, Volta 31,775, ,253, (11,478,036.02) Western 51,954, ,890, , Total 465,005, ,376, (9,370,639.44) 18

26 45. Eighty three out of the 112 Assemblies audited recorded excess expenditures over their estimated figures. The over runs noted during the period were caused largely by the inability of the Assemblies to make realistic projections for expenditures under HIPC and other Special Funds. Operational results 46. Total revenue received by the Assemblies for the three years under review amounted to GH 475,923, as against a total expenditure of GH 474,376, which resulted in a surplus of GH 1,546, as at 31 December This is shown on regional basis as below: Table 5: Total revenue/total expenditure to2007 Region Total revenue Total expenditure Result Ashanti 92,233, ,655, (1,421,880.43) Brong Ahafo 47,146, ,012, (3,866,274.38) Central 22,534, ,105, , Eastern 46,411, ,130, , Greater Accra 67,924, ,105, ,819, Northern 38,532, ,972, , Upper East 32,227, ,235, (8,305.73) Upper West 32,148, ,015, (866,947.17) Volta 43,286, ,253, , Western 53,478, ,890, ,587, Total 475,923, ,376, ,546,

27 47. Appendix C provides details of the operational results of each audited Assembly for the period 2005 to Balance sheet as at 31 December 2007 Assets Advances - GH 1,068, Sixty-six Assemblies recorded accounts receivables totalling GH 1,068,335 as at 31 December These comprise staff advances, accounts recoverable transactions on behalf of other Assemblies and Government departments. 49. Even though the Financial Memoranda requires regular monthly recoveries of staff advances and advances to Government departments at the earliest possible time, we observed very low advance recovery rates among some of the Assemblies with no repayments at all in some instances. For instance, the underlisted six Assemblies did not make any recoveries from defaulting beneficiaries during the stated periods. 20

28 Table 6: Assemblies with no recoveries from beneficiaries Region Assembly Bal. of advance Period of no. recovery Ashanti Kwanwoma 1, Brong Ahafo Sene 6, Eastern New Juaben 3, Eastern Akuapem South 6, Upper East Garu-Jempane 47, Upper West Talensi-Nabdam 11, Total 76, We recommended to the management of the Assemblies to step-up their recovery efforts to forestall any balance becoming irrecoverable. Liabilities Creditors-GH 3,186, The total liabilities of the Assemblies as at 31 December 2007 amounted to GH 3,186, This was made up of loans, deposits, retention amounts and with-held taxes among others. An amount of GH 1,028, representing 32.28% of the total indebtedness was owed by five Assemblies namely: Birim South District (GH 116,499.34), Kumasi Metropolitan (GH 252,696.71), Jirapa- Lambussie District (GH 215,060.55) Shama Ahanta East 21

29 (GH 166,312.17) and Accra Metropolitan Assembly (GH 1,138,888.26). 52. We also noted that the accounts payable of five Assemblies exceeded their cash balances and advances as tabulated below: Table 7: Assemblies with liabilities in excess of cash resources Assembly Amansie Central Cash/ Bank Advances Total Creditors Current Assets Less Creditors 16, , , , (5,230.51) Wenchi 10, , , , (11,795.09) Yendi , (4,752.57) Lawra 189, , , , (59,769.07) Bibiani- Anwiaso , , , (36,838.03) Total 217,451,09 38,935,53 256, , (118,385.27) 53. This state of affairs could affect the ability of these Assemblies to settle their indebtedness as and when they fall due. 54. We recommended to managements of the affected Assemblies to endeavour to spend within approved budgets to secure proper balance between current assets and liabilities. 22

30 MANAGEMENT ISSUES 55. We noted that managerial lapses which included noncompliance with the regulatory framework for District Assemblies resulted in a wide range of irregularities in the operations of the Assemblies. Total cash and other financial irregularities noted in this respect, amounted to GH 10,205,325. These have been analysed globally according to type and also by District Assemblies as detailed respectively in Appendices E and F attached. 56. We further noted that internal control structures such as Internal Audit Units (IAUs), and Audit Report Implementation Committees (ARICs) required under the Audit Service and Internal Audit Agency Acts had not been established by most of the District Assemblies, a key factor that contributed to the irregularities noted. 57. Details of management issues involving cash and other operational irregularities noted during our audits are provided in the succeeding paragraphs. CASH IRREGULARITIES Misappropriation and direct disbursement from revenue - GH 1,406, Poor supervision and ineffective internal controls resulted in the misappropriation of revenue amounting to GH 1,147,184 and 23

31 direct disbursement from revenue in the sum of GH 259,183 all totalling GH 1,406,367 by 64 MMDAs. The direct disbursement from revenue contravened Part II Section 18 of FAR, 2004 (L.I. 1802) which requires that all Internally Generated Revenue (IGF) collected should first be lodged into an operational bank account before disbursement. 59. A summary of the cash irregularities by region is provided in the table below while Schedule F attached to this report provides the details on the various Assemblies involved. Cash irregularities: 2005 to 2007 Region Misappropriation GH Direct disbursement GH Ashanti 101,189 11,888 B/Ahafo 24,801 40,827 Northern 67,931 46,637 Upper East 7,851 23,327 Upper West 51,829 24,144 Western 70,586 Eastern 68,808 14,548 G/Accra 64,872 16,170 Volta 14,078 81,642 Central 63,860 Total GH 1,147,184 GH 259,183 24

32 Discussed below are the instances of cash irregularities involving misappropriation of revenue: Misappropriation of revenue by 52 Assemblies - GH 1,147, The inability of Revenue Collectors to account for revenue collected and the failure of DFOs to lodge revenue received in full resulted in the misappropriation of GH 1,147,184 in 52 MMDAs. 61. We also noted that the failure by the Finance and Administration Sub-Committees of the Assemblies to carry out their monthly and quarterly revenue performance monitoring functions as required by Part 1 Section 1 of the Financial Memoranda did not allow them to routinely identify and deal with the lapses. The breakdown of cases of misappropriation of revenue on regional basis is provided below: Misappropriation of revenue: 2005 to 2007 Region No. Of Assemblies Amount GH Ashanti ,189 B/Ahafo 6 24,801 Northern 4 679,310 Upper East 4 7,851 Upper West 5 51,829 Western 6 70,586 Eastern 3 68,808 25

33 G/Accra 2 64,872 Volta 4 14,078 Central 4 63,860 Total 52 GH 1,147, We requested the managements of the Assemblies involved to recover the monies and to sanction the culprits. We further recommended improved supervision and regular checks as well as periodic auditing by Internal Audit Units. 63. The Financial and Administration Sub-Committees of the Assemblies should regularly conduct their monthly and quarterly monitoring of revenue projections against actual and investigate the causes of any serious variances. Provided below are significant cases of misappropriation of revenue which our audits uncovered during the period under review. Accra Metropolitan Assembly Lorry park tickets not accounted for- GH 47, The Accra Metropolitan Assembly issued 113,200 lorry park tickets valued at GH 47,495 to 24 Revenue Collectors of the Traffic and Parking Unit, during the period January 2005 to September Management, however, failed to ensure that revenue collected with the tickets amounting to GH 47,495 was accounted for, in contravention 26

34 of the requirements of Part VIII Section 19 of the Financial Memoranda for District Assemblies (FMDA). 65. The lapse was attributed to the failure of the Assembly s Revenue Supervisors to ensure that revenue collected with tickets previously issued was accounted for before new ones were issued to them. The illegal retention of revenue collected denied the Assembly access to funds for the execution of its development programmes. 66. We recommended the recovery of the outstanding amount from the Collectors involved and advised management to ensure that new tickets are only issued to Revenue Collectors after they had fully accounted for all the previous tickets in their possession. Revenue short accounted for- GH 17, Our audits during the three year period covered by this report disclosed that Mr. Alex Danyo, an Accountant of the Town and Country Planning Department, Messrs Paper and Pen System Limited, a Revenue Contractor and nine Revenue Collectors of the Accra Metropolitan Assembly together collected a total revenue of GH 230,491 between 1 August 2005 and 12 April 2007 but accounted for only GH 212,925. The difference of GH 17,566 was misappropriated by the Collectors mentioned. 27

35 68. In-effective internal controls and poor supervision by management were the cause of the misappropriations recorded. We recommended that, to forestall future incidents, management should ensure that all revenue collected is paid to bank promptly by Revenue Collectors. 69. We further recommended that the total misappropriated revenue of GH 17,566 should be recovered from the Accountant, the Revenue Contractor and the nine Revenue Collectors. The Metropolitan Finance Officer who was supposed to supervise the Collectors and ensure that all revenue collected was fully banked but failed should be sanctioned for negligence of duty. Under payment of revenue - GH 39, The Town and Country Planning Department of the AMA entered into an agreement with the Assembly under which the former was to collect revenue on behalf of the latter. 71. The terms of the agreement required the Department to retain 70% of revenue collected and pay the remaining 30% into the deposit account of the Assembly with the Bank of Ghana. 72. We, however, noted that as a result of lack of monitoring and failure to enforce the provisions of the agreement, the Department collected total revenue of GH 165,002 and paid only GH 10,070 28

36 which represented 6.1% of revenue collected instead of the correct amount of GH 49,501 under the agreement. Consequently, the Assembly was underpaid revenue in the sum of GH 39, We recommended that the underpaid revenue of GH 39,430 should be recovered from the Town and Country Planning Department and appropriately paid into the Assembly s coffers. We further recommended the enforcement of the terms of the agreement with the Department to forestall future under payments of revenue to the Assembly. Manya Krobo District Assembly Misappropriation of revenue - GH 51, Ineffective internal controls and poor management supervision at the Manya Krobo District Assembly resulted in the misappropriation of funds totalling GH 51,164 as detailed below: Assembly Amount (GH ) Particulars of official Nature of misappropriation Manya Krobo 19, Revenue Collectors 13, Samuel Antwi Revenue not accounted for Revenue not accounted for 1, DFO Overpayment DFO Use of fictitious receipts to support payment 29

37 14, DFO 3, DFO Total 51, Failure to account for proceeds from farm inputs Misappropriation of Water and Sanitation funds. 75. We recommended to management to recover the total funds of GH 51, misappropriated and to take disciplinary action against the culprits to serve as deterrent. Mfantseman Municipal Assembly Falsification of accounting records - GH 34, Part VIII Section 6 of the Financial Memoranda for District Assemblies states that the book copies of a receipt form shall always be the carbon copy of the original. We, however, noted that recordings on the book copies of some receipts issued between July 2006 and December 2007 to 35 Revenue Collectors by Mr. Kojo Amadu, Senior Revenue Superintendent in charge of the Mankesim revenue office differed from what appeared on the originals of the same receipt number issued out to Revenue Collectors who made the payments. 77. The amounts on the original copies of receipts issued to the Collectors added up to GH 92,071.41, whilst the book copies of the 30

38 receipts retained by Mr. Kojo Amadu added up to GH 58, leaving an amount of GH 34, unaccounted for. 78. We recommended the full recovery of the revenue of GH 34, unaccounted for from Mr. Kojo Amadu and disciplinary action taken against him. Management should also ensure that receipts are promptly issued to Collectors to acknowledge receipt of revenues they pay. The Assembly should, in addition, introduce revenue charts to monitor revenue collections. Discussed below are the instances of cash irregularities involving direct disbursements from revenue. Direct disbursements from revenue by 12 Assemblies- GH 259, Part VIII Section 31 of the Financial Memoranda states that All Revenue collected shall be paid to the Treasury or Bank in full, and any commission or salary payable to Revenue Collectors shall be paid from an Expenditure item. Finance officers are not allowed to pay to a Revenue Collector any portion of the salary or commission due him until he has accounted for all money collected by him. 80. Contrary to the provision quoted above, 12 MMDAs directly disbursed GH 259,183 from revenue collected as commissions payable to Revenue Collectors and met other expenditures from 31

39 revenue collected. The breakdown on regional basis is provided below: Direct disbursements from revenue: 2005 to 2007 Region No. of Assemblies Amount (GH ) Ashanti 1 11,888 B/Ahafo 1 40,827 Northern 2 45,637 Upper East 1 23,327 Upper West 2 24,144 Western - - Eastern 1 14,548 G/Accra 2 16,170 Volta 2 81,642 Central - - Total 12 GH 259, The practice of directly disbursing monies from revenue collected weakens control over payments, and increases the risk of misappropriation, un-authorised borrowing of cash and other irregularities which could result in financial losses to the Assemblies. 82. Management explained that it found it convenient to pay Collectors commissions directly from revenue collected, as the Collectors, particularly those in the remote areas always threatened to quit the job when payment of their commissions were delayed. 32

40 Management however agreed to adhere to the provisions of the Financial Memoranda to strengthen control over revenue collection. The instances are as follows: Ketu South District Assembly Use of revenue collected for recurrent expenditure - GH 77, Between January 2007 and December 2007, a Cashier of the Ketu South District Assembly received a total revenue of GH 245,949 but paid only GH 168,896 to bank leaving a difference of GH 77,053 which was used on the recurrent expenditure of the office. 84. The practice contravened Part VII Section 3.1 of the Financial Memoranda for MMDAs which states that all revenue received should be paid to the treasury or Bank in full. Details of revenue received and the amounts paid to bank and the recurrent expenditures incurred were compiled for management. 85. The direct disbursements from revenue occurred because management failed to enforce the regulations, a situation which could be exploited to indulge in unauthorised borrowing. We recommended that remedial measures should be put in place to ensure that revenues received by the Cashier are promptly paid to bank in full. Management assured to regularise the situation. 33

41 East Gonja District Assembly Direct cash disbursement from revenue collected - GH 44, Contrary to Part VIII Section 29 of the Financial Memoranda for MMDAs as well as Regulation 22(1) of the Financial Administration Regulations of 2004(L.I.1802), officials of the East Gonja District Assembly made direct cash disbursements of GH 44,100 from revenue collected without first paying the collections into bank. 87. The practice could result in unauthorised expenditures and could be subjected to abuse. We urged management of the Assembly to strictly comply with the relevant provisions of the Financial Memoranda on disbursements of public funds. Dormaa Ahenkro Municipal Assembly Payment of commission from revenue collected - GH 40, Part II Regulation 22(I) of FAR, 2004 states that all moneys collected shall be paid in gross to the bank and no disbursements shall be made from the money. On the contrary, our audit disclosed that revenue amounting to GH 40,827 realised from the sale of value books was expended on commission payments to Revenue Collectors and 50% share of revenue paid to Urban and Town Councils. 89. Management explained that the action was taken to alleviate the financial hardships of the Commission Collectors and the Town 34

42 and Urban Councils. We found the explanation unacceptable and recommended that all revenue collected should be banked in full and payments made upon properly authorised payment request. Unpresented value books 90. Among the cash irregularities noted during our audits were unpresented value books. Discussed below are the irregularities as noted. Unpresented value books by 31 Assemblies - GH 146, Part VIII Section 19 of the Financial Memoranda states that No Revenue Collector shall normally have in his possession more than two receipt books of any one type, one for current use and one for reserve. 92. On the contrary, we noted during our audits that Revenue Superintendents in 31 Assemblies persistently continued to issue new value books to Revenue Collectors without ensuring that previous ones issued had been accounted for. 93. The practice resulted in unpresented value books with a total face value of GH 146,059 and 1,772 GCRs of undetermined value in the custody of Revenue Collectors in 21 and 30 Assemblies respectively. We have provided below the number of value books not presented for audit on regional basis: 35

43 Region Unpresented value books: 2005 to 2007 Value books with face values (GH ) Number of Assemblies Value books without determined Face values (qty) Number of Assemblies Ashanti B/Ahafo 4, Central 9, Eastern 68, G/Accra 47, Northern 9, Upper East 3, Upper West Volta 2, Western Total GH 146, Suppression of revenue collected and failure to present value books by Revenue Collectors result in concealment of revenue collected. These acts constitute major sources of revenue leakages and unauthorised borrowing which prevent Assemblies from realising their revenue targets. 95. Weak supervision by superior officers and the failure by Revenue Collectors to comply with Part VIII Section 29 of the FMDA which requires Revenue Collectors to balance their cash books and present them for checking periodically, accounted for the lapse which in turn resulted in the Assemblies losing substantial revenue that should have accrued to them. 36

44 96. We urged the managements of the Assemblies to retrieve the unpresented value books and the revenue of GH 146,059 being the sales of the value books with face values from the Collectors. Disciplinary action should also be taken against them to serve as deterrent. Unrecovered loans, advances, imprests and rents by 66 Assemblies - GH 1,068, Among the cash irregularities during the period were unrecovered loans, advances, imprests and rent. Discussed below are instances of these irregularities recorded by 66 Assemblies which totalled GH 1,068, Part VII Section 43 of the Financial Memoranda for District Assemblies provides that all advances shall be re-paid in accordance with conditions laid down by the Assembly when the advance is being granted. Also, Part IX Section 39 of the Financial Memoranda stipulates that standing imprest shall be retired at the end of each financial year whilst special imprest shall be retired within the period allowed. 99. Contrary to the above provisions, we noted that 66 Assemblies failed to recover outstanding loans, advances, imprests and rents amounting to GH 1,068,335. Provided below are the number of 37

45 Assemblies with outstanding loans, advances, imprests and rent on regional basis, as at 31 December 2007: Region No. of Assemblies Outstanding loans, advances, imprests and rent (GH ) Ashanti ,936 B/Ahafo 9 173,430 Northern 8 160,126 Upper East 6 113,489 Upper West 7 127,340 Western 5 37,932 Eastern 3 10,974 G/Accra 2 83,102 Volta 4 35,642 Central 7 122,364 Total 66 1,068, The absence of effective debt recovery mechanisms such as deduction at source from staff salaries and non enforcement of existing regulations on the granting and recovery of loans and advances could thwart efforts in the speedy recovery of loans and negatively impact on the cash flow position of the Assemblies We recommended to the managements of the Assemblies involved to recover the outstanding amounts from the defaulters and 38

46 put in place effective repayment schedules for all future facilities that would be granted Significant cases of outstanding loans/advances, imprests and rents unrecovered during our audits are highlighted below: Accra Metropolitan Assembly Failure to collect rent on towed vehicles - GH 50, During the period under review, 24 Hour Towing Services Limited clamped and towed 26 vehicles to the yard of the Accra Metropolitan Assembly which should have attracted penalties totalling GH 50,850. AMA s share, on 50/50, basis as provided in paragraph 6.8 of the Agreement, should have been GH 25, The Assembly, however, failed to collect the revenue due. According to management, the offending vehicle owners failed to pay the appropriate penalties. We recommended to management to ensure that either the fees/penalties are paid by the owners of the vehicles or the vehicles should be disposed off by auction to recover the amounts owed and also decongest the yard. Unretired special imprests -GH 2, Even though special purpose imprests are required to be retired within the period allowed, our audits disclosed that two special purpose imprests totalling GH 2,500 granted to officials of the 39

47 Metropolitan Public Health Department of the AMA on PV Nos. MPHD 15/4/06 and MPHD 41/07/06 in April and July 2006 respectively to arrest stray animals in the Metropolis had not been retired, in contravention of Part IX Section 40 of the FMDA, The lapse was attributed to the failure of management to impress upon the officers who received the imprest amounts to retire them We recommended to management to ensure that all special purpose imprests granted to staff including the total amount of GH outstanding are retired within the periods allowed to prevent misapplication or misappropriation of the amounts involved. Tema Municipal Assembly Outstanding advances- GH 29, Our review of the accounts of the Tema Municipal Assembly for the period ended 31 December 2007, revealed that total advance of GH 29,754 granted to 182 members of staff by management of the Assembly remained outstanding The failure of the Integrated Personnel Payroll Data (IPPD) Section of the Assembly to effect deductions from the officers salaries at source and the failure of officers to honour their debt obligations resulted in the anomaly which contravened the provisions 40