REPUBLIC OF GHANA PUBLIC EXPENDITURE REVIEW - i/ <1994 (Effective Planning and Execution of the Development Budget) RETURN TO AFRICA INFORMATION SERVI -IM Ministry of Finance May 29, 1995 亡伟 . 户 】 气 TABLE OF CONTE= LIST OF TABLES LIST OF ABBREVIATIONS vi EXECUTIVE SUMMARY Vii INTRODUCTION 1 CHAPTER 1: The Development Budget in the Government's Annual Fiscal Programme 3 Expenditure Budget Structure 3 Sectoral Share of the Development Estimates 8 The Public Investment Programme (PIP) 10 Guidelines for Preparation of the PIP 12 Evaluation of Guidelines 14 I CHAPTER 2: Characteristics of the Development Budget is main Features of the Development Budget is Evaluation of Expenditure Proposals Submitted by MDAs 22 CHAPTER 3: Financing the Development Budget 25 Sources of Finance 25 Matching Funds 26 District Assemblies Common Fund 28 CHAPTER 4: Development Budget: Implementation issues 30 Project implementation 30 Contract Award Procedures for New ProJects 31 System for Procurement of Capital Goods 34 Payment Procedures 35 The Warrant System & Decentralization of Payments 38 CHAPTER 5: -The 1994 Development Budget 41 Summary of the 1994 Budget. 41 Sectoral and Spatial Distribution 43 Poverty Alleviation 45 CHAPTER 6: Economic Infrastructure and the Development Budget 49 Roads 50 Water 54 CHAPTER 7: Conclusion 59 matrix of Issues Raised in the 1994 PER 62 AL APPENDICES Appendix 1 Public Financial Management Reform Programme Appendix 2 Distribution classification - National Projects in the 1994 Development Budget ii LIST OF TABLES 1.1 : 1994 Actual Expenditures met from the Consolidated Fund 1.2 : Ministries and their Budget Heads 1.3 1994 Actual Development Budget by MDAs: Broad Coverage 1.4 Sectoral Distribution of 1994 Actual Development Expenditure: Broad Coverage 1.5 Distribution of Actual Development Expenditure by MDAs, Narrow Coverage 1.6 : Distribution of 1994 Development Budget Estimates by Item, Narrow Coverage 1.7 Sectoral Distribution of 1994 Development Estimates by Item, Narrow Coverage 1.8 Sectoral Share of 1994 Actual Development Expenditures, Narrow Coverage 1.9 : Actual Development Expenditure and GDP, 1993 and 1994 1.10 -: Coverage of the PIP for the Period 1986 - 1996 1.11 Projects Requiring EER or Cost Effectiveness Analysis 2.1 Age Profile of Projects by Sector 2.2 : Disbursement of Foreign Inflows by Sector 2.3 : 1994 Development Budget - Age Profile of Contracts by MDAs 3.1 Sources of Funds for Budget Finance (0m) 3.2 : Provisions for Recurrent and Development Budgets, 1993 - 1994 3.3 1994 Provision for and Disbursement of Matching Funds. 3.4 : 1994 Quarterly Releases of District Assemblies Common Fund 4.1 : Sectoral Distribution of 1994 Actual Development Expenditure, Showing Spillovers (tbillion). 5.1 : Summary of the 1994 Budget List of Tables cont'd 5.2 Distribution of Per Capita Expenditure by Locality and Ecological Zones 6.1 Condition Mix of Roads in Ghana, 1994 6.2 Distribution of Road Contracts in 1994 6.3 Age Distribution of Road Projects 6.4 MRH, 1993 Development Budget Spillovers 6.5 Regional Distribution of Water Facilities by GWSC as at 1994 6.6 GWSC On-going Water Projects in 1994 6.7 GWSC Suspended Projects as at 1994 ANNEX TABLES - A1.1 : 1993-1994 Budgeted Development Estimates (0m) AL.2 : Percentage Distribution of Development Estimates by Item A1.3 : 1993-1994 Actual Development Expenditure (0m) A1.4 Percentage Distribution of Actual Development expenditure by Item, 1993 and 1994 A3.1 Inflows and Outflows, 1994 A3.2 : Distribution of the DACF: Quarterly Releases by Region A3.3 : Share of the Districts in the DACF: Quarterly Releases A4.1 : Tenders Processed by Central Tender Board, 1993-1994 A5.1 : Regional Distribution of 1994 DACF A5.2 : Regional Distribution of 1994 Development Budget Expenditure A5.3 : Percentage Distribution of 1994 Development Budget Expenditure by Sector Total A5.4 : Percentage Distribution of the 1994 Development Budget Expenditure by Regional Total A5.5 : Regional Distribution of the DACF and the 1994 Development Budget Expenditure iv List of Tables cont'd A6.1 : Summary of Regional Distribution of Road Projects (0m) A6.2 : GWSC On-going Water Projects in 1994 V List of Abbreviations 1. AESC - Architectural and Engineering Services Corporation 2. BOP - Balance of Payments 3. CPC - Construction Projects Consultants 4. DACF - District Assemblies Common Fund 5. DHS - Demographic and Health Survey 6. DFR - Department of Feeder Roads 7 DUR - Department of Urban Roads 8 ECG - Electricity Corporation of Ghana 9 ERR - Economic Rate of Return 10 FAR - Financial Administration Regulations 11 GCAA - Ghana Civil Aviation Authority 12 GDP - Gross Domestic Product 13 GPHA - Ghana Ports and Habours Authority 14 GHA - Ghana Highway Authority 15 GLSS - Ghana Living Standards Survey 16 GOG - Government of Ghana 17 GRC - Ghana Railway Corporation 18 GSC - Ghana Supply Commission 19 GWSC - Ghana Water and Sewerage Corporation 20 ICB - International Competitive Bidding 21 IPAD - Investment and Project Analysis Division 22 LCB - Local Competitive Bidding 23 MDAs - Ministries, Departments and Agencies 24 MFEP - Ministry of Finance and Economic Planning 25 MOFA - Ministry of Food and Agriculture 26 MOF - Ministry of Finance 27 NGOs - Non Governmental Organizations 28 NORRIP - Northern Region Rural Integrated Programme 29 NRCD - National Redemption Council Decree 30 MRH - Ministry of Roads and Highways 31 PAMSCAD - Programme of Action to Mitigate the Social Cost of Adjustment. 32 PE - Personal Emoluments 33 PER - Public Expenditure Review 34 PFMRP - Public Financial Management Reform Programme 35 PFP - Policy Framework Paper 36 PIP - Public Investment Programme 37 PMUs - Project Management Units 38 PWD - Public Works Department 39 RIC II - Reconstruction Import Credit II 40 VRA - Volta River Authority vi EXECUTIVE SUMMARY 1. This year's report, the second to be issued by the Government of Ghana reviews public expenditure practices with particular reference to the Development budget. It follows on the first review which analyzed the 1993 fiscal programme with emphasis on recurrent expenditures. 2. Although the 1993 review identified weak budget formulation and control as the central problems of expenditure management in Ghana, it did not develop specific actions for addressing them. However, in the year since its publication Government has developed the Public Financial Management Reform Programme (PFMRP), a medium term strategy for achieving improved public expenditure management. Similarly, the recommendations for addressing the policy and operational difficulties identified in this review will be integrated into the PFMRP to make it complete. 3. The thrust of the 1994 PER, "Effective Planning and Execution of the Development Budget" identifies the systemic weaknesses in development budget preparation whose removal will promote the policy objectives of 'VISION 2020', and enhance growth and development. 4. In 1994 recurrent expenditures constituted 73 per cent of total Government expenditures met from the Consolidated Fund while Capital expenditures accounted for 15.1 per cent. Development expenditures amounting to C165.6billion represented 14.5 per cent of total Government expenditures. Releases made to the District Assemblies Common Fund (DAF) amounted to C26.2billion. Broad Coverage 5. In terms of broad coverage, total development outlay consisting of total Government development outlay of cl65.6billion and foreign inflows of C172billion amounted to C338.5billion. 6. Of the total development outlay excluding the DACF, economic infrastructure accounted for 57.6 per cent, productive sector 11.5 per cent, social sector 15.2 per cent and the remaining 15.7 per cent went to administrative and regulatory agencies. Public Investment Programme 7. The Development Budget which shows planned expenditures to be funded directly from the Consolidated fund is the annual instalment of the Public Investment Programme which is a recording of Public Investment activities to be undertaken by Government and quasi- Government agencies. 8. The PIP was designed to bring projected Capital expenditure in line with likely resource availability. while project selection vii for the PIP was to be based on detailed feasibility studies, in the case of large projects costing over US$5m an ERR in excess of 15 per cent was required. For Social Sectors cost effectiveness was the criterion for selection. 9. The initial PIP was confronted with a large number of projects already in existence. In order to rationalize these and provide a basis for proper project selection, a programme within a programme, referred to as the "core" programme, was introduced. As more sectors and projects were brought into the PIP, the concept of Supercore was also introduced. Most of the projects which were admitted into the Supercore programme were donor-assisted, and had the first call on domestic resources. The core and super core concepts were abolished in 1990 due to improvements in Government tax collecting efforts which ensured regular and adequate funding for projects. 10. The PIP guidelines which seek to direct the preparation of sector programmes for consideration and selection, have shown some deficiencies. First they failed to address the issue of the large number of existing on-going projects, and secondly, they did not succeed in getting sectors to rank their projects. 11. While the PIP initially resulted in major improvements in resource allocation, its utility as a tool in resource allocation has been eroded considerably. Progress on Public Investment Programming 12. At its inception the work on the PIP benefitted from the participation of core staff from sector Ministries who were responsible for developing sector programmes. The idea was to introduce them to the analytical tools and budgetary processes necessary to enable them set up counterpart units in the Ministries to undertake subsequent project preparation. These counterpart programming units were not set up, with dire consequences for the sustainability of the PIP process. 13. Secondly, the large number of projects submitted for analysis put the technical capability of the staff assigned for project evaluation under severe strain. The Integration of the PIP task force into the IPA Division of the Ministry of Finance was expected to ensure adequate staff complement for the increased work load, but it turned out that the work load in addition to the routine IPA work did not allow the staff to devote adequate time for rigorous analysis required for the preparation of the PIP. Consequently, in recent years, the staff have not been able to produce the PIP ahead of the Development Budget. A further result of these developments, added to non-availability of logistics is that physical monitoring of on-going projects has been minimal. viii Respective Roles of the Ministry of Finance and the NDPC in Developing Multi-Year Plans 14. Article 86 of the Constitution assigns to the National Development Planning Commission (NDPC) the responsibility for making proposals for the development of multi-year rolling plans as well as for monitoring, evaluating and coordinating development policies, programmes and plans. Although the formulation of a perspective and medium term outlook is necessary as a guide for annual budget formulation, the assumption of a longer horizon may weaken the focus of the public investment effort. While the relationships between the activities of the Ministry of Finance and the NDPC require synchronization, it is obvious that the NDPC's five year planning framework should guide the three year PIP. The Ministry of Finance would thus need to continue its preparation of the three-year rolling PIP. Characteristics of the Development Budget 15. It is noted that the development budget carries a large number of projects indicating that funds are being dissipated on small projects, thus taxing the supervisory capability of Government. 16. The age profile of projects suggests that current policies are not being reflected in development. It also questions whether returns on investment are being maximized. 17. At the item level, construction accounted for 74.2 per cent of development expenditure, while item 8 recorded 17.9 per cent in 1994. At the sector level (broad coverage), 57.6 per cent of development expenditure went into economic infrastructure, 15.7 per cent to Administration, 15.2 per cent to the Social Sector and 11.5 per cent to the Productive Sector. Maximising Returns from Development Outlays 18. It appears that information contained in the annual budget circulars is inadequate to enable MDAS make realistic projection of their expenditure needs. 19. MOF will need to translate overall growth rates into sector targets and also advise sectors how the expected inflation and exchange rates should be factored into the costing of their estimates. It has been the practice for the Ministry of Finance to make contingency provisions in adjustment votes to meet additional liabilities arising from such price fluctuations, but experience shows that these votes have been inadequate to meet these contingencies. 20. The time available between the issue of budget circulars and the deadline for the submission of proposals is inadequate for detailed analytical work. The failure of MDAs to submit their ix sector policies in advance, of or along with, their project proposals does not help in giving budget hearings the right background for project selection. At the MDA level, budget preparation is often relegated to low level staff, indicating lack of commitment by those in authority. Financing the Development Budget 21. In 1994 a total of t1261.3billion was available to finance the Government budget. This was made up of 4826.4 billion from tax revenue and t434.9 billion from non-tax revenue, including grants. 22. Gross foreign inflows amounted to *472.7billion, out of which t172.9billion was channelled directly to support development projects. While 4236.7billion was on-lent to state-owned commercial entities, $63.2billion was in the form of project grants. When account is taken of debt amortisation of 4178.8billion, net foreign inflows amounting to *293.9 billion. Almost 54 per cent of this was concessional while the remainder came from commercial sources. Problems of Budget Implementation 23. For the years 1993-94 the approved provisions (narrow coverage) constituted 57 per cent of total submissions from the MDAs suggesting a funding gap of 43 per cent. In terms of actual expenditure, however, 95 per cent of approved votes was released. While the level of submissions may have exaggerated the resource requirements, it is evident from spillovers that the sectors absorptive capacity exceeds available resources. 24. Although the 1993 PER proposed a mechanism for ensuring adequate and timely release of Matching funds for donor-assisted projects, they failed to receive the necessary endorsement of a major donor, IBRD. However, because projects had been explicitly listed and provided for in the 1994 budget, Government was able to meet these obligations as they fell due. 25. In line with Constitutional requirement that not less than 5 per cent of total tax revenue be paid every year to District Assemblies to support their development projects, an amount of 38.5billion was released to the District Assemblies Common Fund (DACF) . However, since releases are made quarterly in arrears, the release of c12.3billion for the 4th quarter of 1994 was made in early 1995. 26. The 1994 development budget was characterized by a higher than anticipated expenditure spillover. This creates problems for fiscal management and raises issues of adequacy of funding as well as the implementation capacity of MDAs. The spillovers also pre- empted the implementation of projects that are based on current polices. x 27. For on-going ptojects the discontinuity in payment especially at the end of the year creates cashflow problems for contractors and often leads to stoppage of work. For new projects, the time lag between project identification and its implementation introduced by Governmental regulations seeking to make contract awards transparent introduces delays thus increasing the cost parameters underlying them, leading to price escalation. 28. The processing of civil works contracts from bid opening to the signing of contracts should not exceed 110 days for local and 180 days for international competitive bidding. In some instances, however, delays are still encountered. The lack of expertise on the part of some MDAs in the preparation of evaluation reports, delays in the preparation of evaluation reports after bid opening as well as objections raised by Contractors and or Donor Agencies to decisions of the tender Boards are some of the factors cited to explain these delays. 29. It has been noted that procurement by most MDAs are made on need basis, as this does not allow advantage to be taken of bulk purchases to bring down the unit cost of items.- The 1994 Fiscal Programme 30. The 1994 budget aimed at achieving real GDP growth rate of 5 per cent, an end of period inflation of 15 per cent, an overall BOP surplus of US$180 million and a budget surplus of $68.0 billion (1.3 per cent of GDP). The budget also assumed an average exchange rate of $925.00 = US$1.00. 31. GDP grew by 3.8 per cent while inflation averaged 24.9 per cent. Merchandise imports and exports amounted to US$1.6billion and US$1.2billion respectively resulting in a trade deficit equivalent of 7.6 per cent of GDP. Services recorded a deficit of US$387 million while current account balance excluding official transfers showed a deficit of USS528 million. 32. The fiscal outturn was much more satisfactory. Total receipts exceeded total expenditures by as much as l1l.7billion as against a planned surplus of only l42.9billion. 33. Recurrent expenditures, exceeded programmed levels by over $47 billion, half of the over-expenditure being accounted for by Personal Emoluments, while Development Expenditures recorded a shortage of 7 per cent. 34. With regard to financing, despite a large shortfall in official flows especially due to the non-disbursement of programmed credits, repayments remained on schedule. xi Regional Distribution of the Development Budget 35.- Funds totalling C115.8 billion was spent on regional projects in 1994. This was made up of 024.9 billion from the DACF and 090.9 billion from the Development Budget. The DACF was distributed to the regions according to the formula approved by Parliament. The allocation ranged from 17.5 per cent for Ashanti to 4.6 per cent for the Upper West Region. In per capita terms the distribution ranged from 01,177 for Greater Accra to C1,960 for the Upper West Region. 36. Of the approved programme for the Development Budget 34.3 per cent went to National Projects (projects that have nation-wide impact) and 65.7 per cent was allocated for projects in the regions (projects whose benefits are localized). While the range in per capita allocation of the Development Budget, C2,278 to C10,418 for Eastern and Northern Regions respectively was considered wide, the pattern of distribution recognized certain regional development needs and distribution characteristics. 37. The combined DACF and the Development Budget also showed a similar wide range in the regional distribution suggesting that the formula for the distribution of the DACF had not influenced the regional distribution of the Development Budget. The Poverty Focus of Development Expenditure 38. According to the GLSS III, even though there was a general reduction in poverty in the country it is still prevalent in rural areas and among food crop farmers. 39. While this situation has persisted for a number of years, funding allocation in the 1994 Development Budget was not particularly structured to address the issue of poverty. 40. Similarly, efforts at enhancing the status of women through the institution of specific projects in the Development Budget have so -far. been marginal despite the acknowledgement of the vulnerability of women. Government's Role in Infrastructural Development 41. On account of the almost total dependence of the road and water sectors on Central Government financing and the observation that they encumber as much as 43 per cent of the Government share of development funding, the report focuses on the two sectors. (i) Roads 42. The Road Sector was allocated an amount of t72billion from GOG budgetary sources for its development expenditure for 1994. This included an amount of $12billion from the Road fund for periodic maintenance. Xii 43. Total payments made to the road sector from GOG budgetary resources in 1994 amounted to 72.1 billion. This included Road Fund inflow of $16 billion for periodic maintenance. Domestic lending sources contributed *18 billion while donor inflow amounted to 69.3 billion. Thus a total of 4159.4 billion was disbursed to the sector. By the end of 1994, unpaid bills stood at $47 billion. 44. The budgetary allocation in 1994 of l72 billion was not adequate to pay for the total value of works on hand. The minimum financing submitted by the Ministry for Government funding was $120 billion. Therefore, the financing gap identified at the beginning of the budget year amounted to 48 billion. 45. The lesson this teaches is that reliance on current revenue to finance road works severely impairs the ability of Government to deliver new roads as needed. 46. The determination in the value of investment made in road construction occasioned by the non-adherence to maintenance schedules has meant that heavy outlays on rehabilitation and reconstruction have to be alongside the extension of the road network to new areas. Due to the large number of on-going projects in the sector coupled with the wide regional distribution of projects the country is not deriving the maximum benefits expected from the investments made, because resources are thinly spread. 47. The disparity between the projected targets and fund allocation has created a perennial problem of spillovers of outstanding payments into ensuing years. This particular situation has been a result of poor management of funds, increase in scope of works, additional contracts outside the normal budgetary approvals etc. 48. In the present economic situation of rapid cedi depreciation and high domestic inflation, price and other economic parameters that underlie the provision for projects keep changing thus rendering the provisions inadequate. The small size of contingent provisions in the budget makes it impossible for these mark-ups to be addressed thus they show up as unpaid bills to be settled out of provisions for subsequent years-. Foreign companies win major contracts because they have access to credit and better turn-overs which automatically qualify them for higher classifications to undertake these jobs. 49. It is in the light of the advantages to the foreign contractors that Government in 1994 had to settle huge amounts emanating from disputes with some of these contractors. The local companies by their contract terms are qualified for compensation. However, this does not usually reflect in their contracts. (ii) Water 50. The provision of water is important both as a public utility and as an input into the promotion of health. In this regard, Government has as its objective, the extension of the coverage of potable water to 100 per cent of the population by the year 2020. 51. Only about 65 per cent of the country's estimated population is served with clean water. About 76 per cent of the urban population, constituting about one-third of the national population, has access to potable water while only 46 per cent of the rural population is served with potable water. 52. The GWSC operates 208 piped water supply systems in the country and 7,956 drilled wells fitted with handpumps. In the last few years GWSC, with financial and technical assistance from multilateral and bilateral donors, has reorganized and rationalized its Corporate structure and operations to improve its operating efficiency. It undertook the rehabilitation of physical infrastructure, repair and replacement of equipment and other facilities of the urban systems throughout the country. 53. In 1994, GWSC produced 38.82 billion gallons of water as against the target of 37.18 billion for the pipe borne water supply system. With respect to the hand pump system, it is estimated that the production was 4.2 billion gallons. 54. A Rural Water Supply and Sanitation Strategy has been formulated based on sustainability and management of the systems by the communities and increased investment in the sector. The local currency required for rural water is provided by Government through the budget. A Rural Water Division has been established to supply water to the rural areas on a demand driven basis. The systems are community managed. The Division also acts as a central body to coordinate the activities of all donor and non-Governmental agencies supporting rural water delivery and regulates all rural water supplies. 55. In spite of the recent initiatives and measures, there are still numerous problems to be overcome in addition to reducing the water coverage gap of about 35 per cent of the population. The major problems are inadequate funding for rehabilitation, the provision of water systems for areas not served, cost recovery as well as inadequate tariff levels. 56. A number of projects have remained in the budget for many years. The main problem affecting completion has been the inability to match actual cash flow releases with planned requirements, whether the projects are foreign or fully Government financed. Xiv 57. In 1994, of the 4-5.3billion approved by government for the GWSC, $4.Obillion was released. The Corporation used internally- generated funds of $8.3 billion for the execution of some projects principally under Accra-Tema (ATMA) Rehabilitation Projects. Donor funds disbursed to the GWSC and the Water Sector amounted to about $7.1 billion. 58. Out of the $4.0 billion released to the GWSC in 1994 $3.1 billion was used to meet current obligations (including *600 million for rural handpump water) and 40.9billion was used as payment for spillovers from 1993. Conclusion 59. The report concludes by making recommendations for improving various aspects of development budgeting: its design and formulation, its management and the reporting of expenditures and evaluation of its contribution to the process of growth. 60. The problem of retaining quality staff is hinted at. Staff morale needs to be improved in two respects - compensation and the provision of specialised training. While the provision of infrastructure to meet the needs for growth continues to dominate the Development Budget, the report suggests that this could be more cost-effective if we did not rely entirely on current revenue to finance these requirements. 61. To address the major weakness of the previous report, the 1994 Review develops specific actions to resolve the deficiencies in the budget process. The matrix attached to the Conclusion identifies problems in the three stages of: Budget Formulation, Reporting and Evaluation and Budget Management and makes specific recommendations for each of the issues. X-v F INTRODUCTION 1. This report, the second to be issued by the Government of Ghana, reviews its public expenditure practices for the financial year 1994 with particular reference to the formulation, control and monitoring of the development budget. It follows up the last review which.analyzed the 1993 fiscal programme. 2. The 1993 Review diagnosed the problems of expenditure management and control in Ghana, and made recommendations for medium-term solutions. 3. The document identified weak budget formulation and control as the central problem facing public expenditure management in Ghana. Specifically, the ineffective management of the largest single item in the budget, Personal Emoluments (PE), the lack of quality data and the weak commitment on the part of Ministries, Departments and Agencies (MDAs) were compounded by the incompatibility of Drawing Limits (DLs) with Financial Encumbrances (FEs). 4. In discussing these problems, the report examined their effects on the recurrent budget. While some problems relating to sectoral allocations of resources and improper management of matching funds were highlighted, the report was generally limited in its treatment of the development budget. Thus, for 1994, Government has decided that the review should focus on the problems relating to the Development Budget,. 5. The 1993 document itself did not develop specific actions for addressing the management problems it identified. However, in the year since its publication, Government has developed a strategy, the Public Financial Management Reform Programme (PFMRP), aimed at addressing the problems indicated. 6. The PFMRP is a medium-term strategy for achieving improved public expenditure management through better budget planning, resource allocation, data collection and expenditure control; improved public finance procedures; and accounting and auditing systems. In effect, the PFMRP (attached as Appendix 1) forms the basis for reforming public financial management in Ghana. 7. The thrust of the 1994 PER, "Effective Planning and Execution of the Development Budget", is intended to identify the systemic weaknesses in development budgeting whose removal will promote the policy objectives of Vision 2020', and enhance growth and 'Ghana-Vision 2020 is a Report presented by the President to Parliament setting out the Government's Programme of Economic and Social Development Policies aimed at accelerating the rate of growth of the economy in order to make Ghana a middle income country by the year 2020. 1 development. 8. The 1994 PER therefore complements the 1993 report. Its recommendations for addressing the policy and operational weakness identified will be integrated into the PFMRP to make it complete. 9. This Review is divided into Seven Chapters. Chapter One, provides an overview of the structure and objectives as well as the process of formulation of the Development Budget, it reviews the history and scope of the Public Investment Programme (PIP), and the criteria for project selection. 10. Chapter Two, describes the characteristics of the 1994 Development Budget. 11. Chapter Three examines financing sources for a broad-based Development Budget including the District Assemblies Common Fund. Chapter Four discusses the implementation of the budget, including contract award procedures for projects, and the system for procurement of capital goods. 12. Chapter Five reviews the 1994 Development Budget and discusses the developmental impact of allocations, with Chapter Six examining the role of-the infrastructural sector in the development process. 13. Conclusions drawn from the review are outlined in Chapter Seven and a matrix of proposed actions is attached for guidance. 2 CHAPTER 1 THE DEVELOPMENT BUDGET IN THE GOVERNMENT' S ANNUAL FISCAL PROGRAMME 14. The expenditure aspect of the Government's annual fiscal programme is classified broadly into Recurrent and Capital expenditures. Recurrent expenditures include the expenditure categories under items 1-6, as well as interest payments, and transfer payments like pensions, gratuities and Government's Social Security contributions on behalf of its employees. 15. In 1994, Recurrent Expenditures constituted 73 per cent of total Government expenditures. Table 1.1 below shows the share of the other expenditure categories, Capital, Special Efficiency and Other Expenditures, in total government expenditures. Table 1.1: 1994 Actual Expenditures met from the Consolidated Fund CATEGORY m Share 1. RECURRENT 838,962 73.0 2. CAPITAL 173,864 15.1 - Development 165,605 - Net Lending 8,259 3. SPECIAL EFFICIENCY 50,998 4.4 4. OTHER EXPENDITURE 85,747 7.5 TOTAL 1,149,572 100.0 Source: 1995 Budget Statement, Republic of Ghana, February 1, 1995 Expenditure Budget Structure 16. The expenditure budget is structured on the basis of Heads, Sub-Heads, Items and Sub-Items of expenditure. The Budget Head usually represents all expenditures of Ministries and is sub- divided into sub-heads, each representing an activity under a Department. Each activity is in turn divided into nine standard items of expenditure, that is, items 1-9. In some large Ministries Expenditure Heads may relate to Departments also. This is on account of the large number of Departments under those Ministries. 3 17. All expenditures programmed in the recurrent and development budgets are identified by a nine-digit code thus: 123-456-789. The first three digits (123) represent the Head (that is, the Ministry responsible for the activity), the next two digits (that is 4 and 5), the sub-head; the sixth digit represents the item. The seventh digit represents the Ministry or Head office of a Department and the 10 regions. Thus: '0' represents the Ministry or Head.Office of a Department, while the ten Regions are assigned the following numerals: Greater Accra Region 1 Volta Region 2 Eastern Region 3 Central Region 4 Western Region 5 Ashanti Region 6 Brong Ahafo Region 7 Northern Region 8 Upper East Region 9 Upper West Region A The last two digits (ie 8 and 9) represent the sub-items. Digits: 1 2 3 - 4 5 6 - 7 8 9 Head Sub-Head Item Ministry/Head sub-item Office of Department or Region 18. The following Table lists the present Ministries and the allocation of Budget Heads. Table 1.2 Ministries and their Budget Heads MINISTRY BUDGET HEAD 1. Food & Agriculture 001-012 2. Lands & Forestry 040-049 3. Mines & Energy 050-052 4. Trade & Industry 060 5. Tourism 070 6. Env. Science & Tech 080-081 7. works & Housing 100-102 8. Roads & Highways 110 9. Transport & Comm 120-123 10. Education 140-145 11. Youth & Sports 150 12. Health 160-163 13. Emp & Social Wel. 180-184 14. Interior 200-204 4 15. Local Gov't & Rural Dev. 220-231 16. Government Machinery 240-270 17. Information 280-281 18. Admin of Justice 300-302 19. Foreign Affairs 320-322 20. Finance 340-349 21. Gen. Govt Services 370 22. Defence 380 23. Parliamentary Affairs 604 EXTRA MINISTERIAL DEPARTMENTS 24. Pub. Services Commission 600 25. Audit Service 601 26. National Commission for Civic Education 602 27. Judicial Service 603 28. Office of Parliament 604 29. Commission on Human Right & Administrative Justice 605 30. Nat. Comm. on Culture 608 31. Nat. Electoral Comm. 609 32. District Assemblies Common Fund 610 33. National Media Comm. 611 19. The various objects of expenditure are identified as Items 1- 9. The activities covered by the Items are as follows: Item 1 - Personal Emoluments (PE) Item 2 - Travelling and Transport Expenditure Item 3 - General Expenditure Item 4 - maintenance, Repairs and Renewals Item 5 other Current Expenditure Item 6 - Subventions Item 7 - Constructional works Item 8 - Procurement of Plant and Equipment, Furniture and Vehicles Item 9 Other Development Expenditure Development Expenditure Budget 20. Capital expenditures are defined as Development Expenditures, (that is, Items 7 - 9) and loans and advances extended to Public Sector employees as well as to SOEs and to a smaller extent, private sector entities, for the financing of projects. 21. It is under Development Expenditures that appropriations are made for the financing of annual projects and programmes being undertaken by MDAs and for their acquisition of capital goods. 5 22. Item 7 covers expenditures on the construction, extension, improvement, rehabilitation and renovation of all the fixed assets of Government including buildings, roads, bridges, dams, etc. 23. Item 8 provides for expenditures on capital goods like Plant and Equipment, Machinery, Furniture and Vehicles. 24. Item 9 caters for projects and programmes which have both recurrent and capital components. In effect, these are expenditures on specified development projects and programmes with defined objectives that should be implemented in composite form. 25. The budget format limits the definition of expenditures to activities to be funded exclusively from Consolidated Fund receipts (i.e. tax and non-tax, such as income, fees as well as grants). This coverage is considered a narrow one (Total GOG Outlay in tables 1.3 and 1.5), since it does not take account of donor flows disbursed directly to projects. When the budget format includes donor flows channeled directly to projects (Direct Inflows in Tables 1.3 and 1.4), then the coverage is considered broad, hence broad coverage. Table 1.3: 1994 Actual Development Budget by XDAs: Broad Coverage Ministries Total GOG Direct Total Devt. Outlay Inflows Outlay (Broad (Narrow Coverage) Coverage) Food & Agriculture 3,411 20,629 24,040 Lands & Forestry 3,551 2,015 5,566 Mines & Energy 1,728 7,642 9,370 Trade & Industry 385 1,417 1,802 Tourism 143 0 143 Env., Sci. & Tech. 3,752 2,385 6,137 Works & Housing 10,990 14,130 25,120 Roads & Highways 92,909 69,307 162,216 Transport & Comm. 1,587 6,047 7,634 Education 5,730 31,452 37,182 Youth & Sports 331 0 331 Health 5,472 7,695 13,167 Employment & Soc Wel 813 129 942 Interior 5,073 4,920 9,993 Local Govt&Rural Dev 719 777 1,496 Govt machinery 2,342 0 2,342 Information 1,276 0 1,276 Justice 483 0 483 Foreign Affairs 463 0 463 Finance 8,002 4,012 12,014 Defence 3,972 312 4,285 Extra Ministerial Dept 3,136 0 3,136 Gen Govt Services 4,153 0 4,153 PAMSCAD 383 0 383 NCC 4,802 0 4,802 Total 165,605 172,870 338,475 ouce:inistry of Finance 6 Table 1.4: Sectoral Distribution of 1994 Actual Development Expenditure, Broad Coverage Narrow Direct Broad % of Broad Sector Coverage inflows Coverage Coverage Of GDP Productive 8,690 30,286 39,975 11.5 0.8 Econ.Infra- structure 105,486 89,484 194,970 57.6 3.8 Social 12,014 39,276 51,290 15.2 1.0 Administration 39,415 13,824 53,239 15.7 1.0 Total 165,605 172,870 338,475 100.0 6.5 ource: Ministry of Finance 26. The distribution of Development Budget estimates by MDAs (narrow coverage), did not show any marked variation from year to year. This is a result of the marginal approach adopted by MOF in allocating resources. Annex Tables Al. to A1.4 show the effect of this. Table 1.5: Distribution of Actual Development Expenditure by MDAs, Narrow Coverage Ministries/Departments Total GOG Distribution outlay of Dev't Budget Food & Agriculture 3,411 2.1 Lands & Forestry 3,551 2.1 Mines & Energy 1,728 1.1 Trade & Industry 385 0.2 Tourism 143 0.1 Environment, Science 6 Technology 3,752 2.3 works & Housing 10,990 6.6 Roads & Highways 92,909 56.1 Transport & Communications 1,587 1.0 Education 5,730 3.5 Youth & Sports 331 0.2 Health 5,472 3.3 Employment & Social Welfare 813 0.5 Interior 5,073 3.1 Local Government & Rural Development 719 0.4 Government Machinery 2,342 1.4 Information 1,276 0.8 Justice 483 0.3 Foreign Affairs 463 0.3 Finance 8,002 4.8 Defence 3,972 2.4 Extra Ministerial Departments 3,136 1.9 General Government Services 4,153 2.5 PAMSCAD 383 0.2 NCC 4,802 2.9 Total 165,605 100.0 ource: Ministry of Finance 7 I Sectoral Share of the Development Expenditure Estimates 27. In 1994 the economic infrastructure sector composed of Works and Housing, Roads, and Transport and Communications, was allocated 53.1 per cent of the narrow development budget. The Social Sector consisting of Education, Health and Employment and Social Welfare was allocated 7.4 per cent while the productive sector comprising Agriculture, Lands, Forestry and Mines and Energy accounted for 7.9 per cent. As shown in Table 1.6 the others, mainly administrative and regulatory in function, were allocated 31.6 per cent of the Development Budget. Table 1.6: Distribution of 1994 Development Budget Estimates by Item, Narrow Coverage Sector Allocation % of Of Which Item Omillion Total (percent) Provision 7 8 9 Productive 13,796 7.9 3.7 8.0 22.5 Econ 92,541 53.1 74.2 3.0 27.4 Infrastructure Social 12,903 7.4 6.6 13.4 2.1 Administration 54,974 31.6 15.5 75.6 48.0 Total 174,214 100 100 100 100 Source: Ministry of Finance 28. At the item level, as shown in Table 1.7, construction (item 7) was allocated 67.8 per cent of the development budget for 1994. Item 8 was allocated 20 per cent while item 9 was allocated 12.2 per cent. 8 Table 1.7: Sectoral Distribution of 1994 Development Estimates by Item: Narrow Coverage Sector Total Of Which Item 7 8 9 Productive 100.0 42.1 20.4 37.5 Econ 100.0 93.1 1.0 5.9 Infrastructure 100.0 60.4 36.1 3.5 Social 100.0 33.4 48.0 18.6 Administration ________ Total 100.0 67.8 20.0 12.2 Source: Ministry of Finance Actual Development Expenditures 29. Actual Development Expenditures are defined as expenditures authorized within the year as well as payment of spillover of claims for work done in the preceding year. For 1994 total expenditures authorized from the Estimates was 0165.6 billion, including spillovers amounting to 027.2 billion. Table 1.8 shows the sectoral breakdown of,actual 1994 development expenditure. Table 1.8: Sectoral Share of 1994 Actual Development Expenditure. Narrow Coverage Sector Total GOG % of Total Outlay GOG Dev't (Cm) Outlay Productive 8,6.90 5.2 Economic 105,486 63.7 Infrastructure. Social 12,014 7.3 Administration 39,415 23.8 Total 165,605 100.0 Source: Ministry of Finance 30. In the narrow coverage the share of actual Development Expenditure in GDP (see Table 1.9) is more or less constant: 3.1 per cent in 1993 and 3.2 per cent in 1994. On the basis of the broad coverage the share of actual development increased in excess of 1 per cent: from 5.4 per cent in 1993 to 6.5 per cent in 1994. 9 Table 1.9: Actual Development Expenditure & GDP, 1993-1994 Actual Development %age Share of Expenditure Actual Dev't Current YEAR (kmillion) Expenditure in GDP GDP (t) Narrow Broad Narrow Broad Coverage Coverage Coverage Coverage 1993 121,349 215,597 3.1 5.4 3,949,024 1994 165,605 338,475 3.2 6.5 5,185,700 Source: Ministry of Finance The Public Investment Programme (PIP) 31. The Development Budget is that annual instalment of the PIP which shows planned expenditure to be funded directly from the Consolidated Fund. 32. The PIP is a recording of public investment activities planned to be undertaken by Government and quasi-Government bodies. It identifies the sources of financing for these projects and the time frame for their implementation. 33. Work on the PIP was started in 1985 as one of the key conditions of effectiveness for the World Bank Second Reconstruction Import Credit (RIC II). It aimed at improving public expenditure management through the adoption of a technical approach to resource allocation. This was in contrast to the mere listing of projects which, until 1985, characterized the Development Budget. The annual budget was also narrow-based, reflecting only expenditures programmed to be met from the Consolidated Fund. 34. The first PIPs were prepared by a Task Force constituted by some staff members of the then Ministry of Finance and Economic Planning (MFEP) the MDAs and local consultants . By 1990, the process had matured and work of the Task Force was fully integrated into the work of the Investment and Project Analysis Division (IPAD) of the (MFEP). 35. The PIP, at its introduction, provided a basis for deriving the broad based annual Development Budget except that the published Budget did not reflect donor flows. It has been published in two volumes. Volume 1 presents the underpinning macro-economic framework, and highlights the planned investment and related financial profile for the medium term. 10 36. Volume 2 is published as separate sector profiles and provides information on project and programme cost, Sources of funding as well as information on projects with financing gaps. For example, for the 1994-96 PIP there were sixteen sector reports. 37. The PIP process thus seeks to provide, on the basis of well defined economic criteria, a multi-year planning and implementation framework for the identification, selection and phasing of development projects. This objective is to be realized by ensuring that projects in the productive sector which would be selected for inclusion in the annual development budget would be those that yielded the highest economic rate of return, while social sector projects were to be cost effective and have minimal recurrent cost implications. Concept Of Core And Supercore Projects 38. The initial PIP had to contend with a large number of projects already in existence. To rationalize these and provide a basis for proper project selection, it introduced a programme within a programme referred to as the "core" programme. 39. The core Programme was used to bring the projected capital expenditures in line with likely resource availability. Projects and programmes in the productive and economic infrastructure sectors were included in the category if they were expected to yield an ERR in excess of 15 per cent. However, projects having a lower rate of return were included if they were judged to have substantial non-quantifiable externalities. 40. On this basis out of the 201 projects that were included in the 1986-88 PIP, 104 were categorized as core, and the remainder non-core. 41. Between 1987-89 many more projects, especially donor funded ones were admitted into the PIP. In the light of limited resources, it became necessary to reclassify a sub-set of the core projects into a supercore category which had the first call on domestic resources. 42. The Supercore mechanism was thus to protect a smaller set of core PIP projects, mostly donor assisted, from disruptions caused by slow disbursement. In support of the concept, a special account was established into which programmed funds were released quarterly for the timely funding of the Supercore projects. 43. The operation of the account, however, led to the tying up of scarce resources whenever any of the Supercore projects experienced implementation difficulties and delays because the funds could not be transferred to finance other projects. This created problems of fiscal management and called for a review. At any rate the 11 improvements in Government revenues that had occurred in the wake of the restructuring and reform of the tax collection system assured the reduced number of projects regular and adequate funding. The core and supercore concepts, therefore, became obsolete and were abandoned in 1990. 44. Table 1.10 shows the rising trend in the number of sectors and projects covered in the various PIPs prepared for the years 1986 to 1996. Table 1.10: Coverage of the PIP for the Period 1986-96 No. qf Fea: i- No. of No. of No. of lxty St PIP No. of On-going New es,incJu- PIP (years) Sectors Projects Projects Projects ed in tne New. Projects 9 9 201 123 78 25 19 1 12 314 25 6 2 198- 1 1 12 142 29 52 1 1991 1992 14 387 347 40 19 1 3 14 402 366 361 1992 1 94 14 417 80 7 1 1993 1995 14 404 365 39 1 6 16 411 369 42 1 Guidelines for the Preparation of the PIP 45. By 1985, the GOG had realized that the large number of development projects carried on the budget from year to year, without completion, led to a dissipation of investment resources. with the introduction of the PIP, new Guidelines were issued that indicated the type of projects that would be admitted and the criteria to apply for their selection. 46. The idea was to rationalize the large number of on-going projects. This focus was stated in the 1987 Budget Guidelines and repeated annually thereafter, and sought to complete on-going projects. In order to maximize the yield from earlier investments, new projects were not eligible for consideration unless deemed to be absolutely important. In all cases, they were required to be .supported by detailed feasibility studies. 47. To fulfil Government's social objectives, sizable portions of the development budget were to be devoted to projects designed to: a. alleviate rural poverty by encouraging income generating activities; b. mitigate economic hardship associated with the 12 implementation of the Structural Adjustment Programme; c. improve the quality of life through the provision of services like health, water and electricity. 48. For the selection of projects, the Economic Rate of Return (ERR) criterion was to be applied. For large projects costing over $5 million an ERR of at least 15% was required for their inclusion in the PIP. In addition to the obligation for feasibility studies to be conducted for all projects entering the PIP. Further, the projects were to be ranked on the basis of the following: a. key projects for the rehabilitation of economic infrastructure and the easing of existing infrastructural bottlenecks; b. export-oriented and efficient import substituting projects with relatively short gestation periods and quick returns; c. projects which directly generate budgetary revenue; d. projects with assured foreign funding or capable of attracting foreign funding of not less than 60 per cent of planned total investment; e. on-going projects at advanced stages of implementation with large sunk capital and still assessed to be viable. 49. Where the application of the ERR criterion was not appropriate as in the case of social sector projects, the cost effectiveness technique was to be applied. The projects were also to fit one or more of the following descriptions: a. strategic social projects with relatively minimal recurrent expenditure for the Government budget; b. projects with high effective employment and income generation potential located in rural areas; c. relatively low cost social projects aimed at improving the quality of life in the rural areas; and d. social projects capable of attracting community participation. Equity and Balanced Development 50. In the preparation of the PIP adequate consideration was to be given to the regional distribution of projects to ensure equitable and balanced development of all regions. 13 51. These Guidelines have not changed since August, 1987 when they were first issued and are expected to guide MDAs in the selection of projects. To the extent they refer to regional balance and the welfare of the rural people, they anticipate the 1992 Constitution which in Article 36 requires Government to: a. undertake even and balanced development of all regions and every part of each region; b. improve the conditions of life in the rural areas, and generally, redress any imbalance in development between the rural and the urban areas. 52. The Constitution further requires Government to bring about equality of economic opportunity to all citizens, and, in particular, take the necessary steps to ensure the full integration of women into the mainstream of the economic development of Ghana. 53. These are the requirements of social justice and equity which dictate that Government effort be addressed to improving the economic situation of depressed areas and the well-being of disadvantaged people. Evaluation of Guidelines 54. The above guidelines were introduced to address some undesirable features that had been observed in Government's project selection. A number of reasons account for these: a. allocation of resources are highly skewed in favour of urban projects and for residential accommodation; b. the scramble by all MDAs for resources for financing projects of doubtful developmental and social merit; and c. the uncontrolled variation of on-going projects. 55. The Guidelines did not address the issue of the large numbers of on-going projects. They sought to limit the entry of new projects through the application of the criteria listed in the Guidelines. This was expected to be achieved through the elimination of projects already in the budget. 56. Further, the provision in the Guidelines that allowed new projects to be introduced if they were deemed "absolutely important" offered opportunities for MDAs to initiate projects even as they could not muster sufficient resources to complete on-going ones. 14 57. The Guidelines did not force the sectors to choose ,between projects, so that between one project and another there was no way of knowing which one was considered more important. 58. The requirement of the PIP Guideline that a number of individual rehabilitation projects be lumped under one broad head called the Umbrella Project ie. a programme, allowed for an indefinite number of projects to be taken on each year without the necessary studies being done. 59. In addition to the above, another weakness of the Guidelines is that some of the conditions for the acceptability of projects into the PIP are more relevant for industrial project analysis. For example it will be difficult to describe any project in the budget as import substitute or export oriented, or as being capable of directly generating budget revenue. 60. Aspects of the Guidelines that were more relevant were those related to the even spread of projects and the welfare of the people in the rural areas. As is demonstrated in Chapter 5, resource allocation was not guided by explicit policy. Evaluation of the PIP 61. The introduction of the PIP initially resulted in major improvements in resource allocation. This was achieved primarily because it provided a basis for prioritizing sectors according to their contribution to the growth effort. Within this limited number of sectors the PIP process, by insisting on a transparent set of criteria for project selection, provided a better screening of projects submitted by the sectors, thus providing, overall a better project portfolio. Its utility as an efficient tool in resource allocation has however been eroded over the years. 62. In composing the initial Task Force the Ministry of Finance insisted on the participation of the core staff who had developed the Programmes in the sector Ministries. The insights provided by the staff members allowed a better appreciation of the programmes while allowing the intense scrutiny of project as well as project scope and financing possibilities. The interaction with the Task Force was to introduce them to the analytical tools and the budgeting process necessary to enable them develop counterpart units in the sector Ministries to undertake the subsequent preparation of projects. The idea was not formalized and the staff who had participated in the PIP process when they rejoin thier parent Ministry were left to undertake other assignments. The Counterpart Teams were never set up. Thus from the very inception the conditions were not created for the sustainability of the PIP process. 15 63. The large increase in the number of PIP projects submitted for analysis put under severe strain the technical capability of the staff assigned for evaluating the projects. The integration of the PIP Task Force in 1990 into the IPA Division of Ministry of Finance was expected to ensure adequate staff complement for the increased workload, but it turned out that this load in addition to routine IPA work did to allow the staff to devote adequate time for the rigorous analysis required for the preparation of the PIP. Thus, as shown in table 1.7 below out of fifty nine projects for five major sectors examined with costs in excess of US$ 5 million and requiring an ERR of 15 per cent only thirty per cent only thirty (about 51 per cent) were actually analyzed. Table 1.11: Proiects Requiring ERR or Cost Effectiveness Analysis No. of PIP Projects for Selected Percentage of Ministries sectors with Projects Projects Investment in Analyzed Analyzed Excess of U mS$5m Roads 28 18 64 works 12 7 58 Agriculture 6 3 50 Education 9 1 11 Health 4 1 25 Total 59 30 N.A 64. Thus in recent years, the staff have found it difficult to produce the PIP ahead of the Development Budget, especially because of the short lead time between the issue of the Budget Guidelines and the preparation and publication of the PIP. 65. Resulting from the increased workload, and lack of logistic support, the physical monitoring of on-going projects could not be undertaken by MOF. Thus staff was not informed on the state of implementation of projects. 66. To avoid the discipline of project preparation, especially the requirement that the feasibility of large projects being sponsored should be proved to generate at least 15 per cent returns, MDAS submitted projects disguised as small projects. Once they were admitted their true costs were revealed. The generalization of this behavior undermined the integrity of the process and contributed to the inability to keep expenditures within limits. The PIP and the New Planning System 67. Article 86 of the Constitution assigns to the National Development Planning Commission (NDPC) responsibility for making proposals for the development of multi-year rolling plans, as well as for the monitoring, evaluation and co-ordination of development policies, programmes and plans. 68. The National Development Planning (System) Act 1994 (Act 480) provides for a new system aimed at developing a decentralized national planning system by synthesizing various District Development and Sectoral plans into a comprehensive national framework. It also seeks to ensure the compatibility of sector and spatial policies and programmes within District plans. 69. To fulfil its mandate the NDPC proposes to develop a five-year investment programme which will seek to forecast funding requirements and identify sources of funding. Each year of the five-year rolling plan is to constitute a basis for deriving the Government's annual Development Budget. 70. The NDPC's plans could duplicate the PIP while the multi-year planning framework is necessary for budget preparation (and the PIP's three-year planning outlook has been very useful in this regard), it is doubtful that a longer horizon provides any additional advantages. It may weaken the focus in the PIP by proving an unduly long time-frame. 71. In the mean time the Investment and Project Analysis Division (IPA) of the Ministry of Finance would continue with the preparation of the rolling three-year Public Investment Programme and selection of projects for inclusion in the annual budget after undertaking economic rate of return analysis (ERR) for projects in the productive sector as well as cost effectiveness analysis for social sector projects. This will ensure the selection of the right projects into the development budget. 17 CHAPTER 2 CHARACTERISTICS OF THE DEVELOPMENT BUDGET 72. The characteristics of the Development Budget reveal a great deal about the development effort, that is, whether resources are being invested efficiently and whether important economic and social issues are being addressed effectively. Main Features of the Development Budget 73. The Development Budget carries a large number of projects, indicating that funds are being dissipated on small projects, thus taxing the supervisory and monitoring capability of Government. 74. The age profile of projects suggests that current policies are not reflected. It questions whether returns from investment are being maximized-through the execution of projects with quick pay- back or through the prompt completion.of projects. Table 2.1: Age Profile of Projects by Sector Total Years No. of Sector contracts Less 1-3 4-6 Over 6 Than One Productive 53 0 27 17 9 Infrastructure 114 2 62 16 34 Social 215 1 79 36 99 Administration 216 1 89 45 81 Total 598 4 257 114 223 75. It exhibits a high concentration of projects and allocations under the infrastructural sector revealing the focus of the development effort and the thrust of Government policy, that is, its direction at the provision and improvement of economic infrastructure. At the Item level, the concentration of projects and allocation under Item 7 shows heavy construction activities. 76. The source of funding being applied also tells a story. 41 per cent 'of total foreign inflows (ie aid and commercial facilities) support the development of* economic infrastructure. Because of the conditions and procedures to satisfy before its use, it mostly finances projects being executed by large, mostly foreign, contractors and pre-empts resources needed to finance GOG projects. Thus it tends to inhibit the growth of indigenous contracting firms. 18 Table 2.2: Sectoral Disbursement of Foreign Inflows Sectors Total % of Total Economic Infrastructure 194,445 41.13 Productive 123,645 26.16 Social 40,457 8.56 Administrative 114,163 24.15 Total 472,710 100.00 77. As can be observed the 1994 Development Budget, had as many as 598 contracts. Of this number, as many as 337 or nearly 57 per cent were over four years old. Table 2.3:1994 Development Budget- Age Profile of Contracts by MDAs No. of Years Total No. of Total No. PIP of Minstries Projects Contracts Less thmni1 1-3 4-6 Over 6- 1. Food & Agiculture 87 42 . 19 15 8 2. Environment, Sc.& Tech 28 28 0 9 3 18 3. Trade & Indusiry 8 3 0 2 0 1 4. Lands & Forestry 14 11 - 8 2 1 5. Employment & Soc Wei. - 73 1 18 0 56 6. Interior 51 0 26 14 11 7. Govt Machinery 21 0 5 0 16 8. Tourism 3 2 1 0 0 9. Transport & Communi. 60 10 0 3 1 6 10.Energy & Mines 41 0 0 11.Works & Housing 38 75 0 48 8 19 12.Educatn 20 74 - 31 12 31 13.Heafth 18 68 0 32 24 12 14.Local Gov.& Rural Dev 7 8 0 0 0 8 15.PAMSCAD 8 - - - 16.Admin. of Justice 8 0 4 0 4 17.Finance 21 0 15 1 5 I8.Defence 45 0 10 19 18 19.Extra Min. Depts 17 1 14 2 0 20.Information 7 1 0 0 1 0 21.Roads & i4ways 62 26 0 10 7 9 22.Mulisectoral 12 . 23Cufture 1 13 0 4 5 4 Total 411 598 4 257 114 223 NOTE: While the PIP projects number 411, the Budget identifies contracts. These total 598. One PIP Project may generate several contracts. 78. In 1994, new projects provided for turned out to be mostly under Item 8 in the form of the acquisition of vehicles, plant and 19 equipment. This description of the procurement of capital goods as 'project' follows the definition in the FAR, Section 45 which classifies the initial provision of equipment for a new installation and the renewal of the equipment items, as new projects. The on-going projects, narrow coverage basis, were heavily concentrated under items 7. 79. The distribution of expenditure at item level was: 67.8 per cent; 20 per cent and 12 per cent for Items 7, 8 and 9 respectively (refer to table 1.5). 80. Actual releases also showed a similar pattern: 74.2 per cent under item 7, 17.9 per cent under Item 8 and 7.9 per cent under item 9 refer to annex table A1.4. 81. At the sector level, 53.1 per cent of planned expenditure went to economic infrastructure and 31.6 per cent to Administration. The Social and Productive sectors had. 7.4 and 7.9 percent respectively (refer to table 1.4). Releases reveal more or less the same weights: 63.7 per cent for Economic infrastructure, 23.8 per cent to Administration, 7.3 per cent to the Social Sector and 5.2 per cent for the Productive sector. 82. On a broad-based coverage the distribution of expenditures show that almost 58 per cent went for the provision of economic infrastructure, almost 16 per. cent to the administrative and regulatory agencies while the social sector received 15 per cent with the balance of 11 per cent to the productive sectors. - 83. The Development Budget therefore exhibits the following characteristics: a. a large number of on-going projects with a majority older than four years; b. majority of projects and resources concentrated under Item 7; c. although substantial amounts of resources are assigned to Economic Infrastructure, Administration also receives a significant proportion especially of local funds as against the rather low levels of allocation made to the social and productive sectorr,; and d. the financing shows a strong bias toward foreign aid. Multiplicity and Age of Projects 84. The persistence of on-going projects is often attributed to inadequacy of resources made available for their implementation. This excuse, however, cannot be accepted since in spite of inadequate resources MDAs do not make the necessary effort to concentrate resources on a few projects. 20 85. An implication of the multiplicity of projects is that investment funds are spread thinly and thus prolong the pace of execution of the projects, hence the age profile exhibited. Again, for projects that by nature require heavy expenditure per unit of work done, such low provisioning could lead to over-expenditures as experienced under the Ministry of Roads and Highways. 86. The large number of projects also strains the administrative and supervisory capacities of MDAs. Monitoring and evaluation of projects, therefore, cannot be total and there is some evidence that many of the 'age-long' projects are just a cover for obtaining extra resources and that the projects as originally conceived may have been completed. 87. The transfer of District Projects from Central Government to District Assemblies for funding through the DACF has revealed that projects that were completed, paid for and are in use, continued to receive budgetary allocations which were then applied to other projects. 88. The large number of projects also constrains Government's ability to translate its policies into action and consequently affects its performance. In the management of these projects Government faces a dilemma, that is, whether to scrap some of them in spite of the investments already made on them and release funds to support projects developed from current policies, or to maintain them at the expense of its policies. The resolution of the problem should be based on the relative economic returns from implementing either one of the options. 89. The age profile of the projects denotes that investments made by Government are not yielding any returns because until the projects are completed no services can be derived from them. In effect, Government sustains the Contractors working on these projects by annually taxing the people and transferring funds to contractors through payment of certificates submitted for work done. Foreign Financing 90. The annual budget circular calls on all MDAs to provide fully for the matching funds needs of donor funded projects. This is essential if programmed aid flows are to be realized. Donor funded projects are, therefore, assured both local and foreign funding at the same time. This has impelled MDAs to look for foreign funding for the projects they are handling or to accept project proposals from foreign financiers and donors. MDAs are, therefore, gradually losing their responsibility to initiate projects informed by their better knowledge of local conditions. 21 91. Again, the conditions for qualification to bid for tenders on such projects are so stringent that most indigenous contracting firms fail to satisfy them. Thus, they lose the opportunity to add to their experience and expand their scope of operation. This also means that the nation derives much reduced benefits from aid since there is substantial reverse flow by way of imports and service payments due to the foreign contractors. 92. In 1994 a number of contract award for donor-assisted projects were delayed because the procedures adopted varied from Ghana's and in our view did not assure adequate transparency in the selection of Contractors. Evaluation of Expenditure Proposals submitted by MDAS 93. The characteristics of the Development Budget described above have been created over time by the interpretation of the development process as transmitted through the Budget Guidelines by MOF and as perceived by MDAs and reflected in their expenditure proposals. Most of the submissions made by MDAs were thus deficient in a number of ways and this is blamable on both MOF and the MDAs. 94. MDAs are supposed to be guided by the MOF through the annual budget circulars as to how they should respond to the macro- objectives and other broad policies proposed to be pursued in the financial year. It does seem, however, that not enough information is offered to enable the MDAs make realistic projection of their expenditure needs. For example, unlike previous years the 1994 Budget Guidelines did not provide the macro-economic parameters necessary to guide planning. Previous guidelines that gave some macro-economic figures like the planned growth rate in GDP, only did so by way of information. No instruction was given as to how the growth rate would translate into sector targets although the information was available in the Policy Framework Paper which provided the background for Government's fiscal programming. 95. Again, MDAs are not advised as to how they should factor changing economic variables like the rate of inflation and the exchange rate in their estimation of cost, nor were they given prior notice of proposed policy changes that would affect their projections. It was the belief of the Ministry of Finance that once the base costs were known the consequential adjustment for exchange rate depreciation, inflation and wage levels would be done automatically. Therefore contingent provisions were made in Adjustment Votes, for Items 7 and 8, to meet the additional liabilities. However, experience showed that the Votes were inadequate to meet the contingencies. 96. Notwithstanding the above however, it is questionable whether MDAs have the technical capability to handle the information 22 because just a few of them have properly established budget or planning units to do the work. The situation is made worse by the relegation of the budget preparation exercise to low level subordinate staff. 97. Further, the time available between the issue of budget circulars and the dead-line for submission of proposals, and in fact, from one budget exercise to the next, is too short to allow for any serious work to be done. For instance the 1994 Budget circular which was issued on July 30, 1993, called for submission of proposals by August 13. In 1994 Parliament passed the Appropriations Act on May 16, 1994. For Government to meet the Constitutional requirement for the submission of the next budget one month before the end of the financial year, work on the 1995 Budget had to start in July, 1994. The futility of doing anything within the available time frame should explain the inanition on the part of MDAs. 98. Though MDAs are requested by Budget Circulars to precede their estimates with their policies for the fiscal year those which comply do not indicate the link between policy and proposed estimates, not to mention that many of them in fact do not comply. Many budget hearings are, therefore, conducted without the benefit of the relevant Ministry's policies. Thus, no serious intellectual input is introduced in the budget preparation exercise since most of the information used at hearings is very stereotype. 99. This could be the reason the exercise is relegated to low level subordinate staff who have turned it into an annual routine of listing projects and checking whether provisions obtained in the previous year have been adequate to cover claims and if not, what extra funds to request. This central role of subordinate staff is confirmed when at budget hearings they are called upon by senior administrative officers to respond to queries raised. 100. At this level of responsibility even the little information needed to guide discussions at budget hearings is denied. Submissions made do not provide any detailed project descriptions to identify the projects' economic and technical significance. Expenditure estimates are not related to work to be done, nor are they informed by the time frame for their completion. No reports are presented on the progress of implementation and problems being encountered so that no platform is offered for a review. Delays in implementation, which at times may be due to other factors, are very readily attributed to inadequate funding. 101. The submissions MDAs make invariably ignore the ceilings transmitted to them. It is a moot question whether by their persistence in annually submitting excessively high expenditure proposals, MDAs wish the MOF to accept that the levels often allowed them are unrealistic, or that they are exploiting the strong positive correlation that has been observed between large 23 requests and higher approved levels. 102. In either case the need to prune the requests down to reasonable levels consumes a lot of time and degenerates budget hearing into "market place haggling" with hardly any application of rational considerations like the MDAs' own implementation capacity. 103. MDAs have tended to concentrate their project proposals for the budget under Item 7 is constructional works. The result is that projects and programmes under Item 9 are not given adequate attention in the preparation and discussions of the budget proposals. Consequently the programmes under Item 9 that rather have developmental impact are marginalised. 104. The large number of projects being carried makes it difficult for any serious study or evaluation of projects to be done. The AESC supervises projects for Government but it cannot claim to do any serious technical appraisal of the projects because that exercise would strain its resources. Most MDAs also have no economists or trained personnel to undertake evaluation or economic appraisal of projects. To the extent MDAs carry large numbers of projects no serious reporting can be done on them. 105. Projects are not ranked. This would require an evaluation of . all the projects being implemented. But as has been demonstrated above there is not enough time between the completion of one budget process and the start of another to enable serious appraisal to be undertaken of the budget to guide the succeeding year's budget. 106. Because of the way the budget is structured, ie. by item, and the mode by which MDAs are directed to allocate resources, almost all MDAs programme for expenditures under all the items. Since MDAs may not have the competence to supervise work in construction they should handle much less of such projects and more of projects that relate better to their competence. Development estimates submitted would then support the statutory responsibilities of MDAs and translate sector policy into implementable projects. 107. Finally, proposals for the procurement of equipment and furniture do not provide any information-on the state of existing ones. The Financial Administration Regulations require MDAs to prepare in the course of their budget exercise an equipment schedule which shows items currently held and their condition including age and serviceability, as well as new requirements indicating. whether they are replacement or additions. This requirement is often ignored except in respect of vehicles, the procurement of which the Chief of Staff must approve. 24 CHAPTER 3 FINANCING THE DEVELOPMENT BUDGET sources of Finance 108. The budget is financed by tax revenues, non-tax revenues (that is, incomes and fees), foreign grants and domestic and foreign borrowing. For 1994, Table 3.1 identifies the various sources of budget financing. Table 3.1: Sources of Funds for Budget Finance, 1994 ITEM Om % OF TOTAL 1. Tax Revenue 826,400 65.5 2. Non-Tax Revenue 434,881 34.5 -Income & Fees 122,106 -Grants 39,483 -Divestiture Receipts & NPART 273,292 Total Domestic 1,261,281 100.0 3. Foreign (net) -84,966 -Borrowing 29,986 -Amortisation -114,952 Source: Republic of Ghana, The 1995 Budget Statement 109. Article 176 of the Constitution requires that all these monies be deposited in the Consolidated Fund and all payments be made from it. By Article 252 of the Constitution, not less than 5 per cent of the tax revenue is earmarked f6r the District Assemblies Common Fund (DACF). 110. Gross foreign inflows in 1994 was 0472.7 billion, made up of finance channeled directly to support development projects of 0172.9 billion; facilities guaranteed by Central Government and on- lent to state-owned commercial entities of 0236.7 billion as well as project grants of 063.2 billion. After account is taken of debt repayment of 0178.8 billion (which includes principal amortization, interest and charges), net foreign inflows (refer to annex table A3.1) amounted to 0293.9 billion. Another important feature of the gross inflows is the split between concessional financing and commercial credits available to Ghana. In 1994 of the total gross k inflows, 0254.6 billion (ie almost 54 per cent) were concessional. 0218.1 billion were of a commercial nature. Adequacy Of Finances 111. For the years 1993-1994 the approved provisions (narrow coverage) constituted about 57 per cent of total submissions from the sectors. Assuming that the submissions made by MDAs represent their genuine demand for investment funds, then it would look like there was a shortfall of 43 per cent in total fund requirement. In terms of actual expenditure, however, 95.0 per cent of approved votes was released indicating some over-programming in the draft Estimates. 112. As indicated in Table 3.2 allocations for the recurrent and development budgets for 1994 represent about 80 per cent and 20 per cent respectively of total expenditure. Even though nominal allocation for the development budget doubled from 1993, this represented only a 25 per cent increase in the development budget's share of the annual budget. Table 3.2: Provisions for Recurrent and Development Budgets, 1993-94 1993 1994 Year __ __ __ __ __ __ __ (OM) %(0M) %_ _ Recurrent Budget 493,200 83.1 743,616 78.8 Development Budget 100,000 16.9 174,153 18.4 District Assemblies Common Fund - - 26,193 2.8 TOTAL 593,200 100 942,722 100 Source: Budget Estimates, 1993, 1994 Matching Funds 113. The Development Budget incorporates provisions for the complementary finance of programmes supported by donor inflows. Direct project support is estimated at 0172.9 billion in 1994. To provide for some aspect of local costs for these projects, the Government of Ghana utilized 035.0 billion from its estimates to match the foreign finance. 26 114. Two types of complementary financing can be identified. Firstly, commercial facilities and mixed credits which in 1994 amounted to 0218.1 billion usually requires 15 per cent down payment as a pre-condition for loan effectiveness. Thus no annual allocation of matching funds are required when the initial down payment is made. 115. The annual allocation of budgetary funds to support anticipated concessional financing constitute the second type of complementary financing, referred to as matching funds. The GOG is obliged to meet the domestic cost requirements for these projects as a condition for project implementation. 116. In formulating the development budget, MDAs are required to identify all on-going and pipeline donor-supported projects and programmes, indicating GOG's contribution for the year as well as the foreign-funded component. Details to be provided in support of such projects and programmes include the following: a. original cost of project/programme; b. current revised cost of project/programme; c. provision made in the preceding year's budget (stating separately GOG's matching and donor funds); d. actual expenditure to date (stating matching funds and donor funds separately); and e. planned expenditure for the ensuing year. 117. Requests for -the release of matching funds are submitted quarterly and amounts released are lodged in special bank accounts created for the projects. Disbursements are made by Implementing Agencies. Management of Matching Funds 118. The problem associated with matching funds for donor funded activity has been long standing. The 1993 PER proposed a mechanism of assuring the projects of adequate and timely release of local funds. The proposals failed to receive the necessary endorsement of a major donor, the World Bank. However, because projects had been explicitly listed and provided for in the 1994 budget, Government was able to meet these obligations as they fell due. Table 3.6 provides a breakdown of provisions for and releases of matching funds made in 1994. 27 Table 3.6: Provision for and Disbursement of Matching Funds2 Ministries Programmed Om Disbursed Om 1. Food & Agric 1,465 985 2. Lands & Forestry 1,370 1,023 3. Energy & Mines 1,518 883 4. Tourism 60 50 5. Environment 538 1,137 6. works & Housing 1,641 947 7. Roads & Highways 26,222 27,382 8. Transport & Comm 308 76 9. Education 2,100 1,395 10. Health 525 479 11. Local Gov't 930 160 12. Culture 50 510 13. Gov't Machinery 40 37 Total 36,767 35,027 ource: Sector Minxstries and Budget Divisio: (MUO) District Assemblies Common Fund (DACF) 119. Article 252 Section 2 of the Constitution enjoins the Central Government to pay to District Assemblies not less than 5 per cent of total tax revenues every year to support their development projects. Section 3 of the same Article mandates Parliament to approve annually, a formula for the distribution of the DACF. In accordance with this provision the following formula was adopted: i. The need factor: (35 per cent):-which is meant to redress the current imbalances in development. ii. The responsive factor: (20 per cent):-which is meant to motivate the Districts. iii The equalizing factor: (30 per cent) -which is to ensure that each district has access to a specified minimum from the Fund. iv. Service pressurg factor:(15 per gent):-which is to assist in improving existing services which as a result of population pressure are deteriorating faster than envisaged. 2 Due to data constraints not all projects may have been captured. 28 120. A contingency provision amounting to 10 per cent of the Fund was set aside to cater for any unforeseen developments. This amount was taken out of the total before the application of the formula., For 1994, a total of C38.5 billion was released to the DACF. Since releases are made quarterly in arrears, the actual transfers for the year totalled C26.1 billion. The release of $12.299 billion for the 4th quarter of 1994 was made in early 1995. 121. A detailed breakdown of releases by District, is provided in Annex Tables A3.1 and A3.2. The breakdown on quarterly basis is as follows: Table 3.5: 1994 Quarterly Releases of District Assemblies Common Fund Period Amount (Obn) 1st quarter 6.900 2nd quarter 8.185 3rd quarter 11.108 4th quarter 12.299 Total 38.492 122. District Assemblies have the responsibility for identifying, designing and managing development projects within their areas. However, in the transition, various development projects which have been initiated by Central Government in those districts will need to be completed. Therefore, in 1994, Central Government invited the districts to assume responsibility for financing these projects from their share of the DACF, if they so wished. CHAPTER 4 DEVELOPMENT BUDGET IMPLEMENTATION ISSUES Project Implementation 123. The 1994 Development Budget was characterized by high level of expenditure spillovers larger than anticipated(see table 4.1 below). This tendency creates problems for fiscal management and raises a question regarding the adequacy of funding for development projects as well as the implementation capacity of MDAs. Table 4.1: Sectoral Distribution of 1994 Actual Development Expenditure showing spillovers (9 billion) Sectors GOG Spillovers Total GOG Releases Devt. Exp. Economic Infrastructure 84.3 20.8 105.1 Social 10.5 1.5 12.0 Productive 8.6 0.14 8.7 Administration 35.0 4.8 19.8 Total 138.4 27.2 165.6 124. The more critical problem is that by pre-empting the implementation of projects based on current policy, the situation described, denies the benefits that would accrue from the implementation of projects based on Government's current thinking and priorities. 125. For on-going projects, it is noted that discontinuity in payment for projects, especially at the end of the year, creates cashflow problems for contractors. Since contractors are expected to prefinance their work, delays in reimbursing them, while fresh appropriations are sought in Parliament, lead to project stoppage. 126. For new projects, the time lag between project identification and its implementation introduced by Governmental regulations seeking to make contract awards transparent introduces delays thus increasing the cost parameters underlying them, leading to price escalation. 30 Direct Labour 127. The Development Budget also includes a number of projects executed by direct labour. By this method funds are released to the agencies, in advance, for the purchase of materials and inputs. Many of these projects involve community participation and are supervised by technical officers in the MDAs. Contract Award Procedures for New Projects 128. New projects should normally go on tender, and the procedure to be followed depends on the classification of the project, ie whether National, Regional or District. 129. The existence of Tender Boards derives from administrative instructions issued by the Ministry of Finance in 1967, Circular No.C.1/67 of 28th February, 1967. Central, Regional and District Tender Board were set up and assigned responsibilities for tender processing and contract awards. Levels of authority for approving contracts, as well as composition of Tender Boards were clearly spelt out in the circular. Responsibilities of Tender Boards 130. Tender Boards are empowered to consider tenders for works and supplies and to make recommendations for the award of contracts relating to: (i) Building and Civil Engineering Works (ii) Road Construction works; and (iii) Supplies and Procurement. Central Tender Board 131. The Central Tender Board is empowered to consider tenders from qualified contractors for works and supplies with the estimated cost of over $250 million. During 1993 and 1994, the Board processed eleven (11) tenders amounting to $BO,706,539,051.80. (A list of tenders processed by the Board in 1993 and 1994 is attached as Annex Table A4.1). Regional Tender Boards 132. Regional Tender Boards, located at the offices of Regional Coordinating Councils, are empowered to consider tenders from qualified contractors for works and supplies, the estimated cost of 31 k which is above *100 million but does not exceed 250 million and to make recommendations to the Regional Minister for the award of contracts. District Tender Boards 133. The Local Government Act 1993 (Act 462) created District Tender Boards to advise the relevant District Assemblies on the award of contracts in the Districts, which are to be exclusively financed from the Districts' own resources or which have been approved by Government. The financial ceiling for District Tender Boards is $100 million. Types of Tenders 134. There are three types of tenders: a. Open Tender b. Selective Tender; and c. Negotiated Tender Open.Tender 135. In open tender procedure involving Local Competitive Bidding (LCB), the client advertises the tender in the Local Press and the official Gazette, as well as, Foreign Newspapers, if it is International Competitive Bidding (ICB), stating in the invitation any qualification that is required or which contractors are eligible to purchase tender documents in order to bid. Selective Tender 136. In this process, the client selects at its convenience or in accordance with its needs, a number of contractors already known to the client. usually, a minimum of three contractors are selected to submit tenders for the works. The process for the choice of a contractor in selective and open tendering after this stage, is virtually the same. Negotiated Tender 137. With regard to negotiated tender the client hands over to the contractor a set of tender documents to enable the contractor price and submit a tender to the client. At the same time, the Executing Agency also estimates the cost of the works. 138. On occasion, normal open tender procedures may be modified. These are when: (a) the specialized nature of the work is such that selective tendering or negotiation with a selected contractor is desirable; (b) there is an urgent need to start the work earlier than is possible by the normal tender procedure; (c) there is a need for sole sourcing of funds for a project where a proposal has been submitted on a turn-key arrangement; (d) the extension of an existing project was not foreseen at the time of the original award. 139. Before an Implementing Agency modifies the open competitive tender procedure, prior authorization has to be obtained from the Central Tender Board, for projects above t250 million. In the Regions, however, no such authorization is required. Generally, however, such modifications are rarely applied. Thus, out of the eleven tenders processed by the Central Tender Board during the 1993 and 1994 fiscal years, only one (1) was awarded on negotiated contract basis. Delays in Approving Awards 140. The processing of civil works contracts through Local Competitive Bidding (LCB) procedure, should normally not take more than 110 days to complete i.e. from Bid Opening through signing of the contract for the project to commence. In the case of civil works contracts processed through International Competitive Bidding (ICB) procedure, a maximum period of 180 days is recommended. 141. In some instances, however, the prescribed contract processing time has been exceeded for various reasons. The following factors may be noted as accounting for delays: (a) Lack of expertise on the part of some Implementing Agencies in the preparation of Evaluation Reports, which often tends to result in presentation of poor Reports. In such instances the Board directs the client Ministry's Consultant to re-submit the Report after necessary improvements have been made. This invariably prolongs the processing of tenders. (b) Delays in the preparation of Evaluation Reports on Tenders after Bid Opening:- This problem is prevalent in the case of project wholly or partially financed from, external sources, and where there is the need for bid documents as well as Evaluation Reports to be scrutinized and approved by the donor, before they can be submitted to the Central Tender Board for adjudication. (c) Objections raised by Contractors and Donor Agencies to decisions of the Central Tender Board regarding the award of contract, after the Board has adjudicated on the Evaluation Report. The back and forth prolongs the tender processing period and delays project implementation. System for Procurement of Capital Goods 142. Most capital goods and equipment needed by Government as new installations or for replacement are catered for under Item 8 of the Development Budget. To ensure transparency and value for money therefore, procedures have been evolved for procuring the goods. 143. Currently, procurement of capital goods can be done through three arrangements: i. the Ghana Supply Commission (GSC); ii. the Central Tender Board; iii. Project Management Units (PMUs) of donor funded projects. The Ghana Supply Commission (GSC) 144. In 1960, an Act of Parliament was passed creating the GSC and obliging government departments and agencies to make all procurement through it. Over the years, this law gradually ceased to be obeyed by MDAs until 1990 when the PNDC promulgated Law 245 (Ghana Supply Commission Law 1990) to reinforce the obligation for Government agencies to channel all purchases through the GSC. 145. The GSC is the principal purchasing agent of Government and all supplies and equipment are to be obtained by indent on the Commission except as provided for in the FAR, 1979. The functions of the Ghana Supply Commission (GSC) are to procure for the Government, all supplies and stores, the cost of which are payable out of public funds; to safeguard public expenditure by advising Government on all aspects of standardization of supplies and stores in the public service; the management of stocks and reserves by MDAs and the transfer of supplies and stores from one government agency to another. 34 146. The procurement procedure by the GSC involves both technical and commercial evaluation. For limited or local tenders, bidders registered with the GSC are selected. For international tenders, the GSC generally follows a procedure similar to that described in paragraph 134. Award of contracts 147. The GSC raises orders for the supply of goods which are fairly straightforward without too much technical detail. However for large contracts there is the need for contract negotiation, testing of equipment etc before the contract is signed. This may cause some delays in the view of the indentor (recipient). However it must be noted that GSC is legally required to enter into formal correspondence with bidders which will eventually be incorporated into the contract documents. This may be the reason for apparent delays which indentors often complain about. Deficiencies in the Procurement System 148. At present procurement for most MDAs is done on need basis. This is because of the uncoordinated manner in which MDA submissions for procurement are handled. This means that purchases are made in the course of the year whenever a Ministry, Department or Agency obtains approval to make procurement. On the other hand, if proper coordination were in place, advantage could be taken of bulk purchases during procurement to bring down the unit cost of items. 149. Project Management Units(PMUs) for donor funded projects tend to make procurement without consulting GSC. PMUs argue that they have the expertise and are able to procure items faster than going through the GSC. Payment Procedures 150. This section of the review assumes that all the processes involved in tendering, leading to the award of contracts have been prepared, the necessary bids have been made and the contract awarded to the successful bidder. The contractor is deemed to have presented his programme of work and subject to any modifications and amendments in line with the contract specifications, the site is handed over to him to enable him start work on the project. It is necessary, therefore, to consider the post-contract certification, payments for works satisfactorily executed as well as some possible causes for delay in payments. 35 Project Inspection and Certification 151. All public works funded from the National Budget must be supervised by agencies of Government that have the technical know- how. The agencies are the Architectural and Engineering Services Corporation (AESC), the Ghana Highway Authority (GHA), the Public Works Department (PWD), and the Ghana Water and Sewerage Corporation (GWSC). They also prepare certificates or bills for payment for work done. These Agencies are to ensure that works contracted out are executed to specification. With regard to donor funded projects, Government utilizes the services of private Consultants. This is particularly so with regard to major road projects. 152. The AESC is the main consultant for Government for public works. Established by NRCD 193 of 1973, its functions, amongst others, are to provide consultancy services in respect of all works on behalf of Government, undertake technical studies and design; and investigate, survey and design houses, highways and airfields. 153. As Government's Consultant, AESC is responsible for preparing Interim Payment Certificates to cover work done. Based on the assessed value of work done by the contractor, interim payment certificates are prepared. The three parties involved in project execution - the Client Organization, the AESC and the Contractor - must be satisfied that the claim reflect actual work done. The Quantity Surveyor of AESC, on receipt of a claim made by the Contractor, visits the site to take measurements before the certificate is prepared. This is not only to ensure that work is done according to specification, but also to discuss at site meetings with the Contractor, problems that require solutions. Site meeting, involves Officials from the AESC, the Client Organization and the Contractor, the Regional Economic Planning Officer, and the Regional Co-ordinating Director. 154. It is to be noted that where the AESC is not the consultant on the project, the relevant consultant either from GHA, GWSC, etc. perform a similar function in project inspection and certification. AESC Interim Payment Certificate 155. A typical AESC Interim Payment Certificate would contain details of the project such as the name of the project, the contractor, the contract sum and date of award. Other details that feature in the payment certificate include the total value of works executed, retention fund details, as well as variation Orders and Fluctuation details. The amount recommended for payment to the Contractor is net of deductions like retention or capital loan repayment that may be made from the gross value of the certificate. An AESC Interim Payment Certificate has to be certified by various 36 signatories connected with the project. These are the AESC Quantity Surveyor, the Architect, Official of the Client Organization, the Regional Economic Planning Officer, the Regional Coordinating Director and the Regional Minister. Progress Reports on the project by the AESC consultants as well as the Regional Economic Planning Officer normally accompany the payment certificate. 156. This certification process is repeated for the entire life of the project. On completion, of the project a final payment certificate is prepared after which fifty per cent of all retention monies withheld by the Treasury is paid to the Contractor at the time of handing over. Retention monies are deductions (usually 10 per cent) made from Interim payment certificates until the completion of the project. After paying fifty per cent of the amount withheld the rest of the retention money is withheld for a period of about six months to cover the defect/liability period when all noticeable defects on the work are to be rectified by the Contractor or the amount used to engage the services of another Contractor. It is noted that this money which belongs to the contractor and is withheld until the project completion does not attract any interest payment. Variation Orders 157. Variation Orders tend to affect the contract sum of the project depending on whether there are additions to or omissions from the project. Variation Orders are mostly at the request of the Client but sometimes at the request of the Consultant, with the consent of the Client. This comes about as a result of works which are additional to the main works. This would add to the original project cost. One hardly finds omissions which warrant reductions in project cost. Fluctuation Claims 158. Apart from Variation Orders, the Quantity Surveyor may also add fluctuation to the certificate value. This is usually in conformity with the terms of the contract. For example World Bank Projects allow for revision of rates, if within ten to fourteen days to end of tender period, changes in the exchange rate necessitate a revision of the prices to reflect the exchange rate change. With locally funded projects, fluctuations in the certificate value may be due to wage increases which affect the cost of labour or increases in prices of goods and services. In the contract document therefore, an agreement is reached allowing for revision of the contract sum to reflect the changed situation. 37 Mobilization Advance 159. Mobilization Advance used to be granted contractors to assist them mobilize equipment, materials, labour, etc to commence work on their projects. In 1979 this facility was restricted when it was realized that contractors were misapplying the funds. 160. In special cases mobilization advance may be granted on the recommendation of the client organization subject to the execution of a performance bond through a bank guarantee. The current practice is to grant between 10-25% of the contract sum as an advance, usually for projects awarded by selective Tender. This is because the employment of Selective Tender Procedure is usually warranted by some urgency and requires a short lead time for completion. 161. Recovery of mobilization advance is done through deductions from certificates for work done. In the first 30% of work, no deductions are made. Between 30-50% of work completed the deductions are made in equal installments, and this amount is recovered in full before the completion of the project. The Warrant System and DecentraliZation of Payments 162. All Public Expenditures in Ghana must be covered by a warrant issued for that purpose by the Minister for Finance. The Financial Administration Regulation (FAR) 1979, Section 60 sub-sections 1 & 2 vest the Minister with authority to issue specific warrants for Capital Expenditure. Unlike the Recurrent Budget, where a General Warrant is issued to the Controller and Accountant General, Specific Warrants are issued by the Minister for Finance to enable expenditures on development projects to be made. 163. Prior to 1990 all payment Certificates had to be channelled through the Sector Ministries to the Ministry of Finance where specific warrants were issued for payment to be made. Fiscal decentralization took the form of devolving Ministerial powers from the center to the Regions and Districts. The authority to sign warrants was delegated by the Minister for Finance to Sector Ministers, Regional Ministers and District Chief Executives. 164. Since January 1991, warrants have been issued at the National, Regional and District levels. Sector Ministers are responsible for issuing warrants for National projects, while Regional Ministers and District Chief Executives are responsible for Regional and District Projects respectively. 165. To facilitate the decentralization of payments, projects were classified according to the three levels of Governmental administration, i.e. National, Regional and District. 38 (i) National Level Warrants issued for payment at the national level cover constructional projects such as buildings and roads. The size of the outlay and the strategic importance of the project are important determinants. The projects are awarded through the Central Tender Board and involve sums exceeding 1250 million. (ii) Regional Level - Payments for Regional level projects are made by Regional Treasury Officers upon the issue of warrants by Regional Ministers. Like the National level projects, funds which used to be transferred quarterly by the Minister of Finance are now done monthly upon submission of AESC Payment Certificates and Progress Report. (iii) District Level District Level projects comprise simple structures like bungalows, offices, and feeder roads. The District Chief Executive, issues warrants authorizing District Treasury Officers to pay contractors for work done on District projects. With the establishment of the District Assembly Common Fund, the Ministry of Finance transfers funds quarterly to the Common Fund Administrator for disbursement to the Districts. Causes of delay in Payment 166. It is observed that there are still some delays in the payment for work done and it is appropriate to consider some of them (i) Non-Provision for Suspended Projects Usually a number of projects which have been suspended have outstanding payment certificates for which no provision has been made in the Budget. Since payment must be made against allocation in the Budget, there are often delays especially when compensatory savings cannot be readily quoted. (ii) Inadequate Project Funds Because of the large number of projects undertaken in any given fiscal year, allocations made are often inadequate. What is more, the contractor works in excess of the funds allocated for the year. The search for 'extra' funds to meet this excess work tends to delay payment for work done. 39 (iii) Fluctuations and Variation Orders As mentioned earlier, any Variation Order or Fluctuation introduced into the project will lead to cost increases. Since this would not have been anticipated at the time of budget preparation, certificate values tend to be higher than expected, and there may not be enough funds to meet such claims. (iv) Insufficient Data on Outstanding Claims very often the financial year comes to a close without the Ministry of Finance being furnished with reliable data on the stock of pending certificates in the Regions and Districts. Projects that are admitted into the Budget for implementation in the ensuing year thus take no cognisance of pending certificates, yet the first charge on the votes in the ensuing year are these outstanding certificates. There may be payment delays arising from insufficient funds to meet subsequent payments. A2. CHAPTER FIVE THE 1994 DEVELOPMENT BUDGET Summary of the 1994 Budget 167. The 1994 budget aimed at achieving the following macroeconomic targets: a. real GDP growth rate of 5 per cent b. an end of period inflation of 15 per cent c. an overall BOP surplus of US$180 million d. a budget surplus of 068.0 billion (1.3 per cent of GDP) The budget also assumed an average exchange rate of 0925.00 = US$1.00. 168. The attainment of the growth target was contingent upon an increase in domestic investments to a level of 15 per cent. This was to be achieved by creating the enabling environment for the private sector to raise its share of investment while public investment maintained its level in constant terms. Private sector resource mobilization was to be encouraged by the previous year's liberalization of the capital allowances regime. 169. The lowering of inflationary pressures was to be achieved through increases in production and slowing down of monetary expansion, aided by a healthy fiscal policy. 170. The balance of payments surplus would contribute to the positive economic climate by ensuring enhanced reserves to cushion the economy and stabilize the cedi. Fiscal Performance 171. GDP grew by 3.8 per cent while inflation averaged 24.9 per cent. 172. The fiscal outturn was satisfactory. Total receipts exceeded total expenditures by as much as 0111.7 billion as against a planned surplus of onlY 042.9 billion. 173. As regards tax revenues excepting taxes on international trade which fell well short of the planned target by 084.0 billion all the other sources of revenue namely taxes on income, on domestic goods and non-tax revenue exceeded the programmed levels. As shown in Table 5.1, actual tax revenues recorded 0826.0 billion as against a programmed amount of 0865.0 billion, a shortfall of about 4.7 per cent. Non tax revenues exceeded the programmed amount by 0190 billion. 41 k 174. Recurrent expenditures, on the other hand, exceeded programmed levels by over 047 billion, half of the over-expenditure being accounted for by Personal Emoluments. The only item of expenditure which did not exceed programmed levels were Development Expenditures which suffered a shortfall of almost 7 per cent. Total expenditures thus increased from 01,066 billion to 01,149 billion. 175. With regard to financing, despite a large shortfall in official flows especially due to the non-disbursement of programmed credits, repayments however remained on schedule. This resulted, as shown in Table 5.1, in a net out-flow of 084.9 billion. 176. on the external sector a trade deficit of $409.6 million, equivalent to 7.6 of GDP. Although receipts from merchandize exports of $1,214 million exceeded the programmed target of $1,206 million. However, this positive development may offset by the recorded level of merchandize imports of $1,626 million as against the programmed $1,623 million. 177. The current account balance excluding official transfers recorded deficit of $528.3 million. 178. The capital account recorded net inflows of $505 million. The various movements in the current .and capital account generated.an overall BOP surplus of $178.2 million. 42 Table 5.1: Summary of the 1994 Budget Revised Provisional Budget Budget Actual Revenues Tax Revenue 867,823 865,028 826,400 Non Tax Revenue 210,246 244,580 434,881 Total Revenue 1,089,069 1,109,608 1,261,281 Expenditures Recurrent 743,616 791,548 838,962 Capital 177,359 179,811 173,864 - Development 174-,153 176,605 165,605 - Net Lending 3,206 3,206 8,259 Other Expenditures 90,298 85,298 136,745 Total Expenditure 1,011,273 1,066,657 1,149,572 Deficit/Surplus 66,796 42,951 111,709 Financing Financing -66,796 -42,951 -111,708 Foreign (net) 83,777 86,375 -84,966 Domestic (net) -150,573 -129,326 -26,742 Source: Budget .Statement, RgpUbhc of GEana, February 1, 1995 179. In compliance with the Constitution, the District Assemblies Common Fund received 038 billion in 1994 for financing development projects in the Districts. Sectoral and Spatial Distribution 180. Evidence from the GLSS shows that there has been a general reduction in poverty since the mid 1980s. This section seeks to examine the contribution of the 1994 Development Budget to this state of affairs, and seek ways to improve the potential beneficial impact of such programmes in the future. In this context the analysis seeks to review the sectoral and spatial distribution of 43 the Development Budget as they affect the quality of life of the population in general and women as a special group. 181. In the 1994 budget, 0174.2 billion was proposed for development (narrow coverage basis), an increase of 84 per cent over 1993. Actual Development Expenditure amounted to 0165.6 billion including.spillovers, of 027.2 billion.Refer to table 4.1 for the sectoral breakdown. Spatial Distribution' 182. In 1994 a total amount of 0115.8 billion was spent on regional projects, made up of 024.9 billion2 from the DACF and 090.9 billion from the Development Budget. To give effect to the decentralization process the Common Fund made disbursements to the Assemblies. The regional distribution of the Common Fund is as shown in Annex Table A5.1. The highest allocation of 17.5 per cent went to Ashanti Region and the lowest allocation of 4.6 per cent went to the Upper West Region. In per capita terms the distribution ranged from 01,176.6 to 01,960.4 for Greater Accra and Upper West Regions respectively. 183. Out of a total of 0174.2 billion budgeted for development projects, 0138.4 billion representing 79.4 per cent of the budget was released during the year. Of the approved programme 34.3 percent went to National Projects and 65.7 percent was allocated for projects in the regions. For purposes of this distribution "National Projects" are defined as projects that have a nationwide impact. For this reason these projects cannot be claimed by any particular community. (Appendix 2: Distribution Classification - National Projects in the 1994 Development Budget) 184. Annex Table A5.2 gives a regional distribution of the 1994 Development Budget. While the pattern of distribution does not appear to exhibit a satisfactory balance it nevertheless recognizes certain regional development needs and distribution characteristics (Annex Tables A5.3 and A5.4. Some of these include: a. Evidence of wide gaps in the range of regional resource allocations. The highest regional allocation was 10.2 'The regional distribution may be based on a crude measure and analysis, but nevertheless shows an interesting trend in the distribution of the 1994 Development Expenditure. 'Excludes Contingency and fourth quarter allocation. 'For purposes of the analysis, actual expenditures for the year were used. This excluded the spillovers. 44 per cent of the development budget expenditure the lowest was 1.4. per cent. Similarly the highest per capita allocation was 010,418 and the lowest was 02,278.2. b. The sector4l investment spread that should promote effective regional development is not in evidence. The Central Region appeared to have a better sectoral investment spread comparatively, by way of the balance it achieved in the distribution of its investments (Percentage of. Budgetary Expenditure by Regional Total - Annex Table A5.4). c. The Northern Region received the highest in percentage and per capita allocations, both of which are almost twice the national average. Yet, over 88 per cent of the Northern Region's allocation was invested on one road - the Northern Region section of the Kintampo-Yapei-Tamale- Makongo Road. d. The bulk of the investments in the Brong Ahafo Region was in economic infrastructure in support of agricultural production. The investments in Greater Accra were in urban infrastructural services and health (Percentage of Budgetary Expenditure By Sector Total- Annex Table A5.3) Regional Distribution of Combined DACF and Development Budget 185. The regional distribution of the combined DACP and the development budget expenditure as in Annex Table AS.5 gives the highest allocation of 17.3 per cent to the Northern Region and the lowest at 3.3 per cent to the upper East and West Regions. On per capita allocation basis the Central Region had 09,369.4 as the highest while the Upper East Region had the lowest 03,614.8. This trend is similar to the pattern exhibited in the regional distribution of the Development Budget. The wide range suggest the need for a distribution p6licy (formula) for allocation of resources to the regions to satisfy the Constitutional requirement of balanced development. Poverty Alleviation 186. The extent to which poverty has declined is the real measure of the impact of developments in the economy. As these effects are usually felt over a period of time and cannot be ascribed to any particular projects the discussion on poverty in the succeeding paragraphs starts earlier than the 1994 Development Budget. 187. The Ghana Living Standards Survey placed the poverty line in 1987/88 at 032,981 per capita per annum using Accra prices of the same period. With this poverty line, about 36 per cent of 45 Ghanaians were classified as poor. By 1991/92 the country had made significant gains in reducing poverty. About 31 per cent of Ghanaians were classified as poor, down from 41 per cent in 1988/89. The reduction in national poverty is accounted for mainly by the reduction in rural poverty, as urban poverty reduced only marginally. Table 5.2: Distribution of Per Capita Expenditure by Locality and Ecological Zone Area/zone Mean Annual Per Capita Exp. (9,000) URBAN 205 Accra 250 Other Urban 190 RURAL 148 Semi-urban 164 Small Rural 141 Rural Coastal 176 Rural Forest 151 Rural Savannah 126 167 Source: Ghana Statistical Service - GLSS3, 1991/92 188. In the rural areas per capita expenditure is lower in the small-rural areas than in the semi-urban areas and is higher in the coastal zone than in the forest zone, which in turn is higher than in the Savannah Zone (GLSS 3, 1991/92 ). Poverty Alleviation and the Development Budget. 189. The GLSS III has shown that even though there was a general decline in poverty in the country between 1988 and 1992 it is still prevalent in the rural areas and among food crop farmers particularly. While we have lived with this situation for a number of years funding allocation in the 1994 Development Budget is not particularly structured to address this issue. 190. Improvements in the quality of life can be achieved in the long term through the increased accessibility of rural people to health education, housing and potable water as well as the creation of opportunities for employment and income generation. 191. A coordinated approach on the pursuit of these objectives requires a perspective framework incorporating medium to longer term objectives. The vehicle for the realization of these objectives is the new decentralized planning system. The Planning Systems Law (Act 480) makes the NDPC the national co-ordinating body responsible for regulating planning through Legislative Instruments and Planning Guidelines. 192. The NDPC shall co-ordinate District Development Plans and integrate economic, spatial and sectoral plans of Ministries and Sectoral Agencies and ensure that these plans are compatible with national development objectives. The NDPC shall approve the plans and programmes of Districts, Ministries and other Sectoral Agencies. It shall also monitor the implementation of approved plans, programmes and projects with the view to evaluating and revising National development plans, programmes and policies in the light of changing domestic and international economic, social and political conditions. The NDPC shall also monitor the annual development budget of the Ministry of Finance to ensure that sectoral and geographical budgetary allocations are compatible with national development objectives. 193. This refocusing of the development effort will require an increase in the share of development budget expenditure for health, education, rural water and for promoting employment generation through increased agricultural production especially in food crop farming. Support for Women. 194. Current human development indices show that women are still a vulnerable group. Female unemployment is about 50 per cent higher than that for male. While about 49.8 per cent of females have never attended school only about 3 per cent attain secondary or higher education compared to 29.1 per cent and 9 per cent respectively for males. Adult literacy is lower among females at 39.5 per cent than their male counterparts at 60.8 per cent (GLSS3,1991/92). Total fertility rate for women aged 15-49 is 5.5 children per woman because about 81 per cent of all women do not practice any method of contraception. (Ghana, DHS, 1993). It is acknowledged that a conscious effort has to be made to provide an extra boost to the effort to enhance the status of women in the society. As such, any limitations on women as a social and economic group will adversely affect the socio-economic development of the country. 47 k 195. it is for this reason and the rapid enhancement of the status of women through economic empowerment and the narrowing of the female-male gap that a start was made to institute additional and specific projects in the development budget for the sole support of women. CHAPTER 6 ECONOMIC INFRASTRUCTURE AND THE DEVELOPMENT BUDGET 196. Expenditure on infrastructures accounted for 57.6 per cent of Development spending. This sector includes roads, transport facilities, communications, air and sea ports, electricity and water supply. 197. Ghana's public sector has evolved a system for sharing the responsibility for the provision of infrastructure. Most infrastructure was initially financed by Central Government which subsequently passed on responsibility for its management, maintenance and further extension to Public Sector Agencies which were to operate along commercial lines. Regular maintenance, is financed by user charges. Major rehabilitation and extension are mostly financed by the Central Government budget either directly or with funds borrowed from external sources and on-lent to the Agencies. Repayments are expected to be made through the generation of funds from the commercial sale of services. 198. Thus, the ports are the responsibility of Ghana Civil Aviation Authority (GCAA) and Ghana Ports and Harbour Authority (GPHA) . Telecommunications are managed by Ghana Telecom while railways are under the Ghana Railway Corporation (GRC). For the utilities, the Volta River Authority (VRA) is charged with the responsibility for the generation, transmission and bulk distribution of electricity while the Electricity Corporation of Ghana (ECG) distributes to domestic and industrial consumers. The production, transmission, distribution and sale of water is the responsibility of the Ghana Water and Sewerage Corporation (GWSC). 199. Road construction and maintenance have, however, remained the sole responsibility of Central Government. This is due in part to the difficulty in recovering costs for such investments and also to the lumpy nature of investments in roads. . Rural water production and delivery is managed by a specialized unit of the Ghana Water and Sewerage Corporation, the Rural Water Division, which receives substantial support from Central Government. 200. On account of the almost total dependence of the road and water sectors on Central Government financing and the observation that they encumber as much as 43 per cent of the Government share of development funding, this chapter concentrates on the two sectors. Roads 201. The Ministry of Roads and Highways is responsible for planning and policy coordination in the road sector. Three technical agencies under the Ministry, namely, the Ghana Highway Authority, Department of Feeder Roads and the Department of Urban Roads are in charge of Trunk, Feeder and Urban roads, respectively. 202. According to the Ministry, the three agencies have limited technical capability to discharge responsibilities of project identification, planning and preparation, execution and supervision. The Ministry therefore hires Consultants to support the activities of the agencies. Review of 1994 Budgetary Performance 203. In 1994, the Sector's main policy objective was to raise the country's road condition mix. Table 6.1 shows the condition mix of roads in the country as at December 1994. The target of the sector is to achieve a condition mix of 70 per cent good, 20 per cent fair and 10 per cent poor by the year 2005. Table 6.1: Condition Mix of Roads In ghana, 1994 Road Type Good (M) Fair (M) Poor (%) Trunk Roads 47 25 28 Urban Roads 15 20 65 Feeder Roads 22.6 30 47.4 Source: Ministry of Roads and Hignways, Accra. 204. The Road Sector was allocated an amount of 072 billion from GOG budgetary sources for its development expenditure for 1994. This included an amount of 012 billion from the Road fund for periodic maintenance. 1994 Budget Outturn 205. Total payments made to the road sector from GOG budgetary resources in 1994 amounted to 072.1 billion. This included Road Fund inflow of 016 billion for periodic maintenance. Domestic lending sources contributed 018 billion while donor inflow amounted to 069.3 billion. Thus a total of 0159;3 billion was disbursed to the sector. By the end of 1994, unpaid bills stood at 047 billion. 206. These expenditures were made in respect of 436 on-going road contracts which the Ministry of Roads and Highways was handling. For budgetary purposes, the Ministry of Roads and Highways considers every contract as a project. This is the reason for as many as 436 projects listed as on-going in 1994, This is accounted for almost entirely by the re-categorization of periodic maintenance projects, lumped together by the PIP, as separate contracts by the sector. Development contracts, as a rule, retain their identity, both in the PIP and in sector classification. Though the new titles in the budget may be numerous, they still come under their broad title in the PIP, "Periodic Maintenance". The kinds of maintenance activities include regravelling, resealing, resurfacing, concrete drains and improvement of sidewalks among others. Thus, a stretch of road listed as awarded to three contractors is considered as three projects in the Budget. Table 6.2: Distribution of Contracts in 1994 Type No. On-going Trunk 84 Feeder 198 Urban 65 Bridges/ Culverts 84 Total 436 207. The budgetary allocation in 1994 of 072 billion was. not adequate to pay for the total value of works on hand. The minimum financing submitted by the Ministry for Government funding 0120 billion. Therefore, the financing gap identified at the beginning of the budget year amounted to 048 billion. 208. The lesson this teaches is that reliance on current revenue to finance road works severely impairs the ability of Government to deliver new roads as needed. This constraint operates all the time and is particularly binding in years when Government revenue targets are not met. on account of this, Government in 1994 started to- consider options for attracting private sector participation in the road sector. 209. The deterioration in the value of investment made in road construction occasioned by the non-adherence to maintenance schedules has meant that heavy outlays on rehabilitation and reconstruction have to be made alongside the extension of the road 51 network to new areas. Out of the 436 projects indicated in the age distribution table, 175 were commenced in 1994, 227 of the projects are between one and three years old, 31 are between four and six years while 3 projects are over six years. Due to the large number of on-going projects in the sector coupled with the wide regional distribution of projects (refer to Table 6.3) the country is not deriving the maximum benefits expected from the investments made, because resources are thinly spread. Table 6.3: Age Distribution of Road Projects Year of No. of Project Amount Cost to Commenceme Projects Value 0m Spent ft Complete fn at 1994 175 58,199.20 14,771.86 43,427.34 1993 126 84,029.44 36,961.25 47,068.19 1992 61 33,129.33 24,231.99 8,897.34 1991 40 42,936.48 23,232.08 19,704.40 1990 17 12,430.05 10,804.10 1,625.95 1989 13 11,305.88 7,590.23 3,715.65 1988 1 8,905.50 8,905.50 0.00 1987 1 13,422.20 12,616.36 805.84 1985 1 12,103.70 12,103.70 0.00 1984 1 21,515.49 21,515.49 0.00 Total 436 297,977.27 172,732.56 125,244.71 ource: ministry of Roads and Highways. The Problem of Spillovers 210. The disparity between the projected targets and fund allocation has created a perennial problem of spillovers of outstanding payments into ensuing years. This particular situation has been a result of poor management of funds, increase in scope of works, additional contracts outside the normal budgetary approvals etc. 211. In the present economic situation of rapid cedi depreciation and high domestic inflation price and other economic parameters that underlie the provision for projects keep changing thus rendering the provisions inadequate. The absence of contingent provisions in the budget makes it impossible for these mark-up to be addressed thus they show up as unpaid bills to be settled out of provisions*for subsequent years. Table 6.4: MRH, 1993 Development Budget Spillovers Agency Periodic Reconstruction Total Maintenance & Construction f!bn Obn Obn GHA 7.7 23.7 31.4 DUR 1.7 0.5 2.1 DFR 2.8 0.6 3.4 Total 12.2 24.8 37.0 lource: Ministry ot Roads ana Highways Implication for Project Stoppage 212. A complication with some of the major projects being executed by mostly foreign contractors, a suspension or stoppage of the projects may entail the following implications: a. The Government has to compensate Contractors for idle time. In addition to payment for works already executed,if the work s to be terminated, the contractor is paid 5% of contract sum as termination cost. In addition, the contractor is entitled to compensation for loss of profits on outstanding work. This is 10% of cost of outstanding work. b. When the project has to be suspended,the client bears the cost of partial demobilization eq. cost of retrenchment of non essential staff, securing equipment to avoid loss and damage and remobilisation when necessary.Personnel kept on site also have to be remunerated. Standstill costs under mutual suspension may amount to $60 million per month ; c. On resuscitation of the project thus suspended, contractor have to be re-mobilised to commence work; d. It is to be noted that when road contracts are abandoned the road deteriorates and extra budgetary allocation is needed to bring it to the status quo ante. 213. Thus overall funding limitations should guide the admission of new projects into the Development Budget, considering the additional costs to be incurred when projects are not completed on time. Domestic Versus Donor Funded Projects 214. Projects funded by donors have conditions that bias towards foreign based contractors. These donor funded projects have built- in mechanisms to assure funding, timely payment and compensation in cases of delayed payments. The foreign companies win these major contracts because they have better access to credit, better turn- overs which automatically qualify them for higher classifications to undertake these jobs. 215. It is in the light of the advantages to the foreign contractors that Government in 1994 had to settle huge amounts emanating from disputes with some of these contractors. The local companies by their contract terms are qualified for compensation. However, this does not usually reflect in their contracts.Refer to annex table A4.1. Water 216. The provision of water is important both as a public utility and as an input into the promotion of health. In this regard, Government has as its objective, the extension of the.coverage of potable water to 100 per cent of the population by the year 2020. The guidelines below are for the selection of technology for the provision of water: a. Pipe borne water supply for communities with population of over 2,000; b. Handpump-operated borehole system for rural communities with population of 500 - 2000 at one borehole for every 300 persons; and c. Hand-dug wells for rural communities with population below 500. 217. Only about 65 per cent of the country's estimated population is served with clean water. About 76 per cent of the urban population, constituting about one-third of the national population, has access to potable water while only 46 per cent of the rural population is served with potable water. 218. The GWSC operates 208 piped water supply systems in the country and 7,956 drilled wells fitted with handpumps. ( see Table 6.5 below for the regional distribution). In the last few years GWSC, with financial and technical assistance from multilateral and bilateral donors, has reorganized and rationalized its Corporate structure and operations to improve its operating efficiency. It undertook the rehabilitation of physical infrastructure, repair and 54 replacement of equipment and other facilities of the urban systems throughout the country. Table 6.5: Regional Distribution of Water Facilities by GWSC as at 1994 Region Pipe Water Wells with* System Handpumps Ashanti 28 1,200 Brong Ahafo 29 507 Greater Accra 2 50 Western 23 764 Central 14 902 Eastern 41 693 Volta 36 693 Northern 15 509** Upper West 10 1,600 Upper East 10 1,038 Total 208 7,956 Source: GWSC * excludes about 1,500 provided by NGOs. ** includes 350 provided by NORRIP. 219. in 1994, GWSC produced 38.82 billion gallons of water as against the target of 37.18 billion for the pipe borne water supply system. With respect to the hand pump system, it is estimated that the production was 4.2 billion gallons. 220. A Rural Water Supply and Sanitation Strategy has been formulated based on sustainability and management of the systems by the communities and increased investment in the sector. The local currency required for rural water is provided by Government through the budget. .A Rural Water Division has been established to supply water to the rural areas on a demand driven basis. The systems are community managed. The Division also acts as a central body to coordinate the activities of all donor and non-Governmental agencies supporting rural water delivery and regulates all rural water supplies. Urban Systems 221. In spite of the recent initiatives and measures, there are still numerous problems to be overcome in addition to reducing the water coverage gap of about 35 per cent of the population. The major problems are inadequate funding for rehabilitation, the provision of water systems for areas not served, cost recovery as well as inadequate tariff levels. On-going Projects 222. GWSC is currently handling about sixty projects. (See Table 6.6 for on-going projects receiving funding from Government). GWSC defines an on-going project as either of the following to which funds have been spent: i. A completely new water supply system; ii. Capacity expansion of an existing water supply system; iii. Major rehabilitation of any component of an existing water supply system; iv. Extension of an existing water supply system to new (previously unserved) areas; V. A combination of any of the above. 223. A number of projects have remained in the budget for many years As can be seen from Table 6.6, 75 percent of the projects have been on the PIP since 1986. The main problem affecting completion has been the inability to match actual cash flow releases with planned requirements, whether the projects are foreign or fully Government financed. Suspended Projects 224. Nineteen Water Supply Projects spread in eight regions have been suspended. (See table 6.7). GSWC defines a suspended project as a project which was. started but its execution stopped before completion and is currently not funded from any source (PIP, GWSC's own funds, Donor Assistance). 225. work components usually needed are civil structures, pipelines, etc. The principal reason for suspension is lack of funding. An amount of US$37.36 is required to complete the projects. Project Financing 226. The sources of Domestic financing for the GWSC is Government of Ghana through the PIP and GWSC's own funds from revenue generated through water sales. Foreign sources of financing are principally loans from bilateral and multilateral sources. Some amount of Grant inflows also support some water schemes. 227. In 1994, of the 05.3 billion approved by government for the GWSC, 04.0 billion was released. The Corporation used internally- generated funds of 08.3 billion for the execution of some projects principally under Accra-Tema (ATmA) Rehabilitation Projects. Donor funds disbursed to the GWSC and the Water sector amounted to about 07.1 billion. 228. Out of the 04.0 billion released to the GWSC in 1994 C3.1 billion was used to meet current obligations (including 0600 million for rural handpump water) and 00.9 billion was used as payment for spillovers from 1993. Table 6.: GWSC On-coing water Proiects in 1994 1994 1994 Year of No of Provision Releases Commencement* Projects OM 0m 1994 1 80.0 - 1992 3 140.0 50.0 1990 10 1,985.0 1,623.8 1986 43 3,109.0 1,487.7 Total 57 5,314.0 3,158.5 Source: GWSC * Refers to year admitted into PIP 57 Proj. Title Region Amt. Req. to Remarks plate 1. Kofiase Wtr. sa Ashanti 0.78 Pumphouse constructed. Substantial part of the transmissions and distribution constructed. 2. Acherensua B/Ahafo 3.0 Rehab & Capacity Expansion started. Haabang Included distribution network at Wtr Ss Maabeng and Akwasiase. * 6.0 Capacity Expansion to 1800 started in 3. Nkoranza Wtr Se 1971. Treatment Plant, ME Equipment installation and staff qtra pending. * 1.2 3 boreholes exist. Outstanding works 4. Kukuom wtr Sa include mechanization of boreholes, construction of pumphouses, completion of pipelaying & service reservoir. 0.7 2 boreholes drilled. All other works 5. Nkrankwanta Wtr outstanding. Ss Central 8.0 original expansion prog. halted. New stu* dies for capacity expansion now 6. Baifikrom Wtr So ongoing. Eastern 0.43 Improvement of the system supplying 7. Bunso Ntr So the Agriculture stations 0.51 S. Osino Wtr So Extension of supply to nearby towns and villages. Only part of the transmission and distribution mains 0.56 laid. 9. Abaam Wtr gs Started 1977. One borehole drilled 6.9km of 41 transmission and distribution mains. 20,000 gal service 0.32 reservoir, pumphouses and pumping plant outstanding. 10. Abomosu Wtr Ss Outstanding work include raw water 0.22 pipeline, pumping equipment. electrification. 11. Adesuana Wtr So W 0.29 only one borehole drilled. 12. Asuom Wtr s Northern 2.0 90 percent of distribution network laid. 2 boreholes drilled. 13. Karaga Ktr so 2.5 Hew scheme based on groundwater. 14. Kpandai Wtr So Upper East 0.43 New scheme based on groundwater. 15. Kanga Wtr S volta 0.56 Borehole based scheme. 16. Abor*Akat.i Wtr o 7.0 Need to mechanize additional borehole. 70% of transmission main to Akatsi completed. 17. Kpandu-Hohoe- Mkonya Wtr Us Dist. scheme based on V. Lake at 5 0.6 Kpandu Agbenoxoe. Part of transmission line laid. Lake receded from intake during construction. 18. Jasikan WtX as Western 2.24 Completion of service reservoir and 37.36 alternator hose. 19. Asankrangwa Wtr as New surface water scheme to augment existing system. About only 5% otal complete. Waf CHAPTER 7 CONCLUSION 229. This report, the second annual review of Ghana's Public Expenditure Management practices, analyses the systemic weaknesses that have turned the preparation of the Development Budget into a mere Departmental routine. The report examines the processes leading to the publication of the Development Budget and concludes that the development process could benefit from improved participation at policy level. 230.. A major problem relates to staffing and this needs to be improved both at the sector level and at the Finance Ministry. At the MOF, the insubstantial analytic underpinning of the budget process is a continuing cause for worry. The Budget Guidelines that initiate the process do not provide an appropriate guidance to the sectors regarding the contribution the budget seeks. Budget submissions from the sectors are not examined with any rigour and the estimates that emerge are not projected to achieve of any objective outcome. Thus the Development Budget does not evolve as a coherent set of interventions that seek to release the economy's latent possibilities. 231. The PIP process could improve substantially by the infusion of some specialized skills in project preparation for the appraisal of projects entering the budget. While this report recognizes that some objective basis for ranking projects would be useful, it is obvious that even in its absence an improved process of project selection would be achieved if the Budget Guidelines translated the macro-economic objectives into sectoral growth targets. 232. The staffing situation in the sector Ministries is a lot weaker. This situation is further compounded by minimal participation of senior level staff in the task of budget preparation. This, as the report shows, has allowed the sectors to sponsor imprecisely-defined and indifferently-prepared projects which are stoutly defended by the subordinate staff during the hearings. 233. Therefore, as noted in the report, the Development Budget does not provide a context within which a conscious attempt is made to achieve the growth targets established in the year. It also does not relate the cost of projects to the availability of financial resources. 234. The share of the Development Budget in the Government's total expenditure programme is low even when debt amortization is included. To make an impact it is necessary for its share to increase, while focusing on a limited number of sectors. This can be achieved by a reduction in the financing of the administrative sector. 235. Creative ways have to be found to finance the provision of staff housing. A reduction in the financing of residential accommodation in the budget would free resources for the provision of infrastructure and for funding poverty reduction programmes. 236. The increasing size of spillover expenditures, year after year require some control. Spillovers are a symptom of the many weaknesses in the budget process: a large number of projects that never get completed; a pace of work that cannot be sustained by the flow of funds; an inability to match available finance with the extent of physical work, all these leading to over-expenditure paid for by encumbering funds earmarked for other activities. 237. The review concludes that the current portfolio of projects does not satisfy the requirements for an even spatial spread. This is not surprising. The Constitutional requirement for affirmative action to redress any imbalance in development is set in the context of encouraging higher productivity in the economy. Thus it is not a mere mechanical requirement seeking to allocate a tenth of the budget to each region irrespective of its resource endowment or the actual level of its infrastructure. The Development Budget can only be a vehicle for redressing imbalances over time. 238. On budget implementation, the report has noted that the process suffers from a lack of control over cost and other variations in project scope. The relationship of PIP projects to sector projects is not clear and this is further complicated by the concept of umbrella projects. But the feature that defines the lack of quality in our development programmes is the age distribution of projects. While there are too many on-going projects the more worrying problem is that there are still a large number of pre-PIP projects under implementation. Clearly some radical steps need to be taken to excise these "recurrent" development projects from the budget. 239. The aid-dependency of the Development Budget was also noted. Over 21 per cent of the Development Budget is allocated to projects with some level of donor assistance. For the nation, it raises the issue of the "ownership" of the Development Programme and its sustainability. 240. Ownership of the development process requires that projects are initiated and managed by the relevant agencies of Government. But when projects are often donor-determined, the scope, design and supervision are undertaken by foreign consultants and requirements for matching funds for these projects deny resources to wholly- Government funded projects. Thus the sector's management and control of its budget becomes tenuous. 241. For indigenous contractors this donor-driven process explains the domination of the local contracting scene by foreign firms. The development of indigenous contracting capacity may require that the strict application of contract requirements (ie annual turnover, size of plant holdings,) are modified to allow for significant local participation if the full benefits of aid programmes are to be realized. 242. In summary, the 1994 P.E.R. seeks a maturation of the budget process. The link between policy and projects need to be strengthened; project selection must be aided by sound technical input to ensure that projects entering the budget have adequate economic and social significance. The Budget Hearings need to discourage the padding of submissions by which each Ministry seeks to increase its share of the budget. A more objective basis for fund allocation will thus be installed, reducing the need for arbitrariness on all sides. 243. Finally, the report recognizes that the lead time between the approval of one budget and the initiation of the next does not allow any time for reflection and preparation for the next exercise. It is obvious that allowing a two-year cycle for the Development Budget instead of the existing one year (effectively three months) period available in between budgets will ease this critical constraint and allow for better cohesion in entire effort. 244. The following matrix summarizes the main conclusion of the report and proposes a time frame for achieving them. MATRIX ON ISSUES RAISED IN THE 1994 PUBLIC EXPENDITURE REVIEW BUDGET FORMULATION PROBLEM PROPOSAL TIME FRAME 1 Scramble by MDAs for Policy gudied budget hearings 1996 Budget resources for financing to be re-emphasized. Hearings projects not informed by policy. 2 Guidelines do not address Review all on-going projects Before 1996 Budget the issue of how to deal in the budget that are over Preparation. with the large number of six years. projects in the budget. 3 Guidelines do not provide adequate Organise budget workshops By August 1995 information to enable MDAs make for officials in MDAs. realistic projections and also translate activities to achieve projected sectoral growth rates. 4 More time is devoted for the More attention to be focused 1996 budget preparation and analysis of Item 7 on item 9 programmes. preparation. to the detriment of Item 9 which covers programmes for poverty alleviation. 5 MDAs gradually losing their Greater emphasis to be put on From 1995 responsibility to initiate locally funded locally initiated projects. projects. 6 Over-reliance of current Private sector to be involved. 1995 revenue to finance road works. 7 Minimal contingent Make realistic contingency From 1995 provisions in the budget to provisions in budget. take care of inflation, exchange rate fluctuations etc. 62 BUDGET REPORTING AND EVALUATION PROBLEM PROPOSAL TIME FRAME 1 Published budget does not Strengthen MIS to capture all 1995 reflect all donor flows because donor flows to have broad it is still narrow. coverage. 2 Data submitted by MDAs are Policy-guided hearings On-going. defficient and lack policy focus. already initiated. 3 The time available'between Two year time frame for August 1995 the issue of budget circulars and Development Budget to be the deadline for submission of proposed to Cabinet proposals is to short to allow for any detailed analysis and evaluation. 4 Expenditure estimates not Programme of work to On-going related to work to be done nor are synchronise with resource they informed by the time frame availability. for their completion. 5 No reports are presented on Physical inspection to be From 1995 the progress of implementation and intensified by MDAs. problems being encountered. B Insufficient data on expected out- Effective liaison between MDAs From 1995 standing claims (spillover). and supervising consultants. 63 MANAGEMENT OF BUDGET PROBLEM PROPOSAL TIME FRAME 1 Uncontrolled variation orders on Better design and cost- On-going on-going projects. estimation of projects. 2 Issue of "umbrella projects" Sub-projects under From 1996 by which a number of individual Umbrella must be identified rehabilitation projects are by MDAs and provided for at lumped together allows for budget hearing. an indefinite number of projects into the PIP. 3 Inadequate staffing at IPA & MDAs Recruitment and training of From 1996 makes it very difficult for new staff. projects to be analysed. 4 Significant proportion of Conscious re-direction of From 1996 resources going to adminis- resources to social sector. tration and regulatory activities. 5 Investment funds are Projects must be prioritised From 1996 spread thinly and thus prolong, n line with current policy. the pace of execution of the projects hence age-long profile. 6 Large number of projects strains the administrative and supervisory capabilities of MDAs. 7 Most MDAs don't have the technical Recruitment of professionals 1996 capability to handle budget. and establishment of Budget Units in MDAs. (Refer CSSPIP) 8 No criteria for resource distribution Study and develop a policy for 1995 to regions, resource distribution. 8 Imbalance in sectoral investment Develop focused and co- 1996 spread. ordinated investment programme. 9 Prevalence of poverty in rural Develop special poverty 1996 areas. alleviation programmes for rural areas in education, health, water, etc. 10 Gender bias. Specific programmes for 1996 women to be emphasised. __ 64 APPENDIX I II  PUBLIC FINANCIAL MANAGEMENT REFORM PROGRAM GOVERNT OF GHANA AUGUST, 1994  PUBLIC FINANCIAL MANAGEMENT REFORM PROGRAM Table of Contents Page A. Introduction B. Goals I. Achieving macroeconomic balance 3 II. Ownership of the budget by MDAs 5 III. Reliable information on actual expenditures 6 IV. Ensuring that actual expenditures correspond to budgetary allocations 7 C. Strategies I. Effective planning and execution of the development budget 8 II. Effective planning and execution of the recurrent budget 10 III. Implementation of a computerized accounting system 11 Iv. Improved expenditure monitoring 12 V. An effective internal audit function 13 VI. Strengthening financial management skills 15 VII. Next steps for implementation of a public financial management reform program 15 D. Action Plans This report was prepared by a team comprising K.B. Amissah-Arthur, G. Hagan, S. Daisie, H. Maamah, E. Anyidoho, K. Oku-Afari, 0. Ahinakwah, J. Bedu-Addo, S. Montenegro, K. Robson, R. Simpson. & . 盛 宁 & PUBLIC FINANCIAL MANAGEMPM REFORM PROGRAM A. INTRODUCTION 1. The Government of Ghana (GOG) issued in April 1994 a Public Expenditure Review (PER) for 1993. This was the first review prepared by the GOG and it was aimed at being the basis for donor assessment of public expenditure priorities and channel for donor support for projects. The 1993 PER highlighted major issues relating to the budgetary system, expenditure monitoring and expenditure control. A review of the 1993 budget and the impact of public expenditures on six selected sectors was also included. 2. The report and subsequent discussions with donors highlighted several problems among which were: a) weak budget preparation; b) lack of a proper accounting system; c) poor quality data; d) weak monitoring control mechanisms; e) lack of ownership and accountability on the part of MDAs; f) problems of providing matching funds for donor-supported projects; and g) inadequacy of the system to direct resources. 3. As a result of these discussions, the GOG and some of the donors, notably the Canadian International Development Agency (CIDA) , the Overseas Development Administration (ODA) , and the World Bank, agreed on the need to develop a medium-term strategy for reforming the public financial management system in Ghana. As part of this effort, a two-day discussion took place in Washington D.C. during 10-11 August 1994 among the GOG, CIDA, and the World Bank. Consistent with the conclusions of the 1993 PER, the Washington meeting highlighted the need for a strategic approach to public financial management in Ghana. Medium-term goals of the expected public financial management system were agreed in the course of those discussions. It was also agreed that the GOG, CIDA, ODA and World Bank missions prepare a financial strategy report during 15-29 August 1994. This strategy will form the basis for measures to be supported by CIDA's Structural Adjus ' tment Facility (SAF) IV, the World Bank's Private Sector Adjustment Credit (PSAC), and ODA's technical assistance. 4. This report develops a number of strategies and action plans leading to the goals for public financial management agreed in Washington during 10-11 August 1994. Table 1 illustrates the correspondence between the goals and these strategies. 2 5. Section B presents and discusses these goals: * Goal 1: achieving macroeconomic balance, throughout the budget period. * Goal II: ensuring the ownership by Ministries, Departments, and Agencies (MDAs) in the budget preparation, execution, and evaluation processes. * Goal III: generating timely, reliable, and detailed information on actual expenditures (both payments and commitments). * Goal IV: ensuring that actual intra- and inter-sectoral actual expenditures is in line with budgetary allocations. 6. Section C presents and discusses the strategies along with the steps to achieve successful public financial management in Ghana. These strategies are the following: * Strategy I: effective planning and execution of the development budget * Strategy II: effective planning and execution of the recurrent budget * Strategy III: implementation of a computerized accounting system * Strategy IV: improved expenditure monitoring * Strategy V: an effective internal audit function * Strategy VI: strengthening financial management skills * Strategy VII: next steps for implementation of the public financial management reform program 7. Section D of the report presents the plans leading to the implementation of this program. 8. The GOG and the donors have the conviction that the development of the financial management system will be critical to enhancing the public sector's contribution for increasing the economy's efficiency. This, in turn, will create the basis for higher growth and participation of the private sector in economic activity. A better public financial management system is also 3 deemed a necessary condition for Poverty alleviation as it will allow the government to better allocate and monitor of resources devoted to the social sectors. The GOG and the donors also have the conviction that an improved financial management system, by enhancing the efficiency of the public sector and the confidence in public institutions, will lead to better governance. B. GOALS Goal I: macroeconomic balance 9. The GOG is fully committed to higher economic growth, stable prices, balance of payments equilibrium, increasing employment and poverty alleviation. 10. Well planned and executed development and recurrent budgets will achieve allocative efficiency and will help to ensure that macroeconomic balance is attained throughout the budget period. A precondition for this is the existence and use of a modern accounting system in all areas of the public sector, including an appropriate chart of accounts. Once the budget is elaborated and owned by the MDAs, the existence of a monitoring system will allow the authorities to monitor actual expenditures against initial budget provisions. However, this will not be fully effective without a parallel introduction of auditing systems within the MDAs. 11. The GOG has already introduced measures that will help attain these objectives. For example, a broad-based budget draft has been prepared to capture all expenditures and revenues. This could provide a consistent basis for comparing aggregate, sectoral and per-capita expenditures. However, the application of this budget is yet to be fully assessed and developed. There is also a Public Finance Committee, made up of Ministry of Finance (MOF), Bank of Ghana (BOG), and Controller and Accountant General (CAG), that meet to review trends and discuss variations between actual figures and budgetary provisions. This committee could potentially serve as an early warning system. 12. Notwithstanding its weaknesses, the three-year rolling PIP has helped the GOG in its endeavor to allocate resources for increasing the country's physical capital.stock. For the recurrent budget, the IPPD has enabled the GOG to have a grip on personnel emoluments, namely item 1 of the recurrent budget. The CAG office has already started drafting a new chart of accounts that might be the basis for the public sector's financial system. In the area of expenditure monitoring, the Expenditure Monitoring 4 Unit (EMU) at the MOF, has been able to break down the Bank of Ghana's data base to conform with GOG's budgetary items. This experience may prove useful when assessed with the impact that the Deloitte and Touche expenditure monitoring system has had in those ministries where it has been tried. 13. Despite these efforts, there remains a lot to be done. The development budget needs to be rationalized, the numbers of projects assessed and reduced, projects that have been completed cancelled. There are also reasons to revise the contracting system which, currently, at times leads to undesirable practices and results, such as multiple variation orders. The revision of the planning of the development budget will be incomplete without streamlining the provision of matching funds for donor-supported projects. To the extent that the development budget contributes to the provision of a significant part of the economy's investment per year, its rationalization should improve the overall efficiency and growth of the economy, and the performance of the private sector in particular. Other things being equal, increasing the public's awareness and information about the quality and targets of the public investment program will support the private sector's own programming investment requirements and complementarities with public investment. Furthermore, given the high import component of the development budget, its improvement will also contribute to a better determination of the economy's demand for foreign savings and, consequently, to a more accurate assessment of the economy's balance of payments position. 14. Improving the recurrent budget should involve the issuing of early and policy-determined budget' guidelines. This can be attained if the budget hearings are, in turn, policy focussed. Better planning of the recurrent budget along with the introduction of variance analysis to assess the departure of actuals from budget allocations will give the authorities an early warning mechanism of potential inflationary disruptions and, consequently, facilitate quick corrective actions. 15. The public financial management system will be incomplete without discussing resource mobilization and macroeconomic modelling. This report will not address these issues directly, but it goes without saying that to attain these objectives all the measures that the GOG expects to develop will be an input for improving the forecasting capacity and the public sector's mobilization of resources. 5 Goal II: ownership of the budget by MDAS 16. The 1993 PER indicated that MDAs felt they were only spenders and not responsible and accountable for the formulation and execution of their budgets. MDAs have an ownership interest in their budget when they: * have an appreciation of the government's overall fiscal strategy, see that it is well thought out and reflective of serious expenditure pressures, as well as program needs; * feel that the government has made a serious effort to allocate funds to ministries after consideration of the needs of every client group; * have had the time to prepare, and an opportunity to present, their case for their budget allocation; * are ready to accept responsibility and accountability for prudent and transparent use of the funds; * are ready to answer for their program accomplishments; and * feel that the financial management laws, regulations, and policies and procedures are more supportive of program delivery than preservation of administrative routine. 17. MDA ownership brings both authority and accountability. Accountability brings top management's continuing interest and direct involvement, prompts management to defend their funding before Parliament and to the public, ensures that reallocation of funds by MDAs is done with the public interest foremost, secures a management commitment to greater program efficiency, and ensures that funds are more likely to be used to support the government and ministry program goals. 18. Better planning and execution of the development budget facilitates MDA ownership. Government is able to make funding commitments that it can honor during the fiscal year. Administrative rules can ensure that contracting is rigorous. Good training in project management, costing and forecasting enables MDAm to complete their planned program. Effective planning and execution of the recurrent budget includes making allocations early and with strong policy input. MDAs are made aware of the overall budget situation, the state of the economy, economic forecasts and the basis for the broad allocation decisions. The MDAs can start to plan their programs with a greater sense that program plans can be implemented. 6 19. Implementation of a computerized accounting system lets managers know the status of their budget. Senior management will have more timely and complete information on program costs, output costs, and compliance with ministry and government budget policy. Improved expenditure monitoring allows staff in the MOF to provide more certain budgetary allocations and avoid excessive control systems which detract from work on policy analysis, program evaluation and new program development. 20. An effective internal audit function plays an important ownership role because it provides MDA management with the tools to evaluate themselves, make timely program improvements, uncover inefficiency and develop improved ways to carry out MDA programs. 21. Ownership of financial management by sector ministries will be made effective if they can attract and retain the kinds of skilled staff who can run the accounting systems, monitor expenditures and deliver timely reports to top management. Goal III: generation of timely, reliable and detailed information on actual expenditures (both payments and commitments) 22. Information on financial performance, in particular the recording of actual expenditures has been identified by the GOG as seriously deficient. The weaknesses in the present accounting and financial information are evident in the following: * the data requires considerate effort to collect, aggregate and analyze resulting in delays in reporting; * the incompleteness of expenditure returns and the incorrect coding result in gaps and errors in the database; * data gathering and flows are not coordinated within and between institutions; and * the analysis of the data is not structured to reflect the decentralization of services to the districts. As a result, the usefulness of the analysis is questionable since it is incomplete and not sufficiently timely to facilitate decision making. 7 23. The GOG has initiated a number of reforms to improve the quality of its information systems. The expenditure tracking system, being implemented with the assistance of Deloitte and Touche in three pilot ministries, has successfUlly demonstrated some of the benefits to management in receiving reliable and accurate expenditure data. Similarly the early results of IPPD are providing greater accuracy in the estimating and monitoring of employees costs. The Expenditure Monitoring Unit has successfully disaggregated Bank of Ghana government accounts into the budget's itemized structure. Drawing limits, as a cash control tool, which was transformed into an inefficient expenditure control tool, was abolished in the 1994 fiscal year. 24. The GOG has recognized the need to upgrade its financial accounting systems in order to provide the following: * cost data and trend analysis to assist in budget preparation; * variance analysis of actual costs with the budget to provide an early warning of divergences from the approved budget; and * sufficient time during the year to reallocate funds, by virement, to avoid unexpected overspending or underspending. Goal IV: ensuring that inter- and intra-sectoral actual expenditures correspond to budgetary allocations 25. The PER for 1993 acknowledged the difficulty faced by Government in ensuring that budget targets are met so that there are no surprises with overspending or shifts in resource allocations during the year. This difficulty arises , in part, from the budgetary procedures, particularly the estimation of the item 1 costs for the forthcoming year. Also the present budgetary allocation system tends to be inflexible from one year to the next, and reflects earlier expenditure patterns rather than changes in policy focus within individual MDAs. Furthermore, the allocation process is not informed by up-to-date and reliable financial information on plan performance during the current year. As a consequence, major shifts or variances in expenditure patterns, which are permanent, are unlikely to be incorporated into the new budget. The absence of a good, comprehensive expenditure monitoring system is a serious deficiency in managing the implementation of the budget . 26. The GOG has initiated a number of measures to address these problems. The introduction of broad-based budgets is intended to I strengthen the process of intra and inter-sectoral allocation. The role of the Expenditure Monitoring Unit and the pilot expenditure tracking project are steps in improving the information flow and providing data for early decision-making and, where necessary, corrective action. However the complexity of the budgeting and monitoring processes is increasing as the Government's decentralization policy is being implemented and the demands for greater MDA accountability emerges from the reform of the Civil Service. 27. A more effective budget allocation process and monitoring arrangements are needed if the "shocks" of unexpected overspending, or undercollection of revenues, are to be avoided. The increasing complexity of the Government's operations can only be addressed through greater delegation to, and participation by, the MDAs in the budget allocation process and through the implementation of more effective information systems to support devolved accountability to the MDAs. C. STRATHGIES Strategy I: effective planning and execution of the development budget 28. Effective planning and implementation of the development budget maximizes macro-economic and development goals and contributes to macro-economic balance and allocative efficiency by ensuring that: * the right projects are selected; * projects are well -designed for their purpose; * the contracting procedure is effective and transparent; * the phasing of projects is right; * the public program linkages are sound; * recurrent costs are known; and * the project is completed on time. 9 29. This strategy facilitates MDAs ownership when rigorous prioritization methods are employed to make project selections, when government makes global development funding commitments, and when administrative rules ensure that contracting is rigorous. 30. An effective development budget process contributes a great deal to meeting budgetary targets and contributing to the goal of getting accurate budget information. A well structured development budget features very strong project planning and control procedures which result in accurate forecasting of spending and timing of completion of project components. As a result, the developmbnt plan will be able to fit within the expenditure target. Necessary expenditure adjustments can be made by slowing some projects and accelerating others. 31. The process can be started with a conscious decision about the global development allocation, then allocation by sector; development capital invariably has to be rationed; there is never enough funds to satisfy all the legitimate needs. If the entire package is reviewed in depth, sector ministries have to demonstrate that their development projects relate to their program strategies and difficult inter - sectoral and intra - sectoral trade - offs can be made. Good project planning and cash flow forecasting by project staff form an effective basis for both allocations and monitoring progress. Firm development planning project evaluation and documentation standards will also facilitate both the priority setting and monitoring processes. Project managers can be called to account regularly if the government looks at the entire development plan quarterly. Regular reporting can be designed to show cost, time, design, price escalation and service level variances. Building an effective capital budgeting and costing component into the ministry (government) accounting system will provide costing and cash flow information for program and project monitoring. 32. Ghana has improved development budget planning through four initiatives. The first is the initiation and publication of the three year rolling Public Investment Program. A broad based budget has been prepared; it displays all sources of funding and items of expenditure. A budget manual which contains permanent guidelines and procedures for recurrent and development budgeting has been drafted. The 1993 PER identified problems in the development budget and made recommendations for their solution. 33. The strategy to improve development budgeting and implementation will be carried out by five proposed activities over three years: 10 * introduction of new project planning, prioritising, and tracking systems; * thorough reviews of the continuing need or priority of uncommitted projects; * auditing contract/project performance on a selective basis * making stronger financial commitments based on a well prioritized and costed development program; and * building sector ministry capacity to perform better project analysis, planning, contracting and control. Strategy II: effective planning and execution of the recurrent budget 34. When allocations are made early and with strong policy input, MDAs are made aware of the overall budget situation, the state of the economy, and relevant economic forecasts. This is the basis for the broad allocation decisions. With that background, MDAs can start to plan their programs with a sense of certainty about their budgetary allocations. Program plans can be implemented. Necessary budget adjustments, made as a result of revenue shortfalls or urgent spending requirements, can be managed on a prioritized basis and not just across the board. 35. Better planning of the recurrent budget along with the introduction of timely analysis of variations between actual and budgeted figures will give the authorities an early warning mechanism of potential inflationary disruptions and, consequently, facilitate quick corrective actions. For these reasons, this strategy is critical for the goal of macroeconomic balance. Furthermore, to the extent that the recurrent budget represents a significant amount of the total broad-budget, the streamlining of the recurrent budget process will contribute to the objective of providing timely and reliable data to determine the overall fiscal stance of the public sector. This will be beneficial, not just for the public sector, but also private sector economic activity including financial markets. 36. The PER highlighted several problems of the recurrent budget (items 2-5). In particular, the PER stressed the problems that have been created by inadequate accounting and budget controls and poor quality data especially as regards commitments. By highlighting these problems, the PER paved the way for the undertaking of necessary corrective actions. The GOG has taken a very important step by installing the IPPD system which provides 11 data and forecasting facilities on actual personal emoluments (item 1), payroll and personnel system. The recurrent budget preparation and planning has also benefitted by the drafting of the broad-based estimation, which has put the recurrent budget in the context of the whole resource envelope. 37. This strategy will be carried out by: * early circulation of budget guidelines; * making the guidelines more policy guided; * undertaking policy-focused budget hearings in the MOP; * developing the technical, analytic and financial capacity of the budget analysts; * developing and implementing an automation strategy for the Budget Division - Ministry of Finance; * creating budget offices in sector ministries; and * conducting variance analyses of budget results to compare forecasting with actual results, causes for variation and introduce corrective measures. Strategy III: implementation of a computerized accounting system 38. A new computer-based accounting system, derived from revised accounting principles such as commitments accounting, is an essential building block in effective macro-economic management. For example, the following three benefits will materialize as a result of implementing more up to date accounting and financial systems: * there will be more accurate and timely expenditure and revenue data on sector performance which will feed into the next planning cycle; * the scope for improved cash management will emerge with the automation of the Government's accounting for cash and the resulting prompt reconciliation with the Bank of Ghana's records; and * the adoption of commitments-based accounting will result in a closer match of the expenditure and revenue reported in the financial statements with the actual variance of work completed in the comparable accounting period. 12 39. A revised accounting system, supported by new procedures derived from an updated FAD and FAR, will produce the essential financial information required by Government. 40. A new chart of accounts, incorporating the revised, decentralized structure of service delivery, will provide the necessary framework for presenting the financial results to the appropriate managers in line with their new responsibilities and accountabilities. The in-year monitoring of actual expenditure will be facilitated by the more prompt and complete analysis of variances of actuals with budgets. 41. This strategy will be carried out over four years and will be supported by: * devolution of accounting responsibility to sector ministries; * thorough review and documentation of the exact user requirements; this will lead to,a more effective systems design and implementation; * well thought out linkages between the'accounting and the budget systems; * revised financial laws and regulations ( FAR and FAD ) and well documented financial management policies and procedures; * careful attention to human resource requirements recruitment, training, compensation and deployment ); and * appointment of Chief Accountants for many major ministries. Strategy IV: improved expenditure monitoring 42. Improvements in expenditure monitoring are essential for macroeconomic balance and allocative efficiency. Also, a more effective early warning system should assist in reducing the need for expenditure freezes and the resulting reduction in funds for items 2 to 5 in the recurrent budget. 43. By introducing a greater degree of predictability and transparency in the annual allocation process, MDAs should be able to deliver services more effectively and efficiently. The introduction of more reliable monitoring systems should provide MDA's with the opportunity for internally driven budget reallocations and reprioritisation during the year. Their 13 accountability and sense of ownership and commitment to the management of the planned expenditure will be enhanced. 44. Similarly this strategy can help to reassure the key staff in the MOF about budget performance. They can deal with ministries on a more direct and certain basis, avoid panic changes in budgetary allocations or excessive control systems which consume a lot of staff time which could be better spent on policy analysis, program evaluation and new program development. 45. This strategy will be carried out over two years by: * expanding and internalizing the special project on expenditure monitoring being carried out by Deloitte and Touche; * installing better expenditure forecasting methods in MDAs. * consolidating expenditure reporting at the ministry level so that information is consolidated and examined in the MDAs, and set out in a common format before transmission to the MOF; * ensuring that expenditure monitoring systems are developed for compatibility with or eventual linkage to the Government's new computerized accounting system; * developing and implementing an automation strategy for budget reporting and analysis and consolidation of reporting at the ministry level; * formal quarterly evaluation of budget performance; and * appointment of Chief Accountants for many major ministries. Strategy V* an effective internal audit function 46. At present,XGOG has an external audit system. All of the auditors work for the Audit Service ( Auditor General ). All audit work done in the MDAs is done by the Audit Service or by an outside auditor engaged through the Auditor General. All audit reports belong to the Auditor General. Ministries do not have an internal audit capacity which would allow-ministries to make their own examinations, identify their own problems and implement solutions. A government wide operational audit role is performed by the Management Services Division of the Office of the Head of the Civil Service. It looks at operational performance in MDAs. 14 47. The external audit function continues to grow in strength as a result of the Constitutional provisions and powers provided to the Office of the Auditor-General. 48. Internal audit groups play an important role in expenditure control which leads directly to improved macro-economic balance. Internal auditors review financial systems, control and reporting systems and make recommendations for improvements. These lead to reduced expenditure, more efficiency and more timely reporting of data. Using the internal audit process, MDAs secure greater ownership of financial management responsibility. MDAs will have the means to evaluate themselves, discover budget misallocations, uncover inefficiency and develop new ways of conducting programs. 49. In order to ensure effectiveness of internal auditing, GOG will have to carefully plan the implementation and ongoing coordination of the function. MOF will have to ensure that MDA's internal auditors are prioritizing their audits, adhering to modern auditing standards, developing audit plans for their units and coordinating their role effectively with the Auditor-General and CAG. 50. Information systems are customarily one of the top priority areas for internal audit examinations. The internal auditors are key advisers on accounting and reporting systems and .focus heavily on accurate information. Their independence within the ministry permits them to make wide ranging recommendations for systems changes. Similarly, their skills in forecasting and variance analysis assist management to ensure that their estimating methods are sound and the actual expenditures are in line with estimates. 51. The strategy to create an effective internal audit function will be carried out over three years by: * developing an implementation plan which covers structure, staffing, audit standards and training needs; * addressing early the problems entailed in providing suitable compensation, effective recruitment and good training; * appointing internal audit teams to key ministries; and * evaluating carefully the progress the plan and revizing it as necessary. 15 Strategy VI: strengthening financial management skills 52. This is an umbrella capacity building strategy. It will provide the GOG with skilled staff who can run the new systems, provide accounting and auditing skills to MDAs and create valuable linkages between the budgeting and accounting systems. 53. The full benefit of the new accounting systems will only be achieved if there are the appropriate numbers of sufficiently skilled and experienced finance staff located in the MDAs who can meet the following challenges: * maintenance and efficient running of the systems and procedures; * enforcement of adequate supervision and direction to ensure that procedures are followed and standards achieved (through training); * analysis and assessment of the financial results are fed into the decision making process; and * systems are upgraded to meet new, emerging needs. The capacity for analysis and interpretation will need to be strengthened if the optimum benefit of the new systems are to be achieved and sustained. 54. This strategy will be carried out over several years through: * a staffing needs assessment carefully tied into the implementation of the activities which support the other five financial management strategies; * addressing pay classification and promotion policies; and * implementing training and recruitment programs. Strategy VII: next steps for implementation of the public financial management program 55. This strategy document will be reviewed and approved by the COG. Once the document has been approved, the GOG will consider inviting the principal donors to participate in the reform program. 56. The GOG will prepare a detailed program implementation plan, assign program and project responsibilities, and establish an overarching implementation committee by 1 January 1995. -11 h PUBLIC FINANCIAL MANAGEMENT REFORM PROGRAM ACTION PLAN STRATEGY 1 PROGRESS TO DATE BY JAN. 1995 BY JAN. 1996 BY JAN. 1997 Effective planning and Broad-based Total matching funds Policy-guided budget Project appraisal and execution of the budget prepared commitment put guidelines in place adopted by MDA's Development Budget (PIP) in the budget and Budget manual drafted itemised by project Policy-focused budget Expand the data hearings in operation base to include all Public Finance Review the PIP stages in the project Committee operating project list for Early circulation of pipeline reprioritisation and budget guidelines Rolling 3 year potential reduction PIP in place Classification system for Contract costing projects introduced and payments system implemented in line Prioritisation methodo- with accounting system logy for selecting projects revised Implement variance analysis system to Implement revised compare actuals with contracting system estimates Pilot project to evaluate the benefit of the independent verification of contract performance (contract audit) PUBLIC FINANCIAL MANAGEMENT REFORM PROGRAM ACTION PLAN STRATEGY 2 PROGRESS TO BY JAN. 1995 BY JAN. 1996 BY JAN. 1997 DATE Effective planning and execution of the recurrent PER diagnosis Automation strategy Implement variance budget published for budget analysis analysis system to in the Budget compare actuals IPPD being Division prepared with estimates implemented Early circulation Budget manual of budget guidelines drafted Policy-guided Broad-based budgatary allocations budget prepared in place Public Finance Policy-focused budget Committee operating hearings in operation PUBLIC FINANCIAL MANAGEMENT REFORM PROGRAM ACTION PLAN STRATEGY 3 PROGRESS TO BY JAN. 1995 BY JAN. 1996 BY JAN. 1997 DATE Implementation of a computerised accounting IPPO being Commence CIDA's Define user requirements Implement revised system implemented decentralisation study for linking the budgetary FAD and FAR and accounting PER diagnosis systems published Statement of user Start of implementation Chart of accounts requirements agreed of new accounting drafted system Revise FAD and FAR Appointment of chief accountants Appointment of Chief in remaining ministries Accountants in key ministries Use the new Adopt new draft classification in budget accounting policies and preparation procedures incorporating new charts of accounts Propose plan for addressing pay classification recruitment and training PUBLIC FINANCIAL MANAGEMENT REFORM PROGRAM ACTION PLAN STRATEGY 4 PROGRESS TO BY JAN. 1995 BY JAN. 1996 BY JAN. 1997 DATE Improved expenditure monitoring EMU established break Plan to internalise Automation strategy for Start implemen- down of Bank of Ghana work of Deloitte & budget reporting tation of new data base to conform to Touche in MDAs accounting system GOG's budget items Appointment of Chief Accountants in key Commence PER diagnosis published ministries implementation of stores management IPPD forecasting and Start quarterly evaluation system reporting introduced - of budget performance Commence implemen- Review procurement tation of new Pilot expenditure and stores procurement and monitoring system management system stores system (Deloitte & Touche) Extend expenditure Install expenditure Use of drawing limits monitoring system to forecasting at the abolished other ministries treasury Consolidate expenditure Extend expenditure return reporting at monitoring system to remaining ministries MDA level using internal resources PUBLIC FINANCIAL MANAGEMENT REFORM PROGRAM ACTION PLAN STRATEGY 5 PROGRESS TO BY JAN. 1995 BY JAN. 1996 BY JAN. 1997 DATE An effective internal audit function A strengthened external Develop a plan for creating Evaluate progress audit exists (Auditor an effective internal audit with implementation General) with no function in the MDAs independent internal audit addressing issues: in MDA's a. Structure Operational audit exists b. Staffing within MSD of the OHCS c. Standards d. Training e. MOF coordination Proposal for addressing pay classification, recruitment and training Appoint internal audit teams to key ministries PUBLIC FINANCIAL MANAGEMENT REFORM PROGRAM ACTION PLAN STRATEGY 6 PROGRESS TO BY JAN. 1995 BY JAN. 1996 BY JAN. 1997 DATE Strengthening financial management skills Expenditure monitoring Definition of training Implement training pilot project (Deloitte & needs in MDA's programmes & Touche) and related workshops Assessment of options for recruitment Training of district budget officers Proposal for addressing pay classifiction and remuneration package PUBLIC FINANCIAL MANAGEMENT REFORM PROGRAM ACTION PLAN STRATEGY 7 PROGRESS TO BY JAN. 1995 BY JAN. 1996 BY JAN. 1997 DATE Next steps for implementation of the public financial management reform program PER diagnosis Decide and published communicate project implementation plan Meeting in Washington August 10-11, 1994 Assign project responsibilities and Working group appoint manager established GOG, CIDA, World Establish implemen- Bank. ODA tation committee for the program 4 APPENDIX 2: DISTRIBUTION CLASSIFICATION - NATIONAL PROJECTS IN THE 1994 DEVELOPMENT BUDGET - Korle Bu/Komfo Anokye Teaching Hospitals, (40 per cent) - Psychiatric hospitals, - Universities, Research Institutions/Projects, Maritime Academy etc. - Ports, Harbours and Civil Aviation. - Transport and Communications. - Meteorological Services. - National Buildings eg Accra International Conference Centre, Parliament House etc. - Game and Wild Life and Forest Reserves. - Energy Generation in the Public Sector. - General Govt. Services - Defence. - Foreign Affairs. - National Play fields such as the Accra Sports Stadium; - Head Quarters Projects/ Activities - Equipment/Furniture/Vehicle Procurement. - Institutional Strengthening. 4 WM Tabe A1.1 934104 BUDGETED DEVELOPMENT ESTIMATES(CM) - 1993 1994 MINISTRY PROVISION ITEM 7 TEM B TEM 9 ROVISION ITEM7 ITEM 8 ITEM 9 )0 &AGRICULTURE 4,211 876 530 2.805 5.148 1,589 603 2,956 NDS & FORESTRY 3.631 504 1,463 1,644 5,633 2,660 1,359 1.614 IERGY & MINES 1,610 1.322 8 280 3,015 1,553 853 609 IADE & INDUSTRY 95 65 30 910 76 591 243 IURISM 0 152 60 92 IVIRONMENT, SC. & TECH 3.924 1.349 1,529 1,046 5,995 2,052 1,809 2,134 DRKS & HOUSING 12,804 9.917 585 2,322 16,096 15,174 177 745 lADS & HIGHWAYS 38.540 36.460 80 72,000 70,246 250 1.504 ANSPORT & COMM. 3.395 2.344 481 590 4,445 769 492 3.184 'UCATION 6,399 5.675 515 209 5.443 2,716 2,727 IUTH & SPORTS 320 270 50 747 664 83 ALTH 6.217 3.7031 1,882 652 6,363 4,471 1,482 410 IPLOYMENT & SOC. WEL. 231 1441 87 1,097 610 449 381 'ERIOR 1,280 210! 1,030 40 4,573 1,925 2, 103 GAL GOVT & RURL DEV. 3.378 2.150 1,138 90 1,643 86 455 1,1021 iVT MACHINERY 1,727 1,4151 312 3,785 2,083 1,6521 30 'ORMATION 2,138 1,404 632 1001 2,500 256 2,244 9TICE 175 6 9 984 296 688 REIGN AFFAIRS 246 1961 50 6.1011 3,645 2,456 IANCE 613 458, 155 10,1931 1,288 7.56G 1.3391 FENCE 1.748 1,4461 300 4.264 3.560 7041 TRA MINISTERIAL DEPT 887 668 219 3,988 936 3.037 15 NERAL GOVT SERVICES 2.121 207, 410 1,504 7,602 848 1,9131 4,841 MSCAD 310 2401 30 401 4031 403 C 651 4201 231 1.154 8131 541 TOTAL 94,64 71,529! 11,714 11,402- 174,214 118.176 34,768 21,270 Annex Table A1.2 PERCENTAGE DISTRIBUTION OF DEVELOPMENT ESTIMATES BY ITEM 1993 1994 MINISTRY ITEM 7 ITEM 8 ITEM 9 TEM 7 ITEM 8 ITEM 9 FOOD & AGRICULTURE 20.8 12.6 66.6 30.9 11.7 57.4 LANDS & FORESTRY 13.9 40.8 45.3 47.2 24.1 28.7 ENERGY & MINES 82.1 0.5 17.4 51.5 28.3 20.2 TRANDE & INDUSTRY 68.4 31.0 0.0 8.4 64.9 26.7 TOURISM 39.5 60.5 ENVIRONMENT, SC. & TECH 34.4 39.0 26.7 34.2 30.2 35.6 WORKS & HOUSING 77.5 4.4 18,1 94.3 1.1 4.6 ROADS & HIGHWAYS 99.8 0.0 0.2 97.6 0.3 2.1 TRANSPORT & COMM. 69.0 13.6 17.4 17.3 11.1 71.6 EDUCATION 88.7 8.0 3.3 49.9 50.1 YOUTH & SPORTS 84.4 15.6 0.0 88.9 11.1 HEALTH 59.8 30.0 10.5 70.3 23.3 6.4 EMPLOYMENT & SOC. WEL. 62.3 37.7 0.0 55.8 40.9 3.5 INTERIOR 16.4 80.5 3.1 42.1 55.7 2.31 LOCAL GOVT & RURL DEV. 63.7 33.6 2.7 5.2 27.7 67.1 GOVT MACHINERY 81.9 18.1 0.0 55.3 43.9 0.8 INFORMATION 65.7 29.8 4.7 10.2 89.8 0.0 JUSTICE 49.1 50.9 0.0 30.1 69.9 FOREIGN AFFAIRS 79.7 20.3 0.0 59.7 40.3 FINANCE 74.7 25.3 0.0 12.6 74.2 13.1 DEFENCE 82.8 17.2 0.0 83.5 16.5 EXTRA MINISTERIAL DEPT 75.3 24.7 0.0 23.5 76.2 0.4. GENERAL GOVT SERVICES 9.8 19.3 70.9 11.2 25.2 63.7 PAMSCAD 77.4 9.7 12.9 NCC 64.5 35.5 0.0 53.1 _46.9 TOTAL 76.6 12.4 12.0 67.8 20.0 12.2 nx Table A1.3 3 -1994 ACTUAL DEVELOPMENT EXPENDITURE (CM) - 1993 TOTAL OF WHICH TOTAL OF WHICH MINISTRY ITEM 7 ITEMS ITEM 9 ITEM? ITEM ITEM )OD & AGRICULTURE 2,550.8 1,453.1 227.9 869.8 3.384.0 781.2 189. 2,393.4 NDS & FORESTRY 3.251.8 1,994.0 491.0 7668 3.45.7 1,M.4 739.2 1.1e6. 4ERGY & MINES 358.2 159,9 1520 46.3 1,729.2 9126 706.0 109.7 ANDE & INDUSTRY 302.9 96.3 132.9 73.6 3854 82.5 184.3 138.6 )URISM 161.3 1002 61.1 143.4 60.0 834 0.0 MRONMENT, SC. & TECH 280.3 1,699.6 493.3 613.4 3,296.1 1388.8 9013 1,00D.0 ORKS & HOUSING 9,055.1 8,841.5 0.9 212.7 10,838.1 10,094.2 1 2 542.7 )ADS & HIGHWAYS 63,129.2 62.197.4 931.8 72,088.3 70,819.9 0,0 1,2664 1ANSPORT & COMM. 1,3188 645.9 48,5 624.4 1586.8 56.0 102.2 9.6 UCATION 4.216.5 2,4549 1,610.7 151.0 4,724.8 Z215.8 2,473.2 38,0 )UTH & SPORTS 365.6 351,7 13.9 300.1 300.1 0.0 0.0 -ALTH 4,445.1 3,423.6 590.4 431.1 5,023.0 3.158.0 1,229.0 63.0 IPLOYMENT & SOC. WEL. 688.3 410.9 277.4 796.2 401.4 396.8 0.0 rERIOR 2,849.9 1,733.8 1,040.61 75.5 4.396+2 1,547.8 2652.4 190 CAL GOVT & RURL DEV. 815.9 439,1 13731 239.5 8245s 39.9 281.1 3035 )VT MACHINERY 1,714.8 1.561 0 153.8 2,342.1 1,76.9 58.2 0.0 'ORMATION 554.8 454.6 100.2 1.0545 2291 825.4 0.0 STICE 327.6 225.9 101.7 4750 201. 273.4 0.0 REIGN AFFAIRS 5.365.0 3.634.7 1,395.3 335.0 482.8 159.7 302.9 0.0 IANCE 7,909.9 2,487.8 5,2393 182.8 8,002.1 870.3 7,116.8 15.0 FENCE 2,953.4 2,691.1 262.31 3,92.6 2,33.6 1,092.0 0.0 TRA MINISTERIAL DEPT 1,979.3 604.9 1,337.8 36.8 2.641.7 226.1 2,401.6 14.0 NERAL GOVT SERVICES 2,859.6 1.502.4 716.1 641.1 3,664.4 131.0 1,70.3 1,831.1 MSCAO 354.4 59.1 295.3 " 383.0 0.0 0.0 383.0 1.014.8 781. 2537 2. 2358.3 49423 0.0 TOTAL 121,M0.3 99,9S4.j115.769.91 5,594.91368,36045. 102,672.0 24,7153 10,973.11 his amount awcdmWdspMVvuv of C27.2 bgNon Annex Table A1.4 PERCENTAGE DISTRIBUTION OF ACTUAL DEVELOPMENT EXPENDITURE BY ITEM 1993 1994 MINISTRY ITEM 7 ITEM 8 ITEM 9 ITEM 7 ITEM 8 ITEM 9 FOOD & AGRICULTURE 57.0 8.9 34.1 23.2 5.6 711 LANDS & FORESTRY 61.3 15.1 23.6 44.9 21.4 33.7 ENERGY & MINES 44.6 42.4 12.9 52.8 40.9 6.3 TRANDE & INDUSTRY 31.8 43.9 24.3 16.2 47.8 36.0 TOURISM 62.1 37.9 0.0 41.8 58.2 0.0 ENVIRONMENT, SC. & TECH 60.6 17.6 21.9 42.1 27.3 30.6 WORKS & HOUSING 97.6 0.0 2.3 94.9 0.0 5.1: ROADS & HIGHWAYS 98.5 1.5 0.0 98.2 0.0 1.8 TRANSPORT & COMM. 49.0 3.7 47.3 35.0 6.4 58.6 EDUCATION 58.2 38.2 3.6 46.9 52.3 0.8 YOUTH & SPORTS 96.2 3.8 0.0 100.0 HEALTH 77.0 13.3 9.7 62.8 24.5 12.7 EMPLOYMENT & SOC. WEL. 59.7 40.3 0.0 50.31 49.7 0.0 INTERIOR 60.8 36.5 2.6 35.2 60.3 4.5 LOCAL GOVT & RURL DEV. 53.8 16.8 29.4 6.41 45.0 48.6 GOVT MACHINERY 91.0 9.0 0.0 75.8 24.2 INFORMATION 81.9 18.1 0.0 21.7 78.3 JUSTICE 69.0 31.0 0.0 42.41 57.6 FOREIGN AFFAIRS 67.7 26.0 6.2 34.5 65.5 FINANCE 31.5 66.2 2.3 10.9 88.9 0.2 DEFENCE 91.1 8.9 0.0 72.2! 27.8 EXTRA MINISTERIAL DEPT 30.6 67.6 1.8 8.6 90.9 0.5 GENERAL GOVT SERVICES 52.5 25.0 22.4 3.6 46.5 50.0 PAMSCAD 16.7 0.0 83.3 NCC 75.0 25.0 0.0 82.71 17.3 0.C TOTAL 82.4 13.0 4.6 74.2 17.9 7. Annex Table AMS INFLOWS a OUTPLOWS 1994 SECTOR Total Inflows Direct Inflow On-lent Grants Debt repayment Net outflow FOOD & AGRICULTURE 23.114 20,629 518 1,967 14,266 8.848 LANDS & FORESTRY 2.271 2,016 - 255 284 1,986 MINES & ENERGY 98.261 7,643 37.570 53.048 11,013 87.248 TRADE & INDUSTRY 13,809 1.417 12,382 10 16,609 -2800 TOURISM 22,274 - 22.274 - - 22,274 ENV, SCIENCE & TECH 2,386 2,386 - 10 2,375 WORKS & HOUSING 29,827 14.130 13,377 2.319 7,155 22,672 ROADS & HIGHWAYS 76.232 69.307 5,310 1,615 36,540 39,692 TRANSPORT & COMM 88,386 6,048 81,276 1,063 21.486 66.900 EDUCATION 31.453 31,453 - - 1,252 30,201 HEALTH 8,875 7.695 - 1.179 4,286 4,589 EMPLOYMENT & SOC WEL 130 130 - - 5 125 INTERIOR 4,920 4.920 - - 2,574 2,346 LOCAL GOVT & RURAL DE\ 778 778 - - - 778 FINANCE 56,274 4.012 50.551 1,711 48,795 7,479 DEFENCE 312 312 - 14,491 -14179 COCOA 13.410 - 13.410 - - 13.410 TOTAL 472,711 172,870 230, 88 03,187 178,767 29,44 ANNEX TABLE A3.2 DISTRIBUTION OF THE COMMON FUND QUARTERLY RELEASE$ BY REGIONS (o MILLION) REGION I II III IV Western 626.2 742.9 1,008.3 Central 671.9 797.2 1,082.0 Greater Accra 647.2 768 1,042.4 Eastern 874.4 1,037.5 1,408.2 Volta 666.1 790.2 1,072.7 Ashanti 1,147.6 1,361.3. 1,847.7 Brong Ahafo 672.3 798.0 1,083.1 Northern 585.9 695.3 943.9 Upper West 300.0 355.8 483.0 Upper East 370.1 439.2 596.0 Contingency 338.3 399.6 540.7 TOTAL 61900.0 8,185.0 11,108.0 12,299 TABLE A3.3 SHARE OF THE DISTRICTS IN THE COMMON FUND RELEASES BY QUARTER MILLION) I WESTERN REGION DISTRICT I II Ill Sefwi Wiawso 50.4 59.8 81.2 Bibiani 54.4 64.5 87.5 Juabeso Bia 52.4 62.2 84.4 Wassa West 46.5 55.2 74.9 Mpohor Wassa East 51.1 60.6 82.3 Wassa Amenfi 49.8 59.0 80.1 Aowin Suaman 51.1 60.6 82.3 Nzema East 52.4 62.2 84.4 Jomoro 56.3 66.8 90.7 Shama Ahanta East 104.2 123.6 167.7 Ahanta West 57.6 68.4 92.8 TOTAL 626.2 742.9 1,008.3 CENTRAL REGION DISTRICT I li Ill Cape Coast 93.0 110.4 149.8 Komenda/Edina/Eguafo/ Abirem 57.6 68.4 92.8 Mfantsiman 52.4 62.2 84.4 Abura/AsebulKwamakese 47.1 55.9 75.9 Awutu/AfutulSenya 49.8 59.0 80.1 Gomoa 51.1 60.6 82.3 Upper Denkyira 48.5 57.5 78.0 Twifo/Heman/Lower 60.3 71.5 97 Denkyira Agona 60.9 72.3 98.1 AsikumalOdoben/Brakwa 53 62.9 85.4 AjumakolEnyan/Esiam 50.4 659.8 81.2 Assin 47.8 56.7 77 TOTAL 671.9 797.2 1082 GREATER ACCRA REGION DISTRICT I II III Accra Metro. Assembly 295 350.6 475.9 Tema Mun. Assembly 156.6 185.8 252.2 Ga 64.2 74.2 103.4 Dangbe East 89.8 106.5 144.5 TOTAL 647.2 768 1,042.4 I _ EASTERN REGION DISTRICT I II Ill New Juaben 92.1 108.0 146.6 Suhum 52.4 62.2 84.4 Akwapim North 56.3 66.8 90.7 Akwapim South 62.9 74.6 101.3 Yiio Krobo 55.0 65.3 88.6 Asuogyaman 54.4 64.5 87.5 Manya Krobo 55.0 65.3 88.6 Birim North 56.3 66.8 90.7 Birim Sourth 62.2 73.8 100.2 West Akim 55.0 65.3 88.6 Kwaebibirem 58.3 69.2 93.9 Kwahu South 51.1 60.6 82.3 Afram Plains 59.6 70.7 96.0 East Akim 52.4 62.2 84.4 Fanteakwa 52.4 62.2 84.4 TOTAL 874.4 1037.5 1408.2 VOLTA REGION DISTRICT I 1l III Ho 51.1 60.6 82.3 Hohoe 45.2 53.6 72.8 Kpandu 51.7 61.4 83.3 Jasikan 57.0 67.6 91.8 Kadjobi 44.5 52.8 71.7 Nkwanta 55.7 66.0 89.6 Krachi 45.2 53.6 72.8 Keta 57.6 68.4 92.8 Sogakofe 77.3 91.7 124.5 Adidome 68.1 80.8 109.7 Ketu 52.4 62.2 84.4 Akatsi 60.3 71.5 97.0 TOTAL 666.1 790.2 1,072.7 ASHANTI REGION DISTRICT I II Ill Kumasi Metro. Assembly 199.9 237.1 321.8 Bosomtwi 60.3 71.5 97.0 Offinso 47.8 56.7 77.0 Ejisu 53,7 63.7 86.5 Kwabre 61.6 73.0 99.1 Afigya 60.3 71.5 97.0 Ejura 54.4 64.5 87.5 Sekyere East 43.9 52.0 70.7 Sekyere West 53.7 63.7 86.5 Ahafo Ano North 68.1 80.8 109.7 Adansi East 54.4 64.5 87.5 Adansi West 75.3 89.4 121.3 Amansie West 47.1 55.9 75.9 Amansie East 50.4 59.8 81.2 Atwima 57.6 68.4 92.8 Ashanti Akim North 53.0 62.9 85.4 Ashanti Akim South 45.8 54.4 73.8 TOTAL 1,147.6 1.361.3 1,847.7 BRONG AHAFO REGION DISTRICT I II Ill Sunyani 53.0 62.9 85.4 Wenchi 51.7 61.4 83.3 Techiman 69.4 82.4 111.8 Tano 51.7 61.4 83.3 Atebubu 49.1 58.3 79.1 Sene 57.0 67.6 91.8 Nkoranza 45.8 54.4 73.8 Kintampo 51.7 61.4 83.3 Berekum 51.1 60.6 82.3 Jaman 50.4 59.8 81.2 Dormaa 45.2 53.6 72.8 Asunafo 49.1 58.3 79.1 Asutifi 47.1 55.9 75.9 TOTAL 672.3 798.0 1,083.1 NORTHERN REGION DISTRICT I II III Tamale Mun. Assembly 57.6 68.4 92.8 Yendi 40.6 48.2 65.4 Gushegu Karaga 43.2 51.3 69.6 Zabzugu Tatale 41.2 48.9 66.4 Tolon Kumbungu 45.2 53.6 72.8 Savelugu Nanton 40.6 48.2 65.4 Nanumba 47.1 55.9 75.9 East Gonja 45.2 53.6 72.8 West Gonja 45.2 53.6 72.8 West Mamprusi 45.8 54.4 73.8 Bole 45.2 53.6 72.8 East Mamprusi 47.8 56.7 77 TOTAL 585.9 695.3 943.9 UPPER WEST DISTRICT 1 II III Wa 39.3 46.6 63.3 Nadowli 70.7 83.9 113.9 Lawra 60.3 71.5 97.0 Jirapa/Lambussie 79.3 94.0 127.6 Sissala 50.4 59.8 81.2 I TOTAL 300.0 355.8 483.0 UPPER EAST REGION DISTRICT I II III Bolgatanga 55.0 65.3 88.6 Bongo 68.8 81.6 110.8 Bawku East 60.3 71.5 97.0 Bawku West 60.9 72.3 98.1 Builsa 60.9 72.3 98.1 KassenalNankana 64.2 76.2 103.4 TOTAL 370.1 439.2 596.0 TABLE A 4.1 TENDERS PROCESSED BY CENTRAL TENDER BOARD 1993 -1994 TITLE OF PROJECT/ NAL IMPLEMENTING CONTRACT AMT, CONTRACT AMOUNT? AGENCY SUCCESSFUL BIDDERS VARIATION ORDERS 1 Tema Sow'ge Sys. MESSRS WADE ADAMS 03,003,000,000 Varation Orders to date Improvement Works - ONSTR. LTD (UK) f495,000,000 Urban II Proj. (W orks & Housing) TR FA G R. 031 9,069 3_i 2 Rehab. of ESSRS TRAFALGAR 03,129,296,973 Nil Four (4) Bridges HOUSE CONSTR. (Ghana Highway NT. LTD. Authority) 3 Ashlaman Upgrading ot 1: CMI Works Scheme Phase 11 IESSRS M. ISUMAilJ 01,372,576.067 Nil (Lots I & 2) NIQUESCO (JV) (Works & Housing) Lot 2: Elec. Works VIESSRS FANEL LTD. 0329,397,070 arlation Orders: C45m 4 Health Services 4. EQUIPMENT 01,506,420,901.52 Nil Rehab. Proj. ot 1: Supply& =Ffr. 13,378,51e Phase I Lots 1-6 nstal. of Medical (Nn. of Health) Equipment VESSRS ESACO INT. .TD. ot 2: Supply & 02,520,820,979.60 ariation Order of nstal. of Medical =US$3,616,672.8 S$7.942.00 as at 31/1/95 quipment Engineer's Estimate ESSRS TRIPOD of Final Contract NG. LTD. ourt$2,520,828,921.60 nUS$3,624,614.85) ot 3: Electrical 0409.289.135.80 adation Orders of eticulation a US$587,222, 8812,86.00 foreign VIESSRS REFQUA mponentplus ELEC. LTD. 343,258.00 Local ponent as at 31/1/95. (Engines Estimate of Final Contract Amount: 15,428,172.24 ._ *USU96.023.92 TITLE OF PROJECT/ FINAL IMPLEMENTING CONTRACT AMT. CONTRACT AMOUNT AGENCY SUCCESSFUL BIDDERS VARIATION ORDERS Health Services . CIVIL WORKS Exchange Rate S$1.497,901.36 foreign Rehab. Proj. ot 4: Civil Works & as at 21/9/93 omponent plus Phase I Lots 1-6 ssociated Installation US$1.00 = 0390.00 297,477,630.00 local (Mi. of Health) or Korle Bu Hosp. US$11,469,220.39 omponent (Engineer's (contd) ESSRS WADE Foreign Componen stimate of Final DAMS CONSTR. LTD. 0307.068.377 ontract Amount) Local Component. ot 5: Civil Works & US$779,259.35 S$779,494.66 foreign kssociated Installation Foreign Componen omponent plus ation at Komfo Anakye 092,613,872.45 92,662,283.45 local lospital, Kumasi Local Component omponent (Engineers AESSRS WADE stimate of Final DAMS CONSTR. LTD. ontract Amount) Lot 6: Civil Works & US$4,285,111.03 Nil kssociated Installation Foreign Componen for Effia Nkwanta Regional 01,671,193,300.60 Regional Hosp. Sekondi. Local component. vESSRS WADE kDAMS CONSTR. LTD. . 5 Manufacture & Erection ots I & 2: 017,373,951,496.2( Nil of Primary School MESSRS TRAFALGAR Pavilions Lots 1-8 4OUSE INT. LTD. (Ministry of Education) Lots 3: MESSRS #2,016,820,550 Nil KUOTTAM CONST. ORKS ot 5: #1,820,735,820.00 Nil MESSRS TOP INT. ENG. CORP. Lot 6 (To be discussed Nil AESSRS TRAFALGAR with contractor) OUSE INT. LTD. 6 National Feeder Roads Lot 1: #596,622,825 Nil Rehabiliation & Mainte- MESSRS PLANT POOL nance Project. Lots 1-4 (Dept. of Feeder Ros) ot 2: MESSRS #481,544,580 Nil KWANTABISA ENG. TITLE OF PROJECT/ FINAL IMPLEMENTING CONTRACT AMT_ CONTRACT AMOUNTI AGENCY SUCCESSFUL BIDDERS VARIATION ORDERS National Feeder Roads Lot 3: MESSRS 01,715,120,142 Nil Rehabiliation & Mainte- P & W GHANEM nance Project. Lots 1-4 (Dept. of Feeder Roads) (contd) Lot 4: MESSRS 0984,378,025 Nil SODONOR LTD. 7 Construction of Kpong MESSRS IMPREGILO- 012,204.645.860 Nil Irrigation Project RECCHI (JV) (rigation Dev. Auth.) 8 Rehabilitation of ESSRS DYCKERHOFF DM 15,816,325.00 Nil Lower Volta Bridge & WIDMANN foreign component at Sogakope plus 0232,819.383. (Ghana Highway Auth.) local component Rate of Exchange: DM1.00=0306.00 as at 2/1/93 9 Manufacture & -ot 4: 12 local contractors 01.627,095.951 Erection of Primary o be considered for the School Pavilions. award of 247 pavilions Lots 4 & 6 (Min/Education) ot 6: MESSRS 01.542973,539 Nil TRAFALGAR HOUSE NT. LTD 10 Design & AESSRS ENTERPRISE Phase 1: Construction of RAZEL FRERES 04,465,937,499 Kanda Interchange Negotiated Contract) local component p is and Desgin of Sankara Ffr.93,043,723.93 Interchange Projects foreign component (Dept. of Urban Roads) Rate of Exchange: Ffr.1.00 - 0119.00 as at June 1994 11 Cocoa Roads MESSRS SATOM 02,527,054,619 Nil Rehab. Proj. Lots 1 & 3 (Dept. of Feeder Roads) SUMMARY Total Value of Contracts Awarded by Central - 080,158,656,560 Tender Board Total Contract Amount - 080,706,539.052 Including Variation Orders Annex Table A5.1: REGIONAL DISTRIBUTION OF THE 1994 DACF REGION 1994 TOTAL % PER CAPITA POP('000) ALLOC (cedis) 1. G-Accra 2,088.6 2,457.6 9.9 1,176.6 2. Eastern 2,251.9 3,320.1 13.3 1,474.4 3. Central 1,458.6 2,551.1 10.2 1,749.0 4. Volta 1,563.2 2,529.0 10.2 1,633.4 5. B- Ahafo 1,727.3 2,553.4 10.2 1,478.3 6. U-East. 1,052.6 1,405.5 5.6 1,335.3 7. U-West 580.9 1,138.8 4.6 1,960.4 B. Ashanti 2,845.9 4,356.6 17.5 1,530.8 9. Northern 1,709.1 2,225.1 8.9 1,301.9 10 Western 1,609.6 2,377.49 9.6 1,477.0 TOTAL 16,887.7 24,914.4 100.0 1,297.7 SOURCE: Statistical Service - Estimated 1994 Population Common Fund Administrator - DACF Allocations ANNEX TABLE A5.2: REGIONAL DISTRIBUTION OF 1994 DEVELOPMENT BUDGET EXPENDITURE. 1994 1994 PER CAPITA REGION POP('000) BUDGET B EXP. ALLOCATION EXP(M.CEDIS) (CEDIS) 1. G-Accra 2,088.6 15,518.27- 8.9 7,429.9 2. Eastern 2,251.9 5,130.28 2.9 2,278.2 3. Central 1,458.6 11,115.07 6.4 7,620.4 4. Volta 1,563.2 7,879.14 4.5 5,040.6 5. Brong Ahafo 1,727.3 10,460.61 6.0 6,056.0 6. Upper East. 1,052.6 2,399.46 1.4 2,279.5 7. Upper West 580.9 2,680.48 1.5 4,614.4 8. Ashanti 2,845.9 8,914.19 5.1 3,132.3 9. Northern 1,709.1 17,805.38 10.2 10,418.0 10 Western 1,609.6 9,012.51 5.2 5,599.2 Reg. Average 16,887.7 90,915.54 5.2 5,383.5 National Proj.. 16,887.7 47,444.86 27.2 2,809.4 TOTAL RELEASED 138,360.40 79.4 8,193.0 TOTAL UNRELEASED 35,853.60 20.6 2,123.1 BUDGET TOTAL 16,887.7 174,214.00 100.0 10,316.0 SOURCE: Ghana Statistical Service - Estiated 1994 Population. Ministry of Finance ANNEX TABLE AS.3 PERCENTAGE DISTRIBUTION OF 1994 DEVELOPMENT BUDGET BY SECTOR TOTAL REGION GIACCRA ENTRAL BIAHAFO JrWEST NORTHERN ATIONAL SECTOR -ASTERN VOLTA WEAST SHANT ESTERN TOTAL FOOD & AGRICULTURE 3.64 2.39 1.83 3.78 6.41 15.03 1.29 2.23 7.21 2,61 53.59 100.00 LANDS & FORESTRY 26.35 0.67 0.82 0.71 1.09 0.40 0.55 5.81 0.58 2.08 60.95 100.00 ENERGY & MINES 12.33 B.60 13.65 8.60 56.81 100.00 TRADE & INDUSTRIES 1.09 0.99 97.92 100.00 TOURISM 100.00 100.00 ENV, SCIENCE & TECH 8.00 2.70 89.31 100.00 WORKS & HOUSING 11.50 3.20 7.97 19.10 3.91 3.47 2.53 4.25 6.63 3.86s 33.57 100.00 ROADS & HIGHWAYS 14.87 5.00 7.66 6.81 13.09 1.48 2.56 10.26 21.81 10.60 5.86 100.00 TRANSPORT & COMMS 100.00 100.00 EDUCATION 4.15 7.04 5.53 2.99 1.36 0.49 1.92 10.20 1.07 1.401 63.84 100.00 YOUTH & SPORTS 23.33 6.66 1.57 2.83 65.61 100.00 HEALTH 24.11 3.76 16.82 3.88 2.53 1.31 1.66 2.10 5.12 3.83 34.88 100.00 EMP.&SOC. WEL. 4.12 2.97 3.78 3.85 4.17 4.66 4.66 3.96 4.79 4.61 58.43 100.00 INTERIOR 6,55 1.50 8.38 2.25 0.68 0.53 1.26 1.01 108 1.26 7550 100.00 LOCAL GOVT.& R. DEV 6.39 93,61 100.00 ENVIRONMENT - - - - -- GOVT. MACHINERY 4.27 4.43 2.43 4.14 300 6.69 6.07 3.74 4.70 4.27 56.26 100.00 INFORMATION 100.00 100.0 ADMIN OF JUSTICE - 1.81 98.19 100.00 FOREIGN AFFAIRS 100.00 100.00 FINANCE 0.15 0.78 0.34 o5 98.67 10o.O DEFEN4CE 100.00 100.00 EXTRA-MIN. DEPTS 0.16 1.02 2.28 0.78 0.58 1.22 1.43 0.59 5.56 8.20 78.19 100.00 GEN. GOVT. SERVICES I 1 100.00 100.00 PAMSCAD 37.91 7.34 5.14 6.50 4.88 5.07 6.81 7.18 5.65 4.65 8.67 100.00 NAY COM ON CULTURE - 06-4 I - 0.93 3.51 26.03 100.00 muLTI-EcTORAL 0.55 43181 1.37 1.27 22.33 30.08 100.00 TOTAL. UNRELEASED 100.00 REG. BUD. TOTAL 8.91 2.94 6.38 4.52 8.00 1.38 1.54 5.12 10.22 5.17 27.23 100.00 SOURCE: MINISTRY OF FINANCE (PAD) 1994 DEVELOPMENT BUDGET ANNEX TABLE 5.4 PERCENTAGE DISTRIBUTION OF 1994 DEVELOPMENT BUDGET BY REGIONAL TOTAL REGION GiACcRA CENTRAL BIAHAFO JrWEST NORTHERN IATIONAL SECTOR EASTERN VOLTA JfEAST 4SHANTI NESTERN TOTAL FOOD & AGRICULTURE 079 1.57 0.55 1,61 2.06 21.07 1,62 0.84 1.36 0,98 380 1.93 LANDS & FORESTRY 5,87 0,45 0.25 0.31 D.36 0,57 0.71 2,25 0,11 0.80 4.44 1.99 ENERGY & MINES 1.37 2.90 2-12 1.89 2.07 0.99 TRADE & INDUSTRIES 0.03 004 0.80 0.22 TOURISM 0.00 030 0.08 ENV, SCIENCE & TECH 170 1.73 620 1.89 WORKS & HOUSING 7.88 6.64 763 25.78 3.97 15.40 10.05 5.07 3.96 4.56 7.53 6.11 ROADS & HIGHWAYS 69.10 70.28 49.65 62.31 90.17 44.46 68.95 82,93 88.28 84.82 8.91 41.38 TRANSPORT & COMMS 1 3.34 0.91 EDUCATION 1,26 6.49 2.35 1.79 0.61 0.97 3.39 5.41 0.28 0.74 6.36 2.71 YOUTH & SPORTS 0.45 0.39 006 0.09 0.42 0.17 HEALTH 7.80 3-69 7,60 2,48 1.22 2.75 3.11 1.18 1,44 2.13 3.69 2.BB EMP.&SOC. WEL. 0.21 0.46 027 0.39 0.32 1.55 1.39 0.35 0.21 0.41 0.98 0.46 INTERIOR 1.86 1.28 3.32 1.26 0.28 0.97 2.08 0.50 0.27 0,62 7.00 2.52 LOCAL GOVT.& R. DEV 0.78 1.23 0.36 ENVIRONMENT GOVT. MACHINERY 0.64 2.02 0.51 1.23 0.67 6.53 5.30 0.98 0.62 1.11 2.78 1.34 INFORMATION . 2.22 0.61 ADMIN OF JUSTICE , . 0.05 0,98 0.27 FOREIGN AFFAIRS 0.98 0.27 FINANCE 0.24 2.61 1.03 002 16.64 4.59 DEFENCE 1 8.27 2.25 EXTRA-MIN. DEPTS 0.03 0.53 0,54 0.26 0.15 1.34 1.41 0.17 0.82 2,40 4,35 1.62 GEN. GOVT. SERVICES 3,88 1.06 PAMSCAD 0.94 0.55 0.18 0.32 0.18 0.81 0.97 0.31 0.13 0.20 0.07 0.22 NAT COM ON CULTURE 17.85 0.15 1.11 1.56 1.64 MULTI-SECTORAL 0.06 7.18 0.32 0.97 2.28 1.18 1.05 TOTAL UNRELEASED I 1 20.58 REG. BUD. TOTAL 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 SOURCE: MINISTRY OF FINANCE (PAD) 1994 DEVELOPMENT BUDGET ANNEX TABLE A 5.5: REGIONAL DISTRIBUTION OF THE DACF AND THE 1994 DEVELOPMENT BUDGET EXPENDITURE. REGION 1994 TOTAL PER CAPITA POP('000) ALLOC (cedis) 1. G-Accra 2,088.6 17,975.9 15.5 8,606.6 2. Eastern 2,251.9 8,450.4 7.3 3,752.6 3. Central 1,458.6 13,666.2 11.8 9,369.4 4. Volta 1,563.2 10,408.1 9.0 6,658.2 5. B- Ahafo 1,727.3 13,014.0 11.2 7,534.3 6. U-East. 1,052.6 3,805.0 3.3 3,614.8 7. U-West 580.9 3,819.3 3.3 6,574.8 8. Ashanti 2,845.9 13,270.8 11.5 4,663.1 9. Northern 1,709.1 20,030.5 17.3 9,002.2 10 Western 1,609.6 11,389.9 9.8 7,076.2 TOTAL 16,887.7 115,830.1 100.0 6,858.8 SOURCE: Statistical Service - Estimated 1994 Population. Ministry of Finance - 1994 Capital Budget Releases. District Assemblies Common Fund Administrator - 1994 DACF Allocations. Annex Table A6.1: GWSC On-going Water Projects Project Title Year in 1994 1994 PIP Prov. Releases 1. Rehab. of GWSC Property............ 1986 -- 2. Workshop & Stores Rehab............ 1986 10.0 - 3. Handpump Maint. Centres........... 1986 30.0 - 4. Rehab. of GWSC Property............ 1986 - . 5. Accra Rural Wtr Se. Ext........... 1986 60.0 18.8 6. Sekondi/Tdi Wtr Supply............. 1986 124.0 48.1 7. Cape Coast Wtr Supply.............. 1986 165.0 135.3 8. Kumasi Wtr Supply................. 1986 42.0 37.6 9. Sunyani Wtr Supply................. 1986 83.0 79.8 10. Koforidua Water Supply............. 1986 71.0 8.7 11. Ho Water Supply................... 1986 130.0 125.2 12. Fosu Water Supply.................. 1986 250.0 42.2 13. Swedru/Ekumfi/Ojobi............... 1986 50.0 33.2 14. Kwahu Ridge Wtr Supply............. 1986 65.0 65.0 15. Dormaa Ahenkro Wtr Ss............. 1986 50.0 50.0 16. Techiman Water Supply.............. 1986 350.0 153.4 17. Mampong Water Supply............... 1986 50.0 - 18. Berekum Water Supply............... 1986 20.0 10.8 19. Konongo Odumasi Wtr So............ 1986 450.0 167.0 20. Bibiani Water Supply............... 1986 50.0 8.4 21. Winneba Water Supply............... 1990 220.0 165.0 22. New Dist. Capitals Wtr Ss......... 1990 67.0 0.8 23. Formation of Dist. Maitce. Ctres.. 1990 10.0 - 24. Sogakofe/Keta/Ada Foah Wtr Ss..... 1992 40.0 - 25. Four Dist Capitals W/S VR/ER...... 1992 50.0 - 26. Vakpo Wtr Ss Ext. Elect ........... 1986 40.0 26.1 27. Kumawu Water Supply................ 1986 35.0 9.2 28. Likpe Wtr Ss/Reh. of Dist......... 1986 25.0 25.0 29. South Western Dist Wtr Ss......... 1986 75.0 6.9 30. Anum Boso Water Supply ............ 1990 50.0 - 31. Minor Improvement & Rehab......... 1986 76.0 47.0 32. Rehab. of Local Council Sys....... 1986 5.0 - 33. Rehab. of Old Wells (UNICEF)...... 1986 20.0 20.0 34. Rural Wtr Ss (JICA) Drilling...... 1986 20.0 20.0 35. Shallow Wells Mtce (KFW) Reh...... 1986 10.0 10.0 36. Sh,11 Well Drilling Prog..........1986 20.0 20.0 37. HaMdpump Test Programme........... 1986 - 38. C/Reg (French) Drilling of Well... 1986 30.0 30.0 39. Eastern Regional (Dutch)........... 1986 30.0 30.0 40 Western Region (JICA)............. 1986 30.0 - 41. Building of R/W Supply............. 1986 - 42. UNICEF Assisted Small Comm W/S.... 1986 35.0 35.0 43. WATERAID Assisted HandDug Wells... 1986 12.0 12.0 44. GWSC HandDug Wells Prog. Phase 1.. 1986 60.0 60.0 45. Programme for Rural Action........ 1986 30.0 30.0 46. Wtr Se & Station Mgmt (UNDP)...... 1986 -- 61 47. Northern Region..................... 1990 500.0 500.0 48. Upper West Region (CIDA).......... 1990 200.0 200.0 49. Upper East Region (CIDA).......... 1990 300.0 300.0 50. Weija Treatment Plant/Tech Assisted/Procurement.............. 1990 55.0 55.0 51. Eastern Retion GTZ (Replacement/Req. for 5 towns).... 1990 293.0 193.0 52. Rural Water & Sanitation VR....... 1992 50.0 50.0 53. Water Utilization Project......... 1986 120.0 120.0 54. Community Wtr & Sanitation Pjt.... 1990 210.0 210.0 55. vehicle Replacement Plan........... 1986 12.0 - 56. Koforidua Wtr Supply Expansion.... 1994 80.0 - 57. Saltpond/Asikuma/Ajumako Dist Water Supply........................ 1986 93.0 - TOTAL 5,314.0 3,158.5 62 ANNEX TABLE A 6 . 2 SUMMARY OF REGIONAL DISTRIBUTION OF ROAD PROJECTS (pm) NO PROJECT AMOUNT COST NO. REGION OF VALUE SPENT TO PROJECTS COMP 1 ASHANTI FEEDER ROADS 31 11,375.40 4,701.85 6,673,55 2 BRONG AHAFO FEEDER ROADS 22 4,280.74 2,501.37 1.779-37 3 CENTRAL REG FEEDER ROADS 21 2,699.28 1,59318 1,106.10 4 EASTERN REG FEEDER ROADS 37 3,449.93 2.428.51 1,021 42 5 GREATER ACCRA FEEDER ROADS 33 2,944.87 2,296.82 648.05 6 NORTHERN REG FEEDER ROADS 27 3,703.38 1,521.38 2,182.00 7 UPPER EAST FEEDER ROADS 17 1,714.46 1,101.19 613.27 8 UPPER WEST FEEDER ROADS 22 923.96 224.44 699.52 9 VOLTA REG FEEDER ROADS 33 3,378.66 1,687.02 1,691-64 10 WESTERN REG FEEDER ROADS 25 3,391.06 1.780-47 1,610-59 ALL FEEDER ROADS 268 37,861.74 19,836.23 18,025.51 11 ASHANTI URBAN ROADS 4 1,156.27 523.23 633.04 12 GREATER ACCRA URBAN ROADS 46 47,294.33 22,618.43 24,675-90 13 ST URBAN ROADS 14 3,476.69 3,058.08 418-61 ALL URBAN ROADS 64 51,927.29 26,199.74 25,727.55 14 ASHANTI REG HIGHWAYS 9 29,077.62 22,150.80 6,926.82 15 BRONG AHAFO HIGHWAYS 10 32,057.86 18,656.13 13,401.73 16 CENTRAL REG HIGHWAYS 21 22,720.47 17,226.30 5,494.17 17 EASTERN REG HIGHWAYS 7 4,015.16 1,521.47 2,493.69 18 GREATER ACCRA HIGHWAYS 10 18,193.77 9,720.53 8,473.24 19 NORTHERN REG HIGHWAYS 8 28,268.38 27.231.38 1,037.00 20 UPPER EAST REG HIGHWAYS 2 5,467.17 2,710.70 2,756.47 21 UPPER WEST REG HIGHWAYS 10 6,480.01 3.913.26 2,566.75 22 VOLTA REG HIGHWAYS 5 26,815.73 9,720.48 17,095.25 23 WESTERN REG HIGHWAYS 22 35,092.07 13,845.54 21,246.53 ALL HIGHWAYS 104 208.188.24 126.696.59 81.491.65 GRAND TOTAL 436 297977.27 1 2.56 471 ANNEX TABLE A 6 , 2 SUMMARY OF REGIONAL DISTRIBUTION OF ROAD PROJECTSA#m NO PROJECT AMOUNT COST NRO. REGION OF VALUE SPENT TO PROJECTS COMP I ASHANTI FEEDER ROADS 31 11,375.40 4,701-85 6,673.55 2 BRONG AHAFO FEEDER ROADS 22 4,280.74 2.501,37 1,779.37 3 CENTRAL REG FEEDER ROADS 21 2,699.28 1,593.18 1.106.10 4 EASTERN REG FEEDER ROADS 37 3,449.93 2,428.51 1,021.42 5 GREATER ACCRA FEEDER ROADS 33 2,944.87 2,296.82 64805 6 NORTHERN REG FEEDER ROADS 27 3,703.38 1,521.38 2,182.00 7 UPPER EAST FEEDER ROADS 17 1,714.46 1,101.19 613.27 8 UPPER WEST FEEDER ROADS 22 923.96 224.44 699.52 9 VOLTA REG FEEDER ROADS 33 3,378.66 1.687.02 1,691-64 10 WESTERN REG FEEDER ROADS 25 3,391.06 1.780.47 1,610.59 ALL FEEDER ROADS 268 37,861.74 19,836.23 18,025.51 11 ASHANTI URBAN ROADS 4 1,156.27 523.23 633.04 12 GREATER ACCRA URBAN ROADS 46 47,294.33 22,618.43 24,675.90 13 ST URBAN ROADS 14 3,476.69 3,058.08 418.61 ALL URBAN ROADS 64 51.927.29 26,199.74 25,727.55 14 ASHANTI REG HIGHWAYS 9 29,077.62 22,150.80 6,926.82 15 BRONG AHAFO HIGHWAYS 10 32,057.86 18,656.13 13,401.73 18 CENTRAL REG HIGHWAYS 21 22,720.47 17,226.30 5,494.17 17 EASTERN REG HIGHWAYS 7 4,015.16 1,521.47 2,493.69 18 GREATER ACCRA HIGHWAYS 10 18,193.77 9.720.53 8,473.24 19 NORTHERN REG HIGHWAYS 8 28,268.38 27.231.38 1,037.00 20 UPPER EAST REG HIGHWAYS 2 5,467.17 2,710.70 2,756.47 21 UPPER WEST REG HIGHWAYS 10 6,480.01 3,913.26 2,566.75 22 VOLTA REG HIGHWAYS 5 26,815.73 9,720.48 17,095.25 23 WESTERN REG HIGHWAYS 22 35,092.07 13,845.54 21,246.53 ALL HIGHWAYS 104 208.188.24 126.696.59 81.491.65 GRAND TOTAL 436 297.977.27 172,732.56 1