KWAME NKRUMAH UNIVERSITY OF SCIENCE & TECHNOLOGY

INSTITUTE OF DISTANCE LEARNING (IDL)

SCHOOL OF GRADUATE STUDIES

GROUP ASSIGNMENT

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October 2022
Introduction
Over the last decade, countries globally have undergone significant public financial management
(PFM) reforms. Budgetary systems in these countries have been significantly improved with the
introduction of fiscal rules, medium-term budgetary frameworks, and program budgeting, while
accounting systems have benefited from a gradual shift towards reporting according to
international standards like International Public Sector Accounting Standards (IPSAS) (Bajo &
Runtić, 2017; World Bank, 2016). In addition, accounting systems have been acquiring accrual
accounting and International Public Sector Accounting Standards (IPSAS), making reporting
systems more comprehensive and transparent. The financial crisis over the decade experienced
globally has seriously affected public finances, undermining the reforms implemented, and
putting other, more advanced, reforms on hold. Moreover, further weaknesses in the public
financial management systems of countries globally and Ghana have been exposed. These
include poor quality of public sector data, inadequate public financial controls, inadequate
management of fiscal risks, and inefficient public investments. To cope with these problems,
current public financial management reforms are increasingly focusing on responsibility and
accountability through Public Internal Financial Controls (PIFC) and fiscal responsibility
documents as well as on improved risk management and greater transparency (World Bank,
2016).
To improve the quality of financial management and increase accountability and citizens' trust in
Ghana's central and local government units, public expenditure, and financial accountability
(PEFA) is a useful analytical tool (Framework for Assessing Public Financial Management,
n.d.). The PEFA program establishes a framework for assessing and reporting on PFM's
strengths and weaknesses, with quantitative indicators used to assess performance. It is intended
not only for monitoring but also for public finance management reform. It is a global instrument
that is recognized as the gold standard for creating strong and effective public financial
management. Because PEFA is an evidence-based program, it is dependable and has a strong
influence on internal government decision-making at both the national and subnational levels.
Following the financial crisis, economies have tended to achieve greater financial transparency
and reduce risks to the greatest extent possible (Lawson, 2012; World Bank, 2016).
PEFA aims to evaluate and assess PFM performance at specific points in time by using
quantitative indicators. It is based on several principles, including a country-led agenda,

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coordinated donor and international financial institution support, and a shared data pool on
public finance management. PEFA's main goals include improving the capacity to assess PFM
by encouraging country ownership, lowering transaction costs, stimulating donor harmonization,
and tracking PFM progress over time. A good PFM system's goal is to ensure that government
policies are implemented correctly and achieve their goals. A transparent and orderly PFM
system is a prerequisite for achieving desirable fiscal and budgetary outcomes (PEFA
Secretariat, 2016c): total fiscal discipline necessitates effective control of the total budget as well
as risk management, and strategic resource allocation entails planning and executing the budget
following government priorities to achieve policy objectives, and efficient service delivery
necessitates the use of budgeted revenues to provide the best levels of public services possible
with the resources available. PEFA identifies seven performance pillars in open and orderly PFM
systems that are critical to achieving these goals. As a result, the seven pillars define the key
elements of a PFM system. Each pillar includes a set of indicators that measure the performance
of the government's key systems, processes, and institutions. Each indicator has one or more
performance dimensions. Each dimension assesses performance on a four-point ordinal scale
ranging from A to D. The dimensions are calibrated based on the presence of important attributes
relevant to various performance standards (PEFA Secretariat, 2016c).
Financial Management in the Bawku Municipal Assembly
Bawku Municipal District is one of the fifteen districts in the Upper East Region, of Ghana.
Originally created as an ordinary district assembly in 1988 when it was known as Bawku East
District; it was established by Legislative Instrument (L.I.) 1439, until the southern part of the
district was split off by a decree of president John Agyekum Kufuor in August 2004 to
create Garu-Tempane District; thus the remaining part was elevated to municipal district
assembly status on the same year to become Bawku Municipal District. However, on 28 June
2012, two parts of the district were later split off to create Binduri District (from the west)
and Pusiga District (from the east) respectively; thus the remaining part has been retained
as Bawku Municipal District. The municipality is in the eastern part of the Upper East Region
and has Bawku as its capital town.
With reference to the PEFA framework, a critical look at the financial management practices of
the Bawku Municipal Assembly of the Upper East Region of Ghana revealed the following
strength and weaknesses.

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The financial situation Bawku Municipal Assembly
Reference to PI-10: Fiscal risk reporting considerable weaknesses in the financial situation of
the Bawku Municipal Assembly. These pose a threat to the GoG budget because of the assembly
need for funding that ultimately becomes the obligation of GoG to cover (through explicit and
implicit contingent liabilities). The GoG forgoes the revenues that they could earn if MMDAs
were able to generate and mobilize enough financial resources, and which could be
used to fund public service delivery.
Revenue administration
Notwithstanding several years of reform, indications are that the Bawku Municipal Assembly
revenue mobilization is not as strong as it could be. Robust compliance with tax obligations is
still a challenge, the revenue mobilization function is not as strong as it could be, and tax revenue
arrears are significant in size (reference to PI 19: revenue administration). Strengthened
revenue administration would bring in more revenues for the assembly, which are then available
for funding public services and reducing the need to borrow to fund such services.
Expenditure commitment control
Expenditure commitments made outside the approved budget and not supported by cash will
likely result in payments arrears. Although the Ghana Integrated Financial Management
Information System (GIFMIS) is now more or less fully in place (its establishment started in
2012) and is supposed to guard against commitments being made, it still seems to be the case
that commitments of the assembly are made outside the system.
Cash management
In-year execution of the budget still seems to be based on the amount of cash actually available
to pay bills (‘cash rationing’). This leads to considerable unpredictability in budget execution.
The main complaint of the assembly (i.e., the Bawku Municipal) is delays in receiving budget
releases, and thus delays in receiving the funds needed to execute their approved budgets. Such
practices have considerable negative impact on both the strategic allocation of resources (which
may be far less optimum than planned) and on the efficiency of service delivery (PI-21:
Predictability of in-year resource allocation). This situation is partly a symptom of the
unexpected demands on budgetary resources caused by the financial situation of the assembly

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and violations of the expenditure commitment control system. It also reflects the incomplete
consolidation of cash balances that would enable all cash balances available to be used to help
finance budget execution. Establishment of a Treasury Single Account (TSA) would help
alleviate this problem; establishment has begun. Of course, eliminating the retention of IGFs and
tightening up on the flow of budgetary funds to Statutory Funds would help alleviate the issue,
but this might raise political issues.
Extra-budgetary operations
As described under PI-6: Central government operations outside of financial reports, there is
a significant amount of non-transparency in the budgetary system in the assembly that can
negatively impact on budgetary outcomes, particularly the strategic allocation of resources and
efficient service delivery. Although the approved annual budget is funded from all sources of
funding and not just the Consolidated Fund (CF), information on budget implementation does
not include expenditures financed by IGFs, donor project funds, and Statutory Funds. About 20
percent of budgetary funds are spent in this non-transparent manner. Under the 2016 Public
Financial Management Act (2016), this situation will improve, as the reporting on budget
execution will cover all sources of funding.
Budget preparation
The procedures for preparing annual budgets are well-established at the assembly (reference to
PI-17: Budget preparation process), but they don’t guarantee that the approved budgets will
truly meet the needs of society. There seems to be no mechanism for ensuring the cost
effectiveness of proposed spending. Ineffective and inefficient spending are carried forward for
year after year, as there appears not be a mechanism for weeding this out, for example, through
spending reviews outside the budget preparation cycle. One issue is that annual Budget
Guidelines are issued by MoF to MMDAs without the prior scrutiny of the Cabinet, a political
body that might want more say in what goes into the Guidelines. The lack of predictability in the
annual budget complicates the development of a medium-term perspective on budgeting.
Obtaining an annual perspective is even more difficult.
Payroll, procurement, and payments systems
Weaknesses in these systems of the assembly pose major fiscal and fiduciary risks, but
significant progress has been made in recent years in strengthening these systems. Reference to

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PI 23, 24, and PI-25.3 all demonstrate strengthened robustness, the result in part of strengthened
IT systems.

Reference
Bajo, A., & Runtić, D. (2017). Public Financial Management , Accountability , and Citizens ’
Trust.
Framework for assessing public financial management. (n.d.).
Lawson, A. (2012). Evaluation of public financial management reform in Burkina Faso, Ghana
and Malawi 2001–2010. In Final Synthesis Report 2012:7.
World Bank. (2016). Framework for assessing public financial management. Improving Public
Financial Management. Supporting Sustainable Development., February, 1–111.
https://pefa.org/sites/default/files/PEFA Framework_English.pdf
PEFA Secretariat (2016). Handbook, volume I: The PEFA assessment process – planning,
managing and using PEFA. Washington, DC: PEFA Secretariat.
PEFA Secretariat (2016a). Handbook, volume II: PEFA assessment fieldguide. Washington,
DC: PEFA Secretariat.
PEFA Secretariat (2016b). Supplementary guidance for subnational PEFA assessments.
Washington, DC: PEFA Secretariat.
PEFA Secretariat (2016c). Framework for assessing public financial management.
Washington, DC: PEFA Secretariat.

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