ATO GHARTEY

OUTLINEINTRODUCTION

WHAT ?

WHY ?

HOW ?

APPRAISAL

NEXT STEPS

CONCLUSION

INTRODUCTION

Present internal audit within the broader framework of governance and financial management reform.

Indicate what it did or it not do and the implication of the action or inaction.

WHAT DO WE WANT?

PUBLIC FINANCIAL MANAGEMENT REFORM

FOR GOOD GOVERNANCE AND

POVERTY REDUCTION

UNDER

DEVELOPMENT

POVERTY

WHY THE NEED FOR CHANGE

GOOD GOVERNANCE

INTERNATIONAL COMMUNITY

CIVIL STRIFE

SOCIALAWARENESS

BYPEOPLE

HOW ?PREVIOUS ATTEMPTED

SOLUTIONS

ONGOING REFORMS

SOME REFLECTIONS

REALIGNED STATEGY

Structural Adjustment

Institutional Support (SAIS)

Capital Budget: Public Investment Programming

Recurrent Budget:

Budget Task Force Budget Improvement Working

Group (BIWIG

Civil Service Reform Programme

Integrated Personnel and

Payroll Database System (IPPD

National Revenue Secretariat

Economic Management Support

Debt Recording and Management System

Financial Sector Adjustment Credit (FINSAC).

Public Expenditure Reviews

Expenditure Tracking and Control System (EXTRACON, 1993-95)

National Institutional Renewal Programme (NIRP).

Policy Guided Budget earnings

Special Recruitment Privatization and

Divestiture

Public Financial Management Reform

Programme (PUFMARP 1996)

PREVIOUS ATTEMPTED SOLUTIONS

Etc.

Etc.

ONGOING REFORMS

The Civil Service Performance Improvement Programme (CSPIP)

Governance and Public Financial Mgt Reform

Decentralization and Local Govt

Public Sector Incomes Policy and Administration

The National Policy Process and Cabinet Process Reforms

Legal Sector Reforms

State-owned Enterprises Reforms

The Gateway Project

Central Management Agencies (CMAs)

Other Reforms ,e.g. Health,

Education ,Forestry Reform of Subvented

Agencies

SOME REFLECTIONS

Serious Omission of Human Factor and Concerns

Shaky Development Assumptions

Mismatch of Costs and Benefits

Cross Border and Domestic Brain Drain

Unfair Wage Discrimination Against Citizens

Overview

REALIGNED STATEGY

Overview

Constraints

Frustrations

The Realignment

OVERVIEW•Reform impact negligible (World Bank Report No. 19004-GH refers).

•Details of Constraints and Frustrations follow.

Constraints Critical processes, e.g., policy design, coordination and implementation.

Core Systems, e.g., the rules governing the use of human and financial resources.

Structures, e.g., unclear mandates, responsibilities and operational objectives of public sector

Performance Orientation, e.g., Lack of performance-oriented management culture, and poor performance and motivation of public servants resulting in unsatisfactory quantity and quality of service delivery

Frustrations Fragmentation of change process

responsibilities coupled with

Weak coordination mechanism for the implementation process combined with

Unclear and possessive mandates of the “driving forces” of the change process with

Little experience with the implementation of major reform programmes with

Inadequate capacity (managerial, staff, administrative, technical) to manage and institutionalize the necessary changes and

Uncoordinated agenda leads to: workshop fatigue; apparent neglect of work for which staff are being paid; and further stress on and dislocation of already limited staff staff.

The RealignmentFormation And Operationalization Of Technical Advisory

Boards For Ministries. Civil Service Law 1993 PNDC Law 327

Public Sector Re-invention and Modernization Strategy for

Ghana: Transforming vision into Reality” (PUSERMOS). 1997

PUFMARP, Governance and Ghana Poverty Reduction

Strategy (GPRS)

Legislative action in pipeline: Financial Administration Bill,

Central Internal Audit Bill, Procurement Bill, etc.

New Approach:

Membership Functions•Sector Minister, Chairman

•Deputy Minister

•Chief Director (Permanent Secretary)

•Representatives from

i). three public sector organisations

ii). three private sector organisations

With which the Ministry

a)Promote constant interaction between

the Ministry and the users of its services and

b)Advise the Minister on adjustments in policy direction, planning objectives and operational strategies.

NOTE:Boards do NOT exist on the ground.Therefore, policies, programmes, etc. continue to be implemented without adequate transparency, consultation, consensus building, etc.

Ministerial Boards (PNDCL 327)

PUBLIC SECTOR RE-INVENTION AND MODERNIZATION STRATEGY FOR

GHANA:TRANSFORMING VISION INTO REALITY

Functions:

Approved by Cabinet in December 1997 as the framework for conducting Public Sector Reforms in Ghana. Framework:

• Provides for integrating, sequencing, and monitoring reforms.

• Addresses key weaknesses of the public sector.

NOTE: Chairman = Vice President of Ghana

Legislative Action in PipelineLegislative Action in Pipeline

Financial

Administration Bill

Central Internal

Audit Bill

Procurement Bill

Etc.,e.g., Company Law, Insolvency Law

Characteristics of Old and New Approaches

Earlier Approach Current ApproachBrush fire

Unstructured

Uncoordinated

Autocratic.

Governance Flavoured. E.g.

Planned,Participatory, Sector and Inter Sector Programming, Private Sector and Civil Society Involvement.

Structured

Holistic

Convergent

Internal Audit Neglect Internal Audit Neglect and Relevant and Relevant LegislationLegislation

S.M.C.D. 221 Section 48(3)

“The Auditor-General may assign any member of the Audit Service to act as

internal auditor for any body or organisation for the audit of the accounts

of which the Auditor-General is responsible.”

Document PurposeConstitution of the Republic of Ghana, 1992.

Financial Administration Bill 2002:

 

Section 45(1)

 

Section 45(2)

Audit Service Act 2000 Act 584

Deals with finance. No specific mention is made of internal audit. But specific mention is made of Statistical Service, the Auditor-General and the Audit Service.

Provides for external audit in accordance with Audit Service Act 2000 Act 584.

Provides for internal audit in accordance with the currently non-existent Central Internal Agency Law.

No specific mention is made of internal audit. Section 30 on Audit Implementation Committee provides a semblance of Audit Committee.

Other Relevant Legislation

Audit Service Decree 1972, N.R.C.D. 49 Section 8(3)

States: “The Auditor-General may assign any member of the Audit Service to act as internal auditor for any body or organization for the audit of the accounts of which the Auditor-General is responsible. “

Financial Administration Decree, 1979 S.M.C.D. 221

No specific mention is made of internal audit.

Other Relevant Legislation contd.

Consequences of Consequences of

Apparent NeglectApparent Neglect Ghana Education Service Scandal in the 1980s

Relegation to Controller And Accountant-General’s

Department.

Questionable mandate

Conflicts

Lack of control over ride

Duplication of functions

Nonexistence or non-performance

PUFMARP II Project Cost Allocation

National Budget

International Direction

Next Next

StepsSteps

PUFMARP II PROJ ECT COST ALLOCATION

Economic

Governance

(22.0)

Project M

gt

(6.4

)

Unallocated Funds &

Contingencies (3.8)

Revenue Agency

Reform (6

.4)

Additional Expt. Controls (2.8)

Furt

her

BPE

MS

Rol

l-out

(58.

6)

FURTHER BPEMS ROLL-OUT (58.6)

ADDITIONAL EXPT. CONTROLS (2.8)

REVENUE AGENCY REFORM (6.4)

ECON GOVERNANCE (22.0)

PROJECT MGT (6.4)

UNALLOCATED + CONTINGENCIES (3.8)

A national budget is a plan for economic governance and

controlled use of resources for the country .

National Budget

Budget Overview:What Did the Budget Intend to Achieve?

Macroeconomic

Framework

Five Development Priority Areas

President’s Special

Initiative (PSI)

Macroeconomic Framework

Keep inflation low and stable.

Accelerate the implementation of the prioritized GPRS programmes.

Work towards early implementation of HIPC completion point

Intensify rate of infra-structure development through public and private investment

Improve rev. collection and mgt.

Improve exp. mgt.

Reduce debt burden

Develop a more effective interbank foreign exchange rate

Five Development Priority Areas

Vigorous development

of infrastructure

Modernised agriculture based on rural development

Enhanced social services

Strengthening of Governance Institutions

Strengthening

Private Sector

President’s Special

Initiative (PSI)

Stimulate private

enterprise

Improve productivity

Create

jobs

International International DirectionDirection

Mission and Organisation Structure Information

Financial Information

Forward Looking Information

Governance Information

Performance Information

•Abortive ministerial initiative (1997)

•UNDP sponsored study (1999)

•Other developments

•Contract awarded 2001

Antecedents of Formal Recognition of Internal Auditing

TERMS OF REFERENCEReview documentation and consult stakeholders to develop

a full understanding of the issues and options;

Assess current internal auditing functions in MDAs and

MMDAs to determine their requirements;

Determine the most appropriate set-up arrangements and

structure;

Review options complying with international standards in

use in other countries;

Review internal auditing functions in selected countries

that comply with international auditing standards to draw

lessons for the Ghanaian situation;

Suggest realistic options on internal audit and financial control functions complying with international standards;

Determine technical assistance needs to operationlize the organizational set-up and include the provision of the operational requirements of the audit function;

Review existing legislation with a bearing on internal audit and recommend amendments where applicable and, if necessary, develop an internal audit legislative framework; and Develop capacity building programme.

TERMS OF REFERENCE contd.

• Report submission date 27 August Report submission date 27 August 20012001

• Activity commencement date Activity commencement date November 2001November 2001

• Completion of priority activities, e.g. Completion of priority activities, e.g. Implementation committee, Implementation committee, recruitment of key staff, enactment of recruitment of key staff, enactment of law, July 2002law, July 2002..

Progress AchievedProgress AchievedBill in ParliamentBill in Parliament

Milestones

CONCLUSIONWhither are we going? Knowing that our burdens are temporary enables us to bear them with a triumphant smile. Let us move forward with IA. Mindset and attitudinal change also required.

Ato Ghartey