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Business News of Wednesday, 24 June 2020

Source: B&FT Online

Loopholes in revenue management remain large – PIAC report


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The management of petroleum revenues remains flawed with numerous challenges, ranging from lack of transparency in utilisation of funds and a deviation in the core mandate of the Ghana National Petroleum Corporation’s (GNPC), among others, 10 years on from the commercial production of oil and gas.

These were among some of the key findings contained in the Public Interest and Accountability Committee (PIAC) 2019 annual report.

Whereas the total Annual Budget Funding Amount (ABFA) for last year was around GH2.7billion, the report said GH?1.2billion was utilised while the remaining GH?1.5billion cannot be accounted for, the third year running that not only has a sizable proportion of the ABFA not been utilised but has also not been accounted for.

“This is impeding PIAC’s appreciation of the full scope of accounting to the public on the utilisation of our petroleum revenues,” the report lamented.

It also revealed violations in the use of the ABFA, as 45.14percent of it was spent on recurrent expenditure, with 54.85percent on capital expenditure, contrary to Section 8(4)(a) of Act 893 which requires that a minimum of 70 percent be spent on public investment expenditure.

Meanwhile, for the second consecutive year, there was no allocation from the ABFA to the Ghana Infrastructure Investment Fund (GIIF), converse to the provisions of the Petroleum Revenue Management Act (PRMA) and GIIF Act 877. This, PIAC, added, could put future infrastructure development in jeopardy if not checked.

On the subject of the GNPC and what its core focus must be on, PIAC said the state-owned petroleum firm continues to provide guarantees for a range of state-owned firm enterprises, amounting to US$645.5 million in 2019. A practice the Committee’s Chairman, Noble Wadzah, says defeats prudent management of taxpayer funds: “This is about double, compared with the previous year’s and also outweighs the Corporation’s total equity financing of US$164.79 million for the period.”

On consequences of GNPC’S actions, Mr. Wadzah said it has tendency to stifle investment into core activities like exploring for new resources and development of the industry as a whole.

Recommendations

On the way forward, PIAC, which lacks the power to hold individuals and organisations to account on their use of petroleum funds, is urging Parliament to bring its oversight mandate to bear on the Ministry of Finance’s impunity and failure in not accounting for unutilized ABFA.

It added: “For the third consecutive year, the actual ABFA has not been fully utilised and accounted for, bringing the total unutilised and unaccounted ABFA to GHc1.5 billion at the end of 2019.”

The Committee also reiterated earlier calls on Parliament to consider placing some restrictions – cap – on the proportion of GNPC’s budget on corporate social investments and guarantees to state institutions, particularly in the light of the Corporation’s inability to respond to some of its cash calls.

On GNGC’S inability to pay GNPC, it said government must, as a matter of urgency, take strategic steps to address the unsustainable debt of GNGC.

“The Committee further restates its recommendation to the Ministry of Finance to diversify the qualifying instruments in investing the Ghana Petroleum Funds (GPFs.)

PIAC calls on government to expedite action on the infrastructure required for gas evacuation and utilization, in order to avoid huge backlog of make-up gas volumes and the Potential for resource waste,” the report concluded.

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