Evolution of PFM System - Slides

EVOLUTION OF PFM SYSTEMS IN GHANA:
THE JOURNEY SO FAR
PUBLIC FINANCIAL MANAGEMENT FACULTY

Annual Lecture 2019
Venue: ICAG House

Date: 5th December 2019
Speaker:
Mac-Effort K. Adadey (FCCA, ICAG, IIA, COIS, CICP, PMP,
ITIL, MBA, MSc)
OUTLINE
1. The Public
4. Financial
Sector and 2. Technology
Reporting
Public Driven PFM
Landscape of
Financial Initiatives
Ghana
Management
Overview of PFM Landscape in Ghana by: MacEffort K. Adadaey 2

What is Public Sector?
Public Sector refers to:

• Government-owned organizations, and
• Government-provided services.
Private sector comprises:

• Organizations that are not Government owned, and
• The goods and services provided by organizations outside of
the Government.
Budget Reort Writing by: MacEffort K. Adadaey
Why Public Sector Organisations Exist?
To provide basic or essential services to all citizens regardless of ability to
pay
To provide services that are beyond the private needs of those using the
services
To aid control and economic regulations of certain key areas, eg. Defense,
Energy, Health, Water, Law & Order, Economic Affairs, etc.
To correct perceived inequalities in the standard of leaving (minimum wage,
standard of education, health, road, etc)
To fulfil legal requirements for their establishment

1. General Public
Services
2. Defense
3. Public Order &

Safety
4. Education
5. Health
6. Social
Protection
7. Housing &
Community
Amenities
8. Recreational,
Cultural & Religion
9. Economic
Affairs
Functions of Government (UN-COFOG)
10. Environmental
Protection
What is PFM
Public Financial Management (PFM) refers to the set

of laws, rules, systems and processes used by
sovereign nations (and sub-national governments),
to mobilise revenue, allocate public funds,
undertake public spending, account for funds and
audit results,
(Andrew Lawson, 2015).
Budget Reort Writing by: MacEffort K. Adadaey 6

PFM System
PFM System is defined in section 102 of the PFM

Act 2016, as “ legal and administrative procedures
established to permit covered entities to conduct
activities in a manner that ensures correct usage
of public funds to meet defined standards of
probity, regularity, efficiency and effectiveness.

PFM System....
Mac-Effort Adadey (2014), defined PFM System as

“a framework of three Ps (Policies & Laws,
Processes & technology, and People) that are
deployed in a coordinated manner to ensure
effective and efficient use of public funds to meet
the needs of a Nation”

Scope Dimensions of PFM in Ghana
The PFM system in Ghana has two scope dimensions, FUNDING scope and INSTITUTIONAL
scope
1. The Executive, Legislature

1.Consolidated and Judiciary;
Fund Resources 2. Constitutional bodies;
Institutional
Funding 2.Internally Scope
3. Ministries, Departments
Agencies and local
scope Generate Funds (Covered government authorities;
3.Statutory Funds Entities) 4. The public service;
5. Autonomous agencies; and
4.Donor Funds
6. Statutory bodies.

Thematic Areas of PFM Cycle
• PFM encompasses a broad set of functions commonly conceived as a cycle of

six phases
6. Review and
1. Planning
Audit
5. Accounting 2. Budget
and Reporting formulation
4.Budget 3. Budget
Execution Approval
PFM Cycle in Ghana

Evolution of the 3-Ps
Policies
People Processes
Policies & Laws: Financial Laws of Ghana
1. Financial Administration Decree 1979 (S.M.C.D.221)
2. Ghana Audit Service Act 2000
3. Financial Administration Act 2003 (Act 654) (repealed in 2016)
4. Public Procurement Act 2003 (Act 663), as amended by Act 914 2016
5. Internal Audit Agency Act 2003 (Act 658)
6. Financial Administration Regulations 2004 (repealed in 2019)
7. Earmarked Funds Capping and Realignment Act. 2017 (Act 947)

Policies & Laws: Financial Laws of Ghana
1. Financial Administration Decree 1979 (S.M.C.D.221) (repealed)
2. Financial Administration Act 2003 (Act 654) (repealed)
3. Financial Administration Regulations 2004 (repealed)
4. PFM Act 2016 (Act 921)
5. PFM Regulations 2019 (L.I. 2378)
6. Public Procurement Act 2003 (Act 663), as amended by Act 914 2016
7. Ghana Audit Service Act 2000
8. Internal Audit Agency Act 2003 (Act 658)
9. Earmarked Funds Capping and Realignment Act. 2017 (Act 947)

Policies & Laws: Key National Financial Documents
Financial Memoranda for MMDAs 2004

GoG Accounting Manual 2009
MMDAs Accounting Manual 2011
Accounting Manual for MMDAs 2013
GoG Accounting Manual for MDAs 2015
GoG Accounting Manual 2018
GoG Fixed Assets Management Policy & Guideline 2018
Departmental Accounting Instructions
Policies & Laws: Adopted International Standards
1. Government Finance Statistics 2001 & 2014

(adopted in 2011)
2. UN Classification of Functions of Government

(adopted in 2011)
3. International Public Sector Accounting Standards

(adopted in 2014)
Processes
4.
2. 3. Revenue
1. Planning Management
Expenditure
Budgeting Management
• Incremental..to.. • Manual
• 1-Year Planning
Activity-based..to.. • Manual GCR payment
to Medium- Programme Based
and Cash Book process to
term planning Budgeting
to some degree some degree of
• Attempted • Manual to digitisation
Long-Term Plan computerised of digitisation
(Activate to in recent times under the
(40 yr) GIFMIS
Hyperion)
Processes
6. Fixed
5. Cash 7.
Assets 8. Auditing
Management Accounting
Management
• Manual
reconciliation • Still manual. • Cash Basis to • Largely manual
to Real time • FA Module of Modified with some use
access to bank GIFMIS is yet to of CAATs
Accruals
accounts and be utilised • Attempts being
balances
• IPSAS in made at AMIS
• Attempted TSA
progress
People
General staffing
• Growing numbers
• From older folks to younger graduates
Professional Staffing
• Increasing number of Chartered Accountant in the last
two decades
• CAGD - Over 400
• GAS - Over 200 CA
• GRA – Over 170 CA
• Internal Auditors (MDAs & MMDAs) – over 100
Technology Driven PFM Initiatives
Within the past 30 years Ghana embarked on three key

technology driven PFM reform initiatives:
1.Public Financial Management Reform Programme (1995 to 2002), then BPEMS till 2008
2.GIFMIS Project (2011 to 2014)
3.Public Financial Management Reform Project (2015 to 2019)

PFM Problems
A review of GoG Accounting and Financial Management systems was conducted in the
early 1990s which identified several weaknesses in the PFM landscape of Ghana. The
problems include:
1. Incremental budget system 7. No linkage between recurrent and capital
budget
2. Lack of budget ownership 8. Lack of strategic planning
3. Lack of proper accounting , 9. Lack of accurate and timely financial
auditing, and Reporting information for decision making
4. Ineffective public expenditure 10. Weak compliance with financial regulations
monitoring and control 11. Personnel and payroll problems
(phantom/ghost employees)
5. The budget lacked medium term 12. Incomplete aid and debt management
outlook information
6. Lack of broad-based budgeting 13. Low level of human resource capacity

Earlier Efforts
Earlier efforts (i.e Pre-PUFMARP) to address the above problems were
conducted in an isolated and piecemeal manner.
These efforts were found to be ad hoc, disjointed, incoherent, and

incomprehensive. The initiatives include the following:
a)Public Investment Program (PIP) to deal with issues affecting capital budget
b)Civil Service Reform Program
c)Integrated Personnel and Payroll Project (IPPD) to deal with staff cost
d)Budget Improvement Working Group (BIWIG) to help implement the broad-based
budget concept, and
e)Expenditure Tracking System (EXTRACON) to monitor expenditures in the Ministries,
Departments, and Agencies (MDAs)
Earlier Efforts…
These initiatives however did not transform the government’s financial management
system and did not help to implement an integrated system
Instead the piecemeal approach led to each ministry adopting measures that sought its
own solution to its problems leading to a proliferation of accounting systems introduced
and funded by international donor agencies
There was therefore the need to develop an all-embracing programme, which would link
all aspects of public financial management together
PUFMARP was thus conceived from this background by the GoG as a more comprehensive
and integrated approach to resolving the identified PFM problems.

The PUFMARP
PUFMARP (Public Financial Management Reform

Programme) was launched in July 1995 at Akosombo by the
then Minister of Finance with the full backing of the
president of Ghana.
The ultimate objective of PUFMARP was to enhance the

efficiency, transparency and accountability of financial
management functions of government.
PUFMARP Components
1. Budget preparation – introduction of MTEF;
2. BPEMS, an integrated financial management information system;
3. Cash management – introduction of a modern cash management system;
4. Aid and debt management – improving data on aid and debt management and the links with
CAGD and BoG;
5. Revenue management – introduction of VAT, unique Taxpayer Identification Number, IT

system for tax assessment, collection and reporting, and strategy for managing customs data;
PUFMARP
6. Procurement – formulation of national procurement code and development of
mechanisms for compliance with code;
7. Auditing – development of national audit standards, specification of audit reports, and

introduction of value-for-money audits;
8. Legal framework – review of legislative framework and development of revised financial

rules and regulations for Parliamentary approval;
9. Fiscal Decentralisation
10. Human resources development and payroll administration (IPPD)

BPEMS
BPEMS, the core component of PUFMARP, was aimed at reforming the budgeting
(preparation and implementation), accounting and financial reporting system, and to
provide for a computerised platform to run the entire financial management system
Five BPEMS modules were designed to provide the above functions:
1.Accounts Receivable (AR)

2.Purchasing Ordering (PO)
3.Accounts Payable (AP)
4.General Ledger (GL)
5.Public Sector Budgeting (PSB)
The implementation ended somewhere 2008 due to some challenged
Some Challenges of PUFMARP/ BPEMS
• Some 10 key challenges worth noting under the PUFMARP implementation were:
1. No proper sequencing of events. MTEF moved way ahead of the other components
of PUFMARP. BPEMS delay was a potential threat to the success of MTEF
2. The IT component of BPEMS was too complicated and was beyond the capacity of
civil servants
3. Poor network connectivity
4. Lack of top-level commitment from some key stakeholders leading to consultants
managing the program
5. Reform fatigue among relatively few civil servants who have been involved in
many different reforms, sometimes leads to faltering attendance at meetings and
workshops
6. Low participation in training programmes due to non-payment of attendance
allowances
Challenges…
7. Limited capacity to implement reforms. Consultants often led the
implementation process so that the salary gap between these consultants
and the less motivated civil servant worked against project ownership and
sustainability
8. Funding was provided separately by four donors (IDA, DFID, EU and CIDA)
and effective donor coordination and harmonisation was difficult to achieve
9. Donors were interested in achieving their project objectives only and in some
occasions rushed to spend to prevent money returning to their government
chest
10. GoG had no leverage on the use donor funds as disbursement of funds was
subject to the disbursement rules of each donor

Lessons
• The above challenges provided good lessons that informed the
design and implementation of the subsequent PFM initiatives such as
the GIFMIS and PFMR project.
1. Implementation was led by GoG staff whilst consultants provided

technical support
2. Capacity building of GoG implementation teams was given some
attention
3. More public entities were involved in the implementation activities
(MoF, CAGD, GAS, BoG, GRA, MoE, MoH, IAA, MoC and NITA, etc.
Lessons…
4. Project team members were drawn from various MDAs (Team
Leads, TTTs, Advocates,… and later Component Leads, Entity
Internal Support Team, etc)
5. Pool funding arrangements was agreed with the various Donors
funding the project
6. Extra remuneration of Project Management Team was provided
from GoG counterpart funding
7. Good allowances were paid to participants during sensitisation
and training sessions
THE GIFMIS PROJECT
• The focus of GIFMIS Project (2011 to 2014) was to continue with the BPEMS modules
and add other modules that could enhance and deepen the deployment of electronic
PFM systems across Government.
• The GIFMIS modules therefore include the following, plus interface with other related
PFM systems:
1. Accounts Receivable (AR)
2. Purchasing Ordering (PO)
3. Accounts Payable (AP)
4. General Ledger (GL)
5. Cash Management
6. Fixed Assets (FA)
7. Public Sector Budgeting (PSB)
8. Payroll (IPPD)
9. HRMIS
THE PFMR PROJECT
• PFMR project (2015 to 2019) was to strengthen and extend the GIFMIS
coverage to the outstanding public funds and entities.
• The project consisted of 8 main components:
1. IFMIS (Financial modules)
2. Budget module
3. HRMIS module
4. Payroll module
5. Public Procurement
6. Internal Audit
7. External Audit
8. Parliamentary Oversight

NEW PFMR STRATEGY
• A new five-year PFM Strategy was launched (2020 to 2024) to strengthen
and deepen implementation GIFMIS Modules across Government, including:
1. The Financial modules
2. Budget module
3. HRMIS module
4. Payroll module
5. Public Procurement
6. Internal Audit
7. External Audit
8. Parliamentary Oversight
WORKINGS OF GIFMIS

GIFMIS?
❑GIFMIS stands for Ghana Integrated Financial Management Information
System
❑It is an integrated computerized financial management system for:
• Budget Preparation
• Budget Execution
• Accounting and Financial Reporting
• Cash Management.
• Assets management
• Human resource and payroll management

Objectives of GIFMIS
GIFMIS was adopted by government as the core electronic platform for public financial management across all Covered
Entities.
The key objectives of GIFMIS are to:
• improve accuracy, comprehensiveness, reliability, and timeliness of financial and

fiscal reporting at all levels of government, and
• provide credible financial information for better and informed decision-making;
• promote accountability and transparency of the PFM processes
• It is to provide the platform for the implementation of IPSAS
GIFMIS rollout started in 2012 beginning with the MDAs subsisting on Consolidated Fund resources.
The rollout was extended to cover all public funds at MDAs and MMDAs across the country
Overview of PFM Landscape in Ghana by: 37

MacEffort K. Adadaey
The GIFMIS Business Process
• The budget execution and expenditure processes (called P2P), as configured
on the GIFMIS cover the following:
1. Budget requisition
2. Budget Releases (Warrant)
3. Expenditure Initiation (Encumbrance)
4. Purchase Ordering (Commitment)
5. Store Receipting (Delivery of good or service)
6. Invoicing/ PV (Obligation/ Liability)
7. Payment (discharging liability)

GIFMIS P2P Steps
• The approved Budget is first activated on the GIFMIS at the
beginning of each year.
• The PFM laws require that a Warrant should be issued on the
GIFMIS, which represents the authority to commit Government
to financial liability.
• The P2P process then follows as below:

P2P Steps…
1. Warrant issued (to commit the budget)
2. Purchase Requisition is raised (for expenditure initiation)
3. Purchase Order is prepared and issued (when supplier is selected)
4. Stores Receive Advice is prepared (when goods are taken on charge)
5. Payment Voucher is prepared (to recognize liabilities)
6. Cash Requirement is run to establish all liabilities due
7. Cash pooling to establish available bank balances (not being used effectively
yet)
8. Payment is effected (to discharge liabilities), via
• EFT for 3rd party payments
• System cheque for internal
• NOTE: Entities not set-up for the EFT are allowed to use manual cheques but must carry out
dummy payment on the system
GIFMIS EFT Process

GIFMIS Cheque

GIFMIS Expenditure Controls
The above processes are configured on Approval Hierarchies (at least 3

levels) to ensure segregation of duties
Matching rules (Invoice-to-SRA-to-PO) are applied to ensure payment for

only goods received and accepted, except transactions requiring no PO (eg
T&T, allowances, etc)
Financial docs created (PV, PO, SRA, PR, etc) are also electronically
available and can be printed out for reference, thus addressing the fears of
missing financial documents
Status of GIFMIS Rollout (Financials)
• The GIFMIS Financials has been deployed at 946 sites across the country as
follows:
Site Target Achievement Outstanding
1. Consolidated Fund Sites
1.1 National MDAs 250 250 Nil
1.2 Regional MDAs 350 350 Nil
2. IGF Sites 54 62 8
3. Statutory Funds 5 5 Nil
4. Donor Fund sites various 20 Nil
5. Foreign Mission (pilot) 5 1 4
6. Fixed Assets 600 6 pilot 594
Harmonised GOG CoA (GFS 2001 & 2014)
2011 to 2016 2017 to Date
Seg.
Seg Description Size Range
Description Size Range
3
1 Institution 2 01-99
1 Bal Segment 001-999
2 Funding 5 01001 - 99999 2 Funding 5 01001 - 99999

3 Func. Of Govt. 5 70101 - 79999 3 Functions of Govt. 5 70101 - 79999
4 Organisation 10 0010101001 – 9999999999 4 Organisation 10 0010101001 – 9999999999

5 Program 6 000001 – 999999 5 Policy Objective 6 000001 – 999999
6 Sub Program 7 0000001 – 9999999 6 Program/ Su-prog 8 00100001 – 99999999
7 Project 7 0000001 – 9999999
7 Project 7 0000001 – 9999999
8 Activity 6 000001 – 999999
8 Activity 6 000001 – 999999
9 Location 7 0101101 – 9999999
9 Location 7 0101101 – 9999999
10 Policy Obj. 6 000001 – 999999 10 Spare 1 6
000001 – 999999
11 Spare 6 000001 - 999999 11 Spare2 4 0001 - 9999
12 Nat. Account 7 1000001 - 9999999 12 Nat. Account 7 1000001 - 9999999
Total 74 Total 74

FINANCIAL REPORTING LANDSCAPE OF GHANA

Financial Reporting Goal of GoG
The goal of GoG as provided in the PFM Act 2016 is to produce

annual accounts of the entire public sector to cover All Public
Funds at all Covered Entities, using the IPSAS Accrual Basis of
accounting.
Regulation 214 (2) of the PFM Regulations 2019 (LI 2378) states
that “the Controller and Accountant General shall, by 31st
December 2020, put in place systems to produce financial
statements to cover all public funds”.
The Road Map for Whole Government Reporting
Phase 1: • Central Government Reporting by 2018.
• General Government Reporting (Central

Phase 2: Gov’t plus MMDAs) by 2019.
• Whole Government Reporting by 2020

1. Central Gov’t
Phase 3: 2. Local Gov’t
3. Government interest in SOEs & GBEs

Status of Financial Reporting
Public Accounts of Ghana over the years till 2017 was on Budgetary
Central Gov’t (i.e. only the Consolidated Fund)
The scope was expanded to cover extra-budgetary funds in 2018 (i.e IGF,
Donor Funds and Statutory Fund) to produce Full Central Government
Accounts, albeit some limitations
Activities are ongoing to produce General Government Accounts for the

2019 financial year (i.e adding the local government entities, MMDAs)

Statutory Financial Statements
• The Public Accounts of Ghana (i.e General Purpose Financial
Statements) at Entity and National Levels consist of the following:
1. Statement of Financial position ( Balance Sheet)
2. Statement of Revenue & Expenditure
3. Statement of Receipt & Payment
4. Statement of Cash-flow
5. Notes to the Accounts
6. Schedules to the Accounts

Schedules to the Accounts
1. Schedule of Central Government Subventions against appropriation
2. Schedule of Internally Generated Fund Against Appropriation
3. Schedule of Expenditure By Fund Source
4. Schedule of Expenditure Against Appropriation
5. Schedule of Non-Financial Assets
6. Schedule of Work-in-Progress
7. Schedule of Supplier Liability
8. Schedule of Unpaid Withholding Tax
9. Scheduled of Commitment Appropriation

.
The End
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EVOLUTION OF PFM SYSTEMS IN GHANA:

THE JOURNEY SO FAR

PUBLIC FINANCIAL MANAGEMENT FACULTY

Venue: ICAG House

Overview of PFM Landscape in Ghana by: MacEffort K. Adadaey 2

Public Sector refers to:

Private sector comprises:

To fulfil legal requirements for their establishment

3. Public Order &

Public Financial Management (PFM) refers to the set

Budget Reort Writing by: MacEffort K. Adadaey 6

PFM System is defined in section 102 of the PFM

Budget Reort Writing by: MacEffort K. Adadaey 7

Mac-Effort Adadey (2014), defined PFM System as

Budget Reort Writing by: MacEffort K. Adadaey 8

1. The Executive, Legislature

Overview of PFM Landscape in Ghana by: MacEffort K. Adadaey 9

• PFM encompasses a broad set of functions commonly conceived as a cycle of

Overview of PFM Landscape in Ghana by: MacEffort K. Adadaey 11

2. Ghana Audit Service Act 2000

3. Financial Administration Act 2003 (Act 654) (repealed in 2016)

5. Internal Audit Agency Act 2003 (Act 658)

6. Financial Administration Regulations 2004 (repealed in 2019)

7. Earmarked Funds Capping and Realignment Act. 2017 (Act 947)

2. Financial Administration Act 2003 (Act 654) (repealed)

3. Financial Administration Regulations 2004 (repealed)

4. PFM Act 2016 (Act 921)

5. PFM Regulations 2019 (L.I. 2378)

7. Ghana Audit Service Act 2000

8. Internal Audit Agency Act 2003 (Act 658)

9. Earmarked Funds Capping and Realignment Act. 2017 (Act 947)

Financial Memoranda for MMDAs 2004

1. Government Finance Statistics 2001 & 2014

2. UN Classification of Functions of Government

3. International Public Sector Accounting Standards

Within the past 30 years Ghana embarked on three key

2.GIFMIS Project (2011 to 2014)

3.Public Financial Management Reform Project (2015 to 2019)

Overview of PFM Landscape in Ghana by: MacEffort K. Adadaey 20

Overview of PFM Landscape in Ghana by: MacEffort K. Adadaey 21

These efforts were found to be ad hoc, disjointed, incoherent, and

Overview of PFM Landscape in Ghana by: MacEffort K. Adadaey 23

PUFMARP (Public Financial Management Reform

The ultimate objective of PUFMARP was to enhance the

1. Budget preparation – introduction of MTEF;

2. BPEMS, an integrated financial management information system;

3. Cash management – introduction of a modern cash management system;

5. Revenue management – introduction of VAT, unique Taxpayer Identification Number, IT

7. Auditing – development of national audit standards, specification of audit reports, and

8. Legal framework – review of legislative framework and development of revised financial

10. Human resources development and payroll administration (IPPD)

Five BPEMS modules were designed to provide the above functions:

1.Accounts Receivable (AR)

Overview of PFM Landscape in Ghana by: MacEffort K. Adadaey 29

1. Implementation was led by GoG staff whilst consultants provided

Overview of PFM Landscape in Ghana by: MacEffort K. Adadaey 33

Overview of PFM Landscape in Ghana by: MacEffort K. Adadaey 35

Overview of PFM Landscape in Ghana by: MacEffort K. Adadaey 36

The key objectives of GIFMIS are to:

• improve accuracy, comprehensiveness, reliability, and timeliness of financial and

Overview of PFM Landscape in Ghana by: 37

Overview of PFM Landscape in Ghana by: MacEffort K. Adadaey 38