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The Extent of Financial Discipline In District Assemblies in Ghana

A Case Study of the Birim North District Assembly, Eastern Region

Research Paper (postgraduate) 2014 14 Pages

Business economics - Economic Policy

Excerpt

Table of Contents

INTRODUCTION

MATERIALS AND METHODS

RESULTS

DISCUSSIONS

CONCLUSION

REFERENCES

Abstract:

Decentralization is a mechanism for bringing governance closer to the governed and helps to improve public administration by empowering local authorities thereby enhancing the capacity of government to achieve local participation and accelerated development through financial sanity. Section 240(2) (c) of the Local Government Act of Ghana provides each district assembly shall have a sound financial base with adequate and reliable sources of revenue hence making them financially accountable to the people they serve. Despite this requirement, many Metropolitan/Municipal/District Assemblies’ have a limited number of sources of revenue for carrying out their activities. Apart from the District Assemblies Common Fund (DACF), which is 7% of total national tax revenue, the assemblies can also receive grants, land rates, mineral royalties, transfer, ceded revenues and external credits. The use of these monies is expected to conform to the Ministry of Finance and Economic Planning requirements. It is a requirement that, all monies are released at the assembly level by a warrant. This research examined the extent to which financial discipline was concerned within the Birim North District Assembly. It was found that not all monies paid were on the authority of the warrant. They are also expected to engage in activities that can generate revenues, (Internally Generated Fund, IGF) to be used for their administrative and other recurrent operations. However, many of them lack the capacity to develop revenue generating activities while others are unable to generate sufficient revenue internally because of the deprived circumstance of their districts. The researcher also found out that there were a lot of loopholes in the management of finances in the Local Government Service if the case of the Birim North District Assembly is anything to go by, only by the assumption that, this accession is not a hasty generalization. This research envisages providing baseline contribution to sound financial management within the district assemblies of Ghana.

Keywords Decentralization, District Assemblies’ Common Fund, Internally Generated Funds, Revenue Generation, Warrant, District Development Facility

INTRODUCTION

Finding systematic evidence for decentralization outcomes in Africa or elsewhere is difficult. Some comparisons have been made using degree of decentralization as the independent variable, but the measure normally uses—sub-national expenditures as a proportion of total government expenditure—is so flawed as an indicator of the character and functioning of decentralization structure that the results obtained can only be suggestive at most (Acheampong, 1998).

In Dr. Munawwar and Dr. Roger Koranteng’s papers presented at a workshop held at GIMPA, Ghana from 2007-2010, “Decentralization in Ghana”, local government is the {Formatting Citation}lowest tire of government (Koranteng, 2011). It is closest to citizens and the community and therefore known as ‘local’. It has an extremely important role to play in a society as an agent of change and development (Nickson, 2006). The domain of local council encompasses virtually every problem and affair that a common person comes across in his day-to-day life. From birth to death, from water supply, sanitation and education, to marriage, health, disposal of refuse, roads, town planning, etc. for the sake of brevity, suffice is to say that, most of the utilities and services necessary for life in contemporary society are provided by local governments(Barney, 1991).

Total development of Ghana as an economy is in one way or the other highly dependent on decentralization, hence the creation of district assemblies. The main motive for establishing these district assemblies is to develop the areas within their boundaries. Due to these responsibilities, Article 252 of the national constitution provides for the establishment of a District Assemblies Common Fund which shall be allocated annually by parliament among the district assemblies (Goverment of Ghana, 1992). Not less than five percent (5%) of total government revenue is given to the various assemblies as Common fund. According to the ‘Guide for Utilization of District Assemblies’ Common Fund, the distribution of the fund is based on a formula approved by parliament and administered by the District Assemblies Common Fund Administrator which is also dependent on how well an assembly fare in the Functional Organization Assessment Tool (FOAT) i.e. in the case of a District Development Facility. The objective of the District Assemblies Common Fund among others like the District Development Facility popularly known as the DDF is to make available to district assemblies additional source of revenue for development.

The district assemblies apart from the common fund have other sources of revenue to run developmental projects at the local level. These sources include the IGF – Internally Generated Funds, HIPC Fund, District Development Facility (DDF), Capitation Grants, GETFUND and the likes. Revenue such as rates, fees and fines and many more constitute the internally generated fund of the district assemblies. As it has been a measure from the central government of Ghana, assemblies are to spend what they generate internally. The IGF is used to run recurrent expenditure the assemblies make in the day to day running of the assemblies. The main idea is to ease pressure on funds from the central government. The big question that is still to be answered has to do with whether or not funds from the seat of government are used for what they are meant for?

These sources of fund and many other sources to district assemblies testify to the fact that district assemblies have a lot of funds which they can utilize to develop the areas within their boundaries. However the perception among the local people suggests that, considering these numerous sources of funds and the level of development in the districts, there is a financial mismanagement in the district assemblies. This they say is evident in the relatively low rate of development in their communities. Are there measures put in place internally to prevent embezzlement of funds and financial mismanagement at the district assemblies is the question that is mostly asked. There is another perception that personnel employed in the generation of internal funds do not have the right qualification and this has negatively impacted on the performance of the assemblies. There is still a perception that funds of district assemblies, both internally generated funds and central government transfers go into private accounts of some district chief executives, coordinating directors and assembly employed staff (JRA, 1992). These perceptions have prompted the researcher to research into the topic ‘The Extent of Financial Discipline in the Local Government Service of Ghana (District Assemblies)’.

A national accredited online news agency, Ghana Web in 2012 published an article regretting how bad some district assemblies managed finances. The article covered among others the 2011 Auditor General’s report which exposed the accounts of 117 District Assemblies, revealing that over GH¢12.1 million could not be traced, due to what the report says were internal control weaknesses and managerial ineffectiveness, leading to widespread irregularities in the financial administration of the various District and Municipal Assemblies.

In the pursuit of knowing how well funds are managed in the district assemblies, this research intends to clear doubts and or emphasize on the perception that there are many sources that can be utilized for the internal generation of funds that have not been utilized to aid accelerated integrated local level development in the Birim North District.

In spite of real extra resources received by districts after the introduction of the District Assemblies Common Fund in 1994–1995, similar results have been reported in other districts, including urban areas(Acheampong, 1995; Ayee, 1995; Kessey, 1995).

A survey of Kumasi City Council residents, for instance, found that the majority of respondents ‘strongly disagreed that the City Council was sensitive to residents’ needs and Schiewer’s study of three rural districts in Brong-Ahafo and Western Regions reported that ‘community- level aspirations were completely ignored’ in drawing up district plans.

The general objective which seeks to find out how funds are being managed by the district assemblies, the study seeks to achieve the following specific objectives;

1. To determine the extent to which the communities are involved in the preparation and implementation of the district’s composite budget and plans preparation
2. To find out the presence and effectiveness of an internal control system other than the internal audit unit, that checks and controls financial appropriation/misappropriation in operations at the Birim North District Assembly.
3. To find out whether the communities have some idea about the schedule and quantum of government transfers that are allocated to their district, e.g. Common fund Allocation
4. To find out whether the system of accounting at the Birim North District Assembly is in conformity with statutory and standard requirements.

The outcome of the research is of immense benefit to the Birim North district assembly as well as other district, municipal and metropolitan assemblies in the nation. Again, the findings of the study enables the Ministry of Local Government and Rural Development to know and address financial problems in the service and also work hand in hand with the Ministry of Finance and Economic Planning to identify the strengths and weaknesses in the implementation of certain financial and monetary policies thereby recommending appropriate solutions to improve such lapses in the decentralization system.

Finally, this research contributes to the vast existence of literature on the subject matter of quality financial management practices that forestall local level development which can be available for future researchers.

MATERIALS AND METHODS

The design which was used to carry out this study included questionnaires, direct observations and personal interviews. The advantage of these methods is that it helps to obtain as many information from key people in the research population. A sample size of ten (10) respondents were selected through simple random sampling targeting key officers, both heads of departments and subordinates in the offices of the Birim North District Assembly. Again a sample size of two hundred (200) respondents was selected through random sampling in the various communities. Among this sample size, fifty (50) respondents would be drawn from each of the four area councils making the Birim North District. Questionnaires would be designed to find out what peoples’ expectations and perception of financial performance/management of the Birim North District Assembly are. Personal interviews would also be conducted especially in the offices of the Birim North District Assembly.

The data which were collected from these questionnaires were analyzed by employing tools of measuring central tendencies such as frequency table, bar chart, pie chart and percentages, etc.

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Details

Pages
14
Year
2014
ISBN (eBook)
9783668407466
ISBN (Book)
9783668407473
File size
1 MB
Language
English
Catalog Number
v354397
Institution / College
Kwame Nkrumah University of Science and Technology – UNIVERSITY
Grade
Tags
extent financial discipline district assemblies ghana case study birim north assembly eastern region

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Title: The Extent of Financial Discipline In District Assemblies in Ghana