[ 2016-10-26 ]

Govt implements accrual accounting ...
The Minister of Finance, Mr Seth Terkper, has
defended its decision to allocate GH¢1.2 billion
for capital expenditure (CAPEX) for the first
quarter of 2017 without making any provision for
road arrears.
Mr Terpker said the government had resorted to
accrual accounting which mandated it to record
accounting transactions in the period within which
they occur, instead of the period in which the
cash flows related to them took place.

“The reason why we have not made provision for
road arrears in the budget is that we are making
distinction between pipeline projects and
completed projects and this phenomenon is derived
from our accrual accounting principle,” Mr
Terkper said in response to a question on the
floor of Parliament.

That, according to the minister, meant that in the
preparation of the budget, the country’s budget
was shifting from cash accounting to the accrual
accounting concept.

“Mr Speaker, we have a contract data base in
which we track contracts that have been awarded
and are in the pipeline. So the definition of
arrears means that certificates that have
accumulated and had not been paid for besides the
cash flow,”he said.

The tendency of accumulating newer certificates
which government would not be able to pay informed
the decision not to make provision for road
financing, he said.

Mr Terkper indicated that the government had
decided to finance road construction through a
long-term borrowing approach.

“This is because it is not strategic to put
capital expenditure as significant as road
financing on the budget and think that you will be
able to finance it, while you can borrow on a long
term to finance it,” he said.

Minority concern

The Minority recently accused the government of
spending GH¢598.6 million from the Consolidated
Fund and a further GH¢407.3 million from the Road
Fund on road projects within the first seven
months of this year but still owes contractors
GH¢184.6 million in addition to an outstanding
road project bill of GH¢501.2 million.

They contended that instead of funds from the Road
Fund being used to finance road projects, they
were rather being used to finance heavy projects
that do not come under road construction, creating
a funding gap of 50 per cent.

The Road Fund is sustained from fuel levies,
vehicle registration fees, road-user fees, road or
bridge tolls, ferry tolls and international
transit fees.

With the passage of the Energy Sector Levy Bill in
December, 2015, as well as the over 1,000 per cent
increment in road tolls, the fund is expected to
accrue GH¢1.2 billion by the end of December,
this year.

Govt making provision to pay arrears

Mr Terkper explained that one of the reasons
behind the country’s debt increase in recent
times was because of the new model for financing
the construction of roads.

He stressed that the government was determined to
bring to an end the unresolved issues with regard
to the payment of road arrears in the country.

But he indicated that the government was making
other provisions to pay 2016 arrears owed
contractors of all government projects.

Parliament approves

Parliament approved the appropriation of up to
GH¢10.99 billion to finance critical government
expenditures for the first quarter of 2017. The
provision covers estimates for the first quarter
expenditure on essentials and other statutory
payments.

The expenditure categories cover compensation of
employees, goods and services, capital
expenditure, interest payment, grants to other
government units, non-road arrears, tax refunds
and amortisation.

The approval followed a request by Mr Terkper to
Parliament to approve expenditure in advance of
appropriation from January to March, 2017.

By this approval, the government is authorised to
spend from the Consolidated Fund and other public
funds to meet its urgent and statutory expenses
for the first quarter of 2017, pending the
approval of a substantive Appropriations Act for
the 2017 financial year.

The request by the minister of finance was in line
with Article 180 of the 1992 Constitution.

Source - Graphiconline

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