Government contravenes law on allocation of funds into Ghana Petroleum Funds

The Public Interest and Accountability Committee  (PIAC)  has found that the government of Ghana acted contrary to the law on the Ghana Petroleum Funds when it allocated an amount less than that required by the law, but the committee fell short of saying the government broke the law by describing the act as “a compensation error”.

The PIAC issued its first report today, May 17, 2012.

The Committee according to the report found that that there was a compensating error in the distribution of funds to the Stabilisation and Heritage Funds, which together constitute the Petroleum Funds, leading to a slight deviation from the requirement of Act 815, Section 23(1)b: “A minimum of thirty percent of the excess revenue determined in subsection (1) (a) shall be transferred into the Ghana Heritage Fund and the balance shall be transferred into the Ghana Stabilisation Fund each quarter,” it said.

“That is, the allocation to the Ghana Heritage Fund shall not be less than 30% of the excess revenues over the Annual Budget Funding Amount. Thus, the allocation of 21% of the excess revenues to the Ghana Heritage Fund and 79% to the Ghana Stabilization Fund are not consistent with Act 815,” the PIAC said, adding that it is of the view that “this anomaly must be addressed to ensure that the balances standing in the Ghana Petroleum Funds are correct.”

It indicates that the Ghana Petroleum Funds consist of the Ghana Heritage Fund and the Ghana Stabilization Fund. The Ghana Heritage Fund is to _”provide an endowment to support development for future generations when petroleum reserves have been depleted”. The Ghana Stabilization Fund is _”to cushion the impact on or sustain public expenditure capacity during periods of unanticipated petroleum revenue shortfalls”.

The report states that the Ghana Petroleum Funds receive revenues in excess of the Annual Budget Funding Amount. The transfers to the Ghana Petroleum Funds are by percentages approved by Parliament. Section 23(1)a it says provides that: ‘’Where petroleum revenue collected in each quarter of any financial year exceeds one-quarter of the Annual Budget Funding Amount of the financial year, as determined in section 18, the United States Dollar equivalent of the excess revenue collected shall be transferred from the Petroleum Holding Fund into the Ghana Petroleum Funds.’’

The Committee found that transfers were made into the Ghana Petroleum Funds even though the Annual Budget Funding Amount had not been exceeded in any quarter. This action has enabled the Funds to be set up and invested in the first year of operation, it said.

In its findings however, the committee said there was a compensating error in the transfers to the Ghana Heritage Fund and the Ghana Stabilization Fund deviating from the provisions prescribed in Act 815. The Ghana Heritage Fund was under-declared by GH¢9 million whilst the Ghana Stabilization Fund was over-declared by the same amount.

The 13-member PIAC was inaugurated by the Finance Minister Dr. Kwabena Duffuor to provide an independent assessment of how petroleum revenues are managed and used.

The establishment of the committee is a requirement of the Petroleum Revenue Management Act. It has the responsibility to monitor and evaluate compliance with the Act by government and other relevant institutions in the management and use of petroleum revenues and investments.

A member of the commitee and representative of the Ghana Journalists Association (GJA), Mr. Yaw Owusu-Addo told ghanabusinessnews.com that a semi-annual report for 2012 will be released in September 2012.

By Emmanuel K. Dogbevi