-TIROF FINANCE REPUBL[C OF GHANA eHANA DEVELOPMENT FINANCE PROJECT (CDFP) • AUDITE.D FINANCIAL STATEMENTS (2021) * MANAQEMENT LETTER (2021) 9PEER Professional . Ethical i Efficient I Responsive ' Transforming Ghana Beyend Aid TABLE OF CONTENTS CONTENTS PAGE PART ONE - AUDITED FINANCIAL STATEMENTS PROJECT BACKGROUND INFORMATION 1-2 GENERAL INFORMATION 3-3 INDEPENDENT AUDITOR'S REPORT 4-6 STATEMENT OF FINANCIAL POSITION 7-7 SOURCES AND USES OF FUNDS 8-S NOTES TO THE FINANCIAL STAEMENTS 9-10 PART TWO -MANAGEMENT LETTER INTRODUCTION 1-1 AUDIT OBJECTIVES 1-2 AUDIT SCOPE AND METHODOLOGY 2-2 AUDITING STANDARDS 3-3 STATEMENT OF RESPONSIBILITY 3-3 STATUS OF INTERNAL CONTROL SYSTEM 3-3 KEY PERSONNEL 3-3 SUMMARY OF FINDINGS AND RECOMMENDATIONS 3-4 DETAILS OF FINDINGS AND RECOMMENDATIONS 4-10 ACKNOWLEDGEMENT 10-10 DISTRIBUTIONS 11-11 egYOF INANCE REPUBLIC OF GHANA CHANA DEVELOPMENT FINANCE PROJECT (eDfP) AUDITED FINANCIAL STATEMENTS FOR THE YEA« ENDED DECEMBER 31, 2021 #PEER I Prafession al i Ethical f Efficent i Responsive I Trar sf ormi ng G iana Beyond AI d TABLE OF CONTENTS CONTENTS PAGE PROJECT BACKGROUND INFORMATION 1-2 GENERAL INFORMATION 3-3 INDEPENDENT AUDITOR'S REPORT 4-6 STATEMENT OF FINANCIAL POSITION 7-7 SOURCES AND USES OF FUNDS 8-8 NOTES TO THE FINANCIAL STAEMENTS 9-10 GHANA DEVELOPMENT FINANCE PROJECT (GDFP) Introduetion Ghana Development Finance Project (GDFP) referenced Credit Number CR. 6788-GH is funded through Credit by the International Development Association (IDA) at an estimated cost of US$250 Million. The Project was approved on October 29, 2020 and became effective on February 12, 2021 and expected to be closed by June 30, 2027. The Borrower is the Ministry of Finance on behalf of the Government of Ghana. Project Beneficiaries Through direct support to the Development Bank Ghana /Partial Credit Guarantee Facility, Security and Exchange Commission (SEC), Ghana Investment and Securities Institute (GIS1), and Ministry of Finance (MoF), the project will ultimately benefit creditworthy Ghanaian Micro, Small, and Medium Enterprises (MSMEs) and small corporates institutions that lack access to finance, Women-led Micro, Small, and Medium Enterprises (WMSMEs), Project Financial Institutions (PFIs) and Capital market operators. Project Development Objectives (PDO) The PDO is to support the establishment of a financially sustainable development bank to increase access to finance, in particular long-term finance, for viable MSMEs and small corporates institutions. Project's Components Component 1: Long-term wholesale financing and technical assistance US$185.5million Component 1 will provide a Letter of Credit to the Development Bank Ghana (DBG) to on-lend to Participating Financial Institutions (PFls) in Ghana, as well as technical assistance to the MoF, DBG, and PF1s. 1 Component 2: Partial credit guarantee {PCG) facility and digital financing platform -US$56.5 million This component will complement the Letter of Credit by leveraging financial institutions' own resources for MSME financing. It will support the establishment of a PCG Facility and a digital financing platform. Component 3: Capital market development -US$6.0 million This component seeks to build the foundations for the development of the capital market, which is a potential source of complementary long-term financing in Ghana. Component 4: Project management, monitoring and evaluation - US$2.0million This component will cover project implementation costs, including those related to coordination, procurement, financial management (FM), Monitoring 8& Evaluation (M&E), outreach, and support to the DBG to comply with Environmental and Social (E&S) requirements. Specifically, it will cover consultants' salaries and related expenses; operational costs; implementation of the Stakeholder Engagement Plan (SEP); data collection for impact evaluations or similar assessments (see the next paragraph); and other project implcmentation expenses- Stakeholder engagement will entail the completion of two surveys of beneficiaries (PFIs, MSMEs, and capital market operators) to assess their satisfaction with the products and services (credit and training programs) and share lessons learned. 2 General Information Name Designation Project Implementation Team Mr. Patrick Nomo Chief Director Mr. Sampson Akligah Director, Financial Service Division Mr. Abraham Tawiah Directo: of Finance Mr. K. Dankyi Darfoor Project Coordinator Mr. Paul Agbo Senior Project Accountant Mr. Godwing Adapaura Project Accountant Address: Ministry of Finance Finance Drive, Accra. P. 0. Box M40, Accra - Ghana GA- 144-2024 info@mofep.gov.gh Tel: +233 302-747-197 Auditors Ghana Audit Service Post Office Box M96, Accra Bankers Bank of Ghana AUDITS RVICE 1l. c;i of reply the L-1I. jrt daitQ of tho iqouid be quoted RL.",ReY( No:CGAD/GEN.ADM/21/148 M. 96 ........N.G.r P . Box 'c ) (0) 302 66.920/28/29 and we'rmitf Accra ax: 233 (0) 302 6751495 ... July 22.......... thste:wwwghaditq 8 July 22 . ............ ........... ..... 20 ,.... THE CHIEF DIRECTOR MINISTRY OF FINANCE P. O. Box M40 ACCRA REPORT ON THE FINANCIAL STATEMENTS OF THE GHANA DEVELOPMENT FINANCE PROJECT REFERENCED IDA CREDIT NUMBER 6788 We have audited the accompanying financial statements of the Ghana Development Finance Project (GDFP) Referenced Credit Number 6788-GH under the International Development Association (IDA) which comprises the Statement of Financial Position as at 31 December 2021, Statement of Sources and Uses of Funds for the year ended 31 December 2021 including Notes and a summary of significant accounting policies as set out on page 7 of this report. Responsibility of Management and those with Governance for the Financial Statements The Project implementation Team is responsible for the preparation and fair presentation of these Financial Statements in accordance with International Public Sector Accounting Standards (IPSAS), and for such internal cont7ols as Management determines is necessary to enable the preparation of Financial Statements that are free from material misstatements, whether due to fraud or error. Those charged with governance are responsible for overseeing the Ministry of Finance's financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements Our audit objectives are to obtain reasonable assurance about whether the Project's Financial Statements as a whole are free from material misstatements, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards of Supreme Audit Institutions (ISSAls) will 4 always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements, As part of an audit in accordance with ISSAls we exercise professional judgment and maintain professional skepticism throughout the audit. We also: * Identify and assess the risks of material misstatemen:s of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intzntional omissions, misrepresentations, or the override of internal control. * Obtain an understanding of internal controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Project's (MoF's) internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. * Evaluate the overall presentation, structure and content of the Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicated with those charged with governance regar ding, among other matters, the planned scope and timing of the audit and signifi:ant audit findings, including any significant deficiencies in internal control that I identify during my audit. We have also provided those charged with governance with a statement that the audit complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards- Basis for Opinion An audit involves performing procedures to obtain audit evidence about the amounts and disclosure in the financial statement. The procedure selectLd depends on the auditor's judgment, including the assessment of the risk of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, 5 the auditor considers internal controls relevant to the entity's preparation and fair presentation of financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management as well as evaluating the overall presentation of the financial statements. Opinion of the Auditor-General In our opinion, the Project's Financial Statements present fairly, in all material respect the financial position of the Ghana Development Finance Project as at 31 December 2021 and the results of its operations for the year ended in accordance with International Public Sector Accounting Standards (IPSAS) and provisions of the Financing Agreement referenced (IDA) Credit Number 6788-GH and the Accounting Policies set out in Note 1 of the Project's Financial Statements. BENJAMIN . CODJOE DEPUTY AUDITOR GENERAL /CGAD for AUDITOR-GENERAL Date: 8 July 2022 6 MINISTRY OF FINANCE FINANCIAL SECTOR DIVISION 6HANA DEVELOPMENT FINANCE PROJECT CREDIT NO 6788-GH STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2021 NOTES 2021 NON-CURRENT ASSETS US$ Investment In Project 2 1,223,391 70 CURRENT ASSETS 'Bank Balances 3 124y608,30 Total Assets 1,348,000.00 FINANCED BY IDA Designated Loan Account 4 1,348,000.00 Signed: ? Kwabena Dankyi Darfoor Mr. Paul Agbo ject Coordinator Project Accountant Ministry of Finance Ministry of Finance Date: Date: 7 MINISTRY OF FINANCE FINANCIAL SECTOR DIVISION GHANA DEVELOPMENT FINANCE PROJECT CREDIT NO. 6788-GH SOURCES & USES OF FUNDS FOR THE YEAR ENDED DECEMBER 2021 Cumulative as SOURCES OF FUNDS 2021 at 31 DEC. US$ 2021 US$ IDA Designated Dollar Account 1,348,000.03 1,348,000.00 Net Interest earned 0.03 0.00 Total Project receipts 1,348,000.00 1,348,000.00 USES OF FUNDS Component 1 : Long-term wholesale Financing and Technical Assistance 1 1 long-term, local currency Line of Credit to the DBG 0.00 12 Technical assistance 786,757.64 786,757-64 Component 2 : Partial Credit Guarantee Facility and Digital Financing Platform 2.1 Capitalization of PCG Facility 000 0.00 2.2 Technical Assistance for Partial Credit Guarantee Facility 0 00 0,00 2.3 Establishment of a Digital Financing Platform 0.00 0.00 Component 3 : Capital Market Development 3.1 Enhancing the Legal and Regulatory Framework and Capacity Building of the SEC. 0.00 0.00 3.2 Capacity Building of Market Operators 0.00 0.00 4.1 Project Management, Monitoring and Evaluation 436,634.06 436,634-06 Total Expenditure 1,223,391.70 1,223,391.70 Income Surplus 124,608.30 124,08.30 8 MINISTRY OF FINANCE FINANCIAL SECTOR DIVISION GHANA DEVELOPMENT FINANCE PROJECT CREDIT SO 6788-O NOTES TO THE FINANCIAL STATEMENTS 1. Significant Accounting Policies The following are summary of the significant accounting poli2ies adopted in the preparation of the Financial Statements: Basis of Accounting The Financial Statements have been prepared on IPSAS cash basis and under the historical cost convention. This means that revenue and expenditures are recognized in the Financial Statements when they are received and paid for respectively. Under the historical cost convention, assets and liabilities are reflected or disclosed in the Financial Reports at the cost incurred or price paid at the time of transaction. Property, Plant and Equipment All Property, Plant and Equipment acquired or constructed under all sources of funding have been stated at the actual payments made during the year and shall not be depreciated. Revenue and Expenditure Revenue is recognised when funds are received from IDA and expenditures are accounted for in the year when goods and services are incurred and paid for. Presentational Currency The Financial Statement is denominated in the United States Dollar (US$}. 9 MINISTRY OF FINANCE FINANCIAL SECTOR DIVISION GHANA DEVELOPMENT FINANCE PROJECT CREDIT NO. 6788-GH NOTES TO THE FINANCIAL STATEMENTS 2. Investment in Project Investments are the total eligible expenditures incurred on the Project as at the date of reporting. They are recognized in the statement of financial position as assets of the Project at the total value of all eligible expenditures. Opening Bal. Additions Closing Component Jan. 2021 i during 2021 Bce 31 US$ US$Dec. 2021 US$I Us$ Component 1: Long-term wholesale Financing and 0.00 786,757.64 786,757-64 Technical Assistance. Component 2: Partial Credit Guarantee Facility and 0.00 43663406 436,634.06 Digital Financing Platform. Component 3: Capital 0= 000 Market Deve0lopment. . . 0.00 Component 4-Project Management, Monitoring 0.00 0.00 0.00 and Evaluation. Total Expenditure 0.00 1,223,391.0 1,223,391.70 3. Bank Balance This represents the Bank balance of funds in the Project s USD Designated Account with Bank of Ghana, 5. Funds from International Development Association (IDA) The amount of US$ 1,348,000 represents deposits of pcrtions of the IDA funding for the Project during 2021 as 'ollows. Ref. Date 7 Description 2021US$ 1 June 29,2020 Initial Receipt into Designated Account 770,000.00 2 June 30,2021 Advance Into Designated Account 578,O000i iTotal 1,348,000-00 10 CCAD/GEN.ADM/21/147 ML 96 R e U .................... P. O . Box ............. . ..... .. 733 1 '02 664920128129 md. Jr rrn Accra 3 0:00? 6751495 8 July 22 !L: ' ww.ghJudit.orguly 22 THE CHIEF DIRECTOR MINISTRY OF FINANCE ACCRA MANAGEMENT LETTER ON THE MAIDEN AUDIT OF THE GHANA DEVELOPMENT FINANCE PROJECT IDA CREDIT NUMBER 6788-GH FOR THE PERIOD 1 JUNE 2020 TO 31 DECEMBER 2021 Introduction We have in accordance with our mandate under and Section 11(l) of the Audit Service Act, 2000 (Act 584) audited the accounts and other related records of the Ghana Development Finance Project (GDFVp referenced IDA Credit Number 6788-CH funded by the International Development Association for the period 1 June 2020 to 31 December 2021. The audit was carried out by Evans Agyin-Kobina, Russell Owusu Asante, Charles Brown Ahlijah, Linda Danso and Serwaa Twumasi Sarpong. 2. We wish to bring to your attention the following observations and recommendations made during the audit for your information and necessary action. We have discussed these findings with the key personnel whose comments and responses have been incorporated in this report. 3. We shall be grateful to receive your formal response within 30 days after the receipt of this letter as required by Section 29(1) of -he Audit Service Act, 2000 (Act 584). Audit objectives 4. The audit objectives were: a. Express an opinion as to whether the Project's Financial Statements present fairly in all material respects the financial position of the GOFP .Management Letter 2021 Page 1 Project as at 31 December 2021 and the results of its operations for the period in accordance with the provisions of the Financing Agreement referenced IDA Credit Number 6788-GH and the International Public Sector Accounting Standards (IPSAS); bf Evaluate the system of internal controls related to the Ministry of Finance, assess control risk, and identify significant deficiencies, including material weaknesses; and c. Perform tests to determine whether the Ministry of Finance complied, in all material respects, with the Financing Agreement, Project Appraisal Document referenced Report No: PAD3573, World Bank Procurement Regulations for IPF Borrowers dated July 2016, revised in November 2017 and August 2018, Public Financial Management Act 2016 (Act 921), Public Finarial Management Regulations, 2019 (LI 2378), and Public Procurement Amendment Act, 2016 (Act 914) and Income Tax Act, 2015 (Act 896). Audit scope and methodology 5. We audited transactions undertaken by the Ministry of Finance for the period 1 January 2021 to 31 December 2021. We carried out the audit to obtain a reasonable assurance that the Project's Financial Statements were free of material misstatements, in accordance with the inte-national Public Accounting Standards (IPSAS), Public Financial Management Act, 2016 (Act 921), Public Financial Management Regulations 2019 and relevant provisions of other public legal frameworks and the enabling terms and conditions set out in the Project Financing Agreement. 6. As part of the audit, we examined on a test basis, evilence supporting the amounts and disclosures in the Financial Statements, assessed accounting principles used, and evaluated the overall Financial Statements presented, Among the key areas covered in our report included Project governance and delivery, Procurements, Contract Management, Budgetary controls, and Monitoring & Evaluation activities. GDFP Managerment Letter 2021 P.age 2 Auditing Standards 7. The audit was carried out in accordance with the International Standards of Supreme Auditing Institutions (ISSAls). The Standards require that we plan and conduct the audit to obtain reasonable assurance that the Financial Statements are free from material misstatements. Statement of Responsibility 8. It should be noted that the implementation and maintenance of systems of accounting and internal control are primarily the responsibility of Management 9. Our responsibility is to plan and perform the audit work such that there is a reasonable expectation of detecting material irregularities and control weaknesses. As a result, the report should not be regarded as a complete list of internal control weaknesses. Status of Internal Control System 10. In general, the control environment continues to be reliable, although we encourage Management to address the issues raised. Key personnel 11. The following key officers were in charge of the financial and administrative duties of the Project during the period under review. No. Name Designation 1. Mr. Sampson Agligoh Director, Financial Service Division 2. Mr. K. Dankyi Darfoor Project Coordinator 3. Mr. Kurtis Dela Williams Project Procurement Specialist 4. Mr, Paul Agbo Project Senior Accounant 5. Mr. Godvin Adakpakro Project Accountant Summary of findings and recommendations 12. The Project Coordinating Unit (PCU) awarded six consultancies amounting to US$635,409.11 to companies registered and operating in Ghana in US Dollars contrary to the provisions of the Foreign Exchange Act, 2006 (Act 723), and Bank of Ghana Notice prohibiting the pricing of transactions in GDFP Management Letter 2021 Page 3 foreign currencies. We recommended that the Project should ensure adherence to the provisions in Act 723 and the Bank of Ghana Notice referenced above by denominating all contracts to Ghanaian companies and local consultants in Ghana cedis. We also recommended that the dollar denominated procurements in the World Bank's Systerratic Tracking of Exchanges in Procurement (STEP) should be converted to the cedis before signing of the contract. 13. We noted that even though the Internal Audit Unit pre-audited transactions of the Ghana Development Finance Project, we did not sight quarterly Internal Audit reports on the Project as required by Section 7 of the Public Financial Management Act, 2016 (Act 921) and the Project Appraisal Document. We recommended that apart from pre-auditing of transactions, the Internal Audit Unit should periodically review activities of the Project and produce reports to satisfy this requirement. 14- We noted that though the appropriate taxes were withheld, payment of the taxes were made to the Ghana Revenue Authority between two to five months after the amounts were withheld. We recommended that despite the improvements made by the Project Coordinating Unit in 2021 regarding payments of withholding taxes, the PCU should do more to meet the mandatory timelines for the payment of withholding taxes. 1.5 We noted during the review of the project procurement records that eight agreed activities in the cleared Procurement Plan by the World Bank have not been implemented. We recommended that the Prcject Coordinating Unit should expedite action on the preparatory activities such as development of Terms of Reference, Expression of Interest Notice, Short Listing, etc. on these procurements to pave way for the signing of contracts and ultimate execution. DETAILS OF FINDINGS AND RECOMMENDATIONS Pricing of contracts in dollars to Ghanaian companies - US3635,409.11 16. The Foreign Exchange Act, 2006 (Act 723) and Sank of Ghana Notice number BG/GOV/SEC/2012/12 provides that 'no resident of Ghana, other GDFP Management Letter 2021 Page 4 than those licensed by the Bank of Ghana to do so, shall price, advertise, receive or make payment in any foreign currency for goods and/or services such as school fees, sale and rental of vehicles, sale and rental of real estate, airline tickets, domestic contracts, etc. 17. We noted that the Project Coordinating Unit awarded six consultancies amounting to US$635,409.11 to companies registered and operating in Ghana in the United States Dollars contrary to the provisions of the Foreign Exchange Act, 2006 (Act 723) and Bank of Ghana Notice number 13G/GOV/SEC/2012/12 which prohibits pricing of transactions in foreign currencies. We also noted that the consultancies did not involve the acquisition of any items but solely for remuneration to experts involved in the consultancy work. The table below shows details of the contracts: Tittle of assignment Consultant Contract Price Consultancy service for the support of search Pricewaterhouse Coopers and selection of Board and Management of P t e 212,479.11 the Development Bank Itd 2. Consultancy Service as Development Advisor o 90,000.00 for CFF. 3. Consultancy fee as Environmental 60,000 3__ Tfanageim nt Specialist for GDFP. Kobina Otu Okyne 4 Consultancy fee as Social Specialist for the John Boattng GDT, . Akuoko-Tawiah 60J0000 Consultancy Services for the development of Ernst & Young Advisory internal policy for DUG. Services Ltd. 112,930 0 Contract for the development of technical 6. specifications of the Management Daniel Kwasi Tweneboah 100,00000 --l_Information System for DG Total 635,409.11 18. The award of the contract and subsequent payments in dollars or codi equivalent will increase the cedi cost of the consultancies due to the depreciation of the Cedi against the Dollar particularly when the consultants delayed in the execution of the assignments. 19- We recommended that the Project should ensure adherence to the provision in Act 723 and the Bank of Ghana Notice referenced above by GOFP Management Letter 2021 Page 5 denominating all contracts to Ghanaian companies or local consultants in Ghana cedis. We also recommended that the dollar denominated procurements in the World Bank's Systematic Tracking of Exchanges in Procurement (STEP) should be converted to the cedis before signing of the con tract. Management response 20. Management took note of the observation and indicated that no Ghanaian resident company or individual is paid in US Dollars and that all payments were made in Ghana cedis. It added that non-resident companies and nonresident individuals were however, paid in US Dollars. Management stated that the use of prevailing exchange rate was to preserve the value of the contract and the consistency in accounting in the World Bank records and reporting. Audit position 21. We reiterated our recommendation that management should adhere to the law by denominating all contracts in Ghana cedis. Absence of internal audit reports on project 22. Section 7 of the Public Financial Management Act, 2016 (Act 921) states that 'the Internal Auditor of a covered entity shall submit quarterly reports on the execution of the Annual Audit Work Plan to the Principal Spending Officer of the covered entity concerned, the Audit Commi:tee, the Auditor- General and the Director-General of the Internal Audit Agency.' 23. Paragraph 27 of the Project Appraisal Document (PAD) also provides among others that the Internal Audit should ensure that the control environment is adequate for Project implementation. The role of the Internal Audit will be regularly assessed during supervision missions by reviewing their reports and management responsiveness to their findings. This is to ensure that the role is not limited to transactional reviews (pre-auditing) but adds value to the overall control environment through risk assessment- 24 We noted that even though the Internal Audit Unit pre-audited transactions of the Ghana Development Finance Project (GDFP), we did not sight quarterly Internal Audit reports on the GFDP Project as required by Section 7 of the Public Financial Management Act 2016 (Act 921) and the PAD. GOFP Management Letter 2021 Page 6 25. Failure of the Internal Audit Unit to audit the GDFP activities limits the role of the Unit to only transactional reviews without adding value to the overall control environment through risk assessment. 26. We recommended that apart from pre-auditing of transactions, the Internal Audit Unit should periodically review activities -f the Project and produce reports to satisfy this requirement. Management response 27. The normal practice is for Internal Audit Unit to pre-audit payments and this has also been adhered to. Recently the Internal Audit commenced Performance Audit of the Ghana Financial Sector Development Project (GFSDP) and we hope they will extend the exercise to the GDFP. We hope this would be done quarterly in the future. Failure to pay withholding taxes within stipulated time 28. Section 117 of the Income Tax Act, 2015 (Act 896) states that a withholding agent shall pay to the Commissioner a tax that has been withheld or that should have been withheld within 15 days after the end of the month in which the payment subject to withholding tax is made by the withholding agent. 29. We noted that though the appropriate of taxes were withheld, payment of the taxes were made to the Ghana Revenue Authority (GRA) between two and five months after the amounts were withheld We also noted that taxes withheld for the months of November and December 2021 totaling LS$44,190.55 were remitted to GRA on 16 February 2022. 30. The delay in remitting the taxes withheld to the Domestic Division of GRA denies Government of timely inflow of revenue for national development. 31. We recommended that despite the improvements mode by the Project Coordinating Unit in 2021 regarding the payments of withholding taxes, the PCU should do more to meet the mandatory timelines for the payment of withholding taxes, GDFP Monagement Letter 2021 Page 7 Management response 32. Noted and timely remittances of deductions would be made in future- These delays occurred during the 2020 financial year. However, following the 2021 financial audit, efforts have been made to reduce th:s drastically. We currently extract withholding taxes from the Ghana Integrated Financial Management Information System for payment within the scheduled timelines, but the slight delay is due to late signing of bank transfer letters. Delay in implementing activities in the Annual Work plan & Budget 33. Schedule 2 Section E(1) of the Financing Agreement referenced IDA Credit Number 6788-GH require that the recipient shall prepare and furnish to the Association not later than 30th November of each Fiscal Year during the implementation of the Project, a Work plan and Budg?t containing all activities proposed to be included in the Project during the following Fiscal Year, and a proposed financing plan for expenditures required for such activities, setting forth the proposed amounts and sources of financing thereof. 34 Paragraph 39 of the PAD also provides that 'the Borrower (Government) has prepared the Project Procurement Strategy for Development (PPSD) and its related Procurement Plan for the first 18 months, which has been reviewed and cleared by the World Ba:nk to enable the Government to achieve its objectives! 35. We noted during the review of the Project procurement records that eight agreed activities in the Procurement Plan for the first 18 cleared by the World Bank have not been implemented as shown below: No. Activity Execution deadline GH-GDFP-157530-CS-QCBS / Firm to complete a design study and dTaft I business plan for the financigplatform 29 -Sep_-21 GH-GDFP-157533-CS-lNLDV / International coDsuttant to provide 2. technical assistance to the Bank of Chana to develop directives and 30-Nov-20 prudential guidelines for development finance institutions 3. GH-GDFP-157540-CS-1IV / Recruitment of international development 30-NOV-20 finance advisor GH-GDFP-157526-CS-1NDV / Consultant to develop a operational 4. procedures for the line E Credit and PCG Facility to be incorporated in the 30-Nov-20 project implementation manual GDWP Management Letter 2021 Page 8 5. CH-GDIP-157544-CS-INDV / Economic Research and Data Analysts 28-July-21 6- GH-GDFF-194721-CS-INDV / Monitoring and Evaluation Specialist procurement plan 30-Sept-21 7. GH-GDFP-194712-CS-INDV / Consultant to support the MoF in discharge i oversight role over stat owned financial institutions28-uv2 GI-G DFP-194720-CS-QCa5 / Consultant to develop technical 8. specifications of the IT Infrastructure, Cure Business Application, and MIS for the PCG 28-July-21 36. The implementation of some sub components of the Project are dependents on the full executions of the above eight consultancies and therefore the delay in executing these activities will affect th implementation deadlines for the sub components and ultimately the entire Project and its development objectives. 37. We recommended that the Project Coordinating Unit should expedite action on the preparatory activities such as development of Terms of Reference, Expression of Interest Notice, Short Listing, issuing of Request for Proposals, evaluation of Technical and Financial proposals and Negotiation of Contract on these procurements to pave way for the signing of contracts and ultimate execution. Management response a. General Comments 38 The major cause of some delays in implementing sorr e of the activities arose because the engagement procedure does not always produce the quality of consultants expected for supervisory and advis3ry consultancy assignments. Processes have to be repeated and time consuming. Sometimes we have to discuss with the World Bank to allow limited selection method for such high-level consulting assignments. Such high-level consultants may not even respond to advertisements or may have limited time and may not be able to fit in the assignment profile. b. Specific Comments No. Execution Management Comments Activity deadline GH-GDFP-157530-CS-QCBS/ Firm 29-Sept-21 This is a specialized assignment and need 1 to complete a design study and industry players to ApplV Unfortunately, draft business plan for the the assignment was hirst advertised in the financing platform. local and internatioral media incl. Worldj GDP Management Letter 2021 Page 9 Bank website anJ UNDB was not successful. The irms that expressed interest were found not suitable. Effort were made to heatL)unt and use limited approach but this was not successful either. The Project tcgethur with the World Bank decided in March 2022 to re- advertise. The selection process is ongoing, The assignment was first advertised in December 2020 and the project has gone through three (3) cycles of effort to recruit GHi-GDFP-157533-CS-INDV /the right candidate% Each time we are not International consultant to provid able to find the right candidate. The World technical assistance to the Bank of Bank even suggested to us Some tecnicl ssitace o te ankof30-Nov-20 consultants but thr,' werp o utbe Ghana to develop directives and 3 c not ;uitable, prudential guidelines for Subsequently two advertisen-mnts had development finance institutions. been made, the last on 22-1 january 2022. After a lengthy process, a consultant selected withdrew a: the negotiation stage on 131k June, We have invited the 2nd ranked candidate for negotiation GI-GDFP-157540-CS-INDV / The position was deferred until DBG starts 3 Recruitment of international 30-Nov-20 business- New advErt was published on development finance advisor. 22n1 April and new candidates are being evaluated. GH-GDFP-1 57526-CS-INDV / This assignment iE dependent on the Consultant to develop an recommendation of the study and design operational procedure for the line of a business plan for the PCG Facilityr of Credit and FCG Facility to be whichl- is ongoing. incorporated in the projLct implenentation manual. H-GDFi-157544-CS-NDV / This assignment hai been deferred until 5 Economic Research and Data 28-July-21 further discussed Analysts. GH-GDFP-194721CSINDV / A new process to recruit the M & E Monitoring and Evaluation Specialist begun in May 2022. Currentiv Specialist procurement plan. 2 awaiting No Objection on evaluation report from The World Bank CH-GDFP-194712-CS INDV / This assignment was deferred until project Consultant to support the Mof in became effective on 2,51ik February 2022. It discharge its oversight role over now forms part of work plan for 2022/2023 state owned financial institutions. 28-July-21 ClH-GDFP-194720-CS-QCBS / This assignment is dependent on the Consultant to develop technical recommendation of the study and design specifications of the IT of a business plan for the FCG Facility, Infrastructure, Core Business which is ongoing. Application, and MIS for the PCG. 28-July-21 Acknowledgment 39. We are grateful for the assistance and support of Management and staff of the Project during the audit. GOFP Moyiagement Letter 2021 Page 10 BENJAMIN CO OE DEPUTY AUDITOR-GENERAIVCGAD FOR: AUDITOR-GENERAL cc: The Director Financial Sector Division Ministry of Finance Accra The Coordinating Director, Operations Ministry of Finance Accra The Director, ERMERD Ministry of Finance Accra The Project Coordinator Ministry of Finance Accra GDFP Managemenr Letter 2021 Page 11