GHANA PRIMARY HEALTH CARE INVESTMENT PROGRAM (P173168) INTEGRATED FIDUCIARY SYSTEMS ASSESSMENT Section 1: Conclusions 1.1 Reasonable assurance 1. Overall, the assessment concludes that the examined Program fiduciary systems provide reasonable assurance that the financing proceeds will be used for the intended purposes, with due attention to the principles of economy, efficiency, effectiveness, transparency, and accountability and for safeguarding program assets once the proposed mitigation measures have been implemented. Appropriate systems to handle the risks of fraud and corruption, including effective complaint handling mechanisms, have been agreed and established. That said, within the health sector there still remains some systemic fiduciary risks, which though not significant, are worthy of mention, and which if not addressed may likely affect the implementation of the program. Systemic fiduciary risk noted during the implementation of IDA-financed projects within the sector include weakness in stores management practices, delays in providing essential equipment to health facilities, delays in constructions of medical isolation and treatment centres, instances of partial-compliance with government public financial management and procurement guidelines, and lack of adequate follow up on audit recommendations. The assessment however indicates that these issues can be resolved, and the Bank will monitor the status of these systemic issues through the Program Action Plan (PAP). 1.2 Risk assessment The overall fiduciary risk of the Program is assessed as Substantial. Procurement planning, systems, and arrangements: i) critical elements for reviewing the progress of procurement performance (e.g., procurement monitoring with the use of procurement planning and monitoring cycle and periodic procurement audits, integrated annual financial and procurement audits focus more on financial.) ii) compliance and guidance on strengthening procurement institutions and systems through capacity building and computerization of procurement systems. Overall, the program integrated residual procurement risk is rated Substantial Planning and Budgeting: Despite the significant improvements in the processes of budgets and budget preparation, there are challenges that have an impact on budgeting and budget execution, and which may affect program implementation. These risks include inter alia; inadequate budget allocation for Program activities, lack of adequate budget releases (budget outturn), challenges of alignment of the work-plan and procurement plans with the budget with respect to the timing of the cash flows or releases by the Ministry of Finance. This can pose a significant liquidity risk to the overall success of any government program. The assessment revealed that the county budget estimates for revenue collection are overstated and unrealistic. There are still some capacity challenges in the preparation of program-based-budgets, leading to inadequate alignment between development agenda, policy intent, and actual budget. The planning and budgeting risk is assessed as Moderate due to the significant progress that has been made by the Ministry of Finance, Budget Directorate and the Fiscal Decentralization Unit. Whereas the planning and budgeting framework of national and sub-national government is relatively good and capable of supporting the Program, the risk associated with treasury management is high mainly due to delays in release of and insufficient funds for program activities, fundamentally because of government's shifting of priorities and fungibility of cash. An aspect of the treasury management system that remains a significant weakness in implementing the PforR is the fungibility of cash for which program funds could be used for other pressing government needs to the detriment of the Program, due in part to delays in release of funds to programs and insufficient funds for implementation of program activities. This is also an inherent risk in that the funds transfer mechanisms will follow the existing Government of Ghana funds flow. Expenditure commitment controls exist through GIFMIS but are not fully complied with, leading to huge expenditure arrears. There is evidence of Ministries/Departments/Agencies and Budget Management Centers committing for expenditure outside GIFMIS, also contributing to the accumulation of expenditure arrears. While at least 99 percent of all budgeted entities have functional internal audit units with the responsibility of ensuring compliance with all financial management laws and regulations, they are less effective mainly due to low technical capacity coupled with insufficient funding to strengthen their capabilities, including the Internal Audit Agency as a supervisory body. There is also weak political (and managerial) commitment to fully implement audit recommendations; this is also due in part to funding challenges for the effective functioning of Audit Committees, which have been strengthened in terms of its independence with the passage of the Public Financial Management Act 2016. Regarding audit and external scrutiny, over the years, the external audit functions of the Ghana Audit Service, through improved human resources and technical capacity, provide assurance of the ability to detect fraud and corruption through financial irregularities. That said, with the full adoption and roll-out of GIFMIS, the Ghana Audit Service urgently needs to be well equipped and trained to perform audits in an electronic environment. The risk associated with transparency of public funds is high as not all revenues (internally generated funds and donor funds) and expenditures are fully disclosed in consolidated reporting. That said, within the Ministry of Health and its agencies, there is an appreciable level of reporting on Internally Generated Funds by the various Budget Management Centres. However, the validity and reliability of these figures requires more robust systems and further roll out and more importantly using GIFMIS to capture and report on Internally Generated Funds. Expenditure commitment outside GIFMIS is considered high risk; though control measures exist, they are rarely complied with. Technical capacities of finance personnel especially at the district level to use GIFMIS are limited and considered high risk. Reasonable mitigation has been the reliance on the financial monitoring by the various Financial Management and Procurement Unit and, the intervention of staff at the Head Office of both the Ministry of Health and the Ghana Health Service. Internal control risks are assessed as moderate. This is due to factors including systemic weaknesses in the institutional set up of the Internal Audit Unit, inadequate staffing at Budget Management Centres, lack of adequate technical capacity of some staff, senior management of Budget Management Centres not following up on the audit queries, weaknesses in the Audit Committees due to lack of funding and unavailability of qualified Audit Committee members at the sub-national level. While it is acknowledged that both central government and sub-national government Budget Management Centres have the same Chart of Accounts, the limited technical capacity of financial staff at Budget Management Centres accounts for the non-usage of the GIFMIS platform even for those that have direct access to the financial management tool. Consequently, the use of spreadsheets is still prevalent; this poses potential financial management risk in terms of proper classification of financial transactions and risk of non-inclusion in consolidated reporting. 1.3 Procurement exclusions Contracts for the procurement of works, goods, and services under the Program that exceed the OPRC thresholds will be excluded from the PforR financing. There are no high-value contracts under the Program. Section 2: Scope The Fiduciary Systems Assessment relied on desk reviews and secondary sources on the current state of Public Financial Management in Ghana and equally important for the Program was a review of the documents used by the Ministry of Health and the Ghana Health Service governing financial management of their operations at all levels of implementation including the Headquarters, Regional Offices and the sub-national levels, referred to as Budget Management Centres. It must be noted, for purposes of this assessment that the use of Budget Management Centres includes Health Facilities - defined as Health Centers/Clinics/Community-based Health Planning and Services (CHPS) Compounds, and any facility at the decentralized level likely to be a beneficiary of the Program. Section 3: Review of Public Financial Management Cycle 3.1 Planning and Budgeting Ghana's strategic planning, budget formulation and budget preparation have seen significant improvement over the last two decades, especially with the adoption of Program-Based Budgeting in 2014 replacing Activity-Based Budgeting. The Program-Based Budgeting framework defines strategic planning and budgeting with expenditure outlays to identified outcomes (or results) as opposed to inputs against outputs in the erstwhile Activity-Based Budgeting approach, making it much easier to relate planned program expenditures to expected results across Ministries/Departments/Agencies and Budget Management Centres. Program-Based Budgeting also provides a platform for aggregating all sector programs targeted at delivering the required service outcomes. Budget reforms both at national and sub-national levels have resulted in streamlining budget preparation processes with the issuance of annual budget guidelines to all ministries/departments/agencies and Budget Management Centres in a timely manner, which contains preliminary budget ceilings providing reasonable resource allocation levels for budget preparation. At a later stage in the budget preparation process (October/November), cabinet-approved ceilings are then issued to budgetary units that allow the finalization of their annual estimates. Budgeting under the program will follow the Government of Ghana budgetary guidelines as issued by the Ministry of Finance for the Ministries/Departments/Agencies participating in the program. Ministreis/departments/agencies receive budget guidelines from Ministry of Finance and based on sectoral policies, issue internal budget guidelines to the respective cost centers. The key implementing agencies for the program namely, (i) Ministry of Health, (ii) Ghana Health Service and the (iii) National Health Insurance Authority will use the Government of Ghana's planning and budgeting arrangements. The Ministry of Health budget covers investments and operational expenses of the Ministry of Health and its Agencies except for the National Health Insurance Authority. The Ministry of Health Medium Term Expenditure Framework covers its core policy and planning activities as well as the core business of its agencies in charge of service delivery, regulation and training. The National Health Insurance Scheme is mainly financed from a budget allocation approved by the Parliament of Ghana for the payment of claims, operations and investments. National Health Insurance Scheme resources consists mainly of taxes and workers’ social security contributions, accounting for over 90 percent of total financing, and other sources including premium payments from the informal sector, accounting for the remaining 10 percent. The National Health Insurance Scheme aligns its operations with the Health Sector Medium-Term Development Plan. The Scheme plays a crucial role in the implementation of the Ministry of Health’s program as the largest purchaser of health services. As one of the key expected outcomes of the PforR is to improve efficiency in claims processing and management, National Health Insurance Scheme investments in in e-claims processing and management will be needed The Program will support investments and operational expenditures at the primary health care level. Successful implementation of primary health care reforms such as the Networks of Practice and Model Health Centres will require sufficient investment and operational expenditures at the primary level. The IDA/GFF funds will be programmed in a way to complement the current structure of the government budget for primary health care. Program expenditures will be budgeted and expended through the government system. All Program expenditures will be budgeted both in the Medium Term Expenditure Framework and the annual budgets of the Ministry of Health. At the sub-district level, Government of Ghana financing for the Program will be allocated to staff remuneration and goods and services necessary for improvements to primary health care services delivered at this level. PforR financing from IDA, the GFF and the Government of Ghana, will be allocated to goods and services and capital expenditures at all levels, with an emphasis on the sub-district level, that will contribute to development of Networks of Practice and Model Health Centres, improvements in primary health care services, and development of health system components and financing modalities that will contribute to improved primary health care. The fundamental limitation regarding budget transparency and comprehensiveness relates to incomplete disclosure of Internally Generated Funds and some donor funds and insufficient public access to key fiscal information. Improvement in this area will require the development of websites; that said, the basic and rudimentary tool (notice boards) could still serve this purpose until a modern framework is developed. The Program will benefit from the Bank's policy of transparency and public disclosure and the publication of all relevant Program information including financial reports and other fiscal data, covering the entire program whether funded by the Government of Ghana or IDA/GFF. 3.1.2 Adequacy of budget There is predictable government funding for the health sector with a high budget execution rate. The Ministry of Health receives consistent funding from the Ministry of Finance for its health program implementation through the annual planning and budget process. The Ministry of Health has in the past shown high capacity to execute its annual budget. 3.1.3 Procurement planning Based on a review of the procurement performance over the past three years, it is noted that all the planned procurements by the Ministry of Health procurement unit and the Ghana Health Service emanated from end-users. The plans are linked to funds budgeted according to end-user needs. Procurement is realistically planned with goods and services correctly categorized under the applicable procurement method with the appropriate timelines. Procurement activities have an adequate description in the plan. Procurement planning and value for money can be improved by ensuring that project costs included in the annual budget are derived only from project design and specifications, including bills of quantities. This will ensure that budget estimates are realistic and that only the output for the calendar year is included in the year’s budget. 3.1.4 Procurement profile of the Program Implementation of the Program primarily requires staff time, services of consultants, workshops and training, which corresponds to recurrent spending of the implementing agencies. Procurable expenditure under the proposed Technical Assistance component will be managed like that of Investment Project Financing operation. Under the Program, expenditure will be incurred for goods works and services. 3.2 Budget Execution The Program budgeting will be done in accordance with existing Government of Ghana procedures for national and sub-national level Budget Management Centre operations. The budgeting arrangements at all levels are assessed as being adequate for the Program. The assessment revealed that generally due to significant improvements under Public Financial Management reforms, the budgeting arrangements, processes, and guidelines for budget allocations, are adequate and can be used to support the program at both the national and sub-national levels of implementation. Budgeting under the program will follow the government of Ghana budgetary guidelines as issued by the Ministry of Finance for the Ministries/Departments/Agencies and Budget Management Centres participating in the program. Ministries/Departments/Agencies receive budget guidelines from Ministry of Finance and based on sectoral policies, issue internal budget guidelines to the respective cost centers (Departments and Agencies). The key implementing agencies for the program namely, (i) Ministry of Health, (ii) Ghana Health Service, and (iii) National Health Insurance Authority, will use the Government of Ghana's planning and budgeting arrangements. 3.2.1 Treasury management and funds flow for Program implementation The adoption and formal launch of Treasury Single Account in August 2017 introduced functionality allowing the government to consolidate and know its cash position daily, with direct online access to all treasury-managed bank accounts held at the Bank of Ghana. This was an important milestone in Public Financial Management reforms in the country. As part of the Treasury Single Account implementation plan, a number of government bank accounts held in commercial banks have been closed and transferred to the Bank of Ghana. That said, there remain considerable government bank accounts held by commercial banks (for Internally Generated Funds), as well as donor-funded project accounts and foreign exchange accounts not part of the daily cash consolidation framework. Vote holders at all levels (Budget Management Centres to which budget appropriation is provided i.e., Headquarters, District, Budget Management Centre) are required to keep Vote Books to record approved budgets and released warrants. This information may be obtained from the GIFMIS Platform or is the case manually maintained through accounting ledgers. Within the Ministry of Health and at the various levels are several bank accounts that facilitate the transfer of funds to implement different programs. These accounts are considered part of the sub consolidated accounts and are held at a different level to facilitate implementation. The Director of Finance of Ministry of Health, acting on behalf of the Controller and Accountant General has a responsibility to periodically review the management of bank accounts operated by Budget Management Centres to ensure compliance with these requirements, and monitor/assess the efficiency of such accounts. The Program will use the Government of Ghana's cash management framework with flow of funds through the Treasury Single Account and all banking transactions being operated on the GIFMIS platform. The Program will be routed through existing government bank accounts, (the Sub-Consolidated Fund accounts of the Ministry of Health, Ghana Health Service and National Health Insurance Authority) for expenditure management. Regarding the Program's treasury and cash management framework, it is envisaged that there will be (3) three levels of funds flow mechanisms to facilitate implementation namely, (i) Government of Ghana’s budget allocation from the Ministry of Finance to the Ministry o f Health, Ghana Health Service, and National Health Insurance Authority (through the Allocation Formula approved by Parliament), (ii) IDA and GFF funds through the Ministry of Finance/Controller and Accountant General Department to the Sub-Consolidated Fund accounts of the Ministry of Health, Ghana Health Service, and National Health Insurance Authority; and Funds flow from the Ghana Health Service to the beneficiary Budget Management Centres and sub national entities responsible for achieving the DLIs. The PforR financing advance and any subsequent disbursement of IDA/GFF funds on the basis of verified achievement of DLRs will be made to the Sub-Accounts of the three implementing agencies in accordance with the Program Expenditure Framework, reflected in the national budget (and NHIA Allocation Formula). This funds flow arrangement is required to ensure that the implementing agencies dispose of adequate financing for the activities necessary to achieve the DLIs/DLRs, particularly in the context of fiscal constraint and risks relating to the government’s debt servicing requirements and the evolving food and fuel inflation crisis that is affecting the region. In order for the Program funds flow to be consistent with Government of Ghana processes and procedures, it is critical that the Program is included in the annual budget to be presented for approval by Parliament. The Budget for the Program should be part of the Ministry of Health’s annual allocations captured under the various budget headings. The overall budgeted amount will be an aggregated amount of the DLI allocations for all participating and beneficiary agencies including goods and services, and non- financial assets (capex). Once the Budget is approved by Parliament and loaded into GIFMIS, it will allow for the system controls of GIFMIS to be applied including not exceeding the maximum allocated amount and also a full audit trail of all transfers etc., under that budget headings as it indicates the total approved amounts for a specific agency/department for a particular year. It will also show the disaggregation of the allocated amount for each specific participating health agency including allocations to the various sub national health organisations. This information will be readily available on the GIFMIS platform for monitoring. At the participating agency level, they will also have access to their individual approved allocations and the specific activities and procurements as approved. A rolling advance of 25% of the PforR financing will be disbursed after Effectiveness upon request by the Ministry of Health, to support the achievement of the DLIs. The advance will be settled and replenished against amounts due on verified achievement of DLIs. Since cash is fungible, the funds received in the Consolidated fund will be pooled with the Government of Ghana resources. Depending on either a request for an advance or achievement of DLIs/DLRs that have been verified by the Independent Verification Agency, the Ministry of Health will initiate the Withdrawal Application process as an advance or reimbursement. These funds will be transferred on the instructions of the Ministry of Finance into the Sub Consolidated Fund Accounts of the Ministry of Health, Ghana Health Service and/or National Health Insurance Authority. Based on verification of DLIs/DLRs, the Ministry of Health will request disbursement through the Ministry of Finance. The Ministry of Finance will review the request and compare it with the cash plan of the Ministry of Health. The Ministry of Finance will advise the World Bank to transfer the funds into the respective Sub Consolidated Fund Accounts of the Ministry of Health, Ghana Health Service and/or National Health Insurance Authority, for further transfers via GIFMIS into the to the specific beneficiary agencies - Budget Management Centre Operational Accounts. On receipts of these funds, the participating agencies will use GIFMIS to initiate and pay for transactions. Payments for petty cash and operation cost (based on Government of Ghana thresholds) will be through systems generated cheques, whilst the use of Electronic Funds Transfer will be for payments to suppliers. The notice from the CD to the borrower shall include the breakdown of the allocation per beneficiary entity, out of the overall amount of the DLR (s) achieved. The Controller and Accountant-General is responsible for ensuring the adequacy of accounting and reporting functions across all Ministries/Departments/Agencies. In carrying out its mandate, the Government has adopted the GIFMIS as the key platform. The Public Financial Management Act, 2016 (Act 921) and Regulations 13 and 14 of the Public Financial Management Regulation, 2019 (L.I.2378) provide for the establishment of the GIFMIS. Section 8 (3 and 4) of the Public Financial Management Act, 2016 (Act 921) entrusts the responsibility for the integrity of public funds as well as other tasks with the Controller and Accountant General Department, with ultimate accountability to the Minister for Finance. The GIFMIS platform aims to support the management of public funds (the consolidated fund, Internally Generated Funds, statutory funds, and donor funds) and its accounting and reporting. Presently the Ministry of Health and all its department and agencies/Budget Management Centres are fully set up and using the GIFMIS platform to support financial management. 3.2.2 Accounting and Financial Reporting In terms of financial reporting, the Ministry of Health is required by law to complete and submit to the Controller and Accountant General Department, periodic revenue and expenditure variance analysis statement and other financial statements as may be required by the Controller and Accountant General Department. These are prepared on a cumulative basis and submitted to the Controller and Accountant General Department by the 15th day of the month following each quarter of each financial year. The information on the statements is defined by law and the format and content are determined periodically by the Controller and Accountant General. Annual financial information including approved budgets, budget execution reports, procurement Information and audit reports and financial Statements are published and available on either the Ministries/Departments/Agencies websites, or that of the Ministry of Finance and the Ghana Audit Service. Within the Ministry of Health, the Office of the Financial Controller is responsible for the preparation of the consolidated financial reports of the Ministry. Agencies within the Ministry of Health have the responsibility of preparing and submitting their accounts to the Office of the Financial Controller for consolidating into a Ministry-wide account. In accordance with Sections 79 and 80 of Public Financial Management Act 2016, Office of the Financial Controller will prepare quarterly financial reports, and annual financial statements in line with the current Chart of Accounts and existing and applicable Government of Ghana financial management regulations, manuals, and guidelines respectively. The responsibility for preparing and submitting the Financial Reports rests with the respective Heads of Budget Management Centres. The Head of Finance at each Budget Management Centre is in charge of preparing the Financial Report, while Monitoring Staff are primarily responsible for reviewing these for accuracy. Within the MoH, the Financial Reporting and Monitoring Unit is tasked primarily to provide support and monitoring and guarantee reasonable assurance that financial control mechanisms instituted by management are complied with at all levels of operations. In addition, the Financial Reporting and Monitoring Unit is required to provide routine Financial Monitoring Reports and Quarterly Validation/Consolidated Financial Reports to Management and lower level Budget Management Centres. These periodic reports are expected to include recommendations to Management for improving financial management practice and other fiduciary oversight arrangements at the respective Budget Management Centres. There is limited recognition of the importance of Ministries/Departments/Agencies’ accountability to the public and citizens. The Ministry of Health, for example, prepares annual reports but they are not published and made publicly accessible in a timely manner. The 2017 annual report is the latest Ministry of Health report currently available on the Ministry of Health website. The Ghana Health Service does not publish its annual reports; these are consolidated as part of the Ministry of Health Reports. To track and report on program activities and expenditure, the existing Chart of Accounts in GIFMIS will be used to generate the required periodic financial reports and used to report to stakeholders. These quarterly reports will be submitted to the stakeholders including donors within the agreed timeframe as per the Financing Agreement. On the expenditure side, the Program will be clearly distinguished in the existing financial management and reporting framework within Ministry of Health through the use of the existing codes in the GIFMIS Chart of Accounts. This should enable accountability and consistent reporting of Program expenditure and funding requirements. The following financial reports shall be prepared and submitted to the Bank: Report Type Due Date Responsibility Scope Program Interim Financial Report Half Year Reports Director of Ministries/Departments/ Finance Agencies Financial Reports Program Financial Statements Annual Director of Ministries/Departments/ Finance Agencies Annual Audit 3.2.3 Procurement processes and procedures. The Government of Ghana’s procurement policies and regulations are documented and publicly available. The procurement policies and the regulatory system are designed to meet Core Procurement Principles of value for money, economy, efficiency, effectiveness, integrity, transparency, fairness, and accountability. The Program will use the government's systems under the Public Financial Management Act 2016 (Act 921) which guides the procurement of goods, works and services. The Public Financial Management Act provides for competition, economy, and value for money in contracts. Ghana is also a signatory to the Open Government Partnership which has led to the adoption of policies on the use of beneficial ownership disclosure and open contracting data standard and the establishment of an open contracting data standard portal. The Ghana Public Procurement Act, Act 663, was adopted in 2003 to provide for public procurement, establish the Public Procurement Authority; make administrative and institutional arrangements for procurement; stipulate tendering procedures and provide for purposes connected with these. The Act was amended, Act 914, in 2016 to make further provision for public procurement and to make competitive procurement the default procurement method and made it a requirement for restricted tender and sole sourcing to be carried out with justifiable proposals submitted to the Public Procurement Authority for prior approval. Procurement funded by the government uses Ghana’s Public Procurement Act, including in the health sector. In the Ministry of Health, the procurement approach and procedures are based on the Procurement Regulations developed by the Public Procurement Authority. In addition, the health sector uses procurement tools developed by the Public Procurement Authority such as bidding documents etc. The procurement unit of the Ministry of Health is responsible for the management of all procurement and supply chain-related activities within the ministry. 3.2.4 Contract administration Under Ministry of Health procurement, goods and works delivered are inspected by the technical team, drugs are tested by the Ghana Food and Drugs Authority, and service delivery is monitored and certified by management. Procurement records and filing of procurement documentation are good as all key documents relating to contracts are secured. Payments for items supplied are delayed in most instances beyond the 60 days contractual payment timelines. Ministry of Health procurement performance During the assessment period of 2018 to 2020, the Ministry of Health carried out procurement activities for Goods, Works, Non-Consulting Services and Consultancy Services. The procurement process cycle from advertisement to award signing was 8.5 weeks and 5 weeks for RFB- International and RFB- National respectively. The ministry gave 6 weeks to service providers to prepare and submit bids for RFB-National and RFB-International. Bid opening and estimated weeks to carry out the evaluation, obtain requisite approvals and signing of awards was 3 weeks. During this period, a total of 90 contracts were awarded which is broken down into RFQ (61%-55 contracts), RFB- national (11%-10 contracts), RFB-International (13%-12 contracts), and QCBS, CQS, LCS. (15%-13 contracts). The average number of bidders responding to bid adverts and participating in the processes was between 3 and 20, with most of them responding to RFB-National. The ministry experienced significant cost overruns within the three years for more than 10 contracts awarded. In total, the ministry procured the same item on 6 different occasions within a fiscal year. There was a major increment of prices within a fiscal year for goods, works and services. The Ministry of Health procured items including from health sector goods & pharmaceuticals, stationery & office equipment, and computers & accessories. Others include procurement of technical services or non-consulting services, construction & renovation works and consultancy services. The profile of the procurement expenditures in respect of procurement categories include, Goods (200), Works (70), Technical services or Non-consulting services (23), and consultancy services (15). All the procurable expenditures except for Goods were within the current Operational Procurement Review Committee Threshold.1 Ministry of Health Procurement is the benchmark for most public sector procurement agencies being the first government agency to institutionalize the procurement process by developing and utilizing the Ministry of Health procurement procedure manual. Ghana Health Service procurement performance During the assessment period of 2018 to 2020, Ghana Health Service carried out procurement activities for Goods, Works, and Non-Consulting Services. There were no activities for Consultancy Services. The procurement process cycle from advertisement to award signing was 17 weeks and 9 weeks for RFB- International and RFB- National respectively. Under RFQ and Direct Selection, the cycle was 2 weeks and 3 weeks respectively. The ministry gave sufficient time to service providers to prepare and submit bids: RFQ & DC- 1 week, RFB-National – 4 weeks, and RFB-International-7 weeks. Bid opening and estimated time to carry out the evaluation, obtain requisite approvals and signing of awards for RFQ and DC was 3- 4 weeks. RFB-International and RFB-national were evaluated, approved, and awarded within 10 and 5 weeks respectively after bid opening. During this period, a total of 465 contracts were awarded, which is broken down into RFQ (67%-310 contracts), RFB- national (29%-136 contracts), RFB-International (0.6%- 3 contracts), Direct Contracting (3.4%-16 contracts) and QCBS, CQS, IC etc. (0%-0 contracts). The average number of bidders responding to bid adverts and participating in the processes were between 3-15 with most of them responding to RFB-National. The Agency did not experience any cost overruns with the three years. The Agency extended contracts for successful bidders to re-supply items or provide services within a fiscal year provided that the unit cost was maintained with quantities not more than 10% of the previous contract. There was no major increment of prices within a fiscal year. While the procurement procedures for large contracts in the Ministry of Health are assessed as above average, the procurement procedures at the Ghana Health Service are assessed as less robust. Strengthening of the procurement system and institutional capacity at the Ghana Health Service is required. 3.3 Internal Controls The Government also adopted the Financial Administrations Regulations 2004, the Public Procurement (Amended) Act 2016, Act 914, and the various Financial Accounting Manuals of the Budget Management 1 Current OPRC, thresholds are US$50 Mill for Works, US$30 Mill for Goods, US$15 Mill for Services Centres, which further strengthened the legal and regulatory framework for internal controls at all levels of government. 3.3.1 Internal controls In terms of Financial Management arrangements, the document which outlines the processes and procedures for financial management within the Ministry of Health is the Accounting, Treasury, and Financial Reporting (Rules and Instructions) Manual. The document applies to all Budget Management Centres and as such there is hardly any difference in the processes and procedures used by the Ministry of Health or Ghana Health Service. Both have adopted and are using the Accounting, Treasury, and Financial Reporting (Rules and Instructions) Manual as revised. The current version being that effective January 2017 is the 3rd Edition. The Manual enables compliance with not only the Public Financial Management Act, but it is also aligned with various other legislation including the Public Procurement Act, 2003, (Act 663), Public Procurement Amendment Act, 2016, (Act 914); the Internal Audit Agency Act, 2003 (Act 658); the Public Financial Management Act, 2016 (Act, 921); the Financial Administration Regulation, 2004, LI 1802; Audit Service Act 2000, (Act 584). Primarily the document is designed to standardize and improve financial management practices within the Agencies/Budget Management Centers within the Ministry. Within the Ministry of Health, the responsibility for coordinating financial management activities is vested with the Director of Finance of the Ministry of Health or as may be referred to as the Office of the Financial Controller working with the Policy, Planning, Monitoring and Evaluation Division to put in place systems to ensure financial accountability at all levels of operations within the ministry. For the Program, the Office of the Financial Controller is responsible for ensuring efficient and effective financial management, accounting and reporting, particularly with regards to timely receipt of all financial data from participating Budget Management Centres. Within each Budget Management Centre is a finance department mandated to ensure fiduciary oversight of the use of public funds. Generally, the finance department is segregated into three units with specific responsibilities as follows: (i) financial account section responsible for bookkeeping, management and financial reporting; (ii) management account section responsible for planning, budgetary controls and expenditure management; (iii) treasury section which plays a dual role as district and Metropolitan, Municipal and District Assembly treasury, responsible for cash flow management (cash receipt and bank lodgment, preparation of revenue returns, and bank reconciliations). At the operational level, the Head of Budget Management Centre is responsible for the conduct of financial business on behalf of the Ministry of Health, and also responsible for the receipt, custody, and disbursement of Ministry of Health funds. The Head of Budget Management Centre is also responsible for the custody, care, and use of Ministry of Health stores and shall ensure that proper records are kept of transactions and shall be required to produce such records for inspection when called upon to do so by the Minister, Controller, and Accountant-General, Auditor General, Chief Director, or their representative. The Ministry of Health procurement unit abides by the Code Conduct and Disciplinary Procedure outlined in the Ministry of Health Procurement Procedure Manual. There are adequate administrative and audit controls and anti-corruption procedures in place, with the Internal Audit Agency conducting regular audits while the Ghana Audit Service conducts yearly financial and procurement audits. The Ministry of Health and Ghana Health Service procurement units have all the relevant procurement documents such as Public Procurement Act 663 as Amended and its manuals, Ministry of Health Procurement Procedure Manual as well as World Bank Procurement Guidelines and Regulations. The procurement system at Ministry of Health complies with the provisions in Public Procurement Act 663 and its amendment. The Entity Tender Committee and the Central Tender Review Board give final approvals based on contract amount thresholds. The unit carries out procurement with the prescribed bidding documents by the Public Procurement Authority containing all the relevant sections, information, and requirements. The procurement process cycle from advertisement to contract awards is thoroughly followed. Adequate time is allowed for service providers to prepare and submit bids. Bids are opened publicly on closing dates. Evaluation of bids, obtaining of requisite approvals and signing of awards are timely. The Public Procurement Act makes provisions for complaint and addressing grievances as well as procedures regarding bidder suspension and debarment. The law also ensures equal opportunities for all eligible bidders, fairness, and transparency in the procurement process given that bids are advertised widely, procurement decisions and information are made public and accessible. The Program should have a similar system to address procurement-related complaints, consistent with how other government procuring entities handle such complaints. Implementing agencies are to reduce bureaucracy during review and clearance in procurement decisions to minimize delays and to reduce bureaucracy in addressing complaints and to handle grievances as speedily as possible. 3.3.2 Internal audit The regulatory framework for internal audit is broadly consistent with sound financial management principles, but there are gaps in the implementation, particularly at the sub-national level. Parliament in 2003, passed Act 658 that established the Internal Audit Agency as an Independent Government Institution for purposes of ensuring internal control. The Act places emphasis on compliance with financial management laws, regulations and procedures. It also authorized an enterprise risk assessment that will allow deployment of proper and adequate risk mitigating measures, conducting audit inspections, providing training of internal audit standards for internal auditors in the public sector, and then preparing an annual report for executive action. Section 16 of the Internal Audit Agency Act 2003 mandates all Ministries/Department/Agenciess and Budget Management Centres to create internal audit units. These units have the mandate to ensure the prevention and detection of fraud, the prevention and management of financial risk, and the control and safeguarding of public assets. The Ministry of Health and the Ghana Health Service have functioning Internal Audit Units which have been assessed as having the necessary staffing and requisite skills set to ensure fiduciary oversight and compliance. Section 86 of the new Public Financial Management Act 2016, Act 921, requires all Ministries/Departments/Agenciess and Budget Management Centres to create Audit Committees. Operationalization of the regulatory framework faces challenges. The Internal Audit Units outside Headquarters, particularly at the sub-national level, continue to carry out pre-auditing of payment vouchers to the detriment of internal control review, risk management and enterprise risk management and evaluations. This reflects a general lack of technical capacity within the Units. Some progress has been made and about 30 Ministries/Departments/Agencies now have Internal Audit Units that focus on risk- based and systemic issues as opposed to pre-audits. In terms of audit coverage, there are about 518 out of 525 functional internal audit units across the country within the public sector, representing about 99 percent in terms of coverage, of which there are 485 Ministries/Departments/Agencies with established Audit Committees. Each Budget Management Centre is required to prepare annual audit plans approved by both Internal Audit Agency and Ministry/Department/Agency management. In addition, they are required to prepare and submit quarterly internal audit reports to both management and the Internal Audit Agency within 14 days after the end of the quarter. Ad hoc audit reports are also prepared for specific internal audit assignments at the request of management. Important steps, albeit limited in scope, have been made in strengthening the internal audit function at the Internal Audit Agency and across Ministries/Departments/Agencies and Budget Management Centres, and enhancing skills to audit in an electronic environment. This challenge is compounded by the lack of adequate numbers of audit staff with the requisite knowledge in information systems audit and inadequate funding allocation to the Internal Audit Agency to undertake more periodic and sustained capacity building and skills training. The efficiency and effectiveness of internal control and internal audit functions at Ministries/Departments/Agencies and Budget Management Centres largely revolves around the technical capacity of internal auditors. Most internal auditors in Budget Management Centres have limited professional and technical qualifications. These weaknesses are compensated to some extent by internal auditors at Headquarters and Regional levels thereby providing reasonable assurance for ensuring financial integrity and accountability by way of monitoring, evaluating, and training internal auditors. The Audit Committees have a membership of five, with three from the private sector. of which one is the chairperson. Some Ministries/Departments/Agencies face difficulty to find highly qualified independent external members.2 Lack of standardized allowances for the members of the Audit Committees, and in some instances, delay and irregular payments constitute key challenges to the effectiveness of this initiative. Moreover, Audit Committees do not have powers to apply sanctions, although they can commit offenders to appear before it. A continuing weakness in the Public Financial Management reforms has been the poor implementation of audit recommendations. Creating a culture of accountability at managerial and political level remains a challenge. The establishment of Audit Committees is commendable but still at the early stages and yet to be assessed to determine its effectiveness. Specifically for the Program, the internal audit work will be done as part of the routine annual audit work of the respective implementing agencies. The respective Internal Audit Units are required to submit quarterly reports on the execution of the annual audit work plan. The Public Financial Management Law section 83, paragraph 10, requires that where there is suspicion or allegations of fraud, or misuse of public funds, the Internal Auditor shall report the matter to the Director General of the Internal Audit Agency who shall in consultation with the chairperson of the relevant Audit Committees initiate investigation into the matter. 2 Some of the existing external members are on multiple Committees and are not readily available for meetings, so even though Audit Committees have been inaugurated, a lot of them have not been able to meet 3.3.3 Program governance and anticorruption arrangements Ghana has developed a progressive legal and institutional foundation3 for addressing risks of fraud and corruption, although challenges remain pertaining to weak implementation and compliance. There are important functioning anti-corruption bodies which are playing various roles in preventing and combating corruption. These bodies include the Commission on Human Rights and Administrative Justice, the Economic and Organized Crime Office, the Office of the Special Prosecutor, the Ghana Police Service, the Attorney General’s Office, the Financial Intelligence Centre, the Auditor General’s Office, the Internal Audit Agency, the Public Procurement Authority, the Controller and Accountant General’s Department and the Registrar General’s Department. The roll-out of the National Anti-Corruption Action Plan since 2015 provides a coordinated approach to fighting corruption in the public sector. The National Anti-Corruption Action Plan includes goals to build capacity to fight corruption, institutionalize accountability, and engage individuals and key actors in identifying and fighting corruption. The Plan has had 143 broad activities for 10 years of implementation (2014-2024), involving 325 implementing agencies. Its implementation has resulted in increased awareness of the evil of corruption. Support for training and provision of corruption tracking and reporting tools to government agencies has been a priority of the National Anti-Corruption Action Plan. The Plan also seeks to support the improved implementation of corruption laws and regulations, including speedy prosecution of corruption cases. However, only the Commission on Human Rights and Administrative Justice actively reported on the number of corruption cases it has received in 2020. The government actively supports complaints handling in the public sector. The country’s Ombudsman - Commission on Human Rights and Administrative Justice - was created in 1993. Its mandate includes investigation of corruption allegations, breaches of the code of conduct for public officers as provided under Chapter 24 of the 1992 Constitution. Functionally, the Commission on Human Rights and Administrative Justice is an independent multi-purpose complaint handling institution. It is the national institution for the protection and promotion of fundamental human rights and freedoms and administrative justice in Ghana. The Commission thus combines the work of the Anti-Corruption Agency, the Ombudsman, and the human rights commission under one umbrella. The Commission exudes strong capacity and reputation, and has a sub-offices regional level. Public perception of corruption in Ghana has remained unchanged or slightly improved over the past four years. The country’s performance on Transparency International’s Corruption Perception Index was 41 out of 100 in 2017 and has improved slightly to 43 out of 100 in 2020. The creation of the Office of Special Prosecutor in July 2017 was a critical milestone in the government’s efforts to promote a zero -tolerance policy on corruption in the public sector. The Office of Special Prosecutor is mandated, among other responsibilities, to investigate corruption cases and prosecute public officials indicted for acts of corruption. The Office’s role is expected to complement the role of other accountability institutions while 3 Pieces of legislation recently adopted in this respect include the Anti-Money Laundering Act (2008); Civil Service Act (1993); Code of Conduct for Public Officers (1992); Public Financial Management Act (2016); Office of the Special Prosecutor Act (2018); Witness Protection Act, 2018 (Act 975); Right to Information Act, 2019 (Act 989); Public Financial Management Regulations, 2019 (L.I.2378); Public Procurement (Amendment) Act, 2016 (Act 914). taking over the prosecuting role of the Attorney General. By 2019, the Office of Special Prosecutor received 46 complaints from the public and investigated 2 corruption allegations. Ghana’s Public Sector Reform Strategy (2018-2023) prioritizes support for the development and operationalization of service charters by Ministries/Departments/Agencies and public and private institutions. The Public Institutions and Public Sector Reform Secretariat, in coordination with the Commission on Human Rights and Administrative Justice, developed guidelines and prototype service charters for Ministries/Departments/Agencies. The challenges pertain to weak implementation and compliance with financial regulations and procedures, resulting in recurrent irregularities in the audited accounts of Ministries/Departments/Agencies in the Auditor General’s audit reports. The audit of 2020 accounts of Ministries/Departments/Agencies uncovered irregularities amounting to approximately 2 billion Ghana Cedis (US$120 million)4. The report suggests the financial impact of irregularities represents about a 60% reduction from 2018 findings 5 reflecting positive impacts from the ongoing anticorruption measures of the government. The Ministry of Health is among weak performing Ministries/Departments/Agencies with regard toadherence to internal controls and fiscal responsibility. The sector accounted for 47 percent of the total financial impacts arising from irregularities in MDAs’ 2020 accounts, although a large proportion of the reported irregularities emanated from outstanding National Health Insurance Scheme claims and indebtedness to suppliers. The Ministry of Health has a functional client service unit and adopted Service Charters, which describe service standards and service delivery methods and timelines, as well as grievance mechanisms for those not satisfied with services offered or provided to them. The ministry’s client service unit lacks an integrated computer-based grievance redress system, needed to hence a transparent collection and addressing of grievances. This should describe the arrangements for the program including (a) how credible and material fraud and corruption related to FM and Procurement will be reported, and (b) how the borrower will implement its commitment that persons or entities debarred or suspended by the Bank are not awarded a contract under the Program during the period of such debarment or suspension. 3.4 Auditing – Program Audit The Ghana Audit Service is a constitutional government agency established under Articles 187 to 189 of the 1992 Constitution of the Republic of Ghana. It is further governed by an Act of Parliament - Ghana Audit Service Act 2000, Act 584, with unlimited powers to carry out financial, performance and other external audits of all public funds. Its audit reports, which meet standards of the International 4 Report of the Auditor-General on the Public Accounts of Ghana: Ministries, Departments and other Agencies for the year ended 31 December 2020 5 According to the Auditor General Report (2020) total financial impact of the uncovered irregularities in Ministries/Departments/Agencies’ accounts in 2020 was about 5 billion Ghana cedis (UD$833 million) and 3 billion Ghana cedis (US$500 million) in 2019. Organization of Supreme Audit Institutions, are submitted to parliament for scrutiny. The Ghana Audit Service has 90 district and regional offices. Annual audit plans, with input from district offices, inform the choice of public entities to be audited each year, depending on the risk profile of these entities. At present, the Auditor General audits all Metropolitan, Municipal and District Assemblies and Budget Management Centres annually, with the issuance of separate audit reports. There is a huge gap in electronic audit capacity especially with regards to conducting audits within the GIFMIS platform as well as the revenue agency’s information technology infrastructure known as Total Revenue Integrated Processing System. The passage of the Public Financial Management Act provided some key changes to the role of oversight by (i) creation of Audit Committees, thereby strengthening financial accountability and independence and (ii) the deadline for submission of annual financial statements to the Controller and Accountant General; Section 80 of the Public Financial Management Act 2016 now requires all Ministries/Departments/Agencies and Metropolitan, Municipal and District Assemblies and Budget Management Centres to prepare and submit annual financial statements within two months after the end of the preceding financial year. The role of the Audit Committee as per the Law is to ensure that the head of a covered entity, to which the Audit Committee relates: (a) pursues the implementation of any recommendation contained in: (i) an internal audit report; (ii) Parliament’s decision on the Auditor - General’s report; (iii) Auditor-General’s Management Letter; and (iv) the report of an internal monitoring unit in the covered entity concerned particularly, in relation to financial matters raised; (b) prepares an annual statement showing the status of implementation of any recommendation and report on financial matters raised in an internal monitoring unit of a covered entity; and (c) any other related directive of Parliament. Related to the issue of audit oversight and accountability is the role of the Parliament's Public Accounts Committee. The Public Accounts Committee consists of up to 25 members and is chaired by a Member who does not belong to the party which controls the Executive branch of Government. The Committee must examine the audited accounts showing the appropriation of the sums granted by Parliament to meet the public expenditure of the government as presented to the House by the Auditor-General of Ghana. While the Auditor-General conducts periodic audits in line with applicable laws and international standards, implementation of recommendations is poor, leading to recurrent findings. Issuance of a Supreme Court ruling in June 2017, ordering the Auditor General to surcharge all public officials found culpable in financial mismanagement, has provided an additional impetus and emboldened the Auditor General and the Ghana Audit Service to carry out their constitutional duties, following from the failure of politicians to use the Financial Administration Court established by the Judicial Service as part of measures to fight corruption. Over the years, the human and technical capacity of the Ghana Audit Service has improved significantly, and the Service is therefore capable of providing reasonable assurance and professional audit opinion on the use of Program funds. Asides from the statutory financial audits, the Service can offer specific Program audits such as value for money audits, performance audits, procurement audits and specialized forensic audits as may be required during program implementation. The Ministry of Health failed to submit its financial statements by 28 February 2021 for the Auditor General’s validation in compliance with the Public Financial Management Act, resulting in the Auditor General issuing a disclaimer Audit Opinion on their Financial Statements for 2020. The Program financial audit will be done as part of the annual Ministry of Health Audit Report prepared and submitted by the Ghana Audit Service. The Ministry of Health is required by law to, within two months after the end of each financial year, prepare and submit to the Auditor General and the Controller and Accountant General, the accounts of the ministry and make available these to be audited. 3.5 Procurement and Financial Management Capacity In terms of financial management capacity, the Ministry of Health and its agencies have a fairly adequate complement of accounting, treasury, budget, and internal audit staff who are assigned by the Controller and Accountant General Department, and some recruited by the Head of Civil Service to the various Budget Management Centres across the country. The Ghana Health Service is also mandated to recruit the required accounting staff based on its needs at the various sub-national health facilities. Our review indicates that generally there is not an acute shortage of accounting staff and there is a blend of both qualified and not qualified accounting and treasury staff spread across the country. Within the Ministry of Health, the Heads of Budget Management Centres, Vote Controllers, Treasury Officers and various other officers (both finance and non-finance) are entrusted to manage public funds. The responsibility for coordinating the financial management activities rests with the Office of the Financial Controller working with the Policy, Planning, Monitoring and Evaluation Division to put in place systems to ensure financial accountability within the Ministry of Health. Ghana has created a procurement cadre in the public service. The health sector has a few procurement officers who previously worked on World Bank-funded projects, including the Director in charge (Major Contracts) in the Ministry of Health. Procurement is handled mainly by logistics and administrative and stores staff. Most of these have not received/have received appropriate procurement training. Remuneration of procurement staff is comparable to staff with similar grades within the public sector but below that of procurement professionals in the private sector; nevertheless, it is of the view that staff exhibit the highest level of professionality, integrity, and accountability in the discharge of their duties. The Ministry of Health procurement unit is led by the Head of procurement supported by 11 procurement managers, 5 procurement officers and 3 administrative officers with various qualifications spanning from masters and first degrees in procurement, supply chain, logistics and law and Member of the Chartered Institute of Procurement and Supply. The procurement unit of the Ghana Health Service is headed by a Deputy Director, Procurement, supported by procurement managers for the various procurement categories as well as supporting procurement staff. The department has six procurement professionals, three of them have master’s degrees with adequate experience in procurement. Though the Ministry of Health and Ghana Health Service have staff with adequate skills and experience with a satisfactory track record of carrying out procurement, further capacity building and refresher courses are recommended to enable the procurement staff to deliver on their mandate. That said, less than 10 percent (total internal auditors in the public sector is about 2000) and 1 percent of internal auditors are certified internal auditors or qualified accountants and Certified Information Systems Auditor respectively. The technical capacity of internal auditors at Budget Management Centress both in electronic and regular audit experience is weak; presently, no capacity building initiatives are in place for internal auditors on how to audit within a digitized environment. Section 4: Program Systems and Capacity Improvements No. Issue Identified Comments Proposed Mitigation Action Program Action Plan or DLI Possible delays in This arises as a result of Timely and adequate release of DLI the release of the shift in focus of funds could be made a DLI or a Program funds: government priorities, in Program Action Plan to ensure addition to the fact that Program activities are carried cash is fungible - meaning out as planned once Program funds are transferred into the Consolidated Fund, the government could use these funds without recourse to the Program. Weak internal Even though strong Public Regular training and capacity Program controls and Financial Management building for internal auditors on Action Plan internal audit laws have been enacted, risk-based auditing and the framework: historical evidence systems-based audit techniques suggests that non- to reduce the incidence of compliance remains financial irregularities. extremely high thereby resulting in expenditure overruns due to over commitments usually outside GIFMIS, procurement infractions, huge expenditure arrears, low technical capacities and funding challenges for internal auditors, and very weak executive action on audit findings and recommendations Weak technical There are varying gaps in Regular training and capacity DLI and capacity of finance the technical competence building for all Budget Program officers at Budget of Financial Management Management Centres on the Action Plan Management staff between the usage of GIFMIS and related Centres national and the sub topics. national level including Accurate and timely insufficient staffing. This preparation and distribution of could pose a risk to the Program financial and progress successful reports could be made a DLI or implementation of the included in the Program Action program regarding Plan. accounting and reporting. Review of Implementing Agencies Update procurement plan with PAP progress of (IAs) to: PPA. procurement performance. -Prepare annual Project team to hold regular (Procurement procurement plans and meetings to discuss updated planning and publish with PPA. plans and provide monitoring) recommendations for -Develop procurement improvement. monitoring and progress Reporting. (Both manual Procurement audits to review and computerized and report on such monitoring systems) and performance. Review of -Integrated Procurement Annual Procurement audit to PAP progress of and Financial Audits be conducted separated from procurement carried out by Ghana financial audit with separate performance. Audit Service. reports. (Periodic -Integrated procurement Production of timely procurement and financial audits procurement reports and audits) carried out together follow up on focuses more on financial recommendations. findings than procurement related issues. Compliance and -Ghana Institute of Project to budget for and PAP guidance on Management and Public attend such refresher trainings strengthening Administration (GIMPA) and workshop. procurement provides specified institutions and Procurement audits to review procurement trainings systems and report on compliance on and workshops planned trainings and throughout the year on workshops. WB procurement. Project to build capacity for IPF -Public Procurement component by attending such Authority provides clinics and workshops. periodic workshops on Country Systems procurement based on Act 663. -WB provides monthly and periodic procurement clinics. Inadequate Limits AC agencies to The mitigation measures Program funding for fraud effectively carry out their (1) improving collaboration Action Plan & corruption legal mandate and lack of between beneficiary agencies institutions commitment to follow up and Commission on Human actions by. Rights and Administrative Justice in handling fraud and corruption allegations; (2) strengthening governance capacity of beneficiary agencies in targeted areas, including (i) improving capacity for client services and complaints handling, (ii) strengthening information disclosure and coherent online presence. Weakness in Audit Systemic challenges in Regular training and capacity Program Committees’ the strengthening of building of members of Audit Action Plan ability to function Audit Committees to Committees. effectively. follow up on Audit Reports