Public Expenditure

management and Control

LECTURER:
ALHASSAN YUSIF TRAWULE
0242 732976 / alhassantrawule@gmail.com
Outline
• Types and characteristics of public expenditure
• Expenditure classification (Chart of Accounts)
• Tools for Expenditure management and control (Warrants and
Quarterly Ceilings, Commitments, Virement, Chart of Accounts,
GIFMIS),
• Payment processes and Platforms (treasury single account, payment
process on GIFMIS, payment platforms EFT)

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Public Expenditure
• Public expenditure consists of withdrawal from public funds based on
legitimate authority and appropriate evidence of its application
• It is the aggregate of central government (Consolidated Fund)
spending, MDAs spending, MMDAs spending and other public
institutions of state
• A withdrawal that is wrongly charged on the public funds will be
disallowed by the AG and surcharged to the responsible public officer

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Types of Public Expenditure
• Public expenditure may be categorized as:
• Statutory expenditure and discretional expenditure
• Recurrent expenditure and capital expenditure
• Transfer expenditure and non-transfer expenditure
• Actual expenditure and committed expenditure
• Planned expenditure or unplanned expenditure
• Functional expenditure and economic expenditure

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Statutory & Discretional Expenditure
• Statutory Expenditure
• Expenditures charged on public funds by the Constitution and other enactments.
• The government in power has no control over those expenditures.
• Examples include
• Interest payment
• Debt repayment
• Pension entitlements (Under CAP 30 and ESBs)
• Statutory transfers - DACF, GETFund, NHIS, GIIF etc.
• Emolument of certain class of public officers (Article 71)
• Court judgements (nugatory cost)
• Discretional expenditures
• They are determined by the government in power and require parliamentary
approval prior to spending.

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Recurrent and Capital Expenditure
• Recurrent expenditure
• Expenditures for which the outlay and the benefit is expected to be recurrent.
• Example include compensation for employees, goods and services (travel and
transport etc.), interest expense
• Capital Expenditure
• Expenditures for which the benefits extends beyond the year of expenditure.
• They have longer useful life
• Examples: purchase of motor vehicles, construction of roads etc.

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Transfer and Non-transfer Expenditure
• Transfer Expenditure
• Expenditures that are made without any direct economic benefit in exchange.
• It is also known as non-exchange payments
• Examples: subsidies, interest, social benefit cost, grants to other government
etc.
• Non-transfers (Exchange)
• These are exchange based expenditures
• Examples include: wages & salaries, travel and transport, purchase of vehicle
etc.

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Actual & Committed Expenditure
• Actual expenditure
• Expenditure that results from obligation on the public sector entity.
• Commitment expenditure
• Expenditure that is implied from decisions taken by management without any
resulting obligation on the entity.
• Example: an order for supply, contract singed etc.
• Commitment expenditure will eventually become actual expenditure as soon
as the commitment is successfully carried out

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Planned and Unplanned Expenditure
• Planned Expenditure
• Expenditure that has been budgeted prior to spending.
• Unplanned Expenditure
• Expenditures that are notional in nature and therefore not included in the
budget.
• Example: Consumption of fixed capital, Foreign exchange difference,
Contingent expenditure etc.

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Functional & Economic Expenditure
• Functional expenditure
• Expenditure classified based on the purpose or function for which is has been
incurred.
• Example, public service, defense, general services, economic services, etc.
• Economic expenditure
• Expenditure classified based on nature of economic transaction
• Example: compensation for employees, goods and services, interest, subsidies
etc.

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EXPENDITURE CLASSIFICATION
• Classification of accounts is a very important process in managing
public expenditure
• Under the PFMA and PFMR, the CAG is responsible for classifying
accounts in the entire public sector
• This is achieved through a Chart of Accounts
• The design of the chart is guided by international practices such as
the GFS Manuals

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Chart of Accounts
• A chart of accounts is a critical element of the PFM framework for
classifying, recording and reporting information on financial plans,
transactions and events in a systematic and consistent way.
• The chart of accounts is a set of coding elements used to classify, record,
budget and report on all financial transactions in the most suitable form for
making informed and good financial decisions
• It is used to organize the finances of the entity and to segregate
expenditures, revenue, assets and liabilities in order to give interested
parties a better understanding of the financial health of the entity.
• Government of Ghana expenditure classification per the chart of accounts
is dynamic. We have
• MTEF classification (1999 2011)
• GIFMIS classification (2012 to date)

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COA - Objective
• Effective COA achieves these objectives:
• Control
• Accountability
• Budget management (eg. facilitation of virement)
• Financial Planning and management
• Management information systems
• General purpose financial reporting
• Statistical reporting

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Principles of developing chart of accounts
• COA should meet the following principles
• Comprehensiveness
• Adequate granularity (combinations of many data for control)
• Mutual exclusiveness (Unique and avoid confusing in recording)
• Relevance (avoid redundancy of a segment of a code)
• Internal consistency (consistent numbering and structure throughout the
framework)
• Unified framework (same structure and code across the entire public sector)
• Scalability (room for spare capacity for future requirements)

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Factors to consider in designing COA
• The following factors must be considered:
• Institutional framework for financial transaction processing and accounting.
• Transaction processing and accounting platform.
• Accounting basis (Cash basis or Accrual basis).

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Government Financial Statistics Manual
(GFSM)
• Government finance statistics (GFS) are an economic representation
of a government's financial activity
• GFS are the International Monetary Fund’s preferred standard for
publishing financial statistics on government
• The concepts underlying GFS are consistent with those used to
produce balance of payments and national accounts statistics
• The first edition of the GFS Manual was in 1986; second edition was
in 2001; and the current edition is 2011

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GFS
• Purpose
• The primary purpose of the GFS Manual is to provide a comprehensive
conceptual and accounting framework suitable for analysing and evaluating
fiscal policy, especially the performance of the general government sector
and the broader public sector of any country
• The GFS system is designed to provide statistics that enable policymakers
and analysts to study developments in the financial operations, financial
position, and liquidity situation of the general government sector or the
public sector in a consistent and systematic manner
• The GFS analytic framework can be used to analyse the operations of a
specific level of government and transactions between levels of
government as well as the entire general government or public sector
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GFS Manual adoption in Ghana
• The manual which is an economic and accounting policy developed by
the International Monetary Fund is accrual accounting based and
provides complete coverage of government economic and financial
activities
• It also provides a standard for the compilation and presentation of
fiscal statistics
• The Budget Division in conjunction with the Controller and
Accountant General’s Department of the Ministry of Finance and
Economic Planning (MoFEP) is adopting the Government Finance
Statistics Manual (2014)

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GFS classification structure
• GFS structure provides information on:
• Economic Entity
• Funding Classification
• Functional Classification
• Organization Classification
• Program and Sub Program Classification (Themes, Key Focus Areas, Strategic
Codes)
• Economic Classification (Expenditures, Revenues, Assets, Liabilities)

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Chart of Accounts
• COA has been changing over the years to match the changing PFM
environment, particular the approach to budgeting
• We had MTEF classification system based on Activity based budgeting
from 1999 2011
• In 2012 we adopted the GIFMIS classification based on the GFS
requirement and the classifications have been updated in 2018
• GIFMIS classification has been based on Programme based budgeting

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MTEF Classification
• This classification system categorized public expenditure into four
items:
• Item 1: Personal Emolument
• Item 2: Administration Activity Cost
• Item 3: Service Activity Cost
• Item 4: Investment Activity cost.

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GIFMIS Classification
• The 2018 edition of the GIFMIS has 12 segments:
1. Institution – 3 codes
2. Funding - 5 codes
3. Function of Government – 5 codes
4. Organisation - 10 codes
5. Policy Objectives - 6 codes
6. Program / Sub Program Objective - 8 codes
7. Project- 7 codes
8. Activity / Operations – 6 codes
9. Location- 7 codes
10. Spare 1 – 6 codes
11. Spare 1 – 6 codes
12. Natural Account – 7 codes (Assets, Liabilities, Revenues and Expenses)

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Expenditure Classification
• The COA classifies expenditure as a natural account with 8 items as
follows:
• Item 1: Compensation
• Item 2: Use of Goods and services
• Item 3: Consumption of fixed capital
• Item 4: Interest
• Item 5: Subsidies
• Item 6: Grant
• Item 7: Social benefits
• Item 8: Other expenses

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Compensation for employees
• It has four sub-items
• Established Post
• Non established post
• Other allowances
• National pension contribution

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• Non-established post
• Daily rated
• Monthly paid & casual labour
• Probation
• Recruitment
• Secondment
• Limited Engagements

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• Other allowances
• Motorbike Allowance
• Bicycle Maintenance Allowance
• Car Maintenance Allowance
• Bereavement Allowance
• Book Subsidy
• Committee of Council Allowance
• Continuous Judicial Education Allowance
• Funeral Grants
• Journalist Allowance
• Judicial Service Committee Allowance
• Jurors Allowance
• Commuted Leave Allowance
• Night Watchman Allowance
• Protocol Commission
• Rations

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• Other allowances
• Rotational Head of Department Allowance
• Rules of Council Allowance
• Rules of Court Allowance
• Steering Committee Allowance
• Top-Up Allowance
• Training Allowance
• Duty Allowance
• Clothing Allowance
• Board Allowance
• Acting Allowance
• Cashier Allowance
• Commissions Meeting Allowances
• Professional Allowance

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• Other allowances
• Entertainment Allowance
• Fuel Allowance
• Guide Allowance
• Housing Subsidy/Allowance
• Risk Allowance
• Overtime Allowance
• Tools Allowance
• Uniform and Protective Clothing Allowance
• Per Diem & Inconvenience Allowance
• Watchman Extra Days Allowance
• Basic PE Related Allowances
• Traditional Authority Allowance

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• Other allowances
• Commissions
• Travel Allowance
• Transfer Grants
• Out of Station Allowance
• Domestic Servants Allowance
• Foreign Service Allowance
• Utility Allowance
• Special Allowance/Honorarium
• Responsibility Allowance
• Child Allowance
• Cost of Living Allowance (COLA)

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• National pension contribution
• 13% SSF Contribution
• Gratuity
• Pension
• End of Service Benefit (ESB)
• Rounding
• Superannuation
• NHIL
• 40% FAMILY PLAINNING

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Use of Goods and services
• It is classified as follows
• Materials
• Utilities
• General cleaning
• Rental and Lease
• Travel and transport
• Repairs and maintenance
• Training, seminar and conferences
• Consultancy
• Special services
• Other charges
• Emergency
• Insurance

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Materials
• Printed Material & Stationery
• Office Facilities, Supplies & Accessories
• Refreshment Items
• Medical Supplies
• Drugs
• Oils and Lubricants
• Electrical Accessories
• Construction Material
• Spare Parts
• Specialised Stock

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• Other Office Materials and Consumables
• Uniform and Protective Clothing
• Feeding Cost
• Rations
• Textbooks & Library Books
• Chemicals & Consumables
• Teaching & Learning Materials
• Sports, Recreational & Cultural Materials
• Household Items
• Purchase of Petty Tools/Implements
• Clothing and Uniform

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Utilities
• Electricity charges
• Water
• Telecommunications
• Postal Charges
• Sanitation Charges
• Armed Guard and Security
• Fire Fighting Accessories
• Gas and Heating

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General cleaning
• Cleaning Materials
• Contract Cleaning Service Charges

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Rentals
• Office Accommodations
• Residential Accommodations
• Rental of Office Equipment
• Hotel Accommodations
• Rental of Land and Buildings
• Rental of Vehicles
• Rental of Other Transport
• Rental of Furniture & Fittings
• Rental of Plant & Equipment
• Rentals of Computers and Accessories
• Rental of Network & ICT Equipment's
• Rental of Towing Vehicle
• Lease of Communication Gadgets
• Lease of Vehicle Lease of office equipment's

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Travel and transport
• Overseas Medical Treatments
• Maintenance & Repairs -Official Vehicles
• Fuel & Lubricants -Official Vehicles
• Car Rental/Leasing
• Running Cost -Official Vehicles
• Freight and Handling Charges
• Running Cost of Presidential Aircraft
• Running Cost of Fighting Vehicles
• Other Travel & Transportation
• Night allowances
• •Local travel cost
• Mileage Allowance
• •Local Hotel Accommodation
• Foreign Travel-Per Diem
• Foreign Travel Cost and Expenses
• Toll Charges and Tickets
• Fuel Allocation To Waste Management Department

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Repairs and maintenance
• Roads, Driveways & Grounds
• Repairs of Residential Buildings
• Repairs of Office Buildings
• Maintenance of Furniture & Fixtures
• Maintenance of Machinery & Plant
• Maintenance of General Equipment
• Minor Repairs of Schools/Colleges
• Maintenance of Presidential Aircraft
• Maintenance of Fighting Vehicles
• Drains

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Repairs and maintenance
• Markets
• Public Toilets
• Schools/Nurseries
• Traditional Authority Property
• Recreational Parks
• Sanitary Sites
• Street Lights/Traffic Lights
• Cemeteries
• Elevator(Lift)
• Air conditioners
• Security Gadgets
• Maintenance of Computer Software

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Training, seminar and conferences
• Training Materials
• Visits, Conferences / Seminars (Local)
• Examination Fees and Expenses
• Hire of Venue
• Hotel Accommodation
• Library & Subscription
• Recruitment Expenses
• Refreshments
• Seminars/Conferences/Workshops/Meetings Expenses
• Staff Development
• Public Education & Sensitization
• Malaria Expenses

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Consultancy
• Local Consultants Fees
• External Consultants Fees
• Other Consultancy Expenses
• Contract appointments
• Consultants Materials and Consumables

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Special services
• Service of the State Protocol
• Official Celebrations
• Head of State End of Year Activities
• Assembly Members Special Allow
• Assembly Members Sittings Allow
• Unit Committee/T. C. M. Allow
• Canteen Services
• Property Valuation Expenses
• Operational Enhancement Expenses
• Trade Promotion / Publicity

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Other charges
• Bank Charges
• Bank Errors
• Audit Fees
• Exchange Differences
• Rounding
• NHIL – Penalties
• NHIL - Interest
• Arrangement Fee on Loans
• Participation Fee on Loans

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Emergency
• GMP Field Operations
• Refurbishment Contingency
• Emergency Works
• Security Forces Contingency (election)

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Insurance
• Insurance - Residential Accommodation
• Insurance - Office Accommodation
• Insurance - Property, Plant and Equipment
• Insurance - Official Vehicles
• Owners Liability

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3. Consumption of fixed capital
• Depreciation - Lands & Buildings
• Depreciation - Transport (Motor Vehicles, Airplanes, Trains, Ships &
Vessels)
• Depreciation - Furniture and Fittings
• Depreciation - Plant and Equipment
• Depreciation - Other Assets

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4. Interest
• Non-Residents
• External Statutory Payments - Interest
• External Statutory Payments - Principal
• Residents
• Internal Statutory Payments - Interest
• Internal Statutory Payments - Redemption

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5. Subsidies
• To public corporations
• To non financial public corporations
• To financial public corporations
• Oil Subsidy
• Utility Subsidy
• Capitation Grants
• Schools Subsidy (BECE and SHS)
• Feeding Grant
• Fertilizer Subsidy
• To private enterprises
• To non financial private enterprises
• To financial private enterprises

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6. Grants
• District Assemblies Common Fund
• Ghana Educational Trust Fund
• Road Fund
• Petroleum Related Fund
• GOG Shared Revenues
• DDF
• Goods and Services Payments – Transfers to MMDAs
• Compensation Payments – Transfers to MMDAs
• MSHAP
• School Feeding Program
• CWSPII

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• School Feeding Program
• CWSPII
• HIV/AIDS
• Poverty Alleviation
• NORST
• DACF –Assembly Transfer Capital
• DACF –MP Capital
• GOG Asset Transfers to MMDAs
• Research and Innovation Facility

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7. Social benefits
• Social security benefits in cash
• National Health Insurance Scheme
• Social assistance benefits in cash
• Exempt for Aged, Antenatal & Under 5 Years
• Refund for Medical Expenses (Paupers/Disease Category)
• Employer social benefits in cash
• Workman compensation
• Staff Welfare Expenses
• Refund of Medical Expenses

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8. Other expenses
• Insurance and compensation
• Professional fees
• Customs Duties
• DA’s
• UN - Peace
• Court Expenses
• Awards & Rewards
• Donations
• Contributions
• Tuition Fees
• Scholarship/Awards

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• Special Operations (COS)
• Special Operations (NSC)
• Special Operations (Peace Keeping)
• Special Operations (Docking of Ships)
• Refuse Lifting Expenses
• Civic Numbering/Street Naming
• Scholarship & Bursaries
• Grants to Employees
• Grants to Households
• National Awards
• Council Tax

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Expenditure control
• The objective of expenditure control is to ensure that public
resources are spent as intended, within authorized limits, and
following sound financial management principles
• Fiscal rules, medium term budget plans, and annual budgets are
meaningless if expenditure cannot be controlled during execution
• The primary focus of an expenditure control system is to ensure that
the level and allocation of government expenditure reflect the will of
the legislature as voted for in the budget

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• Expenditure controls outcomes include:
• sound financial management principles,
• ensuring that public resources are utilized efficiently,
• incurred obligations are cleared in a timely manner,
• abuse/ misappropriation of public money is prevented, and
• private actors compete on a level playing field for government
contracts

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General features of contemporary
expenditure control system
• An increased focus on ex ante controls over expenditure commitments rather
than ex post controls only at the payment stage of the expenditure cycle
• A shift from controlling only cash expenditures towards controlling the
accumulation of accrued liabilities as well
• Greater devolution of responsibility for routine expenditure controls towards
ministries and agencies and a more risk based approach to the exercise of
centralized controls
• Stronger reliance on internal and external audit to ensure the integrity of
financial control systems in ministries and agencies and
• An emphasis on transparency and accountability to the legislature and the public
for expenditure overruns
• Increasing deployment of e-governance systems to ensure effective linkages in
the control elements

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Expenditure Process/cycle

Authorization Apportionment of Reservation

•Authorization given through the
Appropriation Act
authorization Funds are reserved for those
Commitment
expenditures that are not Funds reserved for orders
•Allotment to periods (by MOF) committed. Eg. statutory
and to sub units (by Sector and contracts
payments
Minister)

Payment Payment Order
Authorization for
Payment made via EFT,
payment after satisfying
cheques or cash that funds are available
Verification or
certification
Responsible officer verify
and satisfy that supplies are
proper and liability has been
created

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Expenditure control mechanisms
• There are several tools applied to expenditure control and these include:
• Budget control / appropriation control,
• Warrants and Quarterly Ceilings controls / drawing limit controls. PSO made request
for warrant through the GIFMIS system.
• Commitment control
• Virement
• Payment controls
• Accounting controls
• Payroll controls
• Procurement controls
• Chart of Accounts, classification control
• GIFMIS/e-governance control

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Structures of controls
• Expenditure controls take place at different levels of government and
this include:
• Legislative control - Approval of the financial estimates of the executive and
ensuring strict compliance to the budget approved
• Judicial control - Court processes that ensure that public official indicted for
malfeasance and abuse of public funds put before it are tried and punished to
serve as deterrent
• Administrative control - Controls instituted by the executive to ensure
effective use of public resources. It includes treasury controls, ministerial
controls and departmental controls

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Payment for goods, works and services
• Responsibility for Payment
• The PFMR provides that the PSO of a covered entity is personally responsible
for making payments.
• In making payment, the PSO is required to ensure that:
• Payment is base on valid, accurate and legal claims
• Evidence of services received, certificate for work done and any other supporting
documents exists
• Commitment for the payment has been approve through LPO generated through GIFMIS
• There is sufficient unspent amount of the appropriation for making payment.

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Payment process
• GIFMIS shall be used from commencement of the procurement
process through to payment.
• Payment process for goods, services and works involves five stages:
• 1. Physical output of woks and supply inspection
• 2. Certification of completion of works or supply
• 3. Recording of invoices and supporting document
• 4. Recording of approval of payment voucher
• 5. Making payment

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Payment process
Stage 1: Physical output of woks and supply inspection
• PSO is require to inspect the physical output of works and supply in the
field prior to certifying the completion of works and supply of large scale.
• Rule is that Expenditure Process/cycle inspection should be carried out
before a progress payment under a contract is made and when works or
supplies are fully completed.
• PSO should not certify the completion of works unless:
• The contract complies with ALL provisions of the contract
• The size, quality and performance of the physical output is consistent with the design
and specifications.
• PSO is permitted to authorize an officer with adequate expertise in the
relevant field to undertake the inspection on his behalf.

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Stage 2: Certification of Completion
• PSO upon completion of works or supply of goods or services prepare a
certificate statement in respect of works and stores received
• The certificate statement should include
• The quantity and particulars of the works and supply
• The method and results of inspection, and
• Any evidence supporting the results
• The certification statement should also include necessary remedial actions
for inconsistent output against the contract
• Remedial actions may include
• Partial rejection and payment for portion accepted
• Full rejection, hence no payment
• Any other action that may be necessary to ensure complete delivery
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Stage 3: Recording invoices and supporting documents
• Upon issuing the certification statement, PSO is required to undertake
the following procedures:
• Record details of the invoices in the GIFMIS
• Upload the certification statement and other supporting documents onto the
GIFMIS

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• Stage 4: Recording approval of PV
• Every payment should be accompanied with a payment voucher authorized
by head of account an approved by the PSO on the GIFMIS.
• In respect of the authorisation and approval of the PV, both the PSO and Head
of Accounts should ensure that:
• Claims for payment are valid, accurate and legal
• Commitment has been approved through LPO or EO under the GIFMIS
• An invoice, a certification statement and a complete set of supporting documents have
been recorded in the GIFMIS.
• Approval for each PV must be recorded on the GIFMIS

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Stage 5: Payment
• All payment for expenditure should be made through the GIFMIS.
• Approved methods of payments are:
• Electronic funds transfer (EFT) for 3rd party transactions
• System cheques or other electronic means for withdrawals of internal
payments (eg. imprest recoupment) and allowances
• Physical cash disbursement from imprest and payment of allowances to
ultimate individual beneficiaries.
• Approved payment shall be release by CAG on the GIFMIS to the
covered entity, where it relates to consolidated fund.
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• Responsibility of PSO
• Ensure that only names of persons who are eligible to receive payment for
work done are kept on the salary payment voucher,
• Keep records of nominal roll of the respective covered entity in a manner that
ensure that the correct amount of emolument is paid
• Ensure that personnel records are updated and validated within GIFMIS
before payroll is run
• Ensure immediate stoppage of salary and notify CAG.
• Institute control of compensation by ensuring segregation of function relating
to authorisation of appointment, payment, recording payments.
• Ensure that appointments, promotions, salary increases, performance
bonuses etcare within the amounts of the line item in the budget.

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• PSO or head HR or assigned officer with HR must validate the payroll prior
to payment of salary by CAG.
• Rationale for Payroll validation include:
• Ensure that only employees belonging to the Unit are on the salary payment voucher
• Declaration of names of employees on posting or transfer as unknown to prompt
steps to suspend the employees from the payroll.
• Declaration of missing names for employees at post but not found on the payment
voucher to prompt steps to reinstate their names.
• Notification for retirements, resignation, termination, vacation of post or death to
prompt deletion of names.
• Recovery of any overpayment of salaries
• Ensure that new recruits and those newly posted or transferred to the unit are
reflected in the PV.
• Comply with any instructions given by CAG in relation to salaries.

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• Stoppage of Payroll payment
• PSO is responsible for ensuring immediate stoppage of payment of salaries to public
servants and notify CAG.
• Circumstances for Stoppage of Salary include:
• Death (day following date of death)
• Conviction of employee for offenses and sentence to imprisonment ( date of conviction)
• Leave without pay (date approval of leave)
• Dismissal or relief of post on administrative and other related grounds (date of dismissal or
relief)
• Vacation of post (date of vacation)
• Resignation or retirement (date specified in the relevant documents or the day of absence,
whichever is earlier)
• PSO should take actions to retrieve any unearned compensation and pay same into
the consolidated fund

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Payroll Deductions
• Deduction from salaries of employees shall be limited to the
followings
• Statutory deductions ( tax and SSF)
• Recovery for overpayment or benefit deduction for amount owed to
government.
• Fines, losses and damages determined through a disciplinary process
• Deductions permitted by law or courts
• Consent deduction ( must be approve by CAG before deduction)
• PSO or head of payroll processing unit of a covered entity shall obtain
the consent of the affected employee before making a discretionary
deductions.

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• Responsibilities of CAG
• May issue payroll instruction to the covered entities
• Ensure payment of employees on CAG’s payroll on date published by
CAG.
• Generates and transmit the Employee salary payment voucher to
each management unit after payroll test run.
• Ensure salary stoppage upon receiving notification from PSOs.
• Make deduction of payroll and pay deductions to the relevant
institutions with the statutory period

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