Public Sector Accounting – Key PFM Principles of Ghana

Introduction

Most people assume the government’s financial system, while complex, operates on logical, straightforward principles. But what if the real rules shaping how the nation’s money is managed are not what they seem? What if the national wallet isn’t one big pot, and the ultimate financial watchdog has been deliberately weakened?

This article pulls back the curtain on that system.

What follows are four key takeaways that reveal the surprising realities of public finance. They explain why government financial management is fundamentally different from a private business, how the nation’s wallet is structured, and where the critical points of failure in the system often lie.

1. It’s Not About Profit, It’s About People

The first and most fundamental principle of public sector finance is that its primary objective is not to maximise profit but to deliver public welfare. Unlike a private corporation focused on shareholder wealth, government entities are designed to provide essential goods and services to citizens, often at a low cost or entirely for free. This non-profit motive is the bedrock of a functioning society.

A fire service, for instance, doesn’t present a bill for each water tanker used to extinguish a house fire. The government builds roads, schools, and hospitals in communities that could never afford to fund such projects on their own. Similarly, when a policy is enacted to distribute free sanitary pads, the goal is to address a social need and remove barriers to education and health, not to generate revenue.

This mission is critical because it ensures that all citizens, regardless of their individual ability to pay, have access to the necessities and protections required for a safe and dignified life. The success of a public entity is measured not in profit margins, but in the well-being and progress of the people it serves.

2. The Nation’s Wallet Is Actually a Collection of Earmarked Money Jars

But if the goal is public welfare, how is the money organised to achieve it? The answer is surprisingly fragmented. A common misconception is that all government revenue flows into one giant pot to be spent as needed. While a central account called the Consolidated Fund exists, the government also operates numerous other public funds established by law for very specific, dedicated purposes.

The following are some of the key elements of public funds, each with a distinct mission:

• District Assembly Common Fund: A constitutionally mandated fund that allocates a percentage of national revenue directly to local governments for development projects. A minimum of 5% of the national revenue for the year (usually, total tax revenue).
• Ghana Education Trust Fund (GETFund): Established to supplement government funding for educational infrastructure, scholarships, and student loans.
• Road Fund: Financed by levies on fuel and tolls, this fund is dedicated to the maintenance and rehabilitation of public roads.
• Sinking Fund: A crucial mechanism designed to prevent the government from running what is effectively a “Ponzi scheme”—borrowing new money just to repay old debts. Instead of waiting for a loan to mature, money is regularly set aside and invested, so that funds are available for repayment without resorting to new borrowing.

3. The Ultimate Financial Watchdog Has Its Leash Pulled

Constitutionally, Parliament is mandated to be the ultimate financial watchdog, providing critical oversight of the executive branch’s management of public funds. It must approve all taxes, budgets, and borrowing.

However, in practice, this oversight has largely failed, allowing financial mismanagement to occur with official approval.

The key reasons for this systemic weakness can be synthesised into three main points:

• Political Partisanship: Parliamentarians often vote along party lines instead of in the objective financial interest of the country. Decisions become tests of party loyalty, with extreme measures taken to enforce the party line, as seen in the controversial passage of the E-levy, where even sick members were reportedly flown in to secure the vote.
• Lack of Technical Skills: Scrutinising a national budget or complex loan agreements requires deep financial and economic expertise. Many parliamentarians lack the specialised technical skills needed to effectively challenge the proposals put forth by the executive branch.
• Conflict of Interest: A significant number of government ministers are also sitting members of Parliament. This creates a fundamental conflict, as these individuals are tasked with providing oversight on the very executive branch in which they serve. They are, in effect, overseeing themselves. 

4. The Three Most Powerful Financial Jobs Aren’t The Same

To an outsider, the roles of the Minister of Finance, the Controller and Accountant General, and the Auditor General might seem to blur together. However, they are distinct positions with highly specific, separate responsibilities.

Understanding this division of labour is essential for knowing who to hold accountable for what.

Here is a simple breakdown of their core functions:

• The Minister of Finance: This is the chief advisor to the President on all economic matters. The Minister is responsible for developing the nation’s fiscal policy, creating the annual budget, and managing government debt. This role is primarily about strategy and policy.
• The Controller and Accountant General: This is the nation’s chief accounting officer. This individual is responsible for compiling the government’s official financial statements, managing the actual disbursement of funds from the treasury, and approving the accounting systems used by all public entities. This role is about execution and record-keeping.
• The Auditor General: This is the nation’s chief auditor. The Auditor General’s mandate is to independently examine the accounts of all public entities—including foreign transactions—to ensure that money is spent legally, efficiently, and for its intended purpose. This office then reports its findings directly to Parliament, acting as an independent check on the entire system.

Clarifying these roles is crucial. When a budget policy fails, accountability lies with the Minister of Finance. When funds are mismanaged or public accounts are inaccurate, the Controller and Accountant General has questions to answer. And when illegal or wasteful spending is uncovered, it is the Auditor General’s report that brings it to light.

In addition to these, there are other key public officers and institutions whose roles must also be understood as they form part of the Public Financial Management architecture of Ghana, as per the Public Financial Management Act 2016, Act 921 and other Acts of Parliament.

These include the Principal Spending Officer (the senior-most administrative head of an entity), Principal Account Holder (the politically appointed person to an entity), the Internal Audit Agency, Office of the Special Prosecutor and Parliament.

Conclusion

The inner workings of public finance are far more complex, politically charged, and systematically fragile than they appear on the surface. Understanding that the government’s mission is welfare, not profit, that its finances are compartmentalised, that its watchdogs are often compromised, and that its key financial roles are distinct, empowers us to see beyond the headlines. This knowledge transforms us from passive taxpayers into informed citizens capable of asking the right questions.

Knowing where the system’s weaknesses lie, how can citizens better demand the transparency and accountability required for sound financial governance?

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