8.5. Advice Given by the Investment Advisory Committee
Section 29 of Act 815 mandates the creation of an Investment Advisory Committee to formulate and to provide broad guidelines and overall management strategies to the Minister of Finance relating to the Ghana Petroleum Funds. The Investment Advisory Committee is expected to submit its recommendations to the Minister of Finance who is required to submit investment advice it receives to Parliament for approval.
According to the Bank of Ghana, the Investment Advisory Committee was formed on 22nd January, 2012 and by 13th March, 2012 it had met two times. Apparently with the Investment Advisory Committee’s formation being very recent, the Bank of Ghana has not received any advice from the Investment Advisory Committee nor has it received any written investment guidelines from the Minister of Finance and Economic Planning as prescribed in Section 25 (a) of Act 815.
The Bank of Ghana explained that it invested the Petroleum Funds based on discussions with the Minister of Finance and Economic Planning. This was necessary because by November 2011 when the investments were made the Investment Advisory Committee had not been established.
8.6. The Operational Management Agreement
Section 25(d) of the law requires the Minister of Finance and Economic Planning to enter into an Operational Management Agreement with the Bank of Ghana for the operational management of the Ghana Petroleum Funds. However, as at the time of writing this report, the Ministry and the Bank were still negotiating the terms of the Operational Management Agreement including the Bank’s service charge.
Under these circumstances, the Bank of Ghana stated that it invested the Ghana Petroleum Funds in what it described as conservative and safe investment vehicles – Euroclear Bonds, which was considered to be AAA rated.
However, the PIAC is of the view that the management of the Ghana Petroleum Funds without an Operational Management Agreement is inconsistent with the relevant provisions of Act 815. The Bank informed the PIAC that by April, 2012, all outstanding issues relating to the Operational Management Agreement would be settled and investment guidelines will be issued by the Minister of Finance and Economic Planning.
i. There was a compensating error in the transfers to the Ghana Heritage Fund and the Ghana Stabilization Fund deviating from the provisions prescribed in Act 815. The Ghana Heritage Fund was under-declared by GHS 9 million whilst the Ghana Stabilization Fund was over-declared by the same amount.
ii. The Investment Advisory Committee and the Minister of Finance and Economic Planning have not provided any investment advice or Investment Guidelines respectively for the investment of Ghana Petroleum Funds. The Committee is of the view however, inspite of this shortfall, that since the Investment Advisory Committee was recently inaugurated and thus barely started its work, the types of investments made by the Bank were appropriate under the circumstances.
iii. The Minister of Finance and Economic Planning is yet to sign the Operational Management Agreement with the Bank of Ghana for the operational management of the Ghana Petroleum Funds. Therefore the current role played by the Bank in the investment of the Ghana Petroleum Funds was done outside of such an agreement.
THE ROLE OF INSTITUTIONS
The PIAC looked at the roles assigned to each of seven key state institutions with responsibility for the management of petroleum revenues in Ghana under Act 815. It assessed their compliance with the provisions thus far.
It found that most of the institutions have not completely fulfilled the mandate provided for them in the Act.
9.2. The Ministry of Finance and Economic Planning
The Minister of Finance and Economic Planning has various roles defined in several parts of Act 815. These include, but are not limited to, the choice of priority areas for spending of petroleum revenues, establishing operational agreements with other state institutions, reporting on petroleum production, revenues and expenditure, developing investment policies and the regulations for the effective implementation of Act 815.
Overall we observed that the Ministry largely adhered to its obligations during the period under review. However it still has some outstanding activities to fulfil to ensure that all the processes and institutions for the effective management of Ghana’s petroleum revenues are in place. We therefore urge them to expedite the necessary actions.
9.3. The Auditor-General
The main role of the Auditor General is captured under Section 45 (1) of the Act which requires the Auditor General to audit and to submit to Parliament a report not later than three months after the receipt of the financial statements and other relevant documents. However, the Bank of Ghana reported to the PIAC that no audit has been conducted by the Auditor General. In the words of the Bank of Ghana, the Auditor General has to come to the Bank to conduct such an audit. This assignment is yet to be undertaken by the Auditor General, who will also publish the reports on the Petroleum Funds within thirty days after submission to Parliament.
9.4. The Bank of Ghana
Section 28 of Act 815 requires the Bank of Ghana to perform specific functions with respect to Ghana Petroleum Funds.
Section 28 (2) of Act 815 requires the Bank to publish two times a year its reports on the Ghana Heritage Fund and the Ghana Stabilization Fund in two state-owned national daily newspapers, but this has not been done. The failure to publish such reports in two national dailies might be attributed to the Bank’s assumption that the Ministry of Finance and Economic Planning was responsible for that. The Bank had, however, complied with other provisions in Section 28 (2) to publish on its own website reports on its activities and the performance of the Ghana Petroleum Funds.
In the view of the PIAC, except for a misunderstanding over who is responsible for publishing the annual reports by the Bank in two state owned newspapers, the Bank has performed most of its roles. According to the Bank, it had created a Ghana Petroleum Funds Secretariat in respect of which it had spent $60,000.
9.5. Ghana Revenue Authority
Section 3(1) of Act 815 empowers the Authority to assess and collect petroleum Revenue due the Republic of Ghana. The Authority has collected oil revenues due the state. Although the GRA is still auditing the cost data of the Jubilee partners, its preliminary assessment showed that the companies are not in a tax-paying position. The authority has informed the Committee that is has an ongoing capacity training programme for its staff.
The role of Parliament as captured in Act 815 means it has responsibility to:
a. Approve the Benchmark Revenue, the Annual Budget Funding Amount and transfers to the Ghana Petroleum Funds;
b. Approve ceiling on the Ghana Stabilization Fund;
c. Approve the programme of activities of the National Oil Company every year;
d. Approve of transfers to GNPC; and
e. May approve after fifteen years from the commencement of this Act the spending of interest accrued on the Ghana Petroleum Funds by simple majority.
Parliament executed its mandate by giving all the approvals required by it under the law.