Ghana’s public finance transformation: The journey, lessons, and future of IPSAS adoption

Banku3 hours ago

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The landscape of public financial management in Ghana has been undergoing a quiet but profound revolution in the recent past. At the heart of this transformation is the adoption of the International Public Sector Accounting Standards (IPSAS) by Ministries, Departments, Agencies (MDAs), Metropolitan, Municipal, and District Assemblies (MMDAs), and State-Owned Enterprises (SOEs). This shift from traditional cash-based accounting to a modern, accrual-based system is more than just a technical accounting change; it is a fundamental step towards greater transparency, accountability, efficiency, effectiveness, and value for money and improved governance for the benefit of every Ghanaian.

The journey so far: A strategic march

Ghana’s IPSAS journey did not begin overnight. It has been a deliberate and phased process, championed by the Government of Ghana through the Ministry of Finance, spearheaded by the Controller and Accountant-General’s Department (CAGD), and hugely supported by the Institute of Chartered Accountants (ICAG).

The first major milestone was the adoption of the Cash Basis IPSAS in 2014 in the preparation of accounts. This was a crucial starting point, standardising how the government reported its cash inflows and outflows. It provided a clearer and more consistent picture of national budget execution and served as a necessary foundation for the more complex transition to come, which virtually came.

The ultimate goal, however, has always been the full implementation of the Accrual Basis IPSAS. This is the gold standard for public sector accounting worldwide. Unlike cash accounting, which records transactions only when cash is received or paid, accrual accounting recognizes economic events when they occur, regardless of cash movement. This means that for the first time, the government can accurately account for and report on its assets (like roads, buildings, and equipment) and its liabilities (such as Debts, pensions, and arrears). This journey towards full accrual adoption is well underway, with significant progress in policy development, capacity building, and the preparation of inaugural accrual-based financial statements for the government’s trial balance.

Key lessons learned along the way

The path to IPSAS implementation is complex, and Ghana’s experience has yielded invaluable insights:

1. Leadership and Political Will are Non-Negotiable: The transition to IPSAS is a massive, cross-governmental endeavour. Its success hinges on sustained commitment from the highest levels of government. The continuous support from the Ministry of Finance, the CAGD, and ICAG has been the single most critical success factor and deserves recommendation.

2. Capacity Building is a Continuous Process: IPSAS is a highly technical field. A significant challenge has been the need to build a critical mass of accounting and finance professionals across all MDAs and MMDAs who are proficient in accrual accounting. This has required, and will continue to require, massive investment in recruitment, training, and continuous professional development (CPD).

3. Technology is an Enabler, Not a Silver Bullet: Implementing IPSAS requires robust Financial Management Information Systems (FMIS). While Ghana has made strides with systems like the Ghana Integrated Financial Management Information System (GIFMIS), the journey has highlighted that technology must be supported by strong processes and skilled people. The system is only as good as the data entered into it.

4. The Challenge of Asset and Liability Valuation: One of the most daunting tasks has been the identification and valuation of the government’s vast portfolio of assets and liabilities. How do you value a decades-old bridge or a historical government building? This process has been painstaking but essential for true financial transparency. The Controller and Accountant-General’s Department has developed systems to record all state assets, including legacy assets, to help solve this problem. However, their implementation and enforcement remain major obstacles.

5. Change Management is Decisive: Resistance to change is natural. Moving from a familiar, long-established cash system to a new, complex accrual system requires careful change management to win the hearts and minds of all stakeholders, from accountants to policymakers.

Insights for the future: The payoff for Ghana

The full adoption of IPSAS is not an end in itself; it is a means to a much greater end. The insights it will provide are transformative:

Enhanced Decision-Making: With a complete picture of the government’s financial health, policymakers can make more informed decisions about infrastructure investment, debt management, and resource allocation. They will understand the true cost of service delivery and the long-term implications of today’s policies.
Strengthened Accountability and Transparency: IPSAS-compliant financial statements are easier for citizens, investors, and international partners to understand and compare. This deters corruption, builds trust in public institutions, and enhances Ghana’s credibility in the international financial markets.
Improved Debt and Resource Management: By having a clear view of both assets and liabilities, the government can better manage its debt portfolio and plan for future obligations, leading to greater fiscal sustainability.

Conclusion: Steadfast on the Path

Ghana’s journey towards full IPSAS adoption is a testament to its commitment to sound and transparent public financial management. While challenges remain, the progress made so far is commendable. The lessons learned are being incorporated into a more robust implementation strategy.

As the nation continues on this path, it is imperative that all stakeholders—Parliament, civil society, the media, and the public—support this crucial initiative. The ultimate destination is a Ghana where public finances are managed with the highest degree of professionalism and openness, fostering economic growth and ensuring that public resources are used effectively and efficiently for the development of our nation. The journey is demanding, but the destination—a more accountable and prosperous Ghana—is well worth the effort. Together, we can build the robust public financial management system that the citizens yearn for.

The author is a Member of the Institute of Chartered Accountants, Ghana.

By CA Baba Adam (Ph.D. Candidate)