Newly passed Local Governance Act, 2016, is expected to give powers to the District Assembly Common Fund (DACF) Administrator to invest in securities temporarily, pending the full release of funds to the districts, the chairman of the local government committee in Parliament, Dominic Azumah, has said.
His comments follow the passage of the Local Governance Act, 2016 by Parliament, with some of the provisions in the act empowering the administrator to invest the Common Fund.
Government securities are debt instruments that governments issue to raise capital. Essentially, a government security is a loan an investor makes to a government.
In return, the government pays the investor interest on set dates, and a return of principal when the security reaches its maturity date. Examples include savings bonds, treasury bills and notes. Governments use securities to pay for infrastructure development and other projects.
Mr Azumah indicated that the decision came from the Ministry of Finance to the Common Fund Administrator for disbursement to the district assemblies.
“In a situation where the monies are released by installments and the first installment is not being able to be disbursed to all the assemblies at a go, those monies can be invested in securities temporarily, pending when the full release is coming and with all the interest accruing from it is added to the Fund for disbursement to the district,” Mr Azumah said.
If the Administrator knows that for the first quarter he is going to get Gh?400m, then a letter from MoFA comes to say: you are collecting Gh?400m, but the release we are going to make to you is Gh?200 for the first installment, that Gh?200m might not be able to serve all the district assemblies, so he is now advised through the law to invest in securities. If by two or three weeks’ time, the Finance Ministry releases the next and last installment of the Gh?200m, that is the total amount for the quarter, the money which has being invested will be withdrawn, [together with] all the interest and disbursed to all the districts”.
If an investment accrues, say, Gh?50m, it will be added to the Gh?400m and disbursed across board, Mr Azumah explained.
Previously, he said, there was an ambiguity as to what to do with the part payment, stressing that if the provision was not inherent, the money will be lying idle in the bank.
The Bill, is now awaiting Presidential assent to become a law.
“The Administrator may invest the monies in the Common Fund in securities or in a manner approved by the Minister responsible for Finance, pending the distribution of monies in the Common Fund,” the bill states.
The bill further states that the expenses incurred by the Administrator shall be a charge on the Consolidated Fund. Charges, including bank charges on transfers and charges on interest, shall be charged on the Common Fund.
On the account and audit of the Common Fund, the Administrator is expected to keep books of account and proper records in relation to the accounts of the Common Fund in the form approved by the Auditor-General.
The Administrator, according to the bill, shall submit the accounts of the Common Fund to the Auditor-General for audit within three months after the end of the financial year.
The Auditor-General shall, not later than three months after the end of the financial year, audit the accounts and forward a copy of the audit report to Parliament, the bill indicates.
Additionally, the administrator is expected within one month after the receipt of the audit report, to submit an annual report to Parliament, covering the activities and the operations of the Fund for the year to which the report relates.
“The annual report shall include the report of the Auditor-General and shall include the manner in which the Administrator has distributed the monies lodged in the Common Fund.”