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- 20 Marks
Question
a) Using public money to procure goods, works, and services to provide public services is a frequent but complicated decision of the Head of Procurement entities. It is required that such decisions should go through due process to attain value for money for the public. The Public Procurement laws are embodiments of core principles that govern the entire process. Procurement entities are therefore entreated to promote and secure these core principles in the conduct of public procurements. Non-compliance with these principles embedded in the law increases the risk associated with public procurement.
Required:
i) Explain SIX (6) general principles of public procurement that an officer in charge of procurement of goods, services, and works should consider in line with the Public Procurement Act 2016 (Amendment) Act 914. (6 marks)
ii) Discuss FOUR (4) risks associated with public procurement in the Ghanaian Public Sector. (4 marks)
b) IPSAS 32: Service Concession Arrangements: Grantor establishes the accounting and reporting requirements for the grantor in a service concession arrangement. In these kinds of arrangements, the grantor is a public sector entity. Service Concession arrangements in the public sector are characterized by binding arrangements that involve private sector participation in the development, financing, operation, and/or maintenance of assets used to provide public services. IPSAS 32’s intention is to create symmetry with IFRIC 12: Service Concession Arrangements on relevant accounting issues (that is, liabilities, revenue, and expenses) from the grantor’s point of view.
Required:
i) State and Explain TWO (2) conditions under which a grantor can recognize a Service Concession Asset. (4 marks)
ii) Explain any THREE (3) pieces of information that the grantor shall present and disclose in its Financial Statements. (6 marks)
Answer
a) Principles of Public Procurement:
i) General Principles:
- Competition: Opening procurement opportunities to all potential suppliers and contractors encourages competition, ensuring value for money. Competitive tendering should be the preferred option.
- Accountability: The procurement entity and the head of procurement are accountable to the public for their procurement decisions and must provide explanations for their actions.
- Transparency: The procurement process should be transparent, from the invitation to tender to the evaluation and selection of suppliers. This transparency ensures public trust and fairness.
- Fairness/Non-Discrimination: All potential suppliers should be treated fairly, with no discrimination based on gender, party affiliation, ethnicity, or religion. Only price and quality should be the deciding factors.
- Economy: The procurement process should aim to reduce costs while achieving the desired outcomes, ensuring that public funds are used efficiently.
- Efficiency: The procurement process should be conducted efficiently to achieve the intended procurement objectives without unnecessary delays or costs.
(6 marks)
ii) Risks Associated with Public Procurement:
- Overvaluation of Procurement Contracts: There’s a high risk of contracts being overvalued for personal gain, leading to waste of public resources.
- Procurement of Inferior Goods and Services: There is a risk of public entities procuring substandard goods and services that do not meet the required specifications, often due to corruption or incompetence.
- Conflict of Interest: Heads of entities and procurement officers might award contracts to companies they have personal interests in, compromising the integrity of the procurement process.
- Fake Procurement: There is a risk of payments being made for goods and services that were never procured, with the proceeds being misappropriated.
(4 marks)
b) Service Concession Arrangements (IPSAS 32):
i) Conditions for Recognizing a Service Concession Asset:
- Control of Services: The grantor must control or regulate the services that the operator must provide with the asset, including who receives the services and the prices charged.
- Control of Residual Interest: The grantor must control any significant residual interest in the asset at the end of the service concession arrangement term, through ownership, beneficial entitlement, or otherwise.
(4 marks)
ii) Information to be Disclosed in Financial Statements:
- Description of the Arrangement: A comprehensive description of the service concession arrangement, including significant terms that may affect future cash flows, should be disclosed.
- Nature and Extent of Rights and Obligations: This includes the rights to use specified assets, receive specified services, or receive specified assets at the end of the arrangement, as well as any obligations to provide the operator with access to assets or revenue-generating opportunities.
- Changes in the Arrangement: Any changes in the service concession arrangement during the reporting period should be disclosed, including the impact on the financial position and performance of the grantor.
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