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The Auditor General has reported that government in 2013 paid GH¢41.8million as commitment fees for loans which had not been disbursed.

The fees were paid on a couple of credit facilities government attempted to contract between 2011 and 2012. The findings, the Public Accounts Committee (PAC) has observed, is a deep-seated problem that has arisen due to government’s inability to prepare adequately before signing loan agreements.

Between 2011 and 2012, government entered into a loan agreement with the China Development Bank (CDB), Barclays Bank and the ECOWAS Bank for Investment and Development with disbursement periods of 32, 36 and 72 months respectively.

The loan facilities as part of requirements had a commitment fee embedded in the contracts, and deputy-Finance Minister Ato Forson explained that “Commitment fees fall due from the day you sign the agreement”.

However, PAC chairman Kwaku Agyeman Manu was surprised the country would pay commitment fees on loans that have not been disbursed yet.

Members of the PAC wondered why as a country government should keep paying commitment to “external friends”, and described it as payment going down the drain.

Nonetheless Ato Forson defended the payment, saying: “I don’t think it is going down the drain. Before parliament approved the CDB arrangement, for instance, we approved a number of subsidiary agreements together with the Master facility agreement (MFA).

“There was a clause under the Master facility agreement that “says a commitment fee should be charged on the entire disbursed amount of the facility. So they were charging 1% of the undisbursed US$3billion loan per the MFA agreement -- this is very much in line with what was approved by Parliament and negotiated between the government of Ghana and CDB.”

He further explained that on the 27th of May 2014 government renegotiated the MFA and agreed between the government of Ghana and CDB that going forward they will not charge the commitment fees on the entire MFA but charge them based on signed subsidiary agreements.

According to Ato Forson, since May 27, 2014- 12 February 2014 “We have been able to save the state an amount of US$30,499,000.99 as commitment fees which would have ideally been charged on the undisbursed amount per the MFA; but because we changed it from the MFA to subsidiary agreement that is the total amount that we have saved, so this is not entirely the situation. The first situation was based on the MFA; it is not because government deliberately paid them,” he added.

Commitment fees are charges or fees that lenders levy on an undisbursed portion of a committed amount for a loan. Disbursements are made when the borrower fulfils the prerequisites for disbursement. The Auditor General report reviewed the external debt records and observed the inability of government to access some loan facilities due to non-fulfillment of its obligations.

“My sampled review of loan facilities disclosed that some disbursements were not made over the disbursement period,” the report highlighted.

It also came to light that government continued to pay commitment fees to the Creditor Institutions even though the disbursement period had expired. It was not apparent from my review that the agreements had been renewed.

“ My examination of payments to the Creditor Institutions showed that in 2013 government paid total commitment fees of GH¢41,768,359.12 on loans disbursements which had delayed between 15 to 63 months,” the Auditor General stated in his report on Consolidated fund to parliament.

The Finance Ministry explained further that the CDB Tranche A expires in 2017, with renegotiations for the commitment fee to be charged on only the undisbursed portion of the subsidiary agreements that have been signed under each Tranche reaching agreement in February 2014. The Barclays Bank PLC loan facility expires in 2015.

With the ECOWAS facility, the deputy minister maintained that there have been some drawdown requests and disbursement in 2014. Impliedly, the funds are still available and committed to the borrower. “The MoF will ensure that MDAs fulfil all conditions pertaining to the loan agreement to facilitate early disbursement,” the minister concluded.

Based on the 2013 Auditor-General’s report, it was also revealed that the transfer of Social Security and National Insurance Trust (SSNIT) contributions amounting to GH¢826million were not completed. Government was said to have failed to pay GH¢15.2million into the Consolidated Fund from proceeds of divestiture.

There was also lack of information on surpluses transferred into the Consolidated Fund by the Bank of Ghana and the National Lottery Authority.

There was an amount of GH¢513,000 that was charged on the Consolidated Fund instead of the accounts of the Ghana National Petroleum Corporation (GNPC), which the Deputy Minister of Finance, Cassiel Ato Forson, described as ‘human error’.