PwC Audit Reveals GHS 136 Million Emergency Fuel Spend at ECG Amid Financial Turmoil
A forensic audit by PricewaterhouseCoopers (PwC) has exposed significant financial mismanagement at the Electricity Company of Ghana (ECG), including an unbudgeted GHS 136 million ($10.4 million) expenditure on emergency fuel purchases over the last quarter of 2023.
The findings come as Ghana’s new administration, led by President John Dramani Mahama, takes office amid mounting economic pressures on the energy sector.
Unbudgeted Emergency Expenditures
Between October and December 2023, ECG relied heavily on emergency fuel procurement to prevent power outages, according to the PwC report. However, only GHS 18.2 million of these purchases were officially declared, with the audit citing inadequate inventory planning and weak procurement processes as underlying factors.
The audit underscores the high cost of these emergency measures, which typically attract premium pricing, further depleting ECG’s already strained finances. PwC identified systemic issues, including:
- Absence of Procurement Guidelines: A lack of standardized procurement processes led to inefficiencies and potential misuse of funds.
- Escalating Costs: Emergency purchases inflated expenditure, intensifying financial pressure on the utility.
- Weak Oversight: ECG’s financial activities remain largely unchecked due to the absence of independent monitoring mechanisms.
Broader Financial Irregularities
The emergency fuel expenditures form part of a wider pattern of financial irregularities revealed in the audit. Key findings include:
- Revenue Under-Declaration: ECG failed to report GHS 1.14 billion ($87.3 million) in revenues during the audit period.
- Complex Banking System: ECG maintains 84 bank accounts across 20 banks, contravening Ministry of Finance and International Monetary Fund (IMF) directives aimed at streamlining financial operations.
- Delayed Payments to IPPs: Persistent liquidity challenges have delayed payments to Independent Power Producers (IPPs), jeopardizing Ghana’s power generation capacity.
PwC noted that emergency expenditures and under-reported revenues have diminished funds available for distribution under the Cash Waterfall Mechanism (CWM)—the payment framework designed to ensure equitable distribution to power sector stakeholders.
Challenges for the Mahama Administration
The revelations present a daunting task for President Mahama’s administration, which has inherited a power utility weighed down by debt, operational inefficiencies, and poor financial governance.
During his inauguration, Mahama pledged to prioritize reforms in the energy sector, but the scale of ECG’s financial troubles underscores the complexity of the challenge.
“This level of financial opacity undermines trust and creates a ripple effect across the energy value chain,” PwC stated, warning that the issues could further destabilize Ghana’s power supply if left unaddressed.
Path to Reform
Immediate steps to address ECG’s financial woes include:
- Enhanced Oversight: Introducing independent monitoring mechanisms to ensure transparency and accountability in financial operations.
- Streamlined Banking Structure: Consolidating ECG’s sprawling network of accounts to align with fiscal directives and improve cash flow visibility.
- Procurement Reforms: Establishing clear guidelines for fuel purchases and other expenditures to minimize inefficiencies.
- Revenue Reconciliation: Addressing the significant gap in revenue reporting to improve liquidity and meet payment obligations to IPPs.
