PwC Forensic Audit Uncovers GHS 303.48 Million in Unexplained Tax Offsets at ECG
A forensic audit of the Electricity Company of Ghana (ECG) by PricewaterhouseCoopers (PwC) has revealed GHS 303.48 million in unexplained “tax offsets” during the last quarter of 2023, raising critical concerns over financial transparency in the energy sector.
Details of the Findings
The audit, which covered the period from October to December 2023, found that ECG deducted GHS 253.48 million in November 2023 and an additional GHS 50 million in December 2023 as tax offsets.
These deductions were made before calculating revenue for Level B beneficiaries under the Cash Waterfall Mechanism (CWM)—the system designed to equitably distribute revenue in the power sector.
PwC reported that ECG failed to provide supporting evidence or a rationale for these deductions, exposing gaps in financial accountability.
The report emphasized several discrepancies:
- Unjustified Tax Offsets: The GHS 303.48 million deductions lacked documentation and justification.
- Weak Reconciliation Processes: ECG’s inability to reconcile tax records with Ghana Revenue Authority (GRA) filings contributed to these discrepancies.
- Regulatory Non-Compliance Risks: The absence of documentation exposes ECG to potential regulatory scrutiny and penalties.
Implications for Power Sector Payments
The audit highlights a troubling pattern in ECG’s financial practices, particularly in its statutory payment obligations.
While ECG is required to allocate 12.5% of net collections for statutory payments after settling Level A Independent Power Producer (IPP) allocations, no such payments were made during November and December 2023.
Instead, the unexplained offsets diminished the funds available for Level B beneficiaries, including critical stakeholders in Ghana’s energy sector.
Adding to the complexity, ECG issued a GHS 500 million credit note to GRA to offset liabilities through April 2024. This credit note arrangement, stemming from a government agreement, allows Ministries, Departments, and Agencies (MDAs) to forego paying electricity bills during this period.
PwC warned that this arrangement deprives CWM beneficiaries of their share of collections, exacerbating liquidity challenges in the power sector.
Broader Financial Irregularities at ECG
The audit also unearthed additional financial management issues, including:
- Underdeclared Revenues: GHS 1.14 billion in revenues went unreported.
- Emergency Fuel Purchases: GHS 136.74 million was spent on emergency fuel purchases, with only GHS 18.2 million declared.
- Non-Compliant Banking Practices: ECG operates 84 bank accounts across 20 banks, contrary to directives from the Ministry of Finance and the IMF.
- Unauthorized Vendor Commissions: GHS 47.50 million was paid out in unauthorized vendor commissions.
Calls for Accountability
The PwC audit underscores the urgent need for ECG to enhance its financial management and accountability mechanisms. With regulatory risks mounting and the broader energy sector impacted by these irregularities, stakeholders are likely to demand swift action to address the lapses.
Efforts to reconcile ECG’s financial records and ensure compliance with statutory and regulatory obligations will be key to restoring confidence in the power sector’s financial integrity.
