GRIDCo fails to collect GH¢234m from customers – A-G’s report

Contrary to Section 91(1) of the new Public Financial Management Act (PFMA) 2016, and Clause 16.1 of the Ghana Grid Company Limited (GRIDCo) transmission agreement with customers, the management of the state transmitter “did not collect from 10 customers a total of GH¢234,338,331, which has been outstanding for more than twelve (12) months as of 31 December 2017”, the Auditor-General’s 2019 report has said.

“We recommended to the management to assess the recoverability of these balances”, the report proposed, adding: “In addition, clauses in the respective transmission agreement including clause 16.2 (reduce capacity for no-payment within 10 working days), 16.3 (termination of service) and 16.1 (application of bank guarantees) aimed at recoverability of transmission fees should be enforced”.

The report noted that based on trade receivable confirmation responses received, “four customers disputed amounts totalling GH¢183,765,553” charged by GRIDCo “as regulatory levies, ancillary charges and power infrastructure levies”.

“We recommended that the management should engage the Public Utilities and Regulatory Commission (PURC) and the respective customers to resolve this dispute”, the report said.

Read below, excerpts of what the A-G’s report said about GRIDCo

GHANA GRID COMPANY LIMITED

42. Contrary to Section 3(3) of the National Pensions Act 2008, (Act 766) Management did not remit to the custodian, Ecobank Ghana Limited, monthly third-tier pension contributions totalling GH¢21,986,104 as of the year-end 31 December.

This amount is made up of the principal contributions due of GH¢2,616,586 and accrued interest of GH¢19,369,518, which has accrued since August 2013.

We recommended to Management to ensure that, contributions are remitted to the appropriate custodians within the required period as set out in Section 3(3) of Act 766 to avoid payment of penalties.

43. Ghana Grid Company acquired VAT agency status in June 2017, however it did not charge output VAT per a directive from the Ministry of Finance. There was however no formal documentation or correspondence for this directive. The approval from the Ghana Revenue Authority has also not been obtained in respect of this directive. In order to avoid penalties from GRA, we recommended that Management should obtain approval from the Ministry of Finance and the Ghana Revenue Authority in respect of VAT not charged on transmission services provided.

44. The Company did not have a signed transmission service agreement (TSA) with 8 customers and power generators, although its accounting and finance manual requires a contract to be in place for transmission services rendered. Also, TSA’s for 7 customers had expired and have not been renewed. We recommended to Management to sign and renew all expired TSA agreements with all its customers.

45. Contrary to Section 91(1) of the PFMA 2016, and Clause 16.1 of the GRIDCo transmission agreement with customers, the management did not collect from 10 customers a total of GH¢234,338,331, which has been outstanding for more than twelve (12) months as of 31 December 2017. We recommended to the management to assess the recoverability of these balances. In addition, clauses in the respective transmission agreement including clause 16.2 (reduce capacity for no-payment within 10 working days), 16.3 (termination of service) and 16.1 (application of bank guarantees) aimed at recoverability of transmission fees should be enforced.

46. Based on trade receivable confirmation responses received, 4 customers disputed amounts totalling GH¢183,765,553 charged by the Company as regulatory levies, ancillary charges and power infrastructure levies. We recommended that the management should engage the Public Utilities and Regulatory Commission (PURC) and the respective customers to resolve this dispute.

47. There was no on-lending agreement between VRA and GRIDCo in respect of facilities VRA borrowed funds to construct and transferred to GRIDCO. The asset was recognised as long-term liabilities in GRIDCo’s accounts. We advised Management to engage VRA and the Ministry of Finance to conclude on an on-lending agreement stating the terms of the facility.

48. Bui Power Authority responded to our trade receivable confirmation that GRIDCo owed them GH¢28.96 million. This has, however, not been recorded in the books of GRIDCo. Discussion with Management disclosed that these amounts have not been agreed upon. We recommended to Management that they should reconcile these amounts with Bui Power Authority (BPA) and once an agreement is reached, Management should recognise these transactions.

49. Contrary to Regulation 39(2c) of FAR 2004, an amount of GH¢22,381,028 recognised as compensation payments were not supported with independent valuer’s report. We recommended to Management to ensure that all compensation payments are recognised and adequately supported. In addition, Management should make such documents available to the audit team.

50. VRA in response to our trade payables confirmation disputed the balance due from GRIDCo as of 31 December 2017. There was difference of GH¢53,752,944 in favour of VRA. The variance is as a result of different rates used in the computation of the transmission losses. We recommended to Management to engage the Public Utilities and Regulatory Commission (PURC) and VRA to resolve the dispute. In addition, Management should recognise the amounts in the general ledger once resolved.

51. GRIDCo as of 31 December 2017 breached the loan covenants ratios with 4 of its lenders. This could trigger early repayment, non-approval of subsequent disbursement or penalties. We advised Management to monitor loan covenants to ensure compliance, as non-compliance may restrict access to funds.

52. In contravention of Section 91(1) of PFMA 2016, Act 921, GH¢112,074 advanced to thirteen (13) institutions has either not been retired or the services for which the payments were made have not been rendered for over six months to six years. We recommended to Management to put in place measures to recover these amounts, if the purpose or services for which the amounts were paid are no longer needed. We recommended to Management to investigate the alleged stolen items and put in place controls to prevent this from recurring.