Financing the Health Sector in Ghana: A Review of ... - EuroJournals

European Journal of Economics, Finance and Administrative Sciences 

ISSN 1450-2275 Issue 17 (2009) 

© EuroJournals, Inc. 2009 

http://www.eurojournals.com 

Financing the Health Sector in Ghana: A Review of the 

Budgetary Process 

Gordon Abekah-Nkrumah 

Department of Public Administration and Health Services Management 

University of Ghana Business School, Legon 

E-mail: ankrumah@ug.edu.gh 

Ted Dinklo 

SEOR Erasmus University, Rotterdam. The Netherlands 

E-mail: dinklo@few.eur.nl 

Joshua Abor 

Department of Finance, University of Ghana Business School, Legon 

E-mail: joshabor@ug.edu.gh 

Abstract 

In the last couple of years, the quest for aid alignment and harmonisation is increasingly 

putting pressure on development partners to change funding modalities from sectoral pool 

funding and programme or project support to some form of budget support modality. In 

Ghana, where donor funds constituted about 13.8% and 14.33% of the health sector budget 

in 2006 and 2008 respectively (Ministry of Health, 2006, 2008), such changes could result 

in difficulties with respect to funds flow to the sector. The aim of this paper is to review the 

budget planning, execution and disbursement processes of the Ministry of Health in Ghana 

to draw some conclusions on whether a move from pool funding to a form of budget 

support modality will affect the flow of funds, especially to service providers. The findings 

of this study exhibit improved national and sectoral level procedures as well as some 

weaknesses in the budgeting process of the Ministry of Health and the Ministry of Finance 

and Economic Planning, and cashflow difficulties which can be traced to both ministries. 

The study also identifies opportunities to improve the levels of dialogue between the 

Ministry of Health and the Ministry of Finance and Economic Planning. It is believed that 

the current state of the budget planning, execution and disbursement process in the health 

sector is unlikely to have an adverse effect on the flow of funds to service providers 

irrespective of the funding modality used. 

Keywords: Financing, Health Sector, Budgetary Review, Ghana 

1. Introduction 

The question of how to improve the delivery of health services in developing countries is of central 

importance to the achievement of the Millennium Development Goals, and to development partners’ 

assistance to the health sector. In 1997, the World Bank wrote a Health Nutrition, and Population 

(HNP) Strategy (World Bank, 1997) that identified three priorities to guide the direction of the Bank’s 

work in the HNP Sector, specifically to work with client countries to: (i) improve health, nutrition, and 

population outcomes of the poor; (ii) enhance the performance of healthcare systems; and (iii) secure

46 European Journal of Economics, Finance and Administrative Sciences - Issue 17 (2009) 

sustainable healthcare financing (Subramanian et al, 2006). Health financing provides the resources 

and economic incentives for the operation of health systems and is a key determinant of health system 

performance in terms of equity, efficiency, and health outcomes. Health financing involves the basic 

functions of revenue collection, pooling of resources, and purchase of interventions. 

It is widely recognised that a strong financial base is a prerequisite for an effective health care 

delivery system. Currently, Governments in sub-Saharan Africa are facing serious financial constraints 

in their attempts to provide basic health services to their people. The causes of this problem have been 

attributed to poor economic performance of African economies and very high population growth rates 

over the last quarter-century (Mwabu, 1990). In Ghana, like many other developing countries, new 

actors, channels, and flows of development finance (e.g. global programmes and sectoral funds, 

projects of private philanthropic organisations, remittances etc.) have become an important part of the 

overall development finance system (Drechsler, 2006). It is important to also argue that in some 

instances, the problem of financing may not necessarily be the quantum or amount of funds available 

to the sector but rather the management of the funds available. That is how the public finance 

management system through the budgetary process allocates resources for carrying out health-based 

interventions. 

The objective of this study is to attempt to gain some understanding of the budgetary process in 

the health sector. Specifically, the study examines the budget planning and preparation as well as the 

execution and disbursement process. The study also examines the strengths and weaknesses of the 

process and how that is likely to affect the flow of funds into the health sector with the changing aid 

architecture (that is the decision by some development partners to shift their funds from the common 

basket in the Ministry of Health (MOH) to the multi-donor or sector budget support fund in the 

Ministry of Finance and Economic Planning (MoFEP). 

The rest of the paper is organised as follows; Section two provides an overview of Ghana’s 

health sector. Section three reviews the relevant literature. Section four discusses the methodology 

used in the study. Section five discusses the results and finally, section six concludes with some policy 

implications. 

2. Overview of Ghana’s Health Sector 

The historical background of Ghana’s healthcare system is influenced by the British. Until 1957, 

Ghana remained a territory of the British government and as a result the system of healthcare delivery 

was modeled by the British, perhaps after their own system back home (Abekah-Nkrumah, 2005). The 

focus of healthcare delivery at the time was the delivery of basic healthcare services to take care of the 

health needs of civil servants and missionaries. Thus, most healthcare facilities were located in the core 

administrative districts with a centralised form of administration. This system did not change until 

1972, when the government at the time attempted to decentralise healthcare services to the districts 

with policy remaining at the center. Several reforms that followed this attempt (1977, 1997 and 2002) 

resulted in what is a fully decentralised system of healthcare delivery, from national to sub-district 

levels (Abekah-Nkrumah, 2005). Following from these reforms, two core functions have been 

identified for the health sector in Ghana; 

• Policy formulation, regulation and coordination of the actions of actors in the sector. 

• Implementation of policy via service delivery 

The MOH has the responsibility of carrying out the former with the latter being performed by 

the service providers in both the public and private sectors. In the public sector, the main service 

provider is the Ghana Health Service (GHS) with a national secretariat and service provision points 

(facilities) at the regional, district, sub-district and community levels. In the private sector, two main 

bodies are identified; the mission providers, who operate mainly in rural areas as private not-for-profit 

organisations, and the private for-profit organisations.


4.1. Performance and Financing of the Sector 

It is generally believed that Ghana’s health sector faces tremendous challenges in improving health 

outcomes. According to NDPC and GoG (2005), the country still faces the challenge of dealing with a 

high prevalence of communicable and preventable diseases, under-nutrition and poor levels of 

reproductive health. In addition to the above, review reports of MOH as well as (NDPC, 2005) is 

indicative that other health threatening non-communicable diseases such as obesity, diabetes, cancers, 

hypertensions and cardiovascular diseases are increasingly becoming major public health challenges. 

Inspite of these major challenges, it is generally agreed that tremendous progress has been made over 

the last couple of years and that government’s commitment to the sector has improved considerably in 

the last couple of years, recording about 400% increase in budget allocation to the health sector (MOH, 

2006). 

Inspite of the increasing inflows of resources into the health sector, it is still believed that financing 

of health services still constitutes a major challenge to politicians and technocrats. For a long time, the 

Government of Ghana (GoG) has been a major source of funds to the health sector with about 45% of the 

total funds available to the sector coming as releases through the national budgeting process. GoG funds are 

made up of tax revenue, financial credits, official development assistance, grants etc. The GoG components 

of the health budget, finances personal emoluments; about 92% of total GoG to the sector, administration 

(3.8%), service delivery (2.5%) and investments (1.4%) (MOH, 2005) 

In addition to GoG funds, the health sector also receives substantial resources from 

Development Partners (DPs); mainly bilateral and multi-lateral donors which constitute about 13.8% of 

the total health sector budget. This comes in the form of programme or project support through a 

basket or earmarked funding modality. Until recently when some of the DPs decided to withdraw their 

funds from the basket in the health sector and channel them through the multi-donor budget support 

fund, basket funds constituted a very reliable form of funding for service delivery, especially at the 

district level, where hospital fees are very low. 

In 2003 a health insurance bill was passed, which aimed at providing a sustainable means of 

funding health services in Ghana, through the establishment of district mutual health insurance, private 

health insurance and private mutual health insurance schemes. The law became fully operational in 

2005 and the funding mechanism includes premiums paid by members to the insurance scheme they 

belong to. Contribution into a health insurance fund is currently 2.5% of all commercial invoices and 

pension contributions. The health insurance fund constituted about 31.6% and 32.6% of the total 

resource envelope of the health sector in 2006 and 2008 respectively. Indications are that this will 

increase substantially in the coming years. (MOH, 2006, 2008) 

3. Literature Review 

Green and Thompson (2002) in their paper contended that it has been about 60 years since V.O. Key 

intimated the lack of a budgetary theory that could explain why public funds are spent on one thing but 

not another or better still how it should be spent. Inspite of tremendous scholarly work since that time 

(1940’s), not much has been achieved in terms of consensus in the budgeting literature. Research effort 

in the area is still fragmented (Miller 1994; Neuby 1997; Rubin 1988). Indeed, what is considered by 

some scholars as a fragmented body of knowledge in budgeting benefited immensely from the scholary 

work of Simon (1957), Lindblom (1959) and Wildavsky (1964) whose work sought to challenge the 

assumption of rationality put forth by scholars of economic inclination. Simon (1957), in his behavioral 

model of rational choice and model of man criticised the utility maximisation assumptions under the 

rational choice model of decision-making. To him decision-makers (budgeting officials) cannot be 

perfectly rational but at best satisfice, knowing that real decision-making is hermeneutic. On his part, 

Lindblom (1959) suggested that the budget process is through an incremental approach. In his works 

on “Policy Analysis” in 1958 and “The Science of Muddling Through” in 1959, he argued the 

impossibility of optimisation as contained in pure rational models but contended that current decisions 

are based on past experiences taking into consideration changes (increamentalism). Though


Londblom’s increamentalism was heavily criticised (Wanat, 1974; Leloup, 1977, 1978), it still 

represents a very significant contribution to budgeting theory. 

Notwithstanding the contention between these approaches, a growing consensus seems to be 

emerging among practitioners and scholars that a sustainable budget system is reliant on the 

administrative, political and broader historical context (Lewis, 1988; Mol, 1988; OECD, 1995; 

Premchand, 1981; Rubin, 1992). In reality, public sector budgeting especially in developing countries 

tends to be associated with a process that is shaped by public managers, politicians, interest groups and 

the general public (Meyers, 1994; Rubin, 1997). Thus, budgets, whether at the national or sectoral level 

depict, political struggles amongst administrative, political and societal forces aimed at gaining 

legitimacy and control over budget outcomes. The process of legitimisation and control, based on 

contextual variables within the administrative, political and societal environment, have led to 

researchers and practitioners advocating for new budgeting methods at one time or the other (line item, 

performance, programme, zero-based, increamental budgeting etc) (Miller, 1991; Lüder, 1992; Lüder, 

1994). Thus, the budget constitutes an economic, political, legal and managerial tool for the purpose of 

governance whether at the national or sectoral level (Foster and Fozzard, 2000). 

With the wave of new public management engineered reforms in the public sector, a very 

important aspect of the budgeting process has become the issue of performance. Thus, the budget is 

increasingly used as an instrument for generating reliable information to pursue the effectiveness and 

efficiency objectives of government and ultimately ensure fiscal sustainability (McGill, 2001) The 

core of performance budgeting is addressing two fundamental budgetary issues: allocative and 

productive efficiency in public expenditure (Robinson, 2002). 

Although productive efficiency and efficiency in the allocation of public expenditure are the 

core objectives of performance budgeting, there is also an important link between performance 

budgeting and macro-level goals pertaining to the level of aggregate expenditure and to fiscal 

sustainability. Clearly, to the extent that performance budgeting succeeds in boosting productive 

efficiency, aggregate public expenditure should, ceteris paribus, be smaller than it would otherwise be. 

Moreover, in the case of a government seeking consciously to achieve reduction in aggregate 

government expenditure - whether for allocative efficiency or fiscal consolidation purposes - improved 

expenditure prioritisation is also potentially of the greatest importance. The principle is that, by making 

expenditure reductions more discriminating and thereby reducing reliance upon crude techniques such 

as across-the-board cuts, spending cuts become somewhat less difficult to accomplish (Robinson and 

Brumby, 2005). 

Broom and McGuire (1995) suggest that performance-based information may be most helpful 

for management improvement rather than for budgetary matters. Melkers and Willoughby (2001) infer 

that performance-based budgeting information has its strongest impact on the agency level, a slightly 

dampened effect at the central budget office level, and then muted effect on the legislative side. They 

believe that based on the perceptions of effectiveness of state budget officials, performance-based 

budgeting initiatives are less successful in terms of appropriation levels than in management 

improvement in state agencies. 

Different empirical constructions of the budget process have been put forth within the literature. 

Principally, such constructions are based on what will constitute sound institutional elements (i.e. 

aggregate fiscal discipline, resource allocation reflecting strategic objectives and effective and efficient 

implementation of programmes), good principles and a transparent accountable process. Generally, it 

has been suggested that budget should follow the principles of Comprehensiveness and Discipline, 

Legitimacy, Flexibility, Contestability, Honesty, Transparency and Accountability (World Bank, 1998; 

Foster and Fozzard, 2000; International Budget Project, 2001). The above-stated elements and 

principles are supposed to be the basis of a transparent and accountable process. The authors above 

have suggested that such a process should include the following: 

• Policy review – a review of the activities of the previous planning period. 

• Policy planning and resources allocation – Establishing a resource framework, objectives, 

policies, strategies and allocating resources in a manner that is linked to the policy priorities.


• Budget execution – This includes revenue generation, release of funds and deployment of 

personnel to undertake the activities incorporated in the budget. 

• Records keeping and accountability – This involves the tracking of all revenues and expenditure 

made, accounting for them as well as ensuring that such transactions comply with rules, 

regulations and procedures of the public accountability systems (internal and external audits). 

• Monitoring and evaluation – This involves the monitoring and evaluation of the implemented 

budget programmes to ascertain implementation efficiency and effectiveness and ensuring that 

feedback are incorporated into the ensuing budget process. 

In practice, most developing countries have operationalised the first two steps above into what 

is popularly known within the public sector budgeting literature as the Medium-Term Expenditure 

Framework (MTEF). The MTEF is an approach to budgeting that aims at improving the effectiveness 

of fiscal policy by linking government policies, priorities and requirements with available resources. It 

provides the “linking framework” that allows expenditures to be driven by policy priorities and 

disciplined by budget realities. The MTEF consists of a top-down resource envelope consistent with 

macroeconomic stability and broad policy priorities, a bottom-up estimation of the current and 

medium-term costs of existing policy and ultimately, the matching of these costs with available 

resource in the context of the annual budget process. It is intended to facilitate a number of important 

outcomes: greater macroeconomic balance, improved inter- and intra-sectoral resource allocation, 

greater budgetary predictability for line ministries, and more efficient use of public monies (Le 

Houerou and Taliercio, 2002). 

The actual process for coming out with the MTEF according to World Bank, (1998), Foster and 

Fozzard (2000), and International Budget Project (2001), consists of the following steps: 

• Development of a macroeconomic framework as the basis for revenue and expenditure 

projection for about three years. 

• This is followed by a sector review process to agree on objectives and related activities as 

well as the costing of such activities. 

• Stage three involves a series of hearings between the sector ministry and that of the ministry 

of finance to review the outputs of the review process in stage two. 

• The next stage looks at the development of a strategic expenditure framework for 

establishing sector ceilings. 

• Stage five of the process looks at medium-term allocation of resources on the basis of 

affordability and sectoral priorities. 

• The next stage deals with the revision of budget estimates in compliance with budget 

ceilings giving by the Ministry of Finance. 

• The final stage in the process is the scrutiny and revision of the sectoral budget for inclusion 

in the state budget that is submitted to parliament for approval. 

Thus, the review of the budget process in Ghana will be done using the model discussed above. 

4. Methodology 

This paper is based on a field study carried out in June 2006 and sponsored by the Netherlands 

Embassy in Accra 1 . As a result, a greater percentage of the discussions in this paper is based on the 

findings of that field work. Initially a desk review was conducted relying on technical report from the 

MOH as well as relevant articles. The report of the desk review formed the basis for the field work. 

Respondents for the field work were purposively selected to include Budget Management Centres 

(BMCs) with strong as well as weak budgetary systems. Key policy makers from MoFEP, MOH (i.e. at 

the national, regional, district and sub-district levels) and development partners were interviewed. In 

1 This does not in any way make the Netherlands embassy responsible for the views expressed in this paper. They are 

purely that of the authors


all, 22 institutions from the Greater Accra, and Western regions of Ghana were contacted (see list at 

appendix 1). The requisite information was gathered through interviews using an interview guide with 

each interview lasting for about an hour or more. In each institution senior managers and or persons 

very knowledgeable in the process participated in the interviews. Consultations at the national level 

and with other stakeholders made it possible to select required respondents at the peripheries. Interview 

responses formed the basis for an initial report which was presented in a debriefing session, attended 

by some stakeholders. Comments from these meetings were taking into consideration in coming out 

with a final report. After a year and some months of the initial report, a follow up was made in 2008 by 

talking to officials of MOH, MoFEP, some districts and BMCs in the Brong Ahafo region. The rational 

of the follow up was to ascertain improvements, if any, to inform final recommendations and 

conclusion. 

5. Findings and Discussions 

This section presents the findings of the study which is presented in three main themes; budget 

planning and preparation, budget execution and disbursement and finally reporting and consistent with 

the framework proposed in the literature (World Bank, 1998; Foster and Fozzard, 2000; International 

Budget Project, 2001). In presenting the findings, the study tried to explain how these processes take 

place at the MoFEP between MoFEP and MOH and its agencies as well as the level of collaboration 

between the District Assemblies (DA) and the District Health Directorate (DHD). The study also 

looked at the strengths and weaknesses of the budget planning, preparation, execution and funds 

disbursement process. 

5.1. Budget Planning and Preparation 

5.1.1. Ministry of Finance and Economic Planning (MOFEP) 

The budgeting process in Ghana is initiated by the MoFEP. The process begins with MoFEP issuing 

budget preparation guidelines which contains ceilings for the various Ministries, Departments and 

Agencies (MDAs). The basis for arriving at these ceilings include variables such as the level of 

government’s direct participation in a sector, expected revenue for a particular year and the overall 

policy agenda of the country. The guidelines prepared by MoFEP are circulated to all the MDAs which 

is used as a guide to prepare their budget and finally submitted to MoFEP. The budget prepared by the 

MDAs is activity driven and revolves around four main items: Item 1 (Personal Emoluments); Item 2 

(Administration); Item 3 (Service); Item 4 (Investments). Activities to be carried out are identified 

under these four main areas and their cost determined, irrespective of the funding sources. Of course 

this does not mean that in preparing the budget, no attention is paid to sources of fund just because that 

is catered for in the ceilings. MoFEP organises budget hearing where officials from the various MDAs 

appear to justify their budget for incorporation into the national budget. After this process, MoFEP 

may make some changes to some of the budgets submitted and finally puts all of them together as a 

composite budget for the country, which is finally submitted to Parliament for approval. 

5.1.2. Ministry of Health (MOH) 

The planning process within MOH begins with a sectoral dialogue where all the agencies and partners 

within the sector meet to agree on priorities for the budget year. These priorities are identified from the 

five-year strategic plan for the health sector. At the end of this meeting, preliminary budget guidelines 

for the sector are drawn and these are revised after MoFEP has submitted budget guidelines to MOH. 

In this budget guidelines, ceilings for all the agencies as well as direct BMCs in the health sector are 

specified. The ceilings sent by MOH to its agencies and BMCs is a factor of the ceilings given by 

MoFEP and its expectations of inflows from its development partners. Budgets are then prepared at the 

lower levels based on what the priorities are and within the broad policy framework of the sector. This 

is then aggregated at the various administrative levels such as the district, region, agency and then 

finally headquarters at MOH. The aggregate budget of the MOH which includes all its agencies, BMCs


and facilities is then submitted to MoFEP. The budget is prepared around the four expenditure items as 

discussed above. In real terms, the main activity for budgeting is for items 2 and 3. This is so because 

item 1 – Personal Emoluments is beyond the control of even the MOH headquarters. Item 4 – 

Investments is also controlled by MoFEP. Previously, a wish list was submitted by the lower levels. At 

the moment however, the MOH headquarters has frozen further expenditure on investments until 

outstandings are completed. This means that investments are currently not budgeted for except that the 

BMC doing so has already secured funds to that effect. This process is repeated every year to come up 

with the budget for MOH. The preparation of the budget is said to be guided by a medium-term policy 

framework. 

Another very important observation is that the budget preparation process at BMC level has to 

be done twice or even more. The first budget which is prepared is based on the ceiling provided by the 

MOH and the policy priorities for the coming year. This budget is submitted to the regional and central 

levels together with all other budgets submitted to MoFEP. But the actual resources allocated to the 

BMCs differ in general substantially from the original ceilings. These irregular budget cuts mean that 

the BMCs have to prepare their budgets again based on actual resources received. This tends to 

undermine the budget preparation process and make it difficult for a BMC to plan ahead. As a result, 

some BMCs do not put any effort in the first budget preparation process knowing that after receiving 

their actual ceiling they have to do it all over again. 

5.1.3. Policy Dialogue 

In addition to tracing the budget planning and preparation process we also tried to assess the level of 

dialogue that takes place between MoFEP and MOH as well as MOH and its agencies. Initial 

information gathered indicates that the level of dialogue between MOH and MoFEP required some 

level of improvement. MOH saw MoFEP as a very powerful body that sets ceilings and will not 

change those ceilings irrespective of what MOH does. On the other hand, MoFEP also saw MOH as 

not being interested in dialogue. Responses from our interviews show that, the following, among 

others, account for the low level of dialogue between the two: 

• That the incentive for MOH to dialogue with MoFEP is almost non-existent because about 80% 

of funding that comes from MoFEP goes into Personal Emolument and Investment which MOH 

has no control over. 

• That MOH without recourse to MoFEP can get the extra funding needed to provide services from 

its development partners. Thus, MOH dialogues more with their development partners than with 

the MoFEP. 

• That MOH needs extra capacity to develop the instruments needed to make a strong case in such 

dialogues. Responses from our interview indicate that the budget is a key instrument used by 

MDAs to engage MoFEP on issues of policy and resource allocation especially during the budget 

hearing process. Unfortunately however, the budget planning and preparation unit of the MOH is 

handicapped in terms of skill portfolio and numbers. This makes it difficult for the MOH to 

prepare budgets which have clear links between policy priorities and available funds. This 

invariably affects the ability of the MOH to defend such budgets or make a strong case at the 

budget hearing to secure the necessary funding for its programmes 

• That, institutional and administrative structures at the MoFEP are not operating as expected and 

these sometimes pose a great challenge for effective dialoguing between the two institutions. 

After a year and some months of the initial interviews, the follow up shows that the level of 

dialogue between MOH and MoFEP has improved tremendously. The reason for this has been 

attributed by some as the diversion of hitherto pooled funds in the sector to MoFEP through the multidonor 

budget support modality. This is invariably pushing MOH to dialogue with MoFEP. 

The second level of dialogue is that which occurs between MOH and it agencies. Relatively, 

this is better than what goes on between MOH and MoFEP. Nevertheless, most of the respondents 

interviewed felt there still exists tremendous opportunity for the sector to dialogue amongst itself in a 

more beneficial way than it is at the moment. Again, the follow up shows that the sector is currently


making good progress. Periodic meetings have been put in place with the sector minister chairing and a 

desk officer also appointed to see to progress in intra-sectoral collaboration. 

The third level of dialogue in the budget planning and preparation process is that between the 

sector and the decentralised political administration at the regions and districts. Evidence gathered 

shows that there is virtually no policy dialogue between the regional co-ordinating council (RCC) and 

the regional directorate of health (RDH). The dialogue that takes place at this level is what can be 

referred to as occasional intervention especially in crises periods (i.e. when there is an outbreak of an 

epidemic). 

The situation at the district level is not very different, except that on relative terms, there is 

better interaction between the district co-ordinating council (DCC) and the district directorate of health 

(DDH) than is the case at the regional level. The directorate of health in certain instances shows its 

budget to the DCC and in most cases, this happens when the DDH needs some level of support from 

the former. This dialogue is therefore not about where we are going as a district in terms of health (i.e. 

with all the stakeholders of the district being present and contributing to the debate). The general 

thinking is that a lot more can be done to improve the level of dialogue at the decentralised levels, but 

the inconsistencies between the Local Government Law and the Ghana Health Service and Teaching 

Hospitals Act (GHSTHA) pose a major challenge. 

From the perspective of the Local Government Law (LGL), the District Chief Executive (DCE) 

has the overall responsibility for running the district and it is therefore expected that policy on health 

for the district would be under his control. However, the Ghana Health Service and Teaching Hospitals 

Act, makes the DDH accountable to the DCE only on matters of administration but technically to their 

headquarters in Accra. This means that, the budget of the DDH is controlled from Accra via the RDH. 

This situation creates some level of difficulty for the District Assembly with respect to their ability to 

elicit accountability from the DDH. On the other hand, the DDH does not have any incentive to include 

the District Assembly (DA) on policy issues because the most important variable; “funds” to 

implement it policies does not come from the District Assembly. The follow up reveals that two 

legislations are currently being reviewed, hopefully, to address some of these issues. 

5.2. Budget Execution and Disbursement 

After the budget of MoFEP has been approved by Parliament, amounts included therein are disbursed 

to the various MDAs. However, the channels used for disbursement as well as the frequency depend on 

the item of expenditure. These items of expenditure are financed from various sources at the level of 

MoFEP. However, our attention at this point will be focused more on the disbursement process from 

MoFEP to MOH and from MOH to its agencies and respective BMCs. The discussion will centre on 

the four expenditure items and their conventional funding sources (i.e. GOG, Internally Generated 

Fund - IGF and Donor Pool Fund - DPF). 

5.2.1. Item 1 – Personal Emoluments (PE) 

This is the salaries of all employees employed by the government of Ghana and working within the 

health sector. There are two types of employees. Those who are permanent and therefore captured on 

the government payroll and casuals. The permanent employees are paid through the central 

government treasury at the Controller and Accountant General’s Department at the end of every month. 

Salaries do not pass through MOH, it is sent directly to the recipient’s bank account. Evidence shows 

that this channel is very smooth and salaries are always paid on time. It is also important to note that 

salary negotiations for this category of health sector workers is not done by MOH but directly between 

the respective professional bodies and the government. The source of funds for this category of PE is 

purely GOG. The second category of PE is that paid to casual workers. These are workers employed at 

the BMC or facility level and not yet or will not be captured into the central government payroll. The 

payment for this category is between the facility or BMC and the worker in question. This type of PE is 

normally paid from IGF.


5.2.2. Item 2 - Administration 

This is expenditure for running the administrative machinery of the health sector. Items of expenditure 

in this category are funded mainly from three sources; GOG,IGF and DPF. The GOG is disbursed from 

central government treasury at the Controller and Accountant General’s Department through the 

regional and district treasuries to the respective BMCs or directly to the DDH, where facilities in a 

particular district do not have a BMC status. This was done quarterly but has now been changed to 

monthly to reflect the provisions of the Financial Administration Law. This means that funds for this 

activity do not pass through MOH headquarters but straight to the agency, BMC or district on whose 

behalf that budget amount has been accrued. Evidence gathered shows that, channels for disbursing 

funds for this activity is smooth, only that the flow is erratic because of challenges with cash flow. 

Because of the erratic nature of disbursement for this activity, BMCs, agencies or facilities that 

generate IGF and have the authority to use such IGF on their own, apply some part towards the funding 

of activities in this category. Available evidence in 2006 show that about 15% of the total IGF is spent 

on this line of activity. It was also observed that in certain facilities and BMCs, part of the DPF which 

is normally referred to as the basket fund is used to finance administrative expenditure and this is 

estimated to be about 5% of the total DPF received. The substantial reduction in the quantum of DPF 

currently is likely to change the percentage spent on item 2, though information is currently not 

available to substantiate this. 

5.2.3. Item 3 - Service 

This is expenditure for actual service delivery. This line of expenditure is funded from basically three 

sources (i.e. GOG, IGF and DPF). Unlike item 2, the disbursement of GOG for item 3 is different. The 

money is released from the central government treasury at Controller and Accountant General’s 

Department to MOH headquarters. This is then forwarded into the accounts of the various agencies, 

BMCs and districts through a wire transfer. For those in areas that make it impossible to use this 

method, their cheques are sent to them through the regional health directorate then into their accounts. 

It was observed that this channel is also smooth, however the flow of funds is erratic due to cash flow 

problems.The biggest challenge with GOG service is that the bulk of the funds come in when the year 

is almost ending and this affects the execution of programmes most of which are time-driven. Again 

any unspent amount on GOG service by the end of the year would have to be returned to government 

coffers. According to the annual programme of work for 2006 the GOG portion of the service budget is 

about 9.52%. 

In most cases it was found that IGF is used to augment the service budget and this is about 24% 

according to programme of work for 2006 and 2008. Since this fund is generated by the agency, 

facility or BMC it is readily available and depends on the revenue generating ability of the unit in 

question. As at 2006 when the initial survey was conducted, DPF used to be a major funding source for 

this item of expenditure, accounting for about 35.32% of the service budget. Due to the move to multidonor 

buget support by some of the health development partners as well as increased inflows from the 

National Health Insurance Scheme (NHIS) the situation has changed (by the 2007 budget, it was 7.1% 

of the service budget). This proportion is disbursed from a central fund at MOH to agencies and the 

RDH and subsequently released from the RDH to the districts and BMCs on quarterly basis. 

5.2.4. Item 4 - Investments 

This is expenditure on infrastructure and capital items. This includes new acquisitions as well as the 

maintenance of existing capital items. Funding sources includes GOG, IGF, DPF and Financial Credits 

(FCs). Disbursement is dependent on which fund is being used. GOG and FCs have same disbursement 

mechanisms. Procurement of capital items in question is carried out by MOH headquarters and 

furnishes MoFEP with requisite documents showing that such procurement has been carried out. Upon 

satisfying itself, MoFEP releases funds directly to the supplier. Thus, GOG and the FCs portion of the 

investment budget is managed directly by MoFEP. Figures in 2006 and 2008 indicated that GOG is 

about 10.17% and 8.27% of the investment budget respectively. However, no figures were available


for FCs at the time of the field work. In some cases, the IGF has been used for new acquisitions but 

mostly used for maintenance and is estimated at 3.73% and 8.64% in 2006 and 2008 of the investment 

budget. In 2006, DPF financing of investment was estimated to be around 25% of the item 4 budget. 

With substantial reduction in DPF flows, the percentage will definitely change. Unfortunately, current 

figures are not available to substantiate this fact. 

5.2.5. Disbursement of Other Funds 

These are non-traditional sources of funds for financing the budget of the health sector. At the national 

level, some amount of information may exist to take account of these sources for the purposes of 

drawing up the budget. Unfortunately, this kind of information is totally unavailable at the lower levels 

and therefore is not taken care of in the budgeting process. The following are some of the sources 

identified. 

HIPC –Funds from 

HIPC relief are managed by MoFEP and MOH is expected to access the fund by presenting proposal 

for funding to MoFEP. Funds are then released to MOH after negotiations and agreements between 

MoFEP and MOH. Estimates in the 2006 and 2008 programme of work show that this accounts for 

about 4% and 0.3% of total funding to the health sector. 

DACF 

Resources released from the consolidated fund to the District Assemblies through the Administrator of 

Common Fund. This fund is used to run the District Assemblies. By law the District Assemblies are 

expected to use 1% of this amount on malaria and HIV/AIDS. From our observation, this amount is not 

directly disbursed to the DDH but spent directly by the District Assembly on activities which to them 

can contribute to improving the malaria and HIV/AIDS situation of the district. In addition, there is 

evidence that, the District Assembly upon request from the DDH released funds for certain 

programmes. It must be stated that this is not a frequent and normal phenomenon. It happens only 

when the need arises. It is therefore not possible for the DDH to incorporate this kind of funding into 

their budgets. A year after the initial survey shows that the situation has not changed. 

Donor Earmarked Funds 

Resources from both bilateral and multi-lateral donors. This fund is allotted for specific activities. 

There are currently two ways by which this fund is disbursed and this is based on who is given the 

funds. One option is lodging the funds with MOH or an agency and the money is used for the assigned 

activity. The other is sending the money directly to the district or centre of spending or carrying out 

programmes or projects and making payment for such programmes or projects on behalf of the 

beneficiaries. It was observed that, in districts or BMCs, where adequate information exist that 

earmarked funds will be available over a certain period of time, a separate budget is prepared to that 

effect but not incorporated into their master budget submitted to headquarters. This is done if they 

know the money involved would be advanced directly to them. It is a challenge for MOH to have 

accurate data on the quantum of funds that flows into the sector through this source because of the way 

they are disbursed. However, estimates in the 2006 programme of work shows that it constitutes about 

7.5% of total funding to the health sector. Follow up responses indicatr that challenges with earmaked 

funds are getting worse. This is because it is growing in size and increasingly becoming difficult for 

the center to capture such funds for planning purposes. 

NHIF 

This is contributions into the National Health Insurance Fund which is currently 2.5% of all 

commercial invoices and pension contributions. As at 2006 it constituted about 31.6% of the total 

resource envelope of the health sector. Currently, it is about 32.6%. At the first survey, a framework 

for disbursing the fund was yet to be agreed upon. Currently, that has been done and disbursement of


this fund to facilities, Mutual Health Insurance Organisations (MHIO) has already commenced. 

Disbursement from the fund to beneficiary organisations is used to support the indigent, the poor and 

the aged and also to improve the quality of service while a portion is retained for re-insurance. 

5.3. Reporting 

All agencies and BMCs of MOH have a responsibility to report to the MOH periodically. These reports 

flow from the lower levels to the top in the same manner as the budgets. The reports are item based and 

source driven just like the budgets but directed to two main centers; Utilisation of GOG funds through 

MOH to MoFEP and DPF through MOH to respective donors. Reports for GOG funds used to be 

quarterly but now is monthly for administration and quarterly for service. On the other hand, reports to 

donors are submitted on quarterly basis. There is a major challenge with reporting at almost all the 

levels. This is manifested in delays and sometimes the quality of reports submitted by the lower levels 

to the headquarters. At each level, the blame is shifted to the one below, especially when it has to do 

with delays. Several factors account for this state of affairs, chief amongst them include; inadequate 

capacity in terms of the skill portfolio and numbers especially at the lower levels and in certain cases 

commitment and attitude to work. This situation could create serious challenges for the sector, 

especially in cases where further releases of funds are tied to the submission of such reports. 

5.4. Strengths and Weaknesses of The Budgetary Process 

This section looks at the strengths and weaknesses of the budget planning, preparation, execution and 

funds disbursement process in the health sector. The strengths of the budgeting process include: 

• At all levels, health is seen as a very important social service (priority- having about 400% 

budget increase over the last couple of years) with respective budgets based on the agreed 

medium-term policy framework at that level where applicable. 

• Allocations to MDAs at all levels are based on the priorities at that level, level of direct 

participation by government in a sector and the budget submitted by that level; 

• Annual budgets are rolled from the medium-term expenditure framework, especially at the 

national and sectoral levels where such frameworks exist. 

• Appropriate and relevant fora exist for meaningful dialogue at almost all the levels. Institutional 

and administrative structures are already in place at almost all the levels with channels of 

disbursement well established. 

The weaknesses of the budgeting process include: 

• At all levels, existing institutional and administrative structures seem to work around 

particular skills and personalities and therefore may not be sustainable. Related to this is the 

fact that instruments for dialogue at all levels are relatively weak. 

• It takes too long to get things done either because of the bureaucracy or the attitudes of the 

individuals involved. 

• Flow of funds from one level to the other is very erratic. This is purely a cash flow problem, 

rather than the willingness to release funds. This results in variations between budget and 

releases at almost all the levels, therefore, affecting programme implementation. 

• Capacity for budget planning and preparation, disbursement and monitoring as well as 

cordination of investment expenditure seem quite weak. 

• There also exist weak structures at the national level for gathering and co-ordination of IGF 

data for budgeting purposes. 

The follow-up excercise revealed some improvements. For example dialogue between MoFEP 

and MOH has improved tremendously, with reason being that the move by development partners to 

multi-donor support and sectoral budget support has given MOH no option than to dialogue with 

MoFEP. Again, the flow of item 2 has also improved tremendously.


6. Conclusion and Implications 

The findings of this study have given us a good understanding of the budgeting process as well as the 

sources of funds and the channels for the disbursement of such funds. The entire process is shaped by 

managers, politicians and interest groups as suggested by (Meyers, 1994; Rubin, 1997). The findings 

also demonstrate the quest for control and legitimacy at each level. Notwithstanding the above, the 

most critical question is whether the budgetary process demonstrates inherent features to promote 

aggregate fiscal discpline, resource allocation that reflect strategic objectives and effective and efficient 

implementation of programmes as advocated in the literature?. Again, can it be concluded that, the 

process exhibits the principles of comprehensiveness, legitimacy, flexibility, honesty, contestability, 

transparency and accountability, which invariably is a fundamental pre-requisite for the proposed 

funding modality (sectoral budget support)? Related to this is also the question of whether the current 

system of budgeting in the sector is overly rationalistic and therefore needs the processes to be more 

reasonable. For instance, what is the assurance that in the case of Ghana, following the rational steps of 

an MTEF will improve budget outcomes? Are people going through the laid down processes because 

they believe it will contribute to output improvement or for the mere purposes of following procedure? 

The findings of the study do not suggest clear-cut answers to the questions posed above. The reality is 

that there are challenges; cashflow, administrative and institutional bottlenecks and the absence of 

relevant instruments for engaging in inter-ministerial and sectoral dialogue. Serious commitment is 

required from all stakeholders to tackle these challenges. 

However, the positive side to this story is that opportunity exists to improve the systems both at 

the MoFEP and MOH to ensure that whatever funding modalities are used in the health sector by the 

different actors will bring about efficient and effective utilisation of resources, leading to positive 

health outcomes. 

Is it also not possible to look at the current situation as a “win win situation”? In that, 

development partners moving to multi-donor budget support could use their funds as a leverage to 

influence the dialogue at that level and help MoFEP to strengthen and improve its processes. In a 

similar fashion, development partners operating through the basket funds at the sector level could also 

concentrate their efforts on improving the systems at that level. 

It would be useful for concerted efforts from all fronts to improve on the weaknesses identified. 

It is important to caution that, the assumption of pure rationality as articulated by those of the rational 

school may not result in the desired changes. The capacity of institutions to deliver the required 

changes is embedded in the quality and desire of its human resources. It will therefore be essential that 

all stakeholders through commitment take purposeful actions to achieve the desired changes. Staff at 

various levels may require adequate capacity accompanied by the right levels of motivation and 

encouragement to trigger the desired and acceptable changes. In this way, one will be assured that 

irrespective of whatever funding modality is being used, there will be timely release as well as 

effective and efficient utilisation of public resources to the good of all and sundry. 

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Appendix 1 

List of Institutions Contacted 

National Level 

1. Ministry of Health 

2. Ghana Health Service 

3. Ministry of Finance and Economic Planning 

Development Partners 

1. World bank 

2. DFID 

3. Netherlands Embassy 

4. Danida 

Greater Accra 

1. Ridge Hospital 

2. Regional Health Directorate 

3. Abokobi District Health Directorate 

Brong Ahafo Region 


2. Municipal Assembly 

3. Regional Hospital 

4. Municipal Hospital 

Western Region 


2. Shama Ahanta East District Health Directorate 

3. Mphour Wassa East District Health Directorate 

4. Shama Ahanta East District Assembly 

5. Mphour Wassa East District Assebly 

6. Effia Nkwanta Hospital 

7. Essikado Hospital 

8. Kwesimintsim Hospital

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