Examining the Drivers and Effects of Financial Irregularities in Ghana's Metropolitan, Municipal and District Assemblies

Abstract

Financial irregularities within subnational governments are prevalent worldwide, transcending varying stages of development. These irregularities impede the effective delivery of public services, erode trust in subnational governments, inflate the costs of public transactions, and mostly result in financial losses to states. This thesis aims to address this pressing concern by examining the nexus between reported financial irregularities within Ghana's Metropolitan, Municipal and District Assemblies (MMDAs) and the underlying factors driving them. Furthermore, it seeks to identify the thresholds at which these financial irregularities significantly affect the fiscal autonomy of MMDAs. Employing methodology including the method of moments quantile regression, dynamic panel threshold regression analysis, and Granger causality analysis, this study analyses a dataset spanning 216 MMDAs for a 10-year period (2012-2021). The findings indicate that successive increases in revenue, asset, and liability levels exhibit statistically significant and positive relationships with financial irregularities in Ghana's MMDAs. Moreover, female chief executives exhibit a statistically significant relationship with lower levels of financial irregularities. However, this association is not statistically significant at higher levels of financial irregularities. Contrary to expectations, the adoption of regulatory frameworks appears to have limited influence on mitigating financial irregularities. Moreover, contract and procurement/store irregularities impede fiscal autonomy above a threshold of 6% of total financial irregularities, whereas cash management irregularities consistently undermine fiscal autonomy irrespective of the threshold level. These findings underscore the necessity of implementing strong financial management practices and reliable accountability measures within Ghana’s MMDAs, especially as their revenues, assets, and liabilities grow. The research recommends strengthening internal control mechanisms, fostering transparency and accountability, embracing technological advancements, and broadening revenue sources to mitigate financial irregularities and boost the fiscal independence of MMDAs. Furthermore, efforts should be made to tackle gender-specific leadership challenges to improve the effectiveness of female chief executives in MMDAs. Additionally, policymakers should conduct regular and comprehensive assessments of regulatory frameworks to address shortcomings in their implementation.