New Corporate Governance Approach to Accountability for Donor Funds - International Law Office

International Law Office

Company & Commercial - Ghana

New Corporate Governance Approach to Accountability for Donor Funds

September 24 2007

Background
Accountability
Compliance
Comment


Background

In 2003 the US government established the Millennium Challenge Corporation (MCC), which is mandated to provide grants to developing countries for the implementation of projects that reduce global poverty through the promotion of sustainable economic growth. To be eligible for the funds, countries are required to rule justly, have economic freedom and invest in people.

In August 2006 Ghana signed the long-awaited $547 million Millennium Challenge Compact. The compact funds, which would be distributed over a five-year period, aim to reduce poverty by raising farmers' incomes through private sector-led agribusiness development. The programme is expected to alleviate directly the poverty of over 230,000 Ghanaians and to enhance the livelihood and welfare of 1 million Ghanaians.

To ensure that the funds make the desired impact, the compact makes accountability central to continued eligibility to access the funds. Accordingly, a governance agreement was executed between the government of Ghana and the MCC, and the Millennium Development Authority was established, pursuant to Acts 702 and 709 of the Millennium Development Authority Act 2006. The authority is empowered to oversee the implementation of the compact programme in order to ensure effective use of the funds.

Accountability

The board of the authority is structured to ensure the participation of key stakeholders and proposed beneficiaries of the compact funds. The board is made up of both government-appointed and non-state members; the latter are selected by umbrella bodies of private sector enterprises and non-governmental and civil society organizations. There are also observers on the board, including an MCC representative and three representatives from the districts in which compact programmes are to be implemented.

In addition to the standard requirements of accountability to be performed by the board, including the approval of budgets, audit plans, proper accounting and auditing, the authority has an additional obligation to account to stakeholders through zonal committees operating in areas of the country where compact projects are being, or will be, implemented.

A significant example of a mandatory requirement under the governance agreement is that the minutes of board meetings are to be posted on the authority's website within two weeks of each meeting. The authority is also required to keep accurate and systematic records of the performance of its obligations.

Compliance

Additionally, the authority must ensure that the use of MCC funding complies with US laws, regulations and executive orders on money laundering, terrorist financing, restrictive trade practices, boycotts, sanctions or other legislative restrictions, and complies with applicable Ghanaian laws.

Comment

The introduction of a continuous qualification criterion based on sound corporate governance, rather than the standard donor agency criteria of a one-time qualification for aid, is a significant innovation. The compact funds are no windfall for Ghana: it will have to earn all accessible funds through a process that compels the authorities to ensure that the authority's corporate governance structures indeed guarantee the alleviation of Ghanaian poverty.


For further information on this topic please contact Isabel Boaten at General Law Consult by telephone (+233 21 253 073) or by fax (+233 21 253 075) or by email (isabel@generallawconsult.com).



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