The Kumasi Metropolitan Assembly relied on the District Assembly Common Fund meant for developmental projects to settle judgment debts totalling GHS670,720.78 to four contractors in 2020.
According to an audit report released by the Auditor-General on the use of the District Assembly Common Fund, the payments followed legal action the contractors initiated against the assembly.
“In all the four cases, the Assembly defaulted in payment of contractual obligations which the contractors (Kerecom, Osbon, Sapsco and Saboadu) sought legal action and the court awarded judgment debts in favour of the contractors,” the report said.
The report noted that the assembly had gone foul of section 7 of the PFMA, 2016 (Act 921) which notes that “a Principal Spending Officer of a covered entity shall ensure the regularity and proper use of money appropriated in that covered entity.”
The assembly was unable to honour payment obligations to the contractors by the due dates, and also failed to negotiate for Alternative Dispute Resolution instead of court settlement.
This resulted in the payment of the judgment debts, the report surmised.
“The use of DACF funds to pay judgment debts which were not budgeted for deprived the Assembly of funds to execute projects in the Metropolis,” the Auditor-General’s audit report added.
The Auditor-General’s department thus recommended that the penalty paid for the default should be refunded from the Assembly’s IGF account into the DACF account.
“Management should in future negotiate for arbitration to resolve contractual disputes,” it added.
One other assembly also fell short of section 7 of the PFMA, 2016 (Act 921).
The Birim Central Municipal Assembly used an amount of GHS 234,200.00 from its Common Fund allocation to settle judgment debt.
This occurred because the Assembly unilaterally suspended the construction of a three-storey 18-unit classroom block at Akim Oda Presby School as far back as August 2001.
As such, the contractor, Messrs Petrado Ltd, took the Assembly to court and was awarded the judgment debt.
In this case, the report also noted that the use of DACF funds to pay judgment debts deprived the Assembly of funds to provide amenities for the communities.