Relevance of Audited Financial Statement during Tender Evaluation in Ghana: A Case of KNUST
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Date
2015-02-10
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Abstract
In recent times, much attention has been given to a number of regulations in public institutions. Prominent among these is the Public Procurement law, Act 663 of 2003. Even though the Act is capable of ensuring efficient and effective procurement practices, its implementation is beset with quite a number of difficulties, because according to the Act 663, Section 22(i) and (ii) qualification of tenderers includes financial resources but the details are missing. KNUST is one of the public institutions facing this problem of what financial ratios to use in order to ascertain the financial capability of suppliers for their procurement needs. In this study the purpose was to find out the level of frequency with which Audited Financial Statements are requested and the procedures and method used in analyzing the audited financial statements. The study shows that most of panel members for tender evaluation at KNUST are quite experienced with most members having served on the evaluation panel between Four (4) and Six (6)yrs. The study reveals that audited financial statements are required from suppliers almost all the time as part of the tender evaluation process and liquidity ratios were the main financial ratios used for the assessment of supplier for goods. Interestingly, all the respondents in the study underscored the importance of audited financial statements in tender evaluation. However, the panel for works relies on the determination of annual work turnover of suppliers and even though the panel members (works) indicated they have some level of knowledge in financial management and auditing, it appears that these are rarely applied in terms of using financial ratios in supplier assessment. The study recommends amongst others, the use of other ratios such as profitability and efficient ratios in addition to the liquidity ratios in assessing financial capabilities of suppliers, the inclusion of a professional accountant on the evaluation panels and the evaluation panel should be an ad-hoc committee and a review of the procurement Act (Act 633) to cater for the gaps.
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This dissertation is submitted to the Department of Building Technology, in partial fulfilment of the requirement for the award of a Master of Science Degree in Procurement Management
Keywords
Financial Statement, Procurement Act, Tender Evaluation Panel, Audit