- 30 Marks
Question
The ministry of finance of Ojaja Republic prepared the aggregate Medium-Term Expenditure-Framework (MTEF) budget for consideration by the National Assembly as contained in the country’s Constitution. The following are the MTEF actual budget estimates and the approved budget estimates by various sectors as thoroughly screened by the Budget Committees of the Senate and House of Representatives:
Ojaja Federal Republic Summary of total budgeted expenditure by sector for 2020
| Sector Code | Sector Name | Actual Estimates 2020 (N’m) | Approved Estimates 2020 (N’m) |
|---|---|---|---|
| 01 | Administrative Sector | ||
| Personnel Cost | 40,000 | 34,000 | |
| Overhead Cost | 25,000 | 21,250 | |
| Consolidated Revenue Charges | 18,600 | 15,810 | |
| Capital Expenditure | 62,400 | 53,040 | |
| Sub-Total | 146,000 | 124,100 | |
| 02 | Economic Sector | ||
| Personnel Cost | 22,500 | 20,250 | |
| Overhead Cost | 12,600 | 11,340 | |
| Consolidated Revenue Charges | 28,600 | 25,740 | |
| Capital Expenditure | 41,300 | 37,170 | |
| Sub-Total | 105,000 | 94,500 | |
| 03 | Law and Justice Sector | ||
| Personnel Cost | 15,800 | 15,800 | |
| Overhead Cost | 20,200 | 20,200 | |
| Consolidated Revenue Charges | 17,500 | 17,500 | |
| Capital Expenditure | 38,500 | 38,500 | |
| Sub-Total | 92,000 | 92,000 | |
| 04 | Regional Sector | ||
| Personnel Cost | 40,800 | 38,760 | |
| Overhead Cost | 22,200 | 21,090 | |
| Consolidated Revenue Charges | 16,700 | 15,865 | |
| Capital Expenditure | 32,300 | 30,685 | |
| Sub-Total | 112,000 | 106,400 |
Summary of total expenditure by sectors:
| Description | Actual Estimates 2020 (N’m) | Approved Estimates 2020 (N’m) |
|---|---|---|
| Personnel Cost | 119,100 | 108,810 |
| Overhead Cost | 80,000 | 73,880 |
| Consolidated Revenue Charges | 81,400 | 74,915 |
| Capital Expenditure | 174,500 | 159,395 |
| Total | 455,000 | 417,000 |
Additional Information:
(i) Administrative sector – all costs at an incremental basis of 15%, except for capital expenditure which will increase by 10%.
(ii) Economic sector – all costs at an incremental basis of 25%, except for overhead cost which will decrease by 5%.
(iii) Law and justice sector – all costs at a declining basis of 5%, except for personnel cost which will increase by 10%.
(iv) Regional sector – all costs at an incremental basis of 10%, except for consolidated revenue charges which will decrease by 15%.
Required:
a. Prepare proposed budget estimates for 2021, 2022, and 2023 based on the approved estimates for the year 2020. (20 Marks)
b. Explain the following in relation to National Chart of Accounts (NCOA) structure for budgeting:
i. Functional segment (2 Marks)
ii. Programme segment (2 Marks)
iii. Geographical segment (2 Marks)
c. Enumerate FOUR steps required for budgeting with the National Chart of Accounts. (4 Marks)
Answer
a. Proposed Budget Estimates (2021-2023)
b. National Chart of Accounts (NCOA) Structure
i. Functional Segment: The functional segment classifies the expenditure and revenue according to the functions of government, for example, administrative, economic, social, and environmental functions.
ii. Programme Segment: This segment provides a detailed breakdown of government programmes and sub-programmes within each function. It facilitates the tracking of specific programme performance within the national budget.
iii. Geographical Segment: This segment identifies the location (geographical areas) where expenditures and revenues are generated or allocated. This helps in understanding the impact of government activities across different regions.
c. Steps Required for Budgeting with the National Chart of Accounts
- Identifying the relevant segments (functional, programme, geographical) in line with the national budget priorities.
- Assigning expenditures and revenues to the respective segments based on budget guidelines.
- Compiling the segment-wise data into the government’s overall financial reporting framework.
- Verifying and reconciling the segment data to ensure accuracy and completeness in the budget presentation.
- Topic: The Budgeting Process in the Public Sector
- Series: MAY 2022
- Uploader: Theophilus