- 20 Marks
PSAF – L2 – Q13.4 – Budget Performance Analysis
Question
(a)
Prepare a budget performance report of Anlo District Assembly based on the extract below.
| Annual budget GH¢’000 | Revised budget GH¢’000 | Actual performance GH¢’000 | |
|---|---|---|---|
| Decentralised transfer | 32,000 | 35,000 | 42,000 |
| Internally generated fund | 56,000 | 45,000 | 33,000 |
| Compensation | 23,000 | 20,000 | 25,700 |
| Goods and services | 13,000 | 18,000 | 24,000 |
| Non-financial asset | 18,000 | 15,000 | 12,000 |
Answer:
Anlo District Assembly
Revenue and expenditure extract of Anlo District Assembly for the year ended 31 December 2023
| Revised Budget GH¢ | Actual Performance GH¢ | Budget Outturn GH¢ | Budget Outturn percentage (%) | |
|---|---|---|---|---|
| Decentralised transfer | 35,000,000 | 42,000,000 | 7,000,000 | 20.00 |
| IGF | 45,000,000 | 33,000,000 | (12,000,000) | (26.67) |
| Compensation | 20,000,000 | 25,700,000 | (5,700,000) | (28.50) |
| Goods and services | 18,000,000 | 24,000,000 | (6,000,000) | (33.33) |
| Non-financial asset | 15,000,000 | 12,000,000 | 3,000,000 | 20.00 |
(b)
Write a report analyzing the budget outturn whilst assessing the likely causes of the variances during the year and discuss the limitations of your analysis.
Answer
(a)
Anlo District Assembly
Revenue and expenditure extract of Anlo District Assembly for the year ended 31 December 2023
| Revised Budget GH¢ | Actual Performance GH¢ | Budget Outturn GH¢ | Budget Outturn percentage (%) | |
|---|---|---|---|---|
| Decentralised transfer | 35,000,000 | 42,000,000 | 7,000,000 | 20.00 |
| IGF | 45,000,000 | 33,000,000 | (12,000,000) | (26.67) |
| Compensation | 20,000,000 | 25,700,000 | (5,700,000) | (28.50) |
| Goods and services | 18,000,000 | 24,000,000 | (6,000,000) | (33.33) |
| Non-financial asset | 15,000,000 | 12,000,000 | 3,000,000 | 20.00 |
(b)
To: Management Committee
From: Director of Finance
Subject: Analysis of Anlo District Assembly Budget Report
On the side of Revenue, the performance of the Assembly was not encouraging since they made an average revenue outturn of (6.67%). A closer examination of the revenue recovered indicates that Internally Generated Fund (IGF) reduced by 26.67% over the budget. This could be as a result of not supervising the collections of these revenues. Covid-19 effects on the performance of businesses and other economic activities of the districts could also be the cause.
However, on the side of Decentralized Transfers, the Assembly’s performance was encouraging since they generated greater revenues against the budget by 20%.
The budget report shown above indicates that the total spending of Anlo District Assembly was in excess of (16.42%), represented by the total expenditure outturn. However, a close examination of individual expenditure items reveals that compensation of employees’ appropriation was exceeded by 28.50%. This could be largely financed by virement of moneys from non-financial assets. These could also be financed from IGF. Goods and Services were also overspent by 33.33%, and this may affect the service delivery capacity of Anlo District Assembly since operational expenses such as training, workshops, and conferences, which are very critical to staff, have to be sacrificed.
Again, purchases of capital assets during the period were reduced as there was a positive outturn of 20%. This could be as a result of cuts made to meet the excess expenditure on compensation of employees and Goods and Services.
In conclusion, the overall budget implementation was not encouraging as Anlo should have taken care of spending within the budget as far as compensation of employees and Goods and Services expenditure are concerned.
Limitations of the Analysis:
- Lack of Qualitative Data: The analysis is based solely on financial data and does not include qualitative factors such as policy changes or external economic conditions that may have influenced performance.
- Historical Nature: The data reflects past performance and may not predict future outcomes, especially in a dynamic economic environment.
- Complexity of Public Sector Accounting: The diverse funding sources and reporting requirements may obscure the true financial picture, making interpretation challenging.
- Potential Discrepancies: Differences between budgetary and accrual-based accounting may lead to inconsistencies in the analysis.
- Limited Disclosure: The extract may not provide sufficient detail on contingent liabilities or risks, limiting the depth of the analysis.
- Uploader: Salamat Hamid