Subject: PUBLIC SECTOR ACCOUNTING & FINANCE (PSAF)

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  • 20 Marks

PSAF – Mar 2025 – L2 – Q5- International public sector accounting standards

Explain major activities of IPSASB to deliver its mandate.

a) The International Public Sector Accounting Standards Board (IPSASB) – formerly the Public Sector Committee (PSC) – of the International Federation of Accountants (IFAC) focuses on the accounting, auditing and financial reporting needs of national, regional, and local governments, related governmental agencies and the constituencies they serve. In 2004, the PSC was relaunched as the IPSASB with revised terms of reference to reflect the Board’s mandate.

Required:                                                                                                                                                                                                                 (i) Explain the major areas of activities undertaken by IPSASB to deliver its mandate.                                                                                (ii) Discuss FOUR non-authoritative materials that the IPSASB develops and issues in fulfilling its objectives.

b) Public Financial Management requires regulation within a macroeconomic framework to ensure that public funds are sustainable, reduction of fiscal risk and to support the general economic policy of the Government. In the Government’s quest to realise this goal, the role of the Ministry of Finance and the Bank of Ghana cannot be overlooked.

Required: Explain FIVE roles each of the Minister for Finance and the Bank of Ghana in supporting the general economic policy of government.

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  • 20 Marks

PSAF – Mar 2025 – L2 – Q4 – Financial statements discussion and analysis

Prepare a paper evaluating Borga and Obi Manso’s 2023 financial performance using specified metrics.

Below are IPSAS-compliant financial statements of two developing countries, Borga and Obi Manso for the year ended 31 December 2023 expressed in the local currency of Ghana and published by an international public financial management organization domiciled in Accra, Ghana.

Statement of Financial Performance for the Year ended 31 December 2024

Borga Obi Manso
GH¢ million GH¢ million
Revenue
Tax Revenue 302,400 317,300
Non Tax Revenue 50,400 76,000
Grants and Donations 10,440 5,985
363,240 399,285
Expenditure
Employee compensation 190,512 161,880
Goods and Services 41,208 50,350
Consumption of Fixed Assets 4,680 8,550
Interest 77,880 76,000
Social Benefits 8,160 17,100
Subsidies – 4,275
Other Expenses 4,800 9,880
327,240 328,035
Surplus 36,000 71,250

Statement of Financial Position as at 31 December 2024

Borga Obi Manso
GH¢ million GH¢ million
Assets
Non-Current Assets
Property, Plant and Equipment 96,000 180,500
Equity Investments 42,000 33,250
Loans Receivables 4,800 2,850
142,800 216,600
Current Assets
Loan Receivables 33,600 37,050
Inventory 4,800 11,400
Cash and Cash Equivalent 57,600 30,400
96,000 78,850
Total Assets 238,800 295,450
Funds and Liabilities
Current Liabilities
Payables 36,000 40,850
Deposits and Trust Monies 58,800 57,000
94,800 97,850
Non-Current Liabilities
Domestic Debt 24,000 38,000
External Debt 50,400 85,500
74,400 123,500
169,200 221,350
Accumulated Funds 69,600 74,100
Funds and Liabilities 238,800 295,450

Required: a) Prepare a paper for presentation at an upcoming PFM forum to evaluate the performance of the two countries using the following metrics: i) Revenue to Total Assets ii) Current Ratio iii) Debt to Owners Fund iv) Accumulated Fund to Total Assets v) Common Size analyses of Tax Revenue, Compensation of Employees and Surplus

b) Using the metrics above, interpret the performance of the two countries under efficiency, short-term liquidity and long-term liquidity/stability of the countries with a metric each.

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  • 20 Marks

PSAF – Mar 2025 – L2 – Q3- Public sector fiscal planning and budgeting

Examine implications of Ghana's 2025-2028 fiscal policy proposals per PFM Act 2016.

a) The Government has unveiled its transformative agenda, driven by its fiscal strategy, covering the period 2025 -2028. In the Agenda 2028 document released by the government, the following strategies were outlined:

  1. Taxes on individual income (referred to as pay-as-you-earn) will be suspended until 2029.
  2. Development will be driven by debt, with the government leveraging its goodwill to borrow from development partners and investors to fund its development programmers and projects. By the end of 2024, the debt-to-GDP ratio was projected to reach 80%.
  3. There will be significant government expenditure aimed at boosting development and enhancing citizens’ living conditions. Data from 2024 indicate that the fiscal balance relative to GDP stands at 17%.
  4. All forms of extravagance and wastefulness within the public sector will be eradicated to ensure efficiency, effectiveness, and value for money across all government operations.
    The statement also noted that the government reserves the right to suspend the fiscal rules and targets as and when necessary.

Required:
i) Examine the implications of the government’s policy propositions (1 to 4) in relation to the principles of formulating and implementing fiscal policy objectives outlined in the Public Financial Management Act 2016, (Act 921).

ii) Discuss the steps and events that will necessitate a cabinet approval for a suspension of the fiscal rules and targets under the Public Financial Management Act 2016, (Act 921).

b) The Public Expenditure and Financial Accountability (PEFA) Framework is designed to evaluate the public financial management performance of public institutions. However, some critics, including the Director of Finance of your entity, argue that PEFA represents a form of neo-colonialism repackaged for Africa, and therefore, African countries should resist its assessment.

Required:
i) Explain to the Director of Finance FOUR reasons your country’s PFM system should be subjected to PEFA assessment.

ii) Discuss FOUR limitations of the PEFA framework used to assess PFM systems.

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  • 20 Marks

PSAF – Mar 2025 – L2 – Q2 – International public sector accounting standards

Explain the meaning of a qualifying asset per IPSAS for Ghana Highway Authority.

Ghana Highway Authority prepares its financial statements in accordance with International Public Sector Accounting Standards (IPSAS). The Government of Ghana has approved the sum of GH¢678,000 to the Ghana Highway Authority for the construction of a qualifying infrastructural asset.
The following costs were incurred during the construction of the Asset:
i) The sector minister in the process recommended his brother as a consultant to conduct feasibility analysis on the construction of the asset. The consultant charged the Authority the sum of GH¢350,000.
ii) An installation of platforms to enable the project to be undertaken were designed and built at a cost of GH¢225,900.
iii) Some foreign elements of the service required that Letter of Credit was processed to enable execution of the project, and the legal fees charged was GH¢275,000.
iv) Importation of specific components from Germany to execute the project in question cost the Authority €58,890.
v) Haulage and Freight charges cost €5,725.
vi) Cleaning and engine oil for first testing of equipment at the project site amounted to GH¢19,430.
vii) The cost of warranty on the asset was €3,400 should the Authority take advantage of the warranty agreement.
viii) Delivery, handling and other overhead amounted to GH¢156,800 out of which 60% were attributable.
ix) The Ghana Highway Authority consequently incurred cost of GH¢398,560 in modification of an adjoining infrastructure to facilitate the project.
The Government of Ghana was not able to provide all the amount hence the Minister for Finance gave approval to the Chief Executive Officer (CEO) of the Authority to borrow the excess amount from open market which a financial institution provided at a commercial rate of 35% per annum. Government of Ghana (GoG) accounting policy adopts the allowed alternative approach of borrowing costs under IPSAS 5: Borrowing Costs.
A check from the professional website of the Institute of Architects and Engineers in Ghana indicates that the professional fee that can be charged under the service rendered by the consultant would cost only GH¢195,000.
To the extent that the funds borrowed was not GoG funds, and the fact that the funds would be required after 100 days to pay for the cost of the asset, which was provided earlier than envisaged, the CEO took advantage of the 14 weeks’ grace period for payment and invested the funds in a 91-day investment which yielded a return of 24.09% per annum at first maturity when the funds were held in anticipation of payment.
The prevailing exchange rate on the date of the contract was GH¢13.50 to €1.00, however on the day of payment the exchange rate shot up to GH¢15.57 to €1.00.

Required:
a) Explain what is meant by a qualifying asset.

b) Determine the cost of the qualifying asset for capitalization.

c) Based on the information provided, indicate FIVE notes to the accounts in the books of the Ghana Highway Authority.

d) Explain another method or approach by which the borrowing cost could be recognized under IPSAS 5: Borrowing Costs.

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  • 20 Marks

PSAF – Mar 2025 – L2 – Q1- Preparation and presentation of financial statements for covered entities

Prepare the Statement of Financial Performance for Hamile Teaching Hospital for 2023 per IPSAS and related regulations.

The Trial Balance below relates to Hamile Teaching Hospital, a public hospital.

Trial Balance for the year ended 31 December 2023
Debit Credit
GHc’000 GHc’000
Government subvention 100,750
Out-patient services fees 35,000
In-patient services fees 40,000
Development Partner grants (ii) 16,000
Established position salaries 62,000
Casual Labour 5,600
Contract appointment (local and foreign) 1,400
Limited engagements 200
Rent (iii) 500 150
Insurance 340
Consultancy services 120
Conferences, workshops and training 4,500
Purchase of drugs 60,000
Purchase of medical consumables 80,000
Office expenses 20,000
Repairs and maintenance 6,000
Interest on loan 10,000
Pharmacy sales 180,000
Diagnostic 85,000
Mortuary Services 9,400
Cafeteria and Canteen 4,650
Extension services 14,500
Furniture and office equipment (iv) 200,000 40,000
Medical equipment & accessories (iv & v) 420,000 120,000
Motor vehicles (iv) 120,000 20,000
Land and buildings (iv) 300,000 70,000
Bank and Cash 30,000
Receivable from National Health Insurance Scheme (vi) 65,000
Receivable from patients 15,000
Payables 26,000
Loan from foreign Institution (2028) (vii) 350,000
Inventory of drugs 22,000
Inventory of medical consumables 12,000
Accumulated Fund 336,210
Other expenses 13,000
1,447,660 1,447,660

Additional Information:
i) The hospital prepares its financial statements in accordance with the International Public Sector Accounting Standards (IPSAS), the Public Financial Management Act 2016, (Act 921), the Public Financial Management Regulation 2019, L.I 2378, and the current Chart of Accounts of the Government of Ghana.
ii) The Development Partner grants received from the Health Care Fund, an international organization that provides free medical care to the rural poor and vulnerable individuals, are typically unconditional. However, 40% of this year’s grant is subject to certain conditions, which had not been met as of December 31, 2023.
iii) Rent received in advance during the year amounted to GH¢20,000 while rent owed by the hospital for the year amounts to GH¢300,000.
iv) The hospital charges consumption of fixed assets on straight line basis as follows

Non-current Assets Estimated Useful Life
Furniture and office equipment 5 years
Medical equipment and accessories 4 years
Motor vehicles 5 years
Buildings 10 years

Land constitutes 30% of the amount of land and building shown in the trial balance.
v) A medical equipment valued at GH¢20,000,000 which is included in the medical equipment and accessories listed on the trial balance, was completely damaged due to consistent power fluctuations. The value of this equipment should be written off.
vi) The hospital submitted a claim of GH¢11,000,000 to the National Health Insurance Scheme for services provided to patients in the last quarter of 2023, but the payment has not yet been received. This transaction has not yet been reflected in the trial balance.
vii) The hospital took a loan of $100,000,000 from Health World Bank on January 1, 2023, when the exchange rate was $1 to GH¢3.50. The exchange rate on 31 December 2023 is $1 to GH¢5.
viii) The inventories on 31 December 2023 were as follows:

Inventory type Cost Net Realizable Value Current Replacement
GHc’000 GHc’000 GHc’000
Drugs 15,000 16,000 14,000
Medical consumables 10,000 11,000 9,000

Required:
Prepare for Hamile Teaching Hospital:
a) Statement of Financial Performance for the year ended 31 December 2023.

b) Statement of Financial Position as of 31 December 2023.

c) Disclosure notes to the financial statements.

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  • 4 Marks

PSAF – Nov 2024 – L2 – Q5c – Functions of the State Interests and Governance Authority

Explains four functions of the State Interests and Governance Authority (SIGA) in overseeing state entities.

The Nine Hundred and Ninetieth Act of the Parliament of the Republic of Ghana entitled the State Interests and Governance Authority Act, 2019 was established to oversee and administer state interests in state-owned enterprises, joint venture companies, and other state entities and to provide for related matters.

Required:

Explain FOUR functions of the State Interests and Governance Authority (SIGA).

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  • 6 Marks

PSAF – Nov 2024 – L2 – Q5b – Nolan’s Principles of Public Life

Explains four of Nolan’s Seven Principles of Public Life, which guide ethical behavior in public office.

 Nolan’s Seven Principles of Public Life serve as guidelines for ethical behavior in public service. They are not typically enforceable through direct legal actions; instead, they often operate as moral and professional standards shaping the behavior of individuals in public office.

Required:

Explain FOUR of these principles.

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  • 4 Marks

PSAF – Nov 2024 – L2 – Q5a – Public Financial Management Regulations

Explains the provisions in PFM Regulation 2019 for a Principal Spending Officer in the payment process and differentiates between misapplication and misappropriation of funds.

a) The Public Financial Management Regulation makes the Principal Spending Officer (PSO) personally responsible for all payments of the covered entity. To mitigate possible risk exposure of the PSO during the payment process, the regulations provide guidance to assist approving authorities before signing off any payment.

In recent times, the Auditor-General has faulted PSOs for infractions such as misapplication of funds, misappropriation of funds, and partially accounted payments among others. Similar observations were cited in the 2023 Management Letter of Nipa Ye Municipal Assembly.

Required:

i) With reference to the PFM Regulation 2019, LI 2378, explain the provisions available to the PSO in the payment process before approval.

ii) Distinguish between misapplication of funds and misappropriation of funds as used by the Auditor-General with an example each.

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  • 3 Marks

PSA – Nov 2024 – L2 – Q4c – Events After the Reporting Date

Explanation of events occurring after the reporting date and their impact on financial statements.

Explain THREE limitations of ratio analysis

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  • 9 Marks

PSAF – Nov 2024 – L2 – Q4b – Public Expenditure and Financial Accountability

Explanation of the Public Expenditure and Financial Accountability framework and its application.

Based on your results in (a), write a report to the newly appointed board analyzing and indicating whether their performance is better in comparison with the old board.

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  • 10 Marks

PSA&F – Nov 2019 – L2 – Q2a – The Budgeting Process in the Public Sector

Comparison of incremental and zero-based budgeting and explanation of zero-based budget stages.

With continuing pressure to control costs and maintain efficiency, the time has come for all public sector organisations to embrace zero-based budgeting. There is no longer a place for incremental budgeting in any organisation, particularly those in public sector, where zero-based budgeting is far more suitable.

Required:

  • Explain the terms ‘incremental budgeting’ and ‘zero-based budgeting.’
  • Identify the five main stages involved in preparing zero-based budgets.

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  • 6 Marks

PSAF – Nov 2016 – L2 – Q5b – Fiscal Policy and Public Finance

This question explains the adverse consequences that public debt can have on a nation's economy.

Explain any THREE ways by which public debt can constitute a burden to the nation.

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  • 9 Marks

PSAF – Nov 2016 – L2 – Q5a – Fiscal Policy and Public Finance

This question discusses how external borrowing can assist in overcoming the economic recession in Nigeria.

Discuss how external borrowing can bail out the Nigerian economy from the economic recession.

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  • 11 Marks

PSAF – Nov 2016 – L2 – Q4b – Government Expenditure

This question distinguishes between the Board of Survey and Board of Enquiry, and discusses the conditions for constituting a Board of Enquiry.

i. Distinguish between Board of Survey and Board of Enquiry.
(5 Marks)

ii. Under what conditions would a Board of Enquiry be constituted?
(6 Marks)

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  • 9 Marks

PSAF – Nov 2016 – L2 – Q4a – Government Expenditure

This question identifies various sources of loss of public funds in the public sector, focusing on misappropriation and fraud.

Loss or shortage of public funds is depletion in government funds at a given time.

Enumerate SIX sources through which loss of funds may arise in the public sector.

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  • 20 Marks

PSAF – Nov 2016 – L2 – Q3 – The Budgeting Process in the Public Sector

This question covers the preparation of a cash flow projection for the first quarter of 2015 for a housing corporation, alongside an analysis of recurrent expenditure.

The Atlantic Staff Housing Corporation is preparing its budget for 2015. You have been engaged as a Consultant to the Corporation to assist in the preparation of the budget. The following information has been made available:

  1. The total annual subventions from the Federal Government in 2014 was N36,000,000. There is an expectation that this amount will increase by 10% in the year 2015. The expected 10% increase will be received in the first six months of the year along with the normal monthly allocations.
  2. The management has decided to reduce transport and travelling by 5% in the year 2015. The total amount in 2014 was N3,780,000, and the expense will accrue evenly throughout the year.
  3. Capital grant of N14 million is expected in February, May, and November.
  4. Salaries and wages for 2014 were N28 million. In 2015, salaries and wages will increase by 12.5% of the amount paid in 2014. Housing allowance is 33% of salaries and wages.
  5. Ground rent for industrial estates will be received as follows: January N2.8 million, February N1.5 million, and March N2.08 million.
  6. The training and development expenses of N700,000 are to increase by 10% in the year 2015. The total amount will be spent on an equal basis in February and October 2015.
  7. The Corporation will commence construction of 100 low-cost housing units in the year 2015. The following are the commitments through LPOs in 2014, which will be met in the New Year:
    Date Purchased Particulars LPOs Time to Pay Amount (N’Million)
    15/08/2014 Cement 121 February 9.5
    15/09/2014 Iron-rod 111 March 2.8
    31/10/2014 Gravels 120 30/01/2015 1.5
    01/11/2014 Plumbing Materials 122 20/02/2015 0.75
    05/12/2014 Sands 119 March 1.2513
  8. Rent receivable from the shopping complex of the Corporation will be: January N1.7 million, February N1.5 million, and March N2.5 million.
  9. The cash balance as of December 31, 2014, was N1.5 million.

Required:

a. Prepare a cash flow projection for the first quarter of the year 2015.
(15 Marks)

b. Calculate the ratio of recurrent expenditure to total inflow for each month and make a brief comment on the ratio.
(5 Marks)
(Total 20 Marks)

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  • 2 Marks

PSAF – Nov 2016 – L2 – Q2c – Accounting for Government Assets and Liabilities

This question defines and describes the key characteristics of a Government Business Enterprise (GBE).

Identify any TWO characteristics of a Governmental Business Enterprise.

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  • 6 Marks

PSAF – Nov 2016 – L2 – Q2b – International Public Sector Accounting Standards (IPSAS)

This question discusses the benefits of adopting IPSAS in public sector accounting, focusing on transparency, accountability, and credibility improvements.

Enumerate any FOUR benefits in the adoption of Public Sector Accounting Standards (IPSAS).

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  • 12 Marks

PSAF – Nov 2016 – L2 – Q2a – International Public Sector Accounting Standards (IPSAS)

This question outlines the benefits of migrating from IPSAS-CASH to IPSAS-ACCRUAL basis for public sector accounting.

In an effort to promote accountability and transparency in governance, the
administration has adopted and implemented the International Public Sector
Accounting Standards (IPSAS) from January 2014. The governments (Federal, State,
Local) and other public institutions adopted IPSAS in the reporting and presentation
of financial statements to improve the quality and comparability of financial
information, and to be in conformity with other advanced nations of the world. IPSASCASH is already adopted in the budgeting, accounting and presentation of financial
statements, while IPSAS-ACCRUAL takes effect from January 2016.
You are required to:

Identify any SIX benefits of migration from IPSAS-CASH basis to IPSAS ACCRUAL basis.

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