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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  • 20 Marks

PSAF – May 2017 – L2 – SB – Q2 – Financial Reporting and Accountability in the Public Sector

Explain Zero-Based Budgeting stages, benefits, drawbacks, and users in the public sector.

The Zero-based budgeting system is a budgeting system that requires every item of expenditure to be justified as if the particular activity or programme is taking off for the first time.

Required:

a. State the stages involved in the Zero-based budgeting system. (5 Marks)

b. Explain THREE benefits associated with the Zero-based budgeting system. (6 Marks)

c. Explain THREE drawbacks of the Zero-based budgeting system. (6 Marks)

d. State THREE key users of the Zero-based budgeting system. (3 Marks)

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  • 30 Marks

PSAF – May 2017 – L2 – SA – Q1 – Government Revenue

Prepare the financial statements for Kaloba State Government, including Consolidated Revenue Fund, Development Fund, and Statement of Assets and Liabilities.

The following balances were extracted from the books of KALOBA State Government of OTAN as at December 31, 2015:

Item Dr (N’Million) Cr (N’Million)
Cash Account 60,000
Consolidated Revenue Fund as at Jan 1, 2015 120,000
Allocation from Federation Account 300,000
Other Revenue 40,000
Personnel Costs 150,000
Ordinary Shares of N1 each in AKRAN Plc 150,000
Deposits 60,000
Advances 80,000
Loans from Federal Government 60,000
Loans to Local Government 80,000
Fixed Deposit – LOBO Bank Plc 60,000
Total 580,000 580,000

Additional information:

  1. N40 billion should be transferred to the Development Fund for capital projects to be embarked upon in the 1st quarter of 2016.
  2. Other charges approved by the Fund Management Committee and paid during the year but omitted from the books amounted to N50 billion.
  3. Total grants of N100 billion collected from the Federal Government for a capital project to be embarked upon in the 1st quarter of 2016 were not recorded in the books.

Required:

Prepare the following statements for submission to the Auditor-General for the State:

  1. Consolidated Revenue Fund Account for the period ended December 31, 2015. (8 Marks)
  2. Development Fund Account for the period ended December 31, 2015. (3 Marks)
  3. Statement of Assets and Liabilities as at December 31, 2015. (9 Marks)

(b) State the components of General Purpose Financial Statements (GPFS) of a typical Federal or State Government. (4 Marks)

(c) State FOUR principal users of government financial reports and their needs. (6 Marks)

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  • 15 Marks

PSAF – May 2023 – L1 – SC – Q7 – Government Revenue

Differentiates public revenue and receipts, oil and non-oil revenue, and discusses revenue allocation challenges in Nigeria.

Government, like any other economic unit, needs funds, which can be raised from various sources for the purpose of financing its activities.

Required:

a. Differentiate between:
i. Public revenue and public receipts, and state their sources. (3 Marks)
ii. Oil and non-oil revenue. (2 Marks)

b. Discuss FIVE problems associated with revenue allocation in Nigeria. (10 Marks)

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  • 15 Marks

PSAF – May 2023 – L1 – SC – Q6 – Public Sector Reforms

Criteria for selecting loan sources, Paris Club debt rescheduling principles, and challenges in state government project financing.

Sometimes, countries contracting loan obligations are able to choose between different sources of credits, allowing them to base decisions on the most favorable conditions.

Required:

a. Identify and explain FOUR criteria for decision-making in choosing credit sources. (6 Marks)
b. Explain TWO main principles that guide the Paris Club debt rescheduling process. (4 Marks)
c. Discuss FIVE problems facing state governments in financing projects from capital markets. (5 Marks)

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  • 15 Marks

PSAF – May 2023 – L1 – SA – Q5 – Fiscal Policy and Public Finance

Explains why government intervenes in the economy and identifies Nigeria's macroeconomic objectives.

A national economy requires the involvement of government to thrive, and its presence supports citizens’ livelihoods.

Required:

i. Identify and explain FIVE reasons why the government intervenes in the economy. (7.5 Marks)
ii. Identify and explain FIVE macroeconomic objectives in Nigeria. (7.5 Marks)

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  • 20 Marks

PSAF – May 2023 – L1 – SA – Q4 – Regulatory and Institutional Framework

Discusses the requirements for MTEF preparation and submission and identifies documents accompanying the Nigerian budget.

a. In the course of writing Medium-Term Expenditure Framework (MTEF) report, several issues relating to states in the Federation were integrated into the report in line with the Fiscal Responsibility Act (2010).

Required:

i. Explain the TWO requirements of the Fiscal Responsibility Act as it affects time lag for the preparation of MTEF and submission to the National Assembly. (3 Marks)

ii. Identify FIVE documents that should accompany the estimates of revenue and expenditure of Nigeria’s annual budget to the National Assembly (NASS). (5 Marks)

b. Upon assuming office, the head of Bureau of Establishments and Training of Takuro State organized a training workshop for government officials across all Ministries, Departments, and Agencies (MDAs) in the state to emphasize the importance of public sector accounting for efficient job performance.

Required:

i. Identify and explain FOUR objectives of public sector accounting that you will discuss at the workshop. (6 Marks)

ii. Identify SIX external users of public sector accounting reports, highlighting their information needs. (6 Marks)

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  • 20 Marks

PSAF – May 2023 – L1 – SA – Q3 – Pension Accounting in the Public Sector

Outline PTAD's functions and National Pension Commission's powers over PTAD as per the PRA 2014.

a. Sections 42 and 44 of Pension Reform Act (PRA) 2014 established Pension Transitional Arrangements Directorate (PTAD) for public service of the Federation and Pension Transitional Arrangements Directorate (PTAD) for the Federal Capital Territory (FCT) respectively.

Required:

i. Identify SEVEN functions of the PTAD as contained in PRA (2014). (7 Marks)
ii. Identify THREE powers which National Pension Commission has over Pension Transitional Arrangements Directorate for public service of the Federation and Federal Capital Territory. (3 Marks)

b. Two accountants in the Ministry of Finance of Welfare State were in a debate as to which basis of accounting for revenue and expenditure should be adopted in the state. Five bases of accounting for the finance of the state were put forward: accrual basis, cash basis, modified cash basis, modified accrual basis, and commitment basis.

Required:

As a student of public sector accounting, explain any FOUR bases under the following headings:

i. Concepts of the FOUR bases.
ii. THREE merits of cash basis.
iii. THREE merits of accrual basis. (10 Marks)

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  • 20 Marks

PSAF – May 2023 – L1 – SA – Q2 – Regulatory and Institutional Framework

Objectives and contents of Local Government Financial Memoranda and journal entries for Bureau transactions.

a. The revised Local Government Financial Memoranda (1991) spells out the administrative guidelines, the existing checks and balances, and roles of officers in local governments.

Required:

Identify THREE objectives and FIVE contents of Local Government Financial Memoranda. (8 Marks)

b. Bureau of Establishments and Training of Waso State awarded a contract to one of its Government Business Entities (GBE), Unity Enterprises, for the supply of stationery for use in various MDAs in the State. The Bureau conducted the following transactions for the year ended December 31, 2020:

  1. The Bureau issued a purchase order to Unity Enterprises for the supply of 1,250,000 reams of duplicating papers at N1,200 per unit. The items were supplied on May 31, 2020.
  2. An additional order for 5,000 training bags was placed with Unity Enterprises at N2,500 per bag. The bags were delivered on June 30, 2020.
  3. During the year, 1,100,000 reams of duplicating papers and 4,500 training bags were issued to user departments for training activities.
  4. Physical verification revealed that 25,000 reams of duplicating papers were damaged by floodwater.
  5. The Bureau transferred 25,000 reams of duplicating papers to its outstation office.

Required:

Record the above transactions as journal entries in the books of Bureau of Establishments and Training of Waso State.

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  • 30 Marks

PSAF – May 2023 – L2 – SA – Q1 – Public Sector Financial Statements

Prepare statements for government performance and financial position, including adjustments and depreciation calculations.

a. The following information relates to the accounts of Dovet State Government for the year ended December 31, 2022:

Description DR (N’M) CR (N’M)
Land and buildings (cost) 387,500
Long-term investments 187,500
Equipment and furniture 67,500
Accumulated depreciation:
– Land and building 40,000
– Motor vehicles 30,000
– Equipment and furniture 21,250
Motor vehicles (cost) 145,000
Federation account allocation 287,500
VAT allocation 87,500
Grants from Federal Government 33,750
Internally generated fund 97,500
Grant from donor agency 25,000
Personnel emolument 125,000
Maintenance of premises 5,000
Consolidated Revenue Fund charges 32,500
Overhead expenses 25,000
Miscellaneous expenditure/income 37,500 61,250
Loan notes 250,000
Current assets/liabilities 38,750 36,250
Consolidated Revenue Fund (CRF) 81,250
Total 1,051,250 1,051,250

Additional Information:

  1. Loan interest outstanding at the end of the year was N12.5 billion.
  2. Depreciation on tangible assets is charged at the following rates on cost:
    • Building is 5% (cost of land is N250 billion)
    • Motor vehicles is 20%
    • Equipment and furniture is 15%
  3. A building costing N12.5 billion with accumulated depreciation of N5 billion was sold for N11.25 billion. This transaction has not been adjusted in the accounts.
  4. Interest on receivable amounted to N10 billion.

Required:

  1. Prepare the Statement of Financial Performance for the year ended December 31, 2022.
  2. Prepare the Statement of Financial Position as at December 31, 2022.

b. Financial statements provide information that meets a number of qualitative characteristics in financial reporting.

Required:
Discuss FOUR characteristics of financial reporting.

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  • 15 Marks

PSAF – Nov 2015 – L2 – Q7 – Public Sector Reforms

Distinguish between basic infrastructure and development projects with examples and identify funding sources and characteristics.

In order to achieve some development objectives, nations place emphasis on priority programmes like the provision of basic infrastructure and development projects, all of which require appropriate funding.

Required:

a. By means of specific relevant examples, distinguish between “basic infrastructure” and “development projects”. (3 Marks)

b. Discuss TWO development objectives which the priority programmes you refer to in (a) above are planned to achieve. (4 Marks)

c. Identify TWO sources of funding for these priority projects stating TWO distinct characteristics of each source identified and TWO factors that facilitate the commercial viability of the projects. (8 Marks)

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