Subject: PUBLIC SECTOR ACCOUNTING & FINANCE (PSAF)

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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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  • 8 Marks

PSAF – Nov 2024 – L2 – Q4a – Financial Ratio Analysis

Compute financial ratios for Ghana Wind Farms LTD to analyze performance trends.

Ghana Wind Farms LTD, a State-Owned Enterprise (SOE), has appointed a new Board of Directors in January 2023. The new Board, after settling for a year, is interested in assessing their performance for the year 2023 against the performance of the previous Board in the year 2022 through ratio analysis. Below is the financial statement of Ghana Wind Farms LTD for the two years.

Ghana Wind Farms LTD

Statement of Profit or Loss for the Year Ended 31 December 2023

2023 (GH¢) 2022 (GH¢)
Revenue 9,860,000 6,218,000
Direct Cost (5,905,000) (5,822,000)
Gross Profit 3,955,000 396,000
Distribution Costs (297,000) (264,000)
Administrative Expenses (505,000) (455,000)
Other Income 236,000 13,000
Other Gains – 1,482,000
Operating Profit 3,389,000 1,172,000
Finance Cost (1,000,000) (334,000)
Profit Before Tax Expense 2,389,000 838,000
Tax Expense (500,000) (144,000)
Profit After Tax 1,889,000 694,000

Ghana Wind Farms LTD

Statement of Financial Position as at 31 December 2023

2023 (GH¢) 2022 (GH¢)
ASSETS
Non-Current Assets
Property, Plant & Equipment 17,000,000 15,000,000
Investment 5,000 2,000
Advances & Loans – 30,000
Total Non-Current Assets 17,005,000 15,032,000
Current Assets
Inventories 687,000 546,000
Trade and Other Receivables 2,829,000 1,978,000
Prepayments 87,000 42,000
Cash and Cash Equivalents 383,000 434,000
Total Current Assets 3,986,000 3,000,000
TOTAL ASSETS 20,991,000 18,032,000
EQUITY & LIABILITIES
Equity
Government Equity 8,000 8,000
Other Government Equity 613,000 306,000
Capital Surplus 8,471,000 7,599,000
Income Surplus (1,434,000) 478,000
Total Equity 7,970,000 8,697,000
Non-Current Liabilities
Deferred Credit 6,692,000 670,000
Deferred Tax Liabilities 2,498,000 2,572,000
Borrowings (Due After One Year) 1,297,000 950,000
Total Non-Current Liabilities 10,487,000 4,192,000
Current Liabilities
Bank Overdraft 166,000 180,000
Provision for Company Tax 109,000 109,000
Trade and Other Payables 1,820,000 4,516,000
Borrowings (Due Within One Year) 439,000 338,000
Total Current Liabilities 2,534,000 5,143,000
Total Liabilities 13,021,000 9,335,000
TOTAL EQUITY AND LIABILITIES 20,991,000 18,032,000

Required:

a) Compute the following ratios:

i) Current Ratio
ii) Quick Ratio
iii) Inventory Turnover (Days)
iv) Trade Receivable Collection Period (Days)
v) Trade Payables Period (Days)
vi) Working Capital Cycle
vii) Interest Cover Ratio
viii) Total Debt – Total Asset Ratio

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  • 10 Marks

PSAF – Nov 2024 – L2 – Q3b – Public Expenditure and Financial Accountability (PEFA) Assessment

Evaluate the financial performance of a local government based on PEFA assessment results and recommend strategies for improvement.

 Accounting and reporting constitute a key pillar of an organised and transparent public financial management system in the public sector. The effectiveness of accounting and reporting reflects the integrity of financial data, the accuracy of in-year budget reports, and the quality of annual financial statements. In a recent Public Expenditure and Financial Accountability (PEFA) assessment, a local government had the following results:

  • Annual financial reporting: D
  • In-year budget report: D+
  • Financial data integrity: C

Required:
i) Explain the assessment performance to the Municipal Chief Executive of the local government.
ii) Recommend two strategies for improving the performance of the local government in each of the assessed areas.

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  • 10 Marks

PSAF – Nov 2024 – L2 – Q3a – Public Financial Management Cycle

Explaining objectives and improvements in public financial management systems.

As part of efforts to improve public financial management, the government has engaged experts to evaluate the entire public financial management cycle. The review report indicates that every component of the cycle is malfunctioning and emphasizes the need for a stronger commitment to building a robust system to achieve the desired outcomes.

Required:

i) Explain THREE key objectives of an orderly and open public financial management system.

ii) Recommend TWO ways of enhancing each stage of the public financial management cycle towards the attainment of desired outcomes.

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  • 10 Marks

PSAF – Nov 2024 – L2 – Q2b – Related Party Transactions and Disclosures

Explains related party transactions and their implications under IPSAS 20.

You are the Director of Finance at the Ghana Water Development Authority, an entity under the Ministry of Forestry and Water. The Authority has a five-member Board chaired by the daughter of the Sector Minister. The Chief Executive Officer of the Authority has just been appointed by Government for an initial term of four years.

The Chairperson of the board runs boutique services. The Authority buys a lot of presents from this boutique whenever they are confronted with the need to give out presents to any high-profile person. The Chairperson has made a request to the Authority to finance her boutique services with an amount of GH¢546,000 to enable her business to pay some urgent bills. No terms or conditions were provided in the request. Such an assistance from a financial institution would attract the current prevailing bank interest on loans at a rate of 35% per annum. Recently, another member of the Board contracted a loan from the Bank for her child’s university entrance fees at that rate.

Management of the Authority indicated that the amount was not significant to the Authority and has been approved by the Head of the entity and the Chief Director. The approved document has been handed over to you for payment. Considering the PFM Laws and IPSAS, you engaged the Chief Director about the request, but you were directed to go ahead and pay and use the appropriate accounting treatment in such circumstances. You accordingly raised the necessary documentation and effected the payment.

Required:

In relation to IPSAS 20: Related Party Disclosures:

i) Explain the implications of this transaction on the Authority and state how you would account for this transaction in the financial statements of the entity.

ii) State SIX situations where related party transactions may lead to disclosures by a reporting entity.

iii) Explain TWO reasons for disclosing related party transactions/relations.

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  • 7 Marks

PSAF – Nov 2024 – L2 – Q2a – Valuation of Legacy Fixed Assets

Valuation and accounting treatment of legacy fixed assets in compliance with IPSAS.

The Ministry of Indigenous Enterprises has been charged to collect legacy fixed assets data and value them in accordance with International Public Sector Accounting Standards (IPSAS). The Fixed Assets Coordinating Unit (FACU) of the Ministry has collected for valuation the following data for your action:

The Ministry owns a four (4) storey Office Administration block. The average cost per floor is GH¢4,741,256.25. The building was constructed on a land size of 20 plots of land owned by the Ministry. Currently, a plot of land in that area costs GH¢2,500,000. The FACU has measured the sizes of the building as follows:

  • Length: 87.5 meters
  • Width: 42.65 meters
  • Reference Price per Square Meter: GH¢4,432

However, a professional body, the Institute of Architects and Engineers, has given the reference price for the cost of such an office building at an estimated price of GH¢87,965,025. The building has not seen any further facelift ever since. However, a fence wall with a gate to enforce security and secure the land has just been completed in the current year at a cost of GH¢8,970,000 with a lifespan of 50 years.

The year of construction of the office building could not be determined, yet an old watchman who had been there for ages remembers that the building was constructed some 42 years ago, a time when his seventh child was born. It is the decision of the Government of Ghana on the adoption of IPSAS not to take advantage of the three-year exemption period but to account for legacy fixed assets by taking 60% of the reference cost of the legacy assets as the deemed cost, with a reduced lifespan of 30 years.

Required:

i) Calculate the cost of the land and buildings with structures to be brought into the books on the adoption of IPSAS and determine the depreciation chargeable in the first year in respect of these assets.                                                                                              ii) Show the extract of Statement of Financial Position of the Ministry of Indigenous
Enterprises as at that date

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  • 8 Marks

PSAF – Nov 2015 – L2 – Q3c – Government Revenue

Compute Irepodun State Government's revenue budget for 2015 fiscal year.

Irepodun State is inhabited by 8,000,000 citizens. The State is expected to generate revenue from different sources. The following details are provided for the 2015 fiscal year:

(i) The number of taxable adults residing in the State is 3,500,000. The rate of tax payable per resident is N20,000 per taxable adult on average per annum.
(ii) There are 22,500 industries which are expected to pay land use charges of N10,000 per industry.
(iii) There are 2,300,000 residential buildings expected to pay land use charge of N4,500 per house per annum.
(iv) The modern markets built by the State Government will generate N12,000 per annum per stall and N5,000 per annum per seller and hawker operating in the markets. There are 3,000 modern stalls and 250,000 sellers and hawkers assumed to operate in the markets each year. The local governments within the areas of the markets’ location are entitled to 50% of revenue generated from the markets.
(v) There are 5,000 mass transit buses owned by the State Government, each of which generates N5,000 per business day. Assume 28 business days in a month.
(vi) The State expects the following additional revenue in the year:

Revenue Source N’Million
Statutory allocation from the Federation 25,000
Miscellaneous Revenue 3,000

Required:

Compute the revenue budget of Irepodun State Government for the fiscal year 2015.

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  • 10 Marks

PSAF – Nov 2015 – L2 – Q3b – Treasury Management in the Public Sector

Describe five weaknesses in Nigeria's cash management practices.

Discuss any FIVE weaknesses in the current system of cash management in Nigeria.

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  • 2 Marks

PSAF – Nov 2015 – L2 – Q3a – Treasury Management in the Public Sector

State four key objectives of cash planning and management.

Cash management is one of the challenges of Treasuries all over the world.

a. Identify any FOUR objectives of cash planning and management.

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  • 20 Marks

PSAF – Nov 2015 – L2 – Q2 – Pension Accounting in the Public Sector

Analysis of pension misappropriation under the Pension Reform Act, detailing offences, penalties, and competent jurisdictions.

Mr. Betta Tomoro is a staff of Goodlife Local Government Council of Welfare State. He has been in the local government council’s employment for twenty-five (25) years. Recently, he attained the age of fifty-two (52) years. He had risen to the post of an Assistant Director on grade level 15, step 2. Mr. Betta Tomoro and his employer had contributed the sum of N8.5 million under the old Pension Scheme and Pension Reform Act 2014. Monthly contributions are sent to his Pension Fund Administrator (PFA), Diversity Pension Managers Limited.

It is the practice of the Pension Fund Administrator to send to Mr. Betta Tomoro the records of his pension on a monthly basis. However, in April 2015, no further record was received by Mr. Betta Tomoro concerning his pension fund. This resulted in his visit to the Pension Fund Administrator’s office to inquire about the sudden stoppage of his pension fund.

During cross-examination at the Court of Competent Jurisdiction to hear pension-related offences, it was found that five staff members of Diversity Pension Managers Limited had bought mansions in Victoria Garden City and other houses in London valued at N380 million. They jointly floated a company, Owo-mugun Limited, with all operational infrastructure in place, all valued at N175 million. They also had N18 million in various local and international bank accounts.

After two hearings on the allegations of criminal misappropriation of clients’ pension monies filed against these staff, judgment was reserved by the court for December 15, 2015.

Required:

a. In line with the Pension Reform Act 2014, identify TWO acts that constitute criminal offences.
(4 Marks)

b. If by December 15, 2015, the five staff are found guilty of misappropriation of clients’ pension fund, state THREE penalties provided to be imposed on them as per the Pension Reform Act 2014.
(6 Marks)

c. Identify THREE Courts of Competent Jurisdiction that can hear pension-related cases as provided in the Act.
(3 Marks)

d. If Mr. Betta Tomoro preferred to withdraw his service voluntarily from Goodlife Local Government Council at the age of forty-five (45) years, what provisions would be available to him concerning his pension contribution?
(3 Marks)

e. Assuming the prevailing interest rate is 21.5%, compute the total amount payable by the convicts (including interest) if the entire amount misappropriated is ordered to be refunded by the court.
(4 Marks)

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  • 30 Marks

PSAF – Nov 2015 – L2 – Q1 – International Public Sector Accounting Standards (IPSAS)

Evaluate financial treatment for leased machinery, borrowing costs, and investment properties in a public sector agency's financial statements.

Top-Hill State Investment Agency, a government business entity, provided the following transactions for the financial year ended December 31, 2014:

a. On January 1, 2014, the company acquired machinery on lease with a fair value of ₦500,000 and a residual value of NIL at the end of its economic life of five years. The lease payment of ₦139,778 was made first on January 1, 2014, with payments due on the first day of each financial year. The implicit interest rate was set at 8%.

b. Top-Hill State Investment Agency incurred borrowing costs of ₦5 million for the financial year ended December 31, 2014, with ₦1.2 million specifically related to constructing a qualifying asset. The Agency’s policy is to capitalize borrowing costs in line with IPSAS 5 on “Borrowing Costs.”

c. The Agency applies the cost model to its investment properties. At the end of the 2013 financial year, the investment properties carried a value of ₦4.5 million. The Agency depreciates these properties using a 25% reducing balance. The fair value as of December 31, 2014, was ₦4.2 million.

Required:

  1. Explain how the newly leased machinery should be treated in the Financial Statements (Extracts) of the Agency.
  2. State the amount to be taken to the Statement of Financial Performance (Extracts) and the Statement of Financial Position (Extracts) for the year ended December 31, 2014. (20 Marks)
  3. Explain how the ₦5 million borrowing costs should be treated in the financial statements (Extracts) and state the amount to be recorded in the Statement of Financial Performance (Extracts) and the Statement of Financial Position (Extracts) for the year ended December 31, 2014. (4 Marks)
  4. Identify and explain the accounting entries required as of December 31, 2014, to account for the Investment Properties. Show workings. (6 Marks)

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  • 15 Marks

PSAF – May 2022 – L2 – SA – Q7 – Public Sector Reforms,

Discuss reasons for divergence between private and public appraisal of projects and explain key differences in cost-benefit and cost-effectiveness analysis.

Investment appraisal is a process of finding out the least possible costs of an investment and the maximum economic benefits, which may accrue from the commitment of resources.

Required:
a. Highlight FOUR reasons for divergence between private and public appraisal of a project. (4 Marks)
b. How does cost-benefit analysis (CBA) differ from cost-effectiveness analysis (CEA)? (5 Marks)
c. Identify THREE procedures and THREE limitations of cost-effectiveness analysis. (6 Marks)

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  • 15 Marks

PSAF – May 2022 – L2 – SA – Q6 – Public Sector Reforms

Discuss effects and principles of public expenditure on the economy.

Public expenditure is an important segment of the budgetary activities. It refers to the expenses incurred by the government in the course of its activities.

Required:
a. Discuss TWO effects of public expenditure on the economy. (5 Marks)
b. Identify and explain FIVE principles of public expenditure. (10 Marks)

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  • 15 Marks

PSAF – May 2022 – L2 – SA – Q5 – Public Sector Reforms

Discuss principles of debt rescheduling and forms of debt conversion.

Rescheduling is the rearrangement of payment terms of debt with respect to new maturities, grace period, and readjustment of the interest rate. The essence is to facilitate convenience in debt repayment.

Required:
a. Identify and explain TWO main principles of debt rescheduling. (5 Marks)
b. Discuss FIVE forms of debt conversion. (10 Marks)

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  • 20 Marks

PSAF – May 2022 – L2 – SA – Q4 – Government Revenue

Compute financial ratios for Koki Event Center and highlight ways to conduct analytical reviews.

The following information relates to Koki Event Center which is owned and managed by Ogbonge Local Government.

Koki Event Centre
Statement of financial position as at September 30, 2021 (Extract)

Required:
a. Compute the following relevant ratios for the event centre and comment on your results:
i. Current ratio (3 Marks)
ii. Acid test ratio (3 Marks)
iii. Working capital/Total assets ratio (3 Marks)
iv. Total debts/Total assets ratio (3 Marks)
v. Long-term debts/Total assets ratio (3 Marks)

b. Highlight THREE ways by which analytical review can be conducted. (3 Marks)

c. Explain TWO ways the performance appraisal of a profit-oriented entity would differ from that of a public-oriented entity. (2 Marks)

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  • 20 Marks

PSAF – May 2022 – L2 – SA – Q3 – Government Revenue

Identify the powers and functions of state boards of internal revenue and other agencies in revenue generation.

Revenue generation is an important role carried out by some agencies of government with a view to meeting the expenditure of government, required for taking care of the welfare of the citizens. Revenue Mobilisation, Allocation and Fiscal Commission Act 1989 specifically mentioned some powers and functions of the Commission.

Required:
a. Identify FOUR powers and responsibilities of State Board of Internal Revenue Service in Nigeria. (4 Marks)
b. Explain FOUR specific functions of the Department of Petroleum Resources (DPR). (4 Marks)
c. Highlight SIX powers entrusted to the Revenue Mobilisation, Allocation and Fiscal Commission. (6 Marks)
d. Explain THREE sources of revenue payable to the federation account in Nigeria. (6 Marks)

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