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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  • 20 Marks

PSAF – May 2022 – L2 – SA – Q2 – Ethics and Integrity in Public Sector Financial Management

Discuss measures needed for anti-corruption enforcement and ways to detect bid rigging.

Transparency International is committed to advancing accountability, integrity, and transparency. The mission is to stop corruption and promote transparency, accountability, and integrity at all levels and across all sectors of society, while the vision is a world in which government, politics, business, civil society, and the daily lives of people are free of corruption.

Required:
a. Discuss FIVE measures that are needed to ensure transparent, effective, and consistent application and enforcement of laws and regulations on anti-corruption. (10 Marks)
b. Explain TWO ways by which procurement officers can detect bid rigging. (5 Marks)
c. Explain FIVE powers of the Code of Conduct Bureau. (5 Marks)

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  • 30 Marks

PSAF – May 2022 – L2 – SA – Q1 – The Budgeting Process in the Public Sector

Prepare proposed budget estimates for 2021-2023 based on actual and approved estimates for the year 2020.

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)

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  • 6 Marks

PSAF – Nov 2016 – L2 – Q7b – Fiscal Policy and Public Finance

Identifies and explains three key criteria used to assess income distribution within a society.

Discuss THREE specific criteria for income distribution.

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  • 9 Marks

PSAF – Nov 2016 – L2 – Q7a – Fiscal Policy and Public Finance

Discusses the income distribution function and identifies three government instruments that can be used to achieve equitable income distribution.

“An equitable system of public finance aims at even distribution of income and wealth among the various sections of a country.”

You are required to discuss the following:

The income distribution function and any THREE instruments that could be used by government.

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  • 10 Marks

PSAF – Nov 2016 – L2 – Q6b – Government Revenue

Requires calculation and comparison of benefit/cost and net benefit/cost ratios for five local government projects to advise on project selection.

The following estimated costs and benefits relate to FIVE different divisible projects of Eleweran Local Government. The local government has budgeted the sum of N100,000,000 to undertake the following projects:

Project A (N’000) B (N’000) C (N’000) D (N’000) E (N’000)
Estimated Costs of Investment 20,000 40,000 24,000 48,000 60,000
Estimated Benefits 50,000 44,000 40,000 52,000 72,000

You are required to:
i. Calculate the benefit/cost ratio of each of the five projects. (1 1/4 Marks)
ii. Compute the net benefit/cost ratio of each project. (3 3/4 Marks)
iii. Compare the results in (i) and (ii) and advise the chairman of the local government on the project to be undertaken. (5 Marks)

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  • 10 Marks

PSA&F – Nov 2019 – L2 – Q6b – Public-Private Partnerships (PPP)

Identifies five functions of the Bureau of Public Enterprises (BPE) in commercialization and privatization.

The Bureau of Public Enterprises (BPE) is charged with the implementation of the privatization program.

Required:

  • Identify FIVE commercialization functions and FIVE privatization functions of the BPE.

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  • 10 Marks

PSA&F – Nov 2019 – L2 – Q6a – Government Revenue

Explains three ways to authorize payments from the Consolidated Revenue Fund (CRF) and discusses two statutory payments permitted by law to be charged directly to the CRF.

The objective of public financial management is to safeguard public funds from mismanagement. One way to achieve this is by ensuring that payments from the Consolidated Revenue Fund (CRF) are properly authorized.

Required:

  • Identify and explain THREE ways to authorize payments from the CRF.
  • Discuss TWO statutory payments that can be charged directly to the CRF.

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  • 10 Marks

PSA&F – Nov 2019 – L2 – Q5b – Public-Private Partnerships (PPP)

Discusses three benefits and two adverse consequences of Public-Private Partnerships (PPP).

A Public Private Partnership (PPP) is a cooperative arrangement between two or more public and private sectors, typically of a long-term nature.

Required:

  • Identify and explain THREE benefits of Public Private Partnerships (PPP).
  • Discuss TWO adverse consequences of Public Private Partnerships (PPP).

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  • 10 Marks

PSA&F – Nov 2019 – L2 – Q5a – Financial Reporting and Accountability in the Public Sector

Prepares a consolidated budget report comparing budgeted and actual amounts for Ogoja State Government for the year ended 2018.

IPSAS 24 on Presentation of Budget Information in Financial Statements requires a comparison of budgeted amounts and the actual amount arising from execution of the budget to be included in the financial statements of entities. The standard also requires disclosure of an explanation of the reasons for material differences between the budget and actual amounts to ensure that public sector entities discharge their accountability obligations and enhance the transparency of their financial statements.

Ogoja State Government provided the following budget information for the year ended December 31, 2018.

 

 

Required:
Prepare a consolidated budget report for the year ended December 31, 2018.

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  • 10 Marks

PSA&F – Nov 2019 – L2 – Q4b – Fiscal Policy and Public Finance

Discusses circumstances under which debt financing is appropriate and identifies four documents needed for the issuance of bonds.

Public projects can be financed through debt, taxation, and other related revenue. The choice of any one method depends on the objective and the overall long-term implications for the economy.

Required:

  • Discuss TWO circumstances under which debt financing is appropriate.
  • Identify FOUR documents required for the issuance of bonds to a state or local government.

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