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  • 20 Marks

PSAF – L2 – Q12.3 – International public sector accounting standards

Prepare consolidated financial statements and notes for National Health Services and its hospitals for 2023 per IPSAS.

GHANA HEALTH SERVICE

Statements of Financial Performance for the year ended 31st December 2023

GHS Kolebu Saint H
GHC’000 GHC’000 GHC’000
Revenue
Tax revenue 100,000
GoG receipt 2,000
Non-exchange revenue 100,000 2,000 3,000
Internally generated revenue 5,000 400 200
Exchange revenue 5,000 400 200
Total revenue 105,000 2,400 3,200
Expenses
Compensation for employees 40,000 600 500
Depreciation & amortisation 500 300 200
Goods and services 25,000 600 400
Finance costs 1,600 500 100
Total expenses 67,100 2,000 1,200
Surplus for the period 37,900 400 2,000

Statements of Financial Position for the year ended 31 December 2023

GHS Kolebu Saint H
GHC’000 GHC’000 GHC’000
Assets:
Cash & cash equivalent 25,000 800 500
Receivable: GHS 900
Receivable: Others 62,000 700 400
Inventories 12,000 300 200
Current assets 99,000 2,700 1,100
Property, plant & equipment 140,000 40,000 67,100
Investment- Saint H 60,000
Non-current assets 200,000 40,000 67,100
Total Asset 299,000 42,700 68,200
Liabilities
Payable: Kolebu 900
Payable others 60,000 8,000 3,000
Current borrowings 90,000 2,000
Current liabilities 150,900 10,000 3,000
Borrowing 45,000 10,000 5,000
Non-current liabilities 45,000 10,000 5,000
Total liabilities 195,900 20,000 8,000
Net asset (liabilities) 103,100 22,700 60,200

Net Asset/Equity:

GHS Kolebu Saint H
GHC’000 GHC’000 GHC’000
Contribution from owners 60,000
Accumulated Surplus (deficit) 103,100 22,700 200
Total Asset/Equity 103,100 22,700 60,200

Additional information
(i) The Ghana Health Services (GHS) is a government agency responsible for overseeing the health sector. The Kwadwo Teaching Hospital is funded through government appropriations and internally generated funds approved by Parliament. The GHS appoints most of the hospital’s board members on behalf of the government. All employees at Kwadwo receive their salaries from the Consolidated Fund.
(ii) On July 1, 2023, the GHS established the Blessed Hospital to provide high-quality healthcare services in the country. The GHS has fully funded the hospital’s operations through equity and debt guarantees and has also appointed the hospital’s governing board.
(iii) The appropriations to Kwadwo cover employee compensation and goods and services expenses at a ratio of 60% to 40%, respectively.
(iv) At the end of the reporting period, the GHS owed Kwadwo GHC900,000 for services rendered to its staff. The GHS has committed to paying this amount by the end of the second quarter of the following year.
(v) The separate financial statements of the GHS, Kwadwo, and Blessed Hospital are prepared using the same accounting policies.

Required:
Prepare in accordance with the relevant IPSASs:
(a) A consolidated statement of financial performance for the year ended 31 December 2023.
(b) A consolidated statement of financial position as at 31 December 2023.
(c) Note to the accounts.

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  • 20 Marks

PSAF – L2 – Q12.2 – International public sector accounting standards

Assess if a local authority can apply IPSAS 35 to consolidate a housing association's activities.

(a)  A local authority has a policy that, where it holds land that is surplus to its requirements, consideration should be given to making the land available for affordable housing. The local authority establishes terms and conditions to ensure that the housing provided remains affordable and available to meet local housing needs. In accordance with this policy, the local authority sold part of a site to a housing association for GH₵10 million to provide 20 affordable homes. The remainder of the site was sold at open market value to a private developer. The contract between the authority and the housing association specifies what the land can be used for, the quality of housing developments, ongoing reporting and performance management requirements, the process for return of unused land, and dispute resolution. The land must be used in a manner consistent with the local authority’s policy for affordable housing. The agreement also has requirements regarding the housing association’s quality assurance and financial management processes. The housing association must demonstrate that it has the capacity and authority to undertake the development. It must also demonstrate the added value that can be achieved by joining the local authority’s resources with that of the housing association to address a need within a particular client group in a sustainable way. The Board of the housing association is appointed by the members of the housing association. The local authority does not have a representative on the Board.

Required:
Assess whether the local authority could apply IPSAS 35 Consolidated Financial Statement to the activities of the Housing Association.

(b) A national museum is governed by a board of trustees who are chosen by the government department responsible for funding the museum. The trustees have freedom to make decisions about the operation of the museum. The department has the power to appoint the majority of the museum’s trustees.

Required:
Discuss whether the government department has the power over the activities of the museum.                                                                                                                                                                                                                                                                                                                (c)

In a recent workshop, a senior fellow of a civil society organisation asserts that the efforts of the Financial Controller to prepare consolidated financial statements of the authority is an exercise in futility. It further noted that the exercise is a waste of public resources.

Required:
Discuss the merit and demerit of the view of the Senior Fellow in light of IPSAS 35.

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  • 14 Marks

PSAF – L2 – Q12.1 – International public sector accounting standards

Assess if Zamunda government controls Zamunda Transport Agency per IPSAS 35.

Zamunda Transport Agency
(a) (i) A government has established a Zamunda Transport Agency. The Zamunda Transport Agency has assumed many responsibilities previously held by the government. The agency is responsible for the regional transportation network in the metro and regional areas of the jurisdiction, including public transport and major roads and bridges. The agency receives approximately 2/3rds of its funding for operations from a share of the government’s fuel taxes and general tax revenues. The remainder of the revenue for operations comes from non-government sources such as fares, advertising, and property development. The government contributes toward rapid transit projects. The agency has raised capital through significant borrowings that are guaranteed by the government. The agency is allowed to operate autonomously; however, the agency’s mandate is established by legislation, and the government sets the regional transportation vision. The government has the power to appoint and remove a majority of the members of the board of directors of the Zamunda Transport Agency. The government has never exercised this power. The agency’s board of directors is responsible for hiring, compensating, and monitoring the performance of the management and for providing oversight of the agency’s strategic planning, finances, major capital projects, and operations. The government has the power to veto operating and capital budgets, including fares and capital financing plans.

Required:
In line with IPSAS 35 Consolidated Financial Statements, assess whether the government has control over the Zamunda Transport Agency.                                                                                                                                                                                                             (ii)Discuss the procedures you will follow in preparation of the financial statements, given that control has been established in question (a).                                                                                                                                                                                                                                                                                                                                                                                                                                                                     (b)

Zamunda Transport Agency

(b) Explain the following terms used in the IPSAS:

(i) Equity method of accounting;

(ii) Joint arrangement;

(iii) Economic entity view of financial reporting; and

(iv) Associate.

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  • 20 Marks

PSAF – L2 – Q11.4 – Preparation and presentation of financial statements for central government

Prepare the cash flow statement for Zamunda Central Government for 2024 with reconciliation notes.

The Central Government of Zamunda: Cash flows statement for the year ended 31st December 2024

Prepare the cash flow statement for the Central Government of Zamunda for the year ended 31st December 2024, based on the following data:

Cash flows from operating activities GHC million
Corporate income tax 38,000
Custom and excise duties 43,000
Value added taxes 45,000
Multilateral grants 16,000
Income tax (PAYE) 15,000
Fee and charges for services 10,000
Dividend and other investment income 7,000
Bilateral grants 12,000
Fines, penalties and forfeitures 9,000
Established post salaries (22,000)
Non-established post salaries (20,000)
13% SSF contribution for staff (7,000)
Staff allowances (8,000)
Administrative cost (15,000)
Seminar and workshops (12,000)
Training and capacity building (6,000)
Foreign travelling cost (5,000)
Repair and maintenance (8,000)
Domestic debt interest paid (12,000)
External debt interest paid (12,000)
Payments for subsidies on utilities (12,000)
Payment for subsidies on fuel (12,000)
Community empowerment program (12,000)
Support for social protection of aged widows (12,000)
Statutory transfers (12,000)
Other expenses (12,000)

Cash flows from investing activities GHC million
Recoveries of loans and advances 8,000
Payment for property, plant and equipment during year (18,000)
Payments for infrastructure during year (20,000)
Loans and advances granted during the year (13,000)

Cash flows from financing activities GHC million
External borrowing during the year 30,000
Domestic borrowing during the year 20,000
Repayment of external borrowing during the year (10,000)

Additional information for notes:

  • Surplus of revenue over expenses for the year ending 2024: GHC 23,200 million
  • Depreciation charged for the year: GHC 3,500 million
  • Increase in inventories: GHC (1,500) million
  • Taxes recoverable: GHC (16,200) million
  • Accrued expenses: GHC 11,000 million
  • Prepaid rent: GHC (5,000) million
    W1 Taxes recoverable GHC million
    Corporate income taxes 3,000
    Customs & excise duties 5,000
    VAT 6,000
    Personal Income Tax 4,000
    Total taxes receivable 18,000
    Less amount estimated as irrecoverable 1,800
    Taxes recoverable 16,200

    W2 Accrued expenses GHC million
    Domestic debt interest 3,000
    External debt interest 4,000
    Accrued salaries 4,000
    Total accrued expenses 11,000

    W3 Prepaid Rent GHC million
    Prepaid Rent 5,000

    Include a reconciliation note for surplus/deficit to cash flows from operating activities.

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  • 10 Marks

PSAF – L2 – Q10.1 – Revaluation of Assets

Show financial statement extracts for Kumawu District Assembly's building revaluation at 31 December 2024 under IPSAS.

Kumawu District Assembly revalues its buildings and decides to incorporate the revaluation into the financial statements. The following information has been made available:
a) Extract from the statement of financial position at 31 December 2023

Buildings at cost GHc’000
Buildings at cost 300,000
Accumulated Depreciation (93,000)
Carrying amount 207,000

b) Depreciation has been provided at 2% per annum on a straight-line method.
c) The building is revalued at 30 June 2024 at GHc276 million. There has been no change in the remaining estimated future life of the buildings.
Required:
Show the relevant extracts from the financial statements at 31 December 2024.

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  • 20 Marks

PSAF – L2 – Q9.4 – Provisions and Contingent Liabilities

Account for contract cancellation, court ruling, and revised contract costs under IPSAS 19, including provisions and disclosures.

Under IPSAS 19: Provisions, Contingent Liabilities and Contingent Assets, the authority needs to account for the cancellation of contracts, the legal case, the court’s decision, and the potential revision of the contract amount.

Required:

Determine whether provisions should be made for the court award and contract revision, calculate the expected value of the revised contract amount, and outline the disclosures required under IPSAS 19.

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  • 20 Marks

PSAF – L2 – Q5.4 – Public expenditure and financial accountability framework

Discuss roles of EOCO, OSP, PAC, and FIC in promoting ethics and accountability in public sector management.

Ethics management is the responsibility of every organisation; however, certain institutions are specifically established to champion ethical practices and accountability in public sector management.

Required:

Discuss five roles of each of the following institutions in relation to ethics and accountability:

(a) Economic & Organised Crime Office;

(b) Office of the Special Prosecutor;

(c) Public Accounts Committee; and

(d) Financial Intelligence Centre

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  • 20 Marks

PSAF – L2 – Q5.1 – Public expenditure and financial accountability framework

Discuss four unethical problems in public financial management in Unity with examples.

(A) Ethics in public administration has become a serious concern in recent times as the public sector has turned into a fertile space for unethical activities and behaviours. Many believe that ethics should be managed in the public sector to reduce corruption and other unethical behaviours.

(ii) Explain ethics management in the public sector and its approaches.

(B) In dealing with ethical issues, professional skepticism and judgment are required of professional accountants in the public sector.

Required:

Explain professional skepticism and judgment and illustrate how they apply to the public sector.

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  • 20 Marks

PSAF – L2 – Q4.4 – General purpose financial reporting framework

Explain measurement in financial reporting, its objectives, and appropriate measurement bases for legacy assets in a public hospital.

(a) Unity Regional Hospital has many assets which do not carry value in the books of accounts, termed legacy assets. These legacy assets include land and buildings, motor vehicles, equity investment in a special purpose vehicle, and specialized biomedical equipment. Migrating to an accrual basis requires that these assets be measured and recognized in the financial statement. The major concern of the Director of Finance, Ms. Ama Kweku is how to measure these legacy assets to achieve values that will be agreeable to the Auditor.

Required:

(I) Explain measurement in financial reporting.

(ii) Discuss the objective of measurement that should guide the Director of Finance in the measurement of the legacy assets.

(iii) Explain the appropriate measurement basis for each component of the legacy assets of the hospital.

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  • 20 Marks

PSAF – L2 – Q4.3 – General purpose financial reporting framework

Discuss how five issues in a government department's financial reporting affect specific qualitative characteristics of financial statements.

(a) The following issues were identified in the financial reporting processes of a government department.

(b) Discuss the three constraints on information included in the general purpose financial reports.

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