Topic: Government Revenue

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PSAF – Nov 2014 – L2 – Q1 – Government Revenue

Calculation and distribution of revenue collected by Olakoma Federation across federal, state, and local levels.

Question

Eboda State is one of the 30 states in the Olakoma Federation. The Federation has a population of 120 million people with 700 local government councils and a land mass of 300,000 sq kilometers.

Eboda State has a population of 12 million, 25 local government councils, and a land mass of 30,000 sq kilometers.

The following transactions took place in the Office of the Accountant-General of Olakoma Federation during the year ended December 31, 2013:

Revenue Source	Amount (N’ Million)
Crude oil sale	350,000
Domestic oil receipts	445,000
Miscellaneous oil receipts	105,000
Royalty on crude oil	101,000
Royalty on gas	95,000
Rentals on oil field	87,000
Gas flared penalty	77,000
Petroleum profit tax	650,000
Companies income tax	500,000
Other non-oil taxes	225,000
Import duties	255,000
Export duties	125,000
Excise duties	320,000
Custom penalty charge	115,000
Custom fees account	120,000
Common external tariff levy	100,000
Court fees	30,000
PAYE of armed forces	55,000
7% Port levy	25,000
Value Added Tax (VAT)	700,000

Additional Information:

The Olakoma Customs Service is entitled to 7% cost of collection on all revenues collected, while the Federal Inland Revenue Service is entitled to 4% of non-oil revenue.
The sharing formula for the Federation Account and VAT is as follows:

Category Federation Account VAT

Federal Government 52.68% 15%

State Governments 26.72% 50%

Local Governments 20.60% 35%
A 13% derivation is paid to oil-producing states, based on oil and gas-related income.
The sharing ratio in (ii) above is based on the following criteria:

Category State Local Government

Equity 40% 40%

Population 30% 30%

Land Mass 20% 20%

Internally Generated Revenue Effort 10% 10%
The total internally generated revenue effort of the 30 states and 700 local government councils amounted to N500 billion and N300 billion, respectively.
The total internally generated revenue effort of Eboda State and its 25 local governments amounted to N50 billion and N20 billion, respectively. Eboda State is not one of the oil-producing states.
All revenues due to all local governments in each state are paid to the State Joint Local Government Account. This account is entitled to 10% of the Internally Generated Revenue (IGR) of the state.

Category	Federation Account	VAT
Federal Government	52.68%	15%
State Governments	26.72%	50%
Local Governments	20.60%	35%

Category	State	Local Government
Equity	40%	40%
Population	30%	30%
Land Mass	20%	20%
Internally Generated Revenue Effort	10%	10%

Required:

a. State the differences between the Federation Account and the Consolidated Revenue Account. (4 Marks)

b. Calculate:

i. Olakoma Custom Service’s cost of collection. (3 Marks)
ii. Federal Inland Revenue Service’s cost of collection. (2 Marks)
iii. The 13% derivation paid to oil-producing states. (3 Marks)

c. Calculate the amount to be credited to:

i. Consolidated Revenue Fund of Olakoma Federal Government. (6 Marks)
ii. Eboda State Consolidated Revenue Fund Account. (6 Marks)
iii. State Joint Local Government Account. (6 Marks)

(Show workings)

Answer

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Tags: Allocation Formulas, Consolidated Revenue Fund, Cost of Collection, Federation Account, Government Revenue, Revenue Allocation, State Revenue
Level: Level 2

Topic: Government Revenue

PSAF – May 2021 – L2 – Q3b – Fiscal Policy and Public Finance

NPV-based investment recommendation for Omidan Local Government among three projects and a risk-free security alternative.

Question

Omidan Local Government Council has N20,000,000 to invest, if there is an assurance that the investment will earn at least 12% p.a. In view of this, the following projects are being considered:

Project A will earn N21,800,000 at the end of year one with a residual value of N1,500,000;
Project B will earn N24,000,000 at the end of year two with a residual value of N500,000; and
Project C will earn N14,000,000 at the end of year one and another N10,000,000 at the end of year two with no residual value.

If none of the projects is undertaken, Omidan Local Government Council will invest the N20,000,000 in a risk-free security that will earn interest of 12% p.a.

Required:

Assess and advise Omidan Local Government Council on which of the projects to be undertaken using Net Present Value (NPV) method.

Answer

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Tags: Capital Budgeting, Investment Decision, NPV Analysis, Public Sector Finance, Risk-Free Investment
Level: Level 2

Topic: Government Revenue
Series: MAY 2021

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.

Question

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:

N40 billion should be transferred to the Development Fund for capital projects to be embarked upon in the 1st quarter of 2016.
Other charges approved by the Fund Management Committee and paid during the year but omitted from the books amounted to N50 billion.
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:

Consolidated Revenue Fund Account for the period ended December 31, 2015. (8 Marks)
Development Fund Account for the period ended December 31, 2015. (3 Marks)
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)

Answer

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Tags: Consolidated Revenue Fund, Development Fund, Financial Statements, Public Sector Reporting
Level: Level 2

Topic: Government Revenue
Series: MAY 2017

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.

Question

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)

Answer

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Level: Level 2

Topic: Government Revenue
Series: MAY 2023

PSAF – Nov 2015 – L2 – Q3c – Government Revenue

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

Question

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.

Answer

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Level: Level 2

Topic: Government Revenue
Series: NOV 2015

PSAF – May 2024 – L2 – SB – Q5 – Government Revenue

Principles and factors affecting revenue allocation in Nigeria.

Question

In Nigeria, public revenue belongs to its citizenry and is allocated to them through the National Revenue Mobilisation, Allocation and Fiscal Commission.

a. State and explain FIVE principles that guide revenue allocation in Nigeria. (7½ Marks)

b. Explain FIVE factors that led to the controversies surrounding revenue sharing in Nigeria. (7½ Marks)

Answer

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Tags: Fiscal Commission, Public Finance, Revenue Allocation
Level: Level 2

Topic: Government Revenue
Series: MAY 2024

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

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

Question

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)

Answer

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Tags: Analytical review, Current Assets, Event Center, Financial Ratios, Long-Term Debts, Public Sector
Level: Level 2

Topic: Government Revenue
Series: MAY 2022

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.

Question

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)

Answer

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Tags: Fiscal Policy, Government Agencies, Petroleum Revenue, Revenue Generation, Taxation
Level: Level 2

Topic: Government Revenue
Series: MAY 2022

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.

Question

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)

Answer

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Tags: Benefit/Cost Ratio, Local Government Projects, Net Benefit, Project Investment
Level: Level 2

Topic: Government Expenditure, Government Revenue
Series: NOV 2016

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.

Question

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.

Answer

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Tags: Consolidated Revenue Fund (CRF), Government Payments, Public Financial Management, Treasury Management
Level: Level 2

Topic: Government Revenue
Series: NOV 2019

PSAF – Nov 2014 – L2 – Q1 – Government Revenue

Calculation and distribution of revenue collected by Olakoma Federation across federal, state, and local levels.

Question

Eboda State is one of the 30 states in the Olakoma Federation. The Federation has a population of 120 million people with 700 local government councils and a land mass of 300,000 sq kilometers.

Eboda State has a population of 12 million, 25 local government councils, and a land mass of 30,000 sq kilometers.

The following transactions took place in the Office of the Accountant-General of Olakoma Federation during the year ended December 31, 2013:

Revenue Source	Amount (N’ Million)
Crude oil sale	350,000
Domestic oil receipts	445,000
Miscellaneous oil receipts	105,000
Royalty on crude oil	101,000
Royalty on gas	95,000
Rentals on oil field	87,000
Gas flared penalty	77,000
Petroleum profit tax	650,000
Companies income tax	500,000
Other non-oil taxes	225,000
Import duties	255,000
Export duties	125,000
Excise duties	320,000
Custom penalty charge	115,000
Custom fees account	120,000
Common external tariff levy	100,000
Court fees	30,000
PAYE of armed forces	55,000
7% Port levy	25,000
Value Added Tax (VAT)	700,000

Additional Information:

The Olakoma Customs Service is entitled to 7% cost of collection on all revenues collected, while the Federal Inland Revenue Service is entitled to 4% of non-oil revenue.
The sharing formula for the Federation Account and VAT is as follows:

Category Federation Account VAT

Federal Government 52.68% 15%

State Governments 26.72% 50%

Local Governments 20.60% 35%
A 13% derivation is paid to oil-producing states, based on oil and gas-related income.
The sharing ratio in (ii) above is based on the following criteria:

Category State Local Government

Equity 40% 40%

Population 30% 30%

Land Mass 20% 20%

Internally Generated Revenue Effort 10% 10%
The total internally generated revenue effort of the 30 states and 700 local government councils amounted to N500 billion and N300 billion, respectively.
The total internally generated revenue effort of Eboda State and its 25 local governments amounted to N50 billion and N20 billion, respectively. Eboda State is not one of the oil-producing states.
All revenues due to all local governments in each state are paid to the State Joint Local Government Account. This account is entitled to 10% of the Internally Generated Revenue (IGR) of the state.

Category	Federation Account	VAT
Federal Government	52.68%	15%
State Governments	26.72%	50%
Local Governments	20.60%	35%

Category	State	Local Government
Equity	40%	40%
Population	30%	30%
Land Mass	20%	20%
Internally Generated Revenue Effort	10%	10%

Required:

a. State the differences between the Federation Account and the Consolidated Revenue Account. (4 Marks)

b. Calculate:

i. Olakoma Custom Service’s cost of collection. (3 Marks)
ii. Federal Inland Revenue Service’s cost of collection. (2 Marks)
iii. The 13% derivation paid to oil-producing states. (3 Marks)

c. Calculate the amount to be credited to:

i. Consolidated Revenue Fund of Olakoma Federal Government. (6 Marks)
ii. Eboda State Consolidated Revenue Fund Account. (6 Marks)
iii. State Joint Local Government Account. (6 Marks)

(Show workings)

Answer

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Tags: Allocation Formulas, Consolidated Revenue Fund, Cost of Collection, Federation Account, Government Revenue, Revenue Allocation, State Revenue
Level: Level 2

Topic: Government Revenue

PSAF – May 2021 – L2 – Q3b – Fiscal Policy and Public Finance

NPV-based investment recommendation for Omidan Local Government among three projects and a risk-free security alternative.

Question

Omidan Local Government Council has N20,000,000 to invest, if there is an assurance that the investment will earn at least 12% p.a. In view of this, the following projects are being considered:

Project A will earn N21,800,000 at the end of year one with a residual value of N1,500,000;
Project B will earn N24,000,000 at the end of year two with a residual value of N500,000; and
Project C will earn N14,000,000 at the end of year one and another N10,000,000 at the end of year two with no residual value.

If none of the projects is undertaken, Omidan Local Government Council will invest the N20,000,000 in a risk-free security that will earn interest of 12% p.a.

Required:

Assess and advise Omidan Local Government Council on which of the projects to be undertaken using Net Present Value (NPV) method.

Answer

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Tags: Capital Budgeting, Investment Decision, NPV Analysis, Public Sector Finance, Risk-Free Investment
Level: Level 2

Topic: Government Revenue
Series: MAY 2021

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.

Question

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:

N40 billion should be transferred to the Development Fund for capital projects to be embarked upon in the 1st quarter of 2016.
Other charges approved by the Fund Management Committee and paid during the year but omitted from the books amounted to N50 billion.
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:

Consolidated Revenue Fund Account for the period ended December 31, 2015. (8 Marks)
Development Fund Account for the period ended December 31, 2015. (3 Marks)
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)

Answer

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Tags: Consolidated Revenue Fund, Development Fund, Financial Statements, Public Sector Reporting
Level: Level 2

Topic: Government Revenue
Series: MAY 2017

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.

Question

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)

Answer

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Tags: Nigeria, Public Revenue, Revenue Allocation, Revenue Sources
Level: Level 2

Topic: Government Revenue
Series: MAY 2023

PSAF – Nov 2015 – L2 – Q3c – Government Revenue

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

Question

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:

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.

Answer

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Tags: Fiscal Planning, Public Sector Revenue, Revenue Budget, Tax computation
Level: Level 2

Topic: Government Revenue
Series: NOV 2015

PSAF – May 2024 – L2 – SB – Q5 – Government Revenue

Principles and factors affecting revenue allocation in Nigeria.

Question

In Nigeria, public revenue belongs to its citizenry and is allocated to them through the National Revenue Mobilisation, Allocation and Fiscal Commission.

a. State and explain FIVE principles that guide revenue allocation in Nigeria. (7½ Marks)

b. Explain FIVE factors that led to the controversies surrounding revenue sharing in Nigeria. (7½ Marks)

Answer

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Tags: Fiscal Commission, Public Finance, Revenue Allocation
Level: Level 2

Topic: Government Revenue
Series: MAY 2024

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

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

Question

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)

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)

Answer

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Tags: Analytical review, Current Assets, Event Center, Financial Ratios, Long-Term Debts, Public Sector
Level: Level 2

Topic: Government Revenue
Series: MAY 2022

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.

Question

Answer

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Tags: Fiscal Policy, Government Agencies, Petroleum Revenue, Revenue Generation, Taxation
Level: Level 2

Topic: Government Revenue
Series: MAY 2022

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.

Question

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

Answer

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Tags: Benefit/Cost Ratio, Local Government Projects, Net Benefit, Project Investment
Level: Level 2

Topic: Government Expenditure, Government Revenue
Series: NOV 2016

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.

Question

Required:

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

Answer

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Tags: Consolidated Revenue Fund (CRF), Government Payments, Public Financial Management, Treasury Management
Level: Level 2