Topic: Preparation and presentation of financial statements for central government

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  • 8 Marks

PSAF – Nov 2024 – L2 – Q1a – Financial Statements Preparation

Prepare the Statement of Financial Performance for Paja Teaching Hospital following IPSAS guidelines.

Below is a Trial Balance of Paja Teaching Hospital (PTH) under the Ministry of Health for the year ended 31 December 2023.

Debit (GH¢000) Credit (GH¢000)
Cash and Bank – GoG 3,400
Cash and Bank – IGF 72,200
Cash and Bank – Donor Funds 210,400
Undeposited Cash – IGF 4,000
Petty Cash 100
Investments 2,000
Debtors 661,400
Other Receivables 17,700
Withholding Tax
Trust Funds
Trade Payables
GoG Subsidy – Employee Compensation
GoG Subsidy – Goods & Services
Development Partners Programmes Receipt
Other Non-Operating Income
Medicines & Pharmaceuticals 433,900
Surgical 50,800
Medical 111,400
Investigation 140,900
OPD 238,400
Obstetrics and Gynaecology 135,300
Dental 8,300
Pediatrics 40,300
Ear, Nose & Throat 5,300
Eye Care 7,300
Mortuary 30,000
Ambulance Fees 300
Ophthalmology 3,000
Physiotherapy 3,300
Examination Fees 200
Dialysis 400
Feeding 30,400
Employee Compensation – GoG 3,912,500
Goods & Services – GoG 20,800
Employee Compensation – IGF 148,000
Goods & Services – IGF 978,500
Capital Expenditure – IGF 27,500
Goods & Services – Partners Fund 472,400
Accumulated Fund
Total 6,530,900

Additional Information:

  1. The hospital previously used modified accrual accounting but switched to IPSAS accrual basis in 2023.
  2. The hospital revalued legacy assets as follows:
    • Motor Vehicles: GH¢50,250,000
    • Buildings: GH¢120,540,000
    • Medical Equipment & Other Equipment: GH¢31,500,000
    • Land: GH¢15,000,000
  3. Gavi supported the hospital with GH¢200,000,000 in 2023, but 20% was allocated for Q1 of 2024. The Global Fund committed GH¢250,000,000, but only GH¢200,000,000 was received.
  4. NHIA rejected 10% of the hospital’s total claims of GH¢100,300,000.
  5. Parliament approved a write-off of GH¢20,225,000 for unpaid hospital services.
  6. The capital expenditure consists of:
    • Medical Equipment: GH¢19,236,000
    • Furniture & Fittings: GH¢8,264,000
  7. Depreciation Policy (Straight-Line Basis):
    • Building: 5%
    • Motor Vehicle: 20%
    • Medical Equipment: 10%
    • Furniture & Fitting: 25%
  8. Year-end inventory values:
Inventory Type Cost (GH¢000) Replacement Cost (GH¢000) Net Realisable Value (GH¢000)
Medicines (for resale) 146,800 176,100 132,100
Medical Consumables (For use on clients) 29,400 33,800 30,800
Office Consumables 19,600 29,400 18,600

Required:

In compliance with IPSAS, the PFM Act, and the Government of Ghana Chart of Accounts, prepare:
a) A Statement of Financial Performance for Paja Teaching Hospital for the year ended 31 December 2023.

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  • 20 Marks

PSAF – Nov 2016 – L2 – Q1a – Preparation and presentation of financial statements for central government

Prepare the Statement of Financial Performance and the Statement of Financial Position for the Consolidated Fund as of 31 December 2014 under accrual basis, in compliance with IPSAS.

Below is the Trial Balance of the Consolidated Fund for the year ended 31 December 2014.

Additional Information:
i) It is the policy of Controller and Accountant General to adopt the accrual basis of preparing the public accounts of the Consolidated Fund for the first time in compliance with the Financial Administration Regulation 2004 and the International Public Sector Accounting Standards (IPSAS). The effective date is 31 December 2014.
ii) The current Chart of Accounts based on the GFS 2001 is used in the classification of revenues and expenditures.
iii) Consumption of fixed capital charged on cost for the year has been computed as GH¢156,000,000.
iv) Direct tax revenues due to government but were not received at 31 December 2014 amounted to GH¢49,000,000.
v) An established post salary in arrears as a result of salary increment in the fourth quarter of 2014 was GH¢56,000,000 and goods and services outstanding at the end of the year amounted to GH¢12,000,000.
vi) The grant shown in the trial balance as expenditure represents a statutory transfer to the District Assembly Common Fund (DACF). Any arrears in the DACF should be treated as payable. The current rate of transfer is 7.5% on the amount received.
vii) Public debt interest of GH¢14,000,000 was due to creditors but was not paid as at 31 December 2014.

Required:
a) Prepare in a form suitable for publication and in accordance with the relevant Financial Laws and IPSAS:
i) Statement of Financial Performance of the Consolidated Fund for the year ended 31 December 2014.
ii) Statement of Financial Position of the Consolidated Fund as at 31 December 2014.
(Show all workings clearly)

b) Disclose any TWO significant accounting policies as part of the notes to your accounts, as much as the information provided will permit.

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  • 4 Marks

PSAF – Nov 2016 – L2 – Q4b – Public sector fiscal planning and budgeting.

Identify policies influencing resource allocation in a Local Government Authority.

Resources of Local Government Authorities are very often limited. Therefore, there is the need for the limited resources to be efficiently allocated in order that a greater output is achieved from the limited resources.

Required:
Identify FOUR policies that would influence the allocation of resources in a Local Government Authority. (4 marks)

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  • 20 Marks

PSAF – May 2021 – L2 – Q2 – Preparation and presentation of financial statements for central government

Prepare a Statement of Financial Performance and Statement of Financial Position for the Consolidated Fund of Ghana for the year ended 31 December 2020.

Below is the Trial Balance of the Consolidated Fund of Ghana for the year ended 31 December 2020.

Item Description DR (GH¢ million) CR (GH¢ million)
Cash and Bank 61,350
Established Post Salaries 13,524
Non-Established Post Salaries 4,016
Communications Service Tax 5,144
PAYE 6,940
Non-Tax Revenues 2,312
Travel and Transport 468
Administration Cost 6,704
Conferences and Seminars 2,510
Foreign Travel Cost 1,490
Stationery Inventories 20
Stationery Purchased 220
Vehicles Income Tax 2,316
Corporate Tax 4,626
Grants 1,150 2,516
Customs and Excise Duties 1,286
Subsidies for Consumption 1,282
Subsidies for Production 722
Value Added Tax 7,716
Social Benefits 760
State Protocol 100
Allowance 300
Domestic Debt Interest 2,906
External Debt Interest 3,482
Motor Vehicle 4,800 1,920
Equipment 8,400 1,680
Computers 18,400 5,240
Railway (Completed) 5,000
Work in Progress 400
Equity and Security Investment 1,960
Loans and Advances 1,120
Gold and Other Reserves 1,620
Judgement Debt 280
Treasury Bills 22,240
Domestic Debt 26,924
Payables 34,844
External Debt 45,726
Trust Fund and Deposits 4,470
Other Expenditure 1,800
Rent Receivable 1,600
Accumulated Fund 29,516

Total: 175,900, 175,900

Additional information:
i) It is the policy of the Controller and Accountant General to use Accrual Basis of Accounting in preparing the Public Accounts of the Consolidated Fund financial statements in compliance with the Public Financial Management Act, 2016 (Act 921), Public Financial Management Regulation 2019 L.I 2378, and the International Public Sector Accounting Standards (IPSAS).

ii) Inventory in respect of stationery outstanding as at 31 December 2020 cost GH¢18 million and has a current Replacement Cost of GH¢12 million. Meanwhile, the Net Realisable value of the Inventories is estimated at GH¢14 million. No market exists for unused inventories.

iii) An Established Post Salary in arrears as a result of a salary increment in the fourth quarter of 2020 was GH¢56 million, and Public Debt Interest outstanding as at 31 December 2020 amounts to GH¢14 million.

iv) Consumption of Fixed Capital is charged on a Straight-Line Basis for the year as follows:

Asset Useful life
Motor Vehicle 5 years
Equipment 10 years
Computers 5 years
Railway 20 years

v) The Multilateral Partners have extended their Debt Forgiveness policy to the Government, which has resulted in the External Debt write-off amounting to GH¢4 billion in the year. However, this transaction has not been accounted for in the books.

vi) In the year 2019, GH¢8 billion was spent in acquiring Equipment to boost Government projects. However, these transactions were recognised in the accounts as Goods and Services Expenditure in the year 2019. This error has since not been rectified.

Required:
a) Prepare in a form suitable for publication and in accordance with the relevant Financial Laws and IPSAS:

  • Statement of Financial Performance for the year ended 31 December 2020. (9 marks)
    b) Statement of Financial Position as at 31 December 2020. (7 marks)
    c) State and Explain FOUR (4) Conditions under which Revenue from The Sale of Goods shall be recognized in accordance with IPSAS 9: Revenue from Exchange Transactions. (4 marks)

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  • 4 Marks

PSAF – May 2016 – L2 – Q3d – Preparation and presentation of financial statements for central government

This question covers the explanation of the features of the new Chart of Accounts used in the public sector.

The new Chart of Accounts has been designed to reflect the generic organisational structure of Government and its requirements for financial reports. It is based on the Ghana Finance Statistics Manual, International Monetary Fund, and Government of Ghana Reporting requirements.

Required: Explain FOUR features of this new Chart of Accounts.

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  • 3 Marks

PSAF – May 2016 – L2 – Q3b – Preparation and presentation of financial statements for central government

This question addresses how to ascertain the current market values of different public sector assets.

In public sector accounting, assets and liabilities are valued at their current market values or at fair prices, which is defined as the amount of money that would have to be paid to acquire the asset on the valuation date.

Required: Explain how you would ascertain the current market values of the following public sector assets:

i) Securities;

ii) Motor Vehicles;

iii) Office buildings.

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  • 20 Marks

PSAF – May 2016 – L2 – Q1 – Preparation and presentation of financial statements for central government

Prepare a statement of financial performance and a statement of financial position using IPSAS for the Department of Aviation Affairs.

Stated below are the balances extracted from the books of the Department of Aviation Affairs for the year ended 31st December 2014.

Account Description Amount (GH¢000)
Taxes 2,570.00
Wages 1,000.00
Fees, fines, licenses, penalties 104.00
Grants and other transfer payments 120.00
Finance costs 52.00
Supplies and consumables 170.00
Transfers from other government entities 250.00
Revenue from exchange transactions 60.00
Depreciation and amortization expense 66.00
Other revenue 150.00
Impairment of property, plant, and equipment 46.00
Other expenses 70.00
Cash and cash equivalents 255.00
Receivables 80.00
Investments (short-term) 45.00
Prepayments 47.00
Inventories 75.00
Intangible assets 190.00
Land and buildings 1,044.00
Payables (short-term) 1,420.00
Other non-financial assets 15,000.00
Investments (Long-term) 170.00
Receivables (Medium-term) 851.00
Short-term borrowings 700.00
Provisions (Current) 45.00
Superannuation 104.00
Payables (Medium-term) 240.00
Borrowings (Long-term) 665.00
Provisions (Long-term) 82.00
Employee Benefits (Medium-term) 150.00
Other non-financial assets 200.00
Current portion of borrowings 55.00
Employee Benefits (Short-term) 74.00
Capital contributed by other Government entities 194.00
Reserves 850.00

Required:
Use the International Public Sector Accounting Standards (IPSAS) to prepare a statement of financial performance for the year ended 31st December 2014, and a statement of financial position for the year ended 31st December 2014, including Net Assets / Equity.

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  • 20 Marks

PSAF – March 2024 – L2 – Q2 – Preparation of Financial Statements for Central Government

Prepare the Statement of Financial Performance, Statement of Financial Position, and Statement of Budget Information for a central government department based on the given trial balance.

The following Trial Balance was extracted from the records of the Department of Social Integration, a central government department, for the year ended 31 December 2023.

Additional Information:

  1. The Department prepares its financial statements in compliance with the International Public Sector Accounting Standards, the Public Financial Management Act 2016, Act 921, and the Chart of Accounts of the Government of Ghana.
  2. Included in printing materials and stationery is a closing inventory valued at cost of GH¢380,000. The estimated net realizable value and replacement cost of the inventory are GH¢320,000 and GH¢330,000 respectively. The printing is not for commercial purposes.
  3. In June 2023, the government conducted a massive recruitment into the civil services, of which 20 employees were posted to the Department. However, they have not been paid salaries for the period. The amount owed to these employees is GH¢2,500,000 and this should be reflected in the financial statement of the period.
  4. The Department currently pays rent for two of its Regional Offices, and at the end of the year rent of GH¢200,000 was outstanding. Further, the Department also rented part of its premises at the Headquarters. At the end of the financial year, an amount of GH¢150,000 was received to cover 2024 rent. Meanwhile, GH¢20,000 rent has not been received from tenants for the year 2023. These transactions have not been accounted for.
  5. Depreciation of fixed assets is charged on a straight-line basis as follows:
Assets Estimated useful life (in years)
Motor vehicle 5 years
Furniture 4 years
Computers 3 years
Premises 20 years
  1. It was revealed that computer accessories costing GH¢340,000 acquired in 2022 were accounted for as goods and services. However, the Auditor for the 2023 financial year recommended that the transaction should be accounted for as a non-current asset. The recommendation is yet to be implemented.
  2. The budget extract of the Department for 2023 is as follows:
Item GH¢’000
Approved budget allocation 20,000
Internally generated fund 3,000
Donor support 1,000
Compensation for employees 10,000
Use of Goods and Services 6,000
Other expenses 5,500

Required: Prepare in compliance with the International Public Sector Accounting Standards, the Public Financial Management Act 2016, and the Chart of Accounts of Ghana: a) A Statement of Financial Performance for the year ended 31 December 2023.

b) A Statement of Financial Position as at 31 December 2023.

c) A Separate Statement of Budget Information in comparison with the Actuals for the year ended 31 December 2023.

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  • 20 Marks

PSAF – March 2024 – L2 – Q1 – Accrual Basis Challenges and Measurement Objectives

Discuss the challenges in adopting accrual basis accounting and the objectives and bases of measurement in public sector financial reporting.

a) Changing from cash accounting to accrual accounting is necessary to improve financial reporting and transparency in the public sector. However, it is not going to be without systemic and structural challenges.

Required:
i) Explain FIVE (5) challenges involved in adopting Accrual Basis Accounting. (5 marks)
ii) Explain FIVE (5) measures Ghana can put in place to successfully implement Accrual Basis Accounting. (5 marks)

b) Measurement of assets is a very important aspect of financial reporting. Preparers of financial statements should always consider the objective of measurement to ensure that the financial statements provide information that is useful to users for accountability and decision-making purposes.

Required:
i) Explain the objectives of measurement in financial reporting of public sector entities. (4 marks)
ii) Explain FOUR (4) bases of measurement of assets and provide in each situation where it is applied in financial reporting. (6 marks)

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  • 20 Marks

PSAF – May 2019 – L2 – Q4a – Preparation and presentation of financial statements for central government

Prepare the Statement of Financial Performance for the Consolidated Fund for the year ended 31 December 2018.

Additional Information:
i) The Controller and Accountant General uses the modified accrual accounting concept in the preparation of its accounts.
ii) Established Post salaries of GH¢2,937,000 were outstanding as of 31/12/2018.
iii) Interest on domestic and external loans is provided for at 20% and 15%, respectively.
iv) The Central Government depreciates assets on a cost basis using the schedule below:

Class of Assets Number of Years
Building 50 years
Plant, Machinery, Furniture, and Fittings 20 years
Transport Equipment 7 years
Computer Software and License 5 years

v) Provisions:
Specific provision for bad debt is made for loans receivables and investments as and when their non-recoverability is determined, and where a request is made for write-off to parliament. This provision is set at 3% and 5%, respectively.

Required:
a) Prepare the Statement of Financial Performance of the Consolidated Fund for the year ended 31/12/2018.
(10 marks)

b) Prepare the Statement of Financial Position for the Consolidated Fund as at 31/12/2018.
(7 marks)

c) State and explain THREE (3) Accounting Policies that usually accompany Consolidated Fund Financial Statements.
(3 marks)

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  • 20 Marks

PSAF – May 2020 – L1 – Q2 – Preparation and presentation of financial statements for central government

Prepare the Statement of Financial Performance, Statement of Financial Position, Statement of Budget Information, and Notes to the financial statements for Damsa Municipal Assembly.

Below is the extract from the records of Damsa Municipal Assembly (DMA).

Additional Information:

  1. The central government has a constitutional responsibility to pay all established post salaries of the Assembly from the Consolidated Fund. The established post salaries paid by the central government on behalf of the assembly for 2019 amounted to GH¢64,000,000. This payment has not reflected in the books of DMA.
  2. Office consumables in respect of stationery and other items bought for GH¢1,800,000 remained unused during the year. The current replacement cost of the inventories is GH¢1,050,000. Meanwhile, the net realizable value of the inventories is estimated at GH¢1,400,000. No market exists for unused office consumables and other items.
  3. Consumption of fixed capital is to be charged as follows:
    • Motor vehicles: 5 years
    • Furniture and fittings: 5 years
    • Premises: 10 years
    • Equipment: 8 years
  4. During the year, the following assets were acquired and outright payments made for them: Motor Vehicle GH¢7,000,000; Equipment GH¢4,000,000. These have been accounted for.
  5. DMA could not pay the electricity bill for the last quarter of 2019. This was brought to its attention by the Electricity Company Ltd. of Ghana. The amount involved is GH¢4,000,000.
  6. The government has assigned some young graduates to DMA as part of the Nation Builders Corp programme to support the Assembly in revenue mobilisation. The allowances amounting to GH¢2,000,000 due them from DMA for the last month of the year was outstanding. DMA promises to pay them by the end of the first quarter of 2020.
  7. Fixed deposit attracts interest of 20% per annum and some interest is due as at 31 December 2019.
  8. The market store fees received were for two years: 2019-2020.
  9. During the year, the chiefs and people of the Assembly donated a new vehicle valued at GH¢400,000 to the DMA. No record was made in the books.
  10. Extract of the 2019 Budget of the DMA is as follows:
    Decentralised transfer 185,000
    Compensation of employees 74,300
    Goods and Services 35,600
    Other expenses 1,700
    Internally Generated Funds 102,000
    Donations and grants 1,000

Required: Prepare in accordance with the IPSAS and the Public Financial Management Act, 2016 (Act 921): a) Statement of Financial Performance for the year ended 31 December 2019.
(5 marks)

b) Statement of Financial Position as at 31 December 2019.
(5 marks)

c) Statement of Budget Information in Comparison with Actuals for the year ended 31 December 2019.
(5 marks)

d) Notes to the financial statements.
(5 marks)

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  • 20 Marks

PSAF – May 2018 – L2 – Q4 – Preparation and presentation of financial statements for central government

Prepare the Statement of Revenue and Expenditure and the Statement of Financial Position for the Consolidated Fund for the year ended 31 December 2017.

The following are the balances extracted from the Consolidated Fund of Public Accounts for the year ended 31st December 2017:

Description Amount (GH¢ ‘000)
Consumption of fixed Capital 208,878
Miscellaneous Direct Taxes 98,238
Social Security Benefit in Kind 66,120
13.5% SSF Contribution 45,000
Project Grant 9,370
Fines, Penalties and Forfeitures 25,928
Materials and Office Consumables 117,526
General Taxes on Goods & Services 265,064
Travel & Transport 41,610
Social Assistance Benefits 68,678
Established Post- salaries 800,800
Domestic Debt Interest 40,200
Gratuity 20,000
Training, Seminar and Conference Cost 54,250
External Debt Interest 83,772
Allowances to Employees 56,000
Repairs and Maintenance 34,560
Property Income 25,000
Cash & Bank Balances 1,960,898
Advances & Receivables 60,164
Taxes on Exports 581,588
Long Term Receivables 2,836,616
Non-Established Post-salaries 400,104
Payables 1,211,044
Accumulated Surpluses (1/1/2017) (61,343,676)
Deposit and Other Trust Monies 3,752,412
Short-Term Borrowing 11,299,822
Taxes paid by individuals 810,436
Subsidy on Petroleum Products 15,000
Fertilizer Subsidies 24,068
Equity Investment 3,619,752
End of Service Benefit 25,880
Infrastructure, Plant & Equipment 2,028,806
Taxes paid by Companies & Enterprises 135,784
Work-In-Progress 304,880
Domestic Debt 23,719,588
External Debt 32,283,148
Employer Social Benefits in Cash 30,500
Other Expenses (note i) 22,584
Excise Duties 92,900

Additional Notes:
i) Other Expenses:
During the year, the Government of Ghana benefited from free services provided by medical experts who were task forces of the British Government. The main objective of this task force was to help curb cholera in the country. The fair value of these services amounted to GH¢ 18,740,000. It is the policy of the Government to include goods and services received during the year in kind in its financial statements at fair values.

ii) The annual estimates for the year ending 2017 were as follows:

Required:
a) Prepare a Statement of Revenue and Expenditure of the Consolidated Fund for the year ended December 31, 2017, indicating the accompanying variances to the statement.

b) Prepare a Statement of Financial Position of the Consolidated Fund as of December 31, 2017.

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  • 20 Marks

PSAF – Apr 2022 – L2 – Q2a – Preparation and presentation of financial statements for central government

Prepare the financial statements for a public transport corporation in compliance with IPSAS and relevant legislations.

Citizen Transport Corporation (CTC) is a Public Transportation company in Ghana, which seeks to provide reliable and affordable means of transport for commuters within villages, towns, and cities as well as provide intercity movement and transport consultancy services.

The following financial information relates to CTC, as at 31 December, 2020:

Additional information:

  1. CTC uses an accrual accounting basis in the preparation of its Financial Statements in line with the Public Financial Management Act, 2016 (Act 921), Public Financial Management Regulation 2019 L.I 2378, and the International Public Sector Accounting Standards (IPSAS).
  2. The loan in the trial balance represents funds advanced by the Government from the Consolidated Fund to CTC to procure a fleet of buses in 2010. The repayment of the Loan was scheduled to end in 2015. However, due to liquidity challenges facing the corporation, the Loan is still outstanding. On the basis of this, the Minister of Finance after assessing the liquidity profile of CTC, made a specific provision for Bad Debt on Loans Receivable by waiving 50% of the loan outstanding. This was made in line with Section 53 of the Public Financial Management Act 2016, (Act 921).
  3. Provision is to be made for Interest on the remaining Loan.
  4. Salaries and other emoluments outstanding during the year amounted to GH¢12,500,000 while that of use of goods and services other than workshop and seminars amounted to GH¢15,750,000.
  5. Inventories included in use of goods and services available at the end of the year were as follows:
Spare Parts GH¢’ 000
Historical Cost 900,000
Replacement Cost 802,000
Net Realisable Value 995,000
  1. In 2019, CTC bought a Machinery amounting to GH¢30,000,000. This amount was wrongly recognized in the 2019 Financial Statement as an expense instead of an Asset. However, this Machine is still in use.
  2. CTC uses a straight-line basis in depreciating their Capital Assets. Assets and their useful life details are provided below:
Assets Useful Life
Plant and Machinery 15 years
Motor Vehicle 20 years
Building 30 years
Software 10 years
  1. CTC plans to change its accounting policy in the recognition, measurement, presentation, or disclosure of inventory in the financial statements. This will be done in line with IPSAS 3: Accounting policies, Changes in Estimate, and Errors.

Required:
In compliance with IPSAS and relevant legislations, prepare for CTC:

a) Statement of Financial Performance for the year ended 31 December 2020. (9 marks)

b) Statement of Financial Position as at 31 December 2020. (7 marks)

c) Explain TWO (2) Guiding Principles for formulating accounting policy. (2 marks)

d) Explain TWO (2) Conditions that mandate a change in accounting policy. (2 marks)

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