Topic: Public sector fiscal planning and budgeting

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

Explaining objectives and improvements in public financial management systems.

Question

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.

Answer

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Tags: Budget Planning, Financial Oversight, Fiscal Efficiency, Government Expenditure, Public Financial Management
Level: Level 2

Topic: Public sector fiscal planning and budgeting
Series: Nov 2024

PSAF – Nov 2016 – L2 – Q5c – Public sector fiscal planning and budgeting

Explain tax policy and tax planning in the context of tax administration in Ghana.

Question

Explain the following terms used in tax administration in Ghana:
i) Tax Policy
ii) Tax Planning
(4 marks)

Answer

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Tags: ICAG, Professional Level 2, Tax Planning, Tax Policy
Level: Level 2

Topic: Public sector fiscal planning and budgeting
Series: NOV 2016

PSAF – Nov 2016 – L2 – Q5a – Public sector fiscal planning and budgeting

Explain revenue management and identify three procedures involved.

Question

i) Explain the term Revenue Management.
ii) Identify three procedures involved in Revenue Management. (4 marks)

Answer

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Tags: ICAG, Procedures, Professional Level 2, Revenue management
Level: Level 2

Topic: Public sector fiscal planning and budgeting
Series: NOV 2016

PSAF – Nov 2016 – L2 – Q3b – Accounting policies for cash and accrual-based accounting systems.

Explain four circumstances where the Controller and Accountant General can reject payment requisitions by MDAs.

Question

The Controller and Accountant General or an officer appointed by him has the legal authority to reject a requisition submitted by Ministries, Departments, and Agencies (MDAs) for payment.
Required:
Explain FOUR circumstances that will compel the Controller and Accountant General or an officer appointed by him to reject a requisition submitted by an MDA for payment. (4 marks)

Answer

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Tags: Controller and Accountant General, MDAs, Payment Requisition, Public Financial Management
Level: Level 2

Topic: Public sector fiscal planning and budgeting
Series: NOV 2016

PSAF – Nov 2016 – L2 – Q3a – Public sector fiscal planning and budgeting.

Explain four significant principles of budget hearing that align MDA budget proposals with government macroeconomic policy.

Question

a) Budget hearing is a critical activity in the budget process which is conducted to review strategic plans and estimates of the departments in order to ensure that these plans and estimates are in accordance with the government’s macroeconomic policy framework.

Required:

Explain FOUR significant principles of Budget Hearing that ensures that Ministries, Departments, and Agencies (MDAs) prepare their budget proposals in accordance with the government macroeconomic policy framework.

Answer

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Tags: Budget Hearing, Budget Proposals, Macroeconomic Policy, Public Financial Management
Level: Level 2

Topic: Public sector fiscal planning and budgeting
Series: NOV 2016

PSAF – May 2021 – L2 – Q5a – Public sector fiscal planning and budgeting

Analyze the budget performance of Atuum District Assembly and explain the functions of internal audit under the Public Financial Management Act.

Question

a) Since the creation of Atuum District Assembly (ADA) in 2011, inadequate revenue mobilization has been its major challenge making the Assembly unpopular. The newly appointed District Chief Executive (DCE) is concerned about the effectiveness of the revenue budget system of the Assembly.

Below is the extract of the Revenue Budget of the Assembly for the 2021 financial year:

Revenue	Annual Budget (GH¢)	Actual to March (GH¢)
Licenses	880,000	244,000
Fees and Miscellaneous charges	3,400,000	890,000
Investment income	600,400	178,000
Property rate	5,400,000	1,310,000
Basic Rate	750,000	120,000
Grants and donations	1,000,000	320,000

The budget allocation over the various items over the quarters is in the ratio of 3:3:2:2. The DCE indicates that the budget reliability measures of Public Expenditure and Financial Accountability (PEFA) are ideal for assessing the budget performance of the Assembly. In the framework, the following interpretation is given to budget outturns:

Outturn/variance not greater than 5% is scored as A, indicating very good budget reliability.
Outturn higher than 5% but not exceeding 10% is scored B, indicating good budget reliability.
Outturn higher than 10% but not exceeding 15% is scored C, indicating average budget reliability.
Outturn higher than 15% is scored as D, indicating poor budget reliability.

Note that each revenue item is treated as an indicator under the PEFA framework.

Required:

i) As the Budget Officer, prepare the statement of budget performance for the first quarter of the 2021 financial year, indicating clearly the outturn percentage and the respective scores. (5 marks)
ii) Write a report to the DCE on the budget performance of the Assembly and suggest ways of improving the budget reliability of the Assembly. (6 marks)
iii) Discuss FOUR (4) benefits of effective revenue budgeting in the Assembly. (4 marks)

b) In a recent audit committee meeting, there arose a serious disagreement between the Director of Finance and the Chief Internal Auditor concerning the internal audit role in the public sector. The Internal Auditor insists that internal audit’s primary responsibility in the public sector is to carry out intensive pre-audit or to vouch. He concludes that internal audit without pre-audit is useless and unfit for purpose. The Director of Finance opposed this view vehemently, arguing that pre-audit is an old-fashioned practice in the public sector and in the 21st century this should not be encouraged in a forward-looking organization like theirs.

Required:
As a member of the Audit Committee, educate the two key officers of the organization on the functions of the internal audit under the Public Financial Management Act, 2016 (Act 921). (5 marks)

Answer

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Level: Level 2

Topic: Public sector fiscal planning and budgeting
Series: MAY 2021

PSAF – Nov 2020 – L2 – Q5c – Public sector fiscal planning and budgeting

State and explain four internal control systems that Assemblies can implement to effectively control their revenues.

Question

Revenues of Local Government Authorities are often limited. Therefore, there is a need for the Assemblies to institute adequate internal controls over their revenues to improve their financial health.

Required:
State and explain FOUR (4) internal control systems that the Assemblies can put in place to effectively control their revenues. (4 marks)

Answer

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Tags: Internal Control, Local Government, Public Sector Accounting, Revenue Control
Level: Level 2

Topic: Public sector fiscal planning and budgeting
Series: NOV 2020

PSAF – Nov 2020 – L2 – Q5a – Public sector fiscal planning and budgeting

Explain five segments of the Ghana Integrated Financial Management Information System (GIFMIS) Chart of Accounts.

Question

Explain FIVE (5) segments of the Ghana Integrated Financial Management Information System (GIFMIS) Chart of Accounts. (5 marks)

Answer

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Tags: Chart of Accounts, GIFMIS, Public Sector Accounting
Level: Level 2

Topic: Public sector fiscal planning and budgeting
Series: NOV 2020

PSAF – July 2023 – L2 – Q5a – Public sector fiscal planning and budgeting

Prepare a Cash Flow Forecast for Tham District Assembly for the first quarter of 2022.

Question

The following transactions relate to Tham District Assembly (TDA):

i) The estimated internally generated funds of the Assembly for the fourth quarter of 2021 and the first quarter of 2022 are given below:

Source of Revenue	Oct 2021 (GH¢’000)	Nov 2021 (GH¢’000)	Dec 2021 (GH¢’000)	Jan 2022 (GH¢’000)	Feb 2022 (GH¢’000)	Mar 2022 (GH¢’000)
Fees and Charges	300,000	320,000	310,000	400,000	450,000	420,000
Licenses	120,000	120,000	200,000	180,000	140,000	160,000
Property rate	800,000	1,200,000	1,000,000	900,000	900,000	1,300,000
Fines and Penalties	50,000	50,000	40,000	60,000	80,000	80,000

ii) The revenue policy of the Assembly is as follows:

Fees and Charges: 100% of Fees and Charges are expected to be collected in the month of estimation.
Licenses: Licenses are collected in the month following the month of estimation.
Property Rate: Property rates are collected in the third month after the month of estimation.
Fines and Penalties: Fines and Penalties are collected on the spot.

iii) Experience shows that about 10% of the amount owed in respect to property rate is never received.

iv) Decentralised transfer is estimated at GH¢2,000,000 and GH¢1,800,000 for the first and second quarters of 2022 respectively. The decentralised transfers are often released in the second month of each quarter, except for the first quarter, which is released in the last month.

v) Goods and services are paid two months in arrears. The projected expenses in the Assembly’s 2021 and 2022 budgets are as follows:

Oct 2021 (GH¢’000)	Nov 2021 (GH¢’000)	Dec 2021 (GH¢’000)	Jan 2022 (GH¢’000)	Feb 2022 (GH¢’000)	Mar 2022 (GH¢’000)
365,000	280,000	280,000	290,000	200,000	320,000

vi) The Assembly budgets to acquire equipment and furniture amounting to GH¢300,000,000 in the month of February 2022. It has planned that 50% of the amount will be paid in the month of purchase, and the balance paid equally over the following two months. The equipment and furniture will be depreciated at the rate of 10% per annum.

vii) The cash and cash equivalent balance at the end of the 2021 financial year was GH¢63,000.

Required:
Prepare a Cash Flow Forecast for the first quarter of 2022, showing clearly the forecast for each month and the quarter as a whole. (10 marks)

Answer

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Level: Level 2

Topic: Public sector fiscal planning and budgeting
Series: JULY 2023

PSAF – May 2017 – L2 – Q3a – Public sector fiscal planning and budgeting

This question involves preparing a cash forecast for a public hospital for the first quarter of 2017 and advising on financing options.

Question

KTM Regional Hospital is a public referral hospital under Ghana Health Services established in 1980. The hospital is a sub-vented organization that finances its operations from Internally Generated Revenues (IGR) and government subventions. In order to forecast for the first quarter of 2017, you are provided with the following information on revenues and expenditure projections of the Hospital for the fourth quarter of 2016 and first quarter of 2017.

Month	IGR (GH¢ ‘000)	Subvention (GH¢ ‘000)	Donations (GH¢ ‘000)	Non-Established Post (GH¢ ‘000)	Goods and Services (GH¢ ‘000)	Non-Financial Assets (GH¢ ‘000)	Other Expenditure (GH¢ ‘000)
October 2016	2,000	8,000	200	300	700	1,200	120
November 2016	2,400	–	–	310	740	–	240
December 2016	2,500	–	100	400	900	1,000	125
January 2017	3,000	10,000	500	600	800	–	130
February 2017	3,200	–	700	820	1,600	–	150
March 2017	3,400	–	900	800	840	–	290

Additional Information:

The cash and bank balance of the Hospital as at December 2016 was a deficit of GH¢500,000.
Breakdown of IGR:
- National Health Insurance Customers (60% of IGR) pay two months after service.
- Corporate Customers (20% of IGR) have one-month credit terms.
- Cash Customers (20% of IGR) pay immediately.
Government subvention is released in two equal instalments in the second and third month of each quarter.
Donations for March 2017 (GH¢900,000) will be received 40% in cash and 60% in kind.
Non-established post refers to wages and salaries for casual and contract workers, paid in the month incurred.
Goods and services are paid 40% in the month incurred and 60% in arrears.
Non-financial assets are paid for in four equal instalments starting from the month of purchase.
Other expenses are paid as and when incurred.

Required:

i) Prepare a cash forecast for the Hospital for the first quarter of 2017, showing the forecast for each month and that of the quarter as a whole. (12 marks)

ii) On the basis of the cash forecast in (i) above, advise management on the financing options available to them for the 2017 fiscal year. (4 marks)

Answer

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Level: Level 2

Topic: Public sector fiscal planning and budgeting
Series: MAY 2017

PSAF – May 2017 – L2 – Q2a – Public sector fiscal planning and budgeting

This question explores the methods of authorizing payments from the Consolidated Fund and identifies statutory payments permissible by law in the public sector.

Question

The objective of enactments relating to public financial management, among others, is to safeguard public funds from plunder. One way to achieve this objective is by making specific provisions on the modalities for making payments from the Consolidated Fund (Article 178 of the 1992 Constitution). The law requires that all payments from the Consolidated Fund should be authorized and the payment should comply with certain general rules.

Required:

i) Identify and explain THREE ways of authorizing payments out of the consolidated fund. (6 marks)

ii) Identify FOUR statutory payments permissible by law in the public sector. (4 marks)

Answer

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Tags: Authorization of Payments, Consolidated Fund, Public Financial Management, Statutory Payments
Level: Level 2

Topic: Public sector fiscal planning and budgeting
Series: MAY 2017

PSAF – May 2017 – L2 – Q1a – Public sector fiscal planning and budgeting

This question examines the fundamental differences between public and private sector entities, the concept of outsourcing, and factors to consider when outsourcing in the public sector.

Question

a) The current medium-term strategic plan of Dumko Municipal Assembly (DMA) has the overall objective of improving the performance of the Assembly. One critical strategy towards the attainment of this goal is the adoption of a new public management strategy to increase participation of the private sector in the provision of public services without losing sight of the differences between the public sector and the private sector. In fact, some of these differences are so fundamental that they cannot be washed away anytime soon.

The Chief Executive suggested outsourcing as a key strategy in improving the delivery of public services at the local level through the private sector. DMA is currently bedevilled with poor revenue mobilization, lack of proper data on the Assembly’s activities, and poor infrastructure provision. Other supporting activities like cleaning and security are not well performed or are performed at a very high cost by internal staff. These issues have been tabled at the first strategy meeting convened by the Chief Executive.

Required:

i) Describe THREE fundamental differences between public sector and private sector entities that DMA should take cognizance of in pursuance of the new public management strategy. (3 marks)

ii) Explain the term ‘outsourcing’ in the public sector context and advance TWO arguments for the use of outsourcing by DMA in its operations. (4 marks)

iii) Explain THREE factors that the management of DMA should consider in making the decision to outsource some of its functions. (3 marks)

Answer

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Tags: New Public Management, Outsourcing, Public Services, Public vs. Private Sector, Revenue Mobilization
Level: Level 2

Topic: Public sector fiscal planning and budgeting
Series: MAY 2017

PSAF – May 2016 – L2 – Q4d – Public sector fiscal planning and budgeting

This question discusses the reasons for the necessity of a decentralized financial management system in Ghana.

Question

The problems associated with decentralized financial administration and exercising controls have received considerable attention from both academicians and legislators.

Required: Explain FOUR reasons why it is necessary to have a decentralized financial management system in Ghana.

Answer

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Level: Level 2

Topic: Public sector fiscal planning and budgeting
Series: MAY 2016

PSAF – May 2016 – L2 – Q3a – Public sector fiscal planning and budgeting

This question asks about the concept of a Long-Term Development Plan, its guiding principles, and reasons for failure in Ghana.

Question

Of late there has been a lot of discussions on the necessity for a Long-Term Development Plan in Ghana.

i) What is a Long-Term Development Plan?

ii) Outline THREE guiding principles of a Long-Term Development Plan.

iii) Explain TWO reasons why earlier Long-Term Development Plans failed in Ghana.

Answer

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Level: Level 2

Topic: Public sector fiscal planning and budgeting
Series: MAY 2016

PSAF – May 2016 – L2 – Q2c – Public sector fiscal planning and budgeting

Explanation of the budget's role as a management tool for public accountability.

Question

i) Explain any THREE types of relationships between Government policy and the annual budget. (3 marks)

ii) Explain FOUR reasons why the budget is regarded as a management tool for public accountability. (4 marks)

Answer

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Level: Level 2

Topic: Public sector fiscal planning and budgeting
Series: MAY 2016

PSAF – Nov 2023 – L2 – Q5b – Public sector fiscal planning and budgeting

Explanation of public financial management terms including Mid-year Review, Virement, and Revised Budget.

Question

b) Explain the following terms as applied to public financial management:

i) Mid-Year Review (2 marks)

ii) Virement (2 marks)

iii) Revised Budget (1 mark)

Answer

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Level: Level 2

Topic: Public sector fiscal planning and budgeting
Series: NOV 2023

PSAF – Nov 2023 – L2 – Q5a – Public sector fiscal planning and budgeting

Explain budget reliability with practical illustration and its impact on public accountability, strategic resource allocation, and coordination and control.

Question

National budgeting is not only a legal process but also an administrative process that ensures the attainment of public value economically, efficiently, and effectively. Budget reliability and credibility are essential components of the budget management processes.

Required:

i) Explain, with practical illustration the term budget reliability. (4 marks)

ii) Discuss how a reliable budget will help government to achieve the following:

Public accountability
Strategic resource allocation
Coordination and Control (6 marks)

Answer

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Level: Level 2

Topic: Public sector fiscal planning and budgeting
Series: NOV 2023

PSAF – Nov 2023 – L2 – Q3b – Public sector fiscal planning and budgeting

Compute and interpret financial ratios for government fiscal performance analysis.

Question

Below is an extract of aggregate fiscal data trend for Government of Ghana for the years 2021 and 2022.

	2022	2021
Cash Basis	Actual (GH¢’million)	Actual (GH¢’million)
Total Revenue and Grants	26,824	28,865
Taxes	21,744	26,209
Other revenues (Including IGF)	2,391	1,515
Grants	2,689	1,141
Total Expenditure
Recurrent	29,276	36,795
Wages and Salaries	12,917	14,623
Purchases of goods and services	1,388	3,221
Subsidies and Social transfers	25	0
Grants to other Government units	4,267	5,442
Other non-interest expenses	1,604	1,980
Interest	9,075	11,529
Acquisition of non-financial assets	7,134	7,678
Balance	(9,586)	(15,608)

Statistical and economic data obtained for the two years are as follows:

	2022	2021
GDP (GH¢’million)	136,957	167,353
Total population (million)	27.67	28.3

Required:

i) Compute the following financial ratios for 2022 and 2021:

Total Revenue to Gross Domestic Product (GDP)
Wages and Salaries to Tax Revenue
Fiscal Balance to GDP
Total Expenditure per capita
Capital Expenditure to Total Expenditure

(5 marks)

ii) write a brief report interpreting the results of the ratios computed above

Answer

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Tags: Financial Ratios, Fiscal Data, Government Performance, Public Sector Analysis
Level: Level 2

Topic: Public sector fiscal planning and budgeting
Series: NOV 2023

PSAF – Nov 2019 – L2 – Q5d – Public sector fiscal planning and budgeting

Explanation of the difference between planning and budgeting in the public sector.

Question

Explain the difference between planning and budgeting in the public sector. (2 marks)

Answer

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Level: Level 2

Topic: Public sector fiscal planning and budgeting
Series: NOV 2019

PSAF – Nov 2019 – L2 – Q5b – Public sector fiscal planning and budgeting

Explanation of Treasury Single Account and its purposes.

Question

As part of the measures for regulating the Financial Management systems of Public Sector Entities, Government through Public Financial Management Act, 2016, (Act 921) established the Treasury Single Account (TSA).

Required: i) Explain what is meant by Treasury Single Account. (2 marks) ii) Explain any THREE (3) purposes for the establishment of Treasury Single Account. (3 marks)

Answer

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Tags: Government Finance, Payment Control, PFM Act 2016, Public Sector Management, Treasury Single Account
Level: Level 2