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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Tags: Budget Performance, Internal Audit, PEFA Framework, Public Financial Management
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 – Nov 2019 – L2 – Q5a -Public sector fiscal planning and budgeting

Discuss objectives for ensuring asset control systems and circumstances where accountability is discharged.

Question

a) According to Section 52 of Act 921, “A principal Spending Officer of covered entity, State – Owned enterprise or public corporation shall be responsible for the asset of the institution under the care of the Principal Spending Officer and shall ensure that proper control systems exist for the custody and management of the Assets”.

Required:

i) State and explain TWO (2) objectives for which spending officers are required to ensure the existence of proper control systems. (4 marks)

ii) State and explain any THREE (3) circumstances under which the Principal Spending Officer is discharged of accountability over government stores. (6 marks)

Answer

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Tags: Accountability, Asset Management, Control Systems
Level: Level 2

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

PSAF – Nov 2019 – L2 – Q3b – Public sector fiscal planning and budgeting

Compute and analyze financial ratios for the Consolidated Fund of Ghana for 2017 and 2018.

Question

b) The financial information below relates to the Consolidated Fund of Ghana.

Statement of Financial Position of the Consolidated Fund as at December 31, 2018

Item	2018 (GH¢’million)	2017 (GH¢’million)
Non-Current Assets
Property Plant and Equipment	4,200	5,600
Equity investment	10,000	12,000
Total Non-current assets	14,200	17,600
Current Assets
Work in progress	2,500	2,000
Receivables	1,100	900
Cash and cash equivalent	3,250	2,980
Other assets	450	600
Total current assets	7,300	6,480
Total assets	21,500	24,080

Funds and Liabilities
Accumulated Fund	(111,280)	(111,620)
Current Liabilities
Payables	1,600	19,000
Trust monies	2,540	2,300
Domestic loans	11,240	12,500
Total Current Liabilities	15,380	33,800
Non-Current Liabilities
Domestic loans	52,000	43,000
External loans	65,400	58,900
Total Non-Current Liabilities	117,400	101,900
Total Funds and Liabilities	21,500	24,080

Additional Information:
i) The total market value of all final goods and services produced domestically in Ghana for 2018 and 2017 fiscal years amounted to GH¢205,100,940,000 and GH¢185,600,400,000 respectively.
ii) According to the Statistical Service data, the population of the country is estimated as 25,000,000 in 2018 and 23,900,000 in 2017.

Required:
i) From the information above, compute for the two financial years, the following ratios:

Gross Debt
Net Debt percentage
Debt per Capita
Debt to Gross Domestic Product ratio
Total Asset to Debt
Capital Asset per Capita (6 marks)

ii) Based on the ratios computed, write a report discussing and analyzing the financial position of the Consolidated Fund to the Head of a “think tank” of a Civil Society Organisation for Financial Accountability. (6 marks)

Answer

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Level: Level 2

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

PSAF – Nov 2017 – L2 – Q5c -Public sector fiscal planning and budgeting

Identifying mechanisms for achieving value for money in public sector management.

Question

Value for money (VFM) is derived from the optimal balance of benefits and costs on the basis of total cost of ownership. The nature of public financial management is such that it involves discretionary decision-taking on behalf of government at all levels. Value for money is therefore not a choice of goods or services which is based on the lowest bid price but a choice based on the whole life costs of the project or service.

Required: Identify FIVE mechanisms that can be used to achieve “value for money” in public sector management. (5 marks)

Answer

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Level: Level 2

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

PSAF – Nov 2017 – L2 – Q3b – Public Sector Fiscal Planning and Budgeting

Describes revenue management and control measures to prevent revenue losses in public sector organizations.

Question

Revenue management is a challenge in many public organizations, including the Damsa District Assembly in which you are currently engaged as Finance Officer responsible for revenue management and control. There are rampant revenue losses resulting from delayed or unbanked collection, failure to assess and collect revenue, inappropriate use of value books, and poor record keeping, among others. Consequently, your Assembly has persistently failed to meet its revenue budget over the years and the Ministry of Local Government has recently cautioned the District Chief Executive (DCE) and tasked him to improve the revenue performance of the Assembly or face dismissal.

In a meeting with the DCE, he put it bluntly: “the Revenue Officer should do something about this immediately else I will fire him before I am fired. My head and your head are on the chopping board; you know it”.

Required:

As the Finance Officer responsible for revenue, describe FOUR revenue management and control measures you would put in place for the Assembly to remedy revenue losses pointed out in the case.

Answer

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Level: Level 2

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

PSAF – Nov 2017 – L2 – Q3a – Public Sector Fiscal Planning and Budgeting

Distinguishing between Activity-Based Budgeting and Programme-Based Budgeting and explaining the advantages of Programme-Based Budgeting.

Question

The Minister of Finance is mandated by law to develop a budgetary system throughout the public sector. Recently, the government has moved away from Activity-Based Budgeting to Programme-Based Budgeting system for many reasons.

Required: i) Distinguish between Activity-Based Budgeting and Programme-Based Budgeting. (4 marks)

ii) Explain FOUR advantages that Programme-Based Budgeting has over the Activity-Based Budgeting. (8 marks)

Answer

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Level: Level 2

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

PSAF – Nov 2017 – L2 – Q2a – Public Sector Fiscal Planning and Budgeting

Describe the challenges faced by public institutions classified as GBEs in preparing financial statements under obsolete financial laws.

Question

A public sector institution has recently had its operations enhanced and modified such that they qualify as Government Business Enterprise (GBE) within the meaning of IPSAS 1. The management of the institution, in preparing their financial report for 2015, realized that the existing financial laws and regulations do not support their new status.

Required: Describe FOUR challenges Public Institutions (like the one in the preamble) face in the preparation of their financial statements when some financial laws and regulations needed to support reporting on their new status and operations have become obsolete. (4 marks)

Answer

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Level: Level 2

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

PSAF – Mar 2023 – L2 – Q5c – Public sector fiscal planning and budgeting

Outlines key issues that should be specified in a Fiscal Strategy Document as required by the Public Financial Management Act.

Question

The Minister of Finance shall, not later than the end of May of each financial year, prepare and submit to Cabinet for approval, a Fiscal Strategy Document.

Required:
Outline FIVE (5) issues that should be specified in the Fiscal Strategy Document.
(5 marks)

Answer

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Level: Level 2

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

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

Explains the concept of virement in public financial management and discusses the prohibitions on its use under the Public Financial Management Act, 2016.

Question

A principal spending officer is of the view that the organization can always carry out unbudgeted activities, programs, and projects through the use of virement. He argues that virement is a smart way of going around the rigid rules that govern national budget implementation.

Required:
i) Explain virement as a tool in public financial management.
(3 marks)

ii) Discuss the prohibitions on the use of virement under the Public Financial Management Act, 2016 (Act 921).
(4 marks)

Answer

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Level: Level 2

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

PSAF – May 2016 – L2 – Q2b – Public Sector Fiscal Planning and Budgeting

Identify procedures in commitment accounting and explain reasons for writing off advances in the public sector.

Question

i) Commitment accounting begins with the commitment process.

Required:
Identify THREE procedures involved in the commitment process. (3 marks)

ii) Heads of departments have administering authority for advances, recoveries, and proper record keeping in addition to administering losses incurred in advances issued to staff of their department (FAR 121).

Required:
Explain TWO reasons why a head of a government entity may decide to write off advances owed by public officials. (2 marks)

Answer

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Tags: Advances, Commitment Accounting, Financial management, Public Sector Accounting, Public Sector Policies, Write-Offs
Level: Level 2

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

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

Discusses the legislative framework governing public sector budgeting in Ghana and the benefits of budgeting in the public sector.

Question

Budgeting is an essential and mandatory financial management process in the public sector. It plays a significant role in public financial governance.

Required:
i) Discuss the legislative framework for public sector budgeting in Ghana.
(4 marks)

ii) Explain FOUR (4) benefits of budgeting in the public sector.
(4 marks)

Answer

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Tags: Benefits of Budgeting, Budgeting, Fiscal Management, Legislative Framework, Public Sector
Level: Level 2