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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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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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 2016 – L2 – Q2a – Public sector fiscal planning and budgeting

Explain the conditions required for government agencies to receive financial support and discuss various public financial management topics.

Question

Government agencies and subvented organisations receive financial support from the government for their operations.

Required:
Explain THREE conditions which these entities must fulfill to enable them to receive financial support from the government. (3 marks)

Answer

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Tags: Budgeting, Commitment Accounting, Financial Conditions, Government Support, Public Institutions
Level: Level 2

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

PSAF – March 2024 – L2 – Q3 – PEFA Framework and Budget Performance Report

Discuss the benefits of the PEFA framework, sources of information for PEFA assessment, and the preparation and interpretation of a budget performance report.

Question

a) The Public Financial Management Regulation, LI 2378 defines Public Financial Management (PFM) as laws, rules, systems, and processes used by the Government to mobilize revenue, allocate public funds, undertake public spending, account for funds, and audit results. In 2001, a group of development partners initiated the Public Expenditure and Financial Accountability (PEFA) framework to assess the status of public financial management at central and local government levels. Since then, Ghana has subjected itself to periodic assessments in an attempt to improve the country’s PFM system.

Required:
i) Discuss FOUR (4) benefits the use of the PEFA framework can bring to a country. (6 marks)
ii) Explain FOUR (4) sources of information for PEFA assessment. (4 marks)

b) Budget Performance Report is one of the major accountability provisions under the Public Financial Management laws. Regulation 215(2) of the Public Financial Management Regulation, 2019, LI 2378 provides that each Principal Account Holder shall not later than 31 March of the ensuing year submit an annual budget performance report to parliament. The following is an extract from the GIFMIS platform representing Government of Ghana funding for the Ministry of Sanitation for the year 2023.

Budget Item	Annual Appropriation (GH¢’000)	YTD Warrant (GH¢’000)	YTD Payments (GH¢’000)
Compensation of Employees	25,500	18,280	17,450
Goods and Services	5,000	3,450	3,400
Capital Expenditure	8,780	1,220	550
Total	39,280	22,950	21,400

Required:
i) Explain the meaning of Annual Appropriation and YTD Warrant to the Principal Account Holder of the ministry. (2 marks)
ii) Enumerate TWO (2) issues that should be specified in the Annual Budget Performance Report to be submitted by the Principal Account Holder according to the Regulations 215 of LI 2378. (2 marks)
iii) Prepare a Statement of Budget Performance Report for the year 2023 showing the budget-warrant outturns and warrant utilization rates. (3 marks)
iv) Interpret the budget performance statement in (iii) above to facilitate the Minister’s upcoming meeting with the select committee of parliament as required under the law. (3 marks)

Answer

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Tags: Budget Performance, Financial Reporting, Government Accounting, PEFA Framework, Public Financial Management
Level: Level 2

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

Explain expenditure in advance of appropriation, mid-year review, and commitment in the context of public financial management in Ghana.

Question

Explain the following processes or practices in public financial management in Ghana:

i) Expenditure in advance of appropriation
ii) Mid-year review
iii) Commitment

Answer

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Level: Level 2

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

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

Discuss ways Parliament can enhance public financial management in Ghana.

Question

Parliament has a constitutional mandate to scrutinize government spending. This oversight function is vested in the legislature as a fundamental principle of the separation of powers. There is, however, the need to improve the capacity of Parliament, especially the committees given the authority to keep the executive in check and to spend within the budget.

Required:
Discuss FOUR (4) ways by which Parliament can enhance public financial management in Ghana, bearing in mind relevant legislations. (10 marks)

Answer

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Level: Level 2

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

PSAF – Nov 2018 – L2 – Q3a – Public sector fiscal planning and budgeting

Prepare a budget for 2019 using 2018 as a base and analyze the budgeting approach.

Question

a) You are the head of the Budget department of the Ministry of Works. The Ministry intends to prepare the budget for the 2019 fiscal year and has intended to use the 2018 budget as a base. Below is the detail of the 2018 Budget:

Assumptions for 2019 Budget: i) The Ministry has introduced new equipment, leading to a 36% increase in IGF, but government grants will be cut by GH¢9,600,000. ii) Established post salary will increase by GH¢3,920,000, non-established post salaries will increase to GH¢4,960,000, and allowances will increase by 15%. iii) Utility cost will decrease to GH¢9,700,000; repairs cost will increase by 9%; and training and seminar cost will increase to GH¢17,820,000. iv) The Ministry expects to acquire new equipment, increasing the equipment cost by GH¢150,000,000.

Required: Using the 2018 Budget as a base and assumptions made, prepare the Budget for the 2019 fiscal year. (10 marks)

b)
i) Identify and explain the type of Budget approach used by the Ministry in the Budget preparation. (2 marks)

ii) Explain THREE (3) merits and THREE (3) demerits of the Budget approach adopted in the preparation of the 2019 Budget. (3 marks)

iii) Explain an alternative approach you would have suggested to the Ministry for their subsequent budget preparation and explain THREE (3) reasons why that approach is appropriate under the circumstance. (5 marks)

Answer

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Level: Level 2

Topic: Public sector fiscal planning and budgeting
Series: NOV 2018

PSAF – Dec 2023 – L2 – Q1a – Public sector fiscal planning and budgeting

Discuss five areas a draft accrual-based accounting policy should cover, indicating the importance of each area.

Question

You are the Assistant Accountant of a fast-growing public university, which is moving from cash basis to accrual basis of accounting. You have been put in charge of developing a draft accrual-based accounting policy for the university.

Required: Discuss FIVE (5) areas that your draft accounting policy will cover, indicating why these areas are important. (10 marks)

Answer

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Level: Level 2

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

PSAF – Nov 2021 – L2 – Q5b – Public sector fiscal planning and budgeting

Explain the specific responsibilities of the Controller and Accountant General towards covered entities under the Public Financial Management Act 2016 (Act 921).

Question

The Controller and Accountant General is a key public officer responsible for ensuring the custody, safety, and integrity of public funds. In addition, the Controller and Accountant General has a responsibility towards covered entities to ensure effective public financial management across the public sector.

Required:
Explain FIVE (5) specific responsibilities of the Controller and Accountant General towards the covered entities under the Public Financial Management Act 2016 (Act 921).

Answer

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Level: Level 2

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

PSAF – Nov 2018 – L2 – Q1b -Public sector fiscal planning and budgeting

Explain four objectives of financial reporting in public financial management.

Question

Public sector entities have downplayed the role of quality financial reporting in public financial management. In recent times, the government has been encouraged by its developing partners to ensure effective financial management and reporting in the public sector by investing in people and processes. The developing partners have touted financial reporting as a major solution to public financial management requirements of developing countries.

Required:
Explain FOUR (4) objectives of financial reporting in public financial management.

Answer

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Level: Level 2

Topic: Public sector fiscal planning and budgeting
Series: NOV 2018

PSAF – May 2019 – L2 – Q3c – Public sector fiscal planning and budgeting

Explain the importance of budget guidelines in public sector accounting and finance.

Question

According to Section 20 of the Public Financial Management Act, 2016 (Act 921), the Minister of Finance shall, subject to the approval of the cabinet, issue guidelines for the preparation of the budget for each financial year and circulate copies of the guidelines to each Covered Entity not later than 30 June each year. Budget Guidelines play an important role in budget development.

Required:
State and explain THREE (3) importance of Budget Guidelines in Public Sector Accounting and Finance.
(3 marks)

Answer

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Tags: Budget Development, Budget Guidelines, Public Financial Management
Level: Level 2

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

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

Explain the primary fiscal policy objectives, guiding principles, and post-budget management activities under the Public Financial Management Act.

Question

Budgeting is an important process by which government plans its programmes and activities for a given fiscal period. For a budget to be effective in the delivery of the economic and social agenda of the government, the budgeting process should be linked to the macroeconomic and fiscal policies of the country. No wonder the Public Financial Management Act, 2016 (Act 921) has made extensive provision on macroeconomic and fiscal policies to guide the government in its budget formulation and execution. The budgeting process is preceded by fiscal policy planning to serve as a foundation for the realization of the inspiration of the budget. A national budget is a means to an end and not an end in itself; therefore, it should be controlled and managed holistically to achieve the desired economic, fiscal, and social outcomes. The Minister of Finance, the Principal Account Holders, and Principal Spending Officers are actively involved in post-budget management and control activities at various levels to ensure that the budget targets are achieved.

Required:
i) Explain the primary fiscal policy objective of the government and identify THREE (3) guiding principles in the formulation and implementation of a fiscal policy objective.
(3 marks)

ii) Explain FOUR (4) post-budget management and control activities prescribed under the Public Financial Management Act, 2016 (Act 921).
(4 marks)

Answer

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Tags: Budget Guidelines, Budget Management, Fiscal Policy, Public Financial Management Act
Level: Level 2