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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Tags: Budgeting, Cash Flow Forecast, Payments, Public Sector, Receipts
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 2019 – L2 – Q3a – Public sector fiscal planning and budgeting

Prepare a flexible budget for 50% activity level and a variance analysis for the Ministry of Works and Housing.

Question

a) The Ministry of Works and Housing prepares its budget using activity volume as a base for control purposes. The Ministry’s normal level of activity is 70%. However, in 2018, the Ministry had a peculiar challenge to the extent that they operated at a 50% level of activity. Below is the budget for 2018.

Level of activity	60%	70%	80%
Income:	GH¢	GH¢	GH¢
IGF	337,500	345,300	353,100
Expenses:
Compensation of Employees	175,200	204,400	233,600
Goods and services	57,000	64,500	72,000
Interest	63,500	73,100	82,700
Assets	31,500	36,700	41,900
Other Expenditure	190,000	190,000	190,000
Surplus/Deficit	(179,700)	(223,400)	(267,100)

Actual Results for 2018:

Description	GH¢
IGF	350,920
Compensation of Employees	129,500
Goods and Services	73,400
Interest	92,000
Assets	31,100
Other Expenditure	172,300

Required:
i) Prepare a flexible budget for 50% level of activity.
(7 marks)

ii) Prepare a Variance Analysis Statement for the operational year 2018.
(3 marks)

Answer

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Tags: Budgeting, Flexible Budget, Ministry of Works and Housing, Variance Analysis
Level: Level 2

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

PSAF – May 2019 – L2 – Q2d – Public sector fiscal planning and budgeting

Identify ways to improve Internally Generated Funds (IGF) of local governments.

Question

d) You have recently been appointed as a District Chief Executive (DCE) of a particular district. It has come to your attention that the Internally Generated Funds (IGF) of the District Assembly are very low, and you intend to address the problem for the assembly.

Required:
Identify FOUR (4) ways in which the IGF of the assembly can be improved.
(4 marks)

Answer

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Tags: Internally Generated Funds, Local Governments, Revenue Collection
Level: Level 2

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

PSAF – May 2019 – L2 – Q2b -Public sector fiscal planning and budgeting

Outline the procedures for payment of works procured by an MDA.

Question

b) Funds are released from the consolidated fund to the Ministries, Departments, and Agencies (MDAs) for use only when an appropriation bill has been passed into an appropriation act. However, when the Appropriation Act is issued, there are certain procedures usually followed in making payments for Capital Expenditure.

Required:
Outline the procedures for payment of works procured by an MDA.
(4 marks)

Answer

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Level: Level 2

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

PSAF – May 2019 – L2 – Q2a – Public Procurement

Analyze internal control measures for public assets, outline payment procedures for capital expenditure, explain procurement offenses, and suggest ways to improve IGF in local governments.

Question

a) The backward development in the public sector has been attributed to weaknesses in the Internal Control Systems in the public sector. Proper systems for the effective control over the custody and management of assets in public institutions are critical for Public Sector Accounting.

Required:
Analyze FOUR (4) key control measures required to be put in place to ensure effective management of Public Assets.
(6 marks)

Answer

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Tags: Capital Expenditure, Internal Control, Internally Generated Funds, Procurement Offenses, Public Assets
Level: Level 2

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

PSAF – April 2022 – L2 – Q5 – Accounting policies for cash and accrual-based accounting systems

Explain constitutional provisions on budgeting, the concept and benefits of Citizen’s Budget, the role of budget guidelines, and how to address financial transactions not covered by IPSAS.

Question

a) Budgeting is an essential element of Public Financial Management and it is a requirement of the Constitution and other Public Financial Management enactments. Budgeting is a process that requires the engagement and participation of citizens for accountability purposes. The prime objective of budgeting is to set out the financial plans of government for the ensuing year and how government plans and programs will be financed.

Required:
i) Explain TWO (2) provisions in the 1992 Constitution relating to budgeting. (4 marks)

ii) Explain Citizen’s Budget and identify THREE (3) of its benefits in Public Financial Management. (5 marks)

iii) Explain the role of budget guidelines in budgeting and identify FOUR (4) items of information to be expected in a budget guideline. (6 marks)

b) A Public Sector entity that applies IPSAS is currently faced with a particular financial transaction for which no IPSAS exists for dealing with the issue. The management is undecided on the choice of accounting policy to apply.

Required:
Discuss how the matter can be dealt with by the management of the entity. (5 marks)

Answer

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Tags: Budget Guidelines, Budgeting, Citizen’s Budget, Constitution, IPSAS
Level: Level 2

PSAF – April 2022 – L2 – Q3b – Public sector fiscal planning and budgeting

Prepare a budget performance report and analyze the budget outturn for Nkong District Assembly.

Question

Below is the Revenue and Expenditure Extract of Nkong District Assembly for the year ended 31 December, 2020.

Description	Annual Budget (GH¢’ 000)	Revised Budget (GH¢’ 000)	Actual Performance (GH¢’ 000)
Decentralised Transfer	32,000	35,000	42,000
Internally Generated Fund	56,000	45,000	33,000
Compensation	23,000	20,000	25,700
Goods and Services	13,000	18,000	24,000
Non-Financial Asset	18,000	15,000	12,000

Required:
i) Prepare a Budget Performance Report of Nkong District Assembly based on the extract above. (5 marks)

ii) Write a report analyzing the Budget Outturn while assessing the likely causes of the variances during the year. (5 marks)

Answer

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Level: Level 2

Topic: Public sector fiscal planning and budgeting
Series: APR 2022

PSAF – May 2018 – L2 – Q3c – Public sector fiscal planning and budgeting

Explain financial controls provided by the Financial Administration Regulation (FAR) 2004 over the management of public funds.

Question

The Financial Administration Regulation (FAR) 2004 L.I 1802 provided for various financial controls over the management of public funds.

Required:
Explain the controls provided by the FAR under the following areas:
i) Signing a blank document
ii) Security of signatures
iii) Use of indelible ink and prohibition of alterations
iv) Amendment of figures
v) Fraction of reporting currency

Answer

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Tags: Document Security, FAR 2004, Financial Controls, Public Fund Management
Level: Level 2

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

PSAF – May 2018 – L2 – Q3b – Public sector fiscal planning and budgeting

Prepare the MDA’s annual budget and calculate the amount of budgetary subvention support required for the fiscal year.

Question

The Budget Department of a Ministry, Department, and Agency (MDA) has received the following inputs from the cost centres for the 2015 budget year:

Expenditure Item	Amount (GH¢)
Construction Works – New Projects	289,199.28
Information and Documentation	250,877.16
Depreciation of Assets	450,000.00
Miscellaneous General Expenditure	180,000.00
Property Purchases	366,874.28
Staff Allowances	50,315.60
Research Activities	243,596.45
Charges and Fees	17,752.62
Repairs and Maintenance	32,294.05
Rehabilitation Expenses	661,506.00
Special Services	24,327.00
Travel and Transport	270,789.35
Printing and Publication	151,924.25
Materials and Consumables	193,236.81
General Cleaning	450,000.71
Utilities	650,000.81
Salaries for Established Post	783,594.00
Staff Overtime	871,900.00
Advertisement and Media	170,000.74
Out-of-Station Allowances	131,114.85
Insurance	74,943.28

For the 2015 fiscal year, the Ministry has projected to generate an amount of GH¢3,036,230.57 from Internally Generated Funds. The law in 2015 allowed the MDA to retain all internally generated funds and use it to finance their budget expenditure.

Required:
i) Prepare the MDA’s annual budget using the current chart of accounts for the public sector and submit it to the Ministry of Finance as their proposed budget for the 2015 fiscal year. (8 marks)

ii) Calculate the amount of budgetary subvention support required from the Ministry of Finance for the 2015 fiscal year. (2 marks)

Answer

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Tags: Budget Subvention, MDA Budget, Public Sector Budgeting
Level: Level 2

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

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

Explain the difference between direct and indirect taxes and suggest three ways to improve tax collection.

Question

Both direct and indirect taxes are critical components of government revenue as they are intricately linked with the overall economy. Collection of these taxes is important for the government as well as the well-being of the country.

Required:
Distinguish between direct taxes and indirect taxes and suggest THREE ways by which tax collection can improve.

Answer

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Level: Level 2

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

PSAF – May 2018 – L2 – Q1c – Public sector fiscal planning and budgeting

Discuss the benefits and preconditions for the successful adoption of an Integrated Financial Management Information System (IFMIS).

Question

Governments all over the world have seen the need to have government businesses automated and integrated for efficiency and effectiveness. This has led to the adoption of Integrated Financial Management Information Systems (IFMIS) by most governments in managing public finances.

Required:
i) Identify TWO benefits a country stands to gain by adopting an Integrated Financial Management Information Systems (IFMIS) in the management of Public funds.

ii) Explain TWO preconditions required to be met for the successful automation of government business through the IFMIS.

Answer

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Level: Level 2