QUESTION ONE

a) Controller and Accountant General (CAG) plays a crucial role in public financial management
in Ghana. The Public Financial Management Act 2016, Act 921 has therefore assigned certain
responsibilities to the Controller and Accountant. The CAG has a general responsibility to the
Minister of Finance to ensure custody, safety and integrity of the Public Funds under his or her
care. In addition, the CAG as the Chief Accounting Officer of Government has responsibility for
accounting and financial management in covered entity.

Required:
In reference to the Public Financial Management Act 2016, Act 921, explain FIVE (5)
responsibilities of the Controller and Accountant General to the covered entities. [5 marks]

b) National budgeting is not an ordinary activity of government but a requirement of Article 179 of
the 1992 Constitution, which imposes the duty on the President of the Republic to cause a budget
to the be prepared and laid for approval for the ensuing year before the end of the current financial
year. However, some argues that national budget is a mere façade and therefore add no value to
national development.

Required:
i) Justify the need for national budgeting as an essential element of Public Financial Management
in Ghana. [ 6 marks]

ii) Discuss the limitations of national budgeting in Ghana [ 4 marks]

c) Until recently, governments largely provide financial information to users on cash basis.
However, there has been mass movement away from cash basis to accrual basis in recent times,
triggered by the adoption of accrual basis IPSAS. Many public sector executives with no
accounting background fail to see any need for such movement and described it as “time and
money wasting exercise”. Your Principal Spending Officer also belongs to this school of thought.

Required:
As the Accountant, explain to the Principal Spending Officer compelling reasons why
government departments should report on accrual basis of accounting. [5 marks]
[Total: 20 marks]
 QUESTION TWO
a) National Happiness Department is a new covered entity established to promote healthy living
among Ghanaians. The Principal Spending Officer is aware of the requirements for every covered
entity to report annually on its financial affairs in accordance with the International Public Sector
Accounting Standards (IPSAS). Given the structural arrangement of the department in the
scheme of the public sector, the Principal Spending Officer is not sure if the department qualifies
as reporting entity under the Conceptual Framework of the General-Purpose Financial Report.
He therefore seeks your advice as an Accountant.
Required:
i) Explain to the Principal Spending Officer, what constitutes a public sector reporting entity under
the Conceptual Framework. [1 mark]

ii) Explain key characteristics of a public sector reporting entity that you would consider as the basis
of your advice to the Principal Spending Officer of National Happiness Department.
[4 marks]

b) Financial Reporting is a means to an end, which is to provide information to service

recipient and resource providers for accountability and decision-making purposes. Therefore,
understanding the information need of the service recipient and resource providers is critical to
useful financial reporting.
Required:
Discuss four main assessments that the primary user will need information in the general-purpose
financial report to make about public sector entity. [6 marks]

c) The Conceptual Framework for General-Purpose Financial Reporting provides for inclusion of
budget information in the general-purpose financial report of public sector entities.
Consequently, IPSAS 24 was issued to provide for disclosure of budget information in the
general-purpose financial reports.

Required:
Discuss the benefits of including budget information in the General-Purpose Financial Rreports.
[4 marks]

d) Accounting Policies are very fundamental to financial reporting in both the public sector and
private sector. You are a member of an expert group established by the Controller and Accountant
General to advise on accounting policies of covered entities adopting accrual basis of accounting.
The group has tasked you to identify they key areas that accounting policies of the covered
entities should cover.

1
 Required:
Explain accounting policy and discuss FOUR (4) key areas that an accrual accounting policy
should cover in the covered entities. [5 marks]
[Total: 20 marks]

QUESTION THREE

a) Governments have been encouraged to invest in building strong public financial management.
Public Expenditure and Financial Accountability (PEFA) framework has been developed to assess
the public financial management systems of countries with the aim of helping them to improve
their public financial management system.

Required:
i) In reference to the PEFA, discuss the THREE (3) outcomes that a country will derived from
establishing an open and orderly public financial management system. [3 marks]

ii) Explain the SEVEN (7) pillars of an open and orderly public financial management system.
[7 marks]

b) The following information is given about two countries in West Africa for 2018 financial year:

Statement of Financial Performance for the year ended 31st December 2018
Country G Country N
Annual Annual
Actual Budget Actual Budget
$'000 $'000 $'000 $'000
Revenues

Tax revenues 7,010,000 7,350,400 45,000,000 52,000,000

Non tax revenues 800,000 1,200,600 4,450,000 6,500,000

Grants and Donations 300,200 420,000 1,200,000 1,800,000

Total revenue 8,110,200 8,971,000 50,650,000 60,300,000

Expenditures

Compensation of employees 3,855,500 3,307,680 20,250,000 20,800,000

Goods and services 801,700 2,310,600 9,000,000 20,800,000

Consumption of fixed
capital 67,500 - 325,000 -

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Interest 2,939,000 2,940,500 13,500,000 13,000,000
Social benefit cost 45,600 67,000 250,000 300,000

Subsidies 86,000 95,000 180,000 195,000

Grants 55,000 80,000 450,000 485,000

Other expenditure 980,000 1,890,000 5,670,000 62,000,000

Total expenditure 8,830,300 10,690,780 49,625,000 117,580,000

Net Operating result (720,100) (1,719,780) 1,025,000 ( 57,280,000)

Statement of Financial Position as at 31st December 2018

Country G Country N
Actual Actual
Assets $'000 $'000
Non-Current Assets
Property Plant and equipment 100,000,000 550,120,000
Capital work in Progress 2,000,000 7,600,000
Equity investment 50,000,000 120,000,000
Loans receivable - - 7,000,000
152,000,000 684,720,000
Current Assets
Loan receivable and loans 1,250,000 5,670,000
Inventory 2,400,500 8,700,000
Cash and Cash equivalent (2,560,000) 1,360,000
1,090,500 15,730,000
Total Assets 153,090,500 700,450,000

Fund and Liabilities

Accumulated Fund 670,000 800,000
Operating Surplus (720,100) 1,025,000
(50,100) 1,825,000
Current Liability
Payables 4,340,600 6,225,000
Long term liabilities
Domestic Debt 66,000,000 320,700,000
External debt 82,800,000 371,700,000
Total liabilities 153,140,600 698,625,000
Total funds and liabilities 153,090,500 700,450,000

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Additional Information
i) The Statistical and economic data of the two countries for 2018 is given below:

Country G Country N
Population 29 million 106 million
Gross Domestic Product ($’000) 238,000,000 1,890,000,000

ii) All figures of the two countries were originally presented in their respective reporting
currencies and have been converted into US Dollar to facilitate analysis.
iii) Non tax revenue reported include dividend received from the Government Business
Enterprises of respective governments. Dividend income constitutes 50% of the non- tax
revenues of country G and 80% of the non-tax revenues of country N.
iv) The Property, Plant and Equipment balances of G and N at carrying amount at the beginning
of year 2018 were $92, 200,000,000 and $541,600,000,000 respectively.
Required:
1) Compute the following accounting ratios of the two countries respectively:
i) Percent tax outturn
ii) Total Revenue to Gross Domestic Debt
iii) Fiscal balance to Gross Domestic product (actual and budget)
iv) Wage bill to Total tax revenue
v) Capital expenditure to Total Expenditure
vi) Interest to Tax revenue
vii) Return on equity investment
viii) Debt to Gross Domestic Product
ix) Primary fiscal balance to Gross Domestic Product [ 4 marks]

2) Based on your computations in (1) above, write a report to the Joint Financial Management
Committee analysing and discussing the financial performance, financial position and prospects
of the two countries, indicating clearly the strength and weaknesses of each country. The report
should also highlight, among others:
 To include key assumptions that underpin your analysis and conclusion.
 Limitations of your analysis. [6 marks]
[Total: 20 marks]

4
QUESTION FOUR

The following is a summarized list of the receipts and payments extracted from the ledger of the
consolidated fund account for the year ended 31 December, 2018:
GHc ’million
Transfer to the Road Fund 853
Repayment of external borrowing during the year 2,554
Corporate Income tax 4,962
Loans and advances granted during the year 2,103
Transfer to the District Assembly Common Fund (DACF) 1,498
Seminar and workshops 1,124
Medical support for pregnant women 1,125
Training and capacity building 1,592
Value added taxes 9,872
Grant for school feeding programme 2,754
Subsidies on fuel 2,110
Income tax (PAYE) 4,129
Financial investment during the year 3,245
Established post salaries 5,935
Custom and Excise duties 5,768
Non-established post salaries 1,864
13% SSF contribution 1,216
Rent tax 2,245
Staff allowances 1,625
Transfer to other statutory funds 652
Administrative cost 547
Fee and charges for services 2,975
Infrastructure works completed 5,332
Trust funds 1,629
Cash payment to support the aged 950
Foreign travelling cost 1,345
Dividend and other investment income 1,156
National award and celebrations 1,164
Repair and maintenance 1,560
Purchase of property plant and equipment 2,763
Capital project grants 1,327
Infrastructure works in progress 2,890
Domestic debt interest paid 2,345
Recoveries of loans and advances 403
External borrowing during the year 14,532

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 External debt interest paid 2,540
Subsidies on utilities 3,120
Other bilateral grants 1,230
Fine, Penalties and forfeiture 1,950
Transfer to GET Fund 1,235
Other expenses 645

The following additional information is made available:

1) The Government of Ghana applies the full accrual basis International Public Sector
Accounting Standards (IPSAS) as the basis for preparing its financial statements.
2) Balances extracted from the ledger of the Consolidated Fund as at 1/01/18 consisted of:
GHc ’million
Domestic Debt 7,560
External Debt 9,250
Payables 3,970
Loans and advances 7,120
Financial Investments 4,870
Cash and cash equivalent 2,860
Property, Plant & Equipment 4,830
Infrastructure completed 1,390
Infrastructure in progress 6,558
Accumulated fund 6,835
3) The approved budget for the 2018 fiscal year excluding that of capital expenditure and
investments is as follows:

Original
Budget Supplementary
Budget

GHc’millon GHc ’million

Direct taxes 6,000 3,500
Indirect taxes 12,000 3,000
Non-tax revenue 6,500 1,500
Grants 6,000 -
Compensation of employees 7,200 2,600
Goods and Service cost 5,100 2,000
Public debt interest 3,500 600
Subsidies & Transfers 4,400 1,450
Grants 6,000 -
Social benefits 1200 -
Other expenses 600

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4) During the year, the Parliament of Ghana approved a transfer of 7.5% of total tax
revenue to the DACF.
5) The capital project grant was received from the UK Government in October 2018. The
Government of Ghana reasonably expects to comply with the grant agreement. The
Government of Ghana is unlikely to comply with some of the conditions for grants
amounting to GHc450 million of the other bilateral grants. The Government of Ghana has
already complied with grant condition in respect of a bilateral grant for the People Republic
of China amounting to GHc2450 million. This grant is highly probable to be received in
the first month after the financial year end.
6) Domestic debt interest and external debt interest amounting to GHc530 million and
GHc230 million respectively was due but not paid due to the financial constraints during
the year.
7) The Government of Ghana applies the revaluation model for its non-current assets in line
with IPSAS 17: Property, Plant and Equipment. In this respect, a professional valuer was
engaged who produced the following values as at 31st December, 2018: Property, Plant and
Equipment GHc15,000 million; Infrastructural assets completed GHc24,000 million and
Infrastructural assets in progress GHc20,000 million.
8) It is the policy of government to provide for consumption of fixed assets on all non-
financial assets acquired during the year and those existing prior to the migration to accrual
basis at the following rate per annum;
Property, Plant and Equipment 25% on cost
Infrastructure asset completed 20% on cost
9) Salaries and other emoluments outstanding during the year amounted to GHc350 million
while that of use of goods and services amounted GHc150 million. Additionally, GHc1,430
million of rent paid during the year relate to 2019. GHc120 million relating to other
expenses was outstanding as at 31st December, 2018.
10) As at 31st December, 2018, corporate tax assessments amounting to GHc3,250 million was
still outstanding to be paid by corporate entities to government, whilst the total amount
owed to government as at 31st December, 2018 in respect of taxes on goods and services
stood at GHc1,900 million. It is estimated that, only 60% of the outstanding debt to
government may be recovered.
11) Inventory included in use of goods and services available at the end of the year was as
follows:

Inventory for use Inventory for sale

GHc’ million GHc’ million
Historical Cost 900 400
Replacement Cost 700 800
Net Realisable value 500 200

7
 Required:
Prepare the following financial statements in accordance with the PFM laws of Ghana, the Chart
of Accounts of government and relevant accrual basis IPSAS:

i) Statement of Financial Performance of the Consolidated Fund for the year ended 31
December 2018. [5 marks]
ii) Statement of Financial Position of the Consolidated Fund as at the year ended 31 December
2018. [5 marks]
iii) Separate statement of Budget Comparison with Actuals in accordance with IPSAS 24
[5 marks]
iv) Notes to the financial statements. [5 marks]
[Total: 20 marks]

QUESTION FIVE
a) In the procurement structures, the Head of Procurement Entity and the Entity Tender Committee
play a critical role in open and orderly procurement. The newly appointed Chief Executive of the
covered entity you work for as an Accountant for years, has invited you for discussion on public
procurement matters in the entity, on particularly the role of the Head of procurement entity and
the Entity Tender Committee and he has advised you to come fully prepared on the subject matter.

Required:
As part of your preparation towards the pending invitation, prepare a brief on the role of the Head
of Procurement Entity and the Entity Tender Committee in reference to the Public Procurement
Act 2003 as amended. [6 marks]

b) The use of single source procurement is the simplest but most risky method of procurement under
the Public Procurement Act 2003 as amended. However, the method remain the most appropriate
method of procurement under some exceptional circumstances under the law.

Required:
Discuss FOUR (4) exceptional circumstances under which the use of single source procurement
is acceptable under the Public Procurement Act 2003 as amended. [4 marks]

c) A public University has entered into an agreement with a private sector estate developer, Safila
Estate Giant Limited to provide residential facilities for senior members of the University. In the
arrangement the estate developer is required to wholly finance and construct 100 residential
houses situated on the university land and the developer has the right to manage the residential
facilities and the University will deduct the rental due from the salaries of the employees and pay
80% to the developer every month in compensation for its services, whilst remaining 20% goes
to the University. The arrangement will last for 20 years upon which the residual assets it handed
over to the University. The University management has tasked the finance directory to appraise
itself with the new arrangements and account for it appropriately in line with the International

8
 Public Sector Accounting Standards. However, the Head of Finance expresses uncertain whether
the arrangement qualifies as service concession arrangement under the IPSAS.

Required:
i) Justify to the Head of Finance that the arrangement in question constitutes service concession
arrangement under IPSAS 32. [4 marks]
ii) Discuss how the University should recognize the resulting: Service Concession Asset, Liability,
Revenues [7 marks]
[Total: 20 marks]

9
SUGGESTED SOLUTIONS
QUESTION ONE
a)
In reference to the Public Financial Management Act 2016, Act 921, Explain five
responsibilities of the Controller and Accountant General to the covered entities. [5 marks]
Under the PFMA, the Controller and Accountant General has the following responsibilities
towards the covered entities
i) Authorises the opening of an account for a covered entity. They provides that covered entity
shall not open bank account or a bank opens accounts for covered entity without the approval
of CAG in writing.
ii) Specifies for a covered entity, the accounting standards, policies and the classification
system to be applied in public accounting, in consultation with the Auditor-General, to
ensure that a proper system of accounting operates;
iii) Provides accounting officers to covered entities. A covered entity is not permitted to engage
their own accounting staff unless they are autonomous entities.
iv) Responsible for the classification and management of value books. All value books are under
the control, security and management of CAG.
v) Issues general instructions to a Principal Spending Officer in accordance with the laws
vi) Develops efficient accounting systems for a covered entity;
vii) Approves accounting instructions of a covered entity;

b)
i) Justify the need for national budgeting as an essential element of Public financial
management in Ghana [ 6marks]

Apart from the legal status of a budgeting, it also offers some economic and behaviour as
follow:
i) Set priority in the Resource
The budgeting process assists government to consider national priority and effectively
allocate the scarce public resources to activities and programmes throughout the public
sector.
ii) Effective planning and control
Budgeting helps government to plan and control effectively the activities and programmes
of the government and the public sector as a whole. Without budgeting, there will be a lacuna
between government plans and actions.
iii) Effective coordinating of government activities
Budgeting process assist government to co-ordinate activities and programmes undertaken
by the several public sector entities in order to achieve national goal congruence. It brings
together the separate subsystems of the public sector to enable them work together towards
the achievement of the objectives of the government as a whole.

10
 iv) Communication tool
Budgeting serves as a means of communicating government plans and programme to the
public administrators, employees and the public in general. The intention of government
backed by legislative approval are best communicated through the budget.
v) Motivation by targets
Budget is full of targets that serve as a tool for motivation to managers and employees at all
level of administration of the public sector. Budgets come with targets and key performance
indicators that motivate the managers and employees to achieve these results. For example,
revenue target of GHc50 billion in the budget would drive the effort of the Ghana Revenue
Authority (GRA) throughout the budget period.
vi) Monitor, evaluate and control performance
Budgeting system will only be complete if it facilitates monitoring, evaluating and
controlling performance of programme, projects and activities carried out by the public
sector entities based on the standards set in the budget.
vii) Public accountability
Budgeting helps government to demonstrate accountability for the resources entrusted to it
the citizens and court the trust of the citizens. The budget also allows the citizens the
opportunity of assess government accountability so demonstrated.
viii)Fiscal discipline
The budget acts as a check on government actions by exposing fiscal indiscipline through
budget outturns.

ii) Discuss major limitations of national budgeting in Ghana [ 4 marks]

Budget has some challenges and limitations in realisation the objectives and some of these
are:
- Cost implications
Budgeting process entails several committee meetings involving the budget committee and
this usually cost the organisation money in terms of allowances for meeting, printing and
publications. When aggregated, it constitutes a significant portion of the goods and services
expenditure budget of government. Remember, the budget office is established under the
Ministry of Finance to be responsible for national budgeting and the cost involved in running
the office could be wholly traced to the cost of budget preparation.
- Time consuming
Putting together a budget consumes a lot of the preparers time, which otherwise could have
been used for equally importance purposes. The time spent on budget preparation results from
budget meeting, budget hearing procedures, budget presentations, budget examination by
Parliamentary select committees, media discussions and so on.
- Economic instability
Budget functions well in a stable macroeconomic environment such this permits preparers to
forecast cost of events and activities with greater precision. Macroeconomic instability renders
a budget “useless” as the estimates quickly become ridiculous due to abrupt changes in prices
and exchange rates for example.
11
- Budget not an end
Budget by itself has not authority unless such authority is evocated by the implementers
through activation of the budget in the organisation. So preparing budget is good but cannot
become an end, it is just the means of achieving national goal. In some cases, politician pad
the budget with softy programmes and projects to win public applause meanwhile they have
not clear intention of achieving them. Budgetary control is crucial for curing this deficiency
in budget
- Misconception of budget authority.
The authority of a budget is simply “spend to the budget” and therefore any spending within
the ambit of a vote is appropriate. However, in practices most public administrators interpret
the authority to mean “spend the budget”, implying that the organisation is under statutory
obligation to spend all the amounts appropriated to it. Thus, organisations embark of end of
year rush spending to deplete the balance on an appropriation at the end of the year. This is
the unfortunate reality.
- Innovation
Budget also counteracts innovation and responsiveness to changes within the budget period.
For example, a budget has been approved of an activity where as in the course of
implementation new dimension have been identified which have not been anticipated in the
budget therefore change could not be made, unless a supplementary budget is introduced to
Parliament on the matter. This inhibits innovativeness on the part of implementers of the
budget. Budget process promote bureaucracy in public administration.

12
c)
As the Accountant, explain to Principal Spending Officer compelling reasons why
government departments should report on accrual basis of accounting. [ 5 marks]
Compelling reasons for reporting on accrual basis of accounting in the public sector are:
i) It is superior in measuring financial performance of public sector entities in terms of
economy, efficiency and effectiveness of serviced delivery. It considers all resources of the
entity, not only cash, in achieving the result of the entity.
ii) It promotes accountability and transparency as it encourages disclosure of all material
transactions, items and events whether cash is involved or not. It supports full disclosure
iii) It provides comprehensive and robust information to support decision making far more than
cash basis of accounting.
iv) It is a well-known basis of accounting in the private sector and stood the test of time in that
sector. New public management promotes fusion of accounting technology between the two
sectors.
v) The use of accrual basis is supported by the Public Financial Management Act 2016, Public
Financial Management Regulation of 2019 and the IPSAS. So, accrual is definitely the way
to go in the public sector.

13
QUESTION TWO
a)
i) Explain to the Principal Spending Officer, what constitutes a public sector reporting
entity under the Conceptual Framework. [1 mark]
Under the Conceptual Framework, a public sector reporting entity may comprise two or more
entities that present General Purpose Financial Report (GPFR) as if they are a single entity. In
reality, not all public sector entities are reporting entity and therefore may not be required to
prepare GPFR.
ii) Explain key characteristics of a public sector reporting entity that you would consider as the
basis of your advice to the Principal Spending Officer of National Happiness Department.
[4 marks]
In determining whether NHD is a reporting entity, the following key characteristics of reporting
given by the Conceptual Framework should be considered:
 The entity raises resources from, or on behalf of, constituents and /uses resources to undertake
activities for the benefit of, or on behalf of, those constituents; and

 There are service recipients or resource providers dependent on the GPFRs of the entity for
information for accountability or decision-making purposes.
The NHD becomes a reporting entity if is has the powers to raise money from or on behalf of
its constituents and under contract to apply the money for the benefits of those constituents.
Secondly, NHD should have constituents who may need the information for accountability and
decision-making purposes.

b)
Discuss the four main assessments that the primary user will need information in the general-
purpose financial report to make about public sector entity. [6 marks]
The primary users will need the GPFR to make assessment of the following:
i) Performance of the entity for the period in terms of service delivery, resource management
and compliance. They would like to find out whether the entity is able to mobilized the required
resources during the year for quality service delivery. The cost of service is also assessed from
the GPFR. The users also want to judge from the GPFR whether activities and operations of the
entity are in compliance with the legally adopted budget.
ii) Liquidity and solvency of the entity. They want to know from the GPFR, the financial
condition and cash requirements of the entity. Users would like to assess the claims against the
assets of the entity to judge the risk exposure of the public services the entity provides.
iii)Long term sustainability of entity’s service delivery and other operations and changes therein
in terms of:
Capability to continue to fund its activities and meet operational objectives in the future,
Current availability of physical and other resources to support service delivery in the future.

14
iv) Capacity of the entity to adapt to changing circumstances (such as demographics or economic
conditions that impact the activities of the entity.
c)
Discuss the benefits of including budget information in the general-purpose financial
reporting. [ 4 marks]
Disclosure of budget information in the GPFR will provide the following benefits to the user of
the entity.
i) The practice affirms the supremacy of a national budget in public financial management and
whip everybody in line.
ii) It helps the users to assess the extent of compliance of the entity’s activities and operations to
the legally adopted budget.
iii)It enhances the predictive power of the financial information as the users can form opinion
about the likely future result based on the budget outcomes.
iv) It makes the financial report comparable, especially where prior year results are not available.
d)
Explain accounting policy and discuss four key areas that an accrual accounting policy
should cover in the covered entities. [ 5 marks]
According IPSAS 3ccounting policies refers to the specific principles, bases, conventions,
rules and practices adopted by an entity in preparing and presenting financial statement.
Disclosure of accounting policies applied in the preparation and presentation of financial
statement permits the users to understand and appreciate the information provided. The key
areas where accounting policies is very important include:
i) Basis of Accounting. The preparer should indicate the basis of accounting used in the
preparation and presentation of the financial statement. It may be on cash basis or accrual basis
and the fact must be stated clearly.
ii) Consumption of fixed capital. The basis of charging consumption of fixed assets should be
disclosed together with the specific rates of consumptions charges. Consumption may be
charged on straight line or reducing balance basis, for examples.
iii)Valuation of inventory. Policy statement should be made about the valuation method used. It
may be lower of historical cost or replacement cost for inventory for use or lower of cost and
net realisable value when the inventory is for sale.
iv) Revaluation. Policy on revaluation of assets should be disclosed, particularly the method that
have been used.
v) Foreign exchange policy. Where foreign currency is involved, a disclosure of the transaction
method and treatment is necessary.
vi) Compliance statement. Where the financial statement is prepared in compliance with
Standards and Laws, this fact must be included in the policy.

15
QUESTION THREE
(a)
i) In reference to the PEFA, discuss the THREE outcomes that a country will be derived
from establishing an open and orderly public financial management system. 3 marks
PEFA identifies three key outcomes of every public financial management systems and these are:
Aggregate fiscal discipline. The objective of public financial management is to ensure effective
control of the total budget and management of fiscal risks. The outcome is that government must
be fiscally discipline

Strategic allocation of resources. The objective of a public financial management system is to

ensure resources are strategically allocated to priority areas of government policy and plans. This
involves planning and executing the budget in line with government priorities aimed at achieving
policy objectives.

Efficient service delivery. The objective of public financial management it to collect revenues
and direct these revenues to the provision of public services in an efficient and effective manner.
It requires using budgeted revenues to achieve the best levels of public services within available
resources
ii) Explain the seven pillars of an open and orderly public financial management system.
7 marks
The pillars are as follows:
Budget reliability. The government budget is realistic and is implemented as intended. This is
measured by comparing actual revenues and expenditures (the immediate results of the PFM
system) with the original approved budget.
Transparency of public finances. Information on PFM is comprehensive, consistent, and
accessible to users. This is achieved through comprehensive budget classification, transparency of
all government revenue and expenditure including intergovernmental transfers, published
information on service delivery performance and ready access to fiscal and budget documentation.
Management of assets and liabilities. Effective management of assets and liabilities ensures that
public investments provide value for money, assets are recorded and managed, fiscal risks are
identified, and debts and guarantees are prudently planned, approved, and monitored.
Policy-based fiscal strategy and budgeting. The fiscal strategy and the budget are prepared with
due regard to government fiscal policies, strategic plans, and adequate macroeconomic and fiscal
projections.
Predictability and control in budget execution. The budget is implemented within a system of
effective standards, processes, and internal controls, ensuring that resources are obtained and used
as intended.

16
Accounting and reporting. Accurate and reliable records are maintained, and information is
produced and disseminated at appropriate times to meet decision-making, management, and
reporting needs.
External scrutiny and audit. Public finances are independently reviewed and there is external
follow-up on the implementation of recommendations for improvement by the executive.

b)
Comments on the question
The question required you to compute certain ratios of two countries and conduct an analysis of
the financial performance, position and prospects. You need to indicate clearly the formula you
have applied in computing the ratios and in some cases the assumption that you have applied. You
are advised to spent much more time to the analysis as much as possible.
1) Computation of required ratios

Formula G N
Total Revenue outturn percentage (Budget - Actual)/Budget x100 5 13
Total Revenue to GDP Total Rev/GDP x100 3.41 2.68
Fiscal balance to GDP Fiscal balance/GDP X100 (0.30) 0.05
Wage bill to Total tax revenue Compensation/Total tax x100 55 45
Capital spending. to Total Expend Capital spend/Total exp *100 9.06 17.17
Interest to Tax revenue Interest /total revenue x100 41.93 30
Return on equity investment Dividend/equity investment *100 0.80 2.97
Debt to GDP Debt/GCP x100 62.52 36.63
(Fiscal balance + interest) /GDP
Primary fiscal balance to GDP X100 0.93 0.77
Debt per capita Debt/population ($) 5131.03 6532.08

2)
Report to the Joint Financial Management Committee
Financial Statement Analysis and Discussion of Country G &N
Introduction
In this report, the financial statements of the above-named countries are analysed and discussed.
The analysis is based on the result of some financial ratios computed for both countries using the
2018 financial reports, as shown in the Appendix. The themes of the analysis are financial
performance, financial position and prospects.

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Financial performance
The financial performance of both countries was assessed using total revenue to GDP ratio, wage
bill to total ratio, interest to total tax ratio and return on equity. Total revenue to GDP ratio
measures the portion of GDP that result from primary revenues and it shows the revenue generation
capacity of the country. Country G performs better than Country in this regard, however both
countries performed below expectation. Country G’s total revenue to GDP is 3.41% and that of N
is 2.68%. Country N manages its wage bill far better than G as it spends only 45% of its tax
revenues to pay salaries whilst G spend hooping 55% of its tax revenues to pay wages. Country G
is encouraging to undertake some reforms to bring the wage bill under control. In relation to
interest performance, Country N outperforms G. It spends 30% of its taxes to pay interest whilst
G has a ratio of 42%. However, both ratios are considered high therefore both countries should
institute effective debt management system to cap the rising interest. Even though both countries
invested highly in equity of state-owned enterprises, they failed to reap acceptable return from it.
Country N has a return on equity of approximately 3% whilst G achieved less than 1%. Both
countries must ensure effective management of its assets to enhance its revenue capacity. In
conclusion, financial performance of both countries is not encouraging, but N is slightly better.

Financial Position
The financial position of the countries is assessed based on fiscal balances to GDP, Debt to GDP,
and Debt per capita. Fiscal balance to GDP of both countries is acceptable, both are lower than
5%. The primary balance of G is 0.93% and that of N is 0.77%. Both countries are fiscally
discipline. However, sustainability of public debt is questionable in G, whose Debt to GDP ratio
is over 62%. Country N has low debt to GDP ratio showing that the debt levels are sustainable.
However, the debt per capital of G, $5141 per person is lower than that of N which is in excess
of$6,000 per person. In conclusion, the financial position is Country N is slightly better than G,
especially in terms of debt management.

Financial prospect
Budget data provides insight into the prospect of both countries. The total revenue outturn rate was
used to assess both countries. The rate of revenue outturn is 5% in country G and 13% in N. The
result of G indicates high budget reliability and that of N reflect a weak budget reliability. Country
N should tighten its budgetary control system to improve its budget reliability.

Conclusion
Both countries, particularly G, has to strengthen its financial performance, position and prospects
to achieve better fiscal outcomes. Meanwhile, the following limitation of the study must be taken
into account:
 That the political context of the two countries are assumed to be similar, however a variation in
political systems may significantly affect the analysis and discussions of the results.
 Likely on-going reforms and policies are not reflected in the analysis.

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 Translation of the reporting currency into a common currency, the dollar, may affect the general
results of the analysis.
 The study also assumes that both financial statements are prepared using same accounting
standards and policies.

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 QUESTION FOUR
Comment about the Question
The question asked the student to prepare financial statements for the Consolidated Fund in line
with the relevant financial laws, classifications and IPSAS. This must be strictly adhered to. The
student must be conversant with the Chart of Accounts of Government of Ghana. Any
classification of items not in conformity with the chart will render your attempt void and hence no
marks will be awarded.
i)

Statement of Financial Performance of the Consolidated Fund

for the year ended 31st December 2018
GHc’
Revenue Notes million
Direct tax 2 14,586
Indirect tax 3 17,540
Non-tax 5 6,081
Grants 6 4,861
Total revenue 43,068

Expenditure
Compensation for employees 7 10990
Goods and Services 8 5152
Consumption of fixed capital 14 11793
Public debt Interest 9 5,645
Subsidies 11 5230
Grants 12 4763
Social benefit 10 2075
Other expenditures 13 3855
Total expenditure 49503
Net Operating Result (6,435)

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ii)

Statement of Financial Position of the Consolidated Fund

as at 31st December 2018
Assets Notes GHc'million
Non-current asset
Property, Plant and Equipment 14 16,945
Infrastructure 14 24,578
Financial Investment 15 8,115
49,637
Current Assets
Inventory 8 900
Infrastructure WIP 14 29,448
Loans and advances 16 10,250
Revenue receivable (5150 -3,090) 2,060
Cash and cash equivalent 17 3,847
46,505
Total asset 96,142

Liabilities and Funds

Current Liabilities
Payables 18 5,875
Deferred grants 450
6,325
Non-current liability

Domestic debt 19 7,560

External debt 19 21,228
28,788
Total liability 35,113
Funds
Trust Fund 1,629
Accumulated Fund 20 59,400
61,029
Total Liabilities and Funds 96,142

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 iii)

Statement of Budget Comparison with Actuals of the Consolidated Fund

for the year ended 31st December 2018
Actual Original Budget Revised Outturn
Revenues GHc'million GHc'million GHc'million GHc'million
Direct tax 14,586 6,000 9,500 (5,086)
Indirect tax 17,540 12,000 15,000 (2,540)
Non-tax 6,081 6,500 8,000 1,919
Grants 4,861 6,000 6,000 1,139
43,068 30,500 38,500 (4,568)
Expenditures
Compensation of employees 10990 7,200 9,800 1,190
Goods and Services 5152 5,100 7,100 (1,948)
Public debt interest 5,645 3,500 4,100 1,545
Subsidies & Transfer 5230 4,400 5,850 (620)
Grants 4763 6,000 6,000 (1,237)
Social benefit 2075 1,200 1,200 875
Other expenses 3855 600 600 3,255
Total expenditure 37710 28000 34650 3060
Net Operating Result 5,358 2,500 3,850 (7,628)

iv) Notes to the financial statements

1. Accounting policies
The following accounting policies and compliances have been made in the preparation and
presentation of the financial statement.
a) Basis of accounting.
The Government of Government prepares and present the financial statement on accrual basis
of accounting in line with the accrual based IPSAS.
b) Consumption of fixed capital
In line with accrual basis of accounting, all non-current assets have been written of over their
useful lives as follows:
 Property, Plant and Equipment at 25% on cost
 Infrastructure asset at 20% on cost.
c) Revaluation of Non-current Assets
All fixed assets existing prior to the adoption of accrual basis has been revalued and included
in the financial statement. The revaluation is carried out by a professional valuer appointed by
Government of Ghana.
d) Valuation of Inventory
Inventory for use are valued on lower of historical cost and replacement cost while inventory
for sale is valued on lower of historical cost and net realisable value.

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e) Compliance statement
The financial statements have been prepared and presented in compliance with the provisions
of the Public Financial Management Act 2016, Public Financial Management Regulation 2019
and the International Public Sector Accounting Standards.

2. Direct taxes are as follows

Direct Taxes GHc million
Company Tax
Income tax 4,129
Rent Tax 2245
11,336
Corporate Tax receivable 3,250
14,586
3. Indirect taxes are made up as follows:

Value added tax 9,872

Custom and excise duties 5,768
15,640
Tax receivables on goods and services 1,900
17,540
4. Total tax revenue is as follow:
Direct Tax received 11,336
Indirect tax received 15,640
26,976
Tax receivable (3250 + 1900) 5,150
32,126

5. Non-tax revenues
Fees and charges 2,975
Dividend and other invest. Incomes 1156
Fines, penalties and forfeiture 1950
6,081
6. Grants revenues
School fee programme 2,754
Capital project grants 1,327
Other bilateral grants 1,230
Grants received 5,311
Deferred grants -450
4,861
7. Compensation for employees

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 Established post 5935
Non-established post 1864
13% Social Security Contribution 1216
Staff allowances 1625
10640
Arears 350
10990
8. Goods and Services
Seminar and workshops 1124
Training and capacity building 1592
Administration cost 547
Foreign travel 1345
National awards and celebration 1164
Repairs and maintenance 1560
7332
Rent advance (1430)
Arrears 150
Inventory at close (700 + 200) (900)
5,152

9. Public Debt Interest

Domestic debt interest paid 2,345
External debt interest paid 2,540
Interest arrears-domestic 530
Interest arrears-external 230
5,645
10. Subsidies and transfers
Fuel 2110
Utilities 3120
5230

11. Social benefits

Medical support (pregnant women) 1125
Aged 950
2075
12. Grants
Road fund 853
District Assembly Common Fund 1,498

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 Transfer to other statutory funds 652
GET Fund 1,235
4,238
District Assembly Common Fund
Arrears 525
(7.5% of 26,976)- 1498 4,763

13. Other expenses

Per trial balance 645
Allowance for receivable
(0.6*1900+3250) 3090
Arrears 120
3855
14. Non-current Asset Schedule

PPE Infrastructure Infra.WIP Total

Cost b/f 4830 1,390 6,558 12765
Additions 2,763 5,332 2890 10,985
Revaluation 15,000 24,000 20,000 59000
22593 30722 29448 82750
0
Consumption b/f 0 0 0 0
Charge for the year 5648 6144.4 0 11792.65

5648 6144.4 0 11792.65

Carrying amount 16945 24578 29448 70957.35

15. Financial investment

Balance b/f 4,870
Additions 3,245
8,115
16. Loans and advances

Balance b/f 7,120

loans and advances granted 2103
Rent Advance 1430
Recoveries (403)
10,250

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17. Cash and Cash Equivalent
Receipt
Tax received 26,976
Non tax 6,081
Grants 5,311
External borrowing 14,532
Recoveries of loans and advances 403
53,303
Payments
Compensation for employees 10,640
Goods and services 7,332

Capital assets 10,985

Interest 4,885
Social benefit 2,075
Subsidies 5,230
Grants 4,238
Other expenses 645
Trust fund monies 1,629
Externa debt repayment 2,554
Loan and advances granted 2,103
52,316
Increase in cash and cash equivalent 987
Cash and cash equivalent at end 2,860
3,847
18. Payables
Balance b/f 3,970
Other expenses 120
Salaries 350
Goods and services 150
DACF 525
Interest 760
5,875

19. Public debt

Domestic External
Balance b/f 7,560 9,250
Additions 0 14,532
Repayment 0 (2554)
Balance at 31/12/18 7,560 21,228

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 20. Accumulated Fund
Balance b/f 6,835
Net Operating result (6,435)
Revaluation 59,000
59,400

QUESTION FIVE

a)
As part of your preparation towards the pending invitation, prepare a brief on the role of
the Head of Procurement Entity and the Entity Tender Committee in reference to the Public
Procurement Act 2003 as amended. 6 marks
Head of Procurement Entity and the Entity Tender Committee play a crucial role in an open and
orderly public procurement process. Head of entity and the officer to whom responsibility has been
delegated (Procurement Officer) are responsible and accountable for procurement actions and
decisions made under the Act 914.The liability of the head of entity and procurement officer are
limited to acts that are inconsistent with the Act 914.
The law has imposed these functions and responsibilities on the head of procurement entity. The
head of entity shall:
i) Ensure compliance to the Act 914 and that concurrent approval from a tender review
committee does not absolve the accountability of the head for contracts made. This means that
at all times, the head of entity is ultimately responsible for proper conduct of public
procurement within the entity.
ii) Establish Procurement Unit within entity and the Unit staffed with qualified personnel.
iii)Empanel competent and qualified evaluation panels to evaluate tenders submitted to the entity
iv) Ensure that procurement procedures are followed. It is his responsibility to ensure that
procurement is carried out through the due process in an open and orderly manner.
v) Ensure stores, vehicles and equipment are disposed of according to the Act
vi) Exercise sound judgement in making procurement decisions
vii) Seek concurrent approval from the tender review committee when threshold is exceeded.
viii) Facilitate contract administration and ensure compliance to contract reporting requirement.
Tender Committee refers to a body within an entity with the responsibility for planning, processing
and generally making procurement decisions and ensuring compliance with the public
procurement law, among others. All entity tender committees perform these general functions:

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 – Ensure that each stage of the procurement process is followed through.
– Ensure that it works within the thresholds established in the law
– Exercise sound judgement in procurement decisions
– Review procurements above its threshold that have been duly processed by the procurement
unit and evaluated by the evaluation panel and seek concurrent approval from the central
tender committee
Specific function of tender committee includes:
– Review and approve procurement plans and quarterly update of the plan to ensure
connection with the objectives and operations of the entity
– Approved cost of items in the plan and ensure they fit into the budget amounts.
– Review procurement schedules and specifications and ensure compliance with law
– Secure concurrent approval from the relevant TRC
– Facilitate contract admin and ensure compliance with all reporting requirements
– Ensure that stores and equipment are disposed of according to the law.

b) Discuss four exceptional circumstances under which the use of single source procurement
is acceptable to the Public Procurement Act 2003 as amended. [4 marks]
Exceptional circumstances for use of Single source procurement:
i) Goods or services are only available from a single supplier or the supplier has exclusive
right. This is so because there is no point advertise to the public for submission of tenders
when you are aware that there is only one available supplier.
ii) Urgent need for the GWS not caused by dilatory conduct of the procurement entity, making
it impracticable to use competitive methods. It take at lease four weeks to receive tenders
for procurement from tenderers and therefore it becomes practically impossible to use
competitive tender when the goods, services and works are needy urgently, not because the
procurement delayed in initiating the procurement process,
iii) Occurrence of catastrophic even making the use of competitive method impracticable.
Speed required in procurement when there is catastrophic event cannot be achieved under
any other method.
iv) Contract for research, experiment, study or development not for commercial purpose.
v) Procurement has implications for National security. National security cannot be
compromised by economic considerations.

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 vi) Where additional supplies need to be procured from a supplier who had made supply in the
immediate to ensure standardization and compatibility with existing goods or equipment

c)
i) Justify to the Head of Finance that the arrangement in question constitutes service
concession arrangement under IPSAS 32. [ 4 marks]
Under IPSAS 32, A service concession arrangement is a binding arrangement between the
grantor and operator in which:
i) The operator uses a service concession asset to provide a public service on behalf of
the grantor for specified period of time, and
ii) The operator is compensated for its services over a period of the service concession
arrangement
Additionally, a service concession asset is the asset used for the provision of public service
under service concession arrangement. The asset is provided by the operator or grantor. The
operator provides the assets through construction, development, acquisition or already existing
asset. The grantor provides the asset by way of existing asset or upgrade of existing asset.
In the given scenario, the following observations can be made:
i) That there exists a binding contract between the University (grantor) and the estate
developer, Safila Estate Giants Limited.
ii) That the arrangement involved the provision of public service, provision of housing to
academic faculty.
iii) The operator is compensated for its services by way of the 80% rent payment of the
staff for the period of the arrangement.
iv) That the asset, the houses, are provided by the operator through construction
Consideration all these cases against the requirement of IPSAS 32, it can be concluded that the
arrangement between the University and Safila Estate Giants Limited constitute a service
concession arrangement that should be accounted for under IPSAS 32.
ii) Discuss how the University should recognize the resulting: Service Concession Asset,
Liability, Revenues under IPSAS 32 [7 marks]

 Recognition of Service Concession Assets

The grantor shall recognize an asset provider by the grantor and an upgrade to existing assets
of the grantor as a service concession asset if:
i) The grantor controls or regulate the services that must be provided by the operator: what
service should be provided, whom the services to be provided for, and price to charge for
the service; and
ii) The grantor controls any significant residual interest in the asset at the end of the service
concession term.

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 When these conditions are met the grantor shall measure the service concession asset at its
fair value and account for it under IPSAS 17 (Property, Plant and Equipment) and IPSAS 31
(intangible asset). In this case, the condition exists and therefore the University shall measure
the houses at the fair value and recognized it as asset in accordance with IPSAS 17 and
IPSAS 31.

 Recognition of Liabilities
IPSAS 32 required that when the grantor recognises a service concession asset, the grantor
shall also recognize the liability. The liability shall be measured at the same amount as the
service concession asset, but adjusted for any consideration from the grantor to the operator
or from the operator to the grantor

The nature of the liability recognized is based on the nature of the consideration exchanged
between the grantor and operator. The nature of consideration as exchange is determined by
the contract.
i) Where the grantor makes direct payment to the the operator, financial liability model is used.
Here the grantor pays upfront to the operator for the services it provides.
ii) Where the operator is compensated by grant of right, then grant fo right to operator model is
used. Here the operator is permitted to charge fees for the service to defray the cost of the
service it provides.
iii)Combination of payment and grant of right.
Given this case, the grant of right to operator model of liability recognition is most
appropriate as the estate developer is allowed to charge rent for the services it provides.

 Recognition of Revenue
The grantor shall recognise any other revenue that result from the arrangement to the grantor,
provided that revenue does not form part of the compensation of the operator for its services.
The revenue should be recognized under IPSAS 9 (Revenue from exchange transactions).

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