NATIONAL INSTITUTE OF PUBLIC

ADMINISTRATION

NAME: MATHEWS SAKALA

STUDENT NO. 27029131
PROG: BARCHELOR OF ACCOUNTING & FINANCE
COURSE: PUBLIC SECTOR ACCOUNTING (BAF 3070)
LECTURER: MR STANELY MWELWA

ASSIGNMENT 1. FEBRUARY 2023

QUESTION 1

(a) Main features of public sector Entity:

 The public sector often uses the private sector to deliver public goods- This is
where the government through the Zambia Public Procurement for example will
advertise for goods to be procured in that particular wing or department of the
government through bidding system, hence the private sector takes part in bidding and
the successful bidder will carry out the contract
 Shares are sold at the Stock exchange, This is where the company registers with the
Lusaka Stock exchange.
 The letters Plc is written at the end of the name of the company. Eg Zambeef Plc,
meaning Public Limited Company
 It is registered through the company’s registration entity (PACRA). Eg Zesco is
registered by PACRA to carry out its mandate on behalf of the government
 It holds annual general meetings AGM, for the purpose of evaluating the
performance of the entity and also appointing new leaders or Board of Directors to
oversee the operations of the company in that particular year
 Public Entities are established to provide services to the general public on behalf
of the central government. Take fore stance the Zambia Revenue Authority was
established through an Act in the constitution of Zambia to be collecting tax on
behalf of the government.
 The central government has control over the operations of the business
 It is audited by the office of the Auditor general.

(b) i. Public sector accounting is the process of recording, analysing and reporting the
financial statements of the sovereign state, or government. This method or type of
accounting only takes into account the cash accounting method. It only records
revenues and expenditures for non-profit making organisation (central government).
Public sector accounting also helps to monitor in the delivery of goods and services of
the government. The Government has the committee which oversee the utilisation of
resources in the public sector known as the Public accounts committee. Its main
objective is to summon any controlling officer to respond to queries arises from the
auditor’s report.
 Public Financial Management- This refers to the set of rules, laws that govern the
utilisation of the public finances. It takes into account the planning process of how the
money is going to be raised and how it shall be used in the public sector. According to
the public finance management Act 2004 which states that funds are supposed to be
used for the purpose for which it was called for. The Act also specifies remedies to
any officer who in case bleaches the law.

ii. Comprehensive and clear legislative frameworks, rules and procedures.

o Effective institutions with clear mandates.

o Transparency and accountability in government operations.
o Effective co-ordination of national planning and budgeting functions and
processes.
o Credible budgeting processes and Budgets
o Broad – nongovernmental involvement throughout the planning and budgeting
cycle.
o Effective parliamentary oversight.

QUESTION 2

(a) Essential matters that are necessary for a sound public financial management that
would that would achieve the desirable results of public expenditure are to mention but
the few;
 Good planning and budgeting- A well dignified plan that accommodates all
essential matters is relevant to the execution of a project or rather any financial
activities that will take place in the financial year.
 Resource Allocation- Efficiency in the allocation of resources in accordance
with agreed strategic priorities.
 Controlled Delivery- Operational efficiency to ensure maximum value for
money in the delivery of services.
 Accountability- A sound financial management requires accountability for
every money that is spent in order to minimise misapplication and
Misappropriation of Public Funds.
 Risk Management- Formulation of strategies on how risks can be managed in
case they fall due.
  Reporting and Auditing- Finally, the system should follow due process and
be seen to do so, by being transparent, with information publicly accessible to
all stakeholders and the general public. Office of the Auditor General audits all
the Financial statements to ensure that Officers accountable, have used the
resources in accordance with the budget.

(b) i.
 Policy formulation- This is done by the combination different persons
e.g. People from the political parties, the civil society, academia and
research bodies.
 Budget formulation- A budget is formulated from the ward level,
constituency level, district level, provincial level and National level.
There is a budget committee at every level in which the budget is
formulated and its main function is to prepare the budget
 Budget Approval- The budget approval is done by the Legislature
 Budget execution( Internal Audit , Procurement , Boards)
 Accounting ( Accountant General ‘s office )
 External audit and Evaluation ( Civil Society , Legislature)

ii. The importance of Legal framework and Institution Framework in ensuring the
effective and efficient public Financial Management.

 Legal Framework- This establishes entitlements in a transparent and

clear way in the usage of resources. It increases public trust in the
confidential treatment of reported data and thereby, facilitates accurate
information and higher response rates.
 Institutional Framework- Lack of sound intuitional framework is the
root cause of many failures in the delivery of services. Therefore
implementing a good institution framework is an important process of
preparing the ground for sustainable development
QUESTION 3.

A. i. The 4 key dimensions in the budgeting process in Zambia.

 Setting up the fiscal targets and the level of expenditures compatible with these
targets. This is the objective of preparing the micro economic framework.
 Formulating expenditure policies. Allocating resources in conformity with both
policies and fiscal targets. This is the main objective of the core processes of
budget preparation.
 Allocating resources in conformity with both policies and fiscal targets. This is the
objective of a successful budgeting process.
 Addressing operational efficiency and performance issues

ii. Main Purpose of Public/ National Budget.

o As a democratic tool, it shows the public how the Government intends to

utilize public resources against which government will be held responsible
or accountable.
o As a political tool, a Budget is an expression of government’s ideological
commitment, political philosophy and policy platform on how a country
moves forward.
o As an economic tool, Government budgets are to shape the economic
priorities of a country or entity. A Budget is normally the most important
document on policy for the year. In modern economy the influence of
government on the economy as a whole is immense as it often the biggest
employer, biggest spender and the biggest single claimant on the
country’s resources. A Government can influence the economy in
numerous ways, but its own revenues, borrowing and spending are the
major macro- economic factors

A Budget, therefore can influence the direction of investment, for

example by lowering taxes for certain sectors of the economy, promote employment and
influence the redistribution of income between various parts of the society.
o As legal tool, the budget has to be in line with constitutional
requirements, relevant legislation and the spirit of participatory
democracy. It must be pointed out that, Governments can only
spend money after they have been authorized to do so by
Parliaments.
o As a management tool, the Budget directs the administration
in its daily operations and spending.
(B) 5 Main stages in the budget formulation process.

1. The Drafting Stage

The initial stage in the budget process is the drafting stage. This
is a consultative process involving key stakeholders. After
appropriate consultations with key stakeholders, the MOF
comes up with the national budget every year. The drafting
stage involves four steps. These are :

i. The Budget Call Circular- Section 38

Subsection ( 1 )- The Secretary to the Treasury shall ,

on approval of the Medium Term Budget Plan ( MTEF )
by the second Friday of Julyeach year , issue to each
controlling officer a Budget Call Circular

Subsection ( 2 ) – the Budget Call Circular shall include :

a) The key policies to be observed , the

parameters to be utilized and the
procedures to be followed in the
preparation of the estimates of revenue and
expenditure at national , provincial , district
and local ( ward ) levels
b) Indicative resource ceiling and expenditure
allocations
c) The deadline for the submission of the
Budget framework paper and the estimates
of revenue and expenditure

This is a document that gives the general economic policy

guidelines on which the budget for the following year is
based. This is issued to Controlling Officers in the line
ministries and provinces.
  The executive wing of the government develops the Call
Circular.
 Based on the guidelines in the Call Circular, the MOF
considers the possible levels of revenues and ways of
financing the budget. The total expenditure level is worked
out.
 On receipt of the Call Circular, the controlling officers in
budget units prepare the budget in the budget standard
form.

Generally the key steps the key steps follows on receipt

of the Call Circular from the MOF are:

 Receipt of the Call Circular from MOF.

 Appointment of Sectoral planning teams’ .These draws up the
Budget.
 Briefing of the Sectoral teams.
 Identification of sub- sectoral programmes.
 Sectoral Planning Teams allocate ceilings to sub-sections as
reflected by the Medium Term-Expenditure Framework
(MTEF)
 Costing the activities for the programmes. This is in
accordance with MOF mission statement.

In order to ensure wide participation in the budgeting process, the MOF has extended its
consultations to individuals, organizations and companies that are affected by the budget.
To this effect the government advertises in the local media to the general public, private
sector and civil society to provide either oral or written submissions on what they wish to
include in the Budget.

However, it must be pointed out that not all submissions are considered and the
government is not bound to provide feedback to the petitioners.

2. The submission of the Estimates

Controlling officers in the budget units will then submit their estimated expenditure to the
Budget office at MOF.

The submission is supported by working papers. Budget units involved in the collection of
non- tax revenue, in the form of levies, charges, and miscellaneous receipts are also
required to submit estimates of revenue. This is accompanied by an explanatory
memorandum indicating strategies to be put in place so as to achieve the set targets. If the
strategies to be put in place require the enactment of law, a draft statutory instrument is
also submitted.

3. Discussion of estimates of Revenue and Expenditure (Budget hearing)

 Section 40- The Secretary to the Treasury may, by last Friday in August each
year , cause to be reviewed with the relevant controlling officer , the budget
framework paper and estimates for a head of expenditure , submitted to
ensure consistency with Government ‘s medium term policies and the
National Development Plan.
 The Budget Office draws up a time table for meetings with all budget units. Each
institution discusses it submission with the MOF. In an event that expenditures
are more or below the required levels, adjustments are made to the required
levels. The adjustments are based on MOF ceilings.
 In the case of revenue, general assumptions are made. These are then discussed
and scrutinized with emphasis on the revenue targets to be achieved, measures
to be put in place and the accompanying legislation. Adjustments are permitted
depending on the perceived capacity of the collecting agency.
 At this stage changes in the tax policy are analyzed. This is done jointly by the
MOF and the various stakeholders who make up the Tax Policy Review
Committee. This is under the chairmanship of the Director of Budget at the
Budget Office. The Committee comprises officials from within the MOF and key
line ministries, such as the ministries of Justice, Commerce and Industry, Mines
and Energy, and Home Affairs.
 Others on the committee include Zambia Development Agency (ZDA), the Bank of
Zambia (BOZ) and the Zambia Revenue Authority(ZRA)
 Also included on the committee are government institutions and departments
that collect or generate revenue.
 The task of the Committee is to analyze submissions on revenue proposals
received from the various stakeholders in the economy and recommend to the
MOF possible proposals to be considered for inclusion in the following year’s
budget.
 The Committee normally breaks into four working groups , These are:
 VAT
 Customs and Excise
 Direct Taxes
 Non- Tax Revenue

The committees will assess the viability of the suggested measures and the
suggested measures and the capacity of the concerned institution to generate
the proposed revenue.

 Once all submissions and reviews have been discussed and concluded., the
Budget Office processes the data and compiles a Consolidated Report , which is
sent to the Permanent Secretary and Secretary to the Treasury (ST) at MOF.
 Committees are not authorized to reject submissions. They can only accept
whole submissions. or some parts of the submissions.
 The Preliminary Budget
 The MOF prepares Cabinet Memorandum on the Budget for
consideration by the Cabinet.
 To support the Budget items, the Cabinet Memorandum includes
proposed fiscal measures required to generate the necessary revenue
to implement the Budget.
 The proposed expenditure measures could include those meant to reduce its
total expenditure. Government is empowered to increase some taxes while
reducing others to achieve its financial objective. Any adjustments are always
accompanied by pieces of legislation in the form of statutory instruments and
bills which to amend certain Acts.
 The Cabinet Memorandum may contain other government policy
measures meant to address major policy issues.

 The Cabinet extensively discusses the Budget proposals .At this stage the
Cabinet can subtract,add, or totally eliminate some components of the
proposed Budget. The discussion provide ministers with a chance to
defend their individual allocations.
 Once the Cabinet approves the Budget proposals, a printed document of
the estimates of expenditure and revenue referred to as the Yellow Book
is published.
 National Budget Policy Statement - Section 40- The Minister
responsible for finance , on approval of the national Budget by Cabinet
prepare a National Budget Policy statement for the next financial year,
which includes ;
a) An overview of the domestic and international macroeconomic
environment in which the estimates were prepared
b) The outline of the economic and fiscal policies proposed for the
upcoming financial year including an explanation of any major
changes in economic and financial policy
c) The objectives and priorities of the proposed estimates
including significant receipts and expenditures of the current
financial year
d) A summary of the projects and programmes for which
appropriations are proposed.
e) Any deficit or surplus projected for the current financial year
and any expected deficit under the proposed estimates
f) Description of the annual and medium term fiscal strategy
g) The maximum limits that the Government intends to borrow or
lend in that financial year in accordance with the Constitution
and,
h) Any other information that the Minister considers necessary

4. The Legislative stage

  During this stage, the Budget is presented to the National Assembly
for approval.
 After the approval of the proposed budget by cabinet, the Constitution of
Zambia mandates the Minister of Finance to present the Budget to the
National Assembly.
 Only the National Assembly has the authority to raise tax and expend
revenue.
 The Minister’s presentation of the Budget to the National Assembly is
traditionally referred to as the “Budget Address”. It is an occasion of major
significance among stakeholders (especially the CSOs) and society.
Thereafter, the whole house (National Assembly) simultaneously resolves
into the “Committee of Supply”. This to meticulously consider the
expenditure proposals the Ministry of Finance. The National Assembly is
only permitted to propose savings in the budget and not additional
spending.

5. The Implementation Stage

 Once the Appropriation Act is passed by the National Assembly,

the President assents or signs a General Warrant. This is passed
on to the MOF. A copy is sent to the Auditor General for his/ her
information.
 The warrant empowers the Controlling officers in budget units to
start spending their allocations on current and capital projects
(programmes).
 The Permanent Secretary in the MOF uses the General warrant to
apportion funds with respect to the requirements of the Budget
units. He /she notify them by issuing Treasury Authority for
recurrent expenditure and capital requisition for Capital spending.
 When they receive the Treasury Authority , the Controlling
Officers in the Budget Units respond by issuing the Expenditure
Warrant This indicates the allocation for recurrent and capital
expenditure .It is then sent to Department Heads.
REFERENCES:

1. ZICA Public and Finance module 2018

2. Mr Stanely Mwelwa’s notes
3. R A. Adams 2004
4. Lawson 2015