PUBLIC SECTOR

ACCOUNTING AND FINANCE

FREDRICK AMISSAH, CA
1 | www.aspireproconsult.com | 0555 213 559
PUBLIC SECTOR ACCOUNTING AND FINANCE
EVALUATION OF FINANCIAL POSITION, PERFORMANCE AND PROSPECTS OF PUBLIC SECTOR ENTITIES

RECOMMENDED PRACTICE GUIDELINE (RPF) 2: FINANCIAL STATEMENTS DISCUSSION AND ANALYSIS

OBJECTIVE
This Recommended Practice Guideline (RPG) provides guidance for preparing and presenting
financial statement discussion and analysis. Financial statement discussion and analysis will assist
users to understand the financial position, financial performance and cash flows presented in the
general purpose financial statements (hereafter referred to as “financial statements”).

STATUS AND SCOPE

 The reporting of information in accordance with this RPG represents good practice. An entity
preparing and presenting financial statement discussion and analysis is encouraged to follow
this RPG. Compliance with this RPG is not required in order for an entity to assert that its
financial statements comply with International Public Sector Accounting Standards (IPSASs).

 Financial statement discussion and analysis should be presented at least annually and should
use the same reporting period as that covered by the financial statements.
 The reporting boundary for financial statement discussion and analysis should be the same as
that used for the financial statements.
 Financial statement discussion and analysis should be issued with the financial statements.
 This RPG is applicable to all public sector entities other than Government Business Enterprises
(GBEs).
 Financial statement discussion and analysis should not be described as complying with this RPG
unless it complies with all the requirements of this RPG.
 In some jurisdictions, preparation and presentation of financial statement discussion and
analysis is a legislative or regulatory requirement, or required by other externally imposed
regulations. Entities are encouraged to disclose information about the impact of such
requirements on compliance with this RPG.

DEFINITION
The following term is used in this RPG with the meaning specified:
Financial statement discussion and analysis is an explanation of the significant items, transactions
and events presented in an entity’s financial statements and the factors that influenced them

PRESENTING FINANCIAL STATEMENT DISCUSSION AND ANALYSIS

 Financial statement discussion and analysis provides information useful to users for
accountability and decision-making purposes by enabling users to gain an insight into the
operations of the entity from the perspective of the entity itself. It also provides the opportunity
to reflect the entity’s interpretation of significant items, transactions and events affecting the
financial position, financial performance and cash flows of the entity. Therefore, financial
statement discussion and analysis complements the information in the financial statements.

2 | www.aspireproconsult.com | 0555 213 559

  Information in financial statement discussion and analysis should meet the qualitative
characteristics of financial reporting taking into account the constraints on information
included in general purpose financial reports (GPFRs) 1.

Content of Financial Statement Discussion and Analysis

The content of financial statement discussion and analysis should be consistent with the financial
statements and the underlying items, transactions and events, as well as assumptions such as those
relating to recognition and measurement.

Financial statement discussion and analysis should include the following, without merely replicating
information in the financial statements:
(a) An overview of the entity’s operations and the environment in which it operates;
(b) Information about the entity’s objectives and strategies;
(c) An analysis of the entity’s financial statements including significant changes and trends in an
entity’s financial position, financial performance and cash flows; and
(d) A description of the entity’s principal risks and uncertainties that affect its financial position,
financial performance and cash flows, an explanation of changes in those risks and
uncertainties since the last reporting date and its strategies for bearing or mitigating those
risks and uncertainties.

The form and specific content of an entity’s financial statement discussion and analysis should
reflect the nature of the entity and the regulatory environment in which it operates.

Where financial statement discussion and analysis includes information that is also in the financial
statements, it should not merely repeat what is in the financial statements, but should analyse and
explain how items, transactions and events affect the entity’s financial position, financial performance
and cash flows. Financial statement discussion and analysis should include cross-references to the
financial statements where appropriate to avoid duplication of information.

USEFULNESS OF FINANCIAL STEMENTS DISCUSSION AND ANALYSIS

 It assists users in understanding the financial position, financial performance, and cash flows presented
in the financial statements.
 It provides useful information to the users for accountability and decision-making purposes by enabling
the user gain insight into the operation from the perspective of the entity itself.
 It allows the entity to reflect its perspective on key items, transactions and events that affect the
financial position, financial performance and cash flows of the entity within the reporting period.
 It provides users with better understanding of the trends the entity’s operations.
 Financial statements discussion and analysis completes the information in the financial statements.
 It helps to discuss the financial statements of the entity to the understanding of users that are distant
from the organisation.
 It is a narrative reporting providing preparers interpretation of the results that will be valuable to the
users in assessing accountability and decision making.

3 | www.aspireproconsult.com | 0555 213 559

TECHNIQUES OF ANALYSING FINANCIAL STATEMENTS

The analysis of entity’s financial statements that provides insights or understanding including changes and
trends about the financial performance, financial position, and cash flows, the following techniques are used to
achieve the purpose.
These are:
 Common size analysis
 Ratio analysis
 Budgetary variance

 Common Size Analysis

This technique displays all the items in the financial statements a percentage of a common base figure rather
as absolute numerical figure.it makes it easier to determine what drives an entities financial performance,
financial position and cash flows for the purpose of comparisons and analyses.
It helps to compare entities of different sizes and different sectors over time.

The major drawback of the common size financial statements is with regards to the classification of accounts.
In a circumstance where two entities are involved, the entities should adopt significantly similar classification
in the preparation of the financial statements to enable the use of the common size analysis. The preparer
should therefore realign the different classification systems used by the entity to an acceptable classification
system where there is non-existence of similar classification.

 Common size statements of financial performance

With this technique, every item of the financial performance are displaced as a percentage of the total
revenue or total tax revenue of the entity. Total revenue is a major item of the statements of financial
performance as all other items depends on.
The common size financial performance is used especially where two entities, probably countries have
prepared their separate financial statements for a given period and want to analyse the performance without
regard to size and political context in which they operate.

 Common size statements of financial position

The common size financial position expressed all items on the statements of financial position as a
percentage of the total assets. That is, assets, liabilities and accumulated balances are all expressed as a
percentage of the total assets.
It helps in the determination of percentage of assets line items in the pool of all assets and how the assets
are financed.

 Ratio Analysis
The ratio analysis technique for financial statements discussion and analysis helps to provide great insights
and understanding of the financial health and performance oaf the entity as well as the cashflows condition.
It helps to determine the relation of certain items of the statements of financial performance, position and
the cash flow. Ratio analysis expresses set of items in terms of the items of the financial position,
performance and cashflows unlike the common size that express items over a single important figure in the
statements.
It usually expresses items of the financial statements as ratios or percentages of certain economic data such
as Gross Domestic Product (GDP), population size, fiscal balance, etc.

4 | www.aspireproconsult.com | 0555 213 559

 Under the Public Financial Management Act,2016 (Act 921) and its consequential Regulations, the following
ratios are required in measuring fiscal achievements of public sector entitie :
 Non-oil primary fiscal balance to GDP
 Non-oil fiscal balance to GDP
 Public debt to GDP
 Capital spending to total expenditure
 Revenue to GDP
 Wage to tax revenue
Other commonly used ratios in the public sector include
 Tax per capita
 Interest to tax revenue
 Interest to total expenditure
 Current ratio

Note : This ratios are grouped into three : financial performance, financial condition/position and fiscal and
cash requirement ratio.

EVALUATION OF FINANCIAL PERFORMANCE

The statement of financial performance tells us the state of the public sector entities at one point in time.
The income statement depicts how an entity has performed over a period of time.

𝑻𝒐𝒕𝒂𝒍 𝒓𝒆𝒗𝒆𝒏𝒖𝒆
Revenue to GDP = × 100
𝑮𝑫𝑷
Meaning: measures gross domestic product attributable to total revenue. The higher the total revenue
accounts for GDP, the better.

𝑻𝒐𝒕𝒂𝒍 𝒓𝒆𝒗𝒆𝒏𝒖𝒆 𝒀𝟐−𝑻𝒐𝒕𝒂𝒍 𝒓𝒆𝒗𝒆𝒏𝒖𝒆 𝒀𝟏

Revenue growth rate = × 100
𝑻𝒐𝒕𝒂𝒍 𝒓𝒆𝒗𝒆𝒏𝒖𝒆 𝒀𝟏
Meaning: depicts increase in total revenue over a period. The higher the rate the better.

𝑫𝒊𝒓𝒆𝒄𝒕 𝒕𝒂𝒙 + 𝒊𝒏𝒅𝒊𝒓𝒆𝒄𝒕 𝒕𝒂𝒙

Tax revenue to GDP = × 100
𝑮𝑫𝑷
Meaning: measures gross domestic product attributable to total tax revenue. The higher the tax revenue
accounts for GDP, the better.

𝑻𝒐𝒕𝒂𝒍 𝒕𝒂𝒙 𝒓𝒆𝒗𝒆𝒏𝒖𝒆

Tax per capita = (𝒊𝒏 𝑮𝑯𝑪 𝒑𝒆𝒓 𝒄𝒊𝒕𝒊𝒛𝒆𝒏)
𝑷𝒐𝒑𝒖𝒍𝒂𝒕𝒊𝒐𝒏
𝑻𝒐𝒕𝒂𝒍 𝒕𝒂𝒙 𝒓𝒆𝒗𝒆𝒏𝒖𝒆
or may be focused on direct tax i.e Direct tax per capita =
𝑷𝒐𝒑𝒖𝒍𝒂𝒕𝒊𝒐𝒏
Meaning: depicts amount of tax paid per citizen. High ratio shows high compliance by citizens.

𝑻𝒐𝒕𝒂𝒍 𝒈𝒓𝒂𝒏𝒕𝒔
Grant to total revenue = × 100
𝑻𝒐𝒕𝒂𝒍 𝒓𝒆𝒗𝒆𝒏𝒖𝒆
Meaning: it indicates the level of grants dependency og the country. Hence high ratio shows high
dependence.

5 | www.aspireproconsult.com | 0555 213 559

 𝑰𝑮𝑭
IGF to total revenue = × 100
𝑻𝒐𝒕𝒂𝒍 𝒓𝒆𝒗𝒆𝒏𝒖𝒆
Meaning: measure the extent to which an entity finances it operation from its own internally generated
revenues.

𝑮𝒐𝑮 𝒔𝒖𝒃𝒗𝒆𝒏𝒕𝒊𝒐𝒏 𝒐𝒓 𝒈𝒓𝒂𝒏𝒕𝒔

Government grants to total revenue = × 100
𝑻𝒐𝒕𝒂𝒍 𝒓𝒆𝒗𝒆𝒏𝒖𝒆
Meaning: measure the extent of dependency on government grants or funding.

𝑪𝒐𝒎𝒑𝒆𝒏𝒔𝒂𝒕𝒊𝒐𝒏 𝒐𝒇 𝒆𝒎𝒑𝒍𝒐𝒚𝒆𝒆𝒔
Wage bill to tax revenue= × 100
𝑻𝒐𝒕𝒂𝒍 𝒕𝒂𝒙 𝒓𝒆𝒗𝒆𝒏𝒖𝒆
Meaning: shows the portion of tax used to pay for compensation.

𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅
Return on equity = × 100
𝑬𝒒𝒖𝒕𝒚 𝑰𝒏𝒗𝒆𝒔𝒕𝒎𝒆𝒏𝒕
Meaning: measures the return on investment in shares made a public entity in other private entities.

𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕
Interest to total tax = × 100
𝑻𝒐𝒕𝒂𝒍 𝒕𝒂𝒙 𝒓𝒆𝒗𝒆𝒏𝒖𝒆
Meaning: shows the portion of tax used to pay for interest on government debt.

𝑮𝒐𝒐𝒅𝒔 𝒂𝒏𝒅 𝒔𝒆𝒓𝒗𝒊𝒄𝒆

Goods and services to total tax = × 100
𝑻𝒐𝒕𝒂𝒍 𝒕𝒂𝒙 𝒓𝒆𝒗𝒆𝒏𝒖𝒆
Meaning: shows the portion of tax used to pay for interest on government debt. It also depicts the inputs
available to the public sector for provision of services.

𝑻𝒐𝒕𝒂𝒍 𝒓𝒆𝒗𝒆𝒏𝒖𝒆
Revenue to capital expenditure/spending = × 100
𝑻𝒐𝒂𝒍 𝒄𝒂𝒑𝒊𝒕𝒂𝒍 𝒔𝒑𝒆𝒏𝒅𝒊𝒏𝒈
Meaning: shows the portion of tax revenue used to expend on capital expenditure.

EVALUATION OF FINANCIAL POSITION/CONDITION

The statement of financial position is a financial snapshot of an organization, usually prepared at the end
of the fiscal year. That is, it provides information about the condition of public sector entities at one
particular point in time. The ratios measures the short, medium and long-term financial health of entity
it terms of its liquidity and solvency. It is thus a measure of debt sustainability especially for countries.

𝑻𝒐𝒕𝒂𝒍 𝑫𝒆𝒃𝒕
Debt to GDP= × 100
𝑮𝑫𝑷
Meaning: it is a measure of sustainability of debt level and shows the portion of gross domestic product
attributable to public debt. High debt rtion(say 60%abd above) increases the financial risk of the country.

𝑫𝒐𝒎𝒆𝒔𝒕𝒊𝒄 𝒅𝒆𝒃𝒕+𝑬𝒙𝒕𝒆𝒓𝒏𝒂𝒍 𝒅𝒆𝒃𝒕

Debt per capita =
𝑻𝒐𝒕𝒂𝒍 𝒑𝒐𝒑𝒖𝒍𝒂𝒕𝒊𝒐𝒏
Meaning: measures the debt burden per citizen in the country.

𝑻𝒐𝒕𝒂𝒍 𝑨𝒔𝒔𝒆𝒕𝒔
Total assets to Debt = × 100
𝑻𝒐𝒕𝒂𝒍 𝒅𝒆𝒃𝒕𝒔
Meaning: measures the extent of assets available to pay government debt.

6 | www.aspireproconsult.com | 0555 213 559

 𝑪𝒂𝒑𝒊𝒕𝒂𝒍 𝒆𝒙𝒑𝒆𝒏𝒅𝒊𝒕𝒖𝒓𝒆
Capital spending to total expenditure= × 100
𝑻𝒐𝒕𝒂𝒍 𝒆𝒙𝒑𝒆𝒏𝒅𝒊𝒕𝒖𝒓𝒆
Meaning: shows the portion of government spending that went into capital expenditure which has the
potential of generating future economic benefits to the government. High ratio shows high future economic
benefits.

𝑻𝒐𝒕𝒂𝒍 𝒕𝒂𝒙 𝒓𝒆𝒗𝒆𝒏𝒖𝒆

Interest cover = = x times
𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒆𝒙𝒑𝒆𝒏𝒔𝒆
Meaning: shows the extent of government’s ability to pay for interest obligations.

Net debt = Financial assets – Gross debt

Meaning: shows the difference between financial assets –and gross debt. A positive amount is ideal.

Gross debt = Domestic debt + External debt

Meaning: it the total of all interest-bearing liabilities.

EVALAUTION OF FISCAL AND CASH REQUIREMENTS

These ratios measure the extent of fiscal attainment and ability of the entity to meet its cash requirements
to provide for public services.

𝑭𝒊𝒔𝒄𝒂𝒍 𝒃𝒂𝒍𝒂𝒏𝒄𝒆
Fiscal balances to GDP = × 100
𝑮𝑫𝑷
Meaning: measures government fiscal balance to GDP. The high the ratio the worse the condition.

𝑭𝒊𝒔𝒄𝒂𝒍 𝒃𝒂𝒍𝒂𝒏𝒄𝒆+𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕
Primary fiscal balance to GDP = × 100
𝑮𝑫𝑷
Meaning: measures government fiscal balance excluding interest payments to GDP. Oil revenues are
considered in the computations. The high the ratio the worse the condition.

𝑭𝒊𝒔𝒄𝒂𝒍 𝒃𝒂𝒍𝒂𝒏𝒄𝒆+𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕
Non-oil Primary fiscal balance to GDP = ×100
𝑮𝑫𝑷
Meaning: measures government fiscal balance excluding interest payments to GDP. Oil revenues are NOT
considered in the computations. The high the ratio the worse the condition.

𝑭𝒊𝒔𝒄𝒂𝒍 𝒃𝒂𝒍𝒂𝒏𝒄𝒆
Non-oil fiscal balance to GDP = ×100
𝑮𝑫𝑷
Meaning: measures government fiscal balance including interest payments to GDP. Oil revenues are NOT
considered in the computations. The high the ratio the worse the condition.

𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝒂𝒔𝒔𝒆𝒕𝒔
Liquidity ratio = :𝟏
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔

Or
𝑪𝒂𝒔𝒉 𝒂𝒏𝒅 𝒄𝒂𝒔𝒉 𝒆𝒒𝒖𝒊𝒗𝒂𝒍𝒆𝒏𝒕
Liquidity ratio = :𝟏
𝑷𝒂𝒚𝒂𝒃𝒍𝒆𝒔
Meaning: measures the ability to pay short term obligations.

7 | www.aspireproconsult.com | 0555 213 559

 𝑵𝒆𝒕 𝒄𝒂𝒔𝒉 𝒇𝒍𝒐𝒘 𝒇𝒓𝒐𝒎 𝒐𝒑𝒆𝒓𝒂𝒕𝒊𝒏𝒈
Cash generating ratio = × 𝟏𝟎𝟎
𝑵𝒆𝒕 𝒄𝒂𝒔𝒉 𝒇𝒍𝒐𝒘
Meaning: measures the extent of an entity to finance its operation from its own activities.

 Budget Variance Analysis (BVA)/ Evaluation of Prospect

This measure the extent to which the entity meets its budget target as it is an indication of organizational
effectiveness and efficiency. It also provides information relating to the extent of budget reliability of public
sector entities. Assessing the prospects of public sector entities is based on usually on how the actual
performance of the entity or nation has deviated from the budget. The PEFA Framework have identified
three(3) performance indicators of public financial management systems. These are:

 Aggregate expenditure outturn

𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝒆𝒙𝒑𝒆𝒏𝒅𝒊𝒕𝒖𝒓𝒆−𝒂𝒄𝒕𝒖𝒂𝒍 𝒆𝒙𝒑𝒆𝒏𝒅𝒊𝒕𝒖𝒓𝒆

Aggregate expenditure outturn = × 100
𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝒆𝒙𝒑𝒆𝒏𝒅𝒊𝒕𝒖𝒓𝒆

Meaning: measures the extent to which aggregate budget expenditure reflects the amounts originally
approved. Outturn between 95% and 105% of the approved budget depicts highest performance.
Out turn score below 85% or above 115% depicts poor performance.

 Expenditure composition outturn

Meaning: measures the extent to which reallocations between main budget categories during execution
have varied in expenditure composition. It is further analysed into three dimensions namly by. Function, by
ecomic type and expenditure from contingency.

𝑩𝒖𝒈𝒆𝒕 𝒊𝒕𝒆𝒎 𝒃𝒚 𝒇𝒖𝒏𝒄𝒕𝒊𝒐𝒏−𝑨𝒄𝒕𝒖𝒂𝒍 𝒊𝒕𝒆𝒎 𝒃𝒚 𝒇𝒖𝒏𝒄𝒕𝒊𝒐𝒏

Expenditure composition by function = × 100
𝑩𝒖𝒈𝒆𝒕 𝒊𝒕𝒆𝒎 𝒃𝒚 𝒇𝒖𝒏𝒄𝒕𝒊𝒐𝒏

Expenditure composition by economic type

𝑩𝒖𝒈𝒆𝒕 𝒊𝒕𝒆𝒎 𝒃𝒚 𝒆𝒄𝒆𝒐𝒏𝒊𝒎𝒊𝒄 𝒕𝒚𝒑𝒆−𝑨𝒄𝒕𝒖𝒂𝒍 𝒊𝒕𝒆𝒎 𝒃𝒚 𝒆𝒄𝒐𝒏𝒐𝒎𝒊𝒄 𝒕𝒚𝒑𝒆
= × 100
𝑩𝒖𝒈𝒆𝒕 𝒊𝒕𝒆𝒎 𝒃𝒚 𝒆𝒄𝒆𝒐𝒎𝒊𝒄 𝒕𝒚𝒑𝒆

𝑩𝒖𝒈𝒆𝒕𝒆𝒅 𝒄𝒐𝒕𝒊𝒈𝒆𝒏𝒄𝒚 𝒓𝒆𝒔𝒆𝒓𝒗𝒆−𝑨𝒄𝒕𝒖𝒂𝒍 𝒄𝒐𝒏𝒕𝒊𝒈𝒆𝒏𝒄𝒚 𝒓𝒆𝒔𝒆𝒓𝒗𝒆

Expenditure from contingency reserve= × 100
𝑩𝒖𝒈𝒆𝒕𝒆𝒅 𝒄𝒐𝒏𝒕𝒊𝒈𝒆𝒏𝒄𝒚 𝒓𝒆𝒔𝒆𝒓𝒗𝒆

 Revenue outturn

Meaning: measures the extent of variation between budgeted revenue reflects and the originally approved.

𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝒓𝒆𝒗𝒆𝒏𝒖𝒆 −𝑨𝒄𝒕𝒖𝒂𝒍 𝒓𝒆𝒗𝒆𝒏𝒖𝒆

Total revenue percent outturn = × 100
𝑩𝒖𝒅𝒈𝒆𝒕 𝒓𝒆𝒗𝒆𝒏𝒖𝒆

𝑩𝒖𝒅𝒈𝒆𝒕𝒆𝒅 𝒓𝒆𝒗𝒆𝒏𝒖𝒆 𝒊𝒕𝒆𝒎 −𝑨𝒄𝒕𝒖𝒂𝒍 𝒓𝒆𝒗𝒆𝒏𝒖𝒆 𝒊𝒕𝒆𝒎

Revenue composition outturn = × 𝟏𝟎𝟎
𝑩𝒖𝒅𝒈𝒆𝒕 𝒓𝒆𝒗𝒆𝒏𝒖𝒆 𝒊𝒕𝒆𝒎

8 | www.aspireproconsult.com | 0555 213 559

TYPES OF FINANCIAL STATEMENT DISCUSSION AND ANALYSIS

The discussion and analysis financial statements through the use of common size financial statements, ratio
analysis and budget variance computation can be done the following:

 Vertical (similar to common size)

 Horizontal or trend analysis (comparing results of an entity over two or more reporting periods)
 Inter entity (comparison with other entities in the same sector, under similar legal, regulatory and
political conditions.

LIMITATIONS OF FINANCIAL STATEMENTS ANALYSIS

 It based on historical information and may not necessarily reflect current changes in an entity’s
operations
 It ignores qualitative information in terms of effectiveness and efficiency of service delivery.
 Financial statements analysis may not reflect the prevailing operations and environmental conditions
such as political, legal, technological and regulatory factors within the entity financials were obtained.
 Inter-entity and inter-country analysis and comparisons may not be accurate since institutional
factors may be overlooked in the analysis.
 Management or preparers use of creative accounting to manipulate the view given my financial
statements while complying with all applicable accounting standards and regulations.
 The financial statements may be prepared using different accounting policies.

NOTE: THE ANALYSIS ARE USUALLY PRESENTED IN THE FORM OF REPORTS OR MEMORANDUM
(EXAM FOCUS).

FORMAT AND WRITING TO BE DISCUSSED IN CLASS

REVIEW QUESTIONS

1. a. In reference with Recommended Practice Guide 2, explain financial statements discussion and analysis
and discuss its usefulness.

b. Explain the general considerations in providing financial statements discussion and analysis.

c. Explain three common tools used in analysis of financial statement of public sector entities.

9 | www.aspireproconsult.com | 0555 213 559

 2. The financial information below relates to the Consolidated Fund of Ghana.
Statements of Revenue and Expenditure for the year ended 31 December, 2018
2018 2017
Revenue GH¢'million GH¢’million
Direct tax 75,000 62,400
Indirect tax 35,400 25,600
Non tax revenue 4,600 3,800
Grant 840 5,500
Total revenue 115,840 98,300

Expenditure
Compensation for employees 53,700 40,500
Goods and services 34,300 38,200
Interest 10,300 12,400
Social benefits 2,450 1,150
Subsidies 180 300
Grant 960 280
Consumption of fixed asset 600 500
Other expenditure 13,010 9,700
Total expenditure 115,500 103,030
Deficit 340 (4,730)

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

2018 2017
GH¢'million GH¢’million
Non-Current Assets
Property Plant and Equipment 4,200 5,600
Equity investment 10,000 12,000
Total Non-current assets 14,200 17,600
Current Assets
Work in progress 2,500 2,000
Receivables 1,100 900
Cash and cash equivalent 3,250 2,980
Other assets 450 600
Total current assets 7,300 6,480
Total assets 21,500 24,080
Funds and Liabilities
Accumulated Fund (111,280) (111,620)
Current Liabilities
Payables 1,600 19,000
Trust monies 2,540 2,300
Domestic loans 11,240 12,500
Total Current Liabilities 15,380 33,800
Non-Current Liabilities
Domestic loans 52,000 43,000
External loans 65,400 58,900
Total Non-Current Liabilities 117,400 101,900
Total Funds and Liabilities 21,500 24,080
10 | www.aspireproconsult.com | 0555 213 559
Additional Information:
i) The total market value of all final goods and services produced domestically in Ghana for
2018 and 2017 fiscal year amounted to GH¢205,100,940,000 and GH¢185,600,400,000
respectively.

ii) According to the Statistical Service data, the population of the country is estimated as
25,000,000 in 2018 and 23,900,000 in 2017.

iii) Non tax revenue reported include dividend received from the Government Business Enterprises of the
governments in the respective years. Dividend income constitutes 50% of the non- tax revenues in the year
2018 and 30% of the non-tax revenues in the year 2017.

iv) Budget information for the two periods are as follows.

2018 2017
Direct tax 73,000 68,500
Indirect tax 25,400 27,800
Total expenditure 120,000 100,500

Required:
i) From the information above, compute for the two financial years, the following ratios:
a) Revenue to GDP
b) Tax revenue to GDP
c) Tax revenue per capita
d) Wage bill to tax revenue
e) Interest to total tax
f) Grants to total revenue
g) Return on investment
h) Capital expenditure to Total Expenditure
i) Primary fiscal balance to GDP
j) Net Debt percentage
k) Debt per Capita
l) Debt to Gross Domestic Product ratio
m) Total Asset to debt
n) Capital Asset per Capita
o) Aggregate revenue outturn
p) Aggregate expenditure outturn

ii) Based on your computations in question (i), write a report to the Joint Financial Management Committee
analysing and discussing the financial performance, financial position and prospects over the two-year period

iii) Based on a Common Size Statement of Financial Performance and Common Size Statement of Financial
Position, write a report discussing and analysing the financial performance and position of the Consolidated
Fund in line with the Recommended Practice Guide 2, Financial Statement Discussion and Analysis.

iv) Describe five (5) limitations of ratio analysis as a measure of performance.

11 | www.aspireproconsult.com | 0555 213 559