INSTITUTE OF CHARTERED ACCOUNTANTS, GHANA

PUBLIC SECTOR ACCOUNTING AND FINANCE

TUTORIAL QUESTIONS – BUDGETING
1. The information below is obtained from the 201 records of the Driver and Vehicle Licensing
Authority.
Number Per unit charge
GH₵
New vehicles registration 800,000 100
Old vehicles inspected and tested 3,000,000 50
New drivers’ licenses issued 400,000 60
Drivers’ licenses renewed 1,000,000 30
Accident reports 200,0000 10

Additional information obtained from the Driver and Vehicle Licensing Authority:
a) Number of new registration in 2016 is expected to increase by 200,000 over the previous years
while the fees charged will remain unchanged.
b) Enforcement will be tightened in 2016 to ensure that all vehicles existing in 2015 are duly inspected
and tested in 2016. The charge for inspection and testing is expected to increase to GH₵ 60 per
vehicle
c) Due to the poor state of the public transport system, it is expected that additional drivers will apply
for licensing in 2016. The number is expected to increase by 50% over the preceding year. The
charges will increase by GH₵ 20.
d) Drivers’ license renewal in 2016 is expected to increase to 1,200,000 but the charge per license will
remain unchanged.
e) The Road Safety Commission has intensified road user education and therefore road accidents are
expected to reduce by 50% in 2016. The charge for 2016 will however go up by GH₵5.
f) Other miscellaneous revenue anticipated during 2016 is GH₵300,000.
g) The quarterly distribution of the revenues anticipated in 2016 is summarised below:

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

New vehicle Registration 40% 30% 20% 10%
Inspection and Testing 25% 25% 25% 25%
New driver licensing 25% 25% 25% 25%
Driver license renewal 25% 25% 25% 25%
Accident reports 20% 20% 20% 40%
Miscellaneous 20% 30% 20% 30%

Required:
Prepare the Revenue Budget for 2016 for DVLA showing clearly the quarterly and annual
information.
 2. Below is a tabulation of government revenue for the 2015 financial year

Fe e s & Co mp a n y
Mo n th Ro y a ltie s PAYE Ch a rg e VAT Ta x
GH¢ '0 0 0 GH¢ '0 0 0 GH¢ '0 0 0 GH¢ '0 0 0 GH¢ '0 0 0
Jan u ary 3,000 22,000 8,000 50,000 25,000
Feb ru ary 3,600 22,000 8,000 50,000 21,000
March 4,320 22,000 9,600 50,000 31,000
Ap ril 5,184 22,000 11,520 55,000 18,000
May 5,000 22,000 5,000 60,500 15,000
Ju n e 6,000 22,000 6,000 66,550 16,000
Ju ly 7,200 26,400 7,200 73,205 13,000
Au g u st 6,000 30,000 6,000 80,000 19,000
Sep temb er 7,200 36,000 7,200 88,000 12,000
Octob er 6,000 25,000 8,000 90,000 22,000
Novemb er 4,000 30,000 9,600 99,000 28,000
Decemb er 4,000 36,000 8,000 100,000 51,000
TOTAL 61,504 315,400 94,120 862,255 271,000

You are required:

a. Calculate the total Non-Tax Revenue collected for the first quarter
[4 marks]

b. Compute the Total Tax Revenue for third and fourth quarter respectively
[4 marks]

c. Calculate the Indirect Tax Revenue for the first Quarter of the year
[2 marks]

d. How much should government transfer to the District Assembly Common Fund for the third
quarter of the year (use 7.5% rate)? [2½ marks]

3. Mass Welfare Department is a government department under the Ministry of Gender, Children and
Social Protection. The department has provided you with some information relating to its
appropriation for 2016 financial year.
 Annual Actual
Appropriation (January - March)
GH¢000 GH¢000
Compensation for employees:
Established post 120,000 34,000
Non-established post 60,000 14,500
Transfer to households 12,000 3,800
Goods and Services:
Travel and Transport 4,000 1,100
General Office expenses 8,000 1,900
Cleaning 16,000 5,600
Workshops, training and conferences 24,000 7,600
Non-financial assets:
Purchase of office equipment 10,000 2,500
Purchase of data management equipment 20,000 5,100
Purchase of motor vehicles 40,000 10,000

Required
Prepare an Appropriation Account for the period to March 2016, showing for the quarter the appropriation,
actual expenditure and the variance.

4. Stated below are the Government of Ghana actual results and Budget of the Public Accounts of
the Consolidated Fund for the year ended 31st December 2012.

REVENUE BUDGET ACTUAL

Direct Tax 326,040 261,115
Indirect Tax 354,676 324,889
Grants 104,872 14,055
Other revenue 86,803 25,464
Total revenue 872,391 535,523

EXPENDITURE
Compensation of Employees 375,166 336,946
Use of Goods and Services 72,600 48,920
Interest 133,097 206,622
Social benefits 3,232 -
Other expenses 74,904 38,125
Consumption of fixed capital 81,600 1,250
740,599 631,863
Excess of revenue over the
Expenditure 131,792 (96,340)

From the above information, you are required to:

a. Assess the performance of the Government spending and Revenue Generation, stating two (2)
possible reasons for the difference between the Actual and Budgeted results of each of the
accounts headings from the Revenue and Expenditure Statement above.

b. State five (5) reasons why budgeted figures and prior year figures are included in the Central
Government financial statements.
 5. The approved estimates for quarterly expenditure of Ministry of Education are shown below.
Also shown is the actual expenditure for the month of January 2015.

Approved Estimate for Jan- Actual expenditure for

March, 2015 January, 2015

GHS GHS
Established Post 27,141 7,239

Non Established Post 6,708 1,767

Overtime allowance 1,044 147

Electricity charges 240 125

Water charges 600 79

Telecommunication 693 478

Postal charges 51 23

Stationery 4,038 1,131

Travel allowance 17,250 4,643

Maintenance of official vehicle 14,700 4,911

Car rental 468 227

Maintenance of equipment 6,000 2,588

Insurance 138 30

Bank charges 72 19
Training and conference cost 36,000 5,688

New building 60,000 12,500

173,781 41,588

Note:
a. The budget for electricity was based on 100 units to be used at GHC1.90 per unit per quarter.
The actual usage was 150 units at GHC2.50 per unit per quarter.

b. The budget for water was based on 125 litres at GHC0.90 per unit per quarter. Actual usage was
150 litres at GHC1.50 per unit per quarter.

You are required to:

i) Prepare a monthly statement comparing the budget figures with the actual expenditure showing
the variances between them.
ii) How much of the total variance in electricity expenses was due to the price increase?
iii) How much of the total variance in water charges was due to more water usage?
 6. The following information were produced by the Ministry of Finance for the 2015 fiscal year:
GH¢ million
• Grants 1,130.70
• Non Tax Revenue 4,358.70
• Taxes on income and Property 9,238.30
• Taxes on Domestic Goods and Services 7,061.70
• International Trade Taxes 4,051.10
• Other taxes 161.40

Required:
The 1992 Constitution and the District Assemblies Common Fund Act 455 requires Parliament to
annually allocate portions of national revenue into the District Assemblies Common Fund
(DACF) for distribution to local governments.

From the above:

i. Calculate the statutory total amount to be transferred into DACF required by law and
grant policy for the 2015 fiscal year.

ii. Assuming that Parliament approves for an equal distribution of the DACF for 2015 to all
local governments, how much would one typical local government in Ghana receive as its
share of the DACF for the 2015 fiscal year for development.

7. Public officers are entrusted with the responsibilities to manage and safeguard public moneys
within the public financial management legal framework, Therefore, a public officer entrusted
with this responsibility must be knowledgeable in the relevant financial enactments.
Required:
Explain the responsibilities of these officers under the public financial management act with regards to
safeguarding public funds:
i. Minister of finance
ii. Controller and accountant general
iii. Chief Director of Ministry of Finance
iv. Principal Spending Officer

8. There are several tools applied to expenditure control in the public sector. Explain how the
following tools are used in controlling expenditure within the public sector:
i. Virement
ii. Warrants and quarterly ceilings controls or drawing limit controls
iii. Appropriation / budget controls
iv. Chart of accounts
v. GIFMIS
 9. On 31st March 2020 the bank balance standing in the books of the Department of Trade under the
Ministry of Trade was GHC 900,000. The department provides you with the following
information:

MONTH IGF GOG Donations Compensation Goods Office Advances

Releases & Grants and Equipment
Services
GHC’000 GHC’000 GHC’000 GHC’000 GHC’000 GHC’000 GHC’000
Jan 4,100 2,000 1,200 1000 600 50
Feb 900 500 320 300 40
Mar 1,300 500 400 320 400 50
April 1,200 600 200 620 320 40
May 1,000 600 550 220 60
June 1,000 600 200 660 420 500 50

Other information:
i. The Internally Generated Funds (IGF) is made up 70% cash and 30% receivables. The receivables
are collectible as follows: 60% in the month following the service delivery and remaining 40% in
the second month following the service delivery. The department is entitled to retain 80% of IGF
collected, and the remaining 20% is payable into the Consolidated Fund in the month in which it
was collected.
ii. The department also enjoys budgetary allocation and government promises to follow schedule
iii. The department anticipates some donations as scheduled above. It was found that 30%, 40% and
70% of donations in March, April and June respectively will be in cash. The remaining portions
are expected to come in the form of materials.
iv. The compensation will be aid at the end of each month
v. Goods and services are paid for one month in arrears
vi. The office equipment acquired in January will be paid in the third month following the month of
purchase and the one acquired in June will be paid for immediately.
vii. The office equipment is to be depreciated at 2.5% per month
viii. Staff of the department are granted advances under an advance scheme approved by the
government. The advances will be recovered in four equal instalments beginning from the month
following the month in which the advance is granted.

Required:
a. Prepare a cash budget for the department for the second quarter of 2020 showing clearly the cash
forecast for individual months and the total for the quarter as a whole
b. Advise management based on the outcomes obtained in question (a)
10. The Ministry of Works and Housing prepares its budget using activity volume as a base for control
purposes. The Ministry’s normal level of activity is 70%. However in 2018, the Ministry had a
peculiar challenge to the extent that they operated at 50% level of activity. Below is the budget for
2018.

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

Actual Results for 2018 GH¢

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

Required:
a. Prepare a flexible budget for 50% level of activity
b. Prepare a Variances Analysis Statement for the operational year 2018